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Sintrones Technology to see surging shipments in 1H23

Sintrones Technology, a maker of in-vehicle computing systems used in smart transportation, has obtained many orders with scheduled shipments concentrating in the first half of 2023, according to company chairman and president Kevin Hsu......»»

Category: topSource: digitimesNov 28th, 2022

5 Value Stocks to Buy for Safety Amid Fed-Led Market Ruckus

We have narrowed our search to five value stocks. These are: MPC, URI, UNM, DDS and CAR. September is historically known as the toughest month on Wall Street. This year, the performances of U.S. stock markets are more disappointing courtesy of an ultra-hawkish Fed. The central bank has raised the benchmark lending rate by 3% year to date.However, the Fed has failed to cool 40-year high inflation. This is because aggregate demand has remained strong owing to astonishing savings that Americans generated in the last two pandemic-ridden years with unprecedented fiscal and monetary stimuli.As the Fed has given a clear indication of the continuation of a rigorous interest rate hike and tighter monetary control, a global financial crisis looms larger. Market participants are pricing the cost of an imminent recession in stock’s valuation.At this stage, it would be prudent to pick value stocks with a favorable Zacks Rank to cushion the portfolio as well as make some gains from the upside potential. These stocks could prove to be valuable once the rally resumes. Five of them are Avis Budget Group Inc. CAR, Marathon Petroleum Corp. MPC, Dillard's Inc. DDS, United Rentals Inc. URI and Unum Group UNM.A Global Financial Crisis Looms Large  The Fed has raised the median of the Fed Fund rate to 4.4% in September from 3.4% in June. This means that the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating a 75 basis-point and 50 basis-point interest rate hike in November and December, respectively.Investors were expecting a rate cut in 2023, which is out of the question now as the central bank has projected that the median benchmark interest rate will reach 4.6% in 2023. This means another 50 basis-point rate hike throughout 2023. The first rate cut is not expected before 2024 as the Fed is expecting inflation to come down to its target rate of 2% in 2025.As the interest rate is surging in the United States, global investors are trying to hold U.S.-dollar denominated assets to get higher returns. Consequently, the ICE U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, has skyrocketed to a 20-year high in 2022.With respect to the U.S. dollar – the British pound plunged to an all-time low, the Japanese yen is at a 20-year low and the euro is at a 20-year low. Currencies of several major emerging economies have fallen to their historic-low levels against the U.S. dollar.Threat of a RecessionEconomists and financial researchers are concerned that a rising dollar will hurt the sales of U.S. multinational companies as their products will be more expensive in the international markets. Further, the volume of international trade is likely to be impacted as most of these trades are settled in U.S. dollar terms.The yields of U.S. government bonds have soared. On Sep 26, the yield on the benchmark 10-Year U.S. Treasury Note touched 3.9%, its highest since 2010. The yield on the short-term 2-year U.S. Treasury Note climbed 4.3%, its highest since 2007. The yield on the long-term 30-Year U.S. Treasury Note closed at 3.703%.The yields of 2-year and 10-Year Notes have inverted for the last two months. After the last round of rate hike in September, the yields on 10-Year and 30-Year Notes have also inverted. Economists generally consider this situation as a sign of an imminent recession.Our Top PicksAt this juncture, investors should be prepared to minimize fluctuations in their portfolio and consequently rebalance it with suitable financial assets to maintain stability. We have narrowed our search to five value stocks. Each of our picks carries a Zacks Rank #1 (Strong Buy) and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.The chart below shows the price performance of our five picks in the past three months.Image Source: Zacks Investment ResearchAvis Budget Group provides car and truck rentals, car sharing, and ancillary services to businesses and consumers. The ability of CAR to cater to a wide range of mobility demands helps it to expand and strengthen its global foothold through organic growth.Avis Budget Group operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. Fleet expansion and technology enhancement efforts by CAR are likely to enhance its offerings.  The forward P/E of Avis Budget Group for the current financial year is 3.4X, lower than the industry average of 14.8X. CAR has a PEG ratio of 0.2, lower than the industry average of 1.3. Avis Budget Group has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.  Marathon Petroleum is poised for further price gains based on a slew of positives. MPC’s $21 billion sales of its Speedway retail business provided it with a much-needed cash infusion. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream.MPC’s exposure to more stable cash flows from the logistics segment diversifies the earnings stream and offers a buffer against the volatile refining business. Consequently, Marathon Petroleum is primed for significant capital appreciation and is viewed as a preferred downstream operator to own now.The forward P/E of Marathon Petroleum for the current financial year is 4.7X, lower than the industry average of 6.2X. MPC has a PEG ratio of 0.3, lower than the industry average of 0.5. Marathon Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 7 days.United Rentals is benefiting from the U.S. administration’s increased focus on infrastructural improvement. URI has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals.Better fleet productivity on broad-based rental demand in non-residential construction and industrial verticals, higher total and rental revenues and stronger pricing aided United Rentals’ second-quarter 2022 results. During the period, rental revenues grew 26.2% from a year ago. Adjusted gross margin expanded 360 basis points.The forward P/E of United Rentals for the current financial year is 9.2X, lower than the industry average of 12X. URI has a PEG ratio of 0.5, lower than the industry average of 1.0. United Rentals has an expected earnings growth rate of 43.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 6.8% over the last 60 days.Unum Group’s conservative pricing and reservation practices have contributed to overall profitability. The sustained increase in premiums is being fueled by high persistency levels in core business lines and strong sales volume along with solid benefits experience.Continued rollout of dental products and geographic expansion have been paying off for UNM as its acquired dental insurance businesses are growing in the United States and the U.K. UNM has continually enhanced shareholders’ value. Unum Group expects 2022 premiums to grow about 2%. Adjusted operating EPS is expected to grow 15-20%.The forward P/E of Unum Group for the current financial year is 6.3X, lower than the industry average of 14.5X. UNM has a PEG ratio of 0.8 lower than the industry average of 1.4. Unum Group has an expected earnings growth rate of 40.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.Dillard's operates retail department stores in the southeast, southwest and Midwest areas of the United States. Its stores offer merchandise, including fashion apparel for women, men, and children as well as accessories, cosmetics, home furnishings, and other consumer goods.Dillard’s has been keen on inventory management since the start of the pandemic, through measures like cancellation, suspension and delaying of shipments as well as merchandise purchase reduction. These aggressive measures to lower excess inventory owing to the pandemic-led decline in demand have proven beneficial to the company’s margins.The forward P/E of Dillard's for the current financial year is 7.4X, lower than the industry average of 7.7X. DDS has a PEG ratio of 0.5, lower than the industry average of 0.7. The Zacks Consensus Estimate for current-year earnings improved 38.3% over the last 60 days. Just Released: Zacks Unveils the Top 5 EV Stocks for 2022 For several months now, electric vehicles have been disrupting the $82 billion automotive industry. And that disruption is only getting bigger thanks to sky-high gas prices. Even titans in the financial industry including George Soros, Jeff Bezos, and Ray Dalio have invested in this unstoppable wave. You don't want to be sitting on your hands while EV stocks break out and climb to new highs. In a new free report, Zacks is revealing the top 5 EV stocks for investors. Next year, don't look back on today wishing you had taken advantage of this opportunity.>>Send me my free report revealing the top 5 EV stocksWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Avis Budget Group, Inc. (CAR): Free Stock Analysis Report Dillard's, Inc. (DDS): Free Stock Analysis Report Unum Group (UNM): Free Stock Analysis Report Marathon Petroleum Corporation (MPC): Free Stock Analysis Report United Rentals, Inc. (URI): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 27th, 2022

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

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

Category: blogSource: zerohedgeSep 26th, 2022

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

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

Category: blogSource: zerohedgeSep 26th, 2022

4 Solid Dividend-Paying Steel Stocks to Shield Your Portfolio

Against the current challenging backdrop, it would be prudent to invest in some top-notch dividend-paying steel stocks. TX, GGB, APEMY and ANIOY are worth adding to your portfolio. The Zacks Steel Producers industry has hit a speed bump after enjoying a short-lived bull run as steel prices have cooled off after catapulting to historic highs last year.The steel industry staged a strong recovery last year after the pandemic-led downturn, courtesy of solid pent-up demand and a rally in steel prices to historic highs. The resumption of operations across major steel-consuming sectors such as construction and automotive, following the easing of lockdowns and restrictions globally, led to an upturn in steel demand.Steel prices hit record highs in 2021 on solid demand, higher raw material costs, tight supply and low steel supply-chain inventories globally. Notably, U.S. steel prices skyrocketed in 2021 on supply tightness and robust demand. The benchmark hot-rolled coil (“HRC”) prices hit a record high of $1,960 per short ton in late September 2021, per S&P Global Platts. But prices lost steam since last October, dragged down by the stabilization of demand, improved supply conditions and higher steel imports. HRC prices slumped to nearly $1,000 per short ton at the beginning of March 2022.However, since Russia invaded Ukraine, steel prices significantly rebounded on supply worries and a spike in lead times. Prices witnessed a significant rally as the war threatened supplies from the two major producing nations. Both Russia and Ukraine are key the producers and suppliers of steel and steel-making raw materials, including coking coal and pig iron. The conflict led to a spike in steel input costs due to disruptions in the supply chains.However, after surging to nearly $1,500 per short ton around mid-April, the rally in HRC prices stalled as prices witnessed a significant downward correction. HRC prices have tumbled more than 45% since their April peak, falling below the $800 per short ton level. The downward drift partly reflects weaker demand. Demand in the automotive market has weakened due to the semiconductor crunch, which is affecting automotive production. The Russia-Ukraine war and soaring energy costs have also dwindled demand in Europe. Falling cost of raw materials (including scrap prices), additions of new production capacity and fears of a recession have also contributed to the downswing in U.S. HRC prices. Mills are also negotiating lower prices for new orders. These factors are likely to keep steel prices under pressure over the near term.Nevertheless, order activities in the non-residential construction market remain healthy, underscoring the underlying strength of this industry. Demand in the energy sector has also improved on the back of an uptick in oil and gas prices.The current challenges in the steel industry should not, however, leave investors shunning the stocks belonging to this space. We believe that attractive dividend-paying steel stocks — Ternium S.A. TX, Gerdau S.A. GGB, Aperam S.A. APEMY and Acerinox, S.A. ANIOY — should remain on investors’ watchlist despite the near-term headwinds.Strengthen Your Portfolio with Dividends Amid VolatilityFinancial markets across the globe have been rattled by a concoction of factors this year. The markets have been battered by issues such as rising interest rates, persistently high inflation and fears of a recession. These factors have contributed to a rough ride for investors for the most part of 2022.With market volatility unlikely to subside anytime soon, it is wise for investors to look for safe-haven stocks that promise attractive and steady returns. Stocks offering healthy dividend hold up well in an uncertain macroeconomic environment, when capital gains are hard to come by.  Stocks with a solid dividend yield and attractive growth prospects offer excellent choices for investors seeking to create a portfolio that not only performs well in a growing market but also offers some downside protection during market downturns. In other words, high-yielding dividend stocks provide a cushion against stormy markets.Consistent dividend payouts also underscore a company’s financial strength and stability. Dividend income helps to mitigate losses in a bear market.How to Pick the Top-Notch Dividend Stocks?Against the current volatile macroeconomic backdrop, it would be prudent to add some top-quality dividend-paying steel stocks to your portfolio.We have employed the Zacks Stocks Screener to find companies that offer a dividend yield of more than 2% (the ratio measures how much a firm pays its shareholders in dividends annually per dollar invested. The criterion includes companies with a dividend yield above the S&P 500′s average dividend yield of roughly 2%), a dividend payout ratio of less than 60% (calculated as Dividends Per Share/Earnings Per Share, the metric helps an investor measure the safety of a company's dividend. A payout ratio below 60% is a good indicator that the dividend will be sustainable), and five-year historical dividend growth of greater than or equal to 0.001 (includes companies that have increased their dividend over the past five years).Our shortlisted stocks also carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Our ChoicesBelow, we highlight four top picks from the Zacks Steel Producers industry.Ternium: Based in Luxembourg, Ternium is a leading producer of flat and long steel products in Latin America. It is expected to benefit from strong demand for steel products. Its shipments in Mexico are likely to be aided by healthy demand from industrial and commercial customers. Healthy demand for construction materials is also expected to support shipments in Argentina. TX is also benefiting from the cost competitiveness of its facilities. It is also taking actions to boost liquidity and strengthen its financial position in the wake of the pandemic.Ternium has a dividend yield of 6.24% at the current stock price. TX’s payout ratio is 9%, with a five-year dividend growth rate of 6.50%. Check Ternium’s dividend history here>>> Ternium S.A. Dividend Yield (TTM)  Ternium S.A. dividend-yield-ttm | Ternium S.A. QuoteGerdau: Brazil-based Gerdau is a leading producer of long steel in the Americas and one of the biggest global suppliers of special steel. It is benefiting from healthy demand for steel in its key operations, which is supporting its volumes. A recovery in major consumer sectors is driving its steel shipments. The company is seeing higher production and shipments on increased demand from the construction and industrial sectors. Healthy demand from construction and manufacturing sectors is driving shipments in Brazil. Higher demand from the non-residential construction market is also supporting volumes in North America. GGB is also gaining from a gradual recovery in demand from the oil and gas industry.Gerdau has a dividend yield of 11.97% at the current stock price. GGB’s payout ratio is 18%, with a five-year dividend growth rate of 67.35%. Check Gerdau’s dividend history here>>> Gerdau S.A. Dividend Yield (TTM)  Gerdau S.A. dividend-yield-ttm | Gerdau S.A. QuoteAperam: Luxembourg-based Aperam is a global player in the stainless, electrical and specialty steel markets. It is benefiting from healthy market conditions in Brazil, which is offsetting the ongoing weakness in Europe. Higher steel selling prices in the Stainless & Electrical Steel segment are supporting its results. The company also remains focused on reducing debt.Aperam has a dividend yield of 6.40% at the current stock price. APEMY’s payout ratio is 11%, with a five-year dividend growth rate of 7.62%. Check Aperam’s dividend history here>>> Aperam Dividend Yield (TTM)  Aperam dividend-yield-ttm | Aperam QuoteAcerinox: Spain-based Acerinox is a leading manufacturer of stainless steel and nickel alloys. The company is expected to gain from strong demand for stainless steel. It is seeing higher demand for flat products in the United States and Europe. Price increases in stainless steel is also aiding its performance. ANIOY has a strong balance sheet with ample liquidity.Acerinox has a dividend yield of 4.26% at the current stock price. ANIOY’s payout ratio is 17%, with a five-year dividend growth rate of 3.61%. Check  Acerinox's dividend history here>>> Acerinox Dividend Yield (TTM)  Acerinox dividend-yield-ttm | Acerinox Quote Just Released: Free Report Reveals Little-Known Strategies to Help Profit from the  $30 Trillion Metaverse Boom It's undeniable. The metaverse is gaining steam every day. Just follow the money. Google. Microsoft. Adobe. Nike. Facebook even rebranded itself as Meta because Mark Zuckerberg believes the metaverse is the next iteration of the internet. The inevitable result? Many investors will get rich as the metaverse evolves. What do they know that you don't? They’re aware of the companies best poised to grow as the metaverse does. And in a new FREE report, Zacks is revealing those stocks to you. This week, you can download, The Metaverse - What is it? And How to Profit with These 5 Pioneering Stocks. It reveals specific stocks set to skyrocket as this emerging technology develops and expands. Don't miss your chance to access it for free with no obligation.>>Show me how I could profit from the metaverse!Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Gerdau S.A. (GGB): Free Stock Analysis Report Ternium S.A. 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Category: topSource: zacksSep 22nd, 2022

Nucor (NUE) Sees Lower Q3 Earnings on Weaker Steel Mills Profit

Nucor (NUE) expects earnings to decline significantly in the steel mills unit on a sequential comparison basis in Q3 due to metal margin contraction and lower shipment volumes. Nucor Corporation NUE has issued a downbeat guidance for the third quarter of 2022. The steel giant projects third-quarter earnings to be between $6.30 and $6.40 per share. This suggests a decline from $9.67 per share in second-quarter 2022 and $7.28 per share in the year-ago quarter. The company expects earnings to decline significantly in the steel mills segment on a sequential comparison basis in the third quarter. The expected decline is due to metal margin contraction and lower shipment volumes, especially at its sheet and plate mills.Nucor expects its steel products segment to deliver another strong quarter, with earnings roughly in-line with second-quarter 2022. Earnings for the raw materials unit are forecast to be flat on a sequential comparison basis in the third quarter. The company continues to believe that 2022 will be the most profitable year in its history.Nucor bought back 5.3 million shares at an average price of $122.24 per share during the third quarter. It has repurchased 17.5 million shares year-to-date at an average price of $134.99 per share. It has returned more than $2.7 billion to shareholders through share repurchases and dividend payments year to date.Shares of Nucor are up 9.9% in the past year against a 20.3% decline of the industry. Image Source: Zacks Investment ResearchNucor’s second-quarter 2022 earnings per share marked a new quarterly record. The results were driven by higher sales prices notwithstanding a decline in total steel mills shipments. Its average sales price climbed 44% year over year and also rose 3% sequentially in the second quarter. Nucor noted that its steel products unit benefited from strong demand in non-residential construction markets in the quarter.U.S. steel prices have witnessed a significant downward correction after surging to roughly $1,500 per short ton in April 2022 due to supply concerns stemming from the Russia-Ukraine war. The benchmark hot-rolled coil ("HRC") prices declined more than 45% since their April peak, falling below the $800 per short ton level. The downward drift partly reflects weaker demand. Fears of a recession have also impacted U.S. HRC prices.Nucor Corporation Price and Consensus  Nucor Corporation price-consensus-chart | Nucor Corporation QuoteZacks Rank & Key PicksNucor currently carries a Zacks Rank #3 (Hold).Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Daqo New Energy Corp. DQ and Sociedad Quimica y Minera de Chile S.A. SQM.Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 61% in a year.Daqo New Energy, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 177.5% for the current year. The consensus estimate for DQ's earnings for the current year has been revised 9.8% upward in the past 60 days.Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 4% over a year.Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 102% in a year. The company carries a Zacks Rank #2 (Buy). Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in?  If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.>>Send me my free report on the top 5 EV stocksWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nucor Corporation (NUE): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Sociedad Quimica y Minera S.A. (SQM): Free Stock Analysis Report DAQO New Energy Corp. (DQ): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 15th, 2022

Futures Fizzle As Walmart Warning Batters Bear Market Rally

Futures Fizzle As Walmart Warning Batters Bear Market Rally US stock futures dropped as investors braced for Wednesday’s Federal Reserve meeting, while Walmart’s surprise profit warning fueled concerns about the strength of US consumer spending. A barrage of earnings including notable misses by the likes of GM and a 3M guidance cut, did not help the mood. Contracts on the S&P 500 and the Nasdaq 100 were each down 0.4% by 7:45am in New York. European stocks rose driven by energy stocks amid a fresh surge in gas prices following Russia warnings of an imminent halving in NS1 shipments even as European Union countries reached a political agreement to cut their gas use. The dollar jumped and 10Y yields tumbled below 2.75% as a recession looks inevitable, no matter how Biden defines it. In premarket trading, Alibaba Group jumped 5.1% after the Chinese e-commerce giant said it will seek a primary listing in Hong Kong, boosting other US-listed Chinese stocks with it. Cryptocurrency-exposed stocks were lower as Bitcoin sank to a one-week low, denting hopes for a sustained rebound. Coinbase fell 4% in premarket trading after a Bloomberg News report that the cryptocurrency company is facing a US probe into whether it improperly let Americans trade digital assets that should have been registered as securities.  Shares of US big-box retailers and e-commerce peers fell in US premarket trading on Tuesday, after Walmart again cut its quarterly and full-year profit guidance just weeks ahead of its earnings report, raising new questions about the damage from surging inflation to consumers’ spending ability. The shares slid as much as 9.8% in US premarket trading. In premarket trading, Target shares drop as much as 4.9%, Costco Wholesale -2.8%; watch Best Buy shares for later in the session Online retailers also fall amid broader worries over the sector, Amazon -3.8%, Etsy -4.1%, EBay -0.6%, Shopify -6% after a PT cut at Citi; also watch Wayfair and Chewy. Here are some other notable pre-market movers: Shopify (SHOP US) shares fall as much as 6% in US premarket trading, as Citi cuts its price target on the e- commerce platform provider amid fresh economic headwinds. Cryptocurrency-exposed stocks are lower in US premarket trading as Bitcoin sank to a one-week low on Tuesday. The group is also pressured after a Bloomberg News report about the US Securities and Exchange Commission probing Coinbase over cryptocurrency listings.  Alibaba (BABA US) shares jump 5.1% in US premarket trading after the Chinese e-commerce giant said it will seek a primary listing in Hong Kong, boosting other US-listed Chinese stocks higher with it. F5 (FFIV US) shares rise 7.8% in premarket trading on Tuesday, after the communications equipment company forecast better-than-expected adjusted earnings for the fourth- quarter. Koss Corp. (KOSS US) shares fall as much as 18% in US premarket trading, setting the headphones maker on track to trim part of the 43% surge it posted the previous session after reaching a deal with Apple in an AirPods patent infringement case. NXP Semiconductors (NXPI US) shares are down 1.2% in US premarket trading even as the company issued a strong forecast for the current quarter driven by demand for components used in automobiles. Analysts note that while supply is improving, demand continues to outstrip it. Aaron’s Co (AAN US) shares fell as much as 35% in postmarket trading on Monday as its revenue and earnings guidance cut shows the pressures facing the furniture and appliances retailer, with analysts anticipating that macro headwinds will continue to weigh Meanwhile, investors are bracing for a flurry of earnings this week to gauge the ability of corporates to overcome supply constraints and soaring prices, just as the S&P 500 is on a course for its best month since October. A barrage of reports from GE, GM, 3M, RTX, MCD And UPS painted a mixed picture, with GE and 3M rising post-results while GM and UPS drop. “There is still scope in the second half of this year, and maybe even early next year, for earnings disappointment,” said Paul Jackson, Invesco’s global head of asset allocation research, in a Bloomberg TV interview. “There’s still probably a delayed reaction for earnings, and then you have a layer on top of that, the margins squeeze that’s coming through higher raw material costs and in some sectors higher labor costs.” Coca Cola Inc., McDonald’s Corp. and Mondelez International Inc. are among companies reporting earnings before the market open, while Texas Instruments Inc., Visa Inc., Microsoft Corp. and Alphabet Inc. will report after hours. These results “could really define an earnings season which, up until now, has been pretty resilient given the backdrop,” said Russ Mould, investment director at AJ Bell. Tomorrow we also get the highlight of the week when the Fed is strongly expected to hike rates by 75 basis-points with many speculating that the Fed will have to inflict much more pain on the Biden economy to get inflation under control. “For the time being, the Fed and other major central banks look much more concerned about the risk of inflation expectations becoming unanchored than high risk weighing on growth,” Valentine Ainouz, deputy head of developed markets research at Amundi, said in a Bloomberg TV interview. “Maybe in some months we will have a pivot toward growth, but this is not the mood right now, the mood now is fighting inflation.” Markets are underestimating the risks of persisting inflation, which is likely to keep central banks hawkish for longer, according to Goldman Sachs strategists. Investors appear to be more optimistic on the central bank put, given that in past cycles the policy makers made a dovish pivot when growth slowed, strategists led by Cecilia Mariotti wrote in a note.  “The Fed’s main enemy is inflation, and it’s desperate to prevent expectations of sustained inflation from taking hold,” said Frédéric Leroux, a member of Carmignac’s strategic investment committee. “The recession that the Fed will probably provoke by its current monetary tightening is an avatar that it can withstand. In fact, it’s not beyond the realms of possibility that the central bank wants a recession, given the bearish effects it would have on prices.” For Katerina Simonetti, an adviser at Morgan Stanley Private Wealth Management, the litany of risks exposes the vulnerability of the 6% rebound in global shares from June lows. “This is most likely a bear market rally and there are significant risks still facing this market,” she said on Bloomberg Television. “We’re probably going to be seeing a lot of choppiness and potentially some further declines in the market before the year end.” European shares edged higher, led by the FTSE 100 which climbed on rising oil and metal prices. Currencies are mostly steady and yields dipped ahead of the Fed meeting tomorrow.  Euro Stoxx 50 is little changed. FTSE 100 adds 0.8%, FTSE MIB lags, dropping 0.4%. European energy and mining stocks outperform while retailers, autos and telecoms are the worst performing Stoxx 600 sectors.  Here are some of the biggest European movers today: UBS shares drop as much as 7.2% after reporting 2Q results that missed expectations. Underlying pretax profit was about 10% below consensus with analysts pointing to a charge in Corporate Center. Eutelsat shares fall as much as 14%, extending yesterday’s losses, after the French satellite operator and OneWeb are set to combine in an all-share deal valuing its UK rival at $3.4 billion. Uniper drops for a fourth day, with shares down as much as 12.6% as a further supply reduction from Russia’s Gazprom helped send gas prices higher. Kesko shares fall as much as 7.6% after the Finnish consumer retail group published its latest earnings, which included declining margins in its Building & Technical retail segment in an otherwise solid report, Kepler Cheuvreux writes. Veolia shares fall as much as 4.4% as the stock was reinstated with an underweight rating at JPMorgan, with the broker bearish on the impact the French water and waste management group will face from Europe’s energy crisis. European retailers slump after Walmart cut its profit outlook, raising new questions about the resilience of consumer spending with inflation at a four-decade high. Zalando declines as much as -6.9%, Ahold -3.7%, Marks & Spencer -5.2% Unilever shares gain as much as 3.2% after the consumer-goods company reported 2Q sales that topped market expectations. Analysts found the sales beat reassuring, though noted the company had maintained its margin outlook for the year. Energy and mining shares are among best-performing groups in the Stoxx Europe 600 index on Tuesday as oil and metals rallied amid a decline in the dollar and signs of tightness in some commodity markets. Shell gains as much as 2.7%, BP +2.4%, Equinor +5.6%; Glencore +3%, Anglo American +3.3% Earlier in the session, Asian stocks edged higher, rebounding from Monday’s decline, helped by a rally in Alibaba Group and other Chinese tech shares. The MSCI Asia Pacific Index advanced as much as 0.4%. Alibaba was the biggest contributor to the gauge’s gains after saying it will seek a primary listing, a move that would allow it to seek inclusion in the Stock Connect link with the Shanghai and Shenzhen exchanges. Sector-wise, consumer discretionary and financials were the top performers. Stocks in China gained despite a resurgence of Covid-19 infections that could threaten the operations of industry giants including BYD and Huawei Technologies, while Hong Kong’s equity benchmark was the best performer in the region. Investors are gearing up for a week of earnings releases from some of the biggest tech companies in the US, with the Fed’s meeting also in focus for further insights on the pace and quantum of rate increases. The MSCI Asiagauge jumped 3.6% last week.  “Despite the slew of data pointing to ongoing growth slowdown, markets seem to have been accustomed to such narrative lately, riding on expectations that growth risks have been priced to a large extent,” Jun Rong Yeap, a market strategist at IG Asia, wrote in a note. “That will clearly be put to the test to a greater extent this week with a series of big tech earnings, Fed’s policy guidance, along with key US inflation and consumer sentiment data ahead,” he wrote. Key stock gauges in India declined ahead of the anticipated interest rate hike by the US Federal Reserve. The S&P BSE Sensex fell 0.9% to 55,268.49 in Mumbai, while the NSE Nifty 50 Index declined by a similar measure. The 30-member Sensex had 21 stocks trading lower. A gauge of information technology companies fell the most among the 19 sectoral indexes compiled by BSE Ltd., all of which declined. Software exporters Infosys and Tata Consultancy Services slipped as investors assessed global recession risks and increasing margin pressure on Indian technology companies. The Fed is expected to hike interest rates by 75 basis points on Wednesday to tame four-decade high inflation. In FX, the dollar climbed, snapping three days of losses, as traders brace for a widely expected 75 basis points Fed rate rise on Wednesday, part of campaign to tackle inflation.The Japanese yen was little changed at 136.58 per dollar. Sterling fell, erasing gains after touching a three-week high against a broadly sluggish US dollar; still, it’s clinging on to $1.20, leading traders to watch if it can see out the month above key psychological levels. In rates, treasuries are underpinned by rally in bunds amid concerns about European gas supply. Gains led by belly of the curve, eroding concession ahead of 5-year auction at 1pm New York time. US yields are richer by 2bp-4bp across the curve with the 10Y yield dropping to 2.75%, and a belly-led advance steepening 5s30s spread by 1.7bp; 2s5s30s fly drops 3.7bp on the day onto tightest levels since March ahead of 5- year sale. The final coupon auction cycle of May-July quarter continues with $46b 5-year note sale, following Monday’s solid 2-year auction. WI 5-year yield around 2.84% is ~43bp richer than June result, a 3.5bp tail. European peripheral spreads are mixed to Germany; Italy widens, Spain and Portugal tightens. Bunds advanced for a fifth day, the longest run since August as focus remains on gas supply concerns. In commodities, crude futures rose for the 2nd day: WTI drifts 2.1% higher to trade near $98.74. Brent rises 1.8% near $107.07. Most base metals trade in the green; LME copper rises 2.8%. Spot gold rises roughly $4 to trade near $1,724/oz. Spot silver gains 1.1% near $19. Todays's economic data slate includes May FHFA house price index, S&P Case-Shiller house prices (9am), July Richmond Fed manufacturing index, consumer confidence, June new home sales (10am); this week also includes durable goods orders, 2Q GDP, personal income/spending (includes PCE deflator), MNI Chicago PMI and University of Michigan sentiment. In terms of today we have the US July Conference Board consumer confidence index, Richmond Fed manufacturing index, June new home sales, and the May FHFA house price index. As discussed above EU energy ministers meet. Earnings is in full bloom with Microsoft, Alphabet, Visa, LVMH, Coca-Cola, McDonald's, UPS, Texas Instruments, Raytheon Technologies, Unilever, Mondelez, 3M, General Electric, UBS, General Motors, ADM, Chipotle, and Deutsche Boerse all reporting. Elsewhere the IMF release their economic outlook update. Last but by no means least the FOMC start their crucial two-day meeting. Market snapshot S&P 500 futures down 0.2% to 3,960.50 STOXX Europe 600 up 0.1% to 426.79 MXAP up 0.3% to 159.28 MXAPJ up 0.5% to 522.24 Nikkei down 0.2% to 27,655.21 Topix little changed at 1,943.17 Hang Seng Index up 1.7% to 20,905.88 Shanghai Composite up 0.8% to 3,277.44 Sensex down 0.7% to 55,385.81 Australia S&P/ASX 200 up 0.3% to 6,807.27 Kospi up 0.4% to 2,412.96 German 10Y yield little changed at 0.98% Euro little changed at $1.0215 Gold spot up 0.2% to $1,723.33 U.S. Dollar Index little changed at 106.50 Top Overnight News from Bloomberg UBS Group AG’s investment bank disappointed in the second quarter as global deal activity collapsed and the trading business struggled to keep pace with Wall Street peers. European natural gas prices surged to the highest level in more than four months, as the region braces for a further reduction in Russian supply that could severely dent efforts to keep the lights on and homes warm this winter. Alibaba Group Holding Ltd. will seek a primary listing in Hong Kong, entrenching the financial hub’s status as an alternative to US markets and paving the way for investors in China to directly buy shares of the country’s most prominent e-commerce company for the first time. Coinbase Global Inc. is facing a US probe into whether it improperly let Americans trade digital assets that should have been registered as securities, according to three people familiar with the matter. A more detailed look at global markets courtesy of Newsquawk APAC stocks took their cue from Wall Street and eventually traded mostly higher, albeit some with mild gains, after seeing mixed trade in the early hours until the Chinese open. ASX 200 was supported by its energy and mining sectors as underlying oil and metals prices rose,     Nikkei 225 moved back toward the 27.5k mark to the downside amid currency dynamics whilst the KOSPI was kept afloat after Q2 GDP topped expectations. Hang Seng overlooked reports that Hong Kong may have to downgrade its annual growth forecast and surged amid a boost from Alibaba rising almost 4% as it plans for a primary listing in Hong Kong, which would make it eligible for the Stock Connect programme and allow mainland Chinese investors to trade Co. shares, in turn helping increase liquidity. Shanghai Comp posted modest gains, but the upside was capped as Shanghai added 10 high and medium-risk areas subject to lockdown. Top Asian News Shanghai adds 10 high and medium-risk areas subject to lockdown, according to Bloomberg. Alibaba (9988 HK/BABA) is pursuing a primary listing on the Hong Kong exchange, expected to occur before the end of 2022; Co. will become a dual primary listed Co. on HKEX and NYSE. Hong Kong may have to downgrade its annual growth forecast in August for the second time in three months, according to SCMP citing the finance chief. PBoC set USD/CNY mid-point at 6.7483 vs exp. 6.7490 (prev. 6. 7543). PBoC injected CNY 5bln via 7-day reverse repos with the maintained rate of 2.10% for a net drain of CNY 2bln European bourses are under modest pressure, Euro Stoxx 50 -0.4%, in what has been a limited session of newsflow ahead of the EU energy update and US earnings; though, strength in commodities is lifting the FTSE 100 +0.5%. However, further pressure has been seen in wake of most recent Kremlin related commentary, with the Nord Stream 1 turbine yet to be installed. Stateside, US futures are dented to the tune of crica. 5/10s of a percent; but, fairly rangebound (ex-above Kremlin related moves) overall pre-earnings and Wednesday's FOMC. Top European News Porsche IPO, Software Fix: What Awaits VW’s New CEO European Oil and Mining Stocks Outperform Amid Commodity Gains Hedging Bond Trades Is Getting Harder in UK’s Volatile Markets Rolls-Royce Names Ex-BP Executive as CEO to Succeed East Beijing Denounces Truss Vow to Crack Down on China Firms in UK UBS CEO Hamers Signals Worst Over for Asia Deleveraging Central Banks RBNZ Governor Orr says in addition to remit review, RBNZ will also review recent performance in conducting monetary policy; will assess inflation and employment outcomes relative to targets, via Reuters. CNB's Frait says policy is already quite restrictive, won't rule out a hike now or in the near time. Temporary FX interventions are normal in situations of shock to balance of payments, via Reuters. FX Aussie fades after probing Fib resistance vs Greenback and Loonie following oil powered rise to best levels since mid-June, AUD/USD back under 0.6950 from 0.6983, USD/CAD above 1.2880 from sub-1.2820. Dollar regains poise otherwise in choppy, cautious trade pre-FOMC, DXY rebounds firmly from 106.190 surpassing Monday high of 106.890 to 107.10+. Yen and Franc find some traction from pronounced bounce in bonds and reversion to bull-flattening, USD/CHF and USD/JPY hold below/above 0.9650 and 136.50 respectively. Euro undermined by ongoing Russian gas supply jitters ahead of Extraordinary Energy Summit, EUR/USD retreats from 1.0250 to circa 1.0140. Pound pulls up after narrowly missing 1.2100 vs Buck, Cable now below 1.2000, albeit still relatively comfortably above a series of recent descending lows. Fixed Income Bonds back in bull-flattening mode as Bunds front run latest leg higher. 10 year German benchmark reaches 155.90 and peaks not seen since late May, while yield breaches 1% with more conviction. Gilts and T-notes lag within 117-6935 and 120-04/119-24 respective ranges ahead of the Fed tomorrow and BoE next week. BTPs off lest levels and lag periphery peers amidst short term and linker supply. Commodities Dutch TTF continues to lift with the August contract in proximity to EUR 200 as Nord Stream 1 is set to be curtailed tomorrow; however, the EU has agreed on a deal to reduce gas use. Crude benchmarks are bid and drawing impetus from the referenced factors and EU divisions, though the magnitude of the move is more modest in nature vs TTF. EU nations agree to reduce gas use for next winter.; only Hungary voted against approval of mandatory gas rationing if Russia shuts off the taps, France24 reports. Reminder, press conferences are expected at 12:30BST/07:30ET and 15:00BST/10:00ET. EU energy chief Simson says Europe has to be prepared for supply cuts from Russia at any moment, expects to have a deal today in curbing gas demand. Libyan oil minister says oil production is 1.1mln BPD. China is to lower retail prices of gasoline and diesel by CNY 300 and CNY 290/tonne respectively as of July 27th. Spot gold is little changed overall and moving at the whim of the USD while base metals remain bid in a continuation of APAC trade. Crypto Coinbase (COIN) faces SEC probe over crypto listings, according to Bloomberg sources. US House lawmakers are reportedly delaying consideration of a bipartisan bill to regulate stablecoins, according to WSJ citing sources, pushing back consideration of the measure until after Congress’ August break. US Event Calendar 09:00: May FHFA House Price Index MoM, est. 1.5%, prior 1.6% 09:00: May S&P/CS 20 City MoM SA, est. 1.50%, prior 1.77% 09:00: May S&P CS Composite-20 YoY, est. 20.60%, prior 21.23% 10:00: July Conf. Board Consumer Confidence, est. 97.0, prior 98.7 Expectations, prior 66.4 Present Situation, prior 147.1 10:00: July Richmond Fed Index, est. -14, prior -11 10:00: June New Home Sales MoM, est. -5.4%, prior 10.7% June New Home Sales, est. 658,000, prior 696,000 DB's Jim Reid concludes the overnight wrap 10 years ago today Draghi uttered the seminal lines "whatever it takes" when referring to keeping Europe together when ECB President. It clearly worked but a decade later, Europe is again facing testing times, still partly because of Italy but also because of inflation and an energy crisis that has flared up again over the last 24 hours. Indeed in yesterday’s EMR we discussed how this week was all about the US (FOMC and likely technical recession confirmation) but that we needed to watch the gas flows as Putin had suggested late last week that if the turbine didn’t make it back to Russia by early this week gas flows could be cut back from 40% capacity to 20% due to works being required on another turbine. The news flow yesterday was originally more positive as documentation between Siemens and Gazprom seemed to indicate that the repaired turbine issue was getting closer to being finalised. However the day turned late in the European session as Gazprom announced that another turbine will go out of service at 7am tomorrow for maintenance and gas would indeed be cut back to 20%. We can’t say we weren’t warned I suppose. It’s a bit confusing as to whether this will be a short restriction of supply while the repaired turbine makes its way back online or whether the paperwork will never quite be resolved, and we live with only 20% supplies for a considerable time. Siemens and the German government have said that there is no reason for transportation of the repaired turbine not to start back on its final leg to Russia. Peter Sidorov has published a review of the latest news here and what it means for the economy over winter in an overnight blog. Peter says that from reading the Russian version of the latest statement from Gazprom, they are looking for clearer guarantees on future sanctions exemptions for maintenance of NS1 and related issues. This will likely be hard to achieve and the Russians will know this. So it appears like Russian politics will be in control here for now. As we mentioned last week, at 40% capacity Germany could make it through the winter even if some light rationing was needed. At 20% you would likely need some notable rationing unless they cut gas exports which would be a very delicate thing to do politically. Gas futures rallied around 10% on the news, closing a touch under that. EU energy minister meet today to discuss the ongoing crisis and potentially revise the rationing plans laid out by the EC last week. The potentially forced 15% reduction that all member states would have to adhere to was very unpopular amongst several members. Expect lots of carve-outs and compromises to appear if a plan that can progress is agreed upon. The biggest market impact to yesterday’s gas move (outside of gas itself of course) was in bonds, with bunds falling -6bps into the close after an earlier sell-off in bonds. 10yr Bunds closed c.-1bps lower. There wasn’t any major move in spreads though as Italy tightened a basis point to bunds. European equities dipped on the news but mostly stayed in positive territory with the exception of the DAX (-0.33%). The Stoxx 600 closed +0.13%. The US is certainly taking an interest in Europe’s problems at the moment (Gas and Italy) but it generally then moves on and marches to its own beat. 10yr Treasuries still climbed c.+5bps, even if they were 4bps off the days highs. This morning in Asia, yields on are around -1bps lower, trading at 2.786%, as we go to press. US equities generally held onto gains with the S&P 500 (+0.13%) but with the NASDAQ (-0.43%) dipping ahead of a huge week of tech earnings. We have Microsoft and Alphabet after the bell today followed by Meta tomorrow and Apple and Amazon on Thursday. So that’s over $7.5 trillion of market cap here alone at stake over the next couple of days although with these 5 stocks being down between around -13% (Apple) YTD to around -50% (Meta), with the other three down around -20 to -25%, this figure would have been closer to $10 trillion at the start of the year. Elsewhere in earnings land, we have GM, NXP Semiconductors, Raytheon Technologies, Coca-Cola, McDonald's, Unilever and Mondelez reporting today amongst others. So plenty to keep an eye on today and for the rest of the week on the reporting front. Back to US equities and Energy was the main winner (+3.71%) as Oil rose c.+2% yesterday and is up another +1.25% this morning ahead of some big oil majors reporting this week. Consumer Discretionary (-0.85%) was the weakest, likely on the bubbling recession fears. After the bell Walmart cut their outlook for Q2 and FY 23 and with it their equity fell -9.94% in after hours. As a result US futures are down with contracts on the S&P 500 (-0.28%) and NASDAQ 100 (-0.40%) edging lower this morning. Asian equity markets have been fluctuating this morning and are still mostly higher with the Hang Seng (+1.60%) leading gains after Alibaba rose as much as +4.80% as it announced that it will be applying for a primary listing on the Hong Kong Stock Exchange. If completed, Alibaba will become a dual-primary listed company in Hong Kong and New York. The move is expected to happen by year-end. Over in mainland China, the Shanghai Composite (+0.81%) and the CSI (+0.96%) are climbing, reversing their previous session declines whilst the Nikkei (-0.06%) is fractionally lower this morning. Elsewhere, the Kospi (+0.12%) is edging up as South Korea’s Q2 growth rose +0.7% q/q (v/s +0.4% expected), faster than the +0.6% growth in the first quarter. Data yesterday wasn’t top tier but both Chicago and Dallas Fed activity indices were slightly weaker than expected. The German IFO was slightly weaker too (88.6 vs 90.1 expected) but it was hard to upstage the poor PMIs from last Friday which set the tone for a major rally in bunds at the back end of last week. Its remarkable that after an initial spike to 0.765% for 2 year Bunds after the ECB, they dipped to 0.35% a day later after first the TPI wobbles and then the weak PMIs, and to around 0.4% at the close last night. In terms of today we have the US July Conference Board consumer confidence index, Richmond Fed manufacturing index, June new home sales, and the May FHFA house price index. As discussed above EU energy ministers meet. Earnings is in full bloom with Microsoft, Alphabet, Visa, LVMH, Coca-Cola, McDonald's, UPS, Texas Instruments, Raytheon Technologies, Unilever, Mondelez, 3M, General Electric, UBS, General Motors, ADM, Chipotle, and Deutsche Boerse all reporting. Elsewhere the IMF release their economic outlook update. Last but by no means least the FOMC start their crucial two-day meeting. Tyler Durden Tue, 07/26/2022 - 08:09.....»»

Category: blogSource: zerohedgeJul 26th, 2022

Futures Surge To Two Week High As Traders Eye End Of Fed"s Hiking Cycle

Futures Surge To Two Week High As Traders Eye End Of Fed's Hiking Cycle Futures are pointing to solid close to the week - now that a recession and earlier rate cuts are assured... .... with a continuation of the rally which has pushed stocks to two week highs, with Tech continuing to lead while Chinese Tech is helping to fuel the global risk-on rally to end the week. Tech-heavy Nasdaq 100 futures added 1% while contracts on the S&P 500 gained 0.9%, trading near session highs  at 3,833 after the main US stock gauge closed near session highs Thursday, adding more than 3% in three days. In Europe, the Stoxx Europe 600 rose 1.5%, with the benchmark set for a small bounce this week. 10-year Treasury yields rose to 3.13% after earlier sliding as low as 3.04%. In premarket trading, software maker Zendesk Inc. soared over 50% on reports it’s close to reaching a deal to be acquired by a group of buyout firms led by Hellman & Friedman and Permira. Bank stocks were mostly higher as well after the latest stress test that results showed all 34 participating banks had passed (of course). In corporate news, Coinbase will launch its first crypto derivative product on Monday in the midst of the current crypto winter. US-listed Chinese stocks rise in premarket trading, on track for their best week since April as more market watchers turn positive on the group amid a gradual easing in Beijing’s crackdown on tech. Alibaba (BABA US) +3%, Nio (NIO US) +2.8%. Here are some other notable premarket movers: FedEx Corp. (FDX US) shares gained in premarket trading with analysts mostly welcoming its annual earnings forecast that was above expectations amid higher package prices and resolution on some operation issues related to labor shortage. Nevertheless, they still maintained caution amid cost pressures and macroeconomic uncertainty. US bank stocks may be volatile Friday after the Federal Reserve announced after the close of trading on Thursday that all banks had passed its annual stress test. Blackberry (BB CN) gained in postmarket trading after it reported an adjusted basic loss per share for the first quarter of 5c, in line with estimates. LendingTree (TREE US) shares dropped 10% in extended trading on Thursday, after the consumer finance company cut its second-quarter forecast for both revenue and adjusted Ebitda. Sarepta Therapeutics (SRPT US) shares may be under pressure after it announced that the FDA has placed a clinical hold on the company’s peptide-conjugated phosphorodiamidate morpholino oligomer to treat patients with Duchenne muscular dystrophy. That said, analysts believe this is mostly a hiccup and that the stock should get a lift once data from the company’s NT gene therapy is disclosed. In his market wrap note, JPM's Andrew Tyler asks "Does this rally have legs" and answers: "The next major catalyst is the June 30 PCE data. This current rally is seeing Tech and Defensive sectors as the largest outperformers. While some investors may play momentum, there seems to be a collective lack of conviction with many believing that this rally fizzles. Traders are looking for confirmation from a breakout above ~3900 resistant level." To be sure, investors are grappling with the question of what comes next if an economic downturn takes hold. One scenario - the bullish one - predicts cooling price pressures and thus scope for central banks to ease up on the pace of interest-rate hikes. In the other one, Jerome Powell hardened his resolve to cool inflation in testimony to lawmakers this week, after acknowledging that a recession may be the price to pay. “In spite of the hawkish remarks from Fed officials, the growing worries that their hikes would trigger a recession actually meant that investors priced in a shallower pace of rate hikes over the coming 12-18 months,” Deutsche Bank AG strategists led by Jim Reid wrote in a note. “That had a knock-on impact on Treasuries.” We discussed this extensively last night. The rising probability of a peak in rates put the policy-sensitive US two-year yield on course for one of its biggest weekly drops since March 2020. Meanwhile, traders are starting to price out any Fed action on rates beyond the December meeting, scaling back the additional tightening they expect and flirting with the possibility of cuts by in 2023. In Europe, equities traded well with the Stoxx rising 1.5% and the Euro Stoxx 50 1% higher back near Thursday’s highs. CAC 40 outperforms peers. Health care and media are the strongest sectors, autos and retail names lag. Here are some of the biggest European movers today: European health care stocks jump, outperforming the broader market. Societe Generale says the fundamentals of the European pharma sector are healthier than US peers. Roche rises as much as 3.4%, Novo Nordisk +3.2% and AstraZeneca +2.6% among the biggest contributors to the gain Ultra Electronics shares rise as much as 13% after a statement that the UK government is leaning toward approving Cobham’s planned takeover of the British defense-technology specialist. LVMH shares rise as much as 2.9% on Bernstein’s top luxury pick at a time of macroeconomic and geopolitical uncertanties, thanks in part to the French giant’s Dior mega-brand, which analyst Luca Solca says is one of the industry’s biggest success stories Telenet shares rise as much as 6.4%, with Barclays and New Street Research both noting that the stock is cheap and it may become more attractive for majority holder Liberty Global to consider buying the rest of the shares. Zalando shares sink as much as 18%, hitting the lowest since Jan. 2019. The online retailer warning on its sales and earnings outlook was not a total surprise, but the scale of the downgrade to its expectations was more significant than anticipated, analysts say. Fast fashion and online retailers decline in Europe following another warning in the sector, this time from Germany’s Zalando. HelloFresh slumps as much as -9.7%, Delivery Hero -6.0%, Deliveroo -2.7%. Fertilizer stocks sink in Europe with Morgan Stanley flagging the industry’s exposure to surging gas prices, gas supply uncertainties and related government measures in Europe to prevent shortages. K+S shares fall as much as 4.9%, Yara down as much as 4.8% and OCI down 3.9% Earlier in the session, Asian stocks headed for a second day of gains as technology shares staged a comeback amid falling yields, with investors continuing to weigh the prospect of higher inflation and monetary tightening. The MSCI Asia Pacific Index rose as much as 1.2%, lifted by tech-heavy markets such as South Korea. A gauge of Asian tech stocks jumped, rallying from the lowest level since September 2020. A Chinese tech measure in Hong Kong advanced 4%. Consumer and health care names also contributed to Friday’s gains amid a global shift to defensive stocks. Asian equities headed for their first weekly gain in three, as the market took a breather from intense selling pressure fueled by fears that aggressive monetary tightening will push the US economy into a recession. Federal Reserve Chair Jerome Powell in testimony to lawmakers stressed his “unconditional” commitment to bringing down inflation. Stocks have fared relatively better in Asia than in other regions as China’s move to dial back Covid restrictions supports market sentiment. Asia’s benchmark is down about 6% this month, compared with at least 8% declines in the S&P 500 Index and the Euro Stoxx 50. “The growth differentials are going to open up between China and the rest of the world,” Kinger Lau, chief China equity strategist at Goldman Sachs, said in a Bloomberg TV interview. Chinese equities “tend to do quite well going into the party congress, three to six months before that. Right now seems like we are in the sweet spot.” Japanese stocks climbed as investors assessed hawkish comments by Fed Chair Jerome Powell on further interest rate hikes and a rally in Treasuries that sent yields lower, boosting tech shares. The Topix Index rose 0.8% to 1,866.72 as of market close Tokyo time, while the Nikkei advanced 1.2% to 26,491.97. Japan’s Mothers index rallied as much as 5.8%.  Nidec Corp. contributed the most to the Topix Index gain, increasing 6.5%. Out of 2,170 shares in the index, 1,540 rose and 550 fell, while 80 were unchanged. In Australia, the S&P/ASX 200 index completed a weekly gain of 1.6% to close at 6578.70, as technology shares staged a comeback amid falling yields. The tech benchmark had a weekly gain of 8.1%, the most since August. Nine of the 11 subgauges ended Friday higher, with only energy and mining stocks sliding after a gauge of commodities retreated.   New Zealand’s market was closed for a public holiday In FX, the Bloomberg dollar spot index dipped into the red, poised for its first weekly decline in a month as investors gauge whether aggressive Federal Reserve rate hikes would tip the US economy into a recession; the Bloomberg Dollar Spot Index fell 0.5% this week while the policy-sensitive US two-year yield is on course for its biggest weekly drop since March 2020. The Japanese yen was the only Group-of-10 currency to fare worse than the dollar, sliding back under 135. “The dollar is undermined by the weakness in PMI data and growing concerns that aggressive rate hikes will eventually cause growth slowdown,” said Akira Moroga, manager of currency products at Aozora Bank in Tokyo. “US yields are also stabilizing from recent sharp climb to weigh on the dollar,” he said. NOK and SEK are the strongest in G-10 FX, JPY is the weakest. Rates erase initial gains, with Treasuries now slightly cheaper across the curve as US stock futures advance beyond Thursday’s highs, while core European bond gains fade and European stocks rally. US yields cheaper by 1bp-3bp across the curve and spreads within a basis point of Thursday’s close; 10-year higher by 1.5bp at 3.10%, bunds in the sector by an additional 3.5bp. Bunds futures complete a ~150 tick round trip, rallying near 149.00 before returning toward 147.50. Cash curves remain bear-steeper, long end bunds cheapen ~3bps having initially richened ~5bps. Cash USTs and gilts are comparatively quiet after following bunds price action in early trade. Italian bonds lag peers, widening the 10y BTP/Bund spread back above 200bps. Focal points of US session include early Bullard comments and University of Michigan inflation expectations, cited by Fed Chair Powell in latest policy decision.  In commodities, crude futures advance, albeit holding within a relatively narrow range. West Texas Intermediate crude traded near $105 a barrel after retreating over the previous two sessions. The US benchmark has lost almost 4% this week, putting prices on course for their first monthly drop since November. Base metals complex is under pressure, LME tin drops over 12%, nickel down over 6%. Spot gold rises roughly $4 to trade near $1,827/oz.  Bitcoin traded rangebound on either side of the 21,000 level. Sliding raw materials prices have contributed to a moderation in market-based measures of inflation expectations. Oil headed for its first back-to-back weekly loss since early April amid a broader selloff in commodities markets. To the day ahead now, and data releases include Germany’s Ifo business climate indicator for June, Italian consumer confidence for June, and UK retail sales for May. Over in the US, there’s also the University of Michigan’s final consumer sentiment index for June, and new home sales for May. From central banks, we’ll hear from the ECB’s Centeno and de Cos, the Fed’s Bullard and Daly, the BoE’s Pill and Haskel, and BoJ Deputy Governor Amamiya. Market snapshot S&P 500 futures up 0.7% to 3,826.75 STOXX Europe 600 up 1.1% to 406.65 German 10Y yield little changed at 1.40% Euro little changed at $1.0525 Brent Futures up 0.4% to $110.51/bbl Gold spot up 0.2% to $1,826.53 MXAP up 1.1% to 159.08 MXAPJ up 1.3% to 527.68 Nikkei up 1.2% to 26,491.97 Topix up 0.8% to 1,866.72 Hang Seng Index up 2.1% to 21,719.06 Shanghai Composite up 0.9% to 3,349.75 Sensex up 0.7% to 52,652.22 Australia S&P/ASX 200 up 0.8% to 6,578.70 Kospi up 2.3% to 2,366.60 U.S. Dollar Index little changed at 104.35 Top Overnight News from Bloomberg Global equity funds saw their biggest outflows in nine weeks as investors piled into cash amid fears that the US economy could be headed for a recession. UK consumers are starting to crumple in the face of soaring prices, according a series of reports that paint a grim picture of the nation’s cost of living crisis. Germany’s economy minister said he can’t be sure that Russia will resume shipments through a key gas pipeline following planned maintenance next month, raising the prospect of a fresh surge in prices and rationing this winter. A more detailed look at global markets from Newsquawk Asia-Pac stocks ultimately followed suit to the gains on Wall St where a decline in yields and lower commodity prices helped the major indices claw back from the opening losses which were triggered by disappointing PMI data. ASX 200 was positive with tech stocks encouraged by US counterparts which benefitted from the lower yield environment although gains in the index were capped by weakness in the commodity-related sectors after the recent pressure in energy and metal prices. Nikkei 225 found early momentum alongside currency flows and held on to gains despite the JPY reversal. Hang Seng and Shanghai Comp. were positive after officials recently suggested ample policy space to sustain a steady economic performance and with the PBoC upping its liquidity efforts. Top Asian News PBoC injected CNY 60bln via 7-day reverse repos with the rate at 2.10% for a CNY 50bln net daily injection, according to Reuters. Xi Trip to Hong Kong in Doubt After Top Officials Get Covid Hong Kong’s Jumbo Mystery Deepens as Restaurant May Be Afloat Gold Set for Weekly Drop on Powell’s Unconditional Inflation Vow Iron Ore Poised to End Wild Week Down as Steel Inventories Rise Hedge Funds Buy Dollar-Yen Downside Options on Recession Risks European bourses have coat-tailed on the positivity seen on Wall Street yesterday and across APAC overnight, with European indices firmer to varying degrees. Sectors overall project a modest defensive bias as Healthcare, Media, Consumer Products, and Food & Beverages reside among the winners, although Tech is also buoyed by the pullback in bond yields. Europe's largest online retailer Zalando (-12%) slumped following a profit warning, and in turn dragged the European Retail sector to the lowest level since March 2020. Stateside, US equity futures are firmer across the board – with the NQ narrowly leading the pack – participants also flagged the ES overcoming resistance at 3,800. Top European News UK PM Johnson's Conservatives lost the parliamentary seat in the Wakefield by-election to the Labour Party and lost the by-election in Tiverton and Honiton to the Liberal Democrats, according to Reuters. Subsequently, PM Johnson has been warned to "watch out for a coup", according to reporting in The Telegraph. Furthermore, Conservative Party Chairman Dowden has resigned following the by-elections. 1922 Committee treasurer Sir Geoffrey Clifton-Brown hints that Tory leadership rules could be changed to allow rebels another shot at the PM, according to Mail's Grove. Boris Johnson’s Party Chair Quits After Double Election Blow Zurich Insurance Sells Legacy German Life Portfolio to Viridium Ukraine Latest: Troops to Leave Key Eastern City as Russia Gains Airlines 2Q Seen Profitable for Most, Deterioration in 2023: DB FX Kiwi elevated amidst favourable crosswinds on NZ market holiday - Nzd/Usd probes 0.6300 as Aud/Nzd retreats towards 1.0950. Euro encouraged by elements of German Ifo survey and Pound shrugs off mixed UK consumption data, all time low consumer sentiment and more pain for PM Johnson on risk factors and gravitating Greenback - Eur/Usd firm on 1.0500 handle, Cable tests 1.2300 and DXY close to base of 104.120-510 range. Aussie, Loonie and Franc all bounce within ranges as Buck backs off, but Yen continues to encounter resistance after decent retracement - Aud/Usd back over 0.6900, Usd/Cad fades from pop above 1.3000 and Usd/Chf reverses through 0.9600 pivot. Scandi Crowns claw back lost ground, Yuan underpinned by PBoC liquidity injection and Peso by hawkish Banxico guidance to supplement 75 bp hike - Eur/Sek sub-10.7000, Eur/Nok near 10.4500, Usd/Cnh under 6.7000 and Usd/Mxn beneath 20.0000. Fixed Income Debt recoils after stretching recovery limits further - Bunds top out at 149.00, Gilts at 114.55 and 10 year T-note 118-00 Trading volumes pick-up on the way back down towards or to intraday lows of 147.21, 113.54 and 117-10+, as risk appetite steadily improves and focus turns to pm agenda Commodities WTI and Brent August futures are extending their modest gains in recent trade despite a lack of news flow. EIA said a status update on the weekly DOE oil inventories report will be provided on Monday. Spot gold remains uneventful under USD 1,850/oz – with the Dollar similarly contained intraday thus far. Focus has turned to base metals, with nickel, zinc, and tin among the biggest losers amid demand woes and surplus concerns. Chile state copper miner Codelco reached an agreement with workers to end the strike, according to Reuters. China is to auction 500k tonnes of imported soybeans from state reserves on July 1st, according to the trade centre cited by Reuters. US Event Calendar 10:00: June U. of Mich. Sentiment, est. 50.2, prior 50.2 10:00: June U. of Mich. Expectations, prior 46.8; Current Conditions, est. 55.4, prior 55.4 10:00: June U. of Mich. 1 Yr Inflation, est. 5.4%, prior 5.4%; 5-10 Yr Inflation, est. 3.3%, prior 3.3% 10:00: May New Home Sales, est. 590,000, prior 591,000 MoM, est. -0.2%, prior -16.6% Central Bank speakers 07:30: Fed’s Bullard Discusses Central banks and Inflation 13:15: Fed’s Daly Interviewed on Fox Business News 16:00: Fed’s Daly Speaks at Shadow Open Market Conference DB's Jim Reid concludes the overnight wrap Fears about an imminent recession have continued to dominate markets over the last 24 hours, with a combination of Chair Powell’s comments, weak economic data and renewed concerns about a European gas cutoff all helping to sound the alarm for investors. Indeed, the sudden rush for safe havens (along with doubts over how far central banks will actually hike if there’s a recession) meant that sovereign bonds rallied sharply, with yields on 10yr bunds (-20.6bps) seeing their largest daily decline in over a decade, which is quite something considering just how volatile bonds have been this year. Having said that the S&P 500 finished up +0.95% so it wasn't all doom and gloom on what was a pretty bad day for news. In terms of the various developments, weak data hampered the narrative and led to a flight to bonds from the outset, with the flash PMIs from Europe and the US painting a gloomy economic picture as we round out Q2. For instance, the Euro Area composite PMI fell to a 16-month low of 51.9 (vs. 54.0 expected), including larger-than-expected declines in both Germany and France. Later in the day, the US composite PMI also fell to 51.2 (vs. 53.0 expected), whilst the weekly initial jobless claims of the week through June 18 came in at 229k, thus taking the smoother 4-week moving average to its highest level since early February. So a bad run of numbers that at the very least add to the growing signs that we’re seeing a noticeable slowdown in growth. As the data was getting weaker, there was no sign that Fed Chair Powell was going to be put off from his challenge of restoring price stability, and he even reiterated before the House Financial Services Committee that their commitment to deal with inflation was “unconditional”. Bear in mind that he left that word out of his testimony before the Senate Banking Committee the previous day, which some had interpreted in a dovish light, so there’s no sign that the Fed are set to let up on the task ahead. Furthermore, Fed Governor Bowman became the latest member of the FOMC to endorse another 75bp hike at the next meeting in July, saying beyond that she favoured “increases of at least 50 basis points in the next few subsequent meetings”. In spite of the hawkish remarks from Fed officials, the growing worries that their hikes would trigger a recession actually meant that investors priced in a shallower pace of rate hikes over the coming 12-18 months. For instance, the rate priced in by the December meeting came down a further -5.5bps to 3.46%, whilst the terminal rate is now seen at just over 3.5%, having expected to be above 4% just before the Fed meeting. The market now sees the terminal rate being hit as early as February 2023 after most of the year so far has seen hikes priced in through the third quarter of 2023. That had a knock-on impact on Treasuries, with the 10yr yield down -6.9bps to 3.09%, and the 2s10s curve flattened -2.9bps to just 6.4bps. The Fed’s preferred indicator of the near-term forward spread also saw a large decline, with a -11.8bps move lower to 168bps, which was the lowest since early March. US equities continued trading in wide intraday ranges but were ultimately boosted by the shallower expected path of policy tightening. The S&P 500 gained +0.95%, leaving it +3.29% on the holiday-shortened week and on pace for its first weekly gain in a month. It was an interesting sector breakdown with shares sensitive to discount rates gaining, as one might expect with the rate move, sending the NASDAQ +1.62% higher. Otherwise, there was a clear delineation between defensives, which outperformed due to the slowing outlook, and cyclicals which ended the day in the red. Utilities, health care, real estate, and staples led the index and all ended in the green, while industrials, financials, materials, and energy all finished in the red. So a risk-off defensive rally in the States. Energy was particularly hit by the fall in brent crude futures, which were -1.51% lower on the day and nearly back beneath $110/bbl for the first time since mid-May. Over in Europe, there were further dramatic developments on the energy side, with German economy minister Habeck raising the country’s gas risk level to the second stage of the emergency plan. That takes them from the early warning phase to the alarm phase, with Habeck going as far as to warn about “a Lehman effect in the energy system” if the market collapsed. Our research colleagues in Frankfurt have written more about what this means (link here), but natural gas futures in Europe rose a further +3.33% yesterday to a fresh 3-month high of €131/MWh. The third and final stage of the plan would be the emergency phase, which occurs when there isn’t enough gas to meet general demand. The fears of recession and the threat of energy shortages meant that European equities took a tumble again yesterday, with the STOXX 600 (-0.82%) closing at its lowest level in 16 months with banks (-3.17%) leading the way as cyclicals also got hit hard in Europe. The DAX (-1.76%) was a regional under-performer with all the focus on the German government gas alert. Sovereign bond yields also plummeted, with those on 10yr bunds (-20.6bps) seeing their largest daily move lower in over a decade, whilst those on 10yr OATs (-20.7bps), gilts (-18.2bps) and BTPs (-15.9bps) witnessed a significant pullback as well. Our European economists don’t think that growth uncertainties will derail the near-term exit path for the ECB, but they write in a blog post yesterday (link here) that the release is another catalyst for a shift in the debate from a question of how quickly they need to catch up, to how far they will be able to go. Moving on to Asia, equity markets in the region are seeing decent gains overnight, with the Kospi (+1.66%) leading the pack followed by the Hang Seng (+1.23%), the Nikkei (+0.76%), the CSI (+0.74%) and the Shanghai Composite (+0.54%). Looking forward as well, US stock futures has risen overnight with contracts on the S&P 500 (+0.43%) and NASDAQ 100 (+0.70%) trading higher amidst the decline in bond yields. In economic data, inflation in Japan is likely to remain closely watched after the core consumer prices climbed +2.1% y/y in May as expected, following a similar rise in April, a level not seen in seven years mainly because of higher energy prices. Excluding energy, prices were up +0.8% in May, also in line with market consensus, following a 0.8% increase in the preceding month. Moving on to some political news, the Conservative party lost two parliamentary seats in yesterday’s by-elections, which will be unwelcome news for Prime Minister Johnson, who’s already seen 41% of his own MPs vote no confidence in his leadership at the start of the month. One of the losses was to Labour in the “red wall” seat of Wakefield, which had been Labour for the entire post-war period until it was won by the Conservatives in 2019, and the Conservative vote share was down from 47% at the last general election to 30% yesterday. Elsewhere, they also lost the usually safe Conservative seat of Tiverton and Honiton to the Liberal Democrats, with the Conservative vote share down from 60% in 2019 to 38% yesterday. Meanwhile, there was some bad news overnight on the economic front from the UK, with GfK’s consumer confidence reading dropping to a record low of -41 in June (vs. -40 expected), something not seen since the survey began 48 years ago. To the day ahead now, and data releases include Germany’s Ifo business climate indicator for June, Italian consumer confidence for June, and UK retail sales for May. Over in the US, there’s also the University of Michigan’s final consumer sentiment index for June, and new home sales for May. From central banks, we’ll hear from the ECB’s Centeno and de Cos, the Fed’s Bullard and Daly, the BoE’s Pill and Haskel, and BoJ Deputy Governor Amamiya. Tyler Durden Fri, 06/24/2022 - 07:53.....»»

Category: smallbizSource: nytJun 24th, 2022

Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze"

Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze" Following a relentless rout that erased nearly $2 trillion in market value from the S&P 500 last week, US equity futures have surged, extending their Monday holiday gains just as predicted on Sunday when we said that a "Nasty Squeeze" was on Deck following last week's "Second Largest Ever" shorting by hedge funds. Nasdaq 100 futures rose as much as 2.2% before trading 1.7% higher as major US tech and internet stocks advanced, poised to extend Friday’s gains; shares of Tesla and Twitter also rose following billionaire Elon Musk’s comments at the Qatar Economic Forum; S&P 500 futures gained 1.8%; the cash market was closed on Monday for a holiday. Asian and European stocks also advanced as did bitcoin which jumped above $21K after sliding below $18K briefly on Saturday. Meanwhile Treasuries and the US Dollar retreated. US stocks came under renewed pressure last week, with the S&P plunged into bear market territory amid surging inflation and fears that aggressive rate hikes by the Federal Reserve will push the economy into a recession. The S&P 500 is set for an 11% drop in June, poised for the worst month since March 2020, which marked the lows of the pandemic selloff. Sentiment was somewhat boosted by Biden’s Monday comments on the economy in which he said that a recession isn't "inevitable" (what else will he say) but strategists have warned of more volatility ahead. “Even if the mid-term investing landscape remains blurry to most market operators at the beginning of this summer season, some investors looking for opportunities to buy shares at a discounted price have been reassured,” said Pierre Veyret, a technical analyst at ActivTrades. “The fact central banks are moving quickly towards a super hawkish stance in order to tame inflation is also perceived as good news by some.” In premarket trading, bank stocks also pushed higher amid a broader rebound in risk assets. In corporate news, HSBC has lost two senior investment bankers in Asia as global banks compete for financial technology talent and dealmaking slows. Meanwhile, the UK’s Payment Systems Regulator will focus a pair of market reviews on the rising card fees charged by Visa and Mastercard. Tech names were also solidly higher; notable movers included Apple +2.4%, Microsoft +2%, Amazon.com +2.6%, Alphabet +2.6%, Meta Platforms +2.1%, Nvidia +3.1% premarket; all six stocks closed higher on Friday, while US markets were closed for a holiday on Monday. Stocks related to cryptocurrencies were also indicating a rally as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Meanwhile, Revlon surged as much as 27% in premarket trading, extending Friday’s rally after the cosmetics firm filed for Chapter 11 bankruptcy. Here are some other notable premarket movers: Tesla (TSLA US) and Twitter (TWTR US) shares rose in premarket trading on Tuesday after billionaire Elon Musk said the CEO label at the social media firm was less important than driving the product and that Tesla will cut its salaried workforce by about 10% over  the next three months. Tesla rose 3.1% and Twitter was up 1.2% in premarket trading Revlon shares surge as much as 27% in US premarket trading, extending Friday’s rally after the cosmetics firm filed for bankruptcy. Major US technology and internet stocks advanced in premarket trading on Tuesday, poised to extend Friday’s gains. Apple (AAPL US) +2.4%, Microsoft (MSFT US) +2%, Amazon.com (AMZN US) +2.6%, Alphabet (GOOGL US) +2.6% Spirit (SAVE US) shares jump 13% in US premarket trading, to $24, after JetBlue (JBLU US) raised its offer to $33.50 per share from $31.50 on June 6, the latest move in a multi-billion dollar takeover contest with rival Frontier (ULCC US). Arrival shares jump 8.6% in US premarket trading after the electric- vehicle maker announced that its zero-emission van has achieved EU certification and received European Whole Vehicle Type Approval. US-listed Chinese stocks are mostly higher in premarket trading, tracking a two-day 2.3% rise in the Hang Seng Tech Index. Alibaba (BABA US) +4.6%, Baidu (BIDU US) +3.5%, Pinduoduo (PDD US)+3.3% Stocks related to cryptocurrencies rise on Tuesday in US premarket trading as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Riot Blockchain (RIOT US) +5.6%, Coinbase (COIN US) +4.7%, MicroStrategy (MSTR US) +5% Citi cuts ratings on International Paper Co. and WestRock to neutral from buy, citing increasing questions about demand as supply additions loom. International Paper falls 1.1% in premarket trading, WestRock -1.5% Keep an eye on Maxar shares as Wells Fargo said the stock is its top pick in the burgeoning space sector, initiating it at overweight, Rocket Lab at equal-weight and Virgin Galactic at underweight. Adobe (ADBE US) shares may be in focus today as the stock was downgraded to equal-weight and given Street-low $362 target from $591 by Morgan Stanley, on expectation of a slowing structural growth profile for the computer software company. After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year. Yet fears are rampant that Federal Reserve policy makers intent on cooling price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc. warned equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday’s rebound. “We think equities will struggle to rebound sustainably until earnings expectations reset lower and/or central banks turn more dovish, which seems unlikely for now,” said Emmanuel Cau, head of European equity strategy at Barclays Plc. European stocks also extended their recent recovery, with the region’s benchmark Stoxx 600 Index rising 1%, led by gains in basic resources and chemical companies’ shares. Consumer discretionary, chemicals and autos also trade well. CAC 40 outperforms. Leonardo jumps as much as 9.7% in Milan trading after its DRS unit agreed to buy Israeli radar-maker RADA Electronic in an all-stock transaction. Valneva rises as much as 23% after CEO Franck Grimaud said the company’s Lyme disease vaccine has the potential of becoming a “blockbuster” with sales of more than 1 billion euros. K+S and OCI shares gain after JPMorgan said valuations are “compelling” and fundamentals remain positive. European fertilizer shares had dropped recently because of rising gas prices. OCI rises as much as 4.6%; K+S +6.3% Air Liquide climbs as much as 3.9%, after the French industrial gas company signed a long-term power purchase agreement with Vattenfall. Mithra rises as much as 21% after the pharmaceutical company said it received subscription commitments for 3.87m new shares at an issue price of EU6.07 apiece, representing a 5% discount to last close. Richemont and Swatch advance after Swiss watch exports for the month of May showed strong demand versus the year-earlier period in the US and Japan as well as in European countries such as France and the UK. Luxury peers also trading higher in a wider rebound. Richemont gains as much as 2.8%, Swatch +2.8%, Hermes +3.3%, LVMH +3.7% European apparel retail shares drop after JPMorgan downgrades Asos, About You, Boohoo and Primark owner AB Foods to neutral from overweight, citing the cost of living crisis with cracks emerging in discretionary spending. Asos declines as much as 5.1%, Boohoo -4.8%, About You -4.3%, AB Foods -3.2% Proximus and Telenet slide after a statement by the Belgian telecom regulator showed that new entrant Citymesh partnered with Romanian carrier Digi Communications and acquired spectrum across various bands. Proximus shares fall as much as 7.8%, Telenet -3.9% Earlier in the session, MSCI’s Asia-Pacific index snapped an eight-day slide to add more than 1% as Asian equities headed for their biggest gain this month. The MSCI Asia Pacific Index climbed as much as 1.8%, set to snap an eight-day losing streak, with financial and tech stocks among the biggest contributors to its advance. The US president spoke overnight after a conversation with former Treasury Secretary Lawrence Summers, as the White House and congressional Democrats are in talks on legislation that aims to fight inflation. Benchmarks in Taiwan, Japan and Hong Kong led gains in the region. Australia’s index advanced for the first time in days after central bank chief Philip Lowe signaled he will only raise interest rates by 25-to-50 basis points at the July meeting. Chinese shares edged lower after recent gains.  “It’s a respite, not a rebound,” said Charu Chanana, a market strategist at Saxo Capital Markets. “We are still in a bear market that is facing a double whammy of Fed tightening and building recession fears, and the second-quarter earnings season is likely to be particularly painful for the markets” due to cost pressures, she added.  Valuations for the MSCI Asia gauge have continued to slide toward pandemic lows, with the index down 18% this year. Still, it’s outperforming a measure of global shares, supported by a rally in Chinese equities this month as the country emerges from Covid-triggered lockdowns. Japanese stocks advanced as investors weighed the impact of the yen’s weakness and the extent of the recent selloff. The Topix Index rose 2% to 1,856.20 as of market close Tokyo time, while the Nikkei advanced 1.8% to 26,246.31. Sony Group Corp. contributed the most to the Topix Index gain, increasing 4%. Out of 2,170 shares in the index, 2,023 rose and 108 fell, while 39 were unchanged. “Stocks that are expected to have an upward revision from the weak yen may be firm,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management. In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,523.80, snapping a seven day losing steak. The benchmark was led by gains in banks and miners, with the financials sub-gauge rising the most since March 10.  In early trade, Australia’s central bank Governor Philip Lowe said he didn’t see a recession on the horizon for the nation.  In New Zealand, the S&P/NZX 50 index rose 1.1% to 10,701.59 India’s benchmark share index posted its biggest two-day advance since May 30, boosted by a recovery in information technology stocks and as investors looked for bargains after a sharp selloff last week.  The S&P BSE Sensex rose 1.8% to close at 52,532.07 in Mumbai, taking its two-day advance to 2.3%. The NSE Nifty 50 Index advanced 1.9%. All of the 19 sectoral indexes compiled by BSE Ltd. gained, led by a measure of oil & gas companies. “Crude prices have corrected by almost 10% from its recent peak, providing some breather to the Indian market,” Motilal Oswal Financial analyst Siddhartha Khemka wrote in a note.   Reliance Industries contributed the most to the Sensex’s gain, increasing 1.6%. All but one of 30 shares in the Sensex index rose. Of the top ten performers on the measure, half were information technology companies, led by Tata Consultancy Services Ltd. that clocked its biggest advance this month.  In rates, treasuries were cheaper across the curve as trading resumed after Monday’s US holiday; cash USTs bear steepened, but trim losses after cheapening ~5bps at the Asia reopen.  Long-end leads losses with stock futures rising after last week’s rout. US yields are ere cheaper by as much as 6bp at long end, steepening 2s10s by nearly 3bp, 5s30s by nearly 4bp; 10-year, higher by ~5bp at 3.27% lags bund and gilts by 3bp and 4.5bp while Italian bonds outperform Treasuries by 12bp in the sector. Bunds and gilts outperform Treasuries, while Italian bonds extend recent gains after ECB’s Olli Rehn reiterated determination to combat unwarranted spikes in borrowing costs for some of the region’s most vulnerable economies.  That said the ECB has yet to disclose said measures, a move which most agree will lead to selling the news. Gilts bull flatten, 10y yields drop 4bps after stalling near 2.6%. Bunds are comparatively quiet. Shorter-maturity Australian bonds rallied after central bank chief Philip Lowe said interest rates are likely to rise by 50 basis points at most in July. Money markets subsequently scrapped bets he would track the Federal Reserve with a 75 basis-point move. Japanese government bonds were mixed after a five-year note sale that drew the weakest demand in more than two years in the aftermath of wild price swings in futures that have made some traders uneasy about their exposure to cash bonds. In FX, Bloomberg dollar spot index fell 0.3% as the greenback weakened against all of its Group-of-10 peers apart from the yen. JPY is the weakest in G-10, plunging to a fresh 24 year low of 136. NOK and SEK outperform. The euro advanced and European bonds rallied, led by the front end even as ECB Governing Council Member Peter Kazimir said negative rates must be history by September. Governing Council member Olli Rehn separetely said that “there has been good reason to expedite the normalization of monetary policy”. The pound extended gains amid broad dollar weakness while UK government bonds inched up. BOE Chief Economist Huw Pill said policy makers would sacrifice growth in order to bring down inflation, saying there’s a risk of prices developing a “self-sustaining momentum. In commodities, WTI drifted 2.3% higher to trade near $112. Most base metals trade in the green; LME zinc rises 2.8%, outperforming peers. LME aluminum lags, dropping 0.3%. Spot gold is little changed at $1,838/oz. Bitcoin is bid and above the USD 21k mark, after last week's slip to a sub-USD 18k low. Elon Musk says he intends to personally support Dogecoin, via BBG TV. Coinbase (COIN) says connectivity issues across Coinbase and Coinbase Pro could cause failed trades and delayed transactions; issue was subsequently resolved. To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill. Market Snapshot S&P 500 futures up 1.9% to 3,744.50 STOXX Europe 600 up 1.0% to 411.06 MXAP up 1.5% to 158.77 MXAPJ up 1.5% to 528.18 Nikkei up 1.8% to 26,246.31 Topix up 2.0% to 1,856.20 Hang Seng Index up 1.9% to 21,559.59 Shanghai Composite down 0.3% to 3,306.72 Sensex up 2.2% to 52,741.19 Australia S&P/ASX 200 up 1.4% to 6,523.81 Kospi up 0.7% to 2,408.93 German 10Y yield little changed at 1.76% Euro up 0.5% to $1.0567 Brent Futures up 1.2% to $115.53/bbl Brent Futures up 1.2% to $115.52/bbl Gold spot down 0.2% to $1,835.31 U.S. Dollar Index down 0.61% to 104.06 Top Overnight News from Bloomberg UK rail workers began Britain’s biggest rail strike in three decades after unions rejected a last-minute offer from train companies, bringing services nationwide to a near standstill. Britain’s local authorities say they can’t afford to pay a mandated increase in the legal minimum wage over the next year without a £400 million cash injection from the national government A majority of European businesses are worried about their ability to meet employee demands for higher wages amid the current spike in inflation, according to a regional survey by Intrum AB Companies in Germany, the UK, France, Spain and Italy are the most distressed since August 2020, according to the Weil European Distress Index. The study aggregates data from more than 3,750 listed European firms A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks gained across amid a broad constructive global risk tone despite a lack of fresh macro drivers and the recent holiday closure in the US, with Bitcoin and Chinese commodity prices also stabilising after the recent tumultuous price action. ASX 200 was led higher by the energy sector and after RBA's Lowe effectively ruled out a 75bps hike next month. Nikkei 225 outperformed and reclaimed the 26,000 level amid a predominantly weaker currency. Hang Seng and Shanghai Comp. were positive with sentiment in Hong Kong underpinned by news the SAR is to propose a quarantine-free business travel corridor with mainland China, while mainland bourses lagged with the US ban on imports from Xinjiang taking effect from today. Japan's PM Kishida says rapid JPY weakening is a source of concern, must closely watch FX moves and consider monetary policy and FX measures separately. Top Asian News Chinese Developer Accepts Wheat, Garlic as Payment to Woo Buyers China Junk Bond Selloff in New Phase With Record Fosun Rout Gold Steady as Traders Weigh Central Bank Plans to Hike Rates Australian Tesla-Supplier Eyes First Lithium Exports Over- Optimism Among China Steel-Makers Behind Iron Ore’s Plunge European bourses are firmer and building on Monday's upside, Euro Stoxx 50 +1.1%; thus far, newsflow has largely focused on familiar themes. Additionally, participants are awaiting the return of the US after Monday's market holiday. Currently, ES +1.7% with the region incrementally outperforming European peers. Elon Musk says there a still a few unresolved matters with Twitter (TWTR) including the number of spam users, via BBG TV; still awaiting a resolution, very significant. Adds, they are reducing the salaried workforce of Tesla (TSLA) by circa. 10% over the next three-months. Top European News French President Macron will invite all parties able to form a group in the new parliament for talks on Tuesday and Wednesday, according to Reuters. BDI revises down 2022 German GDP forecasts: 1.5% (prev. 3.5%); return to pre-COVID level expected at end-2022 at the earliest Central Banks ECB’s Lane said very high inflation means there is a risk inflation psychology could take hold and said the larger increment for rate increase in September does not represent a red alert assessment of inflation. Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision and there is no preview beyond September of what will be the appropriate pace of tightening, according to Reuters. ECB’s Villeroy said the new instrument should be available as much as necessary to make the no-limit commitment to protect the Euro very clear and the more credible such an instrument is, the less it may have to be used in practice. Villeroy added the new instrument will have rules but there will be elements of judgement also and said they would not necessarily need to hold purchases of government or private sector securities to maturity, according to Reuters. ECB's Rehn says EZ inflation pressured are broader and stronger; very likely the September move is more than 25bp in magnitude. BoE's Pill says if there is evidence of persistent price pressures, the MPC is certainly prepared to act, expects further tightening in the coming months, need to consider the exchange rate when assessing inflationary pressures. Worries that using monetary policy to stabilise the FX rate in the short-term would be a distraction from the BoE's goals. HKMA purchases HKD 9.6bln from the market, as the HKD hits the weak-end of the trading range. FX Euro firm as risk revival continues and ECB’s Rehn says 50bp hike in September is highly probable, EUR/USD eyeing 1.0600 after breaching 1.0550, but could be capped by 1bln option expiry interest between 1.0575-85. Sterling rebounds ahead of CBI industrial trends and after BoE chief economist Pill underlines willingness to act if price pressures prove persistent; Pound probes 1.2300 vs Dollar as DXY slips further from recent peaks through 104.000. Loonie and Nokkie boosted by firmer crude prices, as former awaits Canadian retail sales data; USD/CAD close to 1.2900 vs circa 1.3078 double top, EUR/NOK sub-10.4000 within 104.4200+/10.3400 range. Kiwi and Aussie underpinned by improvement in risk appetite, but hampered as NZ consumer sentiment slides to record low and RBA Governor Lowe pushes back on the amount of 2022 tightening priced in at present; NZD/USD hovers above 0.6350 and AUD/USD shy of 0.7000. Franc and Yen remain divergent with SNB and BoJ policy paths, latter largely ignoring latest verbal intervention; USD/CHF pivots 0.9650 and USD/JPY back above 135.00. Israel PM Bennett and Foreign Minister Lapid agreed on dissolving the Knesset and going for an early election, while the vote will take place next week and Lapid will become PM once the vote passes, according to Walla News. Fixed Income Debt divergent and erratic awaiting the return of US cash markets from long holiday weekend. Bunds hold within 143.05-144.01 range and Gilts between 111.11-68 parameters. Treasury futures retreat and curve flits from marginal flattening to steepening ahead of US existing home sales and more Fed speak via Mester and Barkin Commodities WTI and Brent are bid amid broader risk sentiment with newsflow focusing on familiar themes primarily around the reduction in Russia's gas supply to Europe. Thus far, Brent has tested but failed to connivingly breach the USD 116.00/bbl mark ahead of touted USD 116.37/bbl resistance. US Treasury Secretary Yellen said she does not see resuming the Keystone XL oil pipeline as a short-term measure that can address high oil prices, while she added it would take years to have an impact. Yellen also commented that evidence is mixed on the level of pass-through from a gasoline tax holiday to lower prices and said that an exception or ban on insurance for certain Russian oil shipments would effectively provide a price cap on oil, according to Reuters. Brazilian Economy Minister Guedes said Brazil is part of the western energy security, particularly for Europe, while he added that privatising and moving Petrobras to Novo Mercado would increase its market cap from BRL 450bln to BRL 750bln. Guedes added that they will conduct new measures again if the war in Ukraine is escalating, according to Reuters. PetroEcuador may have to stop exports if protests continue and it declared a force majeure to avoid contract penalties, according to Reuters. Vitol CEO says markets are faced with underinvestment and falling production capacity for crude and there is a relatively tight refining situation, via Reuters; if China exports some more products, the tightness felt today won't be felt. Denmark's energy agency declared an 'early warning' stage of gas supply preparedness, according to Reuters. German regulator says they are not in a hurry to declare the highest gas emergency level yet, via Reuters citing BR; however, Sweden declares an "early warning" stage of gas supply preparedness for Western and Southern parts of the nation. Codelco's union presidents ratified the start of a national strike beginning on Wednesday, according to Reuters; an update which, alongside broader risk, is supporting LME Copper. US Event Calendar 08:30: May Chicago Fed Nat Activity Index, est. 0.47, prior 0.47 10:00: May Existing Home Sales MoM, est. -3.7%, prior -2.4% 10:00: May Home Resales with Condos, est. 5.4m, prior 5.61m Central Banks 11:00: Fed’s Barkin Interviewed During NABE Event 12:00: Fed’s Mester Speaks at Women in Leadership Event 15:30: Fed’s Barkin Speaks in Richmond DB's Jim Reid concludes the overnight wrap I’ll be publishing my latest monthly chartbook later today so keep an eye out for it. It will include the slides for last week’s webinar on the default study “The end of the ultra-low default world”. See here for the webinar replay and here for the original default study. Welcome to the longest day of the year although most in markets will already say we've had numerous of those already so far this year. Actually if you're outside of London, trying to get in it could be a very, very long day as the UK is today gripped by the first of three alternate day rail strikes. There is a tube strike today thrown in for good measure. It does seem industrial relations with the government are on a knife edge across the UK as at least 3 million workers across different professions are considering industrial action at the moment over pay and working conditions. So this could become a much bigger story if tensions are not eased. With inflation this high it's not easy to see how they can be without big pay rises being offered. However on this day of wall to wall sun (sorry to the Southern Hemisphere readers), there has been a little more light than dark in markets over the last 24 hours after what was the worst week for global equities since March 2020. The next major event(s) to look forward to are Fed Chair Powell’s congressional testimonies from tomorrow. To be honest though, its been a fairly quiet start to the week given the US holiday yesterday, with the biggest news instead being a fresh rise in European sovereign bond yields after President Lagarde reiterated the ECB’s intentions to start hiking next month, and also shone a bit more light on their plans to deal with any potential fragmentation. We’ll start with those remarks from Lagarde, who appeared in a hearing at the European Parliament yesterday and spoke strongly against any potential fragmentation in the Euro Area. Indeed, she said that “we need to be absolutely certain” that monetary policy was being transmitted to the different Euro Area countries and went as far to say that it was “right at the core of the mandate”, whilst adding “anybody who doubts that determination will be making a big mistake”. So not quite “whatever it takes” but along the same lines. Given the ECB has promised to deal with any fragmentation, that should make life easier for them when it comes to raising rates, and European sovereign bond yields responded accordingly yesterday. Looking at the specific moves, yields on 10yr bunds (+9.0bps), OATs (+11.8bps) and BTPs (+12.3bps) all moved noticeably higher, although by the standards of last week that seemed quite modest given that 10yr bund yields had seen absolute moves of 11bps in either direction on 3 out of 5 days last week. When it came to bonds though, it was UK gilts who were one of the biggest underperformers yesterday after we heard from one of the more hawkish members of the Bank of England’s MPC. Catherine Mann (who was in the minority that favoured of a 50bps move last week) said in a speech that “the incoming data on inflation show increasingly domestic embeddedness, persistence, and momentum”. Furthermore, she also warned about the risk of embedded domestic inflation being “further boosted by inflation imported via a Sterling depreciation”. Against that backdrop, 10yr gilt yields rose by +10.6bps to close above 2.6% for the first time since 2014, whilst overnight index swaps are continuing to price in a more aggressive response from the BoE after the next meeting, with 50bp moves priced in for each of the next 3 meetings, which would be the fastest pace of hikes since they gained operational independence in 1997. In spite of the sovereign bond selloff, equities put in a much better performance yesterday, with the STOXX 600 (+0.91%) seeing a broad-based advance that was supported by all the main sector groups. Other indices on the continent also moved higher, including the FTSE 100 (+1.50%), the DAX (+1.06%) and the FTSE MIB (+0.99%). The worst performer on a relative basis was France’s CAC 40 (+0.64%), which struggled following the news that President Macron had lost his parliamentary majority, which will make passing his agenda much more difficult in the coming years. See our economists’ piece on the topic here. With the US holiday we only had futures to look at, but those on the S&P 500 had moved around +1% higher by the time of the European close. They are +1.62% higher this morning with the NASDAQ 100 futures (+1.71%) also meaningfully higher. Meanwhile, Fed funds futures were again moving in the direction of pricing in a more aggressive path of rate hikes, with the implied rate by the December meeting up +7.18bps to 3.625%, albeit still beneath their closing peak of 3.72% just before the Fed meeting, which meant that Treasury futures were also pointing to fresh declines yesterday as well. Asian equity markets are relatively buoyant this morning with the Nikkei (+1.76%) leading the pack followed by the Hang Seng (+1.42%). In mainland China, the Shanghai Composite (+0.18%) and CSI (+0.12%) are also trading in positive territory whilst the Kospi (+1.03%) is sharply higher in early trade. Elsewhere, the meeting minutes from the Reserve Bank of Australia (RBA) released this morning indicated that the central bank is leaning towards more monetary policy tightening over the coming months. The minutes also revealed that inflation was expected to increase to 7% by the end of the year due to pandemic-related supply chain disruptions, before coming back towards the 2-3% inflation range in 2023. Meanwhile, the RBA Governor Philip highlighted that interest rates were still "very low" but watered-down expectations of 75bps rate hikes thus signaling a 25 or 50bps move at the July meeting. On the FX side, the Aussie Dollar did witness a sharp dip during the RBA Governor’s Q&A session but is reversing losses, trading +0.35% at 0.697 per US dollar, as I type. Elsewhere the Japanese yen has remained under pressure at 135.03 per dollar, not far off a 24-year low of 135.58 hit early last week. Separately, oil prices are higher this morning with Brent futures (+1.04%) at $115.32/bbl and WTI futures increasing +1.79% to $111.52/bbl. To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill. Tyler Durden Tue, 06/21/2022 - 08:02.....»»

Category: dealsSource: nytJun 21st, 2022

Oil & Gas Stock Roundup: Investors Back CVX, XOM & SHEL"s Climate Proposals

Apart from Chevron CVX, ExxonMobil (XOM) and Shell (SHEL), Equinor (EQNR) and Petrobras (PBR) hog the limelight during the week. It was a week when oil prices notched up their best close in nearly three months and natural gas futures reached their highest level since 2008.On the news front, energy giants Chevron CVX, ExxonMobil XOM and Shell SHEL won shareholder support for their push for lower emissions. Developments associated with Equinor EQNR and Petrobras PBR also made it to the headlines.Overall, it was another good seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained 4.3% to close at $115.17 per barrel, while natural gas prices increased around 8% to end at $8.727 per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum from the previous four weeks.Coming back to the week ended May 27, the positive oil price action could be attributed to investor concerns about signs of tight gasoline supplies going into the summer driving season. The Energy Information Administration’s ("EIA") latest report showing a larger-than-expected drawdown in crude stockpiles further pointed to the strained market fundamentals and propped up prices. As it is, the uptick also reflected concerns about supplies from Russia, which is one of the world's largest producers of the commodity.Natural gas notched a healthy weekly gain, too, buoyed by hotter-than-normal early summer weather, lower domestic output, strong LNG shipments and high coal prices.Recap of the Week’s Most-Important Stories1.  Supermajor Chevron recently announced significant changes to its organization and management structure. The company also conducted an Annual General Meeting (AGM), wherein several climate resolutions were put to vote.Starting Oct 1, Chevron’s Upstream (or exploration and production), Midstream and Downstream (or refining) segments will be led by a single decision-maker — executive vice president, Oil, Products & Gas. Nigel Hearne — former head of the company's Europe, Asia and Pacific production — has been entrusted with this role and will look after the entire value chain.Coming to its AGM, some 33% of Chevron shareholders voted in favor of a proposal asking the energy company to substantially cut Scope 3 emissions — a sharp decrease from last year when a similar motion won 61% support. These are the hard-to-address releases from the combustion of fuel (such as jet fuel and gasoline) it sells to end-users that typically constitute more than 90% of an oil and gas holding’s total footprint. (Making Sense of Chevron's Reorganization, Climate Plans)2.   Larger rival ExxonMobil won shareholders’ support for its energy transition strategies after receiving maximum votes against initiatives related to accelerating emission reduction.XOM shareholders disapproved a resolution submitted by the activist group, Follow This, urging rapid measures to curb climate change. In a preliminary voting session, only 28% shareholders supported the proposal to set and publish medium- and long-term targets to reduce emissions from ExxonMobil’s operations and energy products and reduce hydrocarbon sales.This Irving, TX-based company is actively investing in hydrocarbon production to prevent an energy crisis and the rising prices for consumers. The company’s directors previously suggested shareholders to vote against Follow This’ climate proposal as it believes Scope 3 targets are not feasible to manage emissions. (ExxonMobil Wins Investors Support for Climate Strategy)3   At its Annual General Meeting in London, Shell shareholders voted in favor of the company’s energy transition strategy but in lower numbers. Europe’s largest oil company, which has set itself a target of becoming a net-zero greenhouse gas emissions business by 2050, received 80% support for its climate policy.At the same time, a resolution filed by activist group Follow This, which demands the company's targets to be more stringent and in line with the Paris Agreement, got 20% votes — a sharp decrease from last year, when a similar motion won 30% support. As per the investor advocacy group, Shell’s intermediate targets are linked to emissions’ intensity that might actually allow the firm to advance its fossil fuel output.According to the London-based multinational, it has lowered emissions from operations by 18% between 2016 and 2021, with a pledge to extend it to 50% by 2030. Shell also claims to have reduced the net carbon intensity of its marketable product portfolio by 2.5% by the end of 2021 compared with 2016, ultimately targeting a 9-12% reduction by 2024. (How Do Shareholders View Shell's Climate Goals?)4   Another European integrated major, Equinor recently announced its exit from all joint ventures in Russia, clinching the title of the first major Western oil producer to completely remove its exposure in the country.This Zacks Rank #1 (Strong Buy) company has now freed itself from all future commitments and obligations, thereby transferring its participating interests in four joint ventures in Russia to local energy producer Rosneft. Equinor is exiting the Kharyaga project and the accord to leave the development has been inked.You can see the complete list of today’s Zacks #1 Rank stocks here.It was on Feb 27 that the integrated energy major made the decision to commence the process of exiting its joint ventures in Russia just a few days after the country’s troops invaded Ukraine. With the exit from Russia, Equinor has witnessed a massive impairment of its assets in the country. As of Mar 31, 2022, EQNR witnessed an impairment of $1.08 billion on the balance sheet. (Equinor Winds Down its Energy Business in Russia)5.   Brazil’s president, Jair Bolsonaro, recently sacked Jose Mauro Coelho, the chief executive officer (“CEO”) of the state-run oil giant Petrobras, less than two months into the job after the company declined to sell fuels at a subsidized rate to consumers, cautioning it would lead to shortages. However, this latest development raised concerns regarding the continued political interference at the company and the instability that it is creating.Bolsonaro also called for the election of a new board at Petrobras, paving the way for a complete executive revamp. This shake-up is said to be the president’s latest move to influence PBR’s pricing policies and improve his re-election prospects later this year amid surging inflation driven by rising energy prices.The outgoing CEO will be replaced by the senior Brazilian economy ministry official, Caio Mario Paes de Andrade, who is set to be the next top executive of Petrobras. Paes de Andrade will become Petrobras’ fourth chief executive in the last two years. (Petrobras CEO Ousted Again Over Rising Fuel Prices)Price PerformanceThe following table shows the price movement of some major oil and gas players over the past week and during the last six months.Company    Last Week    Last 6 MonthsXOM                +6.2%            +63.1%CVX                 +6.2%            +58%COP                +9.1%            +63.4%OXY                 +12%             +139%SLB                 +17.2%          +68.1%RIG                  +7.2%            +39.1%VLO                 +7.2%            +96.9%MPC                +5.7%            +67.8%The Energy Select Sector SPDR — a popular way to track energy companies — rose 8.3% last week. Over the past six months, the sector tracker has increased 62.2%.What’s Next in the Energy World?Oil prices ended above $115 last week, primarily reflecting an anticipated pick-up in fuel consumption during and post Memorial Day weekend, which marks the start of the summer driving season. The high crude prices, surging demand for motor fuels and the effect of the Russian invasion of Ukraine have also resulted in gasoline and diesel prices reaching record highs.Amid this backdrop, market participants will closely track the regular releases to look for further guidance on the direction of prices. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude production, is closely followed too. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand boost from the easing of coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement for oil.  How to Profit from the Hot Electric Vehicle Industry Global electric car sales in 2021 more than doubled their 2020 numbers. And today, the electric vehicle (EV) technology and very nature of the business is changing quickly. The next push for future technologies is happening now and investors who get in early could see exceptional profits. See Zacks' Top Stocks to Profit from the EV Revolution >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Petroleo Brasileiro S.A. Petrobras (PBR): Free Stock Analysis Report Equinor ASA (EQNR): Free Stock Analysis Report Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 1st, 2022

Key Predictions for Q1 Earnings Reports of F, HOG & ORLY

Read on to know how things are shaping up ahead of Ford (F), Harley-Davidson (HOG) and O'Reilly's (ORLY) quarterly release tomorrow. The first-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far this earnings season, three S&P sector components, namely Tesla TSLA, Genuine Parts Company GPC and PACCAR Inc. PCAR, have come up with quarterly numbers. Despite the industry odds, all three companies not only managed to pull off a comprehensive beat but also witnessed year-over-year growth in the top and bottom lines.A Quick Glance at TSLA, GPC & PCAR’s Q1 NumbersElectric vehicle behemoth Tesla delivered yet another blockbuster show, posting an earnings beat for the fifth straight quarter. TSLA’s first-quarter 2022 earnings of $3.22 a share rose significantly from the year-ago figure of 93 cents and surpassed the Zacks Consensus Estimate of $2.15. Total revenues came in at $18,756 million, beating the consensus mark of $17,276 million. The top line also witnessed year-over-year growth of 80.5%. Importantly, TSLA reported an automotive gross margin of 32.9% and overall gross margin of 29.1% for the quarter.Auto replacement parts provider Genuine Parts reported first-quarter 2022 adjusted earnings of $1.86 per share, up 24% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.70 per share. Higher-than-expected sales and operating profits across both its segments resulted in this outperformance. The company reported net sales of $5,294.6 million, surpassing the Zacks Consensus Estimate of $5,131 million. The top line is also higher than the year-ago quarter’s $4,465 million.Trucking giant PACCAR posted first-quarter 2022 adjusted earnings of $1.72 a share, outpacing the consensus mark of $1.51. The bottom line also rose 27.4% year over year. Higher-than-expected revenues from Trucks and Parts segments led to the outperformance. PCAR reported net sales of $6,472.6 million, beating the Zacks Consensus Estimate of $5,781 million and increasing from the year-ago figure of $5,845.5 million.Factors Setting the Tone for Auto Stocks’ Q1 ResultsFirst-quarter 2022 was difficult for the U.S. auto market. U.S. new vehicle sales declined more than 12% year over year for the January-March period due to escalating supply chain issues despite robust consumer demand. Sales plunged even more drastically in March as limited vehicle supply and tight inventories kept a lid on volumes amid rising COVID-19 cases and compounded chip concerns over the Russia-Ukraine crisis. While low sales volumes are likely to have a negative impact on first-quarter results, the rising prices of vehicles (both used and new) are expected to have offset the same to a large extent. Amid supply-demand mismatch and tight inventory levels, prices of new and used cars hit the roof. In the light of chip crunch, automakers have been prioritizing resources toward high-margin and more popular vehicles like electric cars. The rising deliveries of new energy vehicles (including all-electric, hybrids and fuel-cell) are expected to have fueled revenues.All in all, while soaring commodity costs and limited vehicle supply amid the chip crunch are likely to negatively impact the upcoming results, the rising average price of vehicles and high deliveries of electric cars should have partly counterbalanced the headwinds.Per the latest Earnings Trend report dated Apr 20, the auto sector’s earnings for Q1 are expected to decline 20.8% on a year-over-year basis. As for the revenues, they are estimated to edge up 8% year over year.Key Releases on Apr 27Ford F: This legacy automaker missed earnings estimates in the last reported quarter on lower-than-expected profits in North America and a pretax loss in Europe. Over the trailing four quarters, Ford surpassed earnings estimates on three occasions and missed once, with the average surprise being 179.3%. This is depicted in the graph below:Ford Motor Company Price and EPS Surprise Ford Motor Company price-eps-surprise | Ford Motor Company QuoteOur proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.Our proven model doesn’t conclusively predict an earnings beat for Ford this time around. This is because it has an Earnings ESP of -1.79% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.The Zacks Consensus Estimate for the company’s first-quarter earnings and revenues is pegged at 39 cents per share and $29.95 billion, respectively. F is set to report quarterly results after the closing bell.Declining vehicle sales during first-quarter 2022 due to escalating supply chain issues aggravated by the Russia-Ukraine war are likely to weigh on Ford’s upcoming results. Chip woes kept a lid on vehicle supply despite robust demand. Consequently, Ford witnessed a 17% year-over-year fall in new vehicle sales in the United States during the January-March period. The Zacks Consensus Estimate for total automotive revenues is pegged at $31.9 billion, indicating a decline from $33.6 billion recorded in first-quarter 2021. High commodity costs, a tough labor market and logistical challenges are also likely to have played spoilsports. In its last earnings call, Ford warned that commodity inflation would limit the company’s profit levels in the near term. Amid lower revenues and high manufacturing and operating expenses, Ford is expected to have witnessed a decline in EBIT across various end-markets served.Harley-Davidson HOG: This iconic motorcycle manufacturer posted fourth-quarter 2021 earnings against the consensus estimate of a loss per share. Higher-than-anticipated revenues from both Motorcycles & Related Products and Financial Services segments resulted in this outperformance. HOG surpassed the Zacks Consensus Estimate in the trailing four quarters, with the average being 78%. This is depicted in the graph below:HarleyDavidson, Inc. Price and EPS Surprise HarleyDavidson, Inc. price-eps-surprise | HarleyDavidson, Inc. QuoteThings are not looking up for Harley-Davidson this time around, as it carries a Zacks Rank #3 and an Earnings ESP of 0.00%. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at $1.52 a share and $1.34 billion, respectively.Harley-Davidson has been battling severe supply-chain disruptions amid the global microchip shortage, which is likely to have dented the firm’s production and shipments in the to-be-reported quarter. Evidently, the Zacks Consensus Estimate for worldwide retail sales is pegged at 44,192 units, implying a decline from 44,234 units sold in first-quarter 2021.Nonetheless, the Zacks Consensus Estimate for revenues from the Motorcycles and Related Products segment — which constitutes bulk of the firm’s overall revenues — is pegged at $1,332 million for the March-end quarter, suggesting an increase from the $1,232 million reported in the year-ago quarter. Also, the consensus mark for operating income from the segment is pegged at $241 million, suggesting growth from the profit of $228 million recorded in the corresponding quarter of 2021. On the flip side, The Zacks Consensus Estimate for operating income from Financial Services is pegged at $78 million, depicting a drop from $119 million generated in the comparable year-ago period.O’Reilly Automotive ORLY: This U.S.-based specialty retailer of automotive parts came up with better-than-anticipated results in the last reported quarter on the back of remarkable growth in comparable-store sales. Over the trailing four quarters, the company surpassed earnings estimates on all occasions, with the average being 22.2%. This is depicted in the graph below:O'Reilly Automotive, Inc. Price and EPS Surprise O'Reilly Automotive, Inc. price-eps-surprise | O'Reilly Automotive, Inc. QuoteInvestors expect ORLY to maintain its beat run and our model also predicts the same. This is because the company has an Earnings ESP of +7.07% and a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at $7.43 per share and $3.29 billion, respectively.Robust demand for vehicles is likely to have supported the sales of O’Reilly’s products and services. ORLY’s wide-ranging product portfolio serving the Do-it-Yourself and Do-it-for-Me customers provides the company with a competitive edge and is anticipated to have fueled comparable-store sales growth during the first quarter. This, in turn, is likely to have buoyed O’Reilly’s top line during the January-March period.Further, O’Reilly’s customer-centric business model and surging demand for technologically-advanced auto parts are likely to have bolstered sales during the March-end quarter. Robust digitization efforts are also likely to have boosted the company’s performance during the quarter in discussion. ORLY is also likely to have gained from the opening of new stores and distribution centers in profitable regions during the to-be-reported quarter. ORLY’s upbeat full-year 2022 earnings and sales outlook also instills optimism for the to-be-reported quarter. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report Genuine Parts Company (GPC): Free Stock Analysis Report HarleyDavidson, Inc. (HOG): Free Stock Analysis Report PACCAR Inc. (PCAR): Free Stock Analysis Report O'Reilly Automotive, Inc. (ORLY): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksApr 26th, 2022

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

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

Category: blogSource: zerohedgeApr 20th, 2022

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

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

Category: blogSource: zerohedgeMar 21st, 2022

Sealed Air (SEE) Gains 43% YTD: What"s Driving the Rally?

Sealed Air (SEE) is poised on the ongoing strength in packaging and e-commerce demand as well as savings from its Reinvent SEE strategy. Shares of Sealed Air Corporation SEE have been appreciating so far this year, courtesy of improved top and bottom-line performance in the three quarters of 2021 and an upbeat guidance for the current year. The company has been benefiting from the ongoing strength in packaging demand for food, medical supplies and consumer staples, and increased e-commerce activity. Apart from strong demand for automated equipment and sustainable packaging solutions, SEE is also witnessing higher food service demand. The company’s Reinvent SEE Strategy has been contributing to its earnings performance.Sealed Air has an expected long-term earnings per share growth rate of 9.6%. The company has a trailing four-quarter earnings surprise of 6.5%, on average.The company’s current-year earnings estimates have been revised upward by 1% over the past 30 days, while the same for 2022 has moved north by 2%. The Zacks Consensus Estimate for earnings for 2021 is currently pegged at $3.56, which suggests year-over-year growth of 11.6%. The same for 2022 stands is $4.11, indicating year-over-year improvement of 15.5%.Share Price PerformanceThe stock has gained 41.4% year to date, compared with the industry’s growth of 9.3%.Image Source: Zacks Investment ResearchDriving FactorsSolid Results So Far This Fiscal: Sealed Air has delivered year-over-year improvement in both revenues and adjusted earnings per share in all the three quarters of 2021. Overall revenues improved 12% year over year to $4 billion in the first nine-month period of 2021. Sales in the Food segment in the period went up 8% on favorable pricing and higher volumes with increases across all regions, primarily driven by rising demand in the global food service industry compared to last year and increased automated equipment sales. The Protective Segment’s sales were up 18%, on higher volumes on surging industrial segment demand, strength in automated equipment, sustained momentum in e-commerce and higher demand across all regions.Favorable pricing due to price actions to offset rising input cost led to the improved results as well. Adjusted earnings in the first nine month period of 2021 came in at $2.43, up 6% year over year on higher volumes and benefits from the company’s Reinvent SEE initiatives.Upbeat Guidance: For 2021, Sealed Air expects net sales of $5.5 billion, indicating an increase of 12% as reported and 11% in constant dollars. The company now expects adjusted EBITDA between $1.12 billion and $1.14 billion for the current year. The adjusted earnings per share are anticipated in the band of $3.50 to $3.60. The mid-point of the guidance implies year-over-year earnings growth of 11%. Strong Demand to Fuel Top Line: Around 63% of Sealed Air’s revenues stem from packaging of protein, foods, fluids and goods for the medical and life sciences industries. The food care business continues to gain from the shift in demand for case ready, shrink bags and pre-packaged meals and snacks designed for home consumption amid the pandemic-induced restrictions.In the medical and life sciences portfolio, demand for protected packaging solutions for medical supplies, pharmaceuticals, and personal protective equipment remains high. It has been gaining from growth in online shipments of medical equipment and pharmaceuticals. The company has been witnessing increased demand for temperature assurance packaging solutions that ensure safe and secure distribution of COVID-19 vaccines. Further, e-commerce sales, which contribute around 14% to the company’s sales, have been on the rise amid the stay-at-home scenario.  Sealed Air continues to capitalize on global e-commerce growth and increased demand for recyclable materials, fiber-based solutions and automated packaging.Ongoing Benefits From Reinvent SEE Strategy: In December 2018, Sealed Air announced a reformation plan — Reinvent SEE Strategy — along with a fresh restructuring program to drive growth. The new strategy is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements. One of the most vital aspects of this strategy involves investment in technology and resources focused on new and existing high-growth markets. The company achieved $43 million benefits from Reinvent SEE in the first nine-month period of 2021, which puts it on track to realize benefits of around $65 million for the full year.Automation & Acquisitions Remain Catalysts: Sealed Air’s focus on automation, digital and sustainability is expected to drive above-market growth in its core business. The company’s pipeline for automated equipment continues to improve, and it has set a target of over $500 million by 2025.The acquisition of Automated Packaging Systems strengthened Sealed Air’s automated solutions and sustainable packaging offerings. The buyout of AFP, Inc. expanded its protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. AFP along with the prior acquisition of Fagerdala align well with the ship-in-own-container (SIOC) trend in e-commerce. This trend is transforming e-commerce packaging as more distributors want manufacturers to have their primary packaging parcel ready. These acquisitions and investments that the company has been making in its core business are likely to drive growth.Zacks RankSealed Air currently carries a Zacks Rank #3 (Hold).A Look at Other Packaging StocksBerry Global Group BERY has been gaining from strength in its food & beverage and healthcare end markets, and recovery in the construction space. Its focus on improving operational productivity, along with its partnerships across the value chain, bode well. Shares of BERY have gained 21% in the past year.The Zacks Consensus Estimate for Berry Global’s fiscal 2022 earnings fiscal 2022 earnings has been revised upward by 15% in the past 30 days. The company has a trailing four-quarter earnings surprise of 16.5%, on average. The company has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Amcor plc’s AMCR sales have been benefiting from the stay-at-home trend amid the pandemic. Both the Rigid Packaging and Flexible Packaging segments are performing well through a combination of organic growth and disciplined cost control. The company’s shares have gone up 2% in the past year.The Zacks Consensus Estimate for Amcor’s fiscal 2022 earnings indicates year-over-year growth of 8%. AMCR has a trailing four-quarter earnings surprise of 1.2%, on average. The company carries Zacks Rank of 3.Sonoco Products Co. SON has been gaining from elevated at-home eating trends. The Industrial Paper Packaging segment will benefit from strong demand. The company's focus on optimizing businesses, productivity improvement, standardization and cost control will drive the results. Shares of SON have gained 5% in the past year.The Zacks Consensus Estimate for Sonoco’s ongoing-year earnings indicates a year-over-year growth of 3.5%. It has a Zacks Rank of 3 and a trailing four-quarter earnings surprise of 3%, on average. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sealed Air Corporation (SEE): Free Stock Analysis Report Sonoco Products Company (SON): Free Stock Analysis Report Berry Global Group, Inc. (BERY): Free Stock Analysis Report Amcor PLC (AMCR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 26th, 2021

Goodyear"s (GT) Q3 Earnings & Revenues Beat on High Volumes

Goodyear's (GT) Q3 earnings beat estimates and rise year over year on the back of higher volumes and synergies from the Cooper Tire merger. The Goodyear Tire and Rubber Company GT reported third-quarter 2021 adjusted earnings per share of 72 cents, surpassing the Zacks Consensus Estimate of 23 cents. The bottom line also increased from the year-ago figure of 10 cents. High sales volumes across all segments, thanks to Cooper Tire buyout synergies buoyed the results.The company registered net revenues of $4,934 million, surging 42.3% on a year-over-year basis on higher volume, favorable pricing, increased sales from other tire-related business, and synergies from the Cooper Tire buyout. The top line beat the Zacks Consensus Estimate of $4,613.2 million.In the reported quarter, tire volume was 48.2 million units, up 32% from the year-ago period. Replacement tire shipments increased 44%, benefiting from the buyout of Cooper Tire. Meanwhile, original equipment unit volume fell 7% year over year, affected by lower vehicle production due to shortages of components and materials.The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise The Goodyear Tire & Rubber Company price-consensus-eps-surprise-chart | The Goodyear Tire & Rubber Company QuoteSegmental PerformanceIn the reported quarter, the Americas segment generated revenues of $2,967 million, higher than the prior-year period’s $1,823 million. The segment registered an operating income of $259 million, rising from $106 million. Higher volume and favorable price/mix aided the upswing in operating margins.Revenues in the Europe, Middle East and Africa segment were $1,397 million, rising 21% from the year-ago period. The segment’s operating profit came in at $81 million in the quarter, up from $22million, driven by improvements in price/mix and high volumes.Revenues in the Asia Pacific segment increased 17% year over year to $570 million. The segment’s operating profit came in at $32 million compared with $34 million a year ago owing to high commodity costs.Financial PositionGoodyear — which shares space with other auto players like Bridgestone BRDCY, Magna MGA, and Michelin MGDDY — had cash and cash equivalents of $1,187 million as of Sep 30, 2021, down from $1,539 million on Dec 31, 2020. As of the third quarter of 2021, long-term debt and finance leases amounted to $7,153 million, up from $5,432 million on Dec 31, 2020. Currently, Goodyear carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goodyear Tire & Rubber Company (GT): Free Stock Analysis Report Magna International Inc. (MGA): Free Stock Analysis Report Bridgestone Corp. (BRDCY): Free Stock Analysis Report Michelin (MGDDY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 8th, 2021

Futures Hit Fresh All-Time Highs, Treasuries Rise On Post-Fed Euphoria

Futures Hit Fresh All-Time Highs, Treasuries Rise On Post-Fed Euphoria US equity futures plowed on to record-er highs overnight, propped up by a slew of stellar earnings reports and as investors shrugged off the Federal Reserve's first steps to begin paring its pandemic-era support as Powell reiterated that the central bank can be patient on raising interest rates (even if rate hikes odds pricing in lliftoff in July were virtually unchanged after Powell's announcement). The Fed Chair announced Wednesday that the central bank will start reducing bond purchases, adding that officials won’t flinch from action if warranted by inflation. The U.S. dollar and Treasuries advanced. “There was no dramatic Hulk-like metamorphosis from the Fed last night as they kept close to expectation," DB's Jim Reid said in a note. At 730 a.m. ET, Dow e-minis were down 7 points, or 0.02%, S&P 500 e-minis were up 6.75 points, or 0.15%, having earlier tagged a record high 4,662.5, and Nasdaq 100 e-minis were up 61.25 points, or 0.39%. The U.S. dollar and Treasuries advanced. The S&P 500 and Nasdaq notched record all-time closes for their fifth straight sessions on Wednesday, while the Dow Jones Industrial Average posted a record close for the fourth session in a row. A cheery third quarter earnings season coupled with upbeat commentary about future growth from corporate America has helped Wall Street largely dismiss concerns around rising prices, supply chain snags and a mixed macro-economic picture. A widely expected move by the Fed on announcing its plan to start tapering its monthly bond purchases beginning this month, while sticking to the belief about the "transitory" nature of inflation and waiting for more job growth - before raising interest rates, also helped sentiment. Fed policy makers announced a stimulus-tapering plan as expected, but expressed no hurry to raise benchmark rates even though inflation may run hot for months. While that supported risk-taking in stock markets, a second-day reality check appeared to have emerged in the bond and currency markets. A tug-of-war looked set to continue between dovish central banks and markets pricing in quicker-than-expected rate hikes. Data due at 08:30 a.m. ET is expected to show the number of Americans filing new claims for unemployment benefits fell to a fresh 19-month low last week; It will be followed by a more comprehensive nonfarm payrolls report on Friday: "The risks are now skewed towards the (payrolls data) finally aligning with signals elsewhere in the U.S. economy, after a few months of disappointments," said Jeffrey Halley, senior market analyst, at OANDA. "A number north of 500K could cause equity markets to reconsider ignoring the implications of the Fed taper. Similarly, a low print will keep the lower-for-longer monetary party in equities going well into the night." Elsewhere, U.S. Representative Rick Larsen said on Wednesday his fellow House Democrats could complete votes on President Joe Biden's social spending and infrastructure bills as early as midday on Friday In premarket trading, shares of Qualcomm jumped 8.1% after the chipmaker forecast better-than-expected profit and revenue for its current quarter on soaring demand for chips used in phones, cars and other internet-connected devices. Tesla added 1.9% and was set for a record open, while mega-cap tech titans GAMMA (f/k/a FAAMG) edged higher. Oil firms including Exxon and Chevron rose 0.9% and 0.5%, respectively, tracking crude prices. Biotech darling Moderna imploded as much as 11% after it missed expectations and guided sharply lower. Here are some of the biggest U.S. movers today: Qualcomm (QCOM US) gains 8% premarket as results at the chip giant showed a robust performance against a backdrop of supply constraints, while strength in Android handsets is underpinning growth. Booking (BKNG US) gained 3.7% in post-market trading Wednesday after the company reported gross bookings that beat analysts’ forecasts, as an increase in Covid-19 vaccination rates helped spur a rebound. Roku (ROKU US) falls 7% in premarket after third-quarter results that missed expectations on key metrics for the maker of streaming equipment. Upland Software (UPLD US) slumps 22% in premarket after results, with Jefferies downgrading the stock as it’s the third quarter in a row the firm has not delivered a beat on the top line. Skilz (SKLZ US) drops as much as 13% in premarket after the mobile games platform operator reported a net loss for the third quarter. TDH (DOGZ US) surges as much as 173% in U.S. premarket trading after the pet food firm and meme-trader favorite announced a placement. Magnite (MGNI US) falls 10% in premarket after the advertising solutions firm reported adjusted revenue for the third quarter that lagged behind the average analyst estimate. Qorvo (QRVO US) falls 7% in premarket trading after a sales forecast for the communications systems-maker that fell short of the average analyst estimate. Fastly (FSLY US) jumped 11% in premarket after the infrastructure software maker reported quarterly revenue that surpassed the average analyst estimate after misses in the past two quarters. QuinStreet (QNST US) climbs 21% premarket as the online marketing company raises its full year outlook. European stocks popped higher on the open, then drifted off best levels. The Euro Stoxx 50 rose as much as 0.7% with real estate, oil & gas and healthcare the strongest sectors. Alstria Office REIT AG soared as much as 20% after Brookfield Asset Management Inc. made a bid to take it private. Earlier in the session, Asian stocks rose, headed for their first gain in three days, after the Federal Reserve moved to taper stimulus while saying it will be patient on raising interest rates.  The MSCI Asia Pacific Index climbed as much as 0.7%, driven by gains in technology shares including Tencent, Alibaba and Keyence. Japan and China led gains around the region, with stocks also climbing in Indonesia, Thailand and Hong Kong. The Fed indicated it was alert to inflation risks but still sees them as transitory due to pandemic-related supply and demand imbalances. The S&P 500 climbed to a fresh record high after the Fed comments, pushing its gain for 2021 to 24%, while the Asian benchmark is little changed on the year. “The Fed seems to create market expectations that the decoupling of asset purchases reduction and rate hikes remains intact,” said Banny Lam, head of research at CEB International Investment Corp. “Widening negative real interest rates also provide continued support to Asian equities.” Markets in Singapore, India and Malaysia are closed for holidays In Australia, the S&P/ASX 200 index rose 0.5% to close at 7,428.00, boosted by banks, real estate and technology shares. Eight of the 11 industry groups closed higher. Nib rose after the insurance provider reported premium revenue A$669.5 million, up 8.5% year on year. Domino’s Pizza plunged after the pizza chain operator outlined some inflationary risks for 2022 and flagged weaker sales in Japan. Australia’s bright trade picture was underpinned by strong commodities exports. September trade data revealed the surplus narrowing to A$12.2 billion, after an estimated A$12.4 billion. In New Zealand, the S&P/NZX 50 index fell 0.4% to 12,943.94 In FX, the Bloomberg Dollar Spot Index recovered Wednesday’s drop and advanced 0.3% versus all of its Group-of-10 peers apart from the yen amid speculation that a buoyant U.S. economy will support the currency. The Bloomberg Dollar index erased its losses this week, staying within a bullish technical range it has traded in since June. The Treasury curve bull-flattened with U.S. 10-year Treasury yields falling 3bps to 1.57%. “Dollar-yen looks to be finding some support” as it seems reasonable to expect Treasury yields to trend higher, said Sean Callow, senior currency strategist at Westpac. The Fed “may not be moving any more swiftly than expected to the exit from emergency levels of policy accommodation, but it is still exiting,” Ryan Wang, a U.S. economist at HSBC Holdings Plc, wrote in a note. “This should be enough to support the dollar against a number of currencies where central-bank guidance is more overtly dovish. The continued moderation in global activity is also likely to support the USD.” The euro fell to its weakest level this week and was the worst performer among G-10 currencies; European bond yields fell, led by the short end. The pound fell against a stronger dollar and gained against the euro as investors weighed up the Bank of England’s upcoming monetary policy announcement. The pound’s volatility skew versus the dollar has shifted modestly higher this week ahead of the Bank of England policy decision, yet remains deeply in favor of downside exposure. Norway’s krone extended losses against both the dollar and the euro, even as Norges Bank left its key rate unchanged at 0.25% as expected while reitirating that the policy rate will most likely be raised in December. In rates, curves flattened as 5-, 10- and 30-year bond yields fell at least two basis points each on Thursday, while the two-year rate was little changed. Treasuries were higher with the curve flatter, erasing a portion of Wednesday’s post-FOMC bear-steepening losses. The 10-year yield was richer by ~3bp at 1.57%, outperforming bunds by ~2bp, gilts by ~1bp; Bank of England rate decision priced into overnight swaps is a hike, while analysts favor no change. Treasuries outperformed European bond markets, with stock futures holding Wednesday’s record highs. Bank of England rate decision at 8am ET may deliver first increase since the pandemic. U.S. curves were flatter, unwinding some of Wednesday’s steepening, with 2s10s tighter by ~2bp. In commodities, crude futures rally, recouping over half of Wednesday’s losses. WTI rises 0.9% to regain a $81-handle, Brent adds over 1% before stalling near $83 ahead of OPEC+ gathering. Spot gold holds Asia’s narrow range near $1,775/oz. Base metals are mixed: LME copper and nickel are the best performers; tin and zinc are in the red. Looking at the day ahead now, and the highlight will be the aforementioned BoE meeting, while there’ll also be remarks from ECB President Lagarde, the ECB’s de Cos, Elderson and Schnabel, and BoE Deputy Governor Cunliffe. On the data side, releases include German factory orders for September, the Euro Area October services and composite PMIs and September PPI reading, whilst from the US there’s the September trade balance and the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting to discuss output, and earnings releases today include Moderna, Square, Airbnb, Uber, Duke Energy and Regeneron. Market Snapshot S&P 500 futures up 0.1% to 4,659.50 STOXX Europe 600 up 0.5% to 483.53 MXAP up 0.6% to 199.02 MXAPJ up 0.4% to 647.67 Nikkei up 0.9% to 29,794.37 Topix up 1.2% to 2,055.56 Hang Seng Index up 0.8% to 25,225.19 Shanghai Composite up 0.8% to 3,526.87 Sensex down 0.4% to 59,771.92 Australia S&P/ASX 200 up 0.5% to 7,427.99 Kospi up 0.3% to 2,983.22 German 10Y yield little changed at -0.18% Euro down 0.5% to $1.1551 Brent Futures up 0.8% to $82.57/bbl Gold spot up 0.3% to $1,776.28 U.S. Dollar Index up 0.37% to 94.21 Top Overnight News from Bloomberg The Bank of England will decide Thursday whether to deliver its first interest-rate hike since the pandemic as a divided Monetary Policy Committee grapples with spiking inflation and slowing growth The U.S. is asking OPEC+ to increase output by as much as 800,000 barrels a day, said delegates and diplomats, but the organization is expected to stick to its planned gradual increase, according to a Bloomberg survey Investors are hoping the Federal Reserve can manage the path toward rate hikes as smoothly as its taper announcement, according to strategists, who are cautiously optimistic the coming months will see moderate advances for yields, the dollar and equities. Friday’s labor report is seen as the next flash point for markets, given rates traders remain relatively aggressive about the need for Chair Jerome Powell to avoid being overly patient about hiking borrowing costs Bank of Japan Governor Haruhiko Kuroda and Prime Minister Fumio Kishida helped further shore up the nation’s commitment to its 2% inflation goal and tamp down any lingering speculation of a rethink of the target or tapering plans Having abandoned its experimental bond-yield target two days ago, the Reserve Bank of Australia is now left with the trusty old tools of policy making -- facing traders who still reckon it’s behind the curve Here is a more detailed breakdown of global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the fresh record highs stateside in the aftermath of the FOMC where the Fed announced it is to begin tapering asset purchases but suggested it was in no rush to hike rates. ASX 200 (+0.5%) was kept afloat by advances in tech and financials but with gains in the index capped after weak Retail Sales data and rising COVID-19 cases for Australia’s most populous states, while the energy sector underperformed after oil prices tumbled 4.5% yesterday due to bearish inventory data and the announcement that Iran nuclear talks will resume on November 29th in Vienna. Nikkei 225 (+0.9%) was buoyed on return from holiday as it coat-tailed on the recent advances in USD/JPY and with Japan mulling easing border controls as soon as next Monday, with Toyota also holding on to gains after a jump in H1 profits and JPY 150bln buyback announcement, although the Nikkei finished well off intraday highs after stalling on approach to the 30k level. Hang Seng (+0.8%) and Shanghai Comp. (+0.8%) conformed to the broad upbeat mood but was slow to start after another substantial liquidity drain by the PBoC despite the suggestion by Chinese press that recent reverse repo action showed stabilisation efforts. In addition, COVID-19 concerns continued to linger with Beijing having suspended inbound trains from 23 regions to curb the spread of the virus, while there was also attention on the geopolitical front after the US Department of Defense warned that China’s nuclear stockpile is outpacing forecasts and with China conducting week-long live-fire drills in the East China Sea. Finally, 10yr JGBs were steady with only a slight pullback seen from yesterday’s advances and with prices largely ignoring the subdued picture in T-notes which were pressured heading into the Fed taper announcement, while JGBs were also kept afloat after the 10yr inflation-indexed auction from Japan which showed an increase in both the b/c and lowest accepted prices. Top Asian News From Pianos to Paint, the Chip Crunch Is Hurting Japan Earnings Toyota’s Swelling Profits Belie Global Auto Parts Shortages EU Lawmakers’ Call for High Level Taiwan Ties Defies China Shimao Halts Retail Investors’ Bids for Local Bonds After Plunge Stocks in Europe hold onto the positive bias (Euro Stoxx 50 +0.4%; Stoxx 600 +0.5%) - which originally emanated from the post-FOMC Wall Street session and later reverberated across APAC. US equity futures have been consolidating following yesterdays post-Powell ramp, with the NQ (+0.4%) outperforming the RTY (+0.2%), ES (+0.1%) and YM (Unch). Back to Europe, bourses are posting broad-based gains in what was a morning doused in European corporate updates, whilst the UK’s FTSE 100 (+0.4%) is on standby for the BoE policy decision (full preview available in the Newsquawk Research Suite). Sectors in Europe are mostly firmer with no real overarching bias. Oil & Gas lead the gains following yesterday’s underperformance and in the run-up to the JMMC/OPEC+ meetings later today. Healthcare meanwhile is boosted by pharma-behemoths Roche (+2.5%) and Novartis (+1.6%) after the firms agreed on a bilateral transaction for the sale of 53.3mln (approximately 33%) Roche bearer shares held by Novartis for a total consideration of USD 20.7bln. This in turn has pushed the SMI (+0.8%) to modestly outperform the region. The Telecoms sector is also buoyed by BT (+5.7%) amid constructive earnings, but gains for the sector are capped Telefonica (-1.6%), who hold a larger sector weighting, following their metrics. The morning has been busy in terms of bank earnings, although the sector is constrained by yield dynamics. Nonetheless, SocGen (+3.3%), ING (+1.1%), Commerzbank (+5.2%) and Credit Suisse (+0.7%) all reported today – with the latter also announcing the exit of its prime brokerage activities and will be shifting its focus on to its wealth management business in a bid to better manage risks. Over to the consumer sector, Sainsbury’s (-4.3%) trundles lower after flagging complications from supply chain issues. Finally, in terms of M&A, Alstria Office (+17.5%) soars after Brookfield offered to buy the Co. for EUR 19.50/shr in cash, a premium to yesterday’s EUR 16.62/shr closing price. Top European News Brookfield Enters German Real Estate Fray With Bid for Alstria Credit Suisse Flags Loss Next Quarter to Cap Year to Forget Novartis Unwinds Roche Ties With $20.7 Billion Stake Sale Aston Martin Counts on $3 Million Valkyrie as SUV Drives Rebound In FX, the Dollar has erased all and more of its initial or knee-jerk declines in wake of the FOMC policy meeting that confirmed the start of QE tapering in a few days' time at the pre-announced pace, but kept clear distance between the unwinding of asset purchase and rate lift-off. However, there was a subtle tweak to the language regarding inflation to indicate less of a transitory assessment and Fed chair Powell refrained from using the ‘t’ word in his press conference before responding to a question by saying that it is also used to convey the view that prices rises caused by bottlenecks and supply-demand imbalances will not leave a legacy of persistently higher inflation. In index terms, a marginally higher peak at 94.280 vs 94.217 at best on Wednesday follows a fractionally higher low of 93.818 vs 93.809 and brings Monday’s w-t-d apex (94.313) back into contention ahead of Challenger Lay-offs, jobless claims, trade data and Q3 labour costs that were highlighted by Powell as a key gauge of tightness in the labour market, which he expected to reach max employment levels by mid-2022. EUR - Mixed Eurozone services and composite PMIs have not afforded the Euro any protection from the aforementioned Greenback revival, while the yield backdrop is also weighing as EGB/UST spreads widen, but Eur/Usd might glean some support from option expiries as 1.1 bn resides at 1.1550 and 1.1525. Moreover, the headline pair has found underlying bids around the half round number and a recent trough comes in at 1.1535 (October 29) ahead of the double 2021 low of 1.1525. GBP - Sterling is also succumbing to the broad Buck bounce, but also treading cautiously into the BoE amidst a marked unwind of rate hike pricing via Short Sterling contracts alongside a recovery in UK debt. Cable is hovering around 1.3620 having pulled up just shy of 1.3700 and options are anticipating an 80 pip break-even for the live MPC event that is far from certain even though ‘markets’ are anticipating a 15 bp hike. Note also, implied volatility on the Eur/Gbp straddle suggests a 43 pip move either way, though the cross may also be prone to movement from the current 0.8491-65 range pending developments in France where Brexit Minister Frost is aiming to untangle crossed lines over fishing licences. NZD/AUD/CAD - The Kiwi, Aussie and Loonie are all weaker vs their US counterpart, with Nzd/Usd and Aud/Usd hovering in the low 0.7100s and 0.7400s respectively, and the latter not far off post-RBA reversal lows after downbeat Q3 retail sales and exports within the overall trade balance overnight. Meanwhile, only a tame rebound in crude prices appears to be capping Usd/Cad around a 1.2400 axis in advance of Canadian trade and the jobs face-off with the US on Friday. CHF/JPY - Relative outperformers, or at least holding up better than other majors in the face of the Dollar rebound, as the Franc meanders between 0.9144-11 irrespective of a deterioration in Swiss consumer sentiment and the Yen contains losses below 114.00 on the return of Japanese markets from Culture Day to a benign bond backdrop overall. Note, hefty option expiry interest may keep Usd/Jpy restrained as 2.1 bn sits at the round number and a further 1.8 bn at 114.30. In commodities, WTI and Brent front-month futures have firmer on the day as the benchmarks clamber off yesterday’s worst levels despite the rampant Dollar and in the run-up to the JMMC and OPEC+ meetings slated for 13:00GMT and 14:00GMT respectively (full preview available in the Newsquawk Research Suite). Markets expect a continuation of the current plan to ease output curbs by 400k BPD/m. Outside calls have been getting louder for the producers to open the taps more than planned amid inflationary feed-through to consumers and company margins, although ministers, including de-facto heads Saudi and Russia, have been putting weight behind current plans, with no pushback seen from members within OPEC+ thus far. Furthermore, the COVID situation in China is deteriorating, hence ministers will likely express a cautious approach. However, the US is asking OPEC+ to increase supply by 600-800k BPD, according to delegates. Note some journalists noted that there are three options the US has offered OPEC+, 1) a 600k BPD hike, 2) an 800k BPD hike and 3) 100% compliance on a 400k BPD hike. Nonetheless, sources suggested OPEC+ is likely to stick to plans to raise output by 400k BPD despite calls from the US for extra supply; adding that the US has plenty of capacity to raise output itself. The US-OPEC+ dynamics will be worth keeping on the radar following this meeting. As a reminder, the US threatened the release of its SPR whilst also refusing to rule out oil export bans – suggesting that all tools are being looked at in a bid to lower prices. It’s also worth being cognizant of the knock-on effect the OPEC+ decision will have on Iranian nuclear talks – scheduled to resume on November 29th – with higher oil prices and a lack of OPEC+ coordination, possibly providing more incentives for the US to offer more concessions. WTI Dec takes aim at USD 82/bbl (vs 79.74/bbl low) at the time of writing whilst Brent Jan extends above USD 83/bbl (vs 81.07/bbl low). Metals markets are less interesting this morning, spot gold and silver are consolidating and trade relatively flat, with the former around USD 1,775/oz and the latter just north of USD 23.50/oz. Meanwhile, LME copper is modestly firmer but trades on either side of USD 9,500/t. US Event Calendar 8:30am: Oct. Initial Jobless Claims, est. 275,000, prior 281,000; Continuing Claims, est. 2.15m, prior 2.24m 8:30am: 3Q Unit Labor Costs, est. 7.0%, prior 1.3%; Nonfarm Productivity, est. -3.1%, prior 2.1% 8:30am: Sept. Trade Balance, est. -$80.2b, prior -$73.3b DB's Jim Reid concludes the overnight wrap This morning I’m actually going to put a suit on for the first time in nearly 20 months. In a way I’ll be upset if it fits me as I’ve been doing my Bryson DeChambeau weights routine for much of this time between pockets of injuries and surgery. However, I suspect 30-40mins 3 or 4 times a week won’t leave my suit too vulnerable to an “Incredible Hulk” moment when I put it on. There was no dramatic Hulk-like metamorphosis from the Fed last night as they kept close to expectations and delivered the $15/bn a month taper that our US econ team and consensus expected (Their full review is here). They pre-announced the purchase pace for November and December, whilst remarking that a similar pace would likely prevail so long as the economy evolves as expected. The Fed maintained the pace of taper would change in step with any changes to the outlook. The statement slightly tweaked the characterisation of inflation, noting that it was expected to be transitory. Chair Powell explained this in the press conference, maintaining the institutional view that elevated inflation was not expected to remain persistent and would return to the Fed’s long-term goal as supply bottlenecks abated and Covid-19 moved to the rear-view mirror. He also admitted the change reflected the reality that inflation has been much higher than they had expected, and recognised the burdens that it created for everyday consumers. The press conference spent a lot of time focusing on the dichotomy between high near-term inflation and the Committee’s assessment of full employment, as the market moves to pricing when lift-off will take place. The Chair noted the Committee will need to be flexible when judging what constitutes full employment, as it is a moving target and has moved since before the pandemic. A key point he returned to multiple times is the Committee would need to judge how the labour market evolves once the Delta variant is well and truly behind us. While stressing patience in evaluating these incoming data, he maintained optionality by also noting the Fed would stand ready to raise rates if inflation were threating to move persistently above the Fed’s goal. This risk management consideration is why they’re maintaining flexibility over the pace of taper. STIR markets were still pricing lift-off to take place sometime in 3Q 2022, and for there to be 2 hikes next year, unchanged from before the meeting. Equities were mostly flat on the day before the announcement but progressively climbed higher during and after the presser, with the S&P 500, Nasdaq, and DJIA finishing the day +0.65%, +1.04%, and +0.29% higher, respectively. 2yr yields increased +1.8bps on the day but closed roughly where they were pre-announcement. 10yr yields were +5.3bps higher on the day though with around +4bps added post FOMC and around +9bps from the early lows when fixed income was rallying across the globe. Elsewhere, 10yr breakevens were wider, increasing +3.6bps to 2.56%. Meanwhile, ECB President Lagarde sounded in no hurry to follow the BoE (preview immediate below for today) and the Fed on rate hikes. In a speech yesterday, she said that their three conditions for raising rates “are very unlikely to be satisfied next year”, as “the outlook for inflation over the medium term remains subdued” in spite of the recent surge in inflation. She re-emphasised the point in an interview almost verbatim later in the day while the Fed presser was ongoing, stating a 2022 hike was very unlikely, offering more forceful pushback of market pricing than she opted for during last week’s Governing Council meeting. Central banks will remain in the spotlight again today thanks to the BoE’s policy decision, which is out at 12:00 London time. Our UK economists are expecting that they’ll deliver their first post-pandemic rate hike of 15bps, taking the Bank Rate up to 0.25%, as well as end their current QE program. Similarly to the US, this comes amidst inflation readings that have persistently surprised to the upside over recent months, with CPI at +3.1% in September, and our economists write that they see the BoE’s forecasts being upgraded to show peak CPI nearer to 5%, remaining above target for nearly all of next year, which is broadly in line with recent comments from Chief Economist Pill in a recent FT interview. For more details see their preview (link here). Against this backdrop of central bank action, we had some solid economic data out of the US yesterday that further supported risk appetite. First, there was the ISM services index for October, which rose to a record high of 66.7 (vs. 62.0 expected), so a very promising sign at the start of Q4, even if the prices paid measure rose to 82.9, which was the highest since 2005. Before that we also had the ADP’s report of private payrolls for October, which showed an increase of +571k (vs. +400k expected), which is the strongest growth since June. That comes ahead of tomorrow’s US jobs report, where our economists are looking for growth of +400k in the headline nonfarm payrolls number, with the unemployment rate ticking down to 4.7%. I’ve been trying to get my mantra of the US more likely travelling down a “growthflation” path (over “stagflation”) into the vernacular. However, I think I’ll need a better term if I want it to rival say “BRICs”! That backdrop of positive data supported European markets ahead of the Fed, where the STOXX 600 advanced +0.35% to hit another all-time high. Sovereign bonds advanced too, with yields on 10yr bunds (-0.3bps), OATs (-0.8bps) and BTPs (-2.4bps) all moving lower, though gilts (+3.6bps) were the exception ahead of the BoE later. The strong data also lifted us off the yield lows of the day as we started with a big bond rally. We also saw some significant movements in energy prices, with European natural gas futures surging back +13.23% yesterday amidst a recent decline in fuel shipments from Russia, whilst both Brent crude (-3.22%) and WTI (-3.63%) oil prices saw a major pullback ahead of today’s OPEC+ meeting. In Asia, most major indices are trading higher this morning, including the Nikkei 225 (+0.74%), the KOSPI (+0.30%), the Hang Seng (+0.27%) and the Shanghai Composite (+0.64%), amid gains in US equities yesterday. S&P 500 futures (+0.01%) are almost unchanged, while the 10y US Treasury is at 1.60% (-0.5bps). Meanwhile on the political scene, the US Democrats were reacting to a bad set of results in Tuesday’s election, after the Republicans won the Virginia governor’s race. However, the New Jersey governor’s race was won by Democrat Gov. Phil Murphy 50.2% vs 49%, but came in much closer than the polls had suggested before the election. Gov. Murphy is the first Democrat to win re-election as governor in the state since 1977. Overall though, since President Biden won those two states in 2020 by 10pts and 16pts, respectively, the results have obviously come as a shock to many Democrats. The situation has strong echoes of 2009, a year after President Obama’s election when the Democrats also had control of the presidency and both houses of Congress, when they were trying to push through Obamacare. That round of elections saw the Republicans win the gubernatorial elections in both Virginia and New Jersey (following Democratic victories on the previous occasion), before the Republicans went onto make sizeable gains in the 2010 midterm elections the following year. There’s still just over a year until President Biden’s first set of midterm elections, but the Democrats will be hoping this doesn’t presage a repeat of those 2010 losses. Lastly on the data front, US factory orders grew by +0.2% in September (vs. +0.1% expected). Separately, the UK’s composite PMI was revised up a point from the flash reading to 57.8, and the US composite PMI was also revised up three-tenths to 57.6. To the day ahead now, and the highlight will be the aforementioned BoE meeting, while there’ll also be remarks from ECB President Lagarde, the ECB’s de Cos, Elderson and Schnabel, and BoE Deputy Governor Cunliffe. On the data side, releases include German factory orders for September, the Euro Area October services and composite PMIs and September PPI reading, whilst from the US there’s the September trade balance and the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting to discuss output, and earnings releases today include Moderna, Square, Airbnb, Uber, Duke Energy and Regeneron. Tyler Durden Thu, 11/04/2021 - 07:53.....»»

Category: blogSource: zerohedgeNov 4th, 2021

Ford (F) Beats on Q3 Earnings, Ups "21 View, Reinstates Dividend

Ford (F) forecasts 2021 EBIT within $10.5-$11.5 billion, higher than the prior view of $9-$10 billion. Ford F reported adjusted earnings of 51 cents per share for third-quarter 2021, surpassing the Zacks Consensus Estimate of 28 cents. Higher-than-expected profits, primarily in North America and South America markets, led to this outperformance.  The bottom line, however, compares unfavorably with year-ago quarter’s earnings of 65 cents per share. The company’s consolidated third-quarter revenues came in at $35,683 million, down 4.8% year over year.Shares of the company rallied more than 8.5% in after-hours trading yesterday, as the U.S. auto giant managed to beat the earnings projection for the third quarter of 2021. Investors were also encouraged as the company raised its full-year 2021 guidance for the second time this year, citing robust projections for the fourth quarter, including an increase in wholesale shipments from the third quarter, combined with a continued healthy mix of vehicles sold and net pricing.Ford also announced the decision to reinstate its regular dividend starting from the fourth quarter, more than a year and a half after suspending the payments on account of the coronavirus pandemic. The company will pay a fourth-quarter dividend of 10 cents per share on Dec 1, to shareholders as of Nov 19, 2021.Ford Motor Company Price, Consensus and EPS Surprise Ford Motor Company price-consensus-eps-surprise-chart | Ford Motor Company QuoteSegmental PerformanceFor the third quarter, the total wholesale volume in the Ford Automotive segment dropped 14% year over year to 1,012,000 units but surpassed the consensus mark of 966,000 units. Revenues of the segment slid 4% year over year to $33.2 billion but outpaced the Zacks Consensus estimate of $31.7 billion. Earnings before interest and taxes came in at $2,459 million, lower than the year-ago earnings of $2,665 million.In North America, revenues dropped 5% year on year to $24 billion for the reported quarter. The metric, however, surpassed the Zacks Consensus Estimate of $22.9 billion. The wholesale volume declined 16% from the year-earlier quarter to 546,000 units. The EBIT totaled $2,423 million, lower than the earnings of $3,202 million in the corresponding quarter of 2020, but beating the consensus mark of 1,671 million.In South America, revenues edged down 1% year over year to $0.6 billion for the third quarter but topped the consensus mark of $0.5 billion. The wholesale volume plunged 60% from the year-ago quarter to 20,000 units but marginally exceeded the consensus mark of 19,600 units. The unit’s pretax earnings improved to $2 million, turning around the loss of $108 million reported in the prior-year quarter amid cost-cut and rejig efforts. The reported EBIT also beat the consensus mark of a loss of $84 million.In Europe, revenues jumped 7% year on year to $6.1 billion for the September-end quarter, but marginally lagged the consensus mark of $6.2 billion. The wholesale volume dipped 9% year over year to 218,000 units and also missed the consensus mark of 221,000 units. The pretax loss for the segment totaled $52 million, narrower than the year-ago loss of $444 million, thanks to the aggressive restructuring initiatives. The reported loss is also narrower than the consensus mark of a loss of $228 million.In China, revenues plummeted 41% year over year to $0.6 billion for the reported quarter. The wholesale volume edged down 1% from the prior-year figure to 162,000 units. However, the pretax loss narrowed from the prior year’s $57 million to $39 million.In the International Markets Group, revenues were down 7% from the year-ago figure to $1.9 billion. The wholesale volume slid 13% from the prior-year level to 66,000 units and pretax earnings totaled $125 million, higher than the $72 million reported in the year-ago period.The third-quarter revenues from the Ford Credit unit declined 12.3% year over year to $2,434 million, missing the Zacks Consensus Estimate of $2,782 million. The pretax earnings totaled $1,077 million, lower than the $1,123 million reported in the comparable last year and missed the consensus mark of $1,129 million.Revenues from Ford Mobility came in at $38 million, surging from the year-earlier level of $17 million.Financial PositionFord reported adjusted free cash flow (FCF) of $7,743 million during the quarter, higher than the prior-year quarter’s FCF of $6,558 million. It had cash and cash equivalents of $27,429 million as of Sep 30, 2021 compared with $25,243 million on Dec 31, 2020. The automotive long-term debt increased to $23,767 million on Sep 30, 2021 from $22,633 million as of the end of 2020.GuidanceFord — which shares space with auto biggies including General Motors GM, Tesla TSLA and Volkswagen VWAGY — raised the EBIT guidance for 2021. The Zacks Rank #4 (Sell) company now forecasts the current-year EBIT within $10.5-$11.5 billion, higher than the prior view of $9-$10 billion. Ford’s guidance for the full-year adjusted FCF remains intact within the range of $4-$5 billion. Management projects that commodity costs to flare up $3-$3.5 billion in the ongoing year, and another $1.5 billion in 2022. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The company expects to outlay $40-$45 billion in strategic capital expenditures between 2020 and 2025, including one-half of the more than the $30 billion which it plans to commit exclusively to BEVs during that period. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Volkswagen AG (VWAGY): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 28th, 2021

5 Solid Stocks to Buy on a Thriving Semiconductor Industry

Growing demand for microchips amid supply crunch has been helping companies like NVIDIA Corporation (NVDA), Semtech Corporation (SMTC) and Texas Instruments (TXN). Several industries have been hit hard owing to the global semiconductor shortage. Even microchip makers are struggling to meet the global demand. However, that has been working miracles for the semiconductor industry, with sales surging every month.According to the Semiconductor Industry Association (SIA), global microchip sales rose both month over month and year over year in August. And with no signs of the shortage easing, sales are likely to be high in the coming months.Semiconductor Sales Rise in AugustThe SIA said on Oct 5 that global semiconductor sales reached $47.2 billion in August, jumping 29.7% year over year from $36.4 billion. Moreover, sales rose 3.3% from July’s total of $45.7 billion.According to SIA, chip shipments have been on the rise and hit record highs in recent months as the industry continued to ramp up production owing to a huge demand for microchips across major industries, including auto, computers and electronic goods.Sales grew across all regions on a year-over-year basis in August, with sales jumping 33.5% in Europe, 30.8% in China, 28.2% in the Asia Pacific, 30.6% in the Americas and 23.8% in Japan. Month over month,sales increased 4.9% in Americas, 3.4% in China, 3.3% in Japan, 2.6% in Asia Pacific/All Other,and 1.5% in Europe.Semiconductor Industry BoomingAfter an outstanding 2020, the dream run for the semiconductor industry has continued this year. While the pandemic took its toll on several industries, the semiconductor industry continued to thrive. As more people worked and learned from home, they invested heavily in electronic items, computers and accessories. This gave a thrust to the demand for microchips, thus helping drive sales.However, the problem now seems to be a different one. While microchip has been soaring on higher demand, industries are now facing supply shortages that are affecting them. The auto industry and computer makers seem to be the biggest sufferers of this shortage.According to IHS Markit, microchip shortage will see a cut in production of vehicles by 700,000 in the third quarter, as carmakers continue to halt production temporarily. According to Bloomberg, this could result in a loss of $61 billion in revenues by the end of this year.Industry executives now believe that this supply crunch could continue into 2022 and even 2023. However, this will only benefit the semiconductor industry. Semiconductor sales came in at $133.6 billion in the second quarter, reflecting an increase of 29.2% year over year and a jump of 8.3% from the first quarter of 2021.Our ChoicesGiven the rising demand for semiconductors and continuing supply crunch, the semiconductor industry is only likely to benefit in the near term. Below are five chip stocks that investors can gain from in the current scenario.Texas Instruments Incorporated TXN is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits. The company recently announced that it wouldbe introducing a new TI-84 graphing calculator that will support the programing language Python.The company’s expected earnings growth rate for the current year is 31.7%. Its shares advanced 2.1% in the past 30 days. Texas Instruments carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.NVIDIA Corporation NVDA is the worldwide leader in visual computing technologies and inventor of the graphic processing unit, GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.The company’s expected earnings growth rate for the current year is 68%. The Zacks Consensus Estimate for current-year earnings improved 5.8% over the past 60 days. Nvidia has a Zacks Rank #2.Analog Devices, Inc. ADI is an original equipment manufacturer of semiconductor devices, specifically analog, mixed-signal and digital signal processing integrated circuits.The company’s expected earnings growth rate for the next year is 30.6%. The Zacks Consensus Estimate for current-year earnings improved 2.2% over the past 60 days. Analog Devices carries a Zacks Rank #2.Semtech Corporation’s SMTC devices are used in a variety of applications including computer, communications, industrial, military-aerospace and automotive. The company also provides a limited amount of wafer foundry services to other electronic component manufacturers.The company’s expected earnings growth rate for the current year is 45.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. Semtech has a Zacks Rank #1.Vishay Intertechnology, Inc. VSH is a global manufacturer and supplier of semiconductors and passive components. Its products include metal oxide semiconductor field-effect transistors, Diodes and Optoelectronic Components.The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 8.3% over the past 60 days. Vishay Intertechnology has a Zacks Rank #2. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI): Free Stock Analysis Report Texas Instruments Incorporated (TXN): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Semtech Corporation (SMTC): Free Stock Analysis Report Vishay Intertechnology, Inc. (VSH): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 6th, 2021

Associated Banc-Corp (ASB) Q4 Earnings Beat on Higher NII

An increase in NII on higher loan balance and rising rates support Associated Banc-Corp's (ASB) Q4 earnings, while fall in fee income and increase in expenses and provisions are undermining factors. Associated Banc-Corp’s ASB fourth-quarter 2022 earnings of 70 cents per share handily surpassed the Zacks Consensus Estimate of 65 cents. The bottom line was 43% higher than the prior-year quarter. Our estimate for earnings was 61 cents.Results were primarily aided by a rise in net interest income (NII) on higher rates. The quarter witnessed an increase in loans and deposit balances. However, a rise in expenses, higher provisions and lower non-interest income hurt the results to some extent.Net income available to common shareholders was $105.9 million, up 43% from the year-ago quarter.In 2022, earnings per share of $2.34 grew 7% year over year and beat the consensus estimate of $2.29. Our estimate for earnings was $2.26. Net income available to common shareholders increased 6% to $354.6 million.Revenues Improve on Higher Loans, Expenses RiseNet revenues (FTE basis) were $355.6 million, up 30% year over year. The top line beat the Zacks Consensus Estimate of $347.9 million. Our estimate for FTE revenues was $346.8 million.  In 2022, net revenues (FTE basis) rose 17% to $1.26 billion. The top line beat the consensus estimate of $1.25 billion. Our estimate for FTE revenues was the same as the consensus estimate.NII was $289 million, surging 55% year over year. Our estimate for NII was $271.3 million. The net interest margin was 3.31%, up 91 basis points (bps) year over year.Non-interest income declined 24% to $61.7 million. The fall was due to a decline in almost all fee income components except for card-based fees, other fee-based revenues and other income. In the reported quarter, the company recorded a net investment securities gain of $1.9 million. Our estimate for non-interest income was $70.8 million.Non-interest expenses increased 8% to $196.8 million. The rise was due to increased personnel costs, technology costs, business development and advertising expenses, and FDIC assessment costs. Our estimate for non-interest expenses was $200.7 million.The adjusted efficiency ratio was 54.28%, down from 64.82% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.As of Dec 31, 2022, total loans were $28.8 billion, up 4% from Sep 30, 2022. Total deposits increased 1% to $29.6 billion.Credit Quality: Mixed BagIn the reported quarter, the company recorded a provision for credit losses of $20 million against a provision benefit of $6 million in the prior-year quarter. Our estimate for the metric was $21.7 million.As of Dec 31, 2022, total non-performing assets were $128.5 million, down 21% year over year. Total non-accrual loans were $111.5 million, declining 15%.Capital Ratios Deteriorate, Profitability Ratios ImproveAs of Dec 31, 2022, Tier 1 risk-based capital ratio was 9.95%, down from 11.02% recorded in the corresponding period of 2021. Common equity Tier 1 capital ratio was 9.35%, down from 10.31%.At the end of the fourth quarter, annualized return on average assets was 1.12%, up from 0.87% recorded in the prior-year period. Return on average tangible common equity was 16.15%, up from 11.34%.2023 OutlookManagement expects loan growth to be in the range of 7-9%.NII is projected to increase in the 15-17% range. On the other hand, non-interest income is expected to decline 6-8%.Non-interest expenses are anticipated to rise 4-6%.Our TakeAssociated Banc-Corp’s business-restructuring efforts are likely to keep supporting financials. The company has a solid balance-sheet position, making it well-poised for growth. However, elevated expenses and provisions are likely to hurt profits in the near term. Associated BancCorp Price, Consensus and EPS Surprise Associated BancCorp price-consensus-eps-surprise-chart | Associated BancCorp QuoteASB currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance of Other BanksCommerce Bancshares Inc.’s CBSH fourth-quarter 2022 earnings per share of $1.04 surpassed the Zacks Consensus Estimate of $1.02. The bottom line increased 15.6% from the prior-year quarter.Results primarily benefited from an improvement in NII, a slight rise in loan balance and higher rates. However, an increase in non-interest expenses and provisions and a fall in non-interest income were the major headwinds for CBSH.BankUnited, Inc.’s BKU fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.BKU’s results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher NII, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Commerce Bancshares, Inc. (CBSH): Free Stock Analysis Report BankUnited, Inc. (BKU): Free Stock Analysis Report Associated BancCorp (ASB): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks10 hr. 22 min. ago

Intel Plunges on Earnings Miss, Weak Guidance: ETFs in Focus

Intel missed estimates for both earnings and revenues and offered a weak outlook for 2023, citing cooling demand for its chips used in personal computers. Intel INTC reported Q4 results after market close yesterday. The world’s largest chipmaker missed estimates for both earnings and revenues and offered a weak outlook for 2023, citing cooling demand for its chips used in personal computers.As such, shares of INTC plunged about 10% in after-market hours. Given this, ETFs like First Trust NASDAQ Technology Dividend Index Fund TDIV, First Trust Nasdaq Semiconductor ETF FTXL, Strive U.S. Semiconductor ETF SHOC, Pacer Data and Digital Revolution ETF TRFK, and Invesco Dow Jones Industrial Average Dividend ETF DJD having the highest allocation to the world’s biggest semiconductor maker, will be in focus.Q4 Earnings in FocusEarnings of 10 cents per share came much below the Zacks Consensus Estimate of 20 cents and the year-ago earnings of $1.09. Revenues declined 32% year over year to $14 billion and came in above the estimated $14.5 billion.Client computing, data-center and AI, and network and edge revenues declined 36%, 33% and 1%, respectively. However, accelerated computing systems and graphics, Intel Foundry Services and Mobileye revenues were up 1%, 30% and 59%, respectively (see: all the Technology ETFs here).The chipmaker continued to suffer from dismal PC and data-center markets. Shoppers choose to hold on to the laptops and desktops they purchased at the peak of the pandemic. According to Gartner, Q4 worldwide PC shipments declined 28.5%, the biggest decline since the firm started following shipments in the mid-1990s.As such, Intel projects another big revenue decline for the current quarter, along with deeper-than-expected losses. Revenues are expected in the range of $10.5 billion to $11.5 billion, while loss will likely be about 15 cents per share. Both revenue and earnings per share guidance are well below the current Zacks Consensus Estimate of $14.05 billion and 26 cents per share, respectively.ETFs to TapFirst Trust NASDAQ Technology Dividend Index Fund (TDIV)First Trust NASDAQ Technology Dividend Index Fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. It holds about 93 securities in its basket. Of these firms, Intel takes the second spot, making up for 7.8% of the assets. From a sector look, about 38.6% of the portfolio is dominated by semiconductors & semiconductor equipment, followed by software, and technology hardware, storage & peripherals.First Trust NASDAQ Technology Dividend Index Fund has amassed $1.6 billion in its asset base while trading in a volume of around 125,000 shares per day. It charges 50 bps in annual fees (read: 5 Stocks Powering Nasdaq ETF to Start 2023).First Trust Nasdaq Semiconductor ETF (FTXL)First Trust Nasdaq Semiconductor ETF offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. FTXL holds 30 stocks in its basket, with Intel taking the second spot at 7.6% share.First Trust Nasdaq Semiconductor ETF has accumulated $90.7 million in AUM. The average trading volume is light at around 10,000 shares and the expense ratio is 0.60%. FTXL has a Zacks ETF Rank #2 (Buy).Strive U.S. Semiconductor ETF (SHOC)Strive U.S. Semiconductor ETF seeks broad market exposure to the U.S. semiconductor sector. It follows the Solactive United States Semiconductors 30 Capped Index and holds 31 stocks in its basket, with Intel taking the third spot at 7.2% of assets.Strive U.S. Semiconductor ETF has AUM of $16.5 million and charges 40 bps in annual fees. It trades in a volume of 11,000 shares per day on average.Pacer Data and Digital Revolution ETF (TRFK)Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 83 stocks in its basket. Out of these, Nvidia is the top firm, accounting for an 11.6% share.Pacer Data and Digital Revolution ETF debuted in the space in June and has accumulated $0.9 million in its asset base. It has an expense ratio of 0.60%. TRFK trades in a meager volume of under 100 shares per day on average.Invesco Dow Jones Industrial Average Dividend ETF (DJD)Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 28 stocks in its basket, with Intel making up for the sixth position in the basket for 5.2% of assets (read: After Winning in 2022, What Awaits Dow Jones ETFs in 2023?).Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $298.8 million, while trading in a volume of 64,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Intel Corporation (INTC): Free Stock Analysis Report Invesco Dow Jones Industrial Average Dividend ETF (DJD): ETF Research Reports First Trust NASDAQ Technology Dividend ETF (TDIV): ETF Research Reports First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports Pacer Data and Digital Revolution ETF (TRFK): ETF Research Reports Strive U.S. Semiconductor ETF (SHOC): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks10 hr. 22 min. ago

For the 2nd year in a row, Iran is sailing its biggest warship around the world to show off its growing navy

Iran's navy chief said two Iranian warships are sailing around the globe to "show the authority of the dear people of Iran to the whole world." Iranian warship Makran in the Gulf of Oman.Iranian Army/WANA (West Asia News Agency)/Handout via REUTERS Iranian warships left Iran in September on what one official said was a journey around the world. The ships have sailed across the Pacific and are reportedly on the Atlantic coast of South America. The voyage is likely meant to show off Tehran's growing naval force to friends and foes alike. Iran's biggest warship and one of its frigates are sailing across the Pacific in a first-of-its-kind journey likely meant to show off Tehran's growing naval force to friends and foes alike.The two ships appear to be the frigate IRIS Dena and the forward base ship IRINS Makran. They were spotted by the French and Australian navies in early January as they sailed through the South Pacific. The ships have been granted permission to dock in Rio de Janeiro, reportedly arriving on January 23.Rear Adm. Shahram Irani, Iran's navy chief, said in December that the two warships, which departed Iran in September, will circumnavigate the globe to "show the authority of the dear people of Iran to the whole world."—ALPACI - France Pacific Command (@ALPACIFRAPACOM) December 25, 2022Irani added that "presence in the seas means power and authority."Although it's not a combat ship, IRINS Makran is Iran's biggest warship and its only forward base ship. Converted from an oil tanker in 2020, its deck can hold six to seven helicopters, according to Iran's former navy chief.Video footage indicates that Makran can accommodate vertical-takeoff-and-landing drones. Its deck also has space for ballistic-missile launchers and rocket artillery.Besides acting as a support ship, Iran claims that the Makran can be used for electronic warfare and special-operations missions. This is Makran's second important deployment.Visiting far off landsIranian navy Makran near the Strait of Hormuz in May 2021.Maxar via ReutersIn 2021, in another historic deployment, Makran and the frigate IRIS Sahand sailed around the Horn of Africa and through the Atlantic Ocean to St. Petersburg, where they took part in Russia's Navy Day celebrations.Their voyage through the Atlantic attracted intense scrutiny in the US, which suspected that they were headed to Venezuela or Cuba in an effort to flout Washington's attempts to isolate them.That the warships reached the Atlantic without requesting access to foreign ports showed Iran's "powerful presence in open seas in accordance with international maritime rules," Iranian Rear Adm. Habibollah Sayyari wrote at the time, calling Iran's presence on the open seas a "message of peace and friendship" to the world.Irani, the country's navy chief, also said this month that Iran was "planning to be present" in the Panama Canal — a possible reference to Dena and Makran's deployment, though Irani didn't say which ships will deploy there or when they'd reach the canal.Those comments are purely political, Alex Vatanka, director of the Iran Program at the Middle East Insititute, told Insider.Iranian Navy Mowj-class frigate Sahand in the Persian Gulf in April 2019.Morteza Nikoubazl/NurPhoto via Getty Images"So much of this is part of the vendetta vs. the US," Vatanka said.US Navy and Coast Guard vessels have conducted arms control and maritime security operations in the Gulf of Oman and the Persian Gulf for years. They have repeatedly seized Iranian arms shipments bound for Yemen and have often had tense encounters with Iranian warships.Tehran is saying "if your navy comes off my coast, you'll see our navy off of yours," Vatanka said, adding that "these deployments don't really make sense for Iran at the moment due to its economic difficulties."Sending the two warships abroad is partly meant to distract from Iran's internal troubles, specifically its widespread women's rights protests. "Given the Iranian protests, Iranian leadership wants to show that it's not on its knees," Vatanka added.A US State Department spokesman told The Washington Free Beacon that it is monitoring "Iran's attempts to have a military presence" in the hemisphere.A wave to MoscowRussian President Vladimir Putin and Iranian President Ebrahim Raisi in Samarkand in September 2022.ALEXANDR DEMYANCHUK/SPUTNIK/AFP via Getty ImagesThe naval deployments could also be a signal from Tehran to its partners.Iran has sought help rebuilding its navy, which had ship orders canceled after the 1979 revolution and then suffered losses during the Iran-Iraq War and in a clash with the US in the 1980s.Tehran received aid from Russia, which provided some warships, and other countries, and more recently sought support from China, though Beijing appears to have been wary of sharing naval technology.Following Russia's attack on Ukraine in February 2022, Iran has begun supplying Russia with weapons, including drones and missiles, perhaps seeing an opportunity to expand and deepen the relationship.Tehran wants to show Moscow that it is an equal partner and not just an export market, Vatanka told Insider.Iran has also started an indigenous shipbuilding program to grow its navy, which is designed to defend the Persian Gulf. That force hasn't undergone modernization in decades, but in recent years it has developed and fielded dozens of vessels, including four Mowj-class frigates, the Iranian navy's most advanced warships.Iran's first Mowj-class frigate, Jamaran, in the Persian Gulf in February 2009.EBRAHIM NOUROZI/AFP via Getty ImagesTehran's investment in its navy indicates the force is likely to continue growing and making high-profile voyages, but Iran's limited resources and its rivalries in the Middle East mean that its focus is likely to remain on the Persian Gulf region.Although what Iran does today should be taken with a grain of salt, "there is the question of what they'll be able to do in the next 10, 20 years," Vatanka told Insider.Forecasting the future is difficult, Vatanka said, but "a fully-fledged partnership" between Tehran and Moscow could raise the quality of Iranian naval production and increase its naval capabilities through technology transfer and joint training."Look at Iran's missile and drone programs. 10-15 years ago they weren't as developed. It could be the same with its navy," Vatanka added. "Yet the focus of Iran will continue to be the Persian Gulf, the Gulf of Oman, and the Indian ocean. Iran will want to pretend it is a global force, but that is far from the reality."Constantine Atlamazoglou works on transatlantic and European security. He holds a master's degree in security studies and European affairs from the Fletcher School of Law and Diplomacy. You can contact him on LinkedIn.Read the original article on Business Insider.....»»

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