Advertisements



Nomura: The "Calmest Selloff Ever" Is Over, Brace For Turbulence Ahead

Nomura: The 'Calmest Selloff Ever' Is Over, Brace For Turbulence Ahead Yesterday was different. Bond yields tumbled with stocks (they have tended to rise recently as stocks tanked)... ...and VIX spiked as stocks were spanked (it has been decoupling, exuding calmness for a few days until then)... The change was catalysed by two factors: 1) "Hard-Landing" / "Recession" narrative keeps gaining-steam, so bonds are beginning to "work" as a risk-asset hedge, and 2) Yesterday's VIX-piry (and tomorrow's Op-Ex) removed much of the overhang suppressing vol, crushing hopes for some form of 'stabilization' So given the 'change', what happens next? As Charlie McElligott warns, the bond short covering is only just beginning. Today's ugly Philly Fed miss and significant trend rise in jobless claims is leading to another wave of spastic short-covering / upside-buying in USTs (and USD weakness), as "Growth Scare >> Recession" meme-check builds further steam. In fact, while unwinds have begun, CTA Trend legacy “Short” positioning remains a significant source of “covering” risk instability And notably, McElligott points to Credit / Spread-Product / Long Duration demand from “asset allocators” and real money: "I just get the sense that as the market crystalizes on this (pre-emptive) move towards 'Contraction / Recession / Hard-Landing' that the market is gonna 'come hard' for this stuff." Shifting back to equity-land, the 'calmest selloff ever' is over following VIX-piration yesterday. As SpotGamma notes, yesterday's VIX expiration likely pulled forward expiration “rally fuel” but looked for more support around the 4000 level. However, terrible retail reports from the likes of WMT (-15%) & TGT (-20%) and now CSCO (-10% premarket) signal “recession”, and that comes into an environment with increasing interest rates. This likely triggered both natural & forced liquidations. As markets declined it was quite likely that options hedging flows sold, too, as large short dated put positions went from 2% out-of-the-money, to 2% in-the-money. The concentrated puts positions near 400SPY/4000SPX/300QQQ invoked “jump risk” as options rip higher in value. Shown below is the price of the 5/20exp 4000 strike put – note how its price shot higher as 9AM VIX settlement passed... Negative Gamma is dominating the market's intraday moves... ...which are at near record levels of turbulence. As Nomura's McElligott notes, this is the longest extended period of dealer "short gamma" seen for years, which implicitly has led to the most persistently violent intraday-day range period in recent history... The Nomura strategist offers one more inisght of note, that is that one of the challenges for Stocks now with regards to hopes of some form of stabilization and “finding friends” - at least from within the leveraged community (Equities L/S and M/N space) - is “tight-stops” in this type of VaR environment, where risk-allowances are punitively low due to so many sample days where both longs- and shorts- are consistently blowing through of risk-limits. Still room for more pain as traders are still not 'grabbing for crash-hedges', and tomorrow's OpEx has huge levels of Delta and Gamma set to come off: SPX / SPY will see 35% of the total $Gamma expire Friday ($16.7B of $48.3B), with -$74.5B (!!!) of associated front-week (Short) $Delta set to come-off QQQ will see 41% of the total $Gamma expire Friday ($1.15B of the $2.8B), with -$9.6B of associated front-week $Delta set to come-off IWM will see 42% of the total $Gamma expire Friday, with -$2.9B of associated front-week $Delta set to come-off HYG will see 55% (!!!) of the total $Gamma expire Friday, with -$3.8B of associated front-week $Delta set to come-off The current expiration period has been tracking April's expiration. VIX expiration seemed to lead to a decline in volatility that was released post-expiration. Here we have a relatively large stock OPEX which may provide a bounce into an overall trend lower. Finally, SpotGamma reiterates its recent point that rallies should be framed as short covering and subject to quick and violent reversals. We very strongly believe that a major market low will come with a quarterly OPEX+FOMC combo. Tyler Durden Thu, 05/19/2022 - 13:06.....»»

Category: smallbizSource: nytMay 19th, 2022

Futures Rise As ECB Panics And Fed Looms

Futures Rise As ECB Panics And Fed Looms After five days of non-stop losses, US index futures finally bounced modestly along with stocks in Europe as the ECB announced it would hold an emergency meeting to undo the damage done by its meeting from last week, and ahead of the Fed which today will hike by 75bps, the most since 1994, and will then scramble to undo the damage from pushing the US into a recession in coming days and weeks. Contracts on the S&P 500 and Nasdaq 100 posted modest gains, rising 0.8% and 1% respectively, ahead of the Fed, with markets fully pricing in the biggest rate hike since 1994 amid worries about the outlook for the economy. Europe's Stoxx Europe 600 index jumped more than 1%, snapping a six-day losing streak, while the euro strengthened and the region’s bonds advanced as the European Central Bank’s Governing Council started an emergency meeting. Treasury yields dipped and the dollar retreated from a two-year high. In premarket trading, major technology and internet stocks are higher in premarket trading along with US stock futures ahead of Wednesday’s Federal Reserve announcement, with investors expecting a 75 basis-point increase in rates. Bank stocks were also higher in premarket trading. Here are some other notable premarket movers: Spotify (SPOT US) shares gain 2.2% in premarket trading as Wells Fargo upgraded the stock to equal-weight, saying the music streaming firm’s recent investor day laid out a more profitable company than the brokerage has modeled historically. Chinese tech stocks are mostly higher in US premarket trading, with education shares continuing their winning streak since peer Koolearn’s livestreaming hit went viral. Alibaba (BABA US) +1.9%, Baidu (BIDU US) +3.6%, Pinduoduo (PDD US) +2.3%, New Oriental Education (EDU US) +8.4%, TAL Education (TAL US) +4.5%. iQIYI (IQ US) shares decline 3.9% in US premarket trading as Baidu is in talks to sell its majority stake in the streaming service in a deal that could value all of iQIYI at $7 billion, Reuters reported, citing people with knowledge of the matter. Cryptocurrency-related stocks fell in premarket trading on Wednesday as Bitcoin and Ethereum tumbled. MicroStrategy (MSTR US) -7.6%, Marathon Digital Holdings (MARA US) -7.6%, Riot Blockchain (RIOT US) -7%, Coinbase (COIN US) -6.6%. Apple (AAPL US) and other consumer computer-hardware stocks may be in focus today as Morgan Stanley cut its price targets for such shares due to risks related to a potential slowdown in consumer spending. Moderna’s (MRNA US) shares rose 1.2% in US after-hours trading on Tuesday, while analysts said that the unanimous verdict from an FDA panel, which supported the biotech firm’s Covid vaccine for children, came as no surprise. Qualcomm (QCOM US) stocks could be in focus after the company won a European Union court bid to topple a 997 million-euro antitrust fine for allegedly pressuring Apple to only buy its 4G chips. Fears of stagflation have driven stocks into a bear market and triggered a stunning selloff in bonds in recent days. Uncertainty is elevated heading into the Fed decision: increments of 50 basis points, 75 basis points and even 100 basis points have all been chewed over by commentators. Parts of the US yield curve remain inverted, signaling concerns that restrictive monetary policy will lead to an economic downturn. Today's main event is of course the Fed decision which is expected to include a 75bp rate hike, with latest forecasts released at the same time. Swaps market is currently pricing in around 70bp of rate hikes for the meeting with a combined 202bp of additional hikes priced for the June, July and September meetings. From the forecasts, focus will be on revisions to the Fed’s long-term rate; swaps market is currently pricing a rate peak at around 3.90% by the middle of next year (full preview here). “Markets are poised for aggressive rate hikes, but what of US economic growth?” said Nema Ramkhelawan-Bhana, an economist at Rand Merchant Bank in Johannesburg. “It might not be in recessionary territory just yet, but the landing is not going to be as soft as the Fed predicates. Anything less than 75 basis points or at least a strong willingness to make more significant adjustments will likely turn the market on its head, eroding total returns of global bonds and equities even further.” European equities trade well but off session highs. FTSE MIB outperforms, rallying as much as 3.3% before stalling. Stoxx 600 rises as much as 1.2% with travel, banks and insurance names doing much of the heavy lifting, while the euro strengthened and the region’s bonds advanced as the European Central Bank’s Governing Council started an emergency meeting. While new stimulus may not be on the agenda, officials will discuss a crisis strategy and the reinvestment of bond purchases conducted under the now-halted pandemic emergency program, Bloomberg reported. Here are the biggest European movers: Rate-sensitive sectors such as financials and technology gained in Europe as the ECB holds an ad hoc meeting to discuss market conditions and the Fed concludes its two-day policy meeting. Finecobank shares rise as much as 8.4%, Intesa Sanpaolo +7.5%, Assicurazioni Generali +5.3%. Europe auto stocks are among outperforming sectors in the wider equity gauge, led by French part suppliers Faurecia and Valeo, and carmaker Renault. Faurecia shares gain as much as 8.7%, Valeo +6.5%, Renault +5.6% Whitbread shares rise as much as 6.4% after the hotel operator reported quarterly sales, with Barclays noting the company’s “upbeat tone.” Gerresheimer shares rise as much as 17% after a Bloomberg report that the German maker of packaging for drugs and cosmetics rejected an informal takeover approach from Bain Capital in recent weeks. Nordic and European forestry and paper mill companies’ shares rebound, breaking sharp declines triggered after brokers cut their  respective outlooks for the sector in the past week. Smurfit Kappa stock rises as much as 5.3%, BillerudKorsnas +4.8%, Huhtamaki +5.6% H&M shares drop as much as 6.4% with uncertainty about the margin outlook and ongoing cost pressures overshadowing the apparel retailer’s 2Q sales beat. Getinge shares fall as much as 18% after the medical technology firm lowered guidance, projecting flat organic sales growth for the year. Nordea and JPMorgan downgraded their recommendations. Elia Group shares fell as much as 12% after the electricity transmission company laid out plans for a rights offering. Autoneum shares drop as much as 5.2% after the car- parts maker warned on profits. Vontobel analyst Arben Hasanaj noted the firm’s difficulty in passing on higher costs, along with further likely delays in car production recovery. Voltalia slumps as much as 9.1% after Oddo downgrades to neutral in note as it questions what level of growth is possible after 2023. “The ECB is between rock and a hard place, like most other central banks,” said Marija Veitmane, a senior strategist at State Street Global Markets. “Inflation is very high and shows little signs of quickly declining, while the economy is increasingly fragile, particularly with the war in Europe and ever-rising energy costs. So anything the ECB can announce to reduce systemic risk is very welcome.” Earlier in the session, Asian stocks posted modest declines as sentiment improved from earlier in the week, with Chinese shares rising after domestic economic data showed pockets of recovery. The MSCI Asia Pacific Index was down 0.4% as of 6:07 p.m. in Singapore, as losses in regional tech hardware shares offset advances in China’s internet giants. South Korea and the Philippines led declines, while Japanese stocks fell ahead of a central bank policy meeting this week. Gains in China and Hong Kong helped offset losses elsewhere as data showed the country’s industrial production unexpectedly increased in May. Meanwhile the nation’s central bank kept a key policy rate unchanged, avoiding further policy divergence as the Federal Reserve tightens. “A more accommodative policy and fiscal environment together with stronger corporate fundamentals should be positive for Chinese equity assets,” said Jessica Tea, an investment specialist at BNP Paribas Asset Management. The MSCI Asia gauge dropped almost 4% over the previous two sessions as inflation data from the US fueled bets of a 75-basis-point rate hike by the Fed at Wednesday’s meeting. Still, the index has outperformed a measure of global peers this year, with the latter now in a bear market. Japanese stocks dropped ahead of a Federal Reserve rate decision. A Bank of Japan review on Friday is also on the radar.  The Topix Index fell 1.2% to close at 1,855.93 while the Nikkei gauge declined 1.1% to 26,326.16. Keyence Corp. contributed the most to the Topix Index’s decline, decreasing 3.9%. Out of 2,170 shares in the index, 288 rose and 1,829 fell, while 53 were unchanged. “The sharp decline in JGBs is also contributing to the drop in stock prices as uncertainty mounts ahead of the BOJ meeting,” said Hajime Sakai, chief fund manager at Mito Securities Co Indian stocks fell after swinging between gains and losses for the most part of the session, as concerns over higher inflation and likely tighter monetary policy measures weighed on sentiment.   The S&P BSE Sensex slipped 0.3% to close at 52,541.39 in Mumbai to its lowest level since July 28. The NSE Nifty 50 Index also slipped by a similar magnitude. Reliance Industries Ltd. posted its longest run of losses in more than a month and was the biggest drag on the Sensex, which had 17 of 30 member stocks trading lower. Ten of the 19 sector sub-indexes compiled by BSE Ltd fell, led by a gauge of power stocks. Retail inflation in India held above the central bank’s target in May, while wholesale prices accelerated for a third-straight month as input costs continue to rise, hurting company earnings.  “Commodity prices continue to remain elevated and despite passing on the costs to consumers, India Inc. is still facing margin pressures,” Mitul Shah, head of research at Reliance Securities wrote in a note.   Australia's S&P/ASX 200 index fell 1.3% to close at 6,601.00, the fourth straight day of declines. All sectors finished lower, with mining stocks and banks the biggest drags on the index. During early trade, Australia’s industrial relations umpire raised the minimum wage by 5.2% from July 1, a larger-than-expected increase, affirming speculation of faster tightening by the central bank.  Meanwhile, in New Zealand, the S&P/NZX 50 index was little changed at 10,635.92., after entering a bear market Tuesday. The gauge has shed more than 20% from its January 2021 peak. In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against all of its Group-of-10 peers apart from the Canadian dollar. Risk-sensitive Scandinavian currencies and the Aussie dollar lead gains. The euro rose by as much as 0.9% to 1.0508, and the yield on 10-year Italian bonds fell as much as 30bps after the ECB announced the Governing Council would hold an ad-hoc meeting on Wednesday “to discuss current market conditions.” ECB officials will be invited to sign off on the reinvestment of bond purchases conducted under the now-halted pandemic emergency program, a crisis response that they flagged in their decision last week, according to people familiar with the matter. Three-month euribor fixes higher by the most in more than two years, climbing to the highest since April 2020 as funding rates seek to mirror ECB rate hike expectations. Japanese bond futures drop most since 2013 as traders ramp up bets BOJ will give in to tweak policy. Australian bonds slumped with three-year yields posting steepest two-day climb since 1994. The Aussie extended an advance after the Fair Work Commission said the minimum wage will be increased by 5.2%. Earlier, the RBA said it “will do what’s necessary” to bring inflation back down to its 2-3% target as Goldman sees three more half-point hikes. In rates, Treasuries pared a recent drop, with yields falling up to 8bps led by shorter maturities amid a TSY rally in Asia and early European sessions, leaving yields richer by as much as 12.5bp across front-end leading into US session.  Markets are pricing in 73bps worth of hikes from the Fed today. US 10-year yields around 3.36%, richer by 10bp on the day while front-end outperformance steepens 2s10s, 5s30s spreads by 3bp and 6.5bp respectively. Curve steepens as long-end lags front-end rally and some rate hike premium eases out the swaps market ahead of 2pm ET Fed policy decision. European bonds rallied after ECB announces emergency meeting to discuss market conditions, with French and UK outperforming along with Italy and other peripherals. In commodities, crude futures drop back toward the lows for the week. WTI falls 1.2% near $117.50. Most base metals trade in the green; LME tin rises 2.3%, outperforming peers. Spot gold rises roughly $16 to trade near $1,825/oz Looking to the day ahead, the main highlight will likely be the aforementioned FOMC decision and Chair Powell’s subsequent press conference. There’s also an array of ECB speakers, including President Lagarde, as well as the ECB’s Holzmann, Nagel, Centeno, Muller, De Cos, Panetta and Knot. Otherwise, data releases include Euro Area industrial production for April, US retail sales for May, the NAHB housing market index for June and the Empire State manufacturing survey for June. Market Snapshot S&P 500 futures up 0.8% to 3,768.50 STOXX Europe 600 up 1.2% to 412.15 MXAP down 0.4% to 159.27 MXAPJ little changed at 529.71 Nikkei down 1.1% to 26,326.16 Topix down 1.2% to 1,855.93 Hang Seng Index up 1.1% to 21,308.21 Shanghai Composite up 0.5% to 3,305.41 Sensex up 0.2% to 52,797.58 Australia S&P/ASX 200 down 1.3% to 6,601.03 Kospi down 1.8% to 2,447.38 Brent Futures down 0.2% to $120.90/bbl Gold spot up 0.6% to $1,818.80 U.S. Dollar Index down 0.56% to 104.93 German 10Y yield little changed at 1.77% Euro up 0.6% to $1.0479 Brent Futures down 0.2% to $120.90/bbl Top Overnight News from Bloomberg Federal Reserve Chair Jerome Powell, who’s carefully telegraphed interest rate hikes over four years, looks likely to abandon gradualism and move more forcefully to stamp out inflation along with growing concerns that it will persist The European Central Bank’s Governing Council is ready to step in if it considers moves in government bond markets to be unjustified, according to Belgium’s Pierre Wunsch, as the ECB prepared for an emergency meeting on recent euro-zone bond turbulence The European Union is restarting infringement proceedings against the UK and will launch two new legal actions after London proposed legislation to override part of the Brexit withdrawal agreement, according to an EU official The first batch of a Chinese offshore yuan sovereign bond sale saw the strongest demand in nearly two years, defying a recent stream of outflows at a time when the global debt market is showing deepening levels of stress Even after central banks recognized they got their inflation calls wrong last year, they’ve continued to flub their policy guidance, threatening greater damage to their credibility, roiling markets and undermining the pandemic recovery A more detailed look at markets courtesy of Newsquawk Asia-Pac stocks traded mixed amid cautiousness heading into the FOMC with markets pricing in a more than 90% chance of a 75bps rate hike, while the region also digested better-than-expected Chinese activity data. ASX 200 was led lower by energy, resources and tech, despite a 5.2% national minimum wage increase. Nikkei 225 failed to benefit from strong Machinery Orders data amid the ongoing currency-related jitters. Hang Seng and Shanghai Comp. were positive with encouragement from the latest activity data that showed surprise growth in Industrial Production and a narrower than feared contraction in Retail Sales, while attention was also on the PBoC which rolled over CNY 200bln through its 1-year MLF with the rate unchanged. Top Asian News PBoC injected CNY 200bln via 1-year MLF vs. CNY 200bln maturing with the rate kept at 2.85%, as expected. China's stats bureau said the main indicators show marginal improvement and the economy shows good recovery momentum, but added that the economic recovery still faces many difficulties and challenges. Furthermore, it said policies to stabilise economic growth gained traction and it expects economic performance to improve further in June due to policy support, but noted recovery is still at an initial stage and main indicators are at low levels, according to Reuters. Hong Kong reports 1047 new COVID cases. Appears to be the first time since early April that cases have surpassed the 1k mark. European equities are firmer across the board ahead of the impromptu ECB meeting, Euro Stoxx 50 +1.0%; unsurprisingly,  periphery-nation indexes are outperforming, FTSE MIB +3.0%, given upside in banking names. As such, the Banking sector outperforms with most of its peers also in the green, though the Energy sector lags amid benchmark pricing. Stateside, futures are firmer across the board deriving impetus from European performance, but with overall action somewhat more contained ahead of the Fed and uncertainty around 75bp, ES +0.3%. Baidu (BIDU) is in discussions with potential suitors to offload its 53% stake in video-streaming name Iqiyi, according to Reuters sources. +3.8% in the pre-market. Top European News UK PM Johnson is reportedly determined to reverse Chancellor Sunak's planned GBP 15bln tax raid on business as he tries to firm up support following last week's confidence vote, according to The Times. UK PM Johnson is understood to have told his cabinet to 'de-escalate' the Northern Ireland Protocol stand-off with the EU, according to The Telegraph. UK exports to the EU during H1 of last year fell by 15.6% amid Brexit frictions, according to a study by Aston University cited by FT. Swiss SECO Forecasts (summer): Inflation: 2022 2.5% (prev. 1.9%), 2023 1.4% (prev. 0.7%). GDP: 2022 2.8% (prev. 3.0%), 1.6% (prev. 1.7%) Central Banks BoJ offers an additional emergency bond buying operation; to buy unlimited amounts of 10yr JGBs on June 16th & 17th at 0.25%. Fall in JGB futures has triggered a circuit breaker at the Tokyo stock exchange, via Japan Exchange Group. Japan's Securities Dealer Association's Morita says the JPY may have weakened too much, via Reuters. 8/9 members (vs. 3/9 at the May meeting) of the Times' shadow MPC believe that the BoE should raise rates by 50bps at its policy meeting tomorrow, according to the Times. FX Buck backs off from best levels into FOMC and US data awaiting confirmation of the hawkish hype or half point hike signalled pre-hot CPI; DXY slips from 105.650 peak on Tuesday into 105.380-104.700 range. Aussie rebounds on risk grounds and more aggressive RBA tightening calls, AUD/USD reclaims 0.6900+ status. Yen takes note of latest verbal intervention and Hong Kong Dollar supported by more physical HKMA buying to keep it pegged; USD/JPY sub-134.50 vs 135.50+ overnight. Euro extends recovery rally as ECB holds ad hoc meeting to discuss fragmenting debt markets and Wunsch contends that gradualism does not rule out larger than 25 bp moves; EUR/USD pops over 1.0500 from just below 1.0400 yesterday. Yuan gleans impetus from better than expected or feared Chinese industrial production and retail sales, USD/CNH nearer 6.7200 than 6.7600, USD/CNY close to 6.7100 and not far from 21 DMA at 6.6965 today. Fixed Income Decent bear market retracement in debt approaching the FOMC. Bunds up to 143.79 at best vs new 143.25 cycle low, Gilts towards top of 112.48-111.88 band and 10 year T-note closer to 115-06 than 114-10. BTPs markedly outperform after near 3 full point bounce from Tuesday close in anticipation of an anti-fragmentation tool from the ECB as GC meets for crisis talks. Commodities Currently, WTI and Brent are lower by circa. USD 1.00bbl but reside within comparably narrow ranges of around USD 2.00bbl vs, for instance, yesterday’s USD +6.00/bbl parameters. Curtailed amid COVID updates from China and Hong Kong alongside Biden's reported push for an explanation from producers over why supply isn't increasing. US President Biden has demanded an explanation from oil companies over why they are refraining from putting additional gasoline on the market and wants concrete ideas as to how they can increase supplied, according to a letter seen by Reuters. US Energy Inventory Data (bbls): Crude +0.7mln (exp. -1.3mln), Cushing -1.1mln, Gasoline -2.2mln (exp. +1.1mln), Distillates +0.2mln (exp. +0.3mln) US DoE announced contract awards and issued the fourth emergency sale of crude oil from SPR (as previously announced), in which contracts were awarded to nine including Chevron (CVX), Exxon (XOM) and Marathon Petroleum (MPC). Kazakhstan has capped wheat exports at 550k tonnes and wheat flour at 370k tonnes until September 30th, according to the Agriculture Ministry, via Reuters. Spot gold derives impetus from the USD’s retreat and is now back above USD 1820/oz but still shy of yesterday’s USD 1831/oz best and the subsequent 200-, 10- & 21-DMAs ahead at USD 1842, 1843 & 1845 respectively. US Event Calendar 07:00: June MBA Mortgage Applications +6.6%, prior -6.5% 08:30: May Import Price Index YoY, est. 11.9%, prior 12.0%;  MoM, est. 1.1%, prior 0% May Export Price Index YoY, prior 18.0%; MoM, est. 1.3%, prior 0.6% 08:30: May Retail Sales Advance MoM, est. 0.1%, prior 0.9% May Retail Sales Ex Auto MoM, est. 0.7%, prior 0.6% May Retail Sales Control Group, est. 0.3%, prior 1.0% 08:30: June Empire Manufacturing, est. 2.2, prior -11.6 10:00: April Business Inventories, est. 1.2%, prior 2.0% 10:00: June NAHB Housing Market Index, est. 67, prior 69 14:00: June FOMC Rate Decision 16:00: April Total Net TIC Flows, prior $149.2b DB's Jim Reid concludes the overnight wrap In these crazy days for markets, I'm willing to stake my reputation that I've done something in the last 24 hours that no-one else reading this did. Yes, after a business trip to Europe yesterday, I watched the original Top Gun on my iPad on the plane ride home for the very first time, some 36 years after it came out. My wife wants to watch the sequel, so I thought I ought to see what all the fuss was about. She's seen it around 20 times and always asks what I was doing in my teenage years that's made me miss all the films of her youth. The truth is I was either studying or playing cricket or golf. Not much else. My review is that it was a decent film, but Mavericks' courting technique doesn't really age very well. I'm not sure Maverick and Goose would have been able to get out of the tight spot that the Fed are in at the moment very easily. After the astonishing price action over the previous 2 business days, markets have settled somewhat over the last 24 hours, but overall have continued to struggle as they await today’s all-important Federal Reserve decision. Up until the CPI report last Friday, that decision seemed like a lock in favour of a second consecutive 50bp hike, not because that was the right move, but because the Fed had firmly guided us to such an outcome. The CPI report raised doubts as to whether they could hold that line over the summer, but the WSJ article on Monday night broke the levee as a 75bps move tonight is now suddenly pretty much consensus. Our economics team agrees and have now updated their previously street leading view to have a +75bp hike tonight followed by another +75bp increase in July. The team believes fed funds will reach 3.5% by the end of the year, and hit a terminal rate of 4.1% in Q1 2023, sooner than they thought before the WSJ story. See their full updated call, available here. As we hit this big day, markets now fully price in a 75bps hike today. Indeed, 76.3bps is priced, so that actually incorporates a small risk of 100bps, something former New York Fed President Bill Dudley was openly considering yesterday, which may have contributed to the sentiment that drove the next leg of the selloff in the New York afternoon. A total of 289bps worth of rate hikes by year-end is now priced. So quite the turnaround from a few weeks back when some were even floating the strange idea of a “pause” in September. Clearly the 75bp call is mostly based on a WSJ article so we can't be certain but you would have thought the Fed would have tried to leak out a rebuttal if that wasn't what they wanted to guide the market towards. We will see. Whilst the size of any rate hike will be the focal point, today also brings the latest dot plot from the FOMC and offers an insight into the potential pace of rate hikes over the months ahead. Our US economists expect that to undergo substantial revisions, with the median dot likely rising to 3.5% and 3.8% for 2022 and 2023 respectively. Meanwhile on the economic projections, they think they’ll also show further movements towards a “softish landing”, with growth revised lower throughout the forecast, albeit stopping short of anticipating a recession. Ahead of all that, US equities slipped to fresh lows yesterday with the S&P 500 (-0.37%) falling to its lowest closing level since January 2021. Tech stocks outperformed, in contrast to the recent trend, with the NASDAQ (+0.18%) and the FANG+ Index (+1.97%) bouncing off of recent lows. Small-caps fared less well today and the Russell 2000 (-0.39%) fell to its lowest closing level since November 2020. Over in Europe, equities similarly fell to fresh lows and the STOXX 600 (-1.26%) likewise fell to levels unseen since March 2021. Rates sold off by a smaller magnitude than the previous two sessions (low bar to clear), but an initial rally gave way to a selloff in the European afternoon that continued to gather pace into the New York close. Yields on 10yr Treasuries were up +11.3bps to a fresh post-2011 high of 3.47%, supported by a further rise in the 10yr real yield (+13.7bps) that took it up to a 3-year high of 0.82 The 2s10s curve just about clambered out of inversion territory where it’d closed on Monday, steepening by +3.8bps to end the day at just 3.6bps. But even the Fed’s preferred yield curve measure of the near-term forward spread fell to its flattest level in 3 months, even if it’s still well out of inversion territory for now. This spread will likely collapse in the months ahead. As we go to press, yields on 10yr USTs (-4.63 bps) are moving lower to 3.42% with 2yrs -5.6bps. Today’s focus may be on the Fed, but over at the ECB we had Isabel Schnabel of the Executive Board give a significant speech last night about policy fragmentation. Recall, one of the key takeaways from last week’s ECB meeting was the apparent lack of progress on anti-fragmentation tools, shining a spotlight on Schnabel’s remarks last night. As our European economists emphasised last week, Schnabel argued that any tool would be reactionary, that is in response to more spread widening. She did not offer new details of any potential tool last night, instead echoing President Lagarde that PEPP purchase flexibility would be used to ensure smooth policy transmission in the interim. However, Schnabel also re-emphasised the ECB’s commitment to ensure smooth policy transmission. That Schnabel, a relative hawk on the committee and one that has expressed trepidation about a new facility in the past, so willingly supported the idea of doing what was needed to support policy implementation was an important shift for the ECB. The language Schnabel used last night may support the notion that the spread widening seen to date may already be approaching levels inconsistent with smooth policy transmission. It may not take much more pressure for the ECB to act but we are still in the dark on how they will. Earlier in the day, Dutch central bank governor Knot made some incredibly hawkish comments, saying that if “conditions remain the same as today, we will have to raise rates by more than 0.25 points” in September, and that “our options are not necessarily limited” to a 50bps move, so openly floating the potential to move by even more, which hasn’t been something discussed by the ECB to date. European sovereign bonds sold off significantly against that backdrop, with fresh multi-year highs seen for yields on 10yr bunds (+11.9bps), OATs (+13.7bps) and BTPs (+14.9bps). Peripheral spreads hit new post-Covid highs too, with the gap between Italian and German 10yr yields widening to 241bps. And there were some significant milestones on the credit side as well, with iTraxx Crossover widening +10.4bps to a fresh 10 year high of 544bps outside of 2-months around peak covid, and in North America we saw the CDX IG spread move above 100bps in trading for the first time since April 2020, before settling back at 99.0bps. In Asia markets are mixed with the Hang Seng (+1.44%) trading up boosted by technology stocks following the Nasdaq's overnight gain. Likewise, stocks in mainland China are also higher in early trade with the Shanghai Composite (+1.41%) and CSI (+1.57%) edging higher as the economy showed a slightly better than expected recovery in May (see below). However, the Nikkei (-0.73%) and the Kospi (-1.54%) are trading lower, extending earlier session losses. Outside of Asia, US equity futures are reversing losses this morning with contracts on the S&P 500 (+0.38%) and NASDAQ 100 (+0.59%) trading up. Early this morning, data released showed that China’s industrial production unexpectedly rebounded +0.7% y/y in May (v/s -0.9% expected), against a drop of -2.9% in April, whilst retail sales slid -6.7% in the period, less than -7.1% projected decline and slightly better than April’s -11.1% plunge. Meanwhile, Fixed-asset investment grew +6.2% in the first 5 months of the year (v/s +6.0% expected). Elsewhere, Japan’s core machinery orders strongly beat at +10.8% m/m in April, its fastest pace in 18 months (v/s -1.3% market consensus and +7.1% in March). Yesterday we also heard that the Bank of Japan had bought a record ¥2.2tn in government notes through its fixed-rate operation as they seek to defend their yield curve target and keep 10-year JGB yields beneath their stated limit of 0.25%. This has continued to put pressure on the Yen however, which fell to a closing level of 135.47 per dollar yesterday, thus moving beneath its 2002 closing low of 134.71 and leaving it at levels unseen since 1998. We're at just above 135 this morning after a small rally back. Speaking of currencies under pressure, Bitcoin fell to a 17-month low of $21,966 yesterday, having been trading around $30,000 just prior to the CPI release on Friday. This morning it's at $21,100. Elsewhere, brent crude and WTI futures reversed mid-day gains of near 2% to close -0.90% and -1.65% lower, respectively, following reports that the Biden Administration may pose a surtax on oil company profit margins, as another sign Biden is looking high and low for potential actions to curb oil gains into this year’s mid-terms. The big moves were seen in natural gas however, where US futures were down -16.5% and European futures were up +16.12% after the operator Freeport LNG said that they aiming for a partial resumption of operations at one of their Texas export terminals in 90 days, and that full operations wouldn’t return until late 2022. That’s a longer delay than was expected, and by keeping gas in the US led to that decline in US futures and the rise in European ones. Looking at yesterday’s data, the Fed got a fresh reminder about inflation pressures from the PPI release for May, where the monthly headline gain in prices rose to +0.8% in line with expectations, up from +0.4% in April. That left the year-on-year measure at +10.8% (vs. +10.9% expected), which does mark a second consecutive decline in that measure from its peak of +11.5% in March. One positive for the Fed ahead of today’s meeting is that elements that comprise a larger share of core PCE, such as healthcare, showed some softness, but time will tell. Separately, the UK employment data saw the number of payrolled employees in May grow by +90k (vs. +70k expected), but unemployment ticked up to 3.8% in the three months to April (vs. 3.6% expected). Finally, the ZEW survey from Germany saw an improvement relative to May’s readings, with expectations up to -28.0 (vs. -26.8 expected), and the current situation up to -27.6 (vs. -31.0 expected). To the day ahead now, and the main highlight will likely be the aforementioned FOMC decision and Chair Powell’s subsequent press conference. There’s also an array of ECB speakers, including President Lagarde, as well as the ECB’s Holzmann, Nagel, Centeno, Muller, De Cos, Panetta and Knot. Otherwise, data releases include Euro Area industrial production for April, US retail sales for May, the NAHB housing market index for June and the Empire State manufacturing survey for June. Tyler Durden Wed, 06/15/2022 - 07:53.....»»

Category: dealsSource: nytJun 15th, 2022

Stocks Stage Feeble Attempt At Dead Cat Bounce After Losing $1.3 Trillion In One Day

Stocks Stage Feeble Attempt At Dead Cat Bounce After Losing $1.3 Trillion In One Day US index futures staged a feeble, fading attempt to bounce on Tuesday, following Monday's crash that wiped out $1.3 trillion in market cap and topped a furious 4-day selloff that was the worst since March 2020 and culminated in a bear market amid expectations - even from permabull Goldman - that the Fed's now accepted 75bps rate hike on Wednesday will hurl the economy into a recession. Futures on the S&P 500 rebounded more than 1% in early trading before fading the gain to just 0.24%, while Nasdaq 100 futures climbed 0.5%. US stocks plunged on Monday to the lowest level since January 2021 and closed more than 20% below its January record high, triggering Joe Biden first official bear market. Global equities sold off after an unexpectedly strong reading Friday on US inflation sparked concern that the Fed will go too far in raising interest rates to tame soaring prices. Bond yields dipped after soaring to a peak last seen in 2011. The yield curve remained flat, however, underscoring worries about an economic downturn sparked by tighter monetary policy, with the 2s10s curve just 1bps away from inverting again.  Cryptocurrencies, meanwhile, plunged with bitcoin puking more than 10% to below $21,000 before paring much of the slide as dip buyers emerged. UBS said most long-term owners are now in the red and warned of more losses if coin miners buckle under the pressure and start selling. The dollar was steady near a two-year high. In Japan, the central bank boosted bond-purchase operations to keep yields in check. The yen hovered near a 24-year low against the greenback. “We remain bearish on equity outlook,” said Marija Veitmane, a senior strategist at State Street Global Markets. “Inflation is still a huge problem and central banks need to be very aggressive to fight it. This is a very negative outlook for stocks, so we would be sellers of any rally.” Among notable premarket movers, shares of megacap tech companies like Apple, Microsoft, Alphabet, Tesla and Meta Platforms were slightly higher and poised to recoup some of the losses from Monday: Apple (AAPL US) +1.4%, Amazon (AMZN US) +1.7%, Alphabet (GOOGL US) +1.5%, Meta Platforms (META US) +1.9% and Nvidia (NVDA US) +1.8% in premarket trading. Oracle shares rose 13% in premarket trading after the software company reported higher-than-expected fourth-quarter results. Here are the most notable premarket movers: AMC Entertainment (AMC US) shares rise as much as 3.7% in US premarket trading, in line with a broader rebound in risk assets, and after the movie theater operator said that last weekend’s admission revenues beat that of the same weekend of 2019. Adobe (ADBE US) slides 4.2% in premarket trading as Citi cut its price target on the company to $425, the lowest on Wall Street, citing weaker consumer spending and potentially rising competition. US-listed Chinese stocks post broad-based gains in premarket trading, on track to rebound from a three-day drop, as sentiment toward tech stabilizes: Alibaba (BABA US) shares rise 3.8%, Baidu (BIDU US) +4%, Pinduoduo (PDD US) +4.2%, JD.com (JD US) +3.2% and Li Auto (LI US) +6.1% Braze (BRZE US) shares jump 8% in premarket trading after the company’s first-quarter revenue beat estimates, and full-year guidance also topped expectations. Arista (ANET US) shares decline 4.1% in US premarket trading as Morgan Stanley says in a note that the company, as well as Wiwynn and memory stocks such as SK Hynix and Micron (MU US) are among those most at risk in the semiconductor and networking equipment space when tech firms cut spending on data centers. Kaival Brands (KAVL US) shares surge as much as 57% in US premarket trading, after the vaping products distributor reached deal with Philip Morris to distribute electronic nicotine delivery systems products outside of the US. Outset Medical (OM US) shares fall 4.6% in premarket trading as their price target was cut to a Street-low at Cowen, after the medical technology firm halted shipments on its Tablo Hemodialysis System for home use. The company also suspended guidance for the year. US Silica (SLCA US) shares may be in focus after they were upgraded to outperform from inline at Evercore ISI following the conclusion of the industrial minerals firm’s review of its Industrial & Specialty Products (ISP) segment. With just two weeks left until the end of Q2, a dismal picture emerges: this quarter is set to deliver the biggest combined loss for global bonds and stocks on record, according to Bloomberg. The highest inflation in a generation, stoked by supply-chain and commodity-market disruptions amid China’s Covid struggles and the war in Ukraine, is roiling the outlook. According to Bloomberg,  the big question is whether the Fed and other major central banks will tip their economies into recession as they tighten financial conditions. We disagree: a recession is now assured; the real big question is how sparking a recession in the US will force Putin to pump more gas. European gains were shorter-lived: Euro Stoxx 50 reverses a 1.1% bounce to trade down 0.2%, extending its decline to a sixth day, on track for the longest losing streak since the start of the pandemic and the lowest closing level in 15 months. Retail, media and travel are the weakest Stoxx 600 sectors with broad-based sectoral gains fading as the session progresses. Bonds in most of Europe edged lower, but gilts bucked the trend after data showed spending power of UK households plunged as inflation eroded wage increases. Here are the biggest European movers: Fortum shares rose as much as 9.5%, while Uniper gained 6.1% as Finland is prepared to give Fortum time to sell its Russian power plants and follow other western energy companies out of Russia. Rates-sensitive banking stocks in Europe outperform Tuesday as Treasury yields drop following four consecutive days of increases that lifted the 10-year to the highest level since 2011. HSBC shares gain as much as 3.2%, Standard Chartered +3.2%, Nordea Bank +2.7%, ING +2.8% Wizz Air shares rise as much as 6.2% after Berenberg upgraded the airline to buy from hold, citing the long-term potential of its business, despite numerous recent challenges. Go-Ahead rises as much as 15% amid a potential bidding war. The company accepted a £648m takeover bid from an investor group backed by Australian rival Kinetic, while Kelsian is assessing whether to make offer. Saipem gains as much as 8.5% after five sessions of declines; the company and Trevi signed memorandum of understanding for foundation drilling solutions and services for offshore wind farm projects. Atos shares plunge as much as 27% after the company announced the departure of newly arrived CEO Rodolphe Belmer and a separation into two publicly listed companies. Akzo Nobel shares decline as much as 6.1% after the company reduced 2Q forecasts due to China lockdowns and slower start to EMEA DIY season. Air France-KLM shares fall as much as 13% after the company raised EU2.3b in a deeply discounted rights offering to help repay state aid received during the pandemic. Earlier in the session, Asian stock market indexes hit bleak milestones in quick succession on Tuesday as investor concerns worsened that aggressive interest rate increases in the US could erode corporate earnings. The MSCI Asia Pacific Index dropped as much as 2% to its lowest level in a month after the world equities gauge entered a bear market overnight before paring losses. New Zealand’s stock index extended its decline to 20% from a peak reached last year, entering a bear market, while Singapore’s measure wiped out its gains for 2022. Traders are betting that the Fed will deliver a 75-basis-point rate increase in this week’s meeting -- the biggest since 1994 -- after US inflation hit a four-decade high in May. This is further muddying the economic outlook at a time supply chains are snarled, weighing on the valuation and profit estimates for the MSCI Asia index, which has lost 17% this year. “Bets are off for all asset classes as investors brace themselves for tough action from the Fed to counter higher-than-expected inflation,” said Justin Tang, head of Asian research at United First Partners in Singapore. “The renewed lockdowns in China are also not going to be helpful.” Central banks from South Korea and Australia to India have been raising rates in response to accelerating inflation, with the latter two announcing 50-basis-point increases in their latest decisions. China’s persistent zero-Covid strategy is another factor disproportionately affecting companies in Asia. Singapore’s Straits Times Index is near a correction, down 9.7% from an April high, while Australia’s S&P/ASX 200 Index has dropped 12% over a similar period. Elsewhere, the MSCI Asean Index is inching closer to a 20% drop from a peak reached in January 2021, while South Korea’s Kospi remains mired in a bear market.  Still, investors have identified some potential areas of outperformance, as Asia’s stock measure has held up better than global peers as it continues to trade at a lower forward price-to-earnings ratio. And while China has walked back on loosening some Covid-19 restrictions in Beijing and Shanghai, traders see the country’s fiscal and monetary easing stance giving its beleaguered stocks a further boost.  “China might outperform global equities, as it did in May and early June,” if consumption resumes in the coming months after a relaxation in lockdowns, said Herald van der Linde, head of APAC equity strategy at HSBC Holdings Plc. Meanwhile, commodity-exporting Southeast Asian countries such as Indonesia, which are also benefiting from border reopenings, are expected to continue to shine. The Jakarta Composite Index rose on Tuesday, taking its advance to 7.1% this year. India was no exception to the global rout, and stock gauges fell to their lowest levels in 11-months as inflation and interest-rate concerns continued to fuel selloffs across global equity markets.  The S&P BSE Sensex fell 0.3% to 52,693.57 in Mumbai after rising as much as 0.5% during the session. The NSE Nifty 50 Index dropped by an similar measure to its lowest since July 28. Both benchmarks have dropped more than 14% from October peaks. Foreign institutional investors have taken out $24.2 billion from local stocks this year through June 10, and the selloff is headed for its ninth consecutive month. However, the key indexes have still outperformed Asia Pacific and emerging-market peers this year, helped by net $26.4 billion of stock purchases by domestic investors, which include mutual funds and insurance companies. Consumer-price inflation in India has stayed above the central bank’s target in May while wholesale prices accelerated for a third-straight month as input costs continue to rise for manufacturers. “High inflationary environment, fresh curbs in China and rising crude oil prices are likely to keep the markets under pressure for a while,” Motilal Oswal analyst Siddhartha Khemka wrote in a note.  Reliance Industries contributed the most to the Sensex’s decline, decreasing 1.3%. Among the 30 shares in the Sensex Index, 15 rose, 14 fell and one was unchanged. In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against most of its Group-of-10 peers.  The euro rose from a one-month low against the dollar but still failed to retrace the recent plunge in a meaningful way. German June ZEW expectations came in at -28.0 versus estimate -26.8. Norway’s krone slumped to a fresh 4-week low against the euro after Norges Bank’s regional network report showed businesses were expecting growth to slow. Sweden’s krona got a temporary boost after inflation figures for May came in higher than the median estimate in a Bloomberg survey. A Riksbank survey showed businesses, which are seeing sharp cost increases, are concerned that the coming wage bargaining rounds will lead to higher salary costs than in previous collective agreements. The Swiss franc led G-10 gains as it pared most of yesterday’s drop against the dollar. The pound edged up from a two-year low against the dollar. Sterling remained on the back foot after UK labour market data showed limited further tightening in the jobs market, suggesting that the BOE may raise interest rates by 25bps this week, rather than 50bps. Australian sovereign bonds plunged in catch-up to a two-day rout in Treasuries as the specter of a 75bps Fed hike on Wednesday loomed large. Aussie steadied following a bounce in US stock futures. USD/JPY consolidated. The Bank of Japan ramped up the defense of its policy framework after yields came under renewed upward pressure, unveiling a further set of unscheduled buying operations, including purchases of much longer maturities In rates, treasuries bull steepened with front-end yields richer by 8.5bp on the day into US morning session. S&P futures slightly higher, although remain near Monday session lows as investors continue to position ahead of Wednesday’s Fed decision. Swaps market prices in just under 200bp of rate hikes over the next three meetings with 70bp priced into Wednesday’s decision. Three-month Libor fix jumps over 17bp. US yields richer by 8.5bp to 5bp across the curve with front-end led gains steepening 2s10s, 5s30s spreads by 2.1bp and 1.5bp; 10-year yields around 3.30% and outperforming bunds by 7bp on the day. IG dollar issuance slate; projections for the session remain murky amid markets turmoil and after a number of deals were put on ice Monday. Gilts put in a ~6bps parallel richening move across the curve. Bunds buck the trend, bear-steepening ahead of scheduled comments from ECB’s Schnabel on euro-area bond market fragmentation due later. In commodities, oil held above $120 a barrel as investors evaluated a tight supply outlook and the impact of China’s eventual return from virus curbs. WTI adds 0.7% to trade near $121.71, Brent holds above $123. Spot gold trades a narrow range, fading after hitting $1,830/oz. Base metals are mixed; LME tin falls 5.1% while LME zinc gains 0.3%. To the day ahead now. The ECB’s Schnabel speaks, while in data we get UK jobless claims, ILO unemployment rate, ZEW surveys for the Eurozone and Germany, US NFIB small business optimism and PPI, and Canadian manufacturing sales. Hold on to your hats. Market Snapshot S&P 500 futures up 1.1% to 3,790.50 STOXX Europe 600 up 0.1% to 413.07 MXAP down 0.9% to 159.98 MXAPJ down 0.6% to 529.25 Nikkei down 1.3% to 26,629.86 Topix down 1.2% to 1,878.45 Hang Seng Index little changed at 21,067.99 Shanghai Composite up 1.0% to 3,288.91 Sensex down 0.2% to 52,743.72 Australia S&P/ASX 200 down 3.5% to 6,686.03 Kospi down 0.5% to 2,492.97 Brent Futures up 0.7% to $123.15/bbl Gold spot up 0.6% to $1,829.72 U.S. Dollar Index down 0.34% to 104.72 German 10Y yield little changed at 1.62% Euro up 0.6% to $1.0473 Brent Futures up 0.7% to $123.17/bbl Top Overnight News from Bloomberg The latest jumps in consumer prices and inflation expectations will probably spur Federal Reserve officials to consider the biggest interest-rate increase since 1994 when they meet this week, after Chair Jerome Powell previously signaled a smaller move was the likely outcome JPMorgan Chase & Co. and Goldman Sachs Group Inc. are withdrawing from handling trades of Russian debt after the Biden administration’s surprise announcement last week it’s banning US investors from scooping up such assets As the BOJ escalates attempts to keep a lid on bond yields, BlueBay is betting the central bank will be forced to abandon a policy that’s increasingly out of sync with global peers. The BOJ’s so- called yield curve control is “untenable,” according to Mark Dowding, BlueBay’s London-based chief investment officer Investor fears of stagflation are at the highest since the 2008 financial crisis, while global growth optimism has sunk to a record low, according to Bank of America Corp.’s monthly fund manager survey A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were pressured following the global stock and bond slump as the aftershock from recent hot US inflation reverberated across risk assets and spurred further expectations for a 75bps Fed rate hike this week. ASX 200 was the worst performer as the losses caught up to the index on return from the extended weekend and with the declines led by underperformance in tech and metals. Nikkei 225 extended its declines despite the BoJ’s efforts to cap yields and with the recent rapid currency moves adding to the uncertainty. Hang Seng and Shanghai Comp. were negative as lockdown concerns lingered with China’s Vice Premier Sun suggesting it is necessary to strengthen COVID-19 prevention and control of key places, while Shanghai's Minhang district plans to conduct mass testing on Saturday. Top Asian News Shanghai's Minhang district is planning mass COVID-19 testing on Saturday, according to Bloomberg. BoJ announced additional bond purchases for Wednesday in which it will increase purchases of JGBs across several maturities, while it will continue to conduct additional buying as needed, according to Reuters. European bourses began on the front-foot but quickly slipped into negative territory, Euro Stoxx 50 -0.8%; since the post-open dip, price action has steadily deteriorated further. However, while US futures are directionally in-fitting they remain in positive territory, ES +0.3%; albeit, well of highs and the ES resides around 3760 currently awaiting Fed clarity amid increasing speculation for 75bp. Oracle Corp (ORCL) Q4 2022 (USD): Adj. EPS 1.54 (exp. 1.37), Revenue 11.8bln (exp. 11.66bln). Cloud License And On-Premise License: 2.54bln (exp. 2.19bln). Cloud Services And Licenses Support: 7.6bln (exp. 7.77bln). Total Hardware Revenues: 856mln (exp. 857.71mln). Total Services Revenues: 833mln (exp. 847.89mln). Added USD 15.8bln after Cerner acquisition and it expects cloud business to grow by over 30% in FY23; Co. expects Q1 rev. including Cerner to grow 17%-19%. (PR Newswire) +12% in the pre-market. German cartel office has commenced proceedings against Apple (AAPL) re. tracking regulations for 3rd party apps, via Reuters. Top European News The EU is set to launch three separate lawsuits against the British government after it published its plans to override the protocol, according to the Telegraph. One option would reportedly see the EU end financial equivalence for the City of London. US urged the UK and EU to return to talks to resolve differences over the Northern Ireland Protocol and said it remains a priority to protect gains of the Good Friday Agreement. White House said proposed changes to N. Ireland Protocol won't be an impediment to potential US-UK trade deal or trade dialogue talks in Boston, according to Reuters. UK PM Johnson is not looking to lower household taxes until inflation is brought under control, as such action is unlikely before next year, according to the Telegraph. FX Dollar consolidates after Monday’s melt up to new multi year peaks as clock ticks down to FOMC and US PPI data; DXY hovers around 105.00 and just shy of new 105.290 YTD high. Franc outperforms following suspension of trade in Russia against Rouble and Greenback; Usd/Chf probes 0.9000 to downside after pulling up only pips short of parity yesterday. Euro rebounds amidst more hawkish commentary from ECB’s Knot and irrespective of German ZEW survey misses; EUR/USD back above 1.0400 and decent option expiries between 1.0420-15. Aussie undermined by waning risk appetite and ongoing covid outbreaks in China, but underpinned by RBA Governor Lowe underlining determination to get inflation back to target, AUD/USD towards lower end of 0.6970-18 range. Pound fades after brief upturn in bigger than expected rise in UK employment as other labour market metrics fall short of expectations and EU rift over NI protocol persists; Cable on the cusp of 1.2100 after fleeting breach of round above, EUR/GBP crosses 0.8600 to set fresh 2 month apex. Fixed Income Recovery in EZ debt derailed by supply and hawkish remarks from ECB's Knot as Bunds retreat to 145.00 within a 145.58-144.51 range Gilts and 10 year T-note hold up better between 112.97-29 and 116-03/115-01+ parameters in consolidation after Monday's rout and ahead of US PPI data ** BTP/Bund** spread blows out beyond 250 bp in advance of ECB's Schnabel on fragmentation in bond markets Commodities WTI and Brent are firmer by circa. USD 1.0/bbl at present and reside towards the mid-point of a USD ~2.00/bbl range with specific newsflow thin and broader developments on familiar themes. Themes which include China COVID and travel demand, for instance; but, factors which are overshadowed by broader anticipation going into Wednesday's FOMC. US and Saudi Arabia will announce on Tuesday that US President Biden will visit Saudi Arabia on July 15th and 16th, according to NBC's Pegram citing sources. China's state planner is to increase retail prices of gasoline and diesel by CNY 390/tonne and CNY 375/tonne respectively as of June 15th, via NDRC. Spot gold is essentially unchanged on the session around USD 1820/oz after falling below the 10-, 21- & 200-DMAs yesterday; Copper softer amid broader risk. US Event Calendar 08:30: May PPI Final Demand MoM, est. 0.8%, prior 0.5%; YoY, est. 10.9%, prior 11.0% 08:30: May PPI Ex Food and Energy MoM, est. 0.6%, prior 0.4%; YoY, est. 8.6%, prior 8.8% 08:30: May PPI Final Demand DB's Jim Reid concludes the overnight wrap Where do we start this morning after as action packed a 24 hours as I can remember. The global equity and bond sell-off would have been bad anyway but the late US session headlines from a WSJ article (written by a journalist close to the Fed) that suggested the FOMC may need to surprise with a +75bp hike tomorrow was the last straw. Before we delve into the article and more detail on markets let’s take a one para overview of all the main market highlights. To start with, 2yr USTs capped their largest two-day move (+54.3bps, +29.1bps yesterday), since the week following Lehman’s collapse, while 10yr Treasuries have risen +31.8bps over the last two days (+20.4bps yesterday), the largest such move since December 2010, bringing the 10yr to 3.36%, the highest since 2011. Meanwhile, the 2s10s yield curve swung around violently before closing in inverted territory (-0.3bps) again for the first time since the first days of April and for only the 15th day out of the 3907 business days since May 2007. The historic moves didn’t end with the Treasury market, as Italian 10yr BTP yields (+26.2bps) crossed 4.0% for the first time since 2014, the crossover index widened +32.3bps to 534bps, its widest level since 2012 outside of peak initial Covid widening, Bitcoin fell -15.13% to its lowest since late 2020 and is down another -5.23% this morning, the S&P 500 (-3.88%) finally entered bear market territory (-21.8% from its YTD peaks), while the dollar index surged to its highest level since 2002. So quite a ride although as we'll see below risk is doing a bit better this morning with yields relatively flat. Going through things in more detail, the Treasury market has been at the epicentre of this sell-off after the shocking CPI from last Friday. Yields were drifting higher all day as some on the Street officially updated their call for +75bp on Wednesday and openly considered whether the Fed will need a +100bp hike. The WSJ report then later threw gasoline on the already raging fire, noting the Fed was indeed “considering surprising markets with a larger-than expected” +75bp hike as early as this week given Friday’s alarming CPI and inflation expectations data. All-in, Fed funds futures moved to price in a 94% chance of a +75bp hike on Wednesday. So a +75bp hike on Wednesday won’t come as a surprise anymore. At the end of the day, 2yr yields gained +29.1bps yesterday and +25.2bps Friday, bringing the rate to 3.35%. The 2s10s yield curve inverted, closing the day at -0.3bps, as 10yr yields climbed +11.4bps Friday and +20.4bps yesterday, bringing rates to 3.36%, their highest level since April 2011. As we go to press this morning, 2yr yields are up another 2bps with 10yr yields fractionally higher, thus inverting the curve a little more. US PPI today will be closely watched for the next inflation impulse. The policy rate at end 2022 implied by fed funds futures closed at 3.72%, its highest to date by some margin, and implies just shy of +300bps of tightening over 5 meetings. Markets also moved to price in a terminal rate above 4% in the middle of next year, closer to DB's call which has been the most aggressive on the street. It’s perhaps an understatement to say the market will be hyper focused on how the Fed communicates the near-term path of policy at this week’s FOMC, especially including what size rate hikes they’re considering as adequate for the rest of the year. The selloff was echoed in Europe, where 10yr bunds (+11.5bps), OATs (+15.4bps), and BTPs (+26.2bps) all soldoff, even before the blockbuster WSJ report. ECB speakers returned to the docket after last week’s meeting, where Governing Council member Kazmir noted there was a clear need for a +50bp hike in September, in line with our European economics team’s call. Kazmir went on to warn that the economy faces weak growth for several quarters, piling onto what the market had already deduced – the sharp global repricing in monetary policy would weigh on growth. One of the major fears following the ECB meeting was that absent a new tool designed to stem fragmentation, peripheral spreads would widen out, and yesterday brought a fresh round of peripheral widening, with 10yr Italian spreads widening +14.6bps to bunds, with Spanish bonds widening +9.9bps. Indeed, 10yr BTPs crossed 4.0% for the first time since 2014. Equity markets got the message, selling off across the Atlantic, with the S&P 500 falling -3.87% into bear market territory, down -21.82% from the all-time highs reached in early January, with the STOXX 600 down -2.41%. At one point, every single share in the S&P 500 was lower, though the index staged a heroic rally leaving 5 shares higher on the day. That’s the lowest amount since June 11, 2020 when only one share advanced. Unsurprisingly, every S&P 500 sector was lower, with all but two sectors declining by more than 3%. The NASDAQ fell -4.68% on the hit from higher discount rates, now -32.68% from its November high. Mega-cap shares bore the brunt of higher discount rates, with the FANG+ falling -6.50%, its worst day since September 2020, and -40.98% lower from its own all-time highs reached in November. Markets are trying to bounce this morning with S&P 500 futures +1% and Nasdaq futures +1.15% As we discussed yesterday, this sharp rates repricing is partly due to another attempt at forward guidance from the Fed. Having signalled 50bps at the next two meetings a few weeks ago they reduced volatility. However when it became clear that this guidance may be insufficient it has opened up a market attack. The last man standing continues to be the BoJ and to be honest the more the market attacks the Fed and the ECB the more likely it is that the BoJ own forward guidance (in the form of YCC) will end very messily with huge implications for global rates. If the BoJ throws in the towel in H2 then global bond markets lose a huge anchor. Certainly one to watch for every morning when you wake up! Indeed the BOJ ramped up its scheduled purchases of 5-to-10-year debt today from an expected ¥500 billion to ¥800 billion as the yield on the 10yr JGBs jumped to 0.255%, edging past the upper end of the central bank’s 0.25% target range. Talking of Asia, equity markets are lower this morning but markets are trying to fight back. The Nikkei (-2.00%) is the largest underperformer with the Hang Seng (-1.15%) and Kospi (-1.11%) also lagging. In mainland China, the Shanghai Composite (-1.60%) and CSI (-1.86%) are also lower. Elsewhere, the S&P/ASX 200 is -4.54% lower after returning to trade following a holiday yesterday. In such a broad-based selloff, many would have been interested in how crypto assets would hold up, supposedly uncorrelated with traditional assets. However, digital assets did not escape the wrath of plummeting risk sentiment, with bitcoin falling -15.13% and down another -5.28% this morning as we type. At one point this morning, Bitcoin fell about -10% to trade at $20,823 before recovering a little. There were reports that some exchanges were having trouble liquidating holdings of various crypto assets. This is a classic deleveraging and unwinding of a bubble trade. To the day ahead now. The ECB’s Schnabel speaks, while in data we get UK jobless claims, ILO unemployment rate, ZEW surveys for the Eurozone and Germany, US NFIB small business optimism and PPI, and Canadian manufacturing sales. Hold on to your hats. Tyler Durden Tue, 06/14/2022 - 07:49.....»»

Category: blogSource: zerohedgeJun 14th, 2022

Nomura: The "Calmest Selloff Ever" Is Over, Brace For Turbulence Ahead

Nomura: The 'Calmest Selloff Ever' Is Over, Brace For Turbulence Ahead Yesterday was different. Bond yields tumbled with stocks (they have tended to rise recently as stocks tanked)... ...and VIX spiked as stocks were spanked (it has been decoupling, exuding calmness for a few days until then)... The change was catalysed by two factors: 1) "Hard-Landing" / "Recession" narrative keeps gaining-steam, so bonds are beginning to "work" as a risk-asset hedge, and 2) Yesterday's VIX-piry (and tomorrow's Op-Ex) removed much of the overhang suppressing vol, crushing hopes for some form of 'stabilization' So given the 'change', what happens next? As Charlie McElligott warns, the bond short covering is only just beginning. Today's ugly Philly Fed miss and significant trend rise in jobless claims is leading to another wave of spastic short-covering / upside-buying in USTs (and USD weakness), as "Growth Scare >> Recession" meme-check builds further steam. In fact, while unwinds have begun, CTA Trend legacy “Short” positioning remains a significant source of “covering” risk instability And notably, McElligott points to Credit / Spread-Product / Long Duration demand from “asset allocators” and real money: "I just get the sense that as the market crystalizes on this (pre-emptive) move towards 'Contraction / Recession / Hard-Landing' that the market is gonna 'come hard' for this stuff." Shifting back to equity-land, the 'calmest selloff ever' is over following VIX-piration yesterday. As SpotGamma notes, yesterday's VIX expiration likely pulled forward expiration “rally fuel” but looked for more support around the 4000 level. However, terrible retail reports from the likes of WMT (-15%) & TGT (-20%) and now CSCO (-10% premarket) signal “recession”, and that comes into an environment with increasing interest rates. This likely triggered both natural & forced liquidations. As markets declined it was quite likely that options hedging flows sold, too, as large short dated put positions went from 2% out-of-the-money, to 2% in-the-money. The concentrated puts positions near 400SPY/4000SPX/300QQQ invoked “jump risk” as options rip higher in value. Shown below is the price of the 5/20exp 4000 strike put – note how its price shot higher as 9AM VIX settlement passed... Negative Gamma is dominating the market's intraday moves... ...which are at near record levels of turbulence. As Nomura's McElligott notes, this is the longest extended period of dealer "short gamma" seen for years, which implicitly has led to the most persistently violent intraday-day range period in recent history... The Nomura strategist offers one more inisght of note, that is that one of the challenges for Stocks now with regards to hopes of some form of stabilization and “finding friends” - at least from within the leveraged community (Equities L/S and M/N space) - is “tight-stops” in this type of VaR environment, where risk-allowances are punitively low due to so many sample days where both longs- and shorts- are consistently blowing through of risk-limits. Still room for more pain as traders are still not 'grabbing for crash-hedges', and tomorrow's OpEx has huge levels of Delta and Gamma set to come off: SPX / SPY will see 35% of the total $Gamma expire Friday ($16.7B of $48.3B), with -$74.5B (!!!) of associated front-week (Short) $Delta set to come-off QQQ will see 41% of the total $Gamma expire Friday ($1.15B of the $2.8B), with -$9.6B of associated front-week $Delta set to come-off IWM will see 42% of the total $Gamma expire Friday, with -$2.9B of associated front-week $Delta set to come-off HYG will see 55% (!!!) of the total $Gamma expire Friday, with -$3.8B of associated front-week $Delta set to come-off The current expiration period has been tracking April's expiration. VIX expiration seemed to lead to a decline in volatility that was released post-expiration. Here we have a relatively large stock OPEX which may provide a bounce into an overall trend lower. Finally, SpotGamma reiterates its recent point that rallies should be framed as short covering and subject to quick and violent reversals. We very strongly believe that a major market low will come with a quarterly OPEX+FOMC combo. Tyler Durden Thu, 05/19/2022 - 13:06.....»»

Category: smallbizSource: nytMay 19th, 2022

Market Rout Extends With Futures Tumbling To Verge Of Bear Market

Market Rout Extends With Futures Tumbling To Verge Of Bear Market US stock futures slumped again, extending yesterday’s brutal selloff that erased $1.5 trillion in market value on concerns about everything from slowing growth, to Chinese lockdowns, to soaring inflation and tightening monetary policy. Contracts on the S&P 500 were down 1.2% 7:30 a.m. in New York, having earlier dropped to 3,856, one point away sliding 20% from January's all time highs, and triggering a bear market. The underlying index tumbled 4% on Wednesday, the most since June 2020, as consumer shares cratered after Target slashed its profit forecast due to a surge in costs. Nasdaq 100 futures were down 1.2%. 10Y TSY Yields slumped about 7bps, dropping to 2.833, while the dollar also dropped after yesterday's surge; bitcoin was flat around $29K. The retail rout continued on Thursday: shares of US retailers again tumbled in premarket trading amid growing worries over the impact of rising inflation and the ability of companies to pass on higher costs to consumers; with Bath & Body Works becoming the latest retailer to cut its guidance. Major technology and internet stocks were also down, pointing to further losses in major technology and internet stocks a day after the tech-heavy Nasdaq slumped to its lowest since November 2020. Apple (AAPL US) -1.2%, Microsoft (MSFT US) -1.2%, Meta Platforms (FB US) -1.1%, Netflix (NFLX US) -0.9% and Nvidia (NVDA US) -2.2% in premarket trading. US rail stocks may be in focus as Citi cuts ratings on Norfolk Southern (NSC US), Union Pacific (UNP US) and US Xpress Enterprises (USX US) to neutral from buy, while lowering 2023 estimates “across the board.”Here are some other notable movers: Cisco Systems (CSCO US) plunged 13% in premarket trading after the network-gear maker spooked investors with a warning that Chinese lockdowns and other supply disruptions would wipe out sales growth in the current quarter. Shares of networking equipment makers drop after Cisco cuts outlook, with Broadcom (AVGO US) -3.6% and Juniper Networks (JNPR US) -5.9% in premarket trading. Synopsys (SNPS US) rises 3.8% in premarket trading after the supplier of software used to design semiconductors boosted its profit and revenue guidance for the full year. Target (TGT US) shares fall 2.2% in premarket trading, Walmart (WMT US) -0.3%; Kohl’s (KSS US) is in focus after two senior executives depart Under Armour (UAA US) shares dropped as much as 6% in US premarket trading, with analysts saying that the departure of the sportswear maker’s CEO Patrik Frisk is a surprise and adds uncertainty. Bath & Body Works’s (BBWI US) outlook cut was a little greater than expected, though analysts noted that it was due to higher costs and investment. The company’s shares fell almost 4% in premarket trading. United Wholesale Mortgage (UWMC US) will struggle to main its 1Q earnings level in coming quarters, Piper Sandler says in a note downgrading the stock to underweight from neutral. Shares drop as much as 7% in US premarket trading. The S&P 500 is on track for its longest weekly losing streak since 2001 as traders flee risk assets over fears that the Federal Reserve will push the economy into a recession as it tries to curb inflation. The benchmark is close to falling into a bear market, after dropping 18% from a record high in January. "The US selloff was rather orderly and the market isn’t oversold, yet. That tells us that we are likely not at the bottom yet,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “Consumer sentiment remains depressed and we are seeing consumers retrenching on some discretionary spending.”  Speaking on Tuesday in his most hawkish remarks to date, Fed Chair Jerome Powell said the US central bank will keep raising interest rates until there is “clear and convincing” evidence that inflation is in retreat. JPMorgan's Marko Kolanovic, meanwhile, said - what else - that things can get better for US stocks. “There will be no recession this year, some summer increase in consumer activity on the back of reopening, China increasing monetary and fiscal measures,” he said.  Bolstering his opinion is a conviction that US inflation has probably peaked, or is about to do so, paving the way for a pullback in price pressures that will eventually allow the Federal Reserve to moderate the pace of monetary tightening.  "Since we are pricing in a growth scare but not yet a recession, we could see further downside in the coming weeks, but we are starting to price in a very negative picture already, suggesting we should, at some point, be closer to the bottom,” said Esty Dwek, chief investment officer at Flowbank SA. US stock investors are pricing in stronger odds of a recession than are evident from positive macroeconomic indicators, according to Goldman Sachs strategists. "A recession is not inevitable,” Goldman strategists led by David J. Kostin wrote in a note. “Rotations within the US equity market indicate that investors are pricing elevated odds of a downturn compared with the strength of recent economic data.” Bets that robust earnings can help investors weather this year’s turbulence were thrown in doubt after US consumer titans signaled growing impact of high inflation on margins and consumer spending. Meanwhile, Federal Reserve officials reaffirmed that tighter monetary policy lies ahead, and investors fretted over stagflation risks. “We are pricing in a growth scare,” Lori Calvasina, the head of US equity strategy at RBC Capital Markets, told Bloomberg TV. “There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it’s going to be another near-death experience.” There was some more good news on the China covid lockdown front: Shanghai Vice Mayor said Shanghai port throughput recovered to around 90% of the levels a year ago and that Shanghai will expand work resumption in areas with no COVID risk in early June. Furthermore, Shanghai is to gradually restore inter-district public transport from May 22nd and will require residents to show negative PCR tests taken within 48 hours before using public transport, while an economy official said Shanghai will reduce rents for small and medium-sized enterprises by more than CNY 10bln and the city extended CNY 72.3bln of loans to over 10,000 firms since March, according to Reuters. In Europe, the Stoxx 600 retreated 1.8%, after sliding more than 2% earlier, with all industry sectors in the red and personal care and financial services leading the decline as Wednesday’s retailer trouble in the U.S. spills over into Europe. FTSE 100 lags regional peers, dropping 2%. Here are some of the biggest European movers today: HomeServe shares jump as much as 12% after Brookfield agrees to buy the home emergency and repair services company for GBP4.1b. Societe Generale shares rise as much as 1.5%, as it was raised to outperform from market perform at KBW, with the broker saying the sale of Russian activities removes a key overhang for the bank and should result in a re-rating. Generali shares rose as much as 1.4% after 1Q profit beats analyst estimates as EU136m impairments on Russian investments were more than offset by higher operating income. PGNiG shares rise as much as 6.2% after reporting 1Q results that, according to analysts, support Polish gas company’s outlook. Nestle shares drop as much as 5.3% after Bernstein downgraded the stock to market perform from outperform, saying the shares will “struggle” if market sentiment improves and investors exit havens. Royal Mail shares fall as much as 14% after the postal group’s FY results slightly missed estimates and analysts said its outlook is “disappointing.” National Grid shares fall as much as 2.5%, erasing gains from yesterday’s record high, after the utility company reported full-year results. Earlier in the session, shares of Asian retailers follow their US counterparts lower after Target became the second big retailer in two days to trim its profit forecast. Australia: JB Hi-Fi retreats 6.6%, Wesfarmers -7.8%, Harvey Norman -5.5%, Woolworths -5.6% South Korea: E-Mart - 3.4%; apparel makers Hansae -9.4%, F&F -4.2%, Youngone -8.2% Japan: Fast Retailing - 3.1%, MatsukiyoCocokara -1.4%, Ryohin Keikaku -1.7%, Nitori -3% Singapore: Grocery chain operator Sheng Siong slips as much as 1.3% Hong Kong: Sun Art Retail down as much as 4.1% In China, Tencent Holdings Ltd. plunged 6.6% after warning it will take time for Beijing to act on promises to prop up the Chinese tech sector. Cisco Systems Inc. slid in extended US trading on a disappointing revenue outlook. Japan's Nikkei 225 suffered firm losses amid reports the ruling coalition is considering increasing the corporate tax rate and after several data releases in which Machinery Orders topped estimates but Exports missed as China-bound exports declined by the fastest pace since March 2020. Indian stocks declined to a ten-month low, tracking a sell-off across Asia, on concerns the US Fed’s hawkish stance on inflation may cool economic activity and hurt consumer demand.  The S&P BSE Sensex plunged 2.6% to 52,792.23, its lowest level since July 30, in Mumbai, while the NSE Nifty 50 Index slipped 2.7% to 15,809.40  Software exporter Infosys Ltd. fell 5.4% to a 11-month low and was the biggest drag on the Sensex, which had 27 of 30 member stocks trading lower. All 19 sector indexes compiled by BSE Ltd. declined, led by S&P BSE Information Technology index, that dropped the most in over two years.   “Deteriorating macro sentiment such as soaring inflation, recession fears, and the prospect of the Federal Reserve getting even more hawkish will continue to keep benchmarks on the edge,” Prashanth Tapse, an analyst at Mehta Equities Ltd., wrote in a note.  In earnings, of the 36 Nifty 50 firms that have announced results so far, 21 have either met or exceeded analyst estimates, while 15 have missed forecasts. In Australia, the S&P/ASX 200 index fell 1.7% to close at 7,064.50, tumbling with global shares as concerns over inflation, interest-rate hikes and Ukraine piled up. All sectors dropped, except for health. Consumer shares were among the worst performers, following their US peers lower after Target became the second big retailer in two days to trim its profit forecast. Aristocrat rose after it released its 1H results and unveiled buyback plans. In New Zealand, the S&P/NZX 50 index fell 0.5% to 11,206.93 And in emerging markets, Sri Lanka fell into default for the first time in its history as the government struggles to halt an economic meltdown that prompted mass protests and a political crisis. An index of developing-nation stocks slumped more than 2%. In FX, the Bloomberg dollar spot index declines, with all G-10 majors rising against the greenback. CHF is the strongest G-10 performer with USD/CHF snapping lower on to a 0.97 handle and EUR/CHF slumping below 1.03. The Swiss franc diverged from Japanese yen and dollar after hawkish comments from SNB’s Thomas Jordan Wednesday, which assured traders CHF rates could follow EUR higher. Options trades may also be behind the latest move in the spot market. In rates, Treasury yields dropped about seven basis points as investors sought insurance against further declines in risk assets. Treasury yields richer by up to 6bp across belly of the curve, richening the 2s5s30s fly by 2.2bp on the day; 10-year yields around 2.83% with German 10-year outperforming by 2.5bps. Treasuries extended Wednesday’s rally as stocks resume slide with S&P 500 futures dropping under 3,900 to lowest level in a year; on the curve, the belly led the advance while bunds outperform in a more aggressive bull-flattening move as European stocks tumble. US session highlights include 10-year TIPS reopening at 1pm ET. Flurry of block trades during London session follows a spate of trades Wednesday; five blocks worth a combined cash-equivalent $1.2m/DV01 between 3:38am and 5:35am similarly entailed price action consistent with sales. Most European bonds also gained, with the yield on German 10-year securities falling more than basis points.  German yield curve bull-flattens: 30-year yield drops ~9bps before stalling near 1.05% which has acted as support for much of May so far. The Dollar issuance slate empty so far; eight borrowers priced $8.5b Wednesday, and new issue activity is expected to be muted during remainder of the week. Three-month dollar Libor +2.69bp to 1.50486%. Economic data slate includes May Philadelphia Fed business outlook and initial jobless claims (8:30am), April existing homes sales and leading index (10am). In commodities, crude oil extended declines, while most industrial metals were in the red as global growth fears damped the demand outlook. WTI reverses Asia’s gains, dropping back below $110 but holding above Wednesday’s lows. Spot gold is comparatively quiet, holding above $1,810/oz. Most base metals trade in the green; LME tin rises 2.1%, outperforming peers while copper held near a seven-month low and zinc extended losses. Bitcoin is modestly softer in a relatively contained range that lies just shy of the USD 30k mark. Crypto exchange FTX to start rollout of new stock-trading service on Thursday, WSJ reports; will not accept payment for order flow on stock trades. Looking to the day ahead now, and data releases from the US include the weekly initial jobless claims, along with April’s existing home sales and the Philadelphia Fed’s business outlook survey for May. Central bank speakers include ECB Vice President de Guindos, the ECB’s Holzmann and the Fed’s Kashkari. Finally, the ECB will be publishing the minutes from their April meeting. Market Snapshot S&P 500 futures down 1.1% to 3,879.25 STOXX Europe 600 down 1.7% to 426.41 MXAP down 1.8% to 161.60 MXAPJ down 2.2% to 527.30 Nikkei down 1.9% to 26,402.84 Topix down 1.3% to 1,860.08 Hang Seng Index down 2.5% to 20,120.68 Shanghai Composite up 0.4% to 3,096.97 Sensex down 2.4% to 52,926.71 Australia S&P/ASX 200 down 1.6% to 7,064.46 Kospi down 1.3% to 2,592.34 Gold spot down 0.1% to $1,814.49 U.S. Dollar Index down 0.28% to 103.52 German 10Y yield little changed at 0.96% Euro up 0.3% to $1.0496 Brent Futures down 0.1% to $109.00/bbl Top Overnight News from Bloomberg President Joe Biden is set to meet on Thursday with Finland’s President Sauli Niinisto and Swedish Prime Minister Magdalena Andersson at the White House to discuss the Nordic nations’ NATO bids. China’s top diplomat again warned the US over its increased support for Taiwan, showing the island democracy remains a major sticking point between the world’s biggest economies as Beijing sent more military aircraft toward the island Sri Lanka fell into default for the first time in its history as the government struggles to halt an economic meltdown that prompted mass protests and a political crisis The yuan’s outlook is finally looking more balanced after a 6.5% dive versus its major trading partner currencies since March. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured on spillover selling after the worst day on Wall St in almost two years. ASX 200 was led lower by consumer staples following the retailer woes stateside and mixed Australian jobs data. Nikkei 225 suffered firm losses amid reports the ruling coalition is considering increasing the corporate tax rate and after several data releases in which Machinery Orders topped estimates but Exports missed as China-bound exports declined by the fastest pace since March 2020. Hang Seng and Shanghai Comp initially weakened with the Hong Kong benchmark dragged lower by heavy losses in tech after Tencent’s profit declined by more than 50% and with the mainland pressured as Beijing conducts a fresh round of mass COVID testing, although the mainland bourse recovered most of its losses after Shanghai announced a further gradual easing of restrictions. Xiaomi (1810 HK) Q1 adj. net profit CNY 2.859bln (vs 6.069bln Y/Y), Q1 revenue CNY 73.4bln (vs. 76.9bln Y/Y); global smartphone shipments -10.5% Y/Y at 38.5mln units. Top Asian News Shanghai Vice Mayor said Shanghai port throughput recovered to around 90% of the levels a year ago and that Shanghai will expand work resumption in areas with no COVID risk in early June. Furthermore, Shanghai is to gradually restore inter-district public transport from May 22nd and will require residents to show negative PCR tests taken within 48 hours before using public transport, while an economy official said Shanghai will reduce rents for small and medium-sized enterprises by more than CNY 10bln and the city extended CNY 72.3bln of loans to over 10,000 firms since March, according to Reuters. Japanese MOF official said China's COVID curbs are among the factors that caused a decline in China-bound exports from Japan which fell by the fastest pace since March 2020, while Japan's April imports reached the largest amount on record, according to Reuters. Japan's ruling coalition is reportedly considering increasing the corporate tax rate, according to Jiji. New Zealand sees 2021/22 OBEGAL at NZD -18.98bln (prev. forecast -20.44bln), 2021/22 net debt at 36.9% of GDP (prev. forecast 37.6%) and Cash Balance at NZD -31.78bln (prev. forecast -34.10bln), while Finance Minister Robertson said the economy is expected to be robust in the near term and they see a return to OBEGAL surplus in 2024/25, according to Reuters. European bourses are pressured across the board in a broader risk-off moves after yesterday's Wall St. sell off, as European players look past the brief respite seen overnight on Shanghai's reopening; Euro Stoxx 50 -2.3%. Stateside, the magnitude of the downside is somewhat more contained given newsflow has been limited since Wednesday's downside commenced, ES -1.2%. Top European News EU is reportedly considering a targeted trade war on troublesome Brexiteer MPs and Tory ministers to force UK PM Johnson to do a U-turn on the Northern Ireland protocol, according to The Telegraph. Top UK Economist Defends BOE’s Handling of Inflation Crisis EasyJet Bookings Pick Up Ahead of Uncertain Summer Season Apax-Owned Rodenstock Acquires Spanish Rival Indo European Gas Slips With LNG Imports Helping Boost Stockpiles In FX Franc resurgence and re-emergence as a safe haven currency continues; USD/CHF touches 0.9750 vs 1.0060+ peak on Monday, EUR/CHF sub-1.0250 vs circa 1.0500 at one stage only yesterday. Dollar loses momentum as US Treasury yields retreat further and curve re-flattens amidst ongoing risk rout, DXY ducks under 103.500 after peaking just shy of 104.000 on Wednesday. Kiwi and Aussie find positives via fiscal and fundamental factors to evade aversion; NZD/USD back above 0.6300 after NZ budget and AUD/USD hovering around 0.7000 post- Aussie jobs data. Yen retains underlying bid irrespective of mixed Japanese data, USD/JPY below 128.00 again. Euro firmer beyond EUR/CHF cross ahead of ECB minutes and Sterling off UK inflation data lows awaiting retail sales on Friday, EUR/USD retains sight of 1.0500 and Cable near 1.2400. Rand meandering ahead of SARB in anticipation of 50 bp rate hike, USD/ZAR around 16.0000, irrespective of Gold taking firmer hold of USD 1800/oz handle. Fixed Income Debt resumes safe-haven rally as market mood continues to sour. Bunds top 154.00, Gilts get close to 120.00 and 10 year T-note even nearer the same psychological level. BTPs lag amidst the ongoing aversion to risk, while OATs and Bonos reflect on somewhat mixed auction results. Commodities WTI and Brent are pressured in-fitting with broader sentiment as initial resilience on demand-side positives re. China/COVID were overpowered by the risk move. However, the benchmarks are around USD 1.00/bbl off lows of USD 104.36/bbl and USD 106.76/bbl respectively, following reports that China is discussing the purchase of Russian crude. China is said to be in talks with Russia to purchase oil for strategic reserves, according to Bloomberg sources; detailed on terms and volume reportedly not decided yet Qatar Energy was reportedly selling July Al-Shaheen crude at premiums of USD 5.80-6.40/bbl above Dubai quotes which is the highest in 2 months, according to Reuters sources. Spot gold is bid as it draws haven allure, with the yellow metal marginally surpassing USD 1830/oz. US Event Calendar 08:30: May Initial Jobless Claims, est. 200,000, prior 203,000; Continuing Claims, est. 1.32m, prior 1.34m 08:30: May Philadelphia Fed Business Outl, est. 15.0, prior 17.6 10:00: April Existing Home Sales MoM, est. -2.2%, prior -2.7%; Home Resales with Condos, est. 5.64m, prior 5.77m 10:00: April Leading Index, est. 0%, prior 0.3% DB's Jim Reid concludes the overnight wrap Today is my last day at work this week before I head up to Cambridge tomorrow for my Masters’ graduation. Before you send in a flood of congratulations though, I didn’t actually do any work for this qualification, with not even a single hour of revision. Now at this point you’re probably thinking I’m either a genius or guilty of some serious academic malpractice. I’m hoping the former. But the truth is that I’m benefiting from a quirky tradition that somehow means Cambridge, Oxford and Dublin will upgrade your Bachelors into a Masters after a few years. With the wedding two months away, it appears as though I’m losing all my bachelor status at once. Markets seem ready for a holiday too after the last 24 hours, with the selloff resuming at pace after the brief respite on Tuesday. In fact it was nothing short of a rout with the S&P 500 ending the day down -4.04%, marking its worst daily performance since June 2020, and leaving the index at a fresh one-year low. There wasn’t a single catalyst behind the slump, but weak housing data out of the US along with Target’s move to cut its profit outlook helped feed investor concern that the consumer might not be in as strong a position as previously thought. And that’s on top of all the other worries of late that the global economy is heading in a stagflationary direction amidst various supply-chain issues, alongside the prospect that tighter central bank policy is going to further dent growth and risks tipping various economies into recession. In terms of the specific moves, the S&P 500 gradually tumbled as the day went on, with its -4.04% decline more than reversing its +2.02% bounceback on Tuesday. The decline was an incredibly broad-based one, with just 8 constituents in the index ending the day higher, which is the lowest number since November. That earnings report we mentioned at the top meant that Target (-24.93%) saw the worst performance in the entire S&P 500, after saying they now expected their full-year operating income margin rate to be around 6%. That follows a disappointing report from Walmart the previous day, and meant that consumer staples (-6.38%) and consumer discretionary (-6.60%) were the worst-performing sectors in the S&P yesterday. The latest declines also mean that the S&P is back on track for a 7th consecutive weekly decline, having shed -2.49% since the start of the week, and S&P 500 futures are only up by +0.18% this morning. If the S&P 500 does see a 7th week in negative territory, then that would be the longest run of weekly declines for the index since 2001. Other indices lost ground too given the risk-off move, with the Dow Jones (-3.57%), the NASDAQ (-4.73%), and the small-cap Russell 2000 (-3.56%) all experiencing sizeable declines of their own. European indices had a better performance after closing before the worst of the US declines, and the STOXX 600 was “only” down -1.14% to just remain in positive territory for the week. With recessionary concerns back in focus, sovereign bonds rallied on both sides of the Atlantic as investors sought out safe havens. Yields on 10yr US Treasuries fell by -10.2bps to 2.88%, with the decline mostly led by a -9.6bps move lower in real yields, and nominal yields are only back up +2.5bps this morning. The yield curve also continued to flatten and the 2s10s slope (-6.9ps) fell to its lowest in over two weeks, at 21.0bps, although it’s been over 6 weeks now since the curve last traded in inversion territory. We did get some Fedspeak but to be honest there weren’t any major headlines relative to what we already knew, with Chicago Fed President Evans saying it was “quite likely” the Fed would be at a neutral setting by year-end, whilst Philadelphia Fed President Harker was making the case for more gradual rate hikes after the next few 50bp hikes are delivered. More important for the outlook was the release of various housing data yesterday, where housing starts fell to an annualised rate of 1.724m in April (vs. 1.756m expected), and that was from a downwardly revised 1.728m in March. That comes against the backdrop of rising mortgage rates, and the MBA reported that mortgage purchase applications fell -11.9% in the week ending May 13, leaving them at their lowest levels since May 2020 when the numbers were still recovering from the pandemic slump. Over in Europe, sovereign bond curves also became flatter as investors became increasingly aggressive on the near-term ECB rate path. Indeed the amount of ECB rate hikes priced in by the December meeting hit a fresh high of 108bps, or equivalent to at least four rate hikes of 25bps by year-end. That came amidst further ECB speakers over the last 24 hours, including Finnish central bank governor Rehn, who had already endorsed a July hike and said yesterday that the initial hike was “likely to take place in the summer”. Furthermore, he said that it seemed “necessary that in our policy rates we move relatively quickly out of negative territory”. We also heard from Estonian central bank governor Muller, who also endorsed a July hike and said he “wouldn’t be surprised” if the deposit rate were in positive territory by year-end. However, Spanish central bank governor De Cos said that rate hikes should be gradual as he called for APP purchases to end at the start of Q3, with rate hikes to follow shortly afterwards. Those growing expectations of tighter policy saw shorter-dated yields move higher in Europe once again, with 2yr German yields hitting their highest level since 2011 despite only a marginal +0.1bps move to 0.36%. However, the broader risk-off tone meant it was a different story for their longer-dated counterparts, and yields on 10yr bunds (-1.6bps) and OATs (-2.2bps) both moved lower on the day. Peripheral spreads widened as well, whilst iTraxx Crossover neared its recent highs with a +26.2bps move to 468bps. In terms of the fight against inflation, there was a potential boost on the trade side yesterday as US Treasury Secretary Yellen confirmed ahead of a meeting of G7 finance ministers and central bank governments that the she favoured removing some tariffs on goods that are not considered strategic. Separately the risk-off move also saw oil prices move lower for a 2nd day running yesterday, with Brent crude down -2.52%, although it’s since taken back a decent chunk of that loss this morning with a +1.51% move higher to $110.76/bbl. Over in Asia, equity markets have tracked those steep overnight losses on Wall Street to move sharply lower this morning. Among the key indices, the Hang Seng (-2.25%) is the largest underperformer amidst a broad weakness in tech stocks as the Hang Seng Tech index fell by an even larger -3.40%. Mainland Chinese stocks have performed relatively better however, even if the Shanghai Composite (-0.08%) and CSI (-0.25%) have both moved slightly lower, while the Nikkei (-1.91%) and the Kospi (-1.29%) have seen more substantial losses. Finally there was some important employment data out of Australia this morning ahead of their election on Saturday, with the unemployment rate falling to its lowest since 1974, at 3.9%. The employment gain was a bit softer than expected with just a +4.0k gain (vs. +30.0k expected), but that included a +92.4k gain in full-time employment, offset by a -88.4k decline in part-time employment. Elsewhere on the data side, there were fresh signs of inflationary pressure in the UK after CPI inflation rose to a 40-year high of +9.0% in April. But in spite of the 40-year high, that was actually slightly beneath the +9.1% reading expected by the consensus, which marked the first time in over 6 months that the reading hasn’t been higher than expected. Gilts outperformed following the release as it was also beneath the BoE’s staff projection of +9.1%, and 10yr gilt yields closed down -1.6bps on the day, whilst sterling underperformed the other major currencies leave it -1.28% weaker against the US Dollar. To the day ahead now, and data releases from the US include the weekly initial jobless claims, along with April’s existing home sales and the Philadelphia Fed’s business outlook survey for May. Central bank speakers include ECB Vice President de Guindos, the ECB’s Holzmann and the Fed’s Kashkari. Finally, the ECB will be publishing the minutes from their April meeting. Tyler Durden Thu, 05/19/2022 - 08:02.....»»

Category: personnelSource: nytMay 19th, 2022

Futures Jump Amid Optimism China"s Covid Lockdowns Are Ending

Futures Jump Amid Optimism China's Covid Lockdowns Are Ending Another day, another dead cat-bouncing, bear market rally. After Monday's flattish session which saw tech names slump on fresh inflation fears, Nasdaq futures rebounded on Tuesday, setting up technology stocks for solid gains after a six-week rout as investors were encouraged by China's easing covid lockdowns and amid speculation that Beijing regulators may ease a yearlong clampdown on internet companies at an upcoming meeting with tech executives. Nasdaq 100 futures jumped 2% by 7:00 a.m. in New York after the underlying gauge sank on Monday on concerns about a slowdown in economic growth; S&P 500 futures rose 1.6%. Treasury yields rose modestly above 2.90%, and the dollar retreated. Bitcoin managed to rebound back over $30K. Confirming what we said almost three weeks ago, Shanghai reported three days of zero community transmission, a milestone that could lead officials to start unwinding a punishing lockdown. However, flareups elsewhere in China showed how hard it is to tackle the omicron strain. Among notable moves in US premarket trading, Twitter shares fell 3.3%, set to extend declines for an eighth straight session amid uncertainties around the deal with Elon Musk, while Citigroup rose 4.9% after Warren Buffett’s Berkshire Hathaway unexpectedly disclosed a new stake in the lender, a return to banks for the billionaire who purged many of his bank holdings several years ago. Tech names including Advanced Micro Devices, Tesla and Nvidia were among the biggest premarket gainers as growing recession concerns prompt markets to reasses just how many rate hikes the Fed will pull off before it is forced to reverse. Cryptocurrency-exposed stocks climbed as Bitcoin rose above $30,000 on Tuesday in cautious trading, with the fallout from a collapsed stablecoin continuing to keep sentiment in check. Chinese stocks in US jumped across the board in premarket trading on speculation that regulators may ease a yearlong clampdown on internet companies at an upcoming meeting with tech executives. Here are the most notable premarket movers: Twitter (TWTR US) shares fell 2.4% in premarket trading, on course to extend their seven-day streak of declines, as uncertainties around a deal by buyer Elon Musk weigh on the stock. Tesla (TSLA US) shares rallied 3% in premarket trading. Chinese stocks in US jump across the board in premarket trading on speculation that regulators may ease a yearlong clampdown on internet companies at an upcoming meeting with tech executives. Alibaba (BABA US) +6.2%, JD.com (JD US) +5.6%, Pinduoduo (PDD US) +7% and Baidu (BIDU US) +3.6% Cryptocurrency-exposed stocks climb in US premarket as Bitcoin rises above $30,000 on Tuesday in cautious trading, with the fallout from a collapsed stablecoin continuing to keep sentiment in check. Riot Blockchain (RIOT US) +7.8%; Coinbase (COIN US) +6.8%; Marathon Digital (MARA US) +6.1% Advanced Micro Devices (AMD US) upgraded to overweight from neutral at Piper Sandler, which says in note that the company’s core businesses are running well and mid-to-long-term catalysts remain intact. Stock gains 3.6% in New York premarket trading. United Airlines Holdings’ (UAL US) updated second-quarter guidance is “a solid step in the right direction,” Citi says. United’s shares gained 4.3% in premarket trading. Bird Global (BRDS US) shares jump as much as 40% in US premarket trading with DA Davidson noting management’s announcement of a plan to streamline operations. Take-Two (TTWO US) reported better-than-expected fourth-quarter earnings helped by popular video games like NBA 2K22. The company’s shares rise 5.4% in premarket trading. Global-e Online (GLBE US) shares slump as much as 30% in US premarket trading as analysts slash their price targets on the e-commerce software firm after it lowered its full-year guidance for revenue and gross merchandise value. Imperial Petroleum (IMPP US) shares plunge 48% in US premarket trading. The shipping company priced an underwritten public offering of 72.7m units at $0.55 per unit, with expected gross proceeds of ~$40m. US stocks have been roiled in the past six weeks as the combination of high inflation and hawkish central banks fueled fears of a potential recession. While some strategists including Morgan Stanley’s Michael Wilson expect equities to fall further before finding a floor, they don’t foresee a recession as their base case. The main focus today will be on US retail sales data, which are expected to show a rise of 1% in April. “Investors’ appetite for riskier assets is on the rise after many welcomed today’s positive unemployment and GDP figures” from the eurozone and UK, said Pierre Veyret, an analyst at ActivTrades Plc. “The improving virus situation in China is also blowing a wind of relief in investors’ trading minds.” A challenging global economic outlook amid elevated food and record fuel costs, and tightening monetary settings continues to shape sentiment.  Oil has jumped to about $114 a barrel and an index of agricultural prices is at a record high. But one bond-market measure - the five-year breakeven rate - is signaling inflation has peaked, while the latest virus developments raised hopes China’s damaging lockdowns may soon be eased. On Monday, New York Fed President John Williams on Monday downplayed deteriorating liquidity conditions in financial markets, saying it was to be expected as investors grapple with uncertainty over global events and shifting U.S. monetary policy. No less than six Fed speakers - including Chair Jerome Powell - are due to speak later Tuesday. In Europe, technology and basic-resources stocks led a broad-based advance of the Stoxx Europe 600 following a rally in Chinese tech shares on optimism Beijing may ease up on a yearlong clampdown. Italy's FTSE MIB adds 1.6%, FTSE 100 lags, adding 0.7%. Miners, financial services and banks are the strongest-performing sectors. Equities were also buoyed by data showing the euro-area economy expanded more than initially estimated at the start of the year as the region moved past a wave of Covid-19 infections and defied headwinds from the early days of the war in Ukraine. Here are the biggest European movers: Clariant shares rise as much as 8.7% after the specialty chemical company announced its governance agreement with SABIC will expire at the June 24 AGM, and won’t be renewed. Imperial Brands climbs as much as 7.9% after the tobacco company reduced its losses from next-generation products and continued on a turnaround plan. Daimler Truck gains as much as 7.8% in Frankfurt; Oddo BHF notes strong 1Q report that will reassure in the current environment, while Citi says the company delivered an “encouraging” set of results. Engie rises as much as 6.9%, hitting the highest since March 1, after the French energy company boosted its profit guidance on higher European energy prices. CaixaBank advances as much as 5.4% after the Spanish lender released a new strategic plan that predicts a jump in a key profitability metric and announced a EU1.8b share buyback program. Prosus and Naspers both raised to overweight from neutral at JPMorgan following the broker’s upgrade of Tencent. Prosus shares gain as much as 6.5% in Amsterdam, Naspers climbs as much as 6.7% in Johannesburg. ContourGlobal gains as much as 34% after US private equity firm KKR agreed to buy the power generation business for 263.6p/share in cash, representing a premium of 36% to Monday’s close. Vodafone erases losses after dropping as much as 4.2% as the telecom operator’s forecast for adjusted Ebitda after-leases missed consensus estimates at mid- point. Earlier in the session, Asian stocks advanced for a third day -- its longest winning streak since mid-March -- amid a jump in some technology firms on the back of hopes for an unwind of Chinese lockdowns that have hurt the global economic outlook as well as a dialing back of Beijing’s regulatory crackdowns. The MSCI Asia-Pacific Index climbed as much as 1.5%, on track for a third day of gains. Chinese tech giants Tencent and Alibaba contributed most to the gain, while chipmakers TSMC and Samsung also helped. Shanghai reported no new Covid infections in the broader community for a third day, hitting a crucial milestone toward reduced restrictions. China’s top political advisory body is hosting a meeting Tuesday with some of the nation’s largest private-sector firms, sparking hopes for an improved business climate.  “The mood in Asia is risk on,” said Xue Hua Cui, a China equity analyst at Meritz Securities in Seoul. “Whether this remains a dead cat bounce or not depends on how quickly demand recovers following the end of Shanghai lockdowns.” Hong Kong outperformed, with the Hang Seng Index rising more than 3%. Benchmarks in India also advanced more than 2%, even as state-run insurer Life Insurance Corporation of India dropped in its Mumbai trading debut after a record initial public offering for the nation.  Japanese equities gained with Asian peers amid hopes that China will ease up on Covid lockdowns and regulatory crackdowns. The Topix rose 0.2% to close at 1,866.71. Tokyo time, while the Nikkei advanced 0.4% to 26,659.75. Recruit Holdings contributed the most to the Topix gain, rising 2% after its earnings report. Out of 2,172 shares in the index, 1,164 rose and 932 fell, while 76 were unchanged. Australia's S&P/ASX 200 index rose 0.3% to close at 7,112.50, taking its winning run to a third session. Miners and banks contributed the most to the gauge’s advance. Beach Energy was among the top performers, climbing with other energy shares as oil rallied. Brambles was the biggest laggard after saying CVC won’t be putting forward a proposal for the pallet maker. Investors also assessed minutes from the RBA’s May meeting. The central bank said it considered three options for the size of its first interest-rate increase since 2010. In New Zealand, the S&P/NZX 50 index fell 0.2% to 11,137.88. India’s key gauges surged on Tuesday, boosted by Reliance Industries Ltd. which climbed the most since early March. Still, Life Insurance Corp. of India, the country’s biggest listing so far, slumped on debut. The S&P BSE Sensex rose 2.5%, its biggest jump in three months, to 54,318.47 in Mumbai, while the NSE Nifty 50 Index advanced 2.6%. All of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of metal companies. Reliance Industries advanced 4.2%, providing the biggest boost to the Sensex, which had all 30 members trading higher.  “It’s a much-needed breather for the bulls after five weeks of slide and we may further rise,” said Ajit Mishra, vice-president research at Religare Broking Ltd. “Since all the sectors are participating in the rebound, we suggest focusing more on stock selection. Despite strong gains in the broader market, shares in the state-controlled insurer plunged 7.8%, following a $2.7 billion IPO, India’s biggest on record. The stock trimmed losses from the low, but failed to touch the listing price in the session. LIC’s first-day performance makes for the second-worst debut among 11 global companies that listed this year after raising at least $1 billion through first-time share sales.  In FX, the Bloomberg Dollar Spot Index fell a third consecutive day and the greenback weakened against all of its Group-of-10 peers apart from the yen. The pound lead G-10 gains followed by Scandinavian and Antipodean currencies. The pound rallied and gilts slumped across the curve after a stronger-than-expected reading of the UK employment data stoked speculation that a tighter labor market may prompt the BOE to continue its monetary tightening cycle beyond a widely expected rate rise next month. Average weekly earnings surged 7% in the three months through March, compared to the 5.4% figure economists had expected. The euro rose on the back of a broadly weaker dollar. Bunds slid as haven demand was unwound. Italian bonds also tumbled as money markets wagered on up to 98bps of ECB hikes by December. The Aussie strengthened for a third day while Australia’s sovereign bonds fell after minutes from RBA’s May meeting indicated the central bank considered an outsized rate hike. The RBA said it considered three options for the size of its first interest-rate increase since 2010, according to minutes of its May 3 policy meeting, when it raised the cash rate by 25 basis points. The Australian and New Zealand dollars also benefitted from expectations that Covid lockdowns in Hong Kong and Shanghai will be lifted. The yen gave up earlier gains as US yields resumed their climb, which also weighed on Japan government bonds. In rates, yields rose as Treasuries cheapened with losses led by front-end of the curve, following a sharper bear flattening move across EGBs after ECB Governing Council member Klaas Knot said he supports a quarter-point increase in interest rates in July and that a bigger move may be justified if data show inflation worsening. US Treasury yields cheaper by up to 5.5bp across front-end of the curve, the 10Y TSY trading at 2.91% last and flattening 2s10s spread by 2.2bp on the day; 2-year German yields cheaper by 23bp on the day following Knot comments while German 10s are cheaper by 4bp vs. Treasuries. In U.S. session, focus on a stacked Fed speaker slate led by Chair Jerome Powell who will be interviewed during a Wall Street Journal live event in the afternoon. The Dollar issuance slate includes Export Development Canada 5Y SOFR, OKB 3Y SOFR and JICA 5Y SOFR; six deals priced $9.1n Monday in order books that were 3.3x oversubscribed In commodities, WTI drifts 0.2% higher to trade at around $114. Spot gold rises roughly $3 to trade above $1,825/oz. Base metals are mixed; LME tin falls 1.6% while LME zinc gains 2.4%. European gas prices hit four-week low after EU revised guidelines for purchases of Russian supplies. To the day ahead now, and there’s an array of central bank speakers including Fed Chair Powell, along with the Fed’s Bullard, Harker, Kashkari, Mester and Evans, ECB President Lagarde and BoE Deputy Governor Cunliffe. Data releases include US retail sales, industrial production and capacity utilisation for April, along with the NAHB’s housing market index for May. Elsewhere, there’s also the UK unemployment reading for March. Finally, earnings releases include Walmart and Home Depot. Market Snapshot S&P 500 futures up 1.3% to 4,057.75 STOXX Europe 600 up 1.6% to 440.47 MXAP up 1.4% to 162.83 MXAPJ up 2.2% to 535.18 Nikkei up 0.4% to 26,659.75 Topix up 0.2% to 1,866.71 Hang Seng Index up 3.3% to 20,602.52 Shanghai Composite up 0.6% to 3,093.70 Sensex up 2.1% to 54,080.42 Australia S&P/ASX 200 up 0.3% to 7,112.53 Kospi up 0.9% to 2,620.44 German 10Y yield little changed at 0.99% Euro up 0.4% to $1.0480 Brent Futures up 0.3% to $114.53/bbl Gold spot up 0.2% to $1,827.11 U.S. Dollar Index down 0.42% to 103.75 Top Overnight News from Bloomberg The euro-area economy grew more than initially estimated at the start of the year as the region moved past a wave of Covid-19 infections and defied headwinds from the early days of the war in Ukraine. Economic output rose 0.3% in the first quarter, exceeding a flash reading of 0.2%, according to Eurostat data released Tuesday. Employment, meanwhile, gained 0.5% during same period The UK will lay out its plan to amend its post-Brexit trade deal Tuesday in a direct challenge to the European Union, which is insisting that Prime Minister Boris Johnson must honor the agreement he signed China’s main bond trading platform for foreign investors has quietly stopped providing data on their transactions, a move that may heighten concerns about transparency in the nation’s $20 trillion debt market after record outflows The American and European Union chambers of commerce in separate briefings said their members are rethinking their supply chains and whether to expand investment in the face of China’s zero tolerance approach to combating Covid-19 Turkish President Recep Tayyip Erdogan said he won’t allow Sweden and Finland to join NATO because of their stances on Kurdish militants, throwing a wrench into plans to strengthen the western military alliance after Russia’s invasion of Ukraine A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were positive but with gains capped after the uninspiring lead from Wall St and growth concerns. ASX 200 was kept afloat by strength in the commodity-related sectors after recent gains in underlying prices. Nikkei 225 traded marginally higher with Japan seeking to pass an extra budget by month-end and will begin permitting entry to a small number of tourists. Hang Seng and Shanghai Comp were both firmer with tech spearheading the outperformance in Hong Kong amid hopes of an easing of the crackdown on the sector, while the mainland lagged amid economic concerns and despite Shanghai reporting no cases outside of quarantine for a 3rd consecutive day. Top Asian News China's state planner said China's economy faces increasing downward pressure, while it will step up support for manufacturing companies, contact-intensive services, small companies and home businesses, according to Reuters. Senior Chinese officials are to meet with tech industry chiefs today amid talk of crackdown easing, according to Nikkei. It was later reported that China's top political consultative body began a conference on promoting the sustainable and healthy development of the digital economy, according to state media. Hong Kong Chief Executive Carrie Lam said they will proceed with the planned COVID curbs easing on May 19th, according to Bloomberg. BoJ Deputy Governor Amamiya said it is important to continue current powerful easing to firmly support the economy and that long-term interest rates have been stable since the adoption of fixed-rate operations, while he added that if monetary easing is reduced now, it would make the 2% price goal an even more distant target, according to Reuters. Japan is to permit small groups of tourists to visit this month as a trial ahead of its border reopening, according to Japan Times. European bourses are firmer across the board, Euro Stoxx 50 +1.7%, taking impetus from and extending on a positive APAC handover as the regions COVID situation improves. Stateside, futures are firmer across the board, ES +1.8%, following yesterday's  relatively lacklustre session with participants awaiting numerous Fed speak, including Chair Powell. Twitter (TWTR) prospective purchaser Musk says that his offer was based on the Co.'s SEC filing being accurate, however, yesterday the CEO refused to show proof of less than 5% of fake/spam accounts; deal cannot move forward until this has been disclosed. -3.5% in the pre-market. Home Depot Inc (HD) Q1 2023 (USD): EPS 4.09 (exp. 3.67/3.67 GAAP), Revenue 38.9bln (exp. 36.71bln); Raises Fiscal 2022 Guidance. +2.5% in the pre-market Top European News UK Foreign Secretary Truss is to declare her intention to bring forward legislation that rips up parts of the post-Brexit trade deal on Northern Ireland, according to LBC. Expected around 12:30BST/07:30ET Irish Foreign Minister Coveney says he spoke with UK Foreign Minister Truss on Monday, notes the EU and UK sides haven't met since February and says it is "time to get back to the table" ECB is expected to raise the deposit rate in July according to 39 out of 39 respondents in a Reuters survey, while 26 out of 48 economists see the deposit rate at 0% in Q3 and 21 out of 48 see the deposit rate at 0.25% in Q4. FX Pound the standout G10 performer in wake of outstanding UK labour report; Cable clears string of resistance levels on the way towards 1.2500 and EUR/GBP probes 0.8400 after breaching technical supports . Kiwi and Aussie relish renewed risk appetite and latter also helped by hawkish RBA minutes; NZD/USD above 0.6350 and 1.3bln option expiries at 0.6300, AUD/USD back on 0.7000 handle. Greenback concedes ground ahead of top tier US data and raft of Fed speakers including chair Powell, DXY down to 103.470 vs 104.320 at best; latest session low in wake of ECB's Knot. Franc, Euro and Loonie all up at the expense of the Buck but latter also fuelled by WTI topping USD 115/bbl; USD/CHF sub-parity, EUR/USD surpassing 1.05 in wake of hawk-Knot and USD/CAD near 1.2800. Yen lags as risk sentiment improves and yields outside of Japan rebound firmly; USD/JPY rebounds through 129.00 and just over 129.50. Norwegian Crown boosted by Brent in stark contrast to crude import dependent Turkish Lira and Indian Rupee; EUR/NOK under 10.1500, USD/TRY touches 15.8850 and USD/INR crosses 78.0000 to set fresh ATH Fixed Income Bonds make way for risk revival and brace for US data amidst a raft of global Central Bank speakers. Bunds down to 152.74, Gilts hit 119.25 and 10 year T-note as low as 119-08 before paring some heavy declines UK DMO gets welcome reception for 2015 issuance, but new German Schatz receives cold shoulder even before hawkish comments from ECB's Knot not ruling out a 50 bp July hike if data warrants more than 25 bp China's main bond trading platform is said to have stopped the reporting of bond trades by foreigners following the market downside, according to Bloomberg. Commodities WTI and Brent are firmer in-fitting with broader risk appetite and the aforementioned China COVID improvement; posting gains of circa USD 0.80/bbl. However, upside remains capped amid the ongoing standoff between the EU and Hungary over a Russian import embargo. Iran set June Iranian light crude price to Asia at Oman/Dubai + USD 4.25/bbl, according to a Reuters source   OPEC+ production was 2.6mln below quotas in April, according to a report cited by Reuters; Russian production 1.28mln below the required level in April, sources add. Spot gold is firmer, taking impetus from the USD pressure; though, the yellow metal is yet to move out of earlier ranges. Base metals are bid on risk while Wheat declined amid reports that India is easing some of its export restrictions. Central Banks ECB's Knot says a 25bp hike in July is realistic; says a 50bp rate hike should not be excluded if data in the next few months suggests that inflation is broadening and accumulating. NBH's Virag says they will increase rates further, via Reuters citing slides. NBP's Kotecki says that interest rates will continue to move higher but it is currently difficult to define their target level. US Event Calendar 08:30: April Retail Sales Advance MoM, est. 1.0%, prior 0.5%, revised 0.7% April Retail Sales Ex Auto MoM, est. 0.4%, prior 1.1%, revised 1.4% April Retail Sales Ex Auto and Gas, est. 0.7%, prior 0.2%, revised 0.7% April Retail Sales Control Group, est. 0.7%, prior -0.1%, revised 0.7% 09:15: April Industrial Production MoM, est. 0.5%, prior 0.9% 09:15: April Manufacturing (SIC) Production, est. 0.4%, prior 0.9% 10:00: March Business Inventories, est. 1.9%, prior 1.5% 10:00: May NAHB Housing Market Index, est. 75, prior 77 Fed Speakers 08:00: Fed’s Bullard Discusses Economic Outlook 09:15: Fed’s Harker Discusses Healthcare as Economic Driver 12:30: Fed’s Kashkari Takes Part in a Moderated Townhall Discussion 14:00: Powell Interviewed During Wall Street Journal Live Event 14:30: Fed’s Mester Gives Opening Remarks to Panel on Inflation 18:45: Fed’s Evans Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Recession fears have continued to dominate markets over the last 24 hours, but Deutsche Bank Research is still the only bank to actually forecast one in the US. The tone was set for the day after some incredibly weak data out of China that we discussed yesterday, but that was then followed up with disappointing survey data from the US, which arrived ahead of an array of central bank speakers today (including Fed Chair Powell). Although markets in Asia are bouncing a little this morning, the S&P 500 (-0.39%) last night followed up its run of 6 consecutive weekly declines with a further loss. It was another volatile day that saw stocks trade in a 1.5% range, including going into positive territory briefly in the afternoon before slipping into the close. Sector dispersion was pretty wide, with energy shares gaining +2.62% and consumer discretionary stocks falling -2.12%, led by Tesla retreating -5.88%. Tech was the next biggest laggard, with the NASDAQ (-1.20%) and FANG+ index (-1.34%) underperforming the broader universe. That still leaves the S&P 500 index around 2% above its recent closing low on Thursday, but remember that if we get another week in negative territory, it would still be the first time since 2001 that the S&P has posted 7 consecutive weekly declines. After opening the week much lower, the STOXX 600 did recover through that day to post a slight +0.04% gain yesterday, continuing its recent outperformance. The prevailing risk-off mood meant that longer-dated sovereign bond yields also ended the day lower for the most part. Those on 10yr Treasuries were down -3.6bps to close at 2.88%, having already fallen by -20.8bps over the previous week as investors priced in a growing risk of recession over Fed and inflation concerns. The decline was split between breakevens and real yields. To be fair 10yr yields have gained +3.3bps this morning in Asia, thus almost reversing yesterday's losses so far. At the short-end, the amount of tightening priced in over the near-term has subsided somewhat of late, as it seems investors are searching high and low for a Fed put following a poor run of risk asset performance and the prior relentless repricing towards a more aggressive monetary tightening. Indeed if you were to stop the month right now, it would be the first month in 10 that the rate priced in by the December 2022 meeting has actually fallen rather than risen. That’s been echoed further out the curve as well, with investors now barely expecting the Fed Funds rate to get above 3% in 2023 at all, even though inflation has proven much stickier than the consensus expected over recent months. As Chair Powell put it in an interview last week, getting inflation back to target will “include some pain”. Markets are starting to price some of that out though. Over in Europe longer-dated sovereign bond yields also moved slightly lower, including those on 10yr bunds (-0.8bps), OATs (-1.4bps) and BTPs (-0.8bps). That came as we heard from Bank of France Governor Villeroy, who said to expect “a decisive June meeting, and an active summer”, which fits into the broader debate recently whereby markets are increasingly expecting an initial hike as soon as July. This saw the 2yr bund increase +3.0bps to 0.12%. Another point of interest were also his comments on the exchange rate, saying that “A euro that is too weak would go against our price-stability objective”. In line with the broader theme this year, one asset class that wasn’t impacted by the risk-off tone was commodities, and both Brent crude (+2.41%) and WTI (+3.36%) moved back above $114/bbl yesterday. This morning, both are seeing slight losses though (-0.36% and -0.46%, respectively). There were major gains for wheat futures (+5.94%) too, which saw a significant daily rise following India’s move over the weekend to restrict their exports. And that went alongside other rises in agricultural goods yesterday including corn (+3.6%) and sugar (+2.66%), which is an incredibly important story for emerging markets in particular given the much higher share of disposable income that consumers put towards food in those countries. Another asset class that has had a bad time of late is Bitcoin, shedding another -3.58% to $29,909 yesterday. This morning it is climbing back above the $30k threshold. Marion Laboure in my team published a piece yesterday looking at the recent selloff in crypto, adding some much needed context for what this means for broader adoption efforts. See here for more. Overnight in Asia, it has been a good start for the Hang Seng (+2.23%) amid optimism that today’s meeting between China’s corporates and regulators may lead to an easing of draconian measures on tech companies. Hong Kong is also on track to ease covid curbs on May 19th, a theme that also lifted the Shanghai Composite (+0.29%) after the city reported a third day of no new infections in the broader community, a threshold that allows it to roll back some of the restrictions. The sentiment is upbeat elsewhere in Asia too, with the Nikkei (+0.35%) and the KOSPI (+0.80%) also rising. This optimism is shared by S&P 500 futures, up +0.31%. Elsewhere, it’s likely that Brexit will be back in the headlines today as UK Foreign Secretary Liz Truss is expected to make a statement to parliament announcing a new law that would override parts of the Northern Ireland Protocol. For reference, the Protocol is a part of the Brexit deal which the UK and the EU agreed ahead of the UK’s departure, but has been a persistent source of controversy since. Northern Irish unionists view it as undermining their place in the UK because it places an economic border between Northern Ireland and Great Britain, and the DUP (the second-largest party in the Northern Ireland Assembly) are refusing to help form an executive following their recent elections unless action is taken on the Protocol. The EU have continued to warn the UK against any unilateral action, and there’s been fears of an UK-EU trade war if the row gets worse. There wasn’t much in the way of data yesterday, although the Empire State manufacturing survey for May underwhelmed with a reading of -11.6 (vs. 15.0 expected), which was beneath every estimate in Bloomberg’s survey. There was some easing in the prices paid index though, which fell to a 14-month low of 73.7. To the day ahead now, and there’s an array of central bank speakers including Fed Chair Powell, along with the Fed’s Bullard, Harker, Kashkari, Mester and Evans, ECB President Lagarde and BoE Deputy Governor Cunliffe. Data releases include US retail sales, industrial production and capacity utilisation for April, along with the NAHB’s housing market index for May. Elsewhere, there’s also the UK unemployment reading for March. Finally, earnings releases include Walmart and Home Depot. Tyler Durden Tue, 05/17/2022 - 07:43.....»»

Category: blogSource: zerohedgeMay 17th, 2022

Oil Dips, Gold Rebounds, Bitcoin Struggles

Stocks steady ahead of Fed, Bond yields hit key levels, Oil dips, Gold rebounds, Bitcoin struggles – OANDA US stocks are steadying ahead of a pivotal Fed decision that will deliver the largest rate hike since the start of the millennium. ​ Wall Street knows the next few months could be rather challenging given the current […] Stocks steady ahead of Fed, Bond yields hit key levels, Oil dips, Gold rebounds, Bitcoin struggles – OANDA US stocks are steadying ahead of a pivotal Fed decision that will deliver the largest rate hike since the start of the millennium. ​ Wall Street knows the next few months could be rather challenging given the current forces of inflation and all the uncertainty with energy prices and supply chain issues. ​ Despite all the risks to economic growth, investors are still mostly optimistic that stocks will finish much higher by the end of the year. ​ Market volatility is expected to remain elevated over the next few Fed meetings and that could mean stocks could soften by another 5% before traders aggressively buy the dip. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more The Fed is widely expected to raise rates by a half-point and announce the balance-sheet runoff tomorrow. The Fed knows the first few rate hikes won’t restrain growth that much but their messaging on tightening going forward and the size of the balance sheet runoff start could rattle markets. The S&P 500 index has major support at the 4,050 level heading into the Fed meeting. Fixed income traders have watched many massive technical levels reached, with the 10-year Treasury yield testing 3.00%, the German bund yield tentatively tested 1.00%, and as Gilts tested 2.00%. ​ Aggressive central bank tightening has been keeping the bond market selloff going, but prices should now consolidate until the Fed meeting. Oil Crude prices are declining as Beijing tightens up their Covid controls and as tanker-tracker data showed Russian crude flows increased. ​ Energy traders are not convinced that the EU will be able to move forward with an embargo on Russian oil. ​ Oil seems to have major support around the $100 level as OPEC+ seems poised to rubber stamp next month’s output increase target that they probably won’t hit. ​ Still weighing on oil is the uncertainty with China’s Covid situation. ​ Energy traders are also keeping a close eye on the Fed policy meeting which could contain a hawkish surprise that sends the dollar higher, which will drag down commodity prices. Gold Gold’s two weeks of pain appears to be over as Wall Street has priced in the majority of global central bank tightening. ​ After a major run higher for US and European bond yields, non-interest bearing gold is mustering up a rally as fixed income traders appear to be getting closer to pricing in peak hawkishness. Gold has been battered as investors brace for the most hawkish Fed policy decision since the start of the millennium. ​ The dollar rally could be getting closer to nearing its end and that should be good news for bullion. ​ Gold’s fate could very well be determined on how aggressive the Fed will be with balance sheet normalization. Bitcoin Bitcoin is in wait-and-see mode for the Fed policy decision, which could show Wall Street has priced in peak Fed hawkishness. ​ Bitcoin is struggling to muster up a rally as investors remain cautious about buying risky assets. Bitcoin needs a fresh catalyst as sentiment on Wall Street remains fairly downbeat. ​ Article By Edward Moya, OANDA Updated on May 3, 2022, 2:59 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 3rd, 2022

Global Markets Tumble On Hawkish Central Bank Anguish, China Lockdown Fears

Global Markets Tumble On Hawkish Central Bank Anguish, China Lockdown Fears The global selloff that started in Asia, sending China's CSI300 plunging to the lowest level since May 2020, slamming the offshore yuan below 6.60 and sparking a liquidation in oil and cryptos amid fears that the Shanghai lockdown will spread to the capital Beijing and lead to an even greater slowdown in the global economy... ... has quickly spread around the globe, slamming not just European markets but US equity futures which slid as much as 1% as traders fretted over the prospects of aggressive tightening by the Federal Reserve, Chinese lockdowns and disappointing earnings. S&P 500 futures were down 0.9% as of 7:00am EDT after plunging 2.8% on Friday, while Nasdaq futures retreated 0.8%, with the rout hammering tech stocks especially hard. Some context: the Nasdaq 100 Index has erased about $1 trillion in market value since Netflix released disappointing earnings and is closing in on oversold levels; the tech-heavy FANGMAN basket has lost $2.4 trillion in market cap from 2021 ATH as Netflix and Facebook  Meta, have lost most of their gains from past 5yrs. Remember when Facebook hit the $1tn market cap club in 2021? Now it’s worth exactly half that. But now the tech bear market is finally spreading all US stocks which closed at their lowest levels in more than a month on Friday as fears over a more aggressive Federal Reserve tightening cycle led to broad-based selling. Investors are entering another busy week for big technology companies’ earnings, with Alphabet, Microsoft, Meta Platforms, Paypal and Apple all reporting results although don't expect some miraculous surge. Investor mood was already morose after Fed chair erome Powell’s hawkish comments last week hurt sentiment already sapped by the war in Ukraine, a slowdown in China and the risks inflation poses to company earnings, according to Michael Hewson, chief analyst at CMC Markets in London. “The final straw appears to be a concern about the prospect of a policy mistake by central banks, and a possible recession by the end of the year,” he said. One sole glimmer of green, Twitter shares, rose 0.6% in premarket trading after a WSJ report that Elon Musk met with the social media platform’s executives on Sunday as the company turns more receptive toward the billionaire’s $43 billion takeover offer. As discussed earlier, U.S.-listed Chinese stocks fell in premarket trading as expanded Covid lockdown measures in major Chinese cities spark concerns over the country’s growth outlook. Pinduoduo led a decline in American depositary receipts, down 4.7% in premarket trade. E-commerce peers Alibaba Group fell 3.9% and JD.com lost 2.5%. Electric carmakers including Nio and Li Auto also fell. The weakness tracks a 4.9% slump in China’s CSI 300 Index, which closed at its lowest level in two years. Here are some other notable premarket movers: U.S.-listed Chinese stocks look set to open lower on Monday as expanded Covid lockdown measures in major cities sparked concerns over the country’s economic growth outlook. Pinduoduo (PDD US) led a decline in American depositary receipts, down 4.7% in premarket trade. E-commerce peers Alibaba (BABA US) fell 3.9% and JD.com (JD US) lost 2.5%. Electric carmakers including Nio (NIO US) and Li Auto (LI US) also fell. AT&T (T US) reinstated with a buy rating at Goldman Sachs with the focus turning to the telecom giant’s core business, while the broker cuts its rating on Verizon (VZ US) on valuation grounds. AT&T up 0.6% in premarket, Verizon -1.4%. Cenntro Electric (CENN US) rises as much as 22% premarket ahead of the electric-vehicle company’s quarterly update due after the close on Monday. Kellogg (K US) was downgraded to hold from buy at Deutsche Bank, which stays cautious and below consensus ahead of 1Q22 results because of headwinds including worsening inflation and supply chain disruptions. Shares down 1.4% in premarket. Morgan Stanley says DoorDash (DASH US) is the “best executor around” among food delivery companies, but awaits a better entry point as initiates at equal-weight with Street- low $100 target. Shares down 1.1% in premarket on low volume. GoDaddy (GDDY US) upgraded to overweight at Piper Sandler on strong free cash flow potential, with the broker cutting its ratings on Wix.com (WIX US) and Squarespace (SQSP US) in a rejig of its digital presence coverage. GoDaddy little changed in premarket, Wix.com and Squarespace not traded. Coca-Cola and Activision Blizzard are among companies reporting earnings today. In Europe, markets are under heavy pressure: Euro Stoxx 50 drops as much as 2.6% with several other core indexes down over 2%. Spain’s IBEX outperforms. Miners are the weakest performers with the Stoxx 600 sector down over 5%. Energy and consumer products and services similarly lag.  Europe’s Basic Resources Index  crashed 6%, and was set for the worst daily drop since March 2020. Here are some of the biggest European movers today: Ubisoft shares rise as much as 12% after Bloomberg reported the video-game publisher is attracting takeover interest from private equity firms including Blackstone and KKR. Garanti stock rallies as much as 5.6% after parent BBVA sweetened its voluntary offer for the Turkish lender and the unit said 1Q net income tripled. Biogaia shares rise as much as 9.6% after the Swedish food-additives and supplements maker published preliminary 1Q sales figures, which included a large beat on operating profit and net sales. Barco shares rise as much as 4.2% after the projector maker’s Cinionic JV won a contract to install laser projectors in 3,500 U.S. auditoriums of cinema chain operator AMC. The Stoxx 600 Basic Resources and Energy sub- indexes both slumped on Monday amid broad declines for commodities prices on concerns that a growing Covid-19 outbreak in China will hit demand. Shell -4.5%, TotalEnergies SE -3.1%, Glencore -6.0%, Anglo American -6.5% Philips stock falls as much as 11% after publishing its latest earnings, where higher provisions related to its recall of Dreamstation breathing machines overshadowed better-than-expected 1Q sales. Roche shares fell as much as 3.6% after the Swiss pharma company reported mixed first quarter results. Sales beat expectations due to a boost to the diagnostics division, while the pharmaceutical unit missed. As we reported on Sunday, the big news out of France is that Macron won the second round of the Presidential Election with 58.6% of the vote vs Le Pen at 41.4%, while Le Pen conceded defeat after the initial projections, according to Reuters and Sky News. Elsewhere, ECB President Lagarde commented that interest rate hikes will not lower energy prices, according to Barron’s. ECB policymakers are said to be keen to finish bond purchases as soon as possible and possibly hike rates in July but no later than August, while they are leaning towards two rate moves this year with three also a possibility, according to Reuters sources. However, an ECB spokesperson declined to comment on the timing of ending bond purchases and potential interest rate increases. The EU is said to prepare the creation of a new trade and tech council with India, according to FT sources. The new forum could be unveiled on Monday during the European Commission President’s visit to India. Earlier in the session, Asian stocks slumped the most since March 11 as China’s worsening Covid-19 outbreak and a looming rate hike by the Federal Reserve hurt risk sentiment.  The MSCI Asia Pacific Index fell as much as 2.2% Monday, setting off a grim start to the region’s busiest week for earnings. The biggest drags were technology stocks sensitive to higher interest rates, including Taiwan Semiconductor Manufacturing, Alibaba and Tencent.  Equities in mainland China and Hong Kong were among the region’s worst performers. Chinese stocks slid to a two year low amid fears that rising infections in Beijing may spur an unprecedented city-wide lockdown of the capital. The Chinese regulator also ordered platform companies to better handle online violence, dragging tech stocks lower. READ: China Lockdown Angst Rips Through Markets as Stocks, Yuan Plunge The lockdowns that have now expanded to parts of Beijing will “cause a logistical problem that’s going to affect not just China but also the rest of the world,” Jeffrey Halley, Asia Pacific senior market analyst at Oanda, said in an interview with Bloomberg TV.  With no signs of change in Covid zero policy and very little in terms of actual stimulus, “that all points to lower China stocks and we are going to see a weaker yuan going forward,” he added. Investors are also on guard for corporate earnings. Stock-market heavyweights including Kweichow Moutai in China and Samsung Electronics in South Korea are expected to release first-quarter results this week.   With a number of Fed speakers recently showing support for 50-basis-point hikes, tech shares led declines of major gauges in the region. Taiwan’s Taiex dropped 10% from its January high.   Japanese equities dropped, extending a global selloff amid prospects for aggressive U.S. interest-rate hikes and a worsening Covid outbreak in China. Electronics and machinery makers were the biggest drags on the Topix, which fell 1.5%, with 32 of 33 industry groups in the red. Fast Retailing and SoftBank Group were the largest contributors to a 1.9% loss in the Nikkei 225. Indian stocks also fell, joining their peers across Asia, as appetite for risk waned amid renewed concerns over Covid infections and its possible impact on business growth.  The S&P BSE Sensex dropped 1.1% to 56,579.89, while the NSE Nifty 50 Index slipped 1.3% to 16,953.95. Reliance Industries Ltd. lost 2.3%, the most in seven weeks. It was the biggest drag on the Sensex, which saw 23 of its 30 stocks trading lower.   All but one of 19 sectoral sub-indexes compiled by BSE Ltd. declined, led by a gauge of metal stocks.  The continued war in Ukraine and fears of a wider lockdown in Beijing are weighing on sentiment, already impacted by the risk of a global slowdown as the U.S. Fed raises rates to tame inflation. Of the six Nifty 50 firms that have announced results so far, four have missed, while two have beaten analyst estimates. Bajaj Finance, Hindustan Unilever, Axis Bank are among the companies releasing Jan-March earnings this week.  With risk off, safe havens were mostly bid: Treasuries advanced across the curve, with yields on the belly falling about 10bps and 10Y yields sliding 8bps to 2.833%. The belly of the UST curve outperforms by 1-2bps. Peripheral spreads widen to core with 10y Italy lagging peers on the rally. European bonds advanced, yet underperformed Treasuries; the spread between French 10-year bond yields and German equivalents tightened at the open after President Emmanuel Macron was re-elected as French president, only to widen as haven demand supported bunds. IG dollar issuance slate empty so far; preliminary estimates are for around $25 billion this week. •    Three-month dollar Libor +1.11bp to 1.22486%. In FX, the Bloomberg Dollar Spot Index rose a third day to the highest level since May 2020; the greenback advanced against all of its Group-of-10 peers apart from the yen and the Swiss franc; AUD and NZD lag G-10 peers. USD/JPY holds above 128. The euro fell to its lowest level versus the dollar since March 2020, erasing earlier gains amid broader greenback strength.  The pound slumped to the lowest versus the dollar since September 2020 and gilts advanced. The Aussie was the worst G-10 performer amid fears over the outlook for China’s demand for iron ore and with the selloff boosted by options-related selling. The yen rose, as concerns about the economic impact of accelerating U.S. rate increases put a pause on the recent aggressive selling of the currency. Japan’s government bonds tracked Treasuries higher with support from purchases by the Bank of Japan. Perhaps most importantly, the yuan - which until now had resisted any weakness - plunged again, dropping to the lowest level in 17 months as the offshore yuan dropped below 6.60 the lowest level since Nov 2020, spurring a selloff in emerging-market currencies. In commodities, crude futures sold ell off with WTI down over 4% and back on a $97-handle. Base metals are similarly deep in the red. Spot gold drops ~$14 to trade near $1,916/oz. Monday’s pullback in the soaring price of commodities since Russia’s invasion of Ukraine has done little to assuage concerns about runaway inflation. Fed Jerome Powell had outlined his most bold approach yet to reining in surging prices and the European Central Bank signaled stronger tightening. Bitcoin continued to tumble alongside the broader crypto market, even though the harder the stocks fall and the more the Fed tightens, the more it will eventually have to ease, unleashing the next surge higher in cryptos which we expect to push bitcoin over $100,000 and Ether over $10,000. Looking at the calendar, the economic data slate includes March Chicago Fed national activity (8:30am) and April Dallas Fed manufacturing activity(10:30am); consumer confidence, GDP, PCE deflator and University of Michigan sentiment are ahead this week. Today we will earnings from Coca-Cola, Activision Blizzard, Vivendi. Market Snapshot S&P 500 futures down 0.7% to 4,235.25 STOXX Europe 600 down 1.8% to 445.31 MXAP down 2.0% to 166.02 MXAPJ down 2.4% to 546.02 Nikkei down 1.9% to 26,590.78 Topix down 1.5% to 1,876.52 Hang Seng Index down 3.7% to 19,869.34 Shanghai Composite down 5.1% to 2,928.51 Sensex down 1.0% to 56,637.35 Australia S&P/ASX 200 down 1.6% to 7,473.28 Kospi down 1.8% to 2,657.13 German 10Y yield little changed at 0.89% Euro down 0.4% to $1.0751 Brent Futures down 4.4% to $101.96/bbl Gold spot down 0.6% to $1,920.54 U.S. Dollar Index up 0.20% to 101.43 Top Overnight  News from Bloomberg China’s coronavirus outbreak worsened as rising cases in Beijing sparked jitters about an unprecedented lockdown of the capital, with policy makers racing to avert a Shanghai-style crisis that’s already wrought havoc on the financial hub China must take stronger action to boost growth above 5% in the second quarter, said a central bank adviser who warned the country needs to lay a foundation for achieving its full-year target in the face of rising economic risks A sustained and substantial increase in U.S. real yields would be bad news for developing nations as it typically boosts the dollar and sucks capital out of riskier assets, like in 2008 and 2013 The U.S. announced it would start sending diplomats back to Ukraine and provide more military aid as Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin visited Kyiv late on Sunday night, in the highest- level U.S. visit to the war-torn country since Russia invaded China’s central bank stepped up its support for several distressed developers by allowing banks and bad-debt managers to loosen restrictions on some loans to ease a cash crunch, according to people familiar with the matter A more detailed look at global markets courtesy of Newsquawk APAC stocks traded negatively after last Friday's stock rout on Wall Street with risk sentiment hampered by holiday closures, China's COVID-19 woes and as participants brace for a busy week of key earnings releases. Nikkei 225 shed around 500 points with sentiment not helped by several earnings guidance downgrades and with Nissan shares were hit as alliance partner Renault mulls selling a partial stake in the Japanese automaker. Hang Seng and Shanghai Comp underperformed on the COVID situation after daily deaths in Shanghai rose again and with the city to conduct another round of mass testing, while Beijing also scrambles to contain an outbreak with its Chaoyang district to require residents and workers to undergo three COVID-19 tests this week. Top Asian News Asia Stocks Fall Most in Six Weeks as China Outbreak Worsens China Woes Stoking Inflation Angst Set to Weigh on the Euro Shimao Unit Proposes to Pay Down Puttable Bond Faster: REDD Loan Curbs Eased for Distressed Developers: Evergrande Update European cash markets kicked off the week lower across the board with a relatively broad-based performance seen across the majors. Sectors are lower across the board with a clear defensive tilt: Energy and Basic Resources sit at the bottom of the bunch amid hefty downside in underlying commodities. Stateside futures are lower in tandem with the broader market sentiment, whilst the NQ is slightly more cushioned by the earlier decline in yields. Twitter is reportedly re-examining Elon Musk’s bid and be more receptive to a deal with the sides meeting on Sunday to discuss the proposal. It was separately reported that Twitter is facing increasing shareholder pressure to negotiate with Elon Musk in his takeover bid and that the Co. is in talks with Elon Musk in which a potential deal could be made as early as this week, according to WSJ. Top European News Macron Gets Second Chance to Show France His Vision Can Work Credit Suisse Special Audit Backed by Norway’s Wealth Fund SocGen Too Quick to Axe Boss Accused of Trying to Kiss Colleague Art Seized at U.S. Homes Part of Crackdown on Wealthy Russians FX: DXY sets new 2022 peak at 101.750 amid safety flight and sharp slide in crude alongside other commodities. Yen back in favour as risk sentiment sours irrespective of denials about joint Japanese and US intervention discussion - Usd/Jpy towards base of 128.87-127.89 range. Aussie underperforms on Anzac Day due to steep decline in copper and iron ore - Aud/Usd tests 0.7150 and Aud/Nzd cross under 1.0850 vs 1.0940 at one stage overnight. Yuan extends depreciation as Covid spreads to a district in Beijing and PBoC continues to lower Cny midpoint reference rate - Usd/Cnh just shy of 6.6000, Usd/Cny eyeing 6.5650. Euro averts 1.0700 test, narrowly, and pares more losses after surprisingly upbeat Ifo survey, on the surface - Eur/Usd rebounds to circa 1.0750, but still well below Macron victory high. Pound loses Fib support on the way through 1.2800 and sub-8400 vs Dollar and Euro respectively. Fixed Income Debt futures firm as risk appetite wanes, but bonds fade beyond 154.50 in Bunds, 119.00 in Gilts and 119-25 in the 10 year T-note. Core EZ bonds lose momentum after German Ifo survey beats and irrespective of less encouraging accompanying statements. French OATs off peak within 147.38-146.28 range posted on confirmation of Macron defeating Le Pen to retain Presidency. European Commission sells EUR 2.499bln (exp. EUR 2.500bln) 0.4% 2037 NGEU; b/c 2.05x (prev. 1.49x), average yield 1.626% (prev. 0.375%). Commodities: WTI and Brent June contacts have continued to decline since the resumption of futures trading. Spot gold has been caged to a near-USD 5/oz range since the European open as the impact of a firming Buck negated the effects of lower yields at the time. Base metals are in a sea of red as China's lockdown woes hit the demand side of the equation – with LME aluminium and zinc the laggards at the time of writing. US Event Calendar 08:30: March Chicago Fed Nat Activity Index, est. 0.45, prior 0.51 10:00: Revisions: Retail Sales, Inventories 10:30: April Dallas Fed Manf. Activity, est. 4.8, prior 8.7 DB's Jim Reid concludes the overnight wrap I survived a weekend alone with my kids but the only way for all of us to cope was to comfort eat and spend so much time on Netflix that I may as well cancel my subscription as there is nothing left to watch now. Never has Mum been so welcome by an adult, 3 kids and a dog, as she was on her return last night. Parenting is hard! Central bankers are finding it hard too at the moment and it was a fascinating past week on that front as several important central bankers belatedly played a game of leapfrog on who could make the most aggressively hawkish rhetoric on taming inflation. Those speaking at the start of the week might have seemed hawkish at the time but by the end of the week they almost looked dovish. The IMF/World Bank gathering probably focused the minds of all the Governors, Presidents and Chairs present and hawkishness spread through the event like wildfire with the notable exception of Japan's Kuroda who is seemingly sticking to the country's YCC. We are now in the Fed blackout period so they won't add to the hawkishness for the 9.5 days before we get the FOMC decision. Note that the BoJ meet on Thursday although nothing suggests they are going to pivot and will remain the last hawkish shoe to drop. The French election has passed without incident with President Macron gaining 58.6% of the vote vs. 41.4% for Le Pen. Macron won 66.1% of the second round vote in 2017 and with him unable to stand in 2027 and with the traditional parties share of the vote at record lows who knows where French politics will be by then. However much water will flow under Le Pont des Arts before we need to worry about that. Meanwhile, the next hurdle for Macron will come with the Parliamentary elections on the 12th and 19th of June. Commonly referred to as the ‘third round’, the elections will be crucial as it will define the make-up of the government Macron must rely on to push through his reform program. See Marc de-Muizon's blog last night here for more on this. The Euro popped nearly +0.6% higher at the Asian open after the results became clear but has subsequently dipped into negative territory as risk off dominates in Asia. Mainland Chinese stocks are sliding with the Shanghai Composite (-1.95%) and CSI (-2.39%) down, falling to its lowest level since 2020 amid the worsening Covid situation in China, particularly in the financial hub of Shanghai. Strict restrictions have begun to spread, with authorities ordering mandatory Covid tests in a district of Beijing and many buildings locked down. The Hang Seng (-2.47%) is also lagging and elsewhere, the Nikkei (-1.94%) and Kospi (-1.44%) are weak. Outside of Asia, futures contracts on the S&P 500 (-0.42%) and Nasdaq (-0.30%) are lower with 2 and 10yr US yields both around -5bps lower. Brent and WTI are both around -2.9%. Moving on to this week now and it is an important one for European inflation with German CPI on Thursday and the French and Italian equivalent (plus PPI) on Friday with the overall Euro CPI the same day. US (Thursday) and European Q1 GDP (Friday) will also be of interest. Back to the US and inflation related data will be the closest watched with Friday's ECI expected to be strong. This is one of the key indicators the Fed use for labour market strength. The core PCE deflator (the Fed's preferred inflation measure) also comes out as part of the income and spending report data on Friday. The rate of growth may well tick down here so this might provide a shred of good news on inflation without changing the story too much. It will be an important week for corporate earnings too with 179 of the S&P 500 reporting and 134 in the Stoxx 600. Big US tech will be the highlight with Microsoft and Alphabet (tomorrow), Meta (Wednesday), and Apple and Amazon (Thursday). Consumption patterns will be in focus when we get results from Coca-Cola (today), Mondelez, Chipotle (tomorrow), Kraft Heinz (Wednesday) and McDonald's (Thursday). Meanwhile, a range of banks across the globe will give a pulse check on consumer credit. Notable reporters will include HSBC, UBS, Santander (tomorrow), Credit Suisse (Wednesday), Barclays (Thursday), finishing with BBVA and NatWest on Friday. Other notable financials reporting will include Visa (tomorrow), PayPal (Wednesday) and Mastercard (Thursday). Other tech-related companies releasing results will include Activision Blizzard (Monday), LG, Qualcomm, Spotify (Wednesday), Samsung, Intel and Twitter (Thursday). In healthcare, another sector that benefitted from the pandemic, reporters will include Novartis (tomorrow), GlaxoSmithKline (Wednesday), Eli Lilly, Merck, Sanofi (Thursday) and AstraZeneca (Friday). To see how the commodity rally and the focus on energy transition affected major commodity companies worldwide, markets will get earnings from Iberdrola, Vale (Wednesday), Total, Repsol (Thursday), Exxon, Orsted, Chevron and Eni (Friday). Downstream users like transport firms will report too, including General Motors (tomorrow), Boeing, Mercedes-Benz and Ford (Wednesday). Other notable corporates releasing results will include Texas Instruments, General Electric, UPS and Caterpillar. The rest of the day by day calendar of events appears at the end as usual on a Monday. Reviewing last week now, as discussed at the top a cadre of central bank officials reinforced the idea that monetary policy needs to tighten on both sides of the Atlantic this year, thus driving sovereign yields higher. Chair Powell, in his last remarks before the Fed’s May meeting communications blackout, lent credence to the wisdom of front loading the hiking cycle and getting policy rates to neutral as quickly as possible. Regional Fed presidents, spanning ideologies, concurred throughout the week. Short-term markets ended the week pricing more than 150 basis points of tightening over the next three meetings, embedding some risk premium for a 75 basis point hike at each meeting. Futures markets are implying Fed policy rates will be north of 2.80% by the end of the year, above the Fed’s estimates of neutral. President Lagarde was careful to draw a distinction between the US and European situation, but nevertheless would not rule out an increase to ECB policy rates as early as July, following the cessation of net APP purchases, which is likely early in the third quarter. Markets are pricing 24 basis points of ECB tightening by the July meeting, and 85 basis points of tightening for the rest of the year. Bank of England Governor Bailey highlighted the path of policy was laced with uncertainty, but inflation was likely to increase due to rising energy costs. Bailey added the bank would not sell its security holdings into fragile markets. Even committed dove, Ingves of the Swedish Central Bank, rowed back on his previous mantras and acknowledged tightening was needed. As a result, Sovereign yields were higher in each jurisdiction, with 10yr Treasury, bund, and gilt yields increasing +8.2bps (-1.2bps Friday), +10.6bps (+2.4bps Friday), and +7.4bps (-4.9bps Friday), respectively. For their part, 10yr OAT yields closed the week at a +44.5bp spread above bund equivalents, their tightest since March, as President Macron’s polling advantage increased heading into yesterday’s election. Equity indices retreated on the tighter policy path. The STOXX 600 fell -1.42% (-1.79% Friday) while the S&P 500 was -2.75% lower (-2.77% Friday), bringing it into correction territory YTD (-10.37%) again. Mega cap tech stocks bore the brunt, with FANG+ falling -8.76% (-1.99%) as higher discount rates hit valuations. The mega cap losses accelerated after Netflix reported it lost subscribers in the first quarter, which sent its share prices more than -35% lower. The reprieve was only temporary the following day when Tesla reported a record profit on the back of surging electric car demand. Brent crude oil futures were relatively subdued by comparison to other asset classes and recent volatility, falling -5.43% (-2.48% Friday) over the week to $105.64/bbl. Elsewhere the IMF revised down their global growth expectations in light of Russia’s invasion, expecting the global economy to grow 3.6 percent in each of the next two years. Fighting continued in eastern Ukraine, with Russia declaring victory over the port city of Mariupol, while there was not any material public progress in peace negotiations. The Credit Derivatives Determinations Committee said Russia’s remuneration of foreign currency bonds with rubles would constitute a default and trigger credit default swaps. Russia has a 30-day grace period, which ends May 4, to make creditors whole. Tyler Durden Mon, 04/25/2022 - 07:48.....»»

Category: worldSource: nytApr 25th, 2022

Futures Slide, Nat Gas Soars As Traders Return From Holiday

Futures Slide, Nat Gas Soars As Traders Return From Holiday Equity futures fell, Treasury yields rose and nat gas prices soared to the highest since 2008 as US markets reopened after a three-day holiday weekend while the U.K. and euro-zone markets remain closed. Nasdaq 100 futures led the retreat, falling 0.3% at 730 a.m. EDT after tumbling as much as 0.8%, and signaling a bearish start to the week after the U.S. market was closed on Friday for a holiday. S&P 500 futures also dropped 0.2%, while European markets remained closed on Monday. Oil was flat, while a cautious overall investor mood bolstered the dollar and gold. The USDJPY was set for the longest winning streak on record. Nat gas soared another 3%, rising to the highest level since 2008. “We think inflation is no longer a net positive for earnings growth given the impact on costs that are now showing up in margins,” Morgan Stanley strategists led by Michael Wilson wrote in a note. The effects of soaring prices “are now more likely to be a headwind to growth.” In U.S. premarket trading, Twitter rose after Elon Musk said the economic interests of the board are not aligned with shareholders as the social media company took steps to ward off his takeover attempt. Meanwhile, DiDi Global plummeted after the company said it will hold an extraordinary general meeting on May 23 to vote on delisting its shares from the New York Stock Exchange. Fed Chair Jerome Powell may reinforce bets that the central bank will raise interest rates by a half point in May when he speaks at an event on Thursday. Later that day he’s due to participate in a panel hosted by the International Monetary Fund. Investors will also focus on earnings and guidance as companies from Bank of America to The Bank of New York Mellon Corporation report on Monday. The pattern across markets suggests investors remain uncertain whether high inflation has peaked or not. Price pressures are being fanned by supply-chain snarls from China’s Covid restrictions and disruptions to commodity flows due to the war. Concern is growing that the U.S. economy faces a downturn as the Fed pivots toward aggressive policy tightening to contain the cost of living. History suggests the Fed will face a difficult task in tightening policy to cool inflation without causing a U.S. recession, according to Goldman Sachs Group Inc. It put the odds of a contraction at about 35% over the next two years. “Major regime change is rarely smooth in either geopolitics or economics, and markets are under-pricing these risks,” Eric Robertsen, chief strategist at Standard Chartered Bank Plc, wrote in a note. “We are increasingly concerned about a summer of turbulence and volatility.” Meanwhile, in its latest downbeat note, Morgan Stanley wrote that the positive effects from inflation on earnings growth for U.S. firms have peaked as rising costs trim their margins and price pressures caused by the Ukraine war hit consumers. U.S. index futures followed a decline in Asia-Pacific stocks, which were sapped by Japan and China, despite the latter reporting stronger than expected GDP while March economic data confirmed that recent lockdowns have crippled the local economy. Markets in Australia, Hong Kong and much of Europe remain shut for Easter. Asian stocks dropped for a second day in holiday-thinned trading amid continued concern over the impact of inflation and efforts to contain it on global economic growth. The MSCI Asia Pacific Index fell as much as 1.1%, with India, Vietnam and Japan leading losses among national benchmarks. Mumbai-listed IT giants were among the biggest drags on the regional gauge after disappointing results from Infosys due to surging wages. Hong Kong and Australia remained closed for Easter holidays. Energy stocks outperformed after oil climbed on political unrest in Libya and Russia’s warning of the potential for record prices if more nations ban its products. Concerns of energy-driven inflation and moves by the Federal Reserve and other central banks to combat it have driven the recent global equity selloff, with tech stocks bearing the brunt in Asia. Meanwhile, China reported faster economic growth for the first quarter, while retail sales in March showed the first monthly decline since July 2020, as markets brace for the impact of the latest Covid outbreaks and lockdowns. The nation’s central bank refrained from lowering interest rates Friday, disappointing investors who had been looking for a cut. China Jitters Mount as Easing Calls Echo Across Trading Floors “China’s first quarter GDP was a bit stronger than expected, but what matters now is how the economy is doing after lockdowns in Shanghai so I see very limited impact on markets,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank. “I would think we are just seeing a calm before the storm.”  In geopolitics, Ukrainian officials said the remaining defenders of Mariupol are encircled by Russian forces but have not surrendered the strategically important port city, as a deadly strike was reported in Lviv near the Polish border. Ukrainian officials will be in Washington for this week’s meetings of the International Monetary Fund and the World Bank to seek financial support. In rates, Treasuries were higher across the curve by ~1bp, led by longer-maturity issues; 10- and 30-year yields reached new YTD highs, steepening the curve. 10-year Treasury yields edged down one point to 2.83% in the Asia session after rising as much as 5bps earlier in the session to 2.88% and rising 13 basis points last week; 30-year as much as 4.4bp to 2.96%; 2s10s and 5s30s spreads are wider but remain inside last week’s ranges, when both steepened sharply for a second straight week as traders dialed back the total amount of Fed tightening that’s expected following smaller-than-expected increase in the March core CPI. Yields climbed during Asia session amid speculation the market will move further toward pricing in a half-point rate increase by the Fed at its May meeting, already almost fully priced in. In FX, a gauge of the dollar rose against all its Group-of-10 peers; The New Zealand and Australian dollars led declines while the Japanese yen outperformed, swinging between gains and losses as BOJ Governor Haruhiko Kuroda said the currency’s rapid moves were fueling negative effects on the economy. The dollar extended its advance for a 12th day versus the yen, the longest winning streak on record, according to data going back five decades compiled by Bloomberg. USD/JPY up by as much as 0.3% to 126.79; one-week risk reversals at a 35 basis-point premium in favor of the topside. Bank of Japan Governor Haruhiko Kuroda said a weak yen is good for the economy, although a rapid drop can disrupt corporate planning. “With several markets closed for holiday today, the low liquidity may potentially amplify the risk-off market moves, aiding to support the dollar strength,” said Jun Rong Yeap, market strategist at IG Asia Pte. The currency market stuck to the trading patterns of recent days as a holiday-thinned session on Monday brought low volumes in spot and options markets alike. Market Snapshot S&P 500 futures down 0.4% to 4,371.75 MXAP down 0.9% to 172.33 MXAPJ down 0.7% to 572.84 Nikkei down 1.1% to 26,799.71 Topix down 0.9% to 1,880.08 Hang Seng Index up 0.7% to 21,518.08 Shanghai Composite down 0.5% to 3,195.52 Sensex down 2.2% to 57,073.46 Australia S&P/ASX 200 up 0.6% to 7,523.43 Kospi down 0.1% to 2,693.21 Brent Futures down 0.4% to $111.27/bbl Gold spot up 0.7% to $1,991.92 U.S. Dollar Index up 0.22% to 100.72 Top Overnight News from Bloomberg U.S. natural gas prices surged to the highest level in over 13 years as robust demand tests drillers’ ability to expand supplies China reported its biggest decline in consumer spending and worst unemployment rate since the early months of the pandemic as Covid lockdowns put a strain on the world’s second- largest economy Shanghai reported its first deaths as the biggest Covid flareup China has faced during the pandemic prompted more cities around the country to impose restrictions on their residents The odds of an economic contraction in the U.S. over the next two years are about 35%, according to Goldman Sachs Group Inc. Long-maturity Treasuries are contending with their biggest drawdown on record, according to their most popular exchange-traded fund Japan’s giant investors look set to bet on yen weakness continuing and boost their purchases of Treasuries over the rest of the year A more detailed look at global markets courtesy of Newsquawk Asian stocks traded mostly negative and US equity futures were also subdued amid a higher yield environment as gains in energy prices stoked inflationary' concerns, while market sentiment was also clouded by the mass holiday closures for Easter Monday and with participants reflecting on the recent PBoC actions and Chinese GDP data. Nikkei 225 (-1.6%) underperformed and fell beneath the 27k level with the index not helped by a choppy currency as officials continued their jawboning including BoJ Governor Kuroda who stated the recent Yen weakening has been quite sharp and that an excessively weak Yen or the currency's rapid depreciation can have a further negative impact but is basically positive overall. KOSPI (+0.1%) was indecisive after North Korea conducted projectile launches a day after the 110th birth anniversary of leader Kim's late grandfather and state founder Kim II Sung, while the US and South Korea are also to begin their spring training exercises this week. Shanghai Comp. (-0.8%) was negative following the PBoC’s recent actions including the narrower than expected 25bps RRR cut on Friday which follows the central bank's surprise decision to keep its 1-year MLF rate unchanged and with headwinds from the ongoing COVID-19 concerns in China where more cities tightened controls and Shanghai reported its first fatalities from the current outbreak but also recently unveiled plans to resume production in the city. Furthermore, stronger than expected Chinese GDP growth for Q1 and Industrial Production in March failed to spur risk appetite, as the data only partially took into account the latest restrictions including the lockdown in Shanghai that began in late March, while Retail Sales disappointed and the Unemployment Rate increased. As a reminder, markets in Australia. New Zealand and Hong Kong were closed for holiday and there are also mass closures across Europe including the UK for Easter Monday. Top Asian News Larsen Said to Weigh Merging Tech Arms Into $22 Billion Firm Sri Lanka Must Show IMF Sustainable Debt Plan to Secure Aid Tesla Shanghai Sets Out Hand Washing, Sleeping Plans for Workers DiDi Shares Plunge in U.S. Premarket on Plan for Delisting Vote Europe remains closed for the Easter holiday US Event Calendar 10:00: April NAHB Housing Market Index, est. 77, prior 79 Central Banks 16:00: Fed’s Bullard Discusses the U.S. Economy and Monetary Policy Tyler Durden Mon, 04/18/2022 - 07:48.....»»

Category: blogSource: zerohedgeApr 18th, 2022

10 Signs The War In Ukraine Is Part Of The Great Reset

10 Signs The War In Ukraine Is Part Of The Great Reset Via WinterOak.org.uk, Welcome to the second phase of the Great Reset: war. While the pandemic acclimatised the world to lockdowns, normalised the acceptance of experimental medications, precipitated the greatest transfer of wealth to corporations by decimating SMEs and adjusted the muscle memory of workforce operations in preparation for a cybernetic future, an additional vector was required to accelerate the economic collapse before nations can ‘Build Back Better.’ I present below several ways in which the current conflict between Russia and Ukraine is the next catalyst for the World Economic Forum’s Great Reset agenda, facilitated by an interconnected web of global stakeholders and a diffuse network of public-private partnerships. 1. The war between Russia and Ukraine is already causing unprecedented disruption to global supply chains, exacerbating fuel shortages and inducing chronic levels of inflation. As geopolitical tensions morph into a protracted conflict between NATO and the Sino-Russia axis, a second contraction may plunge the economy into stagflation. In the years ahead, the combination of subpar growth and runaway inflation will force a global economic underclass into micro-work contracts and low-wage jobs in an emerging gig economy. Another recession will compound global resource thirst, narrow the scope for self-sufficiency and significantly increase dependence on government subsidies. With the immiseration of a significant portion of the world’s labour force looming on the horizon, this may well be a prelude to the introduction of a Universal Basic Income, leading to a highly stratified neo-feudal order. Therefore, the World Economic Forum’s ominous prediction that we will ‘own nothing and be happy’ by 2030 seems to be unfolding with horrifying rapidity. 2. The war’s economic fallout will lead to a dramatic downsizing of the global workforce.  The architects of the Great Reset have anticipated this trend for a number of years and will exploit this economic turbulence by propelling the role of disruptive technologies to meet global challenges and fundamentally alter traditional business patterns to keep pace with rapid changes in technology. Like the pandemic, disaster preparedness in the age of conflict will rest significantly on the willingness to embrace specific technological innovations in the public and private spheres so that future generations can supply the labour demands of the Great Reset. A recurring theme in Klaus Schwab’s Shaping the Future of the Fourth Industrial Revolution is that groundbreaking technological and scientific innovations will no longer be relegated to the physical world around us but become extensions of ourselves. He emphasises the primacy of emerging technologies in a next generation workforce and highlights the urgency to push ahead with plans to digitise several aspects of the global labour force through scalable technology based solutions. Those spearheading the Great Reset seek to manage geopolitical risk by creating new markets which revolve around digital innovations, e-strategies, telepresence labour, Artificial Intelligence, robotics, nanotechnology, the Internet of Things and the Internet of Bodies. The breakneck speed in which AI technologies are being deployed suggest that the optimization of such technologies will initially bear on traditional industries and professions which offer a safety net for hundreds of millions of workers, such as farming, retail, catering, manufacturing and the courier industries. However, automation in the form of robots, smart software and machine learning will not be limited to jobs which are routine, repetitive and predictable. AI systems are on the verge of wholesale automation of various white collar jobs, particularly in areas which involve information processing and pattern recognition such as accounting, HR and middle management positions. Although anticipating future employment trends is no easy task, it’s safe to say that the combined threat of pandemics and wars means the labour force is on the brink of an unprecedented reshuffle with technology reshaping logistics, potentially threatening hundreds of millions of blue and white collar jobs, resulting in the greatest and fastest displacement of jobs in history and foreshadowing a labour market shift which was previously inconceivable. While it has long been anticipated that the increased use of technology in the private sector would result in massive job losses, pandemic lockdowns and the coming disruption caused by a war will speed up this process, and many companies will be left with no other option but to lay off staff and replace them with creative technological solutions merely for the survival of their businesses. In other words, many of the jobs which will be lost in the years ahead were already moving towards redundancy and are unlikely to be recovered once the dust is settled. 3. The war has significantly reduced Europe’s reliance on the Russian energy sector and reinforced the centrality of the UN Sustainable Development Goals and ‘net zero‘ emissions which lies at the heart of the Great Reset. Policymakers marching lockstep with the Great Reset have capitalised on the tough sanctions against Russia by accelerating the shift towards ‘green’ energy and reiterating the importance of decarbonisation as part of the ‘fight against climate change’. However, it would be very short-sighted to assume that the Great Reset is ultimately geared towards the equitable distribution of ‘green’ hydrogen and carbon-neutral synthetic fuels replacing petrol & diesel. While UN SDGs are crucial to post-pandemic recovery, more importantly, they are fundamental to the makeover of shareholder capitalism which is now being vaunted by the Davos elites as ‘stakeholder capitalism’. In economic terms, this refers to a system where governments are no longer the final arbiters of state policies as unelected private corporations become the de facto trustees of society, taking on the direct responsibility to address the world’s social, economic and environmental challenges through macroeconomic cooperation and a multi-stakeholder model of global governance. Under such an economic construct, asset holding conglomerates can redirect the flow of global capital by aligning investments with the UN’s SDGs and configuring them as Environmental, Social, and Corporate Governance (ESG) compliant so that new international markets can be built on the disaster and misery of potentially hundreds of millions of people reeling from the economic collapse caused by war. Therefore, the war offers a huge impetus for the governments pushing the reset to actively pursue energy independence, shape markets towards ‘green and inclusive growth’ and eventually move populations towards a cap-and-trade system, otherwise known as a carbon credit economy. This will centralise power in the hands of stakeholder capitalists under the benevolent guise of reinventing capitalism through fairer and greener means, using deceptive slogans like ‘Build Back Better’ without sacrificing the perpetual growth imperative of capitalism. 4. Food shortages created by the war will offer a major boon to the synthetic biology industry as the convergence of digital technologies with materials science and biology will radically transform the agricultural sector and encourage the adoption of plant-based and lab-grown alternatives on a global scale.  Russia and Ukraine are both breadbaskets of the world and critical shortages in grains, fertilisers, vegetable oils and essential foodstuffs will catapult the importance of biotechnology to food security and sustainability and give birth to several imitation meat start-ups similar to ‘Impossible Foods’ which was co-funded by Bill Gates. One can therefore expect more government regulation to usher a dramatic overhaul to industrial food production and cultivation, ultimately benefiting agribusiness and biotech investors, since food systems will be redesigned through emerging technologies to grow ‘sustainable’ proteins and CRISPR gene-edited patented crops. 5. Russia’s exclusion from SWIFT (The Society for Worldwide Interbank Financial Telecommunication) foreshadows an economic reset which will generate precisely the kind of blowback necessary for corralling large swathes of the global population into a technocratic control grid. As several economists have opined, weaponizing SWIFT, CHIPS (The Clearing House Interbank Payments System) and the US Dollar against Russia will only spur geopolitical rivals like China to accelerate the process of de-dollarisation. The main benefactor of economic sanctions against Russia appears to be China which can reshape the Eurasian market by encouraging member states of the Shanghai Cooperation Organisation (SCO) and BRICS to bypass the SWIFT ecosystem and settle cross-border international payments in the Digital Yuan. While the demand for cryptocurrencies will see a massive spike, this is likely to encourage many governments to increasingly regulate the sector through public blockchains and enforce a multilateral ban on decentralised cryptocurrencies. The shift to crypto could be the dress rehearsal to eventually expedite plans for programmable money overseen by a federal regulator, leading to the greater accretion of power in the hands of a powerful global technocracy and thus sealing our enslavement to financial institutions. I believe this war will bring currencies to parity, therefore heralding a new Bretton Woods moment which promises to transform the operation of international banking and macroeconomic cooperation through the future adoption of central bank digital currencies. 6.  This war marks a major inflection point in the globalist aspiration for a new international rules-based order anchored in Eurasia. As the ‘father of geopolitics’ Halford Mackinder opined over a century ago, the rise of every global hegemon in the past 500 years has been possible because of dominance over Eurasia. Similarly, their decline has been associated with losing control over that pivotal landmass. This causal connection between geography and power has not gone unnoticed by the global network of stakeholders representing the WEF, many of whom have anticipated the transition to a multipolar era and return to great power competition amid America’s receding political and economic influence and a pressing need for what technocrats call smart globalisation. While America tries desperately to cling to its superpower status, China’s economic ascent and Russia’s regional ambitions threaten to upend the strategic axial points of Eurasia (Western Europe and Asia Pacific). The region in which America previously enjoyed uncontested hegemony is no longer impervious to cracks and we may be witnessing a changing of the guard which dramatically alters the calculus of global force projection. Although China’s ambitious Belt and Road Initiative (BRI) has the potential to unify the world-island (Asia, Africa and Europe) and cause a tectonic shift in the locus of global power, the recent invasion of Ukraine will have far-reaching consequences for China-Europe rail freight. The Ukrainian President Zelensky claimed that Ukraine could function as the BRI’s gateway to Europe. Therefore, we cannot ignore China’s huge stake in the recent tensions over Ukraine, nor can we ignore NATO’s underlying ambition to check China’s rise in the region by limiting the sale of Ukrainian assets to China and doing everything in its capacity to thwart The Modern Silk Road. As sanctions push Russia towards consolidating bilateral ties with China and fully integrating with the BRI, a Pan-Eurasian trading bloc may be the realignment which forces a shared governance of the global commons and a reset to the age of US exceptionalism. 7. With speculation mounting over the war’s long term impact on bilateral trade flows between China and Europe, the Russia-Ukraine conflict will catapult Israel – a leading advocate of the Great Reset – to even greater international prominence.  Israel is a highly attractive BRI market for China and the CCP is acutely aware of Israel’s importance as a strategic outpost connecting the Indian Ocean and the Mediterranean Sea through the Gulf of Suez. Furthermore, the Chinese government has for many years acknowledged the primacy of Israel as a global technology hub and capitalised on Israel’s innovation capabilities to help meet its own strategic challenges. Therefore, Naftali Bennet’s mediation between Moscow and Kiev is likely to factor the instrumental role of the Belt and Road Initiative (BRI) in expanding both China and Israel’s regional and global strategic footprint. Israel’s status as among the leading tech hubs of the future and gateway connecting Europe and the Middle East is inextricably tied to the web of physical infrastructures, such as roads, railways, ports and energy pipelines which China has been building over the past decade. Already a powerhouse in auto-technologies, robotics and cybersecurity, Israel aspires to be the central nation in the millennial Kingdom and the country’s tech startups are predicted to play a key role in the fourth industrial revolution. Strengthening its evolving relationship with China amid the Russia-Ukraine crisis could help propel Israel into a regional hegemon par excellence with a large share of centralised economic and technological power converging in Jerusalem. As Israel embarks on efforts to diversify its export markets and investments away from the United States, it begs an important question. Is Israel in the formative stages of outsourcing its security interests away from the US and hedging its bets on the Sino-Russia axis? 8. It is now common knowledge that Digital IDs are a central plank in the World Economic Forum’s Great Reset agenda and are to be streamlined across industries, supply chains and markets as a way of advancing the UN 2030 SDGs and delivering individualised and integrated services in future smart cities. Many have cottoned on to how such a platform can be used to usher in a global system of technocratic population control and compliance by incorporating humanity into a new corporate value chain where citizens are mined as data commodities for ESG investors and human capital bond markets and assigned a social and climate score based on how well they measure up against the UN SDGs. This seamless verification of people and connected devices in smart environments can only take place once our biometrics, health records, finances, education transcripts, consumer habits, carbon footprint and the entire sum of human experiences is stored on an interoperable database to determine our conformity with the UN SDGs, thus forcing a monumental change to our social contract. Vaccine passports were initially touted by public-private partnerships as an entry point for Digital IDs. Now that such a logic has run its course, how might the present geopolitical tensions contribute to scaling what is the key node in a new digital ecosystem? Ukraine has traditionally been called Europe’s breadbasket and alongside Russia, both nations are major global suppliers of staple grains. Therefore, the war has all the makings of a black swan for commodities and inflation. With an economy teetering on the brink of collapse due to a global supply crunch, I believe the resulting economic tremors will trigger wartime emergencies across the world and the public will be told to brace themselves for rationing. Once this takes place, the multilateral adoption of Digital IDs which interface with Central Bank Digital Currencies can be touted as the solution to efficiently manage and distribute household rations under an unprecedented state of emergency and exception. The Bank of England has already floated the prospect of programmable cash which can only be spent on essentials or goods which an employer or government deem sensible. Once the issuer is granted control over how it is spent by the recipient, it will become nigh impossible to function adequately without a Digital ID, which will be required to receive food parcels and obtain a basic means of subsistence. Think UBI (Universal Basic Income). If food inflation continues on an upward trajectory with no signs of abating, governments may institute price controls in the form of rationing and ration entries could be logged on blockchain ledgers on the Digital ID to track our carbon footprint and consumptive habits during a national emergency. 9. Europe is directly in the line of fire once a hybrid war between NATO and the Sino-Russia axis is underway. It would be remiss to ignore the clear and present danger posed by a cyber attack on banks and critical infrastructure or even a tentative and tactical nuclear exchange with intercontinental ballistic missiles (ICBMs). I can’t see how any warring party will not be limited by the doctrine of mutually assured destruction so a thermonuclear fallout is unlikely. However, the use of remote access technologies to erase system memory from the SWIFT banking apparatus or Cross-Border Interbank Payment System can potentially render much of the international economy non-operational and send the dollar into a tailspin. If an event of such cataclysmic proportions was to occur, it will undoubtedly lead to increasing demands to overhaul cyber security. The fallout from such an event could very well establish a new global security protocol according to which citizens must possess a Digital ID as a necessary national security measure. One can imagine how accessing the internet or public services in the aftermath of a nationwide cyberattack may require citizens to use a Digital ID to authenticate that their online activities and transactions are from a legitimate and non-malicious source. There are few coincidences in politics. 10. The economic implications of this war will be so disastrous that governments and the public sector will require a significant injection of private capital to address the financing shortfall.  This will effectively render the traditional separation of powers between central banking institutions and governments obsolete, as the former will be positioned to disproportionately influence the fiscal trajectory of nation states, whose sovereignty will be hollowed out by the wholesale capture of governments by the central banks and hedge funds. Therefore, the nation-state model is gradually being upended by a global technocracy, consisting of an unelected consortium of leaders of industry, central banking oligarchs and private financial institutions, most of which are predominantly non-state corporate actors attempting to restructure global governance and enlist themselves in the global decision-making process. Therefore, the future of international relations and the social, economic and political transformation which the world is presently undergoing in light of the pandemic and Russia-Ukraine conflict will not be decided through multilateralism and elected representatives of sovereign states. Rather, it will be decided through a network of multi-stakeholder partnerships which are motivated by the politics of expediency and not accountable to any electorate or beholden to any state and for whom concepts like sovereignty and international law are meaningless. Tyler Durden Mon, 03/14/2022 - 23:40.....»»

Category: blogSource: zerohedgeMar 15th, 2022

US stocks climb as investors digest economic data and brace for wave of corporate earnings

Stocks headed for a third straight win after wholesale inflation in December rose less than expected. AP Photo/Richard Drew Wall Street's key benchmarks rose Thursday, on course to extend a win streak.  Wholesale inflation in December showed signs of cooling with a reading of 0.2%.  Federal Reserve officials are ramping up messaging about hiking interest rates a few times this year.  US stocks rose Thursday, on course to extend a winning streak as investors assessed labor-market and inflation data while preparing for the steady stream of corporate earnings kicking off this week. All three of Wall Street's major benchmarks were headed toward a third consecutive win, staying in recovery mode after a selloff was sparked by the prospect the Federal Reserve will accelerate a drawdown of stimulus measures this year. Stock futures ahead of the bell slightly stretched gains after the Labor Department said wholesale prices rose by 0.2% in December, less than an expected increase of 0.4%, suggesting a modest cooling in inflation. But the producer price index was at 9.7% for 2021, the highest level since 2010. Weekly jobless claims, meanwhile, unexpectedly jumped by 23,000 to 230,000, remaining at pre-pandemic lows but it was the highest amount since mid-November.Here's where US indexes stood shortly after the 9:30 a.m. open on Thursday:   S&P 500: 4,740.19, up 0.29%Dow Jones Industrial Average: 36,385.42, up 0.26% (95.10 points)Nasdaq Composite: 15,236.56, up 0.34% Investors are preparing for the start of the fourth-quarter earnings season. Delta Airlines posted an earnings beat on Thursday, while banks including JP Morgan and Citi to release results on Friday. Investors are also digesting messaging from the Federal Reserve that it embarking on a quick pace of interest-rate hikes to tackle hot inflation. The Federal Reserve Presidents of San Francisco and Philadelphia, Mary Daly and Patrick Harker, respectively, said separately they anticipate interest-rate hikes to start as early as March.Lael Brainard, who was nominated by President Joe Biden to serve as the next vice-chair of the Federal Reserve, said in prepared remarks that "the most important task" for the central bank is to curb inflation. Brainard will appear Thursday before the Senate banking committee as part of her confirmation hearing.Around the market, Wharton professor Jeremy Siegel sees the S&P 500 rising 9% in 2022. Meme coins lead crypto revival, with shiba inu coin leaping 12%. Oil prices declined from a two-month high. West Texas Intermediate crude fell 0.5% to $82.25 per barrel. Brent crude, the international benchmark, slipped 0.3%, at $84.40.Gold lost 0.3% to $1,821.30 per ounce. The 10-year yield shed less than 1 basis point, at 1.741%. Bitcoinlost 0.5% to trade at $43,724.90. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

World"s Most Bearish Hedge Fund Shuts Down: Here Is Russell Clark"s Farewell Letter

World's Most Bearish Hedge Fund Shuts Down: Here Is Russell Clark's Farewell Letter It was about four or five years ago that we dubbed Russell Clark (formerly of Horseman Global and more recently of Russell Clark Investment Management) the world's most bearish hedge fund, and for a good reason: roughly a decade ago, Clark decided to take his fund net short - an unheard of event in an industry where despite the name, the average net exposure is well north of 100% - and while his market bias ebbed and flowed, it remained short for much of the past ten years. What is more remarkable is that despite his extremely bearish positioning, Clark managed to eek out consistent monthly gains and with the exception of 2016 he was profitable virtually every year in the past decade... and then 2019 happened and things started falling apart when his hedge fund lost a staggering 35%. He never really recovered. This was the beginning of the end for Clark - sensing what was coming, two years ago we wrote that the "World's Most Bearish Hedge Fund" Loses 75% Of Its Assets After Worst Year On Record." Back then we wrote the following: Every trader has heard the age-old saying "don't fight the Fed". Everyone, perhaps with one exception: Horseman Global's CIO, and recently owner, Russell Clark, who has been upping his bearish bets in the face of a relentless liquidity onslaught by the Fed, ECB and PBOC, which now also includes the Fed's "NOT QE." In fact, in his ambition to on up the central banks, Clark may have overdone it, because according to his latest investor letter, the fund's equity net short position is now the highest it has been in history, at a whopping -110.87%, offset by a 60.59% net long in bonds. Alas, while we admire Clark's courage, we have less empathy for the fund's performance, which has seen better days, and after slumping 6% in October, and losing money on 4 of the past 5 months, is now on pace for its worst year on record, down 27.05% YTD, surpassing the -24.72% return posted in 2009, and reversing all the goodwill the fund created with its 7.5% return last year when most of its peers lost money alongside the S&P500. In light of the above, we have been fascinated how long Horseman can remain solvent as the Fed remains irrationally bullish and liquid, and unfortunately for Clark - who recently put his personal money where his mouth is and bought a controlling interest in Horseman where he was the main portfolio manager for years - the answer appears to be "not much longer" - as the fund reports, as of October 31, the AUM for the Horseman Global Fund was down to just $150 million... Two years later, despite the crash in early 2020 which helped boost the fund's fortune for a few months, the slow and steady death by a thousand redemption letters continued, and this morning our prediction has finally come true: the man who for the past decade valiantly fought the Fed, and all other central banks, has finally thrown in the towel. And with capital in his core RCIM Global Fund dropping to just $119 million from as much as $1.7 billion in 2015, Clark writes in what is his last letter to investors that "after a couple of years of turbulent markets and the increasing influence of politics rather than economics on the markets, I have come to the decision that the best way forward is for the Fund Directors to wind up the fund and return capital." The fund shuts down after dropping 5.3% for the month of October and down 2.6% in 2021. While Clark touches on various things in his last letter, what is most notable is the justification for his shutdown. To regular readers of Zero Hedge, nothing he says will be a surprise: the Fed has taken over the "market" which has now become a political tool to shape and mold public opinion, while the core role of markets - discounting the future and price discovery - no longer exists, to wit: This is why I am returning capital. Markets have now become a political choice. US markets are essentially a bet on the Fed unable to raise rates, and congress unable to regulate big tech or raise corporate tax rates. Commodity markets have now become a bet on Chinese policy objectives, and currencies have become a bet on what Chinese policy objectives are too. Give me an economic problem, then I can properly gauge risk. Give me a Chinese political problem – I am taking a guess as much as the next person. Did I think Alibaba was going to fall 50% this year? No, not until the Chinese government told me to think that way. Is Alibaba a good short now? I have no idea, and like everyone else will have to wait to see what the Chinese government says. So, I think it time to step back, have a think about where we are going, and then come back when I can see an opportunity for my skill set. Perhaps that’s never, but I doubt it. The only constant in life is change. As always, we admire Clark's honesty and courage to say it how it is, even if it means we may not hear from him ever again. Meanwhile, in a fitting epitaph for his fund, Bloomberg writes that "the closure marks an end to yet another bearish hedge fund manager’s fund as stocks continue to march ahead. Clark, who uses macro economic analysis to bet on stocks, is among a series of long-short equity hedge fund managers who have fallen way behind surging markets and have suffered investors exodus." The end of Clark’s fund is a contrasting echo to how his investing career began more than two decades ago. As a graduate trainee at UBS Group AG in Sydney, he followed friends getting rich by day-trading tech stocks in 2000 and spent his first few paychecks on five dot-com shares. Four crashed to zero, and the fifth lost half its value as the tech bubble burst. This time, a short wager on tech stocks was his latest contrarian bet. Clark told clients earlier this year that he was betting against technology shares as regulators from the U.S. to China crack down on the industry. Tech stocks as measured by NASDAQ Composite Index have been on a tear ever since. Clark had been net short equities for the vast majority of the last nine years. He has faced a difficult period of performance and capital raising, and his firm -- previously named Horseman Capital Management -- shuttered two funds. Born and raised in Canberra, Australia, Clark bought the controlling interest in Horseman in 2019. He had joined Horseman in 2006 and started running the firm’s flagship fund in 2010 when John Horseman, a highly successful global stock fund manager in the 1990s, retired. Clark, who runs his investment firm from his office inside a small house in a quiet mews near Buckingham Palace Gardens in London, had said in 2019 that he was convinced that a stock market crash was near. Or, he told Bloomberg in rare public remarks, “this could be my farewell interview.” Ironically, he was right: the March 2020 crash - the biggest market crisis since the Great Depression - indeed happened just a few months later but in turn it produced the biggest and most coordinated market bailout by central banks and "helicopter money" in history. And that, for the world's most bearish hedge fund, was the final straw. Clark's final message to investors is below: The fund lost 5.30% this month, mainly from the short book. After a couple of years of turbulent markets and the increasing influence of politics rather than economics on the markets, I have come to the decision that the best way forward is for the Fund Directors to wind up the fund and return capital. The success I enjoyed from 2011 through to beginning of 2016 largely stemmed from asking the question that no one seemed to ask – why does the Yen and Japanese Government Bonds rally whenever there is a crisis? The obvious answer was capital flows from Japan would create a bull market in the area they flowed to, and then when the Japanese pulled capital back, it would create a bear market, often with significant currency volatility. Armed with that observation, and combined with analysis of the commodity markets, we build a portfolio that was largely short emerging market and long bonds. Since 2016, using the same analysis as above, Japanese capital flows have almost exclusively been to the US, and are an order of magnitude larger than anything seen before. And yet, US equities still power ahead, Yen remains weak, and currency volatility has been consigned to the history books. Of course, I asked myself why this is. Why did a model that worked so well, for the best part of 25 years, stop working? The obvious answer is that central banks led Quantitative Easing (QE). But that answer alone seems insufficient to me. Japan has had low interest rates for years and was still racked by bouts of extreme equity and currency volatility. The other problem with that answer is that the big inflation spike seen this year should then lead to greater volatility in equities, especially as central banks dial back QE programs. The answer for me comes from China. China wants a strong currency, and to keep consumption strong. It seems to me that the Chinese government uses it extraordinary control of the economy to control activity and the currency through the commodity markets. To elaborate, I expected China to post a weak trade surplus in October, and for currency devaluation fears to spike (particularly after the recent Evergrande selloff). Chinese trade surplus was actually very strong. And it was strong because Chinese imports of oil and iron ore were down significantly. Chinese steel production was down a stunning 20% year on year, a number you would typically only see in a bad recession. China has effectively taken control of key commodities, and now adjusts volumes to suit its own needs. Taking all this volatility through physical markets, has essentially collapsed financial market volatility, and also led to commodity currencies being significantly weaker than commodity prices – which has been a problem for me this year. Now I understand this, non-obvious trades at the beginning of the year such as long oil, short iron ore now seem obvious. The surprising weakness of gold and other precious metals can make sense in this analysis. It also explains why the extraordinary fiscal and monetary policies of the US have not been met with greater commodity or bond turbulence. It is very hard for me to get bearish US treasuries when I see Chinese steel production down 20% year on year. The big question then is whether this Chinese policy of absorbing financial risk in the physical economy sustainable? History suggests not, as most countries prefer to devalue than slow economic growth. However, I can see reasons why China may continue with this policy. The most powerful is that with US policymakers seemingly unable to raise interest rates, or balance budgets there is a gap in the market for a credible currency. Is China making a play for reserve currency status? And this is why I am returning capital. Markets have now become a political choice. US markets are essentially a bet on the Fed unable to raise rates, and congress unable to regulate big tech or raise corporate tax rates. Commodity markets have now become a bet on Chinese policy objectives, and currencies have become a bet on what Chinese policy objectives are too. Give me an economic problem, then I can properly gauge risk. Give me a Chinese political problem – I am taking a guess as much as the next person. Did I think Alibaba was going to fall 50% this year? No, not until the Chinese government told me to think that way. Is Alibaba a good short now? I have no idea, and like everyone else will have to wait to see what the Chinese government says. So, I think it time to step back, have a think about where we are going, and then come back when I can see an opportunity for my skill set. Perhaps that’s never, but I doubt it. The only constant in life is change. This will be my final newsletter and it just leaves me to thank you for your support and wish you all the success in the future. From a personal perspective I plan to keep producing research, so keep an eye out for my future notes. Russell. As usual, the full letter is available to professional subs in the usual place. Tyler Durden Thu, 11/11/2021 - 10:34.....»»

Category: blogSource: zerohedgeNov 11th, 2021

Futures Drift Before Taper-Triggering Jobs Report

Futures Drift Before Taper-Triggering Jobs Report US equity-index drifted in a tight range overnight, in a tight range before key jobs data that could provide clues on the Federal Reserve’s policy. As noted in our preview, unless the jobs report is a disaster, it will virtually assure the Fed launches tapering in one month. Markets drifted higher on Thursday after the Senate averted the risk of an immediate default, pushing global stocks on course for their best week since early September, but a late day selloff wiped away most gains and closed spoos below the critical 4400 level. At 07:30 a.m. ET, Dow e-minis were up 35 points, or 0.10%, S&P 500 e-minis were up 5.00 points, or 0.1%, and Nasdaq 100 e-minis were up 10.75 points, or 0.07%. Treasury Yields were 1 point higher after earlier tagging 1.60%, the highest since June. The dollar was flat while Brent topped $83 before paring gains. Bitcoin traded above $55,000. Uncertainty over the debt ceiling negotiations and a run-up in U.S. Treasury yields over elevated inflation were major concerns among investors earlier this week, injecting volatility in equity markets this week. High-growth FAAMG stocks slipped in premarket trading following sharp gains in previous session. Energy firms including Chevron Corp and Exxon Mobil gained about 0.8% tracking crude prices, while major U.S. lenders also edged up as the benchmark 10-year yield hit its highest level since June 4. Here are some of the biggest movers and stocks to watch today: Tesla (TSLA US) shares in focus after Elon Musk says a global shortage of chips and ships is the only thing standing in the way of the company maintaining sales growth in excess of 50% Sundial Growers (SNDL US) shares rise as much as 19% in U.S. premarket after the Canadian cannabis producer said it will buy liquor and pot retailer Alcanna for $276m in stock Allogene Therapeutics (ALLO US) plunges 36% in U.S. premarket trading after an early-stage study of its cell therapy was put on hold by U.S. regulators Prelude Therapeutics (PRLD US) fell in U.S. premarket trading, adding to Thursday’s 40% plunge on early- stage data for the company’s experimental cancer treatments that Barclays says came in below expectations Vaxart (VXRT US) rises 8% in U.S. premarket trading after its oral tablet vaccine candidate cut transmission of Covid-19 in animals, according to data from a study led by Duke University Faraday Future (FFIE US) slides 4% in U.S. premarket trading after J Capital says it is short on the stock. The short-seller says they don’t think the company “will ever sell a car” Codiak Biosciences (CDAK US) shares fell 6% in Thursday postmarket trading after disclosing that Sarepta Therapeutics is terminating a research license and option agreement Agile Therapeutics (AGRX US) tumbled Thursday postmarket after the women’s health-care company said that it intends to offer and sell shares of its common stock, as well as warrants to purchase shares of its common stock, in an underwritten public offering Looking to today's main event, economists expect September hiring to have surged by 500,000 jobs as the summer wave of COVID-19 infections began to subside, and as millions of Americans no longer receive jobless benefits, positioning the Fed to start scaling back its monthly bond buying.  “All roads lead to non-farm payrolls data which will decide, in the market’s minds, whether the start of the Fed taper is a done deal for December,” said Jeffrey Halley, senior market analyst at OANDA. “I do not believe that markets have priced in the Fed taper and its implications to any large degree yet. Even a weak number probably only delays the inevitable for another month.” Even “reasonably soft” payrolls and unemployment figures wouldn’t be enough to change the minds of its officials, according to Ipek Ozkardeskaya, senior analyst at Swissquote. “Only a shockingly low figure could do that,” she said. “The persistent rise in oil prices can only continue boosting inflation fears and the central bank hawks, limiting the upside potential in case of a further recovery in stocks.” “As soon as you start thinking about tapering it’s really hard to not then think about what that means for the Fed funds rate and when that might start to increase,” Kim Mundy, currency strategist and international economist at Commonwealth Bank of Australia in Sydney, said on Bloomberg Television. “We do see scope that markets can start to price in a more aggressive Fed funds rate hike cycle.” In Europe, tech companies led the Stoxx Europe 600 Index down 0.2%, with energy stocks and carmakers being the only industry groups with meaningful gains. Chip stocks fell, especially Apple suppliers, following a profit warning from Asian peer and fellow supplier AAC Technologies. On the other end, European travel stocks rose after U.K. confirmed the travel “red list” will be cut to just seven countries; British Airways parent IAG and TUI led the advances. Here are some of the biggest European movers today: Daimler shares gains as much as 3.2%, outperforming peers, after UBS upgrades stock to buy from neutral, calling it an earnings momentum story that stands to gain from strong demand, electrification trends and its future focus on passenger cars. Adler shares rise as much as 13% after shareholder Aggregate sells a call option to Vonovia for a 13.3% stake in the German real estate investment firm at a strike price of EU14 per share. Cewe Stiftung shares jump as much as 4.2%, their best day in over three months, after the photography services firm gets a new buy rating at Hauck & Aufhaeuser. Weir shares fall as much as 6.3%, to the lowest since Nov. 13, after the U.K. machinery maker announced that a ransomware attack will affect full-year profitability; Jefferies says it’s unlikely that guidance beyond that will be revised. Zur Rose slumps as much as 9.2% after Berenberg downgrades the Swiss online pharmacy to hold from buy, citing the expected negative impact from a delay in the implementation of mandatory e-prescriptions in Germany. Czech digital-payments provider Eurowag shares slide as much as 10% as it starts trading in London, after pricing its IPO below an initial range and making its debut a day later than planned. Asian stocks rose for a second day as China’s market reopened higher and the U.S. Senate approved a short-term increase in the debt ceiling. The MSCI Asia Pacific Index advanced as much as 1% in a rally led by consumer discretionary shares. Alibaba and Tencent were among the biggest contributors to the gauge’s climb. Shares in mainland China surged more than 1% as investors returned from the Golden Week holiday. Chinese property shares fell after a report that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year, while investor concerns about developers’ liquidity rose after Fantasia bonds were suspended from trading. In mainland: CSI 300 Real Estate Index drops as much as 2%, Seazen Holdings falls as much as 5%, Poly Developments -4%. Asia’s stock benchmark is slightly down for the week, as rising bond yields weighed on tech-heavy indexes in South Korea, Taiwan and Japan. The gauge is down more than 1% this month amid an energy shortage in China and India.  “Markets may not want to commit directionally” given that we have non-farm payrolls data on the docket, making a follow-through of today’s rally suspect, said Ilya Spivak, the head of Greater Asia at DailyFX. Traders are expecting today’s U.S. employment data to provide clues on the direction of the world’s largest economy. On Thursday, the U.S. averted what would have been its first default on a debt payment. Most major benchmarks in Asia climbed, led by Japan, Indonesia and Australia. India’s central bank kept its lending rates at a record low at a policy meeting today. In Australia, the S&P/ASX 200 index rose 0.9% to close at 7,320.10. All industry groups edged higher. The benchmark rose 1.9% for the week, the biggest weekly gain since early August. Miners led the charge, having the best week since July, banks the best since the start of March. EML Payments tumbled after an update on its Ireland subsidiary from the country’s central bank. Chalice Mining continued its rebound, finishing the session the strongest performer in the mining subgauge.  There is a risk of excessive borrowing due to low interest rates and rising house prices, Reserve Bank of Australia said in its semiannual Financial Stability Review released Friday. In New Zealand, the S&P/NZX 50 index fell 0.1% to 13,086.60 In rates, Treasury futures remained under pressure after paring declines that pushed 10-year yield as high as 1.5995% during European morning, highest since June 4; the 1.60% zone is thought to have potential to spur next wave of convexity hedging. U.K. 10-year is higher by 4bp, German by 2.3bp - gilts underperformed, weighing on Treasuries as money markets continue to bring forward BOE rate-hike expectations. During U.S. session, September jobs report may seal case for Fed taper announcement in November.  In FX, the greenback traded in a narrow range versus G10 peers while 10-year Treasury yields approached 1.6%, outperforming Bunds.  Gilt yields rose 5-6bps across the curve; demand for downside protection in the pound eases this week as the U.K. currency moves off cycle lows amid money markets repricing. U.K. wage growth rose at its strongest pace on record in a survey of job recruiters, indicating strains from a shortage of workers are persisting. Turkish lira initially weakens above 8.96/USD before recouping half of its losses In commodities, oil extended a rebound, on track for a seventh weekly gain. Crude futures pushed to the best levels for the week. WTI rises 1.5% near $79.50, Brent pops back on to a $83-handle. Spot gold trades a $5 range near $1,757/oz. Base metals are mostly positive, with LME nickel gaining over 3.5%. Looking at the day ahead, the highlight will be the aforementioned September jobs report. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Market Snapshot S&P 500 futures little changed at 4,389.50 STOXX Europe 600 down 0.3% to 457.18 MXAP up 0.4% to 194.72 MXAPJ up 0.2% to 636.80 Nikkei up 1.3% to 28,048.94 Topix up 1.1% to 1,961.85 Hang Seng Index up 0.6% to 24,837.85 Shanghai Composite up 0.7% to 3,592.17 Sensex up 0.7% to 60,070.61 Australia S&P/ASX 200 up 0.9% to 7,320.09 Kospi down 0.1% to 2,956.30 Brent Futures up 1.4% to $83.09/bbl Gold spot up 0.0% to $1,756.25 U.S. Dollar Index little changed at 94.29 German 10Y yield up +3.4 bps to -0.151% Euro little changed at $1.1549 Top Overnight News from Bloomberg Global talks to reshape the corporate tax landscape are set to resume on Friday after Ireland’s decision to adhere to the world consensus on a minimum rate removed one hurdle to an agreement that still hangs in the balance Germany’s Social Democrats hailed a positive start in their effort to form a government after their first meeting with the Greens and the pro-business Free Democrats A U.S. nuclear-powered attack submarine struck an object while submerged in international waters in the Indo- Pacific region last week, the Navy said, adding that no life- threatening injuries were reported China drained the most short- term liquidity from the banking system in a year on a net basis as it reduced support after a week-long holiday. Government bond futures slid by the most since August China’s central bank will continue to push for the reform of its benchmark loan rate and make deposit rates more market-based, according to a senior official India’s central bank surprised markets by suspending its version of quantitative easing, signaling the start of tapering pandemic-era stimulus measures as an economic recovery takes hold U.K. government bond yields have climbed to levels last seen before the Brexit referendum in 2016 relative to German peers, as traders brace for inflation in Britain over the next decade to far outpace the rate in Europe’s largest economy A detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly higher as the region conformed to the global upbeat mood after the agreement in Washington to raise the debt ceiling which the Senate approved, with the overnight bourses also invigorated by the return of China and strong Caixin PMI data. The ASX 200 (+0.9%) was led higher by strength in mining names with underlying commodity prices boosted as Chinese buyers flocked back to market which helped the ASX disregard a record increase in daily COVID-19 cases in Victoria state. Nikkei 225 (+1.3%) was the biggest gainer and reclaimed the 28k level as exporters benefitted from a softer currency, while attention turns to PM Kishida who will outline his policy program today and is reportedly planning to present an additional budget after the election. Furthermore, there were recent comments from an ally of the new PM who suggested that capital gains tax could be raised to 25% from the current 20% without affecting stock prices, although this failed to dent the mood in Tokyo and weaker than expected Household Spending was also brushed aside. The gains for the KOSPI (-0.1%) were later reversed alongside the tentative price action in index heavyweight Samsung Electronics after its Q3 prelim. results showed oper. profit likely rose to its highest in three years but missed analysts’ forecasts. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were mixed with the latter jubilant on reopen from the Golden Week holiday after improved Caixin Services and Composite PMI data which both returned to expansionary territory. This helped mainland stocks overlook the recent developer default fears and largest daily liquidity drain by the PBoC since October last year, although Hong Kong initially lagged amid heavy Northbound Stock Connect trade. Finally, 10yr JGBs declined on spillover selling from T-notes and with havens shunned amid the gains across riskier assets, although downside in JGBs was limited given the BoJ’s presence in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Gold Steadies Ahead of Key U.S. Jobs Report as Yields Climb Investors Fear Tax Talk in Kishida’s ‘New Japanese Capitalism’ China Coal Prices Plunge as Producers Vow to Ease Shortages China Developer Stocks Fall After Report of Monthly Sales Drop An initially contained to marginally-firmer European cash open followed an upbeat APAC handover (ex-Hang Seng) was short-lived with bourses coming under moderate pressure; Euro Stoxx 600 -0.3%. As such, major indices are all in the red, except for of the UK FTSE 100 which is essentially unchanged and bolstered by strength in heavy-weight energy and mining names given broader price action the return of China. Sectors were initially mixed at the open, but in-fitting with the action in indices, has turned to a predominantly negative performance ex-energy. Crossing to the US, futures have directionally been following European peers, but the magnitude has been more contained, with the ES unchanged as we await the September labour market report for any read across to the Fed’s policy path; however, officials have already made it clear that it would have to be a very poor report to spark a deviation from its announced intentions, where it is expected to announce an asset purchase tapering in November. Returning to Europe, Daimler (+2.5%) stands out in the individual stocks space, firmer after a broker upgrade and notable price target lift at UBS; Marks & Spencer (+1.5%) is also supported on broker action. To the downside lies Weir Group (-3.0%) after reports of a ransomware attack. Top European News Adler’s Largest Shareholder Sells Option on Stake to Vonovia; A Controversial Tycoon Sits on Adler’s $9 Billion Pile of Debt Chip Stocks Drag Tech Gauge Lower as Asian Apple Supplier Warns European Gas Rises as Bumpy Ride Continues With Cold Air Coming Lira Weakens to Fresh Low as Rising U.S. Yields Add Pressure In FX, the Dollar is trying to regroup and firm up again after its latest downturn amidst a further rebound in US Treasury yields, more pronounced curve re-steepening, and perhaps some relief that the Senate finally passed the debt ceiling extension bill, albeit by a slender margin and only delaying the issue until early December. Looking at the DXY as a benchmark, a marginally higher low above 94.000 and lower high below 94.500 is keeping the index contained as the clock ticks down to September’s jobs report that is expected to show a recovery in hiring after the prior month’s shortfall, but anecdotal data has been rather mixed to offer little clear pointers for the bias around consensus - full preview of the latest BLS release is available via the Research Suite under the Ad-hoc Economic Analysis section. From a technical perspective, near term support for the DXY resides at 94.077 (vs the current 94.139 base) and resistance sits at 94.448 (compared to a 94.338 intraday high). TRY - A double whammy for the already beleaguered Lira as oil prices come back to the boil and ‘sources’ suggest that Turkish President Erdogan’s patience is wearing thin with the latest CBRT Governor as the Bank waited until September to cut rates. Recall, Erdogan has already ousted a CBRT chief for not loosening monetary policy in his belief that lowering the cost of borrowing will bring inflation down, and although the reports have been by a senior member of his administration there is a distinct feeling of no smoke without fire in the markets as Usd/Try remains bid having only held below 9.0000 by short distance between 8.9707-8.8670 parameters. CHF/JPY - No real surprise that the low yielders and funders are underperforming, even though broadly upbeat risk sentiment during APAC hours has not rolled over to the European session. The Franc has retreated to 0.9300 vs the Buck and Yen is trying to fend off pressure on the 112.00 handle after failing to sustain momentum through 111.50 before weaker than expected Japanese household spending data overnight. However, decent option expiry interest from 111.85-75 (1.4 bn) may weigh on Usd/Jpy pending the aforementioned US payrolls outcome. AUD - Some payback for the Aussie after Thursday’s outperformance, as Aud/Usd loses a bit more momentum following its rebound beyond 0.7300 and with hefty option expiries at 0.7335 (2.7 bn) capping the upside more than smaller size at the round number (1.1 bn) cushions the downside. In commodities, WTI and Brent remain on an upward trajectory after the mid-week pullback; as it stands, crude benchmarks are near fresh highs for the week, with WTI for November eyeing USD 80/bbl once again. Fresh news flow for the complex has been sparse, aside from substantial UK press focus on the domestic energy price cap potentially set to increase next year. More broadly, US officials have largely reiterated commentary from the Energy Department provided on Thursday around not currently intending act on energy costs with a reserve release. The session ahead has just the Baker Hughes rig count specifically for crude scheduled, though the complex may well get dragged into a broader risk move depending on the initial reaction to and analysis on NFP. For metals, spot gold and silver are contained around the unchanged mark and haven’t been affected by any significant amount by the firmer USD or elevated yield space thus far. Elsewhere, base metals are buoyed by China’s return and strong Caixin data from the region, although it is worth highlighting that the likes of LME copper are well off earlier highs. US Event Calendar 8:30am: Sept. Change in Nonfarm Payrolls, est. 500,000, prior 235,000 Change in Private Payrolls, est. 450,000, prior 243,000 Change in Manufact. Payrolls, est. 25,000, prior 37,000 Unemployment Rate, est. 5.1%, prior 5.2% Sept. Underemployment Rate, prior 8.8% Labor Force Participation Rate, est. 61.8%, prior 61.7% Average Weekly Hours All Emplo, est. 34.7, prior 34.7 Average Hourly Earnings MoM, est. 0.4%, prior 0.6% Average Hourly Earnings YoY, est. 4.6%, prior 4.3% 10am: Aug. Wholesale Trade Sales MoM, est. 0.9%, prior 2.0%; Wholesale Inventories MoM, est. 1.2%, prior 1.2% DB's Jim Reid concludes the overnight wrap I’ve never quite understood why you’d go to the cinema if you’ve got a nice telly at home but such has been the nature of life over the last 19 months that I was giddy with excitement last night at booking tickets for James Bond at the local cinema next week. We’ve booked it on the same night as our first ever physical parents evening where I’ll maybe have the first disappointing clues that my three children aren’t going to be child prodigies and that maybe they’ll even have to settle for a career in finance! Markets have been stirred but not completely shaken this week and yesterday they continued to rebound thanks to the near-term resolution on the US debt ceiling alongside subsiding gas prices, which took the sting out of two of the most prominent risks for investors over the last couple of weeks. That provided a significant boost to risk appetite, and by the close of trade, the S&P 500 had recovered +0.83% in its 3rd consecutive move higher, which put it back to just -3.0% beneath its all-time high in early September, whilst Europe’s STOXX 600 was also up +1.60% and closed before a later US sell-off. Attention will today focus squarely on the US jobs report at 13:30 London time, which is the last one before the Fed’s next decision in early November, where a potential tapering announcement is likely bar an extraordinarily poor number today, or an exogenous event in the next few weeks. Starting with the debt ceiling, yesterday saw Democratic and Republican Senators agree to pass legislation to raise the ceiling by enough to get to early December, meaning we won’t have to worry about it for another 8 whole weeks. The Senate voted 50-48 with no Republicans blocking the legislation to increase the debt limit by $480bn, with House Majority leader Hoyer saying that the House would convene on Tuesday to pass the measure as well. To raise it for a longer period, the chatter out of Washington made it clear that Democrats would need to need to raise the debt ceiling in a partisan manner as part of the reconciliation process. As we mentioned in yesterday’s edition, this extension means that a number of deadlines have now been punted into the year end, including the government funding and the debt ceiling (both now expiring the first Friday of December), just as the Democrats are also seeking to pass Biden’s economic agenda through a reconciliation bill containing much of their social proposals, alongside the $550bn bipartisan infrastructure package. And on top of that, we’ve also got the decision on whether Chair Powell will be re-nominated as Fed Chair, with the decision 4 years ago coming at the start of November. So a busy end to the year in DC. The other main story yesterday was the sizeable decline in European natural gas prices, with the benchmark future down -10.73% to post its biggest daily loss since August. Admittedly, they’re still up almost five-fold since the start of the year, but relative to their intraday peak on Wednesday they’ve now shed -37.5%. So nearly a double bear market all of a sudden! The moves follow Wednesday’s signal that Russia could supply more gas to Europe. However, even as energy prices were starting to fall back from their peak, the effects of inflation were being felt elsewhere, with the UN’s world food price index climbing to its highest level in a decade in September. Looking ahead, today’s main focus will be on the US jobs report for September later on. Last month the report significantly underwhelmed expectations, coming in at just +235k, which was well beneath the +733k consensus expectation and the slowest pace since January. That raised questions as to the state of the labour market recovery, and helped to complicate a potential decision on tapering, with nonfarm payrolls still standing over 5m beneath their pre-Covid peak. This month, our US economists are expecting a somewhat stronger +400k increase in nonfarm payrolls, which should see the unemployment rate tick down to a post-pandemic low of 5.1%. On the bright side at least, the ADP’s report of private payrolls for September on Wednesday came in at an above-forecast 568k (vs. 430k expected), while the weekly initial jobless claims out yesterday for the week through October 2 were beneath expectations at 326k (vs. 348k expected). Ahead of that, global equities posted a decent rebound across the board, with cyclicals leading the march higher on both sides of the Atlantic. As mentioned at the top, the S&P 500 advanced +0.83%, which was part of a broad-based advance that saw over 390 companies move higher on the day. That said the index was up as much as +1.5% in early US trading before slipping lower in the US afternoon. The pullback was partly due to new headlines that China’s central bank plans to continue addressing monopolistic actions in internet companies that operate in the payments sector. Nonetheless, Megacap tech stocks were among the big winners yesterday, with the FANG+ index up +2.08%, whilst the small-cap Russell 2000 index was also up +1.58%. In Europe, the STOXX 600 (+1.60%) posted its strongest daily gain since July, and the broader gains helped the STOXX Banks index (+1.61%) surpass its pre-pandemic high, taking it to levels not seen since April 2019, even as sovereign bond yields moved lower. Speaking of sovereign bonds, yesterday saw a divergent set of moves once again, with yields on 10yr Treasuries up +5.2bps to 1.573%, their highest level since June, whereas those across the European continent moved lower. The US increase came against the backdrop of that debt ceiling resolution, and there was a noticeable rise in yields for Treasury bills that mature in December, which is where the debt ceiling deadline has now been kicked to. Elsewhere in North America, the Bank of Canada’s Macklem joined the global central bank chorus and noted inflation pressures were likely to be temporary, even if they’ve been more persistent than previously expected. Meanwhile over in Europe, lower inflation expectations helped yields move lower, with those on 10yr bunds (-0.3bps), OATs (-1.1bps) and BTPs (-3.6bps) all moving back. Overnight in Asia, all markets are trading in the green with the Nikkei (+2.16%) leading the way, along with CSI (+1.34%), Shanghai Composite (+0.60%), KOSPI (+0.22%) and Hang Seng (+0.04%). Chinese markets reopened after a week-long holiday so the focus will again be back on property market debt, and today the PBOC injected just 10bn Yuan with its 7-day reverse repos, resulting in a net liquidity withdrawal of 330bn Yuan. That comes as the services and composite PMIs did see a pickup from August level, with the services PMI up to 53.4 (vs. 49.2 expected), moving back above the 50 mark that separates expansion from contraction. In Japan however, household spending was down -3.0% year-on-year in August (vs. -1.2% expected) which came amidst a surge in the virus there. There’s also some news on the ESG front, with finance minister Shunichi Suzuki saying that the country would introduce ESG factors when considering the finance ministry’s foreign reserves. Looking forward, S&P 500 futures (+0.06%) are pointing to a small move higher. In Germany, as talks got underway today on a potential traffic-light coalition, it was reported by DPA that CDU leader Armin Laschet had signalled his willingness to stand down, with the report citing unidentified participants from internal discussions. In televised remarks last night, Laschet said that his party needs fresh voices across the board and that new leadership will be in place soon. This moves comes as Germany’s Social Democratic Party held talks with the Greens and the Free Democratic Party to enact a new three-way ruling coalition, which would leave the CDU out of power entirely. There wasn’t a massive amount of data yesterday, though German industrial production fell by -4.0% in August (vs. -0.5% expected), which follows the much weaker than expected data on factory orders the previous day. Elsewhere, the Manheim used car index increased +5.3% in September, its first positive reading in 4 months. Our US economics team points out that there tends to be around a two month lag between wholesale prices and CPI prints, so we aren’t likely to see this impact next week’s CPI print but it will likely prevent a bigger fall towards the end of the year. To the day ahead now, and the highlight will be the aforementioned September jobs report from the US. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Tyler Durden Fri, 10/08/2021 - 07:50.....»»

Category: smallbizSource: nytOct 8th, 2021

Futures Rebound As Energy Prices Soar

Futures Rebound As Energy Prices Soar US equity futures and European markets rebounded from a tech rout on Monday that was triggered by fears of soaring energy costs, stagflation, tech overvaluation and escalating Chinese property distress even as Asian shares tracked Monday's broad Wall Street sell-off to weaken for a third straight session. The dollar rose and yields rebounded back ato 1.50% as the rise in oil continued, pushing Brent above $82/bbl. At of 7:15am ET, S&P futures were up 16.25 points, or 0.38%, to 4,307; Dow futs were up 116 points and Nasdaq futures rose 47.25 points as technology shares bounced in Europe. Bitcoin jumped above $50,000 for the first time since Sept 7. The “market correction, initially sparked by tapering expectations and China’s property sector worries, is now being driven by record energy prices as well as lingering political uncertainties in the U.S. about the crucial question of the debt ceiling,” said Pierre Veyret, a technical analyst at ActivTrades. “Markets are likely to stay volatile this week and with no clear direction until there is significant progress on the existing concerns.” Additionally, the recent calm in global markets which hit an all time high as recently as a few weeks ago, has been shattered by a growing wall of worry spanning a debt crisis in China, elevated inflation on the back of commodity supply shocks, fading economic recovery and U.S. political bickering. Meanwhile, investors brace for a tapering of stimulus by the Federal Reserve. Nerves eased on Tuesday, however, led by a tech rebound following Monday's Facebook-led rout, and big bank stocks were higher in premarket trading as 10-year Treasury yields climbed to about 1.5% led again by breakevens as oil not only held onto recent impressive gains - along with most other commodities after a gauge of commodities soared to an all-time record - but Brent rose above $82 . As to the insanity in Europe's gas sector, European natural gas contracts soared on Tuesday to an unprecedented 111.70 euros per megawatt-hour, compared with 15.49 euros in February. The continent is bracing for a winter crunch in energy supply, with German front-month power contracts also jumping to record levels. Global shortages of gas and coal are pushing energy prices higher, disrupting markets from the U.K. to China, as economies emerge from the pandemic. Surging costs are threatening to raise inflation and starting to weigh onindustrial production, with some companies in Europe forced to cut output. “The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter,” trader Energi Danmark wrote in a note Tuesday. “Everything looks set for another week of price climbs.” In U.S. premarket trading, Facebook found dip buyers in premarket trading after a 4.9% plunge on Monday amid an hours-long service disruption. The stock added 1.6% in the early New York session. Lordstown Motors shares declined as much as 4.6% after the electric vehicle automaker was downgraded to underweight by Morgan Stanley, while the PT was also cut to $2 from $8. Uphealth fell after pricing its share offering at a discount. And Facebook was up 1.5% following Monday’s slump after it blamed a global service outage that kept its social media apps offline for much of yesterday on a problem with its network configuration. Here are some other notable premarket movers: Amplify Energy (AMPY US) rises 10% in U.S. premarket trading, paring some of Monday’s 44% plunge tied to an oil spill from a California offshore pipeline operated by the company Comtech Telecom (CMTL US) slid more than 7% Monday postmarket after it reported adjusted earnings below average analyst estimates It is “the period of a multiplicity of shocks percolating through the financial markets leaving them in the fog, with many watching from the sidelines for clarity,” Sebastien Galy, a senior macro strategist at Nordea Invetsment, wrote in a note. The technology subgroup in Europe’s benchmark Stoxx 600 advanced for the first time in eight days. European natural-gas contracts jumped as much as 16% and West Texas Intermediate crude headed for a seven-year high. Earlier in the session, MSCI's broadest index of Asia-Pacific shares outside Japan dropped as much as 1.3%, declining for a third consecutive session. Japan stocks were down 2.5%, South Korea gave up 2% and Australia shed 0.4%. The drop in markets took MSCI's main benchmark to 619.77, the lowest since November 2020 but it pared losses to be down 0.6% in late Asia trade. The index has shed more than 5% this year, with Hong Kong and Japanese markets among the big losers. "Investors are clearly worried about inflation due to supply chain disruptions and the rally in energy prices," said Vasu Menon, executive  director of investment strategy at OCBC Bank.  "We have seen tech stocks outperform value stocks, so if inflation remains a worry, then tech stocks tend to get hit," Menon said. In rates, Treasuries were under pressure with yields near session highs, cheaper by up to 2.5bp across belly of the curve. Yields rose not only on the continued surge in commodities, but about the total chaos over the debt ceiling D-Date which will be hit in two weeks. Gilts lag amid bond auctions, adding to upside pressure on yields, while S&P 500 futures pare about a third of Monday’s 1.3% slide. The RBA kept monetary policy unchanged as expected.  In FX, the dollar rose against most Group-of-10 currencies near a one-year high versus major peers ahead of key U.S. payrolls data due at the end of the week; the pound bucked the trend, advancing for a fourth session. The euro fell 0.25% to $1.1592, while the yen rose 0.29% to $111.18. Leveraged funds sold the kiwi aggressively after a New Zealand business survey showed weak third-quarter economic sentiment.  Sentiment on the euro over the next year reached its most bearish since June 2020 on Friday amid a widening policy divergence between the Federal Reserve and the European Central Bank. In commodities, oil prices reached a three-year high on Monday (and continued higher on Tuesday) after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production. Underscoring the rise in commodity prices, the Refinitiv/CoreCommodity CRB index rose to 233.08 on Monday, the highest in more than six years. U.S. oil rose 1.15% to $78.51 a barrel, a day after hitting its highest since 2014. Brent crude stood at $82.2 after rising to a three-year top. Gold prices eased to $1,757 per ounce, after rising on Monday to the highest since Sept. 23. "OPEC+ may inadvertently cause oil prices to surge even higher, adding to an energy crisis that primarily reflects very tight gas and coal markets," said Commonwealth Bank of Australia's commodities analyst Vivek Dhar. "That potentially threatens the global economic recovery, just as global oil demand growth is picking up as economies re‑open on the back of rising vaccination rates," Dhar said in a note. Traders are now turning their attention to Friday’s nonfarm-payrolls data to gauge the timing of the Fed’s taper. In the latest Fed comments, St. Louis President James Bullard said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation. Australia’s central bank kept its monetary settings unchanged. Looking at the day ahead now, the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Market Snapshot S&P 500 futures up 0.2% to 4,301.00 STOXX Europe 600 up 0.4% to 452.37 MXAP down 0.7% to 192.58 MXAPJ down 0.3% to 626.41 Nikkei down 2.2% to 27,822.12 Topix down 1.3% to 1,947.75 Hang Seng Index up 0.3% to 24,104.15 Shanghai Composite up 0.9% to 3,568.17 Sensex up 0.4% to 59,531.35 Australia S&P/ASX 200 down 0.4% to 7,248.36 Kospi down 1.9% to 2,962.17 Brent Futures up 0.7% to $81.86/bbl Gold spot down 0.6% to $1,758.11 U.S. Dollar Index up 0.15% to 93.92 German 10Y yield fell 1.2 bps to -0.225% Euro down 0.2% to $1.1603 Top Overnight News from Bloomberg China’s heavily leveraged property firms saw their stocks and bonds tumble after a failure by developer Fantasia Holdings Group Co. to repay notes deepened investor concerns about the sector’s outlook A steep surge in inflation in the euro area has started to take its toll on the economy, according to a survey by IHS Markit China will strictly prevent bank and insurance funds from being used in speculating commodities in a push to maintain market order and stabilize prices The Federal Reserve said that its internal watchdog plans to open an investigation into trading activity by senior U.S. central bank officials, following revelations about transactions in 2020 Facebook Inc. blamed a global service outage that kept its social media apps offline for much of Monday on a problem with its network configuration, adding that it found no evidence that user data was compromised during the downtime A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured following the tech sell-off in the US and amid several headwinds for global markets including US-China trade frictions, China's record incursion into Taiwanese airspace and with higher oil prices stoking inflationary concerns. ASX 200 (-0.6%) was dragged lower after the losses in tech rolled over into the region and following somewhat mixed Trade and PMI data releases, but with downside stemmed by resilience in gold miners and the energy sector, after gains in the underlying commodity prices including the rally in oil to a seven-year high. Nikkei 225 (-2.2%) slumped below the 28k level and briefly entered into correction territory as it suffered intraday losses of as much as 3% and with index heavyweights Fast Retailing and SoftBank dominating the list of worst performers, while KOSPI (-1.9%) also fell into a correction with the index at least 10% below the record highs registered earlier this year despite efforts by South Korea’s antitrust regulator to dispel fears of a harsh tech crackdown. Hang Seng (+0.3%) was pressured at the open amid tech woes and default fears after reports that Fantasia Holdings missed payments due yesterday for USD 206mln of bonds, although the Hong Kong benchmark then pared its losses with notable strength seen in Chinese oil majors as they benefit from the rising energy prices. Finally, 10yr JGBs were initially kept afloat by the risk aversion but then reversed course amid the uninspired mood in T-notes and Bund futures, as well as weaker metrics from the 10yr JGB auction which attracted a lower bid to cover despite a decline in accepted prices. Top Asian News Gold Drops After Three-Day Gain as Yields and Dollar Push Higher ‘Kishida Shock’ Hits Japan Markets Wary of Redistribution Plan China Orders Banks to Ramp Up Funding to Boost Coal Output S.Korea’s NPS Could Lose $3.5m From Evergrande Stock Investment European equities (Euro Stoxx 50 +0.9%; Stoxx 600 +0.7%) have extended on the marginal gains seen at the open as indices attempt to claw back some of yesterday’s losses. Incremental macro newsflow since the close has not provided much cause for optimism and therefore it remains to be seen how durable any recovery will be. Overnight, the APAC session was mostly downbeat as the region contended with the negative US lead, ongoing US-China trade frictions, China's record incursion into Taiwanese airspace and higher oil prices stoking inflationary concern. Final PMIs for the Eurozone saw the composite revised very modestly higher to 56.02 from 56.1 with IHS Markit noting “the current economic situation in the eurozone is an unwelcome mix of rising price pressures but slower growth”. Stateside, futures are exhibiting gains of a similar magnitude to their European counterparts with the ES +0.2% and no real discernible theme across the US majors as traders await further progress in Washington. Sectors in Europe are mostly higher with clear outperformance in banking names with JP Morgan bullish on the sector; Credit Agricole sits at the top of the CAC after launching a new EUR 500mln share repurchase scheme. To the downside, laggards include Construction & Materials and Autos. Individual movers include Greggs (+8.7%) at the top of the Stoxx 600 after raising its profit outlook for the FY despite concerns over supply chain disruptions and staffing issues. Elsewhere, Infineon (+2.8%) has provided some support for the IT sector after confirming its FY 21 forecasts and being confident about the FY22 outlook. Finally, Melrose (-2.2%) is a notable laggard after the Co. cautioned on the fallout of the global chip shortage which has prompted a surge in client cancellations. Top European News European Banks Have Upside on Capital Returns, Yields, JPM Says Romania Edges Toward First Rate Hike Since 2018: Decision Guide Romania Approves Partial Compensation for Higher Energy Costs Morgan Stanley Expands Diversity-Focused ‘Shark Tank’ to Europe In FX, the broader Dollar and index remain firmer on the session, with the latter on either side of 94.000 from a 93.804 overnight base, but still within yesterday’s 93.675-94.104 range which marks the first immediate points of support/resistance. State-side, US President Biden spoke with 12 progressive members of Congress in which they agreed to follow through on key priorities, while it was also reported that President Biden told House progressives the spending package needs to be between USD 1.9tln-2.2tln. Biden will meet with moderate House Democrats virtually today. It is also worth keeping an eye on the Fed’s review of trading activities which could lead to a shift in the balance between hawks and doves, following the parting of hawks Rosengren (2022 voter) and Kaplan (2023 voter), who were set to be voters during the projected rate hike period. Ahead, the US ISM Services PMI will likely be the focal point from a state-side data standpoint. EUR, GBP - The EUR and GBP continue to diverge. Sterling extends on earlier gains, seemingly a function of the EUR/GBP cross topping out just before its 50 DMA (0.8546) before taking out yesterday’s 0.8529 low on its way towards 0.8500. The Sterling strength has helped Cable regain 1.3600+ status from a 1.3585 low. EUR/USD meanders around 1.1600 in a relatively narrow 1.1591-1.1622 current intraday band – with yesterday’s low at 1.1586 ahead of the 200 WMA at 1.1572. Europe saw the release of final Services and Composite PMIs, which continue to highlight the theme of rising prices and spillover into demand. AUD, NZD, CAD - he non-US Dollars see mild losses but trade off worst levels as the Dollar recedes and as market sentiment holds an upside bias. The AUD/NZD cross meanwhile remains in focus amid this week’s RBA/RBNZ central bank standoff. The RBA overnight provided no surprises and did not contain any significant new observations, with the currency experiencing choppiness upon the release. The RBNZ, meanwhile, is poised for a 25bps OCR hike at its announcement at 02:00BST/21:00EDT tomorrow. The AUD/NZD cross resides around session lows near 1.0455, whilst OpEx sees some AUD 2.1bln at strike 1.0410. The Loonie sees an underlying bid from crude prices, with USD/CAD back under its 50 DMA at 1.2600 ahead of Canadian trade data. JPY, CHF - The traditional havens are at the foot of the G10 bunch in what is seemingly a risk-influenced move. USD/JPY within a tight 110.88-111.25 band vs yesterday’s 110.50-112.07 range. USD/CHF, meanwhile, has popped above its 21 DMA (0.9250) and trades towards the top of its current 0.9238-70 parameter. In commodities, WTI and Brent front month futures are choppy but ultimately hold an upside bias in the aftermath of the OPEC+ meeting yesterday. Nonetheless, the benchmarks remain near yesterday’s highs which saw Brent Dec test USD 82.00/bbl to the upside. Brent resides around USD 81.50/bbl at the time of writing whilst WTI Nov hovers just under USD 78/bbl. With OPEC out of the way and until the next meeting, traders will be eyeing developments (if any) regarding the Iranian nuclear talks, alongside the electricity situation in China. Furthermore, traders must be cognizant of potential intervention by governments in a bid to control rising energy prices. As a reminder, the White House held talks with Saudi counterparts before the recent OPEC+ meeting and expressed concern on prices. Aside from that, news flow for the complex has been light during the European morning. Elsewhere, precious metals are softer on the day but spot gold and silver trade off worst levels with the yellow metal still holding into USD 1,750/oz-status and spot silver back above USD 22.50/oz. Over to base metals, LME copper remains pressured in what seems to be a continuation of the lacklustre trade seen during APAC hours amid a lack of demand as China remains on holiday. US Trade Calendar 8:30am: Aug. Trade Balance, est. -$70.8b, prior -$70.1b 9:45am: Sept. Markit US Composite PMI, prior 54.5 9:45am: Sept. Markit US Services PMI, est. 54.4, prior 54.4 10am: Sept. ISM Services Index, est. 59.8, prior 61.7 DB's Jim Reid concludes the overnight wrap I’m hoping you all survived without WhatsApp, Instagram and Facebook yesterday after the outage. We actually had to resort to a conversation over dinner last night. It was a bit weird without hearing pings go off every few minutes. Once the conversation dried up we went on Twitter and then watched Netflix so it wasn’t a total disaster for US tech in our household. Oh and I’m writing this on my iPad while looking up a few things on Google. Tech led the sell-off last night that stretched to both equities and bonds. One of the noticeable features of the recent weakness in equities is that bonds have struggled to rally. This hints at technicals being nowhere near as strong as they were in the summer and also a realisation that bonds aren’t a great haven if the sell-off is partly inflation related. By the close of trade yesterday, the S&P 500 had shed another -1.30%, making it the 3rd time in the last 5 sessions that the index has lost more than 1%, with the latest move now taking it -5.21% beneath its all-time closing high back in early September. However, unlike some of the other declines of the last month, which have been quite obviously connected to a particular concern like Evergrande or the impact of higher yields, the latest selloff looks to be coming from a more generalised set of concerns, with those worries given a fresh impetus by yet another rise in energy prices yesterday as oil hit multi-year highs. In turn, that spike in energy prices has led to renewed fears about inflation accelerating even further than current forecasts are implying, with knock-on implications for central banks and the amount of monetary stimulus we can expect over the coming months. We’ll start with those moves in energy given the effects they had elsewhere. Yesterday saw Brent Crude oil prices (+2.50%) close above $81/bbl for the first time in nearly 3 years, and this morning it’s up another +0.42%. On top of that, WTI (+2.29%) oil prices hit a 6-year high of its own at $77.62/bbl, which saw its YTD gains rise above +60%. The latest advance for oil has come as the OPEC+ group agreed yesterday that they’d stick to their planned output hike of +400k barrels per day in November, in spite of some speculation that there could be a larger increase in supply. However, it wasn’t just oil moving higher, with European natural gas prices (+2.07%) taking another leg up after their recent surge, which leaves them just shy of their recent peak last Thursday. And what’s also concerning from an inflationary standpoint is that the moves in commodities were broader than simply energy, with metals including copper (+1.17%) seeing sizeable gains as well. Overall, that meant Bloomberg’s Commodity Spot Index (+1.12%) finally exceeded its 2011 high yesterday, and brings the index’s gains since the post-pandemic low in March 2020 to +94.7%. Against this backdrop, equities took another tumble as the major indices on both sides of the Atlantic moved lower, including the S&P 500 (-1.30%) and Europe’s STOXX 600 (-0.47%). Tech stocks saw the brunt of the declines, with the NASDAQ down -2.14% and the FANG+ index down -3.00%, while Europe’s STOXX Technology Index (-2.39%) fell for a 7th consecutive session. Facebook was one of the bigger laggards yesterday as it fell -4.89% - its worst day since November 2020. The company is dealing with whistleblower allegations that their internal research doesn’t match what executives have been saying about the effect the social media company has on its users. The equal weight S&P 500 was only down -0.63% so the big tech stocks definitely led the way. European equities were less affected than their US counterparts however, having missed out on Friday’s late US equity rally following the European close, with the DAX (-0.79%), the CAC 40 (-0.61%) and the FTSE 100 (-0.23%) all seeing declines of less than 1%. A lower tech weighting probably also helped. Those concerns about stagflation represented further bad news for sovereign bonds yesterday, as investors moved to upgrade their expectations of future inflation. In Europe, 10yr German breakevens were up by +2.0bps to an 8-year high of 1.72%, while their Italian counterparts hit their highest level in over a decade, at 1.63%. Meanwhile in the US, 10yr breakevens were also up +1.3bps to 2.39%. Those moves in inflation expectations supported higher yields, with those on 10yr Treasuries up +1.7bps to 1.479% by the close of trade, as yields on bunds (+1.0bps), OATs (+1.3bps) and BTPs (+1.8bps) similarly moved higher. Overnight in Asia, equities have mostly followed the US lower, with the Nikkei (-2.77%), KOSPI (-1.71%), and Australia’s ASX 200 (-0.74%) all losing ground, though the Hang Seng (+0.20%) has recovered slightly thanks to energy stocks, and S&P 500 futures (+0.13%) are also pointing to a modest recovery. Those declines for the Nikkei and the KOSPI leave them just shy of a 10% correction from their recent peaks. In terms of the latest on Evergrande, there are signs that risks are spreading to other property developers, as China’s Fantasia Holdings missed a repayment worth $205.7m on a bond that matured Monday. Unsurprisingly, the developments are continuing to affect China’s HY dollar bond prices, with a Bloomberg index now down by -14.3% since its high back in May. Elsewhere in Asia, we got confirmation shortly after we went to press yesterday from new Japanese PM Fumio Kishida that there’d be a general election on October 31. Interestingly, that will actually be the 3rd general election in a G7 economy in the space of just six weeks, following the votes in Canada and Germany in late September. Back to the US, and Treasury Secretary Yellen’s estimated deadline to raise the debt ceiling – 18 Oct – is now under 2 weeks away, and during a press conference yesterday President Biden called on Republicans to join with Democrats to raise the debt limit, arguing that over a quarter of the US debt was accumulated during the Trump administration and that it should not be tied to “any new spending being considered. It has nothing to do with my plan for infrastructure or building back better, zero.” Senate Majority Leader Schumer plans to hold a vote this week to lift the debt ceiling, though Republicans are set to block the legislation and are forcing Democrats to use the partisan budget reconciliation process that is currently the vehicle of the Biden “Build Back Better” plan. Whilst time was running out to deal with the debt ceiling, President Biden also met with progressive House Democrats yesterday to discuss the budget reconciliation package and about potentially limiting the scope of the bill that makes up much of the President’s economic agenda. Press Secretary Psaki said that there is a “recognition that this package is going to be smaller than originally proposed,” but that the President is looking to get it across the goal line. Initial estimates could see the final package closer to $2 trillion over 10 years versus the current $3.5 trillion plans. Meanwhile on trade, the Biden administration also announced yesterday that they would hold direct talks with Chinese officials in the coming week seeking to enforce prior commitments and start fresh talks to exclude some goods from US tariffs. US Trade Representative Katherine Tai will meet with Chinese Vice Premier Liu He, and is expected to focus on how to add and adjust to the Trump administration’s most recent deal with the Chinese government rather than starting from scratch. There wasn’t much in the way of data yesterday, though US factory orders in August rose by +1.2% (vs. +1.0% expected), and the previous month’s growth was revised up to +0.7% (vs. +0.4% previously). To the day ahead now, and the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Tyler Durden Tue, 10/05/2021 - 07:45.....»»

Category: blogSource: zerohedgeOct 5th, 2021

Troubling Tuesday: Second Selloff in Seven Sessions Comes as Tech Gets Hit by Yield Climb

Investors probably look forward to Friday more than usual this week.  That’s because Friday is the start of a new month, ending what’s been a disappointing and ugly September that got uglier Tuesday as rising Treasury yields and a volatile situation in Washington took their collective tolls. September is now on pace to be the worst month for the S&P 500 Index (SPX) since last October. The index is down more than 3% month-to-date. It’s also a reminder of how rising Treasury yields and worries about rising rates can punish the “growth” sectors like Tech and Communication Services. Investors may remember similar times earlier this year and back in the fall of 2018 when rate worries led to tough times for Tech.  These worries also helped send volatility straight back up toward where it was a little over a week ago during the last major selloff. The Cboe Volatility Index (VIX) topped 23 today, up from around 18 at the end of last week. Typically, it’s pivoted near 20 the last few months, and anything that approaches 25 could signal growing worries about more turbulence ahead. At 20 you start to take notice of VIX, and a VIX of 30 can send a strong bearish signal.  In what could be a bearish development going into Wednesday, a little comeback about an hour before the close met new selling pressure that brought the major indices back within shouting distance of their intraday lows. The late selling could suggest an interesting first half hour tomorrow morning if more sell orders remain to be processed. What happens after that could set the tone. CHART OF THE DAY: 50 TO 100 ACCELERATION. Tuesday saw the S&P 500 Index (SPX—candlestick) slide below its 50-day moving average (blue line) for the second time in six sessions. It’s also approaching its 100-day moving average (red line), a level it’s hardly touched all year. Sometimes these moving averages can represent potential psychological support for the market. Data Source: S&P Dow Jones Indices.  Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. 10-Year Yield Gets the Headlines, but Others Are Up Even More Everyone appears to have their eye on the 10-year Treasury yield, now above 1.5% and at three-month highs. It’s up an amazing 24 basis points in less than a week.  But two-year and five-year yields are also rising. At 1.02%, the five-year yield is up an incredible 183% year-to-date, outpacing the 68% rise of the 10-year yield this year. That means the “curve” ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaSep 28th, 2021

Bond Report: Treasury yields rise as traders look ahead to producer prices and debt sale

U.S. Treasury yields edge higher on Wednesday, extending the steep selloff of the last two days, as investors brace for wholesale inflation data and the second bond auction of the week......»»

Category: topSource: marketwatchSep 11th, 2019

NewsWatch: Stock market’s selloff is only half-done, and final leg will come in 2019, warns Morgan Stanley strategist

Investors should brace for more pain ahead as the stock market’s rough patch is far from over and the new year may not live up to expectations, according to Morgan Stanley’s Mike Wilson......»»

Category: topSource: marketwatchNov 27th, 2018

Market Extra: Stock market’s selloff is only half-done, and final leg will come in 2019, warns Morgan Stanley strategist

Investors should brace for more pain ahead as the stock market’s rough patch is far from over and the new year may not live up to expectations, according to Morgan Stanley’s Mike Wilson......»»

Category: topSource: marketwatchNov 27th, 2018

Futures, Yields Slide In Recessionary Start To New Quarter

Futures, Yields Slide In Recessionary Start To New Quarter As DB's Jim Reid puts it "if you want the good news this morning it's that H1 is now finally over. If you want the bad news it's that there's not much good news around as we start H2 and US equity futures are already down around a percent in the first few hours of the new half year. " Indeed, just when you thoughts stocks couldn't possibly slide any more after just concluding the worst first half in 52 years... ... and with investor and consumer sentiment at record lows, you'd be shocked to learn that futures and stocks started the new month and quarter by plumbing fresh lows as fears of soaring inflation and tumbling earnings boosted concerns about an imminent recession, and the resulting risk aversion lifted bonds and havens and sent risk sliding.  The "Big Short" Michael Burry said we may only be about halfway through the market's decline... Adjusted for inflation, 2022 first half S&P 500 down 25-26%, and Nasdaq down 34-35%, Bitcoin down 64-65%. That was multiple compression. Next up, earnings compression. So, maybe halfway there. — Cassandra B.C. (@michaeljburry) June 30, 2022 ... while Goldman was also downbeat, seeing global equities selling off further in the near term. As of 730am, S&P 500 and Nasdaq 100 pointed to declines of 0.3%, having shaved off as much as a 1% drop earlier... ... while 10-year US Treasury yield slid below 3% to the lowest since early June as markets now price in a record 10bps in rate cuts in Q1 2023 with markets confident the Fed will have to pivot to defeat the coming recession. Every Group-of-10 currency fell against the dollar and the yen, traditional havens, while bitcoin reversed a modest attempt at a breakout that briefly pushed it back over $20K. In premarket trading, shares of US chip companies fell after Micron Technology issued a downbeat forecast on weaker demand for phones and computers. Bank stocks are also lower in premarket trading, putting them on track for their fifth straight day of losses amid a broader slump in equity markets. Other notable premarket movers: Kohl’s (KSS US) plunges 15% in US premarket trading after CNBC reported it’s ending sale talks with Vitamin Shoppe owner Franchise Group. Semiconductor companies are falling on Friday after Micron Technology issued a weak forecast for the current quarter due to lower demand for phones and computers. Micron (MU US) -5.5%, Nvidia -1.3% (NVDA US), Qualcomm (QCOM US) -0.7%. Cryptocurrency-exposed stocks could be active again on Friday as Bitcoin dip buyers are triggering a rally for the largest digital token. Riot Blockchain (RIOT US), Marathon Digital (MARA US) edge up 2.4% and 2.6%, respectively, in premarket. XPeng (XPEV US) burning cash in the short-term is unavoidable, Nomura says in a note that downgrades the Chinese EV maker to neutral from buy. Shares down 0.2% premarket. Risk assets continued to be the target of sellers Friday as recession worries overtake concern about runaway inflation. With Federal Reserve policymakers resolute on getting price growth back to their 2% target, investors are assessing the hit to the economy from harsh rate hikes. “Inflation is the key focus of central bankers; investors losing money is way down their list of concerns,” Chris Iggo, chief investment officer at AXA IM Core, wrote in a note to clients. “Interest rate and inflation markets are taking the view that what is priced in terms of monetary tightening will be enough to bring inflation down, but in order for that to happen, there also needs to be a cost to growth.” Meanwhile, both stocks and bonds were rocked by outflows this week, reflecting investor fears about hawkish central bank policy. About $5.8 billion exited global stock funds in the week through June 29, Bank of America said, citing EPFR Global data. Bonds had redemptions of $17 billion. Separately, global companies have pulled more debt sales in the past six months than in all of 2020. More than 70 deals have been postponed or canceled so far in 2022, according to data compiled by Bloomberg. In Europe, markets reversed sharp opening losses with the Stoxx 600 briefly turning green before sliding 0.5% lower with retail and utility names supporting on the recovery. Bund yields rose after data showed euro-area inflation hit a fresh record, surpassing expectations.  Here are some of the biggest European movers today: European airlines rise on Friday, paring some declines from previous sessions, as oil is headed for the third straight weekly drop on concerns that a potential recession will hurt demand. Wizz Air rises as much as +10%, EasyJet +6.2%, British Airways owner IAG +4.4% Airbus shares rise as much as 4% after BofA analysts led by Benjamin Heelan added the aircraft manufacturer to the bank’s ‘3Q Best Ideas list,’ according to a note. SBB shares advance as much as 21.5% Friday, its largest intra-day gain since April 2017, after the company was included in Nasdaq Stockholm’s OMXS30 index. Sodexo shares gain as much as 5.6%, the most since April 8, after the French caterer reported 3Q revenue that beat the average analyst estimate. Morgan Stanley says Friday’s update is a “relief.” Maersk shares rise as much as 3.0% after JPMorgan upgraded the stock to overweight from neutral and placed it and Kuehne Nagel on their “positive Catalyst Watch” for Q2, citing increased confidence in the longevity of current earnings. European semiconductor stocks tumble after US memory- chip maker Micron 4Q outlook fell short of analyst expectations and said the industry demand environment has weakened. Chipmaker Infineon falls as much as 5.0%, ASML drops 4.9% La Francaise des Jeux shares decline as much as 9.0% after Citi cuts the stock to sell from buy, citing concession fee to be paid that is worse than Street expectations. Craneware declines as much as 12% after an offering of ~1.2m shares by holder Abry Partners VII priced at 1,600p, a 13% discount to last close. OVH Groupe shares drop as much as 6.5% after the analysts adjusted their estimates amid a softening demand outlook. Earlier in the session, Asian stocks declined for a third day, as traders assessed recession risks in the global economy after weak US consumer spending and soft factories data from the region. Investors are also keeping an eye on developments from the Chinese President’s Hong Kong visit.  The MSCI Asia Pacific Index slid as much as 1.1%, adding to nearly 2% weekly loss, weighed down by tech and consumer discretionary stocks. Chipmakers including TSMC and Samsung extended their declines, contributing the most to the measure’s loss along with Australian miner BHP and Indian energy giant Reliance.  Taiwan’s benchmark was again the region’s notable underperformer as it is on course for a bear market following more than a 20% fall from its January high, dragged down by technology stocks. Equity benchmarks in Japan and South Korea slipped more than 1%. Stocks in mainland China retreated after meandering between gains and losses while Hong Kong was closed for a holiday as its new chief was sworn in by Chinese President Xi Jinping.  A further slide in June purchasing managers’ indexes in Asian countries except China and the drop in US consumer spending for the first time this year in May highlighted the fragile foundation of the world economy. Those data dimmed global economic outlook and further dented investor sentiment already weakened by ongoing worries about global central banks’ aggressive rate hikes to fight inflation.  “Overall, weakened US consumer spending will lead to a drop in global demand. It will affect export-dominated markets like South Korea in particular,” said Cui Xuehua, a China equity analyst at Meritz Securities in Seoul. “Traders are also looking to see if there will be policies benefiting Hong Kong, such as a re-opening of borders and increased trade” as Xi visits Hong Kong. Asian stocks plunged about 18% during the first half of this year, capping the first six months with the worst annual drop since 2008. Asian equities have struggled to rebound from a low in May as global recession worries and aggressive tightening by central banks triggered heavy outflows of funds from emerging markets. Chinese stocks have remained a bright spot last month as Beijing winds down its stringent virus restrictions and investors expected regulatory and monetary support for key sectors.   In Australia, the S&P/ASX 200 index fell 0.6% for the week, as the risk-sensitive Australian and New Zealand dollars slumped to their lowest levels in two years amid ongoing recession worries that boosted haven assets. After a late sell-off Friday, shares swung to a loss of 0.4% to close at 6,539.90, driven by declines in energy and material stocks, with a group of mining shares hitting the lowest since Nov. 22 following commodity price drops.  In New Zealand, the S&P/NZX 50 index fell 1.1% to 10,753.16 In FX, the Bloomberg Dollar Spot Index rose by around 0.3% as the greenback traded stronger against all of its Group-of-10 peers apart from the yen. Australian and New Zealand dollars plunged to new two-year lows. The euro fluctuated around $1.0450 after the latest data showed that euro-area consumer prices rose 8.6% from a year earlier in June -- up from 8.1% in May. Economists surveyed by Bloomberg saw a gain of 8.5%. The yen rose and the nation’s bonds were steady to higher. One-week options in dollar-yen are once again overpriced as short-term risks make a strong case for long-gamma exposure. Bank of Japan’s quarterly Tankan report of confidence among Japan’s large manufacturers fell to 9 in June from 14 three months ago, the biggest drop since the peak of the pandemic. In rates, the German curve bear-steepened, with long-end yields ~7bps cheaper after a manufacturing PMIs show notable softness in new orders. Cash Treasuries extended Thursday’s bull steepening move, with front-end and belly dropping over 10bp from prior day’s close while richer by ~4bps at the short end. Ten-year yields fell further to below 3%, breaching the 50-day moving average, while eurodollar strip bull flattens as recession risk and Fed rate cuts continue to be priced in for next year.  10-year yields dropped to as low as 2.937%, the lowest since June 6, before edging back above 2.95% in early US session, outperforming bunds by 5.5bps. The belly and front-end outperformance causing a steepening of 5s30s curve by 6bp on the day and 2s10s by 3bps; 5s30s peaks through 20bp and onto widest levels in a month. Two-year yield fell 10bp to 2.85%. The Eurodollar strip continues to bull flatten as rate hike premium is eased out of next year; Dec22/Dec23 spread drops to -63.5bp and fresh cycle lows.  German government benchmark yields rose after data showed euro-area inflation hit a fresh record, surpassing expectations. The Stoxx Europe 600 Index wavered between losses and gains. Gilts are relatively quiet. Most peripheral spreads are modestly wider to core. In commodities, crude futures advance. WTI drifts 1.9% higher to trade near $107.73. Brent rises 2% near $111.23. Most base metals are in the red. LME copper briefly drops below $8,000 a ton for the first time since February 2021. Spot gold falls roughly $12 to trade near $1,795/oz.  Looking to the day ahead, data releases include the flash Euro Area CPI reading for June, as well as June’s global manufacturing PMIs and the ISM manufacturing reading from the US, along with the UK’s mortgage approvals for May. From central banks, we’ll hear from the ECB’s Panetta and De Cos. Market Snapshot S&P 500 futures down 0.4% to 3,774.25 MXAP down 1.0% to 156.37 MXAPJ down 1.0% to 519.11 Nikkei down 1.7% to 25,935.62 Topix down 1.4% to 1,845.04 Hang Seng Index down 0.6% to 21,859.79 Shanghai Composite down 0.3% to 3,387.64 Sensex down 0.6% to 52,688.97 Australia S&P/ASX 200 down 0.4% to 6,539.91 Kospi down 1.2% to 2,305.42 STOXX Europe 600 little changed at 407.16 German 10Y yield little changed at 1.39% Euro down 0.2% to $1.0459 Brent Futures up 0.8% to $109.95/bbl Gold spot down 0.7% to $1,794.17 US Dollar Index up 0.26% to 104.95 Top Overnight News from Bloomberg The Bank of Japan’s decision to pass up an opportunity to ramp up its policy defenses points to a fear of triggering a further weakening of the embattled yen Japan’s state pension fund, the world’s largest, posted its first quarterly loss in two years as declines in global stock and bond markets during the three months through March weighed down the value of its assets After years of subdued price swings caused by central bank intervention, a key gauge of volatility in the 1 quadrillion yen ($7.4 trillion) government bond market has surged in recent weeks to the highest level since 2008. That’s boosting demand for JGB traders, with Nomura Holdings Inc. noting signs of intensifying competition for talent Copper sank below $8,000 a ton, hitting its lowest since early 2021, as deepening fears about a global economic slowdown drive a rout in industrial metals markets Chinese President Xi Jinping urged Hong Kong to shore up its economy after an era of “chaos,” in a landmark visit that offered few clear answers for how to balance Beijing’s demands for limiting perceived foreign threats with its desire to remain an international financial hub A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks began the new trading month mostly in the red as the region digested a slew of data releases and amid headwinds from the US where Consumer Spending data disappointed and Atlanta Fed's GDPnow model alluded to a recession.     ASX 200 was just about kept afloat by resilience in nearly all industries aside from the commodity-related sectors. Nikkei 225 fell beneath the 26,000 level after the latest Tankan survey mostly disappointed. Shanghai Comp. traded indecisively despite the stronger than expected Caixin Manufacturing PMI data which rose to its highest since May 2021 as sentiment in the mainland was constrained by falling commodity prices, as well as the absence of Hong Kong participants and Stock Connect flows. Top Asian News Chinese President Xi said "one country, two systems" has been successful for Hong Kong over the past 25 years and said Hong Kong is a window and a bridge connecting the mainland to the world, while he added that Hong Kong has to defend against interference and focus on development, according to Bloomberg and Reuters. Hong Kong's new Chief Executive Lee was sworn in and stated the National Security Law brought stability after chaos, while he added the government will strive to control and manage COVID-19 through scientific methods, according to Reuters. UK PM Johnson said China has been failing to comply with its commitments on Hong Kong and the UK intends to do all it can to hold China to account, according to Reuters. PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a CNY 50bln net daily drain, according to Reuters. World’s Top Pension GPIF Posts Quarterly Loss on Stock Rout Three Arrows Crypto Fund CEO Wants to Sell Singapore Mansion Kishida Says LNG Supply From Sakhalin Won’t Immediately Stop Japan Mulls LNG From Spot Market to Replace Russian Supply: METI European bourses are back in the red after briefly recovering from opening losses. Sectors are mixed with no clear theme - Tech is the laggard and Utilities the outperformer. Chip stocks are after sources said TSMC has seen its major clients adjust downward their chip orders for the rest of 2022, whilst Micron's guidance was underwhelming. Stateside, US equity futures remain in negative territory but off worst levels as the contracts coat-tail on some of Europe’s upside. Top European News French government spokesperson said a possible cabinet reshuffle could take place Monday or Tuesday, according to Reuters. Euro-Zone Inflation Hits Record in Boost for Big-Hike Calls Food Inflation Gets a Break as Wheat, Corn and Soy Oil Tumble UK House Sales Slow as ‘Intense’ Market Starts to Cool FX Dollar regroups after late month end fade amidst broad gains ahead of US manufacturing ISM and construction spending - DXY retests 105.000+ levels from 104.640 low yesterday. Yen bucks trend, but off recovery peaks as yields firm up and risk aversion wanes - Usd/Jpy around 135.500 vs 134.74 overnight base. Aussie underperforms and hits fresh 2022 trough sub-6800 and Kiwi under 0.6200 after decline in ANZ consumer sentiment. Pound undermined by downward revision to UK manufacturing PMI with Cable below 1.2100 and prone to test of Fib support if 1.2050 breached. Euro back on 1.0400 handle and propped by better than forecast Eurozone manufacturing PMIs and stronger than expected inflation metrics. Rand extends declines alongside Gold as SA power and pay issues rumble on - Usd/Zar above 16.3400, spot bullion below Usd 1800/oz. Fixed Income Debt futures rack up more safe haven gains before recovery in risk sentiment and sharp reversal. Bunds recoil from 149.46 to 148.24, Gilts retreat to 113.79 from 114.52 and 10 year T-note pulls back from 118-29+ to 118-06 as benchmark yield retests 3% briefly. Bonds subsequently bounce off lows awaiting US manufacturing ISM and construction spending ahead of long Independence Day holiday weekend. Commodities WTI and Brent front-month futures retrace some of yesterday’s losses with upside also spurred the recovery across the stock markets Libya's NOC announced a force majeure over Es Sider, Ras Lanuf Ports and the El Feel oilfield, while it noted that oil production decreased as daily exports ranged between 365-408k BPD which is a decline of 865k BPD, according to Reuters. Spot gold is under pressure after the yellow metal breached USD 1,800/oz to the downside – with the next level to the downside at USD 1,786/oz, the May 16th low. Base metals are softer across the board as recession woes grapple with the risk-correlated market. LME 3M copper briefly fell beneath the USD 8,000/t for the first time since January. India raised the basic import tax on gold to 12.5% from 7.5%, according to BQ Prime citing a Gazette notification. US Event Calendar 09:45: June S&P Global US Manufacturing PM, est. 52.4, prior 52.4 10:00: May Construction Spending MoM, est. 0.4%, prior 0.2% 10:00: June ISM Manufacturing, est. 54.5, prior 56.1 DB's Jim Reid concludes the overnight wrap If you want the good news this morning it's that H1 is now finally over. If you want the bad news it's that there's not much good news around as we start H2 and US equity futures are already down around a percent in the first few hours of the new half year. Having said that it's eminently possible that whatever age you are reading this you might ALL have now witnessed the worst first half of a year in your career either looking back or forward. So if you've survived that it might not all be bad news. Younger readers can come back to me after the awful H1 2055 and tell me I'm wrong. Henry will put out some more stats in our usual month-end performance review shortly, which reads like a bit of a horror story, but for what it’s worth the S&P 500 has now seen its worst H1 total return performance in 60 years, and also in total return terms it’s fallen for two consecutive quarters for the first time since the GFC. Meanwhile 10yr Treasuries look set (with a final calculation imminent) to have recorded their worst H1 since 1788, just before George Washington became President. As I mentioned in a previous chart of the day, bad H1’s for equities have tended to be followed by much better H2’s. But with increasing warnings that a recession is round the corner, it isn’t so obvious where things are headed this time round. Indeed, equities saw another significant selloff yesterday as those fears were magnified yet again by another weaker than expected round of data which genuinely puts the US at risk of a technical recession in H1 already. That included the US weekly initial jobless claims for the week through June 25, which although coming in inline at 231k (vs. 230k expected), did send the smoother 4-week moving average up to its highest level so far this year. Our preferred measure, namely containing claims, edged up but is not yet signalling a recession though. Personal spending also came in at just +0.2% in May (vs. +0.4% expected), and the prior month was revised down three-tenths as well, whilst real personal spending (-0.4%) saw its first monthly decline of the year as well. That translated to a 0.3% MoM Core PCE reading, below expectations of 0.4%, while the YoY reading was 6.3%. The prospect of the Fed being forced into hikes to fight stubborn inflation while growth is rolling over appears to be something the markets will have to wrestle with sooner rather than later. Indeed, the Atlanta Fed’s 2Q GDP nowcast estimate was revised down from 0.3% to -1.0% which if proved correct will signal a technical recession as a minimum. Today's ISM will be a big sentiment driver on this front. Against the weak growth backdrop, the S&P 500 (-0.88%) continued its run of having declined every day this week, whilst Europe’s STOXX 600 (-1.50%) saw even sharper losses. Utilities (+1.10%) were the clear outperformer, as investors rotate into defensive sectors. In turn, the NASDAQ underperformed, closing down -1.33%, also finishing in the red every day this week to date. The S&P 500 lost -20.58% in the first half of the year, its worst first half performance since 1970. Meanwhile, the NASDAQ has fared even worse, declining -22.44% this quarter alone and -29.51% in the first half of the year, its worst first half in the data available in Bloomberg. But in some ways the fear was more evident among sovereign bonds, which rallied significantly as investors continued to seek out safe havens and grew more doubtful about whether central banks would be able to persist in taking policy into aggressive territory. Indeed, the rate priced by Fed funds futures for the December 2022 meeting came down -6.5bps to 3.39%, and the rate priced by December 2023 came down an even larger -13.6bps to 2.96%. Those shifting expectations meant that yields on 10yr Treasuries fell back beneath 3% in the session for the first time in nearly 3 weeks, ultimately settling -7.6bps lower on the day at 3.01%. The decline in 10yr yields was split between breakevens and real yields, as both had a volatile session to end the quarter. Breakevens fell -4.7bps to 2.35%, their lowest levels since September. Other recessionary indicators were flashing warning signs of their own, with the near-term Fed spread down another -14.9bps to 142bps, meanwhile the 2s10s curve managed to eek out a marginal steepening, but is still flirting with inversion, closing at just 5.1bps. This morning, 10yr UST yields (-5.92 bps) are lower again, moving back below 3% to 2.95% with the 2s10 curve flattening -1bps at 4.13% as we type. We saw much the same pattern in Europe yesterday, albeit with even larger moves lower in yields that sent those on 10yr bunds (-18.3bps), OATs (-15.2bps) and BTPs (-13.3bps) sharply lower. As in the US, European sovereign yield declines were driven by falling inflation compensation, with the 10yr German breakeven coming down by -12.3bps to 2.03%, which is its lowest closing level since Russia’s invasion of Ukraine began. That was echoed in a declining oil price with Brent crude down -1.60% yesterday at $109.52/bbl, meaning that oil prices saw a monthly decline in June for the first time since November 2021, back when the Omicron variant first emerged and travel restrictions started going back up again. Speaking of energy prices, there were a few interesting headlines on that front yesterday, including a comment from President Biden that he is seeking more production from the Gulf states. Biden is set to travel to the Middle East from July 13-16, so that’s an important event on the geopolitical calendar, and ahead of that, we also saw the OPEC+ group move to ratify yesterday a further supply hike of +648k barrels per day in August. In Europe however there was more bad news on the energy side, with natural gas futures up a further +3.53% to a fresh three-month high of €144.51 per megawatt-hour. My colleague George Saravelos put out a fascinating blog yesterday (link here) that highlighted how worried he’s becoming on the gas supply situation, with year-ahead natural gas prices making fresh record highs and electricity prices skyrocketing. A key event as part of that will be the shutdown of the Nordstream pipeline from July 11-21 for regular annual maintenance, and press reports are suggesting that authorities are attempting to find a solution on sanctions restrictions to move gas turbine components back to Russia. So while we all spend most of our time thinking about the Fed and recessions, what happens to Russian gas over H2 is potentially an even bigger story. Mark July 22nd in your dairies to see whether the gas supply starts getting back to normal or not. Asian equity markets are reversing early morning gains and are mostly down again. The Kospi (-1.04%) is the largest underperformer across the region followed by the Nikkei (-0.88%). Over in mainland China, the Shanghai Composite (-0.30%) and CSI (-0.20%) are down but are trimming losses, as the nation’s private factory activity rose at the fastest pace in 13 months in June (more on this below). Markets in Hong Kong are closed for a holiday marking the 25th anniversary of Chinese rule. Bucking the regional trend is Australia’s S&P/ASX 200 which is trading +0.26% higher at the time of writing. Outside of Asia, stock futures are once again sliding with contracts on the S&P 500 (-0.84%) and NASDAQ 100 (-0.86%) indicating a disappointing start in the US later today. Early morning data showed that China’s Caixin/Markit manufacturing PMI advanced to 51.7 in June, returning to expansion territory for the first time in four months against a previous reading of 48.1 and well above analyst expectations for an uptick to 50.1. The recovery as suggested in the survey was propelled by a strong rebound in output, as the easing Covid restrictions sent factories racing to meet recovering demand. Over in Japan, Tokyo’s June CPI rose +2.3% y/y (v/s +2.5% expected) and against a +2.4% increase in the prior month. Core CPI advanced +2.1% in June from a year earlier, notching the fastest pace of increase in seven years in a sign of broadening inflationary pressure in the world’s third largest economy. Separately, the unemployment rate in Japan surprisingly edged up to +2.6% in May from +2.5% in April. Meanwhile, sentiment at Japan’s large manufacturers deteriorated in the April-to-June period as the headline index worsened to a level of +9, a decline from the previous quarter’s reading of 14. Looking at yesterday’s other data, French CPI came in at +6.5% as expected on the EU-harmonised measure in June, although German unemployment unexpectedly rose +133k in June (vs -5k expected) as Ukrainian refugees are now being included in those looking for work. Looking back to May however, the Euro Area unemployment rate hit its lowest level since the formation of the single currency at 6.6% (vs. 6.8% expected). Finally in the US, the MNI Chicago PMI came in at 56.0 (vs. 58.0 expected). To the day ahead now, and data releases include the flash Euro Area CPI reading for June, as well as June’s global manufacturing PMIs and the ISM manufacturing reading from the US, along with the UK’s mortgage approvals for May. From central banks, we’ll hear from the ECB’s Panetta and De Cos. Tyler Durden Fri, 07/01/2022 - 07:57.....»»

Category: blogSource: zerohedgeJul 1st, 2022

5 Mistakes Making It Harder For Owners To Secure SME Loans

After the massive economic shock caused by the pandemic, and the slowdown of the economy, banks, private lenders, and credit unions were far too skeptical to dish out loans, anything from mortgages to small-medium enterprise loans. Yet, after much prevails during the last two years, with the economy now moving full steam ahead, bank approval […] After the massive economic shock caused by the pandemic, and the slowdown of the economy, banks, private lenders, and credit unions were far too skeptical to dish out loans, anything from mortgages to small-medium enterprise loans. Yet, after much prevails during the last two years, with the economy now moving full steam ahead, bank approval rates are still not as high as they were roughly two years ago. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Approval rates have come down almost more than half in the last two years since the start of the pandemic. The latest figures reveal that in December 2019, approval rates from big banks, and smaller banks were 28.2% and 50.6%, respectively. In December 2021, the same financial lenders approved roughly 14.2%, for big banks and 20.1% coming from small banks. More alarming, institutional lenders had a two-third approval rate, around 66% in December 2019. Back in 2021, that figure fell to 24.9%. Banks and credit unions are now pulling back on rampant SME loans, as they look to brace for turbulent economic conditions lying ahead. Yet, the more than 32 million small and medium businesses in America have quickly become the backbone of the macroeconomy, sustaining millions of jobs and fueling the economy. Business owners are perhaps already well-aware of the current challenges they’re facing, as consumers are becoming more cash strapped as inflation runs rampant. While many businesses do seek financial relief, whether through the Paycheck Protection Program (PPP), or financial aid from traditional lenders there is a chance that lenders can deny applications for various reasons. There’s a list of things business owners should know before they apply for a business loan. Understanding why lenders can be so meticulous when it comes to the business loan assessment process will help one better understand how to overcome these types of challenges. Here’s a look at the five mistakes that are making it harder for business owners to secure an SME loan. Business Credit Worthiness One of the first mistakes business owners need to overcome in order to secure a loan is to ensure that their credit and financial situation are up to scratch. Even the U.S. Small Business Administration (SBA) lists it as one of the number one reasons why business owners are oftentimes denied loans. Business owners should ensure that their credit reports and credit scores are up to date. Furthermore, any previous financial conditions, regarding taxes, liens, garnishments, and bounced checks should have valid reasoning during the application process. The best thing any business owner should do, before applying, is to address any of these disputes and problems beforehand. This will help to give lenders better insight into current and past financial conditions. Improve Personal Credit Another reason why lenders could disapprove a business loan is because of bad personal credit. According to a recent survey by Goldman Sachs, nearly 70% of business owners mentioned that personal credit was a defining factor for them when they applied for a business loan. Bad personal credit or a low credit score could still land you a business loan, but this would come at a higher interest rate and additional fees. Juggling a robust credit score, both for a business and for yourself is one of the easiest ways to secure a business loan, especially at a time when interest rates are only set to go up in the coming months. Financial Limitations In The Business Several financial limitations can make it harder for business owners to successfully secure a loan. From bad business credit, limited access to venture capital, inflation, and low cash flow could become determining factors for the borrower. In most cases, it’s advised that business owners consider what their current financial situation may be, and how they can improve it before applying for a loan or credit. Whether it's improving business operations to increase cash flow, or even taming inflation by adjusting prices according to the consumer price index, there are different strategies every owner can use that will suit their business needs. Inexperienced and Tender Business In some instances, lenders can look at how long a business has been operational before they accept or approve a loan application. While some entrepreneurs and business owners may enjoy a sudden growth spurt in their business, it’s not necessarily to say that this will reflect positively when they seek additional financial aid or relief. Depending on where a business is registered, or operating from, some states, and even financial institutions, and credit unions will not accept a loan application if a business hasn’t been operational for at least two years. There are instances where a lender will accept an application, even when the business has been open for less than the specified time, but this comes with higher interest rates and fees. The overall process of this can also take weeks, sometimes months to receive approval, so it’s advised that business owners consider whether this route is worth the administration and wait. Uncontrolled Gearing Ratio The gearing ratio refers to the amount of current business-related debt, concerning its physical equity capital. This means that when a business has more debt than equity capital, its gearing ratio tends to be higher. Lenders will always consider the gearing ratio before they approve a loan application. So business owners need to control and manage their credit limits and their reasonable debt usage. To lower the gearing ratio, it’s advised that business owners use their credit more responsibly, and ensure that all the equity capital or assets are kept in line with the level of business debt. Additional Issues These are only a few of the most common things that make it harder for business owners to properly secure a small-medium enterprise loan. Alternatively, some other mistakes or problems can keep a business owner from having access to financial capital - these include: Missing information in the application. Insufficient financial information was provided. Limited collateral in the business. The loan amount is too high or too little. The Bottom Line Securing a business loan can help any business owner finance their business needs and ventures. It’s hard to sometimes understand why a loan is not approved or why applications will get denied, well before the loan process has even commenced. So far, these are among the most common mistakes business owners tend to run into when they apply for a small or medium-sized business loan. Business owners should ensure that they meet all the requirements and that both their business-related financial condition is well-organized. By simply ensuring you meet the basic prerequisites, it may already help fast-track the loan application. Updated on Jun 30, 2022, 2:42 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 30th, 2022

Stocks, Cryptos Tumble To Close Out Catastrophic First-Half

Stocks, Cryptos Tumble To Close Out Catastrophic First-Half It was supposed to be a 7% ramp into month-end on billions in pension fund residual buying. Instead, it ended up being more or less the opposite, with crypto-led liquidations dragging futures and global markets lower, and extending Wednesday losses after central bankers issued warnings on inflation and fueled concern that aggressive policy will end with a hard-landing recession, which increasingly more now see as being 2022 business, an outcome that now appears assured especially after yesterday's disastrous guidance cut from RH, the second in three weeks! Recession fears and inflation woes may be prolonged by today's PCE deflator report. The consumer price gauge favored by the Fed may have picked up to 6.4% last month from 6.3%. Personal income growth probably edged up but Bloomberg Economics highlights an anticipated decline in real personal spending as a major worry. Meanwhile, China’s economy showed further signs of improvement in June with a strong pickup in services and construction, even if the latest Chinese PMI print came slightly below expectations. Also overnight, Russia said it withdrew troops from Ukraine’s Snake Island in the Black Sea after Ukraine said its forces drove Russian troops from the area. In any case, with zero demand from pensions so far (even though the continued selling in stocks and buying in bonds will only make the imabalnce bigger), overnight Nasdaq 100 contracts dropped 1.8% while S&P 500 futures declined 1.3%, and cryptos crumbled, with bitcoin dragged back below $19000 and Ether on the verge of sliding below $1000. The tech-heavy gauge managed to end Wednesday’s trading slightly higher, while the S&P 500 fell for a third straight day. In Europe, the Stoxx Europe 600 Index slid 1.9%. Treasuries gained, the dollar was steady and gold declined and crude oil futures edged lower again. Which brings us to the last trading day of a quarter for the history books: the S&P 500 is set for its biggest 1H decline since 1970 and the Nasdaq 100 since 2002, the height of the dot.com bust. The Stoxx 600 is set for the worst 1H since 2008, the height of the GFC.  Traders have ramped up bets that the global economy will buckle under central bank tightening campaigns -- and that policy makers will eventually backpedal. The bond market shifted to price in a half-point rate cut in the Federal Reserve’s benchmark rate at some point in 2023. On Wednesday, during the annual ECB annual forum, Fed Chair Jerome Powell and his counterparts in Europe and the UK warned inflation is going to be longer lasting. A view that central banks need to act fast on rates because they misjudged inflation has roiled markets this year, with global stocks about to close out their worst quarter since the three months ended March 2020. “Markets are worried about growth as central bankers continue to emphasize that bringing down inflation is their overriding objective, and that it may take time to bring inflation down,” said Esty Dwek, chief investment officer at Flowbank SA. “We still haven’t seen total capitulation in markets, so further downside is possible.” Meanwhile, the cost of insuring European junk bonds against default crossed 600 basis points for the first time in two years on Thursday. And speaking of Europe, stocks are also down over 2% in early trading, with all sectors in the red. DAX and CAC underperform at the margin with autos, consumer discretionary and banking sectors the weakest within the Stoxx 600.  Here are some of the biggest European movers today: Uniper shares slump as much as 23% after the German utility withdrew its outlook and said it was discussing a possible bailout from the German government following Russia’s move to curb natural gas deliveries. SAP sinks as much as 6.5% after Exane BNP Paribas downgraded stock to neutral from outperform, saying it sees risks on demand side in the near term as software spending decisions come under increased scrutiny. Sanofi shares decline as much as 4.5% after the French drugmaker said the FDA placed late-stage clinical trials of tolebrutinib on partial hold in US because of concerns about liver injuries. European semiconductor stocks fell, following peers in the US and Asia lower amid growing concerns that the industry might face a downturn soon as chip stockpiles build. ASML drops as much as 3.4%, Infineon -4.1%, STMicro -3.1% Norsk Hydro shares slide as much as 6% amid metals decline and as DNB cuts the stock to sell from hold, citing concerns about rising aluminum supply. Stainless steel stocks in Europe fall, with Morgan Stanley saying the settlement on the latest ferrochrome benchmark missed its expectations. Outokumpu shares down as much as 6.6%, Aperam -7.2%, Acerinox -4% Saab shares jump as much as 8.4%, after getting an order worth SEK7.3b from the Swedish Defence Materiel Administration for GlobalEye Airborne Early Warning and Control aircraft. Orsted shares rise as much as 2.5%, before paring some of the gains. HSBC raises to buy from hold, saying any further downside for the wind farm operator looks limited. Bunzl shares rise as much as 2.6% after the specialist distribution company said it now expects very good revenue growth in 2022. Grifols shares rise as much as 7.8% after slumping on Wednesday, as the company says that the board isn’t analyzing any capital increase “for the time being.” Earlier in the session, Asian stocks fell for a second day as tech-heavy indexes in Taiwan and South Korea continued to get pummeled amid concerns over the potential for aggressive monetary tightening in the US to rein in inflation.  The MSCI Asia Pacific Index declined as much as 1.2%, dragged down by technology shares including TSMC, Alibaba and Tencent. Taiwan slid more than 2%, while gauges in Japan, South Korea, Australia dropped more than 1%.  Stocks in mainland China rose more than 1% after the economy showed further signs of improvement in June with a strong pickup in services and construction as Covid outbreaks and restrictions were gradually eased. Traders are also watching Chinese President Xi Jinping’s trip to Hong Kong, his first time outside of the mainland since 2020.  Asian stocks are struggling to recover from a May low as the threat of higher US rates outweighs China’s emergence from strict Covid lockdowns and its pledge of stimulus measures. While mainland Chinese stocks led gains globally this month, the rest of the markets in the region -- especially those heavy with technology stocks and exporters -- saw hefty outflows of foreign funds.  “Investors continue to assess recession and also inflation risks,” Marcella Chow, JPMorgan Asset Management’s global market strategist, said in an interview with Bloomberg TV. “This tightening path has actually increased the chance of a slower economic growth going forward and probably has brought forward the recession risks.” Asian stocks are set to post a more than 12% loss this quarter, the worst since the one ended March 2020 during the pandemic-induced global market rout. Japanese stocks declined after the release of China’s data on manufacturing and non-manufacturing PMIs that showed slower than expected improvements.  The Topix Index fell 1.2% to 1,870.82 as of market close Tokyo time, while the Nikkei declined 1.5% to 26,393.04. Sony Group contributed the most to the Topix Index decline, falling 3.4%. Out of 2,170 shares in the index, 531 rose and 1,574 fell, while 65 were unchanged. “Although China is recovering from a lockdown, business sentiment in the manufacturing industry is deteriorating around the world,” said Tomo Kinoshita, global market strategist at Invesco Asset Management China’s Economy Shows Signs of Improvement as Covid Eases. Indian stock indexes posted their biggest quarterly loss since March 2020 as the global equity market stays rattled by high inflation and a weakening outlook for economic growth.  The S&P BSE Sensex ended little changed at 53,018.94 in Mumbai on Thursday, while the NSE Nifty 50 Index dropped 0.1%. The gauges shed more than 9% each in the June quarter, their biggest drop since the outbreak of pandemic shook the global markets in March 2020. The main indexes have fallen for all but one month this year as surging cost pressures forced India’s central bank to raise rates twice and tighten liquidity conditions. The selloff is also partly driven by record foreign outflows of more than $28b this year.  Despite the turmoil in global markets, Indian stocks have underperformed most Asian peers, partly helped by inflows from local institutions, which made net purchases of more than $30b of local stocks. “Investors worry that the latest show of central bank determination to tame inflation will slow economies rapidly,” HDFC Securities analyst Deepak Jasani wrote in a note.  Fourteen of the 19 sector sub-gauges compiled by BSE Ltd. fell Thursday, with metal stocks leading the plunge. The expiry of monthly derivative contracts also weighed on markets. For the June quarter, metal stocks were the worst performers, dropping 31% while information technology gauge fell 22%. Automakers led the three advancing sectors with 11.3% gain. Australian stocks also tumbled, with the S&P/ASX 200 index falling 2% to close at 6,568.10, weighed down by losses in mining, utilities and energy stocks.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 10,868.70 In rates, treasuries advanced, led by the belly of the curve. German bonds surged, led by the short-end and outperforming Treasuries. US yields richer by as much as 5.4bp across front-end and belly of the curve which outperforms, steepening 2s10s, 5s30s by 2bp and 2.8bp; wider bull-steepening move in progress for German curve with yields richer by up to 13.5bp across front-end with 2s10s wider by 3.5bp on the day. US 10-year yields around 3.055%, richer by 3.5bp. Money markets aggressively trimmed ECB tightening bets on relief that French June inflation didn’t come in above the median estimate. Bonds also benefitted from haven buying as stocks slide. Month-end extension flows may continue to support long-end of the Treasuries curve. bunds outperform by 7bp in the sector. IG issuance slate empty so far; Celanese Corp. pushed back plans to issue in euros and dollars, most likely to next week, after deals struggled earlier this week. Focal points of US session include PCE deflator and MNI Chicago PMI.  In FX, the Bloomberg Dollar Spot Index was steady as the greenback traded mixed against its Group-of-10 peers. The yen advanced and Antipodean currencies were steady against the greenback. French inflation quickened to the fastest since the euro was introduced. Steeper increases in energy and food costs drove consumer-price growth to 6.5% in June from 5.8% in May . Sweden’s krona swung to a loss. It briefly advanced earlier after the Riksbank raised its policy rate by 50bps, as expected, signaled faster rate hikes and a quicker trimming of the balance sheet. The pound rose, snapping three days of losses against the dollar. UK household incomes are on their longest downward trend on record, as the nation’s cost of living crisis saps the spending power of British households. Separate figures showed that the current-account deficit widened sharply to £51.7 billion ($63 billion) in the first quarter. The yen rose and the Japan’s bonds inched up. The BOJ kept the amount and frequencies of planned bond purchases unchanged in the July-September period. The Australian dollar reversed a loss after data showed China’s official manufacturing purchasing managers index rose above 50 for the first time since February in a sign of improvement in the world’s second largest economy. Bitcoin is on track for its worst quarter in more than a decade, as more hawkish central banks and a string of high-profile crypto blowups hammer sentiment. The 58% drawdown in the biggest cryptocurrency is the largest since the third quarter of 2011, when Bitcoin was still in its infancy, data compiled by Bloomberg show. In commodities, WTI trades a narrow range, holding below $110. Brent trades either side of $116. Most base metals trade in the red; LME zinc falls 3.1%, underperforming peers. Spot gold falls roughly $3 to trade near $1,814/oz. Bitcoin slumps over 6% before finding support near $19,000. Looking to the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Market Snapshot S&P 500 futures down 1.2% to 3,775.75 STOXX Europe 600 down 1.8% to 406.18 MXAP down 1.0% to 158.01 MXAPJ down 1.1% to 524.78 Nikkei down 1.5% to 26,393.04 Topix down 1.2% to 1,870.82 Hang Seng Index down 0.6% to 21,859.79 Shanghai Composite up 1.1% to 3,398.62 Sensex up 0.2% to 53,136.59 Australia S&P/ASX 200 down 2.0% to 6,568.06 Kospi down 1.9% to 2,332.64 Gold spot down 0.2% to $1,814.91 US Dollar Index little changed at 105.04 German 10Y yield little changed at 1.42% Euro little changed at $1.0443 Brent Futures down 0.4% to $115.85/bbl Top Overnight News from Bloomberg The surge in the dollar has set Asian currencies on course for their worst quarter since the 1997 financial crisis and created a dilemma for central bankers French Finance Minister Bruno Le Maire said the EU can deliver the global minimum corporate tax with or without the support of Hungary, circumventing Budapest’s veto earlier this month just as the bloc was on the brink of a agreement German unemployment unexpectedly rose, snapping 15 straight months of decline as refugees from the war in Ukraine were included in those searching for work The SNB bought foreign exchange worth 5.7 billion francs ($5.96 billion) in the first quarter of 2022 as the franc sharply appreciated against the euro and briefly touched parity in March The ECB plans to ask the region’s lenders to factor in the economic hit of a potential cut off of Russian gas when considering payouts to shareholders European stocks were poised for their biggest drop in any half-year period since 2008, as investors focused on the prospects for economic slowdown and stubbornly high inflation in the region New Zealand will enter a recession next year that could be deeper than expected, Bank of New Zealand economists said after a survey showed business sentiment continues to slump A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were varied at month-end amid a slew of data releases including mixed Chinese PMIs. ASX 200 was dragged lower by weakness in energy, miners and the top-weighted financials sector. Nikkei 225 declined after disappointing Industrial Production data and with Tokyo raising its virus infection level. Hang Seng and Shanghai Comp. were somewhat mixed with Hong Kong indecisive and the mainland underpinned after the latest Chinese PMI data in which Manufacturing PMI printed below estimates but Non-Manufacturing PMI firmly surpassed forecasts and along with Composite PMI, all returned to expansion territory. Top Asian News NATO Secretary General Stoltenberg said China's growing assertiveness has consequences for the security of allies, while he added China is not our adversary, but we must be clear-eyed about the serious challenges it presents. US blacklisted 5 Chinese firms for allegedly helping Russia in which Connec Electronic, King Pai Technology, Sinno Electronics, Winnine Electronic and World Jetta Logistics were added to the entity list which restricts access to US technology, according to WSJ. Japan's government cut its assessment of industrial production and noted that production is weakening, while it stated that Japan's motor vehicle production declined 8% M/M and that industrial production likely saw the largest impact of Shanghai's COVID-19 lockdown in May, according to Reuters. Tokyo metropolitan government will reportedly increase COVID infections level to the second-highest, according to FNN. It’s been a downbeat session for global equities thus far as sentiment deteriorates further. European bourses are lower across the board, with losses extending during early European hours. European sectors are all in the red but portray a clear defensive bias. Stateside, US equity futures have succumbed to the glum mood, with the NQ narrowly underperforming. Top European News Riksbank hiked its Rate by 50bps to 0.75% as expected, and said the rate will be raised further and it will be close to 2% at the start of 2023. Bank said the balance sheet its to shrink faster than previously flagged, and suggested that policy rate will increase faster if needed. Click here for details. Riksbank's Ingves said inflation over forecast probably not enough for Riksbank to hold extra policy meeting in summer. Ingves added that if the situation requires a 75bps hike, then Riksbank will carry out a 75bps hike. Orsted Gains as HSBC Upgrades With Shares Seen ‘Good Value’ Aston Martin Extends Losses as Carmaker Reportedly Seeking Funds Climate Litigants Look Beyond Big Oil for Their Day in Court Ukraine Latest: Putin Warns NATO on Moving Military to Nordics FX DXY extends on gains above 105.00, but could see more upside on safe haven demand and residual rebalancing flows over fixes - EUR/USD inches towards 1.0400 to the downside. Yen regroups as yields drop and risk sentiment deteriorates to compound corrective price action. Franc unwinds some of its recent outperformance and Loonie lose traction from oil ahead of Canadian GDP. Swedish Crown unable to take advantage of hawkish Riksbank hike in face of risk aversion - Eur/Sek stuck in a rut close to 10.7000. Pound finds some underlying bids into 1.2100 and Kiwi at 0.6200, while Aussie holds above 0.6850 with encouragement from China’s services PMI that also propped the Yuan. Fixed Income Bonds on bull run into month, quarter and half year end - Bunds top 148.00 at best, Gilts approach 113.50 and 10 year T-note just a tick away from 118-00. Debt in demand on safe haven grounds rather than duration as curves steepen on less hawkish/more dovish market pricing. Italian supply comfortably covered to keep BTP futures propped ahead of US PCE data and yet another speech from ECB President Lagarde. Commodities WTI and Brent front-month futures are resilient to the broader risk downturn, and firmer Dollar as OPEC+ member members gear up for what is expected to be a smooth meeting. Spot gold is uneventful but dipped under yesterday's low, with potential support at the 15th June low at USD 1,806.59/oz. Base metals are softer across the board amid the broader risk profile. Dalian and Singapore iron ore futures were on track for quarterly losses. Ship with 7,000 tonnes of grain leaves Ukraine port, according to pro-Russia officials cited by AFP. US Event Calendar 08:30: June Initial Jobless Claims, est. 229,000, prior 229,000 08:30: June Continuing Claims, est. 1.32m, prior 1.32m 08:30: May Personal Income, est. 0.5%, prior 0.4% 08:30: May Personal Spending, est. 0.4%, prior 0.9% 08:30: May Real Personal Spending, est. -0.3%, prior 0.7% 08:30: May PCE Deflator MoM, est. 0.7%, prior 0.2% 08:30: May PCE Deflator YoY, est. 6.4%, prior 6.3% 08:30: May PCE Core Deflator YoY, est. 4.8%, prior 4.9% 08:30: May PCE Core Deflator MoM, est. 0.4%, prior 0.3% 09:45: June MNI Chicago PMI, est. 58.0, prior 60.3 DB's Jim Reid concludes the overnight wrap We’ve just released the results of our monthly EMR survey that we conducted at the start of the week. It makes for some interesting reading, and we’re now at the point where 90% of respondents are expecting a US recession by end-2023, which is up from just 35% in our December survey. That echoes our own economists’ view that we’re going to get a recession in H2 2023, and just shows how sentiment has shifted since the start of the year as central banks have begun hiking rates. When it comes to people’s views on where markets are headed next, most are expecting many of the themes from H1 to continue, with a 72% majority thinking that the S&P 500 is more likely to fall to 3,300 rather than rally to 4,500 from current levels, whilst 60% think that Treasury yields will hit 5% first rather than 1%. Click here to see the full results. When it comes to negative sentiment we’ll have to see what today brings us as we round out the first half of the year, but if everything remains unchanged today we’re currently set to end H1 with the S&P 500 off to its worst H1 since 1970 in total return terms. And there’s been little respite from bonds either, with US Treasuries now down by -9.79% since the start of the year, so it’s been bad news for traditional 60/40 type portfolios. Ultimately, a large reason for that has been investors’ fears that ongoing rate hikes to deal with inflation will end up leading to a recession, and yesterday saw a continuation of that theme, with Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey all reiterating their intentions in a panel at the ECB’s Forum to return inflation back to target. In terms of that panel, there weren’t any major headlines on policy we weren’t already aware of, although there was a collective acknowledgement of the risk that inflation could become entrenched over time and the need to deal with that. Fed Chair Powell described the US economy as in “strong shape”, but one that ultimately requires much tighter financial conditions to bring inflation back to target. Year-end fed funds expectations remained steady in response, down just -0.7bps to 3.45%. However, further out the curve the simmering slower growth narrative continued to grip markets and sent 10yr Treasury yields -8.2bps lower to 3.09%, and the 2s10s another -1.1bps flatter to 4.7bps. In line with a tighter Fed policy path and slower growth, 10yr breakevens drove the move in nominal yields, falling -8.2bps to 2.39%, their lowest levels since January, having entirely erased the gains seen after Russia’s invasion of Ukraine, when it peaked above 3% at one point in April. Along with 2s10s flattening, the Fed’s preferred measure of the near-term risk of recession, the forward spread (the 18m3m – 3m), similarly flattened by -5.7bps, hitting its lowest level in nearly four months at 154bps. And thismorning there’s only been a partial reversal of these trends, with 10yr Treasury yields (+1.3bps) edging back up to 3.10% as we go to press. Over in equities, the S&P 500 bounced around but finished off of its intraday lows with just a -0.07% decline, again with the macro view likely skewed by quarter-end rebalancing of portfolios. The NASDAQ was similarly little changed on the day, falling a mere -0.03%. In terms of the ECB, President Lagarde said on that same panel that she didn’t think “we are going back to that environment of low inflation” that was present before the pandemic. But when it came to the actual data yesterday there was a pretty divergent picture. On the one hand, Spain’s CPI for June surprised significantly on the upside, with the annual inflation rising to +10.0% (vs. +8.7% expected) on the EU’s harmonised measure. But on the other, the report from Germany then surprised some way beneath expectations, coming in at +8.2% on the EU-harmonised measure (vs. +8.8% expected). So mixed messages ahead of the flash CPI print for the entire Euro Area tomorrow. As in the US, there was a significant rally in European sovereign bonds, with yields on 10yr bunds (-10.7bps), OATs (-10.7bps) and BTPs (-16.0bps) all moving lower on the day. Equities also lost significant ground amidst the risk-off tone, and the STOXX 600 shed -0.67% as it caught up with the US losses from the previous session. That risk-off tone was witnessed in credit as well, where iTraxx Crossover widened +21.5bps to a post-pandemic high. At the same time, there were further concerns in Europe on the energy side, with natural gas futures up by +8.06% to a three-month high of €139 per megawatt-hour, which follows a reduction in capacity yesterday at Norway’s Martin Linge field because of a compressor failure. Whilst monetary policy has been the main focus for markets lately, we did get some headlines on the fiscal side yesterday too, with a report from Bloomberg that Senate Democrats were working on an economic package that had smaller tax increases in order to reach a deal with moderate Democratic senator Joe Manchin. For reference, the Democrats only have a majority in the split 50-50 senate thanks to Vice President Harris’ tie-breaking vote, so they need every Democrat Senator on board in order to pass legislation. According to the report, the plan would be worth around $1 trillion, with half allocated to new spending, and the other half cutting the deficit by $500bn over the next decade. Overnight in Asia we’ve seen a mixed market performance overnight. Most indices are trading lower, including the Nikkei (-1.45%) and the Kospi (-0.81%), but Chinese equities have put in a stronger performance after an improvement in China’s PMIs in June, and the CSI 300 (+1.62%) and the Shanghai Comp (+1.31%) have both risen. That came as manufacturing activity expanded for the first time in four months, with the PMI up to 50.2 in June (vs. 50.5 expected) from 49.6 in May. At the same time, the non-manufacturing climbed to 54.7 points in June, up from 47.8 in May, which also marked the first time it’d been above the 50 mark since February. Nevertheless, that positivity among Chinese equities are proving the exception, with equity futures in the US and Europe pointing lower, with those on the S&P 500 (-0.28%) looking forward to a 4th consecutive daily decline as concerns about a recession persist. When it came to other data yesterday, the third estimate of US GDP for Q1 saw growth revised down to an annualised contraction of -1.6% (vs. -1.5% second estimate). Separately, the Euro Area’s M3 money supply grew by +5.6% year-on-year in May (vs. +5.8% expected), which is the slowest pace since February 2020. To the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Tyler Durden Thu, 06/30/2022 - 07:58.....»»

Category: blogSource: zerohedgeJun 30th, 2022