U.S. consumer sentiment edges up in May but worries about social isolation grow

U.S. consumer sentiment rose unexpectedly in early May after a record plunge a month earlier as emergency assistance payments improved household finances hurt by mass layoffs from the coronavirus crisis, a survey released on Friday showed......»»

Category: topSource: reutersMay 15th, 2020

Futures, Global Markets Rise As Europe Unleashes Energy Hyperinflation Bailout Bazooka

Futures, Global Markets Rise As Europe Unleashes Energy Hyperinflation Bailout Bazooka Following a flat Monday futures session when the US was closed for Labor Day and European stocks slumped as Russia confirmed it would halt NS1 pipeline flows indefinitely, on Tuesday European stocks and US equity futures rose as governments attempted to blunt the growing energy crisis, injecting tens of billions in fiscal stimulus to offset soaring energy prices and undoing central bank attempts to crush demand with tighter financial conditions. S&P futures rose 0.6% as Wall Street was set to resume trading after the long weekend, while Nasdaq futures rose 0.7%, ignoring - for now - news of more Chinese lockdowns. Meanwhile, as traders eyes the flood of fiscal "energy support", Treasuries fell across the board, taking the two-year yield to 3.46%, while oil edged down reversing yesterday's OPEC+ production cut gains on demand risks from fresh Chinese Covid lockdowns. The pound rebounded as traders assessed the agenda of incoming PM Liz Truss. European natgas prices eased with politicians scrambling to find solutions after Moscow switched off its main pipeline to the continent. In premarket trading, Bed Bath & Beyond shares tumbled as much as 25% after Chief Financial Officer Gustavo Arnal fell to his death Friday from a Manhattan skyscraper. Other meme stocks were also drifting lower, including GameStop, which declined 5%. US-listed Chinese stocks also slumped premarket, with the drop led by Alibaba which tracked moves in Hong Kong-listed shares in the past two sessions, as lockdowns hit more cities amid an increase in Covid cases. Alibaba (BABA US) falls 2%, Pinduoduo (PDD US) -1.3%, (JD US) -1.8%, Baidu (BIDU US) -0.6%Here are some other notable premarket movers: FedEx (FDX US) shares decline 1.7% in US premarket trading as Citi downgraded the stock to neutral, noting that it’s concerned about the pace of freight activity heading into year-end. Ciena (CIEN US) shares drop as much as 1.4% in US premarket trading after JPMorgan downgrades the communications equipment company to neutral from overweight on “limited upside” for the stock. Digital World Acquisition (DWAC US) shares slump as much as 33% in US premarket trading, after the blank-check firm that is set to merge with former President Donald Trump’s social media group reportedly failed to get enough shareholder support to extend the deadline to complete the deal. Transocean (RIG US) gains 1.4% in premarket trading as the stock was upgraded to buy from neutral by BTIG, which said in a note that improving day rates in the floater market would help the company recharter rigs at higher levels. CVS Health (CVS US) stock could be in focus as the company agreed to buy Signify Health for $30.50 per share in cash in a transaction valued at ~$8 billion. Watch tanker shares as Jefferies says it remains positive on the outlook for the sector in a note raising PTs across its coverage and upgrading four stocks to buy. Euronav, Frontline (FRO US), Nordic American (NAT US) and Tsakos Energy (TNP US) upgraded to buy from hold, with PTs raised on all. Keep an eye on Rollins (ROL US) stock as it was raised to outperform from sector perform at RBC, with the broker saying the pest-control firm offers a “recession- resilient” model against a tough current backdrop. Soaring energy costs have added to the complexities for monetary policymakers attempting to manage surging price pressures and the risk of recession. The focus turns next to the ECB, with economists at some of Wall Street’s top banks expecting it to announce a hike of 75 basis points on Thursday. “The global economy, and in particular the European economy is really faced with a number of very difficult challenges, of which energy is sitting at the heart of everything,” Seema Shah, chief global strategist at Principal Global Investors, said on Bloomberg Television. “It does unfortunately mean that Europe despite all the help that governments are trying to provide for families and businesses, it’s simply not going to be enough to stave off a pretty significant downturn.” And speaking of Europe, the Stoxx 50 rose 0.4%; Germany's DAX outperformed peers, adding 0.7%, FTSE MIB lags, dropping 0.1% despite a massive a massive energy bailout plan announced by the new PM, Liz Truss, which amount to over €170 billion, and is meant to freeze houshold energy bills as well as rescue small businesses. Retailers, travel and autos are the strongest-performing sectors. Here are some of the biggest European movers today: Delivery Hero shares rally as much as 10% after Morgan Stanley raises the stock to overweight, saying the firm is set for the biggest margin improvement in the food delivery sector into 2023 and the most resilient top-line growth. Consumer stocks Greggs rises as much as +7.6%, Asos +8.5%, J D Wetherspoon +6.8% Volkswagen shares rise as much as 3.2% in Frankfurt after the German company decided to push ahead with its plan to list a minority stake in the Porsche sports-car maker this year. Commerzbank shares rise as much as 5% on Warburg upgrade, with the broker seeing good earnings and revenue growth prospects for the German lender. The Stoxx 600 Energy index falls, lagging the broader benchmark, as weaker gas prices and a stalled rally for crude weigh. Gas-exposed names Equinor drop as much as -6.1% and OMV -3.5%, among the biggest decliners Shell decline as much as -2.6% , BP -2.8%, TotalEnergies -2.2% and Eni -4.1% as Brent slipped following the OPEC+ meeting on Monday, with traders weighing the output cut alongside the impact of new lockdowns in China Remy Cointreau shares drop as much as 3.4% after Kepler Cheuvreux analyst Richard Withagen cut the recommendation to reduce from hold, citing slowing global spirits-market growth. BT shares fall as much as 2.8% to the lowest level since November 2021 after Berenberg downgraded the UK carrier to hold from buy, saying 1Q results raised “a multitude of questions” about the investment case. Earlier in the session, Asian stocks turned lower as concerns over global monetary tightening and the impact of Europe’s energy crisis kept risk appetite in check. The MSCI Asia Pacific Index slid 0.4%, reversing an earlier gain of as much as 0.5%. Energy shares were the biggest advancers after oil rallied overnight, while most other sectors fell.  Stocks in China rebounded after days of losses, while key measures of Hong Kong equities were the biggest laggards in the region. Australian stocks declined after the central bank raised its key rate by 50 basis points. Indonesia’s benchmark narrowly missed a fresh record high. The threat of a global economic slowdown continues to weigh on market sentiment, along with worry over inflation amid climbing commodities prices. The most recent earnings season has done little to quell concerns around the region, with MSCI’s main Asia gauge on track for its fifth-straight quarterly loss and volatility surging.  “Monetary tightening and accelerating inflation have weighed on investor sentiment and market returns,” Germaine Share, director of manager research of Morningstar wrote in a report. “We have also seen fund managers turn overweight China in the recent months to buy structural growth opportunities at attractive valuations.” Japanese stocks closed mixed as uncertainty over the global economy countered optimism over the benefits of the weaker yen for exporters.  The Topix fell 0.1% to close at 1,926.58, while the Nikkei was little changed at 27,626.51. Oriental Land Co. contributed the most to the Topix decline, decreasing 6.3% as the stock failed to be added to the blue-chip Nikkei 225. Out of 2,169 stocks in the index, 1,002 rose and 1,014 fell, while 153 were unchanged. “The markets are assuming that the US and European economies are going to be facing difficult situations,” said Hideyuki Suzuki, a general manager at SBI Securities. “Japanese stocks are in a relatively more favorable situation as the country has been late in restarting its economy, so there is still much room for growth.” Indian stocks ended marginally lower, after swinging between gains and losses for most of Tuesday’s session, as the US Fed’s tightening bias and concerns about a worsening energy crisis in Europe remained an overarching themes in Asia.   The S&P BSE Sensex fell 0.1% to 59,196.99 in Mumbai, erasing gains of as much as 0.5%. The NSE Nifty 50 Index dropped by a similar magnitude. Of the 30 members on the Sensex, 10 rose, while 20 fell. Twelve of 19 sector indexes compiled by BSE Ltd. advanced, led by a measure of power companies.  “Markets are still in a range and rotational buying across sectors is helping the index to hold strong amid mixed global cues,” Ajit Mishra, vice president for research at Religare Broking Ltd. wrote in a note. “Since all sectors, barring IT, are contributing to the move, the focus should be more on stock selection.”  In FX, the Bloomberg Dollar Spot Index erased a decline as the greenback traded mixed versus its Group-of-10 peers. GBP and SEK are the strongest performers in G-10 FX, JPY and AUD underperform. Yen trades above 142 as Japan's failed MMT experiment slowly comes to a close. The euro inched up to trade around 0.9950. Leveraged investors were heavily positioned for a lower euro versus the dollar, but they see scope to partially unwind some of that exposure and bet on further pound weakness. Sterling climbed as much as 0.8% to $1.1609 after sliding to the lowest since March 2020 on Monday. The rebound was fueled by a report that incoming UK Prime Minister Liz Truss has drafted plans to fix annual electricity and gas bills for a typical UK household at or below the current level of £1,971 ($2,300). The gilt curve bear steepened. Australia’s sovereign bonds gave back an advance after the central bank raised interest rates by a half- percentage point for a fourth consecutive meeting and signaled further hikes ahead in its drive to rein in inflation. The Reserve Bank took the cash rate to 2.35%, the highest level since 2015, in a widely expected announcement on Tuesday. The Australian dollar slumped. The yen fell to a new 24-year low against the dollar as rising Treasury yields highlighted the policy divergence between the Federal Reserve and Bank of Japan. Bonds were little changed. In rates, TSY 10-year yield rose 6bps to 3.25%, while front-end-led losses flatten 2s10s, 5s30s by 1bp and ~3bp on the day; in 10-year sector bunds outperform by nearly 10bp with 10-year German yields richer by ~3bp on the day. The yield on 10-year bunds is up about 1.4bps to 1.54% while German 2-year yields remain 10bp lower on the day following dovish comments from ECB’s Centeno, Kazaks and Stournaras. UK short-end bonds gain, benefiting from new PM’s plan to freeze energy bills, while long-end gilts declined amid concerns about how the proposal will be funded. Treasury cash market was closed Monday for US Labor Day holiday, and few events are slated for Tuesday. Wednesday has several Fed officials slated to speak.  In commodities, brent fell 3% to near $93, paring its post-OPEC+ meeting gains, effective assuring that more production cuts are coming. Spot gold is little changed at $1,712/oz. Bitcoin has been oscillating under the USD 20,000 mark throughout the European session. Looking to the day ahead now, and in the political sphere the main event will be that Liz Truss succeeds Boris Johnson as UK Prime Minister. Otherwise on the data side, we’ll get German factory orders for July, the German and UK construction PMI for August, and from the US there’s the final services and composite PMIs for August, and the ISM services index too. Market Snapshot S&P 500 futures up 0.5% to 3,944.00 STOXX Europe 600 up 0.2% to 414.17 MXAP down 0.3% to 153.07 MXAPJ little changed at 503.42 Nikkei little changed at 27,626.51 Topix down 0.1% to 1,926.58 Hang Seng Index down 0.1% to 19,202.73 Shanghai Composite up 1.4% to 3,243.45 Sensex up 0.1% to 59,320.84 Australia S&P/ASX 200 down 0.4% to 6,826.54 Kospi up 0.3% to 2,410.02 Gold spot up 0.2% to $1,714.18 U.S. Dollar Index up 0.13% to 109.68 German 10Y yield little changed at 1.57% Euro up 0.3% to $0.9956 Top Overnight News from Bloomberg German factory orders fell for a sixth month in July. Demand slipped 1.1% from June, driven by a slump in consumer goods, particularly pharmaceutical products. That’s worse than the 0.7% drop economists had predicted European households will benefit from at least 376 billion euros ($375 billion) in government aid to stem whopping energy bills this winter, yet there’s a risk the smorgasbord of spending won’t bring enough relief Switzerland and Finland joined Germany in offering credit facilities to energy companies as the worsening supply crunch and surging prices threaten to create financial havoc in Europe China set a stronger-than-expected exchange-rate fixing for a 10th straight day and said it will allow banks to hold less foreign currencies in reserve, its most substantial moves yet to stabilize a weakening yuan China sealed off parts of Guiyang, capital of the mountainous southern Guizhou province, as an increase in virus cases triggered a stringent response Egypt’s government now favors a more flexible currency to support an economy that’s come under pressure from Russia’s invasion of Ukraine, a top official said A more detailed look at global markets courtesy of Newsquawk Asaia-Pac stocks traded somewhat mixed following the holiday lull stateside and as participants braced for this week's central bank decisions beginning with an expected 50bps rate increase by the RBA. ASX 200 lacked firm direction with strength in the energy and tech sectors offset by mixed data releases and an unsurprising 50bps rate increase by the RBA. Nikkei 225 was contained following disappointing household spending and softer wage growth data. Hang Seng and Shanghai Comp were mixed with Hong Kong pressured as losses in tech overshadowed the strength in property names, while the mainland was underpinned after further support pledges by Chinese authorities and with the PBoC cutting its FX RRR which is seen as a measure to stem the recent currency depreciation. Top Asian News PBoC set USD/CNY mid-point at 6.9096 vs exp. 6.9304 (prev. 6.8998) China's Shanghai reportedly added one high-risk area and two middle-risk areas Tuesday after report of one local asymptomatic COVID case outside of quarantine. Japanese Finance Minister Suzuki confirmed fund requests from ministries for FY23 reached JPY 110tln and said they will decide on a fuel subsidy extension based on prices and other factors. Japan is poised to shorted its COVID isolation time to seven days, Nikkei reported. Japan Arrests Kadokawa Executives in Olympic Bribery Probe MUFG to Sell $600 Million of Marelli Debt to Deutsche Bank PBOC Seen Easing Monetary Policy Despite Yuan Slump Evergrande to Exit Shengjing Bank in $1.1 Billion Forced Sale Nomura India’s Head of Debt Shantanu Sahai Is Said to Leave European bourses kicked off Tuesday’s trade in the green following a mixed APAC session, which saw no lead from Wall Street amid the US Labor Day holiday. Sentiment this morning was somewhat choppy and bourses trade off highs. Sectors in Europe are mostly firmer and now portraying a mildly anti-defensive/pro-cyclical tilt, with Healthcare, Utilities, Telecoms, and Food & Beverages towards the bottom of the bunch. Stateside, US equity futures remain firmer across the board with the NQ narrowly outpacing the ES, YM, and RTY. Top European News Europe’s Lehman Warning on Energy Prompts Flurry of Cash Help Retail Rally on Truss Could Be Short-Lived as ‘Storm Is Brewing’ UK Utilities Up on Truss Plans to Cap Electricity, Gas Bills Handelsbanken Recruits From Citi, Penser, Dagens Industri European Gas Drops as Governments Move to Fix Energy Crisis FX The Dollar and index lost upward momentum in low-key US holiday trade on Monday, but found underlying bids to keep the latter propped around 109.50 EUR sees some respite and consolidation on either side of 0.9950 against the USD, whilst several ECB headlines were released in the blackout period, albeit from a monthly publication. JPY declined further on yield differentials, with USD/JPY rising above 141.00 and closer to 142.00. Yuan came under renewed pressure irrespective of a firmer than forecast onshore midpoint fix, with China's COVID situation continuing to be a headwind. Russia's Sberbank said they are beginning to lend the Chinese Yuan, seeing large demand for the currency, according to Reuters. Fixed Income Bunds are off recovery highs, but remain firm within 145.75-144.74 parameters for the Dec contract Gilts have pulled back below parity after rebounding in sympathy to 106.79. 10yr T-note remains depressed towards the bottom of a 116-00/27+ range awaiting the return of US cash markets from the long Labor Day weekend Commodities WTI and Brent futures have declined below the levels seen at the reopening of electronic trade, but divergence is seen in terms of intraday changes between the contracts as the former saw no settlement on account of the US Labor Day holiday. Spot gold hovers around recent levels just above USD 1,700/oz - gold sees key support at 1699.1 and 1678.4, whilst resistance levels include 1,729 and 1,745. Base metals are mostly firmer with 3M LME copper posting mild gains above USD 7,500/oz but off best levels. France's Aluminium Dunkerque is to cut production by one-fifth amid power costs, according to sources cited by Reuters Central Banks ECB's Centeno said monetary policy must be patient, ECB may achieve inflation goal with slow normalisation via Eurofi Magazine. ECB's Kazaks said broad of protracted recession could slow rate hikes' ECB will have above the neutral rate if needed via Eurofi Magazine ECB's Scicluna said determining when to use Transmission Protection Instrument (TPI) is a major challenge, via Eurofi Magazine. ECB's Stournaras sees energy costs moderating and bottle easing; EZ inflation is close to its peak, inflation will start steady deceleration via Eurofi Magazine. BoE's Mann said a fast and forceful approach to tightening, potentially followed by a hold or reversal is better than a gradualist approach, while she added that a 75bps rate hike by the BoE is an important question and that they must ensure inflation expectations do not drift further from the target. RBA hiked rates by 50bps to 2.35%, as expected. RBA reiterated that the board is committed to doing what is necessary to ensure inflation returns to the target and it expects to increase rates further in the months ahead but is not on a preset path. Furthermore, it stated that the size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market, while it noted that the Australian economy is continuing to grow solidly and national income is being boosted by a record level of the terms of trade. US Event Calendar 09:45: Aug. S&P Global US Services PMI, est. 44.2, prior 44.1 09:45: Aug. S&P Global US Composite PMI, est. 45.0, prior 45.0 10:00: Aug. ISM Services Index, est. 55.4, prior 56.7 DB's Jim Reid concludes the overnight wrap US markets might have been closed for the Labor Day holiday, but there was plenty of action in Europe as markets finally reacted to the closure of the Nord Stream gas pipeline on Friday evening. Unsurprisingly it wasn’t a happy one and European assets slumped across the board, with the Euro itself falling beneath $0.99 for the first time since 2002 as we went to press yesterday, whilst the STOXX 600 managed to claw back its initial losses to “only” close -0.62% lower. Those countries most exposed to Russia’s gas were particularly affected, with the DAX falling -2.22% on the day. In the meantime, the prospect that the latest shock would force the ECB into even more aggressive rate hikes saw sovereign bonds yields move higher across the continent. Of course, the one asset class these losses didn’t apply to were energy itself, and European natural gas futures surged by +14.56% on the day, albeit down from +35% up just after 9am London time. That still leaves them at €246 per megawatt-hour, which is still someway beneath their closing peak at €339 a week and a half ago, but is nevertheless almost five times the level they were trading at a year ago. German power prices for next year also rebounded +12.10% (after falling -48.35% last week), which came as Bloomberg reported people familiar with the matter saying that Germany was now unlikely to meet their target to hit 95% gas storage by November following the recent news on Nord Stream. In terms of the next policy steps, EU energy ministers are set to meet on Friday, and EU Commission President von der Leyen tweeted that the Commission was “preparing proposals to help vulnerable households and businesses to cope with high energy prices”. She said the aim was to reduce electricity demand, as well as “Enable support to electricity producers facing liquidity challenges linked to volatility”. Let’s see what they come up with, but we also heard from French President Macron, who said he was in favour of an EU-wide windfall tax on energy profits. Against this backdrop, Brent crude oil prices (+2.92%) moved higher for a second day after the OPEC+ group announced that they would cut production by 100k barrels per day next month. That reverses the increase from September that was one factor helping to lower oil prices, and won’t be welcome news for policymakers as Europe grapples with its own energy issues. In particular, it’ll be interesting to see how this week’s ECB forecasts are affected by the latest energy shock, and how long they expect it to take before inflation returns back to target. In early Asian trade, Brent futures (-0.74%) have reversed a bit of yesterday's gains. Speaking of the ECB, the latest shock from the Nord Stream headlines led markets to price in a further +6bps of rate hikes over the rest of 2022, which brings the total amount expected to +174.9bps. That takes the expected rate implied by year-end to its highest level yet, and means that markets are pricing the equivalent of a 75bps move this week, and then two further 50bps moves in October and December, so a pace unlike anything we’ve been used to seeing over recent years. And in turn, with investors expecting more aggressive rate hikes and faster inflation, sovereign bonds also sold off significantly, with yields on 10yr bunds (+4.0bps), OATs (+4.6bps) and BTPs (+10.8bps) all moving higher on the day. Here in the UK, we got confirmation that Foreign Secretary Liz Truss would become the next Prime Minister today, after she defeated former Chancellor Rishi Sunak in the Conservative leadership election. Truss’ victory was somewhat narrower than recent polls had implied, with a 57%-43% win among party members, and it was also the smallest margin of victory for a new leader with Conservative members since the current system was brought in over 20 years ago. UK assets were unaffected by the news, since it had been widely expected in advance, but they’ve significantly underperformed over the last month as the contest has proceeded, with gilts down -8.2% over August (vs. -5.1% for Euro Sovereigns and -2.6% for Treasuries). Furthermore, since Prime Minister Johnson announced his resignation on July 7, sterling has been the worst performer among the G10 currencies, having fallen -4.21% against the US Dollar. Our FX strategist Shreyas Gopal even put out a report yesterday assessing the risks of a UK balance of payments crisis (link here). In terms of what happens now, Truss will be invited to become PM by the Queen after Johnson resigns today. After that, she’s expected to deliver a speech from 10 Downing Street, and start putting together her new cabinet. The key post of Chancellor of the Exchequer (the UK’s finance minister) is widely expected to go to current Business Secretary Kwasi Kwarteng, who wrote in an FT op-ed on Sunday evening that the Truss government would “take immediate action” on the cost of living, and that there would “need to be some fiscal loosening to help people through the winter”. There were also some lines to reassure markets, saying that they would “work to reduce the debt-to-GDP ratio over time”, and they “remain fully committed to the independence of the Bank of England”. Overnight all the newspapers are reporting that Truss is close to sanctioning the freezing of energy bills for the next 18 months which could cost an eye watering £130bn. For context the entire covid spending has been estimated at somewhere between £300-400bn. Asian equity markets are trading higher this morning following yesterday’s announcement by Chinese officials that they will speed up stimulus efforts in the third quarter to boost the economy as evidence points to a further loss of momentum for an economy marred by pandemic related losses and a property slump. The RRR cut yesterday is also helping. As I type, Chinese stocks are leading gains across the region with the Shanghai Composite (+0.96%) and CSI (+0.54%) both moving higher while the Kospi (+0.10%) is also up. Elsewhere, the Nikkei (+0.02%) is recovering from its earlier losses whilst the Hang Seng (-0.33%) is sliding after its opening gains this morning. S&P 500 (+0.50%) and NASDAQ 100 (+0.63%) futures are edging higher after the holiday. Meanwhile, 2 and 10yr US Treasuries are +6.8bps and +4bps higher respectively, following the global move yesterday. In monetary policy news, the Reserve Bank of Australia (RBA) raised its official cash rate (OCR) to the highest level since 2015, increasing it by 50 bps to 2.35%, its fifth hike in a row to curb soaring inflation that is pushing up prices in the nation. In a statement, the RBA Governor Philip Lowe indicated that the central bank would continue to adjust rates as inflation continues to run above its 2%-3% target range. He added that prices are expected to increase further over the months ahead before peaking later this year. Our economists think the move and comments leans slightly more hawkish which is reflected by Aussie yields rising as I type. In terms of data releases yesterday, we got the final services and composite PMIs for August from Europe, where there were generally downward revisions relative to the flash readings. In the Euro Area, the composite PMI was revised down to 48.9 (vs. flash 49.2), and in the UK, it was revised down to a contractionary 49.6 (vs. flash 50.9), which is the first time in 18 months that the UK composite PMI has been in contractionary territory. Otherwise, Euro Area retail sales grew by +0.3% in July (vs. +0.4% expected). To the day ahead now, and in the political sphere the main event will be that Liz Truss succeeds Boris Johnson as UK Prime Minister. Otherwise on the data side, we’ll get German factory orders for July, the German and UK construction PMI for August, and from the US there’s the final services and composite PMIs for August, and the ISM services index too. Tyler Durden Tue, 09/06/2022 - 07:51.....»»

Category: smallbizSource: nytSep 6th, 2022

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero"

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero" One day after futures ramped overnight (if only to crater during the regular session) on hopes China was easing its highly politicized  Zero Covid policy after it cut the time of quarantine lockdowns, this morning futures slumped early on after China's President Xi Jinping made clear that Covid Zero isn't going anywhere and remains the most “economic and effective” policy for China during a symbolic visit to the virus ground zero in Wuhan, in which he cast the strategy as proof of the superiority of the country’s political system. That coupled with renewed recession worries (market is again pricing in a rate cut in Q1 2023) even as monetary policy tightens in much of the world to fight supply-side inflation, sent US futures and global markets lower. S&P futures dropped 0.2% and Nasdaq 100 futures were down 0.4% after the underlying index slumped on 3.1% on Tuesday. The dollar was steady after rising the most in over a week while WTI crude climbed above $112 a barrel, set for a fourth session of gains. In cryptocurrencies, Bitcoin dipped below the closely watched $20,000 level on news crypto hedge fund 3 Arrows Capital was ordered to liquidate. The Nasdaq's Tuesday’s slump added to what was already one of the worst years in terms of big daily selloffs in US stocks. The S&P 500 Index has fallen 2% or more on 14 occasions, putting 2022 in the top 10 list, according to Bloomberg data. Not helping the tech sector, on Wednesday morning JPMorgan cut its earnings estimates across the sector, especially for companies exposed to online advertising, citing macroeconomic pressures, forex and company-specific dynamics. One of the chief drivers for overnight weakness, China's Xi said during a trip Tuesday to Wuhan where the virus first emerged in late 2019 that relaxing Covid controls would risk too many lives in the world’s most populous country. China would rather endure some temporary impact on economic development than let the virus hurt people’s safety and health, he said, in remarks reported Wednesday by state media. As a result, China’s CSI 300 Index extended loss to 1.4% after the headline, while the yuan drops as much as 0.2% to trade 6.7132 against the dollar in the offshore market. Among key premarket movers, Tesla slipped in US premarket trading. The electric-vehicle maker laid off hundreds of workers on its Autopilot team as it shuttered a California facility, according to people familiar with the matter. Carnival slumped as Morgan Stanley analysts warned that the London and New York-listed cruise vacation company’s shares could lose all their value in the event of another demand shock. Pinterest gained 3.7% as the company’s co- founder and CEO Ben Silbermann quit and handed the reins to Google and PayPal veteran Bill Ready in a sign the social-media company will focus more on e-commerce. Also, despite the pervasive weakness, the Energy Select Sector SPDR Fund ETF (XLE) rebounded off key support (50% Fibonacci) relative to the SPDR S&P 500 ETF (SPY). That said, energy was alone and most other notable movers were down in the premarket: Carnival (CCL US) shares fall 8% premarket as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Nio (NIO US) shares drop 8.2% after short-seller Grizzly Research published a report on Tuesday alleging that the electric carmaker used battery sales to a related party to inflate revenue and boost net income margins. The company rejected the claims. Upstart Holdings (UPST US) shares slump about 9% after Morgan Stanley downgraded the consumer finance company to underweight from equal-weight amid rising cyclical headwinds. Ormat Technologies (ORA US) rallies as much as 5% after the renewable energy company is set to be included in the S&P Midcap 400 Index. 2U (TWOU US) shares rise 16% premarket. Indian online-education provider Byju’s has offered to buy the company in a cash deal that values the US-listed edtech firm at more than $1 billion, a person familiar with the matter said. Watch Amazon (AMZN US) shares as Redburn initiated coverage of the stock with a buy recommendation and set a Street-high price target, saying “there is a clear path toward a $3 trillion value for AWS alone.” Shares in data center REITs could be active later in the trading session after short-seller Jim Chanos said in an FT interview that he’s betting against “legacy” data centers. Watch Digital Realty (DLR US) and Equinix (EQIX US), as well as data center operators Cyxtera Technologies (CYXT US) and Iron Mountain (IRM US) Investors are growing increasingly skeptical that the Fed can avoid a bruising economic downturn amid sharp interest-rate hikes. Evaporating consumer confidence is feeding into concerns that the US might tip into a recession. Naturally, Fed officials sought to play down recession risk. New York Fed President John Williams and San Francisco’s Mary Daly both acknowledged they had to cool inflation, but insisted that a soft landing was still possible. “It seems the market is in this tug of war between on the one hand the hope that we are close to the peak in inflation and rates, and on the other hand the challenge of a slowing economy and potential recession,” Emmanuel Cau, head of European equity strategy at Barclays Bank Plc, said in an interview with Bloomberg TV. “Central banks are walking a very tight line and to a certain extent dictate the mood in the markets.” European equities snapped three days of gains, trading poorly but off worst levels with sentiment also hurt by China remaining committed to its zero-Covid approach. Spanish inflation unexpectedly surged to a record, dashing hopes that inflation in the euro zone’s fourth-biggest economy had peaked, and emboldening European Central Bank policy makers pushing for big increases in interest rates. The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow. German benchmark bonds rose, while 10-year Treasury yields slipped to 3.16%. DAX lags, dropping as much as 1.8%. Real estate, autos and miners are the worst performing sectors. In notable moves in European stocks, Hennes & Mauritz (H&M) gained after the Swedish low-cost retailer’s earnings beat analyst estimates. Just Eat NV tumbled to a record low after Berenberg analysts rated the stock sell, saying the food delivery firm’s UK business will remain under pressure. Here are some of the biggest European movers today: Just Eat Takeaway shares plunge as much as 21% after Berenberg initiated coverage with a sell rating, saying the firm’s UK business will remain under pressure and a sale of its Grubhub unit is unlikely to satisfy the bulls. Carnival stocks slumped over 12% in London as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Pearson drops as much as 6.1% after the education company was cut to sell at UBS, which reduced forecasts to reflect a weak outlook for 2022 college enrollments. Grifols shares plunge as much as 13% on a media report the Spanish plasma firm is weighing a capital raise of as much as EU2b to cut its debt. Diageo shares fall after downgrades for the spirits group from Deutsche Bank and Kepler Cheuvreux, while Pernod Ricard also dips on a rating cut from the latter. Diageo declines as much as 4.2%, Pernod Ricard -3.7% Fluidra shares fall as much as 8.4% after Santander cut its rating on the Spanish swimming pools company. The bank’s analyst Alejandro Conde cut the recommendation to neutral from outperform. H&M shares rise as much as 6.8% after the Swedish apparel retailer reported 2Q earnings that beat estimates. Jefferies said the margin beat in particular was reassuring, while Morgan Stanley said it was a “positive surprise” overall. Ipsen shares rise as much as 3.1% after UBS analyst Michael Leuchten said that accepting palovarotene refiling priority review should be a net present value and confidence boost. Asian stocks fell, halting a four-day gain, as renewed angst over the outlook for global economic growth and inflation help drive a selloff across most of the region’s equity markets. The MSCI Asia Pacific Index dropped as much as 1.5%, led by consumer discretionary and information sectors. Chinese equities in particular took a hit, as the CSI 300 Index fell 1.5% Wednesday after Xi Jinping reiterated his firm stance on Covid zero. Tech-heavy indexes in markets such as South Korea and Taiwan took the brunt of Wednesday’s drop amid lingering concerns that monetary tightening in much of the world to fight inflation will cause an economic slowdown. While Federal Reserve members have played down the risk of a US recession, gloomy data such as US consumer confidence have damped investor sentiment. “Volatility is going to be the enduring feature of the market, I suspect, for the next couple of quarters at least until we get a firm sense that peak inflation has passed,” John Woods, Credit Suisse Group AG’s Asia-Pacific chief investment officer, said in an interview with Bloomberg TV. “Markets, I think, have aggressively priced in quite a serious or steep recession.”  China’s four-day winning streak came to a halt, putting its advance toward a bull market on hold.  “We will continue to see a risk of targeted lockdowns, and that spoils the initial euphoria seen in the markets from the announcement on relaxation of quarantine requirements,” said Charu Chanana, market strategist at Saxo Capital Markets. “Still, economic growth will likely be prioritized as this is a politically important year for China.”  Japanese equities decline as investors digested data that showed a drop in US consumer confidence over inflation worries and increased concerns of an economic downturn.  The Topix Index fell 0.7% to 1,893.57 in Tokyo on Wednesday, while the Nikkei declined 0.9% to 26,804.60. Toyota Motor Corp. contributed the most to the Topix’s decline, decreasing 1.8%. Out of 2,170 shares in the index, 1,114 fell, 984 rose and 72 were unchanged. “There are concerns about stagflation,” said Hideyuki Suzuki a general manager at SBI Securities. “The consumer sentiment from the University of Michigan, which provides one of the fastest data points, has already shown poor figures.” Stocks in India tracked their Asian peers lower as brent rose to the highest level in two weeks, while high inflation and slowing global growth continued to dampen risk-appetite for global equities. The S&P BSE Sensex fell 0.3% to 53,026.97 in Mumbai, while the NSE Nifty 50 Index declined by an equal measure. Both gauges have lost more than 4% in June and are set for their third consecutive month of declines. The main indexes have dropped for all but one month this year. Twelve of the 19 sub-sector gauges compiled by BSE Ltd. eased, led by banking companies while power producers were the top performers.   Investors will also be watching the expiry of monthly derivative contracts on Thursday, which may lead to some volatility in the markets.  Hindustan Unilever was the biggest contributor to the Sensex’s decline, decreasing 3.5%. Out of 30 shares in the Sensex, 10 rose and 20 fell. The Bloomberg Dollar Spot Index inched up modestly as the greenback traded mixed against its Group-of-10 peers; the Swiss franc led gains while Antipodean currencies were the worst performers and the euro traded in a narrow range around $1.05. The relative cost to own optionality in the euro heading into the July meetings of the ECB and the Federal Reserve was too low for investors to ignore and has become less and less underpriced. The yen strengthened and US and Japanese bond yields fell. In rates, fixed income has a choppy start. Bund futures initially surged just shy of 200 ticks on a soft regional German CPI print before fading the entire move over the course of the morning as Spanish data hit the tape, delivering a surprise record 10% reading for June and more hawkish ECB comments crossed the wires. Treasuries and gilts followed with curves eventually fading a bull-steepening move. Long-end gilts underperform, cheapening ~4bps near 2.75%. Peripheral spreads are tighter to core.  Treasuries are slightly higher as US trading day begins, off the session lows reached as bund futures jumped after the first monthly drop since November in a German regional CPI gauge. Yields are lower across the curve, by 1bp-2bp for tenors out to the 10-year with long-end yields little changed; 10-year declined as much as 5.3bp vs as much as 8.2bp for German 10- year, which remains lower by ~3bp. Focal points for the US session include a final revision of 1Q GDP, comments by Fed Chair Powell, and anticipation of quarter-end flows favoring bonds. Quarter-end is anticipated to cause rebalancing flows into bonds; Wells Fargo estimated that $5b will be added to bonds, with most of the flows occurring Wednesday and Thursday. In commodities, crude futures advance. WTI drifts 0.3% higher to trade near $112.13. Base metals are mixed; LME tin falls 5.6% while LME zinc gains 0.4%. Spot gold falls roughly $5 to trade near $1,815/oz Looking ahead, the highlight will be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Market Snapshot S&P 500 futures little changed at 3,829.00 STOXX Europe 600 down 0.8% to 412.69 MXAP down 1.3% to 159.96 MXAPJ down 1.6% to 531.04 Nikkei down 0.9% to 26,804.60 Topix down 0.7% to 1,893.57 Hang Seng Index down 1.9% to 21,996.89 Shanghai Composite down 1.4% to 3,361.52 Sensex little changed at 53,204.17 Australia S&P/ASX 200 down 0.9% to 6,700.23 Kospi down 1.8% to 2,377.99 German 10Y yield little changed at 1.59% Euro little changed at $1.0510 Brent Futures down 0.4% to $117.46/bbl Gold spot down 0.2% to $1,816.09 U.S. Dollar Index little changed at 104.55 Top Overnight News from Bloomberg The Fed’s Loretta Mester said she wants to see the benchmark lending rate reach 3% to 3.5% this year and “a little bit above 4% next year” to rein in price pressures even if that tips the economy into a recession The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow ECB has “ample room” to hike in 25bps-50bps steps to “whatever rate we think, we consider reasonable,” Governing Council member Robert Holzmann said in interview with CNBC Swedish consumers are gloomier than they have been since the mid-1990s, as prices surge on everything from fuel to food and furniture China’s President Xi Jinping declared Covid Zero the most “economic and effective” policy for the nation, during a symbolic visit to Wuhan in which he cast the strategy as proof of the superiority of the country’s political system NATO moved one step closer to bolstering its eastern front with Russia after Turkey dropped its opposition to Swedish and Finnish bids to join the military alliance A more detailed look at markets courtesy of Newsquawk Asia-Pac stocks were pressured amid headwinds from the US where disappointing Consumer Confidence data added to the growth concerns. ASX 200 failed to benefit from better than expected Retail Sales and was dragged lower by weakness in miners and tech. Nikkei 225 fell beneath the 27,000 level as industries remained pressured by the ongoing power crunch. Hang Seng and Shanghai Comp. conformed to the negative picture in the region although losses in the mainland were initially stemmed after China cut its quarantine requirements which the National Health Commission caveated was not a relaxation but an optimization to make it more scientific and precise. Top Asian News Chinese President Xi said China's COVID prevention control and strategy is correct and effective and must stick with it, via state media. Shanghai will gradually reopen museums and scenic sports from July 1st, state media reports. US Deputy Commerce Secretary Graves said the US will take a balanced approach on Chinese tariffs and that a clear response on China tariffs is coming soon, according to Bloomberg. China State Council's Taiwan Affairs Office said it firmly opposes the US signing any agreement that has sovereign connotations with Taiwan, according to Global Times. BoJ Governor Kuroda said Japanese Core CPI reached 2.1% in April and May which is almost fully due to international energy prices and Japan's economy has not been affected much by the global inflationary trend so monetary policy will stay accommodative, according to Reuters. Japanese govt to issue power supply shortage warning for a fourth consecutive day on Thursday, according to a statement. European bourses are on the backfoot as the region plays catch-up to the losses on Wall Street yesterday. Sectors are mostly lower (ex-Energy) with a defensive tilt as Healthcare, Consumer Products, Food & Beverages, and Utilities are more cushioned than their cyclical peers. Stateside, US equity futures trade on either side of the unchanged mark with no stand-out performers thus far, with the contracts awaiting the next catalyst. Top European News UK expects defence spending to reach 2.3% of GDP and said PM Johnson will announce new military commitments to NATO, according to Reuters. UK Weighs Capping Maximum Stake in Online Casinos at £5 Europe Is the Only Region Where Earnings Estimates Are Rising European Gas Prices Rise as Supply Risks Add to Storage Concerns Gold Steady as Traders Weigh Fed Comments on US Recession Risks Choppy Start for Euro-Area Bonds on Mixed Inflation FX Dollar mostly bid otherwise as rebalancing demand underpins - DXY pivots 104.500 within 104.700-350 confines. Franc outperforms on rate and risk considerations - Usd/Chf breaches 0.9550 and Eur/Chf approaches parity. Euro erratic in line with conflicting inflation data - Eur/Usd rotates around 1.0500. Aussie and Kiwi undermined by downturn in sentiment - Aud/Usd loses 0.6900+ status, Nzd/Usd wanes from just over 0.6250. Yen rangy following firmer than forecast Japanese retail sales and BoJ Governor Kuroda reaffirming intent to remain accommodative - Usd/Jpy straddles 136.00. Nokkie welcomes oil worker wage agreement with unions to avert strike action, but Sekkie hampered by softer Swedish macro releases pre-Riksbank policy call tomorrow - Eur/Nok probes 10.3000, Eur/Sek hovers around 10.6800. Rand rattled by decline in Gold and ongoing SA power supply problems, but Rouble rallies irrespective of CBR and Russian Economy Ministry divergence over deflation. Central Banks ECB's Lane said there are two-way inflation risks: "on the one side, there could be forces that keep inflation higher than expected for longer. On the other side, we do have the risk of a slowdown in the economy, which would reduce inflationary pressure", via ECB. ECB's Holzmann said "We will have to make an assessment where the economic development is going and where inflation stands and afterwards there’s ample room to hike in 0.25 and 0.5 levels to whatever rate we think, we consider reasonable" via CNBC. ECB's Simkus said if data worsens, then he wants a 50bps July hike as an option, 50bps hike is very likely in September; ECB's fragmentation tool should serve as a deterrent, via Bloomberg. ECB's Herodotou said EZ inflation will peak this year, via CNBC. ECB's Wunsch said government aid may spell more rate hikes, via Bloomberg; 150bps of hikes by March 2023 is reasonable ECB is said to be weighting whether or not they should announce the size and duration of their upcoming bond-buying scheme, according to Reuters sources. Fed's Mester (2022, 2024 voter) said on a path towards restrictive interest rates; July debate between 50bps and 75bps hike, via CNBC. Mester said if inflation expectations become unanchored, monetary policy would have to act more forcefully; current inflation situation is a very challenging one, via Reuters. SARB Governor said a 50bps hike is "not off the table", Via Bloomberg CBR Governor said she does not see risks of deflation; sees room to cut rates; sticking to policy of floating RUB exchange rate. PBoC will step up implementation of prudent monetary policy, will keep liquidity reasonably ample. Fixed Income Bunds unwind all and a bit more of their hefty post-NRW CPI gains as other German states show smaller inflation slowdowns and Spanish HICP soars. Gilts suffer more pronounced fall from grace in relative terms and US Treasuries slip from overnight peaks in sympathy. UK debt and STIRs also await testimony from MPC member elect to see if newbie leans dovish, hawkish or middle of the road 10 year benchmarks settle off worst levels within 147.37-145.14, 112.66-11.85 and 117-12+/116-27 respective ranges awaiting comments from ECB, Fed and BoE heads at Sintra Forum. Commodities WTI and Brent front-month futures traded with no firm direction in early European hours before picking up modestly in recent trade. US Private Inventory (bbls): Crude -3.8mln (exp. -0.6mln), Cushing -0.7mln, Distillate +2.6mln (exp. -0.2mln) and Gasoline +2.9mln (exp. -0.1mln). Norway's Industri Energi and SAFE labour unions agreed a wage deal for oil drilling workers and will not go on strike, according to Reuters. OPEC to start today at 12:00BST/07:00EDT; JMMC on Thursday at 12:00BST/07:00EDT followed by OPEC+ at 12:30BST/07:30EDT, via EnergyIntel. Libya's NOC suspends oil exports from Es Sider port. Spot gold is under some mild pressure as the Buck and Bond yields picked up, with the yellow metal back to near-two-week lows Base metals are mixed but off best levels after President Xi reaffirmed China's COVID stance – LME copper fell back under USD 8,500/t US Event Calendar 07:00: June MBA Mortgage Applications, prior 4.2% 08:30: 1Q PCE Core QoQ, est. 5.1%, prior 5.1% 08:30: 1Q GDP Price Index, est. 8.1%, prior 8.1% 08:30: 1Q Personal Consumption, est. 3.1%, prior 3.1% 08:30: 1Q GDP Annualized QoQ, est. -1.5%, prior -1.5% Central Banks 09:00: Powell Takes Part in Panel Discussion at ECB Forum in Sintra 09:00: Lagarde, Powell, Bailey, Carstens Speak in Sintra 11:30: Fed’s Mester Speaks on Panel at ECB Forum in Sintra 13:05: Fed’s Bullard Makes Introductory Remarks DB's Jim Reid concludes the overnight wrap I'm finishing this off in a taxi on the way to the Eurostar this morning and I made the mistake of telling the driver I was slightly pressed for time. He seems to be taking the racing line everywhere and my motion sickness is kicking in. A little like this car journey, it's been another volatile 24 hours in markets, with a succession of weak data releases raising further questions about how close the US and Europe might be to a recession. That saw equities give up their initial gains to post a decent decline on the day, whilst there was little respite from central bankers either, with sovereign bonds selling off further as multiple speakers doubled down on their hawkish rhetoric. That comes ahead of another eventful day ahead on the calendar, with investors primarily focused on a panel featuring Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey, as well as the flash German CPI print for June, who are the first G7 economy to release their inflation print for the month, which will provide some further clues on how fast central banks will need to move on rate hikes. Just as we go to print the NRW region of Germany has seen CPI print at 7.5% YoY, way below last month's 8.1%. This region is around a quarter of GDP so it could imply the national numbers will be notably softer when we get them later. The energy tax cuts were always going to come through in June so some respite was always possible but at first glance this seems materially below what might have been expected. This comes after a significant sovereign bond selloff in Europe once again yesterday as President Lagarde reiterated the central bank’s determination to bring down inflation, and described inflation pressures that were “broadening and intensifying”. And although Lagarde stuck to the existing script about the ECB raising rates by 25bps at the next meeting, we also heard from Latvia’s Kazaks who said that “front-loading the increase would be a reasonable choice” in the event that the situation with inflation or inflation expectations deteriorates. Lagarde did nod to this in part, saying that if the ECB was “to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resources availability, we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.” Separately on fragmentation, Lagarde said that they could “use flexibility in reinvesting redemptions” from PEPP starting July 1 in order to deal with the issue. For now, overnight index swaps are only pricing in a +31.3bps move in July from the ECB, so still closer to 25 than 50 for the time being. Meanwhile the rate priced in by year-end rose also by +7.9bps as investors interpreted the comments in a hawkish light. That supported a further rise in yields, with those on 10yr bunds up another +8.1bps yesterday, following on from their +10.7bps move in the previous session. That’s now almost reversed the -21.9ps move over the previous week, which itself was the third-largest weekly decline in bund yields for a decade, and brought the 10yr yield back up to 1.63%, so not far off its multi-year high of 1.77% seen last week. A similar pattern was seen elsewhere, with 10yr yields on 10yr OATs (+9.6bps), BTPs (+4.2bps) and gilts (+7.2bps) all moving higher too. Things turned near the European close with some poor US data releases piling on to some lacklustre confidence figures in Europe. Earlier in the day the GfK consumer confidence reading from Germany fell to -27.4 (vs. -27.3 expected), taking it to another record low. Separately in France, consumer confidence fell to 82 on the INSEE’s measure (vs. 84 expected), which we haven’t seen since 2013. Then in the US, the Conference Board’s measure fell to 98.7 (vs. 100.0 expected), which is the lowest since February 2021. The Conference Board’s one-year ahead inflation expectations hit a record high of 8.0%, surpassing the June 2008 record of 7.7%, adding to the pessimism. Along with waning confidence, the Richmond Fed’s Manufacturing Index registered a -19, its lowest since the peak onset of the pandemic, versus expectations of -7 and a prior of -9, showing that production data has weakened as well. This put a serious damper on risk sentiment which drove Treasury yields and equities lower intraday during the New York session. 10yr Treasury yields ended down -2.8bps after trading as much as +5.5bps higher during the European session. They are down another -4bps this morning. Concerningly as well, there was a fresh flattening in the Fed’s preferred yield curve indicator (which is 18m3m – 3m), which came down another -9.1bps to 165bps, which is the flattest its been since early March. With that succession of bad news helping to dampen risk appetite, US equities gave up their opening gains to leave the S&P 500 down -2.01% on the day. Tech stocks saw the worst losses, with the NASDAQ (-2.98%) and the FANG+ (-3.74%) seeing even larger declines. And whilst there was a stronger performance in Europe, the STOXX 600 ended the day up just +0.27%, having been as high as +0.95% in the couple of hours before the close. We didn’t hear so much from the Fed ahead of Chair Powell’s appearance today, although New York Fed President Williams said that at the upcoming July meeting “I think 50 to 75 is clearly going to be the debate”. Markets are continuing to price something in between the two, although since the last Fed meeting futures have been consistently closer to 75 than 50, with 69.0 bps right now. Those sharp losses in US equities are echoing across Asia this morning. The Hang Seng (-1.86%) is leading the losses followed by the Kospi (-1.82%), the Nikkei (-1.07%) and the ASX 200 (-1.06%). Over in mainland China, the Shanghai Composite (-0.77%) and the CSI (-0.80%) are slightly out-performing after yesterday’s surprise move by China to slash the quarantine period for inbound travellers (more on this below). Looking ahead, US stock index futures point to a positive opening with contracts on the S&P 500 (+0.18%) and NASDAQ 100 (+0.19%) mildly higher. Earlier today, data released showed that Japan’s retail sales advanced for the third consecutive month in May (+3.6% y/y) but lower than the consensus of +4.0%, but with the previous month's data revised up to +3.1% (vs +2.9% preliminary). Meanwhile, South Korea’s consumer sentiment index (CSI) fell sharply to 96.4 in June (vs 102.6 in May), sliding below the long-term average of 100 for the first time since Feb 2021. Separately, Australia’s retail sales put in another strong performance as it climbed +0.9% m/m in May, surpassing analyst estimates of a +0.4% increase. Oil has fallen back slightly overnight after three sessions of gains with Brent futures down -0.84% at $116.99 and WTI futures (-0.64%) at $111.04/bbl as I type. Just after we went to press yesterday, it was also announced that China would be shortening the required quarantine period for inbound travellers to one week from two. So although China is still very-much committed to a Covid-zero strategy for the time being, this step towards loosening rather than tightening restrictions is an interesting development that helped support Chinese equities in yesterday’s session towards the close which filtered through into early northern hemisphere risk performance. In terms of other data yesterday, there were signs that US house price growth might finally be slowing somewhat, with the S&P CoreLogic Case-Shiller index up by +20.4% in April, which is down slightly from the +20.6% gain in March. So still a long way from an absolute decline, but that marks a reversal in the trend after the previous 4 months of rises in the year-on-year measure. To the day ahead now, and the highlight will likely be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Tyler Durden Wed, 06/29/2022 - 08:00.....»»

Category: smallbizSource: nytJun 29th, 2022

5 Beaten-Down ETFs to Buy at Attractive Prices

The beaten-down prices offer a solid buying opportunity for investors. We have highlighted five ETFs from different sectors that have declined more than 25% this year but have a solid Zacks ETF Rank #1 or 2. Wall Street has been on a wild swing this year, triggered by concerns over sky-high inflation, rising interest rates and a dull economic outlook. The sell-off accelerated recently, with the S&P 500 logging in the longest weekly losing streak since 2011 and the Dow Jones registering the first seven-week losing streak since 2001. The tech-heavy Nasdaq Composite saw the sixth consecutive weekly decline. Notably, the S&P 500 saw the worst start to a year since 1939 and is on the brink of bear territory.The beaten-down prices offer a solid buying opportunity for investors. We have highlighted five ETFs from different sectors that have declined more than 25% this year but have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These products, namely, WisdomTree Cloud Computing Fund WCLD, SPDR S&P Biotech ETF XBI, First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN, iShares U.S. Home Construction ETF ITB and Consumer Discretionary Select Sector SPDR Fund XLY are poised to outperform when the market resumes its uptrend.Market TrendsThe Federal Reserve has started raising interest rates more aggressively to fight inflation that will hit consumers and businesses. Fed Chair Jerome Powell has raised interest rates by 50 bps in the latest FOMC meeting. This marks the biggest interest-rate hike since 2000. Inflation jumped 8.3% year over year in April. Though it is down from an 8.5% year-over-year increase in March, it still represents the second-highest inflation in four decades and an ongoing burden for families, especially lower-income Americans.COVID-19 variant concerns and the resultant lockdown measures in China have sparked worries over global economic expansion that will continue to weigh on investors’ sentiment. Notably, the U.S. economy shrank for the first time since the outbreak of the pandemic. GDP dropped 1.4% annually in the first quarter of 2022, marking a sharp reversal from 6.9% annual growth in the fourth quarter. Consumer sentiment hit the lowest level since 2011 in May, according to the latest reading of the University of Michigan Sentiment index. Manufacturing activity grew at its slowest pace in more than one and a half years in April (read: U.S. Economy Shrinks in Q1: ETFs to Win/Lose).Further, a war in Ukraine worsened disruptions in the flow of goods across borders, resulting in skyrocketing food and energy prices, and threatening corporate profits. Corporate results have turned out weaker than expected for the first quarter.However, Powell’s latest remarks that “the bigger rate hikes would be off the table for now even after the hot inflation readings” is expected to rekindle investors’ interest in risker assets once again. After a massive decline, U.S. stocks have become extremely cheap at current valuations. In fact, the meltdown has wiped out more than $7 trillion in market value from the blue-chip stocks in the S&P 500.ETFs to BuyWisdomTree Cloud Computing Fund (WCLD) – Down 41.3%Demand for cloud computing services surged during the pandemic and is expected to grow further, as work, school, and social activities moved increasingly to digital experiences. WisdomTree Cloud Computing Fund offers exposure to emerging and fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follow the BVP Nasdaq Emerging Cloud Index. It holds 76 stocks in its basket and charges investors 45 bps in fees per year.WisdomTree Cloud Computing Fund has amassed $567 million in its asset base and trades in an average daily volume of 472,000 shares. It has a Zacks ETF Rank #2.SPDR S&P Biotech ETF (XBI) – Down 38.7%Biotech might be a good buying option for the long-term investors given the encouraging industry trends, including new drug nods, an accelerated pace of innovation, promising drug launches, the growing importance of biosimilars, cost-cutting efforts, an aging population, expanding insurance coverage, the rising middle class, an insatiable demand for new drugs and ever-increasing spending on healthcare. SPDR S&P Biotech ETF offers equal-weight exposure across 157 biotechnology stocks. It follows the S&P Biotechnology Select Industry Index, charging investors 35 bps in annual fees.SPDR S&P Biotech ETF has AUM of $5.1 billion and trades in an average daily volume of 13.6 million shares. XBI has a Zacks ETF Rank #2.First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) – Down 31.3%Countries across the globe are scaling their renewable energy investments. The United States has been at the forefront of making the climate clean with President Joe Biden’s pledge to go greener. First Trust NASDAQ Clean Edge Green Energy Index Fund offers exposure to the companies engaged in manufacturing, development, distribution and installation of emerging clean-energy technologies, including solar photovoltaics, wind power, advanced batteries, fuel cells, and electric vehicles. It tracks the Nasdaq Clean Edge Green Energy Index and holds 65 stocks in its basket.First Trust NASDAQ Clean Edge Green Energy Index Fund manages assets worth $1.7 billion and charges 58 bps in fees per year. The product trades in an average daily volume of 324,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.iShares U.S. Home Construction ETF (ITB) – Down 30.9%Homebuilders, which are seeing slowdown currently, is expected to rebound as construction activity picks up when the economy strengthens. iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index (read: ETFs to Gain As Inflation Remains Second Highest in 4 Decades).With AUM of $1.4 billion, iShares U.S. Home Construction ETF holds a basket of 47 stocks with a heavy concentration on the top two firms. The product charges 41 bps in annual fees and trades in a heavy volume of around 4.9 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #2 with a High risk outlook.Consumer Discretionary Select Sector SPDR Fund (XLY) – Down 28.2%The consumer sector will likely benefit from higher spending power, elevated wage growth and lower unemployment rate. Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 60 securities in its basket with key holdings in automobiles, Internet & direct marketing retail, hotels, restaurants and leisure, and specialty retail round off the next three spots with a double-digit allocation each (read: Don't Sell in May, Buy These Top-Ranked ETFs Instead).Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $15.4 billion and an average daily volume of around 11 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook. 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 iShares U.S. Home Construction ETF (ITB): ETF Research Reports Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports SPDR S&P Biotech ETF (XBI): ETF Research Reports First Trust NASDAQ Clean Edge Green Energy ETF (QCLN): ETF Research Reports WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 16th, 2022

Futures Jump As Crypto Turmoil Fades, Dip Buyers Make Cautious Appearance

Futures Jump As Crypto Turmoil Fades, Dip Buyers Make Cautious Appearance After dropping to the edge of a bear market, with Eminis sliding to precisely 3,855 or exactly 20% lower than the all time high, US index futures rebounded sharply from the brink (the same way they did on Dec 24, 2018 when the S&P spent a few minutes in a bear market) as the stabilization of much of the cryptosphere (where no new stablecoins suddenly cratered to 0) and an overnight easing in Treasury yields provided some relief after a two-day slide. Nasdaq 100 futures climbed 1.7% as of 730 a.m. in New York. S&P 500 futures were also higher, rising 1.1%, as high as 3976 after dropping to 2,855 yesterday. Twitter shares plunged as much as 26% in New York premarket trading after Elon Musk tweeted that his deal for the social media company was "temporarily on hold." Yields on 10-year US Treasury yields fell for a fourth consecutive day on Thursday, reaching 2.85%, before edging higher again on Friday. The dollar index dipped but remains on course for its longest streak of weekly gains since 2018, while bitcoin and ether reversed several days of harrowing losses to rise back over 30,000 and 2,000, respectively. Abating panic in the cryptocurrency market was among the highlights of a risk-on environment on the last day of the week. Bitcoin added about $1,800 to top $30,000. US cryptocurrency-exposed stocks including Riot Blockchain Inc. and Marathon Digital Holdings Inc. also rallied premarket. In notable premarket moves, Twitter slumped 21% after bidder Elon Musk tweeted deal was “temporarily on hold” pending details about fake accounts. On the other end, Robinhood surged 20% after cryptocurrency billionaire Sam Bankman-Fried snapped up a 7.6% stake, while Affirm jumped 30% after earnings. Cryptocurrency-exposed stocks climbed as digital assets started to rebound after the recent rout linked to the implosion of the TerraUSD stablecoin. Coinbase rose 11% despite being sued over its role in the promotion and trading of a stablecoin that purportedly had its value pegged to the price of the Japanese yen.  Bank stocks rose in premarket trading Friday, putting them on track to snap a six-day losing streak. Here are all the notable premarket movers: Twitter (TWTR US) shares slump as much as 19% premarket after Musk says deal is “temporarily on hold pending details”. Tesla (TSLA US) shares hit a session high, rising nearly 5% on the news Megacap tech stocks and semiconductor makers rally in US premarket trading amid a broad rebound across growth sectors, while Korean chip peer Samsung was said to be in talks to hike chipmaking prices. Apple (AAPL US) +2.1%, Meta Platforms (FB US) +2.4%, Microsoft (MSFT US) +1.8% Robinhood (HOOD US) shares surge as much as 27% in U.S. premarket trading after cryptocurrency billionaire Sam Bankman-Fried disclosed a new 7.6% stake in the online brokerage Cryptocurrency-exposed stocks climb in US premarket trading as digital assets started to rebound after the recent rout linked to the implosion of the TerraUSD stablecoin. Riot Blockchain (RIOT US) +7.9%, Marathon Digital (MARA US) +7.2% US-listed Chinese stocks rise in premarket trading, with sentiment boosted by the Fed’s pushback on speculation of steeper interest-rate hikes and Shanghai’s new timeline to end a grueling lockdown. Alibaba (BABA US) +3.3%, (JD US) +4%, Pinduoduo (PDD US) +4.3%. New Relic (NEWR US) declined 9% in postmarket. It delivered a mixed fourth quarter, according to analysts, with revenue growth coming in ahead of consensus, albeit with a lower beat compared to the last period Figs (FIGS US) sinks as much as 27% in US premarket trading, with Cowen saying that the scrubs maker’s cut to its full-year 2022 sales growth and Ebitda margin guidance is “well below” previous guidance Compass (COMP US) jumpped 7% in extended trading after the real-estate software company reported larger-than-expected revenues in the first quarter, despite guiding toward lower- than-expected second-quarter revenue First Solar Inc. (FSLR US) shares gained 2.8% in extended trading on Thursday, as Piper Sandler upgrades the stock to overweight from neutral Stocks have plunged this year as traders fretted over the impact tighter monetary will have on growth, with the S&P 500 dropping to precisely 20% from its recent peak before bouncing. On Thursday, Fed Chair Jerome Powell on Thursday reaffirmed that the central bank is likely to raise interest rates by a half percentage point at each of its next two meetings, while leaving open the possibility it could do more. The Fed chair also said that whether a soft landing can be executed or not may depend on factors that they cannot control but added they have tools to get inflation under control and that it will ultimately be more painful if high inflation is not dealt with and becomes entrenched. Furthermore, he noted that with perfect hindsight, it would have been better to have hiked rates sooner, according to Reuters. As the Federal Reserve embarks on interest-rate hikes to tame surging inflation, expensive growth shares, including the tech sector, have suffered as higher rates mean a bigger discount for the present value of future profits. This marks a shift in investor outlook after tech stocks had been some of the market’s best performers for years.  “While we continue to see positives for the market, investor sentiment isn’t likely to turn until we get greater clarity on the 3Rs -- rates, recession and risk,” said Mark Haefele, chief investment officer, UBS Global Wealth Management. “Until then, we favor parts of the market that should outperform in an environment of rising policy rates, slowing growth, and geopolitical uncertainty.” At $1.1 billion, tech stocks suffered their biggest outflows so far this year in the week to May 11, second only to financials, which lost $2.6 billion, Bank of America CIO Michael Hartnett wrote in a note, citing EPFR Global data. By contrast, US stocks overall noted their first inflow in five weeks at $93 million. It’s a “very tough time,” Kathy Entwistle, managing director at Morgan Stanley Private Wealth Management, said on Bloomberg Television. “We’re holding just still and quiet and patient and waiting for some more insights as to where we’re going. We still see a lot of volatility on the horizon." In Europe, the Stoxx 600 Index rose 1.2% as the lowest valuations since the start of the pandemic drew buyers. Banks and technology stocks led gains, while autos and telecommunication shares underperformed.  Here are Europe's biggest movers: Evotec shares rise as much as 9.5% after Deutsche Bank analyst Falko Friedrichs raised the recommendation to buy from hold, citing a unique opportunity to invest in a firm with an entire partnered drug pipeline “for free.” Deutsche Telekom shares advance 1.8% after raising full-year outlook for adjusted Ebitda after leases, reflecting higher forecasts for T-Mobile US. Freenet shares gain as much as 4.8% 1Q results show a good start to the year, and there may be scope for a guidance upgrade in 1H22, Citi (buy) writes in note Fortum shares advance as much as 11% on Friday -- the biggest intraday gain since 2009 -- after SEB and Danske Bank raised their recommendation on the stock citing the Finnish utility’s Russia exit and de-risking related to Uniper gas contracts. UCB shares fall as much as 17% after the company said the US FDA said it can’t approve UCB’s psoriasis treatment bimekizumab in its current form, forcing the company and analysts to reasses 2022 expectations. Drax falls as much as 7.6% and is among weakest performers in the Stoxx 600 on Friday after Credit Suisse gives the stock its only negative rating, moving to underperform on elevated power prices. SalMar drops as much as 4%, falling alongside peers in the Norwegian salmon and seafood sector, after a slew of several companies in the sector reported 1Q earnings that came in below expectations. Unipol and UnipolSai drop in Milan trading after releasing first-quarter results and the 2022-2024 strategic plan; analysts note lower-than-expected cumulative dividends in plan for UnipolSai. European Union nations said it may be time to consider delaying a push to ban Russian oil if the bloc can’t persuade Hungary to back the embargo. Wheat production in Ukraine, one of the biggest growers, will fall by one-third compared to last year, according to a US forecast. Earlier in the session, Asian stocks rallied as battered technology shares bounced back, with the regional benchmark still on track for its worst weekly losing streak since 2015 on worries about higher interest rates and lockdowns in China. The MSCI Asia Pacific Index rose as much as 1.8%, advancing with US futures as comments from Federal Reserve Chair Jerome Powell signaled rate hikes of more than 50 basis points may be unlikely. SoftBank was among the biggest boosts after its results, along with Tencent and TSMC. Traders said Friday’s rebound was largely driven by the unwinding of short positions following the recent selloff, with many still nervous about how China’s virus measures can complicate the already murky global economic outlook. The Asian equity measure was on track for its sixth-straight weekly decline, down 2.5% in the past five sessions. “We have to be watchful on the impact of China’s lockdowns, that’s going to have an effect on inflation as well as on growth,” said Jumpei Tanaka, a strategist at Pictet. “Up until now, the earnings outlook hasn’t been lowered that much. The market has been adjusting valuations because of the Fed’s rate hikes. The next key point is how corporate earnings will be affected.” Japan’s Nikkei rose 2.6%, boosted by gains in Tokyo Electron after strong profits as well as SoftBank. In Hong Kong, the Hang Seng Tech Index jumped 4.5%. India’s key equity indexes fell for a 6th straight session and posted their longest stretch of weekly losses in two years as investors’ appetite faded on the back of the local currency’s plunge to a record low and disappointing earnings.  The S&P BSE Sensex declined 0.3% to 52,793.62 in Mumbai after erasing advance of as much as 1.6% during the session. The NSE Nifty 50 Index retreated 0.2% to its lowest level since July 30. Both gauges have retreated 3.7% and 3.8% for the week respectively and fallen for a fifth straight week, their longest run of losses since April 2020. “The fear of rising inflation and expectations of more rate hikes in the near term are weighing on investors’ minds,” according to Kotak Securities analyst Amol Athawale.“Traders are selling at every opportunity given that there seems to be no respite from the negative news flows.” The Sensex and Nifty are now about 14.5% off their peak levels in Oct.  Ten of the 19 sector sub-indexes compiled by BSE Ltd. dropped on Friday, led by metal companies. For the week, utilities stock gauge was the worst performer, dropping about 11%.  ICICI Bank contributed the most to the Sensex’s decline, easing 2.7%. Out of 30 shares in the Sensex index, 15 rose while rest fell. In rates, Treasuries were pressured lower as stock futures pushed through Thursday’s session highs, following gains across European equities. 10-year TSY yields rose to around 2.90%, cheaper by 5bp on the day and sitting close to session highs into early session -- both bunds and gilts underperform slightly across the sector. Risk sentiment was boosted by a rebound in cryptocurrencies, leaving Treasury yields cheaper by up to 6bp across long-end of the curve where 20-year sector underperforms. Long-end led losses steepening 5s30s by 2bp on the day and 2s10s by 2.8bp. The Dollar issuance slate is empty so far; six deals were priced for $11.5b Thursday, taking weekly total to $21.7b vs. $30b projected -- two names decided to stand down. Bund, gilt and UST curves bear-steepen. Peripheral spreads widen, short-dated BTPs lag, widening 5bps to core. Yields on Japan’s debt fell even as those on Treasuries rise across the curve in Asia amid higher equities. In FX, the Bloomberg Dollar Spot Index slumped and the greenback weakened against all of it Group-of-10 peers apart from the yen as investor demand for haven assets ebbed after Federal Reserve Chair Jerome Powell pushed back against speculation of more aggressive interest-rate hikes. Risk sensitive Scandinavian currencies as well ask the Australian dollar led gains. The main theme in the FX options space Friday is gamma selloff following the large swings this week. Still, demand for low-delta exposure on a haven basis remains better bid, with greenback topside in good demand versus the euro and the pound. European government bonds followed US Treasuries lower, snapping a recent rally. Treasury yields rose by 3-7 bps as the curve bear- steepened. The yen pared early weakness after BOJ’s Kuroda stressed FX stability. China’s yuan strengthens against the dollar following warnings from the CBIRC with gains fading following soft loan data. In commodities, Crude futures advance, WTI gains stall near $108. Base metals trade poorly with much of the LME complex down over 1%. Spot gold trades in a narrow range near $1,823/oz. In crypto, Bitcoin rose back above $30,000.  Binance said that withdrawals for Lunar and UST will open when the market becomes more stable, will suspend spot trading for LUNA/BUSD and UST/BUSD at 09:30BST, May 13th. To the day ahead now, and data releases include Euro Area industrial production for March, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include the Fed’s Kashkari and Mester, as well as the ECB’s Centeno, Nagel and Schnabel. Market Snapshot S&P 500 futures up 1.1% to 3,970.75 STOXX Europe 600 up 1.2% to 429.53 MXAP up 1.7% to 160.25 MXAPJ up 1.9% to 522.21 Nikkei up 2.6% to 26,427.65 Topix up 1.9% to 1,864.20 Hang Seng Index up 2.7% to 19,898.77 Shanghai Composite up 1.0% to 3,084.28 Sensex up 1.2% to 53,564.26 Australia S&P/ASX 200 up 1.9% to 7,075.11 Kospi up 2.1% to 2,604.24 German 10Y yield little changed at 0.91% Euro up 0.2% to $1.0403 Brent Futures up 0.8% to $108.30/bbl Gold spot up 0.0% to $1,822.04 U.S. Dollar Index down 0.25% to 104.59 Top Overnight News from Bloomberg Calls are growing for China’s government to sell more bonds to pay for extra stimulus to boost an economy facing its greatest challenges since the initial few months of the pandemic in 2020 For global investors trying to gauge the fallout from surging interest rates and slowing economic growth, Hong Kong is quickly emerging as a must-watch market. While Hong Kong’s $466 billion foreign-reserves stockpile and plentiful interbank liquidity suggest little chance of an imminent crisis, signs of financial stress are building UK Chancellor of the Exchequer Rishi Sunak said the Brexit settlement in Northern Ireland is causing economic and political harm and called on the European Union to be flexible, comments likely to be seen as an attempt to publicly align himself with Boris Johnson after reports of a rift With the U.K. wilting under the fastest inflation in three decades, supermarkets are raising prices at an even quicker rate, according to a new analysis prepared for Bloomberg. That’s turning the screws on shoppers who are already grappling with higher gas and heating bills and falling real incomes Some EU nations are saying it may be time to consider delaying a push to ban Russian oil so they can proceed with the rest of a proposed sanctions package if the bloc can’t persuade Hungary to back the embargo Beijing reported a slight increase in new Covid-19 cases after officials late Wednesday denied the city will be locked down amid growing concern the Chinese capital’s response to a persistent outbreak is about to be intensified Investors are deep in risk-off mood with outflows from stocks, bonds, cash and gold, Bank of America strategists said, citing EPFR Global data A more detailed look at global markets courtesy of Newsquawk APAC stocks were firmer as risk momentum picked up following on from the volatile session on Wall St where the major indices finished mixed but almost wiped out all losses after a late ramp up heading into the close. ASX 200 traded with respectable gains and back above the 7,000 level with tech frontrunning the advances. Nikkei 225 outperformed as focus remained on earnings, while SoftBank surged amid buyback hopes and despite a record loss. Hang Seng and Shanghai Comp joined in on the elated mood with Hong Kong led by strength in tech, although the advances in the mainland were moderated by the mixed COVID headlines with Beijing to conduct the next round of mass COVID testing, while Shanghai aims to achieve zero community spread by the middle of this month and is considering expanding the scale of output resumption. Top Asian News Shanghai Vice Mayor said they aim to have no community spread of coronavirus by mid-May and are considering expanding the scale of production resumption, while they will aim to open up, ease traffic restrictions and open shops in an orderly manner, according to Reuters. Shanghai is to prioritise resuming classes for grades 9, 11 and 12, while supermarkets, convenience and department stores will resume offline operations in an orderly manner and other services such as hairdressing will open gradually, according to Global Times. China Banking and Insurance Regulatory Commission says the Yuan's weakening is not sustainable, adding do not bet on the unilateral devaluation and appreciation or you could face unnecessary losses; retreat in the Yuan was normal market reaction.. BoJ Governor Kuroda said Japan still hasn't achieved a situation where inflation is stably and sustainably at 2%, while the expected rise in inflation is driven mostly by energy costs and is lacking sustainability. Kuroda reiterated the BoJ must continue monetary easing to reach its price target and it is premature to debate an exit from ultra-easy policy, while he also said it is appropriate to maintain the current dovish forward guidance on interest rates, according to Reuters. North Korea said around 350k have shown fever symptoms of an 'unknown cause' and 187.8k are being treated in isolation, while it reported 18k COVID-19 cases and 6 died from a fever in which one was confirmed as a COVID death, according to KCNA and Yonhap. European bourses are firmer as the rebound from Thursday's selloff continues, Euro Stoxx 50 +1.3%. US futures are similarly bolstered across the board, NQ outpacing peers modestly as Tech recoups, ES +0.9%. Samsung (005930 KS) is reportedly in talks to hike chipmaking prices by up to 20%, according to Bloomberg sources. Elon Musk says the Twitter (TWTR) deal is temporarily on hold, pending details supporting the calculation that spam/fake accounts represent less than 5% of users. Pressure in TWTR subsequent extended to -13% in the pre-market; extending to -19% after five-minutes. Top European News UK PM Johnson is considering as many as 90k job cuts in civil service, according to ITV. GVS Shares Rise After Agreeing to Buy Haemotronic for EU212m EU Starts to Consider Oil Sanctions Delay as Hungary Digs In UCB Plunges After FDA Says It Can’t Approve Psoriasis Drug Now Black Bankers Fight to Hold Finance Accountable for Its Promises FX Dollar and Yen shed some safe haven gains as risk sentiment recovers ahead of the weekend; DXY slips from fresh 2022 peak at 104.920, though still positive, and USD/JPY up near 129.00 vs new retracement low circa 127.50. Aussie takes advantage of pickup in risk appetite and Yuan bounce amidst verbal intervention; AUD/USD hovering under 0.6900 from sub-0.6850 yesterday, USD/CNH and USD/CNY around 6.8000 vs 6.8370 and 6.8110. Euro, Pound and Franc regroup, but remain vulnerable around psychological levels; 1.0400, 1.2200 and parity in EUR/USD, Cable and USD/CHF respectively. Loonie off recent lows post hawkish BoC comments and pre Q1 Loans Survey, USD/CAD close to 1.3000 and 1.1bln option expiry interest between 1.2990 and the round number. Peso underpinned after 50 bp Banxico hike as 1 of the 5 voters dissented for 75 bp. Czech Koruna caught between CNB minutes underlining dovish leaning of new head and Holub opining that May’s hike may not be the final one. Fixed Income Bonds bounce after conceding ground to recovering risk assets. Bunds find support just ahead of 154.00, Gilts in the low 120.00 zone and 10 year T-note at 119-07. Curves re-steepen after decent US 30 year sale completes the Quarterly Refunding remit and attention turns to 20 year and 10 year TIPS auctions next week. Commodities WTI and Brent are firmer moving with the broad rebound in risk-assets, however, upside is capped amid the EU considering omitting the proposed Russia oil embargo from the 6th sanctions round. WTI resides around USD 107/bbl (106.29-108.13 intraday range) and Brent trades just under USD 109/bbl (107.79-109.79 intraday range). Spot gold is contained around USD 1820/oz, though it is coming under modest pressure as the DXY picks up most recently. US Event Calendar 08:30: April Import Price Index MoM, est. 0.6%, prior 2.6%; YoY, est. 12.2%, prior 12.5% 08:30: April Export Price Index MoM, est. 0.7%, prior 4.5%; YoY, est. 19.2%, prior 18.8% 10:00: May U. of Mich. Sentiment, est. 64.0, prior 65.2; Current Conditions, est. 69.3, prior 69.4; Expectations, est. 61.5, prior 62.5 10:00: May U. of Mich. 1 Yr Inflation, est. 5.5%, prior 5.4%; 5-10 Yr Inflation, prior 3.0% DB's Jim Reid concludes the overnight wrap As those working in this industry know, spreadsheet errors can have consequences – often costly ones. My fiancée doesn’t spend as much time on Excel as I do, but with our wedding coming up in July, she’s been using a spreadsheet to keep track of the number of guests. I privately regard this sheet to be an abomination, so in the interests of our future marriage I’ve tried to avoid the subject. But a couple of weeks ago I was told that we needed more guests and had to extend further invites, since we were up against the reception venue’s minimum. This I duly did, although having already invited my friends, I mostly resorted to being a lot more generous on my plus-one policy. At the weekend however, she showed me the spreadsheet. It turned out she hadn’t extended the range on the guest list sum function, and we were already comfortably above what we needed. I won’t tell you how much these extra invites have cost us. Thankfully as a primary school teacher she doesn’t teach Excel to her 5- and 6-year-olds, although I then discovered with even more alarm that she’s considered the spreadsheet expert at her school… It’s been a costly few weeks in markets too as investors have priced in growing recession risks, and over the last 24 hours we’ve seen some incredible intraday volatility across a range of asset classes. At one point in the New York afternoon, the S&P 500 had been down -1.94% at the lows, which left it just shy of a -20% decline since its all-time closing peak that would mark the formal start of a bear market. But then in the final hour there was a major recovery that meant the index only saw a modest -0.13% fall on the day, even if that still marked a fresh one-year low. Futures markets are implying we’re going to see that rally extended today, with those for the S&P up +0.92% this morning. But even if we do see a recovery of that sort of magnitude, then the major losses we’ve already seen this week mean it would still be the first time in over a decade that the index has posted 6 consecutive weekly declines. That pattern of deep losses followed by a late recovery was echoed more broadly yesterday, with the NASDAQ paring back losses of more than -2% on the day to eke out a marginal +0.06% advance. For the FANG+ index (-0.30%), the late recovery wasn’t enough to bring it back into positive territory, and there was a significant milestone reached since its latest slump means it’s now more than -40% beneath its all-time high, which surpasses its losses during the Covid selloff of 2020 when it was “only” down by -34% from peak to trough. European equities lost ground too, and the STOXX 600 (-0.75%) similarly saw a second-half recovery, having been as low as -2.41% earlier in the day. Unlike in April, when the equity declines were triggered by the prospect of a more aggressive Fed tightening cycle and went hand-in-hand with sovereign bond losses, this week’s declines have much more obviously surrounded global growth risks, which you can see in the way that Fed Funds futures are now beginning to take out some of the tightening they’d been pricing in over the year ahead. Only yesterday, the futures-implied rate by the FOMC’s December meeting came down by -5.3bps to still be beneath its level from 3 weeks earlier, which marks a change from the almost relentless march higher we’ve seen over the last 8 months. In fact the only major interruption to that trend so far has come from Russia’s invasion of Ukraine in late-February, before the inflationary consequences of the conflict reasserted themselves on market pricing. With investors expecting less monetary tightening and seeking out safe havens, yesterday witnessed a major sovereign bond rally across countries and maturities. The 10yr Treasury yield came down -7.3bps to 2.85%, and at the front-end of the curve, 2yr yields were down -7.8bps to 2.56%. This came on a day with another round of Fed speakers sounding the same tune of late, including Chair Powell who said that +50bp hikes at the next two meetings were probably appropriate. Meanwhile, he sounded an even more pessimistic tone on the path of the economy given the impending tightening, noting that getting inflation back to target would “include some pain” and that whether a soft landing can be arranged is up to matters beyond the Fed’s control. Over in Europe the declines were even larger, with yields on 10yr bunds (-14.6bps) undergoing their biggest daily move since the start of March, as yields on 10yr OATs (-13.8bps), BTPs (18.4bps) and gilts (-16.5bps) saw similar declines. A noticeable feature of the recent sovereign bond rally is how investors’ expectations of future inflation have come down significantly over recent days, with the 10yr German breakeven falling from a peak of 2.98% on May 2 to just 2.29% yesterday, which is an even faster decline than the one seen during the initial phase of the Covid pandemic in March 2020. That flight to havens was evident in foreign exchange markets too, where the dollar index strengthened a further +0.97% to levels not seen since 2002. Conversely, that saw the euro close beneath the $1.04 mark for the first time since late-2016, although the traditional safe haven of the Japanese Yen was the top-performing G10 currency yesterday, strengthening +1.27% against the US Dollar and +2.61% against the Euro. When it came to cryptocurrencies, Bitcoin hit an intraday low of $25,425 shortly after the European open, which is the first time it’s traded that low since late 2020, before recovering its losses to end the session higher at $28,546, and this morning it’s rebounded another +6.34% to hit $30,356. Overnight in Asia we’ve seen a significant rebound in equity markets too, with the Nikkei (+2.52%), the Hang Seng (+2.00%) and the KOSPI (+1.72%) all seeing sizeable advances, and the Shanghai Comp (+0.56%) also posting a solid gain. Those earlier comments from Chair Powell after the US close have supported risk appetite, particularly since he echoed his previous comments about the Fed being on course for further 50bp hikes at the next couple of meetings, rather than moving towards 75bps in the aftermath of the stronger-than-expected CPI reading. A number of yesterday’s other moves have also begun to unwind, with the Japanese Yen down -0.50% against the US Dollar this morning, whilst yields on 10yr Treasuries have risen +3.6bps overnight. Separately in Shanghai, officials said that they planned to stop community spread of Covid-19 and start reopening by May 20, which is the first time that a timeline has been put forward as to when the lockdown might end. Elsewhere yesterday, there was a significant +13.50% rise in European natural gas futures after Gazprom said that gas flows wouldn’t be able to go through the Yamal pipeline because of Russian-imposed sanctions on European companies. But on the other hand, Bloomberg reported that some EU nations were considering a delay in sanctioning Russian oil in light of Hungarian opposition, and instead pushing ahead with the rest of the sanctions package. There were also further signs of the geopolitical shifts as a result of Russia’s invasion, after Finland’s President and Prime Minister endorsed NATO membership, saying the country should apply “without delay”. Staying on the political sphere, tensions have continued to fester between the UK and the EU over the Northern Ireland Protocol, and yesterday’s statements from the two sides indicated there was a difficult phone call between UK Foreign Secretary Truss and EU Commission Vice President Šefčovič. The UK Foreign Office’s readout of the call said that “if the EU would not show the requisite flexibility … we would have no choice but to act.” Then Šefčovič said in his own statement that it was “of serious concern that the UK government intends to embark on the path of unilateral action.” So one to watch into next week given press reports we could hear more from the UK side then. Looking at yesterday’s data, the US PPI reading added to the picture of elevated inflationary pressures. The headline monthly gain for April came in at +0.5% as expected, but the March reading was revised up two-tenths to +1.6%, meaning that the year-on-year figure only came down to +11.0% (vs. +10.7% expected). We also had the weekly initial jobless claims for the week through May 7, which came in at 203k (vs. 193k expected). And in the UK, the Q1 GDP reading was a bit below consensus at +0.8% (vs. +1.0% expected), and looking at the monthly reading for March specifically there was actually a -0.1% contraction (vs unchanged expected). To the day ahead now, and data releases include Euro Area industrial production for March, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include the Fed’s Kashkari and Mester, as well as the ECB’s Centeno, Nagel and Schnabel. Tyler Durden Fri, 05/13/2022 - 07:56.....»»

Category: smallbizSource: nytMay 13th, 2022

The Economy is Great. The Middle Class is Mad

Jeff Swope felt the first spurt of anger bubble up when he learned in February that his landlord was raising the rent on the empty two-bedroom apartment next door by more than 30%, to $2,075 a month. Though Swope, a 42-year-old teacher, and his wife Amanda Greene, a nurse, make $125,000 a year, they couldn’t… Jeff Swope felt the first spurt of anger bubble up when he learned in February that his landlord was raising the rent on the empty two-bedroom apartment next door by more than 30%, to $2,075 a month. Though Swope, a 42-year-old teacher, and his wife Amanda Greene, a nurse, make $125,000 a year, they couldn’t handle that steep a rent increase­—not alongside the student loans and car payments and utility bills and all the other costs that have kept growing for a family of three. “The frustration­—it was always a frog in the boiling water type of thing. I’d always felt it, but on a basic level. Something’s always brewing,” says Swope, from his modest apartment, where Atlanta Braves bobbleheads compete with books for shelf space. “We looked at the rent increase, and it was like, OK, this is ridiculous. I was like, ‘What the???’” [time-brightcove not-tgx=”true”] For Jen Dewey-Osburn, 35, who lives in a suburb of Phoenix, the rage arose when she calculated how much she owed on her student loans: ­although she’d borrowed $22,624 and has paid off $34,225, she still owes $43,304. (She’s in a dispute with her loan servicer, ­Navient, about how her repayments were calculated.) She and her husband know they’re more fortunate than most—both have good jobs—but they feel so stuck financially that they can’t envision taking on the cost of having children. “It’s just moral and physical and emotional exhaustion,” she says. “There’s no right choices; it feels like they’re all wrong.” The exasperation of Omar Abdalla, 26, peaked after his 12th offer on a home fell through, and he realized how much more financial stability his parents, who were immigrants to the U.S., were able to achieve than he and his wife can. They both have degrees from good colleges and promising careers, but even the $90,000 down payment they saved up was not enough when the seller wanted much more than the bank was prepared to lend on the home they wanted. Abdalla’s parents, by contrast, own two homes; his wife’s parents own four. “Their house probably made more money for them than working their job,” he says. “I don’t have an asset that I can sleep in that makes more money than my daily labor. That’s the part that kind of just breaks my mind.” “Our income supposedly makes us upper middle class, but it sure doesn’t feel like it.”Middle-class U.S. families have been treading water for decades—weighed down by stalled income growth and rising prices—but the runaway inflation that has emerged from the pandemic is sending more than a ripple of frustration through their ranks. The pandemic seemed at first as if it might offer a chance to catch up; they kept their jobs as the service sector laid off millions, their wages started climbing at a faster rate as companies struggled to find workers, and they began saving more than they had for decades. About one-third of middle-income Americans felt that their financial situation had improved a year into the pandemic, according to Pew Research, as they quarantined at home while benefiting from stimulus checks, child tax credits, and the pause of federal student-­loan payments. But 18 months later, they increasingly suspect that any sense of financial security was an illusion. They may have more money in the bank, but being middle class in America isn’t only about how much you make; it’s about what you can buy with that money. Some people measure that by whether a family has a second refrigerator in the basement or a tree in the yard, but Richard Reeves, director of the Future of the Middle Class Initiative at the Brookings Institution, says that what really matters is whether people feel that they can comfortably afford the “three H’s”—housing, health care, and higher education. In the past year alone, home prices have leaped 20% and the cost of all goods is up 8.5%. Families are paying $3,500 more this year for the basic set of goods and services that the Consumer Price Index (CPI) follows than they did last year. Average hourly earnings, by contrast, are down 2.7% when adjusted for inflation. That squeeze has left many who identify as middle class reaching to afford the three H’s, especially housing. In March, U.S. consumer sentiment reached its lowest level since 2011, according to the University of Michigan’s Surveys of Consumers, and more households said they expected their finances to worsen than at any time since May 1980. “The mantra has been: Work hard, pay your dues, you’ll be rewarded for that. But the goalposts keep getting moved back,” says Daniel Barela, 36, a flight attendant in Albuquerque, N.M., who is exquisitely aware that his father had a home and four kids by his age. Barela and his partner made around $69,000 between them last year, and he feels as if he’s been jammed financially for most of his adult life. He lost his job during the Great Recession and, after a major credit-card company raised his interest rate to 29.99% in 2008, he had to file for bankruptcy. “No matter what kind of job I’ve held and no matter how much I work, it never seems to be enough to meet the qualifications to own a home,” he says. Even if people Barela’s age, who make up much of the middle class today, earn more money than their parents did, even if they have college degrees and their choice of jobs, even if they have a place to live, an iPhone, and a flat-screen TV, many are now sensing that although they followed all of American society’s recommended steps, they somehow ended up financially fragile. “Our income supposedly makes us upper middle class, but it sure doesn’t feel like it,” says Swope. “If you’re middle class, you can afford to do fun things—and we can’t.” TIME talked to dozens of people across the country, all of whose incomes fall in the middle 60% of American incomes, which is what Brookings defines as the middle class. For a family of three, that means somewhere between $42,500 to $166,900 today. Here’s what we heard: “The American Dream is an absolute nightmare, and I just want out at this point.” “It’s really discouraging. I’m losing hope. I don’t know what to do.” “We did what we’re supposed to do—but we’re just so cost-­burdened.” “It’s the most money I’ve ever made, but I still can’t afford to buy a home.” “I’ve put down roots here. I don’t want to be forced out.” Many mentioned resentment toward their parents or older colleagues who don’t understand why this younger generation don’t bear the hallmarks of the middle class, like a single-­family home or paid-off college debt. “Boomers could literally work the minimum-­wage job, they could experience life—go to national parks or have children and own homes. That’s just not possible for us,” says Julie Ann Nitsch, a government worker in Austin who, when the home she rents goes up for sale in May, will no longer be able to live in the county she serves. “It can take some time for the economic tectonic pressure to build sufficiently—and now the volcano is erupting.”They have a point. Homeownership has become more elusive for each ­successive generation as real estate prices have outpaced inflation. More than 70% of people ages 35 to 44 owned a home in 1980, according to the Urban Institute, but by 2018, less than 60% of people in that age group had bought a place to live. The soaring value of owner-­occupied housing, which reached $29.3 ­trillion by the end of 2019, has created a divide, enriching the older Americans who own homes and shutting out the younger ones who can’t afford to break into the market. Millennials and younger generations came of age in the worst recession in decades, entered a job market where their wages grew sluggishly, and then weathered another recession at the beginning of the pandemic. Through it all, costs continued to rise. Median household income has grown just 9% since 2001, but college tuition and fees are up 64% over the same time period, while out-of-­pocket health care costs have nearly doubled. Just half of all children born in the 1980s have grown up to earn more than their parents, as opposed to more than 90% of children in the 1940s. Both millennials and Generation X have a lower net worth and more debt when they reach age 40 than boomers did at that age, according to Bloomberg. Their worries matter for the larger American economy. As Joe Biden said in 2019, “When the middle class does well, everybody does very, very well. The wealthy do very well and the poor have some light, a chance. They look at it like, ‘Maybe me—there may be a way.’” Mark Steinmetz for TIMEAmanda Greene and Jeff Swope outside their rental in Canton, Ga. If the middle class is feeling left out of one of the strongest economies in decades, when the unemployment rate is at a historic low, it’s a grave sign that social discord is coming. Right now, there’s no Great Recession, no tech meltdown, no collapse of complex real estate investment products to explain away why things are tight. On the surface, the economy looks buoyant. But like Swope’s slowly cooking frog, lots of middle-income earners are realizing that they’re in hot water and going under. “It’s not like this volcano came out of nowhere,” says Reeves, the Future of the Middle Class Initiative director. “To some extent, we’ve seen these long-term shifts in the economy like sluggish wage growth and downward mobility. It can take some time for the economic tectonic pressure to build sufficiently—and now the volcano is erupting.” The costs of all three H’s have soared over the past few decades, but it’s the cost of housing—usually the largest and most crucial expenditure for any family—that is fueling so much of the current discontent. Housing prices have climbed steadily for decades, with the exception of a dip from 2007 to 2009, but growth reached a fever pitch in the past year. Few places are immune; more than 80% of U.S. metro areas saw housing prices grow at least 10%. In the Atlanta metro area, where Swope and Greene live, the median listing price is $400,000, up 7.5% from last year. (They think they could afford a house that costs $300,000.) The rising prices are driven by a legion of forces, including a lag in building in the wake of the Great Recession, a rise in short-term rentals, speculation by institutional investors who own a growing share of single-family homes, a shortage of construction materials, and labor and supply-chain issues. They’re exacerbated by growing demand from families looking to spend the money they’ve saved, boomers who are aging in place rather risking life in a facility during the pandemic, and millennials anxious to start a family. The recent scramble to buy homes has been well documented, but in many places, renters are in a worse position than buyers. Rents rose almost 30% in some states in 2021, and are projected to rise further this year. David ­Robinson, 37, was born and raised in Phoenix and now lives with his girlfriend and three children in a modest three-bedroom apartment in Maryvale, which he considers a low-end part of town. In September, their rent went from $1,200 a month to $2,200, with extra fees, after, he says, “some property-­management company based out of Washington [State]” bought the building. His rent now represents about 50% of his income as a utilities surveyor. “It’s kind of hard to do anything with your family,” he says. “After buying clothes, food, and [paying] the other bills like electricity, water, stuff like that, the financial cushion wears really thin. I’m pretty much working to pay someone else’s bills.” He crosses his fingers that their cars hold out a little longer, not to mention their health. “The No. 1 threat to American constitutional government today is the collapse of the middle class.”Amanda Greene, Jeff Swope’s wife, knows that feeling. She owes $19,000 on her Toyota Corolla, which she downgraded to after her Jeep Cherokee died unexpectedly. And before she married Jeff and went on his health plan, insurance for herself and her 7-year-old daughter through her employer cost $1,400 a month. Greene covered only herself, and paid out of pocket for her daughter. She has a condition that requires extensive testing, and is still paying off thousands of dollars that her insurance didn’t cover. Medical costs have typically risen faster than inflation over the past two decades, propelled by the increased cost of care and more demand for services due to the aging population. National per capita spending on health care in 1980 was $2,968 when adjusted for inflation; by 2020 it was four times that. The pandemic compounded the challenges, as many people lost jobs and the insurance that came with them. More than half of adults who contracted COVID-19 or lost income during the pandemic also struggled with medical bills, according to a survey done by the Commonwealth Fund. Higher education, the third H, has also become steadily more expensive as the cost of college grew and federal funding for public universities plummeted. As prices rose, more students took out loans. Average student-­loan debt in 2020 was $36,635, roughly double what it was in 1990, when adjusted for inflation. Families struggle for decades to keep up with payments. Greene thought she was setting herself apart when she went to a private college to get a degree in nursing. Now she owes $99,000 in loans, while her two sisters who didn’t go to college are debt-free. For many college graduates, the pandemic provided some relief, when the CARES Act paused payments on federal student loans. Suddenly, people had money to pay their other bills, and saw what life would be like without crippling student debt. Greene watched an app on her phone as her loans paused at $99,000—and stayed there. She’s dreading when payments start up again. All told, the three H’s—rent, health care, and higher-­education loans—take up a growing share of Swope and Greene’s take-home pay. Add necessities like food and utilities, and they have months when they write their rent checks without having enough money in their checking account. (Swope gets paid monthly.) They don’t eat out. They switched to generic grocery brands. Although they both work full time, Swope is considering picking up a part-time job. Some economists argue that the parlous state of the middle class is being disguised by poor accounting. Eugene Ludwig, the former comptroller of the currency in the Clinton Administration, says the CPI distorts the real economic picture for lower- and middle-­income Americans because it counts the costs of discretionary items such as yachts, second homes, and hotel rooms. By his calculations, the cost of household minimal needs rose 64% from 2001 to 2020, 1.4% faster than inflation. In March, the Ludwig Institute for Shared Economic Prosperity released a report that suggested housing prices had actually risen 149% (the CPI put it at 54%) and medical costs were up 157% (vs. the CPI’s 90%). “We found that while people in 2001 maybe did have just a little bit of discretionary spending, by 2019 as a comparison, many households did not, particularly the ones with more children,” says the Ludwig Institute’s executive director, Stephanie Allen. (The pandemic made tracking these data too ­unreliable to estimate discretionary spending since then, she says.) The stress and anger people in their 30s and 40s feel is spilling over into their relationships with their parents’ generation. Today, a family in the U.S. making the median household income would need to pay six times that income to buy a median-price house. In 1980, they would have needed to pay double. But many boomers don’t seem to have much sympathy for their children’s predicament. Jeff Swope’s father was able to support a family of three on a social worker’s salary, and bought a house in Sandy Springs, Ga., for around $50,000. His mother sold it last year for $255,000, and that buyer sold it in March for 30% more than that. Swope, on the other hand, graduated from college with a marketing degree in 2003, and got a job selling Yellow Pages ads. When that business disappeared with the proliferation of online search engines, he waited tables and got a second degree so he could teach. He graduated in 2008 in the midst of the Great Recession and supported himself by working as a trivia host and taking whatever teaching placements he could find. He didn’t get an entry-level public school teacher job until 2013. Even now, his income, $55,000, wouldn’t be enough to support a family. He and Greene applied for preapproval for a mortgage but haven’t heard back. He feels stuck. “It’s kind of like, you’re not an adult unless you have a house,” he says. “The older generation looks down on you because they just don’t understand.” One of the things it’s harder for some folks to grasp are the ripple effects of structural changes that were just ­beginning when they were younger. The decades-long decline of unions, for example, has made it harder for workers to negotiate better wages and benefits. Swope is not in a teachers’ union, because Georgia doesn’t allow for collective bargaining for public educators, which is one reason the average public school teacher there made 5% less in the 2020–2021 school year than in 1999–2000, when adjusted for inflation. In Massachusetts, a state with strong teachers’ unions, the average public school teacher’s salary grew 19% over the same time period. Across the nation, a job with health care and other benefits is becoming harder to find. There are at least 6 million more gig workers than there were a decade ago. Even revenue-­rich companies like Google and Meta outsource such functions as cleaning, food service, and some tech jobs, excluding many of the people who work in their offices from the benefits of full-time employment. Adria Malcolm for TIMEThe relationship between Daniel Barela Jr., left, and Sr. has been strained by Daniel Jr.’s struggle to feel middle class At the same time, the unabated rise of automation and technology has meant that ever more employers want workers with a college education. About two-thirds of production supervisor jobs in 2015 required a college degree, according to a Harvard study, while only 16% of already-­employed production supervisors had one. Flight attendant Daniel Barela’s father Daniel Barela Sr. can’t understand why his children are struggling. When he first moved to Albuquerque in 1984, he was making $5.40 an hour as a custodian. He doesn’t have a college degree, but he worked his way up at his company and bought the house where Daniel grew up. He and his wife now own nine properties around New Mexico. “My generation—we didn’t end the week at 40 hours,” he says. “It started at 40 hours if you wanted to be successful, and we did whatever it took. This generation­—at 40 hours, they’re exhausted. They don’t call it the Me Generation for nothing.” The elder Barela has a pension, which people in his role wouldn’t receive today. And he acknowledges that housing is more expensive than it was when he was buying real estate. But he’s also been surprised how hard it is to find ­someone to help him fix up one of his rental ­properties for $12 to $15 an hour. “It’s not just my kids. I see it in other kids—they just don’t want to work,” he says. This frustrates his son to no end. He’s put in long hours to work his way up in the aviation industry and still can’t even qualify to own a home. Whenever he gets a raise, he says, health-­insurance premiums and other costs go up the same amount. It’s not just his imagination. According to the Ludwig Institute, a teacher and an ambulance driver in Albuquerque would make $77,000 a year, which is higher than the U.S. median income of $67,000—but they’d still have to go $6,000 into debt to meet their minimum adequate needs every year. During the pandemic, Barela did have a taste of what life might have been like for his father. Since he was furloughed, and receiving unemployment benefits and stimulus money, he was able to pay off all of his debt, he says. Now that he’s working again, he’s back to using credit cards and living paycheck to paycheck. “Absolutely ridiculous that you can have two of the most important jobs out there and still barely afford to live. I hate this country.”It’s getting so Barela is feeling as if he should just fulfill his father’s prophecy and stop trying so hard. Toil hasn’t gotten him anywhere. Why put in more hours dealing with angry passengers for pay that will get eaten up by bills? “I think if anything, COVID taught us: Is it worth working to the bone over quality of life?” he says. “For myself, I will start to just sustain what I need to sustain, but I’m not going to bend over backwards to fulfill some corporate mantra.” He—like Jeff Swope, and many of the other people interviewed for this story—direct much of their frustrations at the very rich, who accumulate wealth in investments, which when withdrawn are taxed at a far lower rate than wages. Widespread dissatisfaction and shrinkage in the ranks of the middle class has long been linked with political instability. In times of great economic inequality, the rich oppressed the poor or the poor sought to confiscate the wealth of the rich, leading to violence and revolution. But the presence of a middle class has helped America evade that conflict, says Vanderbilt University law professor Ganesh Sitaraman. That’s why he argues that “the No. 1 threat to American constitutional government today is the collapse of the middle class.” It’s no coincidence that the diminishing faith Americans have in their institutions has mirrored the decline in the fortunes of the middle class. And President Biden, who has long fashioned himself as a champion of those in the middle, is nevertheless losing their support; only a third of people approved of his handling of the economy in a March NBC poll, a drop of 5 percentage points since January. Some economists believe that the years following World War II were an anomaly—a period of unprecedented productivity growth and prosperity that will never be replicated. Millions of people went to college on the GI Bill, and wages shot up, allowing families to buy homes and cars and televisions. That means that comparing middle-­class workers with their parents may not be the most useful way to measure their economic state. If their childhoods were built in a period of exceptional economic growth, it’s no wonder that people like Swope and Barela feel left behind today. Moreover, previous generations kept many Americans, including people of color and women, from entering the workforce and from owning homes. “Some of the reasons middle-­class Americans were able to do so well before is that they were excluding people from the labor market, and they had strong trade unions that got them higher wages than the market would have given them,” Reeves says. Adjusting to the new world isn’t going to be easy. Reeves cautions families to compare themselves not with their parents’ generation, but instead with where they would be without the policy actions during the Great Recession and the pandemic recession. Where would the American economy be if the government hadn’t bailed out the banks and the auto companies? What if it hadn’t paused student-­loan payments during the pandemic and sent out stimulus checks and child tax credits? If families could compare themselves with the counter­factual, they might not get so angry—and maybe their anger wouldn’t be as easily weaponized against whoever they think created their economic woes, whether it be people of different races, or Big Business. A little while ago, after Jeff Swope found out about the rising prices in his apartment complex, he posted something in a Facebook group called No One Wants to Work that mocked all the businesses complaining about how they can’t find workers—while they’re offering minimum wage for terrible jobs. “A nurse and a teacher with a 125k household income are about to not be able to not get ahead with any savings. It’s that bad,” he wrote. Some of the commenters blamed him for poor money management. They couldn’t sympathize with someone making a six-figure income and still struggling. But many more of the hundreds of commenters felt something else—that they knew exactly what Swope was feeling. “My boyfriend and I have union jobs at a steel mill and are in about the same boat,” one wrote. Another, also a nurse, wrote that she and her husband, an engineer, were also living paycheck to paycheck. In the comments, their fury was unbridled. “Absolutely ridiculous that you can have two of the most important jobs out there and still barely afford to live,” another commenter said. “I hate this country.” —With reporting by Leslie Dickstein/New York.....»»

Category: topSource: timeApr 28th, 2022

RISMedia Reveals Top 1,000 Power Brokers

Amassing more than $2.4T in collective sales volume for 2021, RISMedia’s Top 1,000 Power Brokers reflect the outcome of one of the hottest real estate markets in decades. The detailed results are now available in RISMedia’s 2022 Power Broker Report, ranking real estate firms by both sales volume and transactions in 2021.  See RISMedia’s 2022 […] The post RISMedia Reveals Top 1,000 Power Brokers appeared first on RISMedia. Amassing more than $2.4T in collective sales volume for 2021, RISMedia’s Top 1,000 Power Brokers reflect the outcome of one of the hottest real estate markets in decades. The detailed results are now available in RISMedia’s 2022 Power Broker Report, ranking real estate firms by both sales volume and transactions in 2021.  See RISMedia’s 2022 Power Broker Directory The production results for 2021 reflect the unprecedented nature of last year’s market. The Top 1,000 respondents to this year’s Power Broker Survey report a collective $2,468,407,918,793 in sales volume for 2021, representing 5,008,011 transactions. Not only does this mark a significant increase over 2020’s numbers, it clearly depicts the inventory strain on last year’s market. While total sales volume increased by nearly $800B YoY, transactions only increased by about 750,000. The cause of the discrepancy is obvious when comparing the YoY average sales price for the Top 1,000: $394,043 in 2020 vs. $492,857 in 2021. With not enough supply to meet demand, home-sale prices—and brokerage sales volume—rose to new heights. The Inventory Shortage: Problem or Semantics? If there’s one thing Power Brokers continue to agree upon it’s that there simply aren’t enough homes to go around. For the fifth year in a row, respondents flagged a lack of inventory as their top challenge, chosen by 79% of Power Brokers in this year’s report—less than the 84% in 2021, but notably higher than 2020’s 68%. “Continued delays in the natural progression of sellers to the market, along with decade-long underbuilding, leaves our markets struggling to meet the demands of population growth and economic developments,” says Dereck Fritz, vice president of Berkshire Hathaway HomeServices Homesale Realty in Pennsylvania. Yet with more than 6 million home sales in 2021, it’s still hard to say there’s a shortage. As RE/MAX CEO Nick Bailey said during the RE/MAX R4 Conference in March, it’s not a question of too little inventory, but rather, who has it. “If we had an inventory problem, you wouldn’t have been able to sell 6.12 million homes,” Bailey told attendees at the event’s opening session. “The inventory was there—the problem was it flew off the shelves in record time. Inventory’s not the problem, it’s who gets it and the timeline in getting it off the shelf. Inventory is only low when it’s not yours.” With that in mind, Power Brokers are becoming more competitive and creative in their strategies to secure listings. “The average amount of equity currently in the hands of each homeowner is at an all-time high,” says Jake Piller, broker/owner of Weichert REALTORSⓇ Heartland in Minnesota. “We are striving to focus on this number and get the word out to each potential seller or those on the fence so they know the reality of the market right now. It is a great time to cash in on the equity and take advantage of what are still low interest rates.” Power Brokers don’t expect the supply and demand imbalance to correct itself anytime soon. “Buyer demand remains high, however, very low inventory across all price points is expected to continue,” says Shawn Schmidt, vice president of Park Co. REALTORSⓇ in North Dakota. “Affordability is a concern as inflation outpaces individual earnings and mortgage rates increase while home prices remain high due to demand. Supply chain issues continue to add to new-home prices.” Moving Past the Pandemic, But Dealing With the Aftermath Along with most of the world, Power Brokers seem to have put COVID-19 and its effects on the housing market behind them, with just 1% reporting pandemic concerns as a challenge to current business. That said, the ripple effect of the pandemic will continue to be felt for some time. “I believe the impact of the pandemic and the isolation of agents will have a negative impact on the traditional brokerages,” says Michael Killmer, broker/owner of CENTURY 21 North Homes Realty, Inc. in Washington state. “The economic concerns about inflation could stall the real estate market and make affordability out of reach with a rise in interest rates.” For many Power Brokers, such challenges are a call to arms. As Trent Barney, CEO of Keller Williams Signature Partners in Kansas, explains, “The economy will continue to see the effects of the pandemic, political policy and cultural unrest for many years. Every business will have to lean into its systems and culture to bring in positive growth. There will be a shift in marketshare negatively impacting the average agent across the country. Every market has an opportunity. It will be our opportunity to shift our business model to adapt to the ever-changing industry and current environment. By focusing on relationships with our people, education, training, lead flow to agents and providing additional services, we will be able to enhance the agent experience and grow through 2022.” Barney echoes the sentiment of most Power Brokers—to get innovative and take a hands-on approach to the challenges at hand. Jemila Winsey, broker/owner of ERA Legacy Living in Texas, exemplifies that spirit. “The continued pandemic, economic concerns, social unrest, etc., present an unprecedented set of challenges to all industries no doubt; however, from my purview, I see an opportunity to grow and reinvent ourselves as brokers and owners,” she says. “We have had to roll our sleeves up to provide new tools and support that make our agents stand out as subject-matter experts. The glass is half-full from where we sit.” A Positive—But Murky—Outlook With so many variables affecting the current market—from economic concerns to geopolitical issues—the outlook for the remainder of 2022 remains murky, despite continued healthy demand from buyers. Like most Power Brokers in this year’s survey, Patrick Conner, president of California’s London Properties, is grappling with a double-edged sword.  “Inflation, we believe, will push people—homeowners, investors and businesses—into hard assets like real estate,” he says. “This is a positive, but leads to other issues like inventory crisis and rising sales prices. Inventory is a major concern—we see this continuing, especially as interest rates move up and the ‘golden cuffs’ of ‘rate-lock’ tighten. Interest rates are a moving target that will, at a minimum, cause our market to pause by the third quarter.” Power Brokers see much opportunity in the year ahead, especially from consumers who put off their home-buying and -selling plans among the uncertainties of the past two years. This group represents the No. 1 opportunity for growth in 2022, according to 30% of respondents. “Price appreciation, lack of inventory and rising interest rates have caused some local buyers to put their purchase on hold for now so that they don’t have to compete with other buyers,” says Suzanne Lail, relocation director for Cottingham Chalk & Associates, Inc. in North Carolina.  “However, Charlotte is thriving with relocating individuals and families, which is good for real estate and the overall economy.” But many Power Brokers fear that inflation’s impact on consumer confidence will keep them on the sidelines of the real estate market. “Inflation coupled with unpredictable interest rates will create hesitancy among buyers and sellers,” says Grattan Donahoe, broker/owner of ERA Donahoe Realty in California. Power Brokers are also concerned about the challenging conditions for another critical consumer group: first-time homebuyers.  “Institutional buyers are beating out all first-time homebuyers,” says Ric Devore, broker/owner of Ohio’s e-Merge Real Estate. “This is a trend that started in late 2010 but took off in the pandemic. This will hurt the housing market for years to come if not solved.” Other Power Brokers feel that the various pressures in today’s market will be a boon for real estate in 2022.  “While we are always cognizant of external social, political and economic events that may affect the markets in which we operate, we are bullish on the 2022 real estate market, even after the remarkable sales records we achieved in 2021,” says Salvatore Troia, CFO of New York City-based Douglas Elliman Realty. “Douglas Elliman is experiencing incredibly high demand coupled with low inventory, pushing prices northward. In addition, increased mortgage rates are driving buyers into the market before they go up again, making the start of 2022 a robust sales season with no signs of slowing.” Succeeding in the year ahead will involve a creative mindset, a renewed focus on agents and increased emotional intelligence, explains Andrea Larson, brand manager for Arizona’s North&Co. “Over the last year, our brokerage faced immense change and disruption; through it all, we found success in evolving, staying agile and strategically pivoting each step of the way,” she says. “Our core focus on our people and professionals is the constant that gives us a hopeful outlook on 2022. As the market shifts and inventory levels remain low, IQ/EQ and creative tactics to find inventory and help clients win are at the forefront of our real estate coaching. With the concerns and variability that the national economy experienced in 2021, we are committed to the financial wellness and literacy of our agents so that they and their businesses can withstand any economic outcome.” To see the Top 1,000 real estate firms ranked by both sales volume and transactions, see RISMedia’s 2022 Power Broker Report. Maria Patterson is RISMedia’s executive editor. Email her your real estate news ideas to The post RISMedia Reveals Top 1,000 Power Brokers appeared first on RISMedia......»»

Category: realestateSource: rismediaApr 1st, 2022

Futures Flat Amid Fresh Inflation Jitters; Yen Tumbles To 5 Year Low

Futures Flat Amid Fresh Inflation Jitters; Yen Tumbles To 5 Year Low Price action has been generally uninspiring, with US index futures and European stocks flat after UK inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates, while Asian markets fell as investors fretted over early rate hikes by the Federal Reserve after strong retail earnings dented the stagflation narrative.  Ten-year Treasury yields held around 1.63% and the dollar was steady. Cryptocurrencies suffered a broad selloff, while oil extended losses amid talk of a coordinated U.S.-China release of reserves to tame prices. Gold rose. At 7:30 a.m. ET, Dow e-minis were down 14 points, or 0.04%. S&P 500 e-minis were up 1.25 points, or 0.0.3% and Nasdaq 100 e-minis were up 24.75 points, or 0.15%, boosted by gains in Tesla and other electric car-makers amid growing demand for EV makers. Target Corp was the latest big-name retailer to report positive results, as it raised its annual forecasts and beat profit expectations, citing an early start in holiday shopping. But similar to Walmart, shares of the retailer fell 3.1% in premarket trade as its third-quarter margins were hit by supply-chain issues. Lowe's rose 2.2% after the home improvement chain raised its full-year sales forecast on higher demand from builders and contractors, as well as a strong U.S. housing market. Wall Street indexes had ended higher on Tuesday after data showed retail sales jumped in October, and Walmart and Home Depot both flagged strength in consumer demand going into the holiday season. While the readings showed that a rise in inflation has not stifled economic growth so far, any further gains in prices could potentially dampen an economic recovery. Indeed, even as global stocks trade near all-time highs, worries are rising that growth could be derailed by inflation, the resurgent virus, or both. The question remains whether the jump in costs will prove transitory or become a bigger challenge that forces a sharper monetary policy response, roiling both shares and bonds. The market now sees a 19% probability of a rate hike by the Fed in their March 2022 meet, up from 11.8% probability last month. “The markets are still driven by uncertainty regarding how transitory inflation is,” according to Sebastien Galy, senior macro strategist at Nordea Investment Funds. “The market is assessing the situation about inflation -- what is in the price and what is not.” On the earnings front, Baidu reported a 13% jump in sales after growth in newer businesses such as the cloud helped offset a slowdown in its main internet advertising division. Nvidia and Cisco Systems are scheduled to report results later today In premarket trading, Tesla inexplicably rose as much as 2.4% in U.S. pre-market trading, extending a bounce from the previous session after CEO Elon Musk disclosed even more stock sales. Peers Rivian and Lucid added 0.9% and 8.8%, respectively. Here are some of the biggest U.S. movers today: Electric-vehicle makers Rivian Automotive (RIVN US), Lucid (LCID US) and Canoo (GOEV US) all move higher in U.S. premarket trading on heavy volumes, extending their gains and after Rivian and Lucid notched up milestones in their market values on Tuesday. The gains for Rivian on Tuesday saw its market capitalization surpass Germany’s Volkswagen, while Lucid’s market value leapfrogged General Motors and Ford. Tesla (TSLA US) shares rise 1.3% in U.S. premarket trading, extending the bounce the EV maker saw in the prior session and after CEO Elon Musk disclosed more share sales. Visa (V US) shares slip in U.S. premarket trading after said it will stop accepting payments using Visa credit cards issued in the U.K. starting next year. Boeing (BA US) gains 1.9% in premarket trading after Wells Fargo upgrades the airplane maker to overweight from equal weight in a note, saying the risk-reward is now skewed positive. Citi initiates a pair trade of overweight Plug Power (PLUG US) and underweight Ballard Power Systems (BLDP US), downgrading the latter to neutral on weak sales in China and likely delay in meaningful fuel cell adoption. Ballard Power falls 3.4% in premarket trading. La-Z-Boy (LZB US) climbed 7% in postmarket trading after it reported adjusted earnings per share for the fiscal second quarter of 2022 that beat the average analyst estimate and boosted its quarterly dividend. StoneCo’s (STNE US) shares fall as much as 9% in postmarket trading Tuesday after the fintech reported a weaker-than-expected adjusted results for the third quarter. Chembio Diagnostics (CEMI US) rose 11% in extended trading after saying it submitted an Emergency Use Authorization application to the U.S FDA for its new DPP SARS-CoV-2 Antigen test. European stocks treaded water with U.S. equity futures as the worst outbreak of Covid infections since the start of the pandemic held the rally in check. In the U.K., inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates, pressing on the FTSE 100 to lag peer markets. Asian stocks fell, halting a four-day rally, as investors factored in higher Treasury yields and the outlook for U.S. monetary policy to assess whether the region’s recent gains were excessive.   The MSCI Asia Pacific Index slid as much as 0.7%, pulling back from a two-month high reached Tuesday. The banking sector contributed the most to Wednesday’s drop as the Commonwealth Bank of Australia reported cash earnings that were below some estimates. South Korea led the region’s decline, with the Kospi falling more than 1%, weighed down by bio-pharmaceutical firms. Asia’s stocks are taking a breather from a run-up driven by expectations for earnings to improve and economies to recover from quarters of pandemic-induced weakness. The benchmark is coming off a two-week gain of 1.5%.  “Shares are correcting recent gains, although I’d say it’s not much of a correction as the drop is mild,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management in Tokyo. “The relatively solid economic performances in the U.S. and Europe signal positive trends for Asian exporters,” which will support equities over the long term, he said.  U.S. stocks climbed after data showed the biggest increase in U.S. retail sales since March, while results from Walmart Inc. and Home Depot Inc. showed robust demand. The 10-year Treasury yield hit 1.64%, gaining for a fourth day. Japanese equities fell, cooling off after a four-day advance despite the yen’s drop to the lowest level against the dollar since 2017. Service providers and retailers were the biggest drags on the Topix, which dropped 0.6%. Recruit and Fast Retailing were the largest contributors to a 0.4% loss in the Nikkei 225. The yen slightly extended its decline after tumbling 0.6% against the greenback on Tuesday. The value of Japan’s exports gained 9.4% in October, the slowest pace in eight months, adding to signs that global supply constraints are still weighing on the economy. Indian stocks fell, led by banking and energy companies, as worries over economic recovery and inflation hurt investors’ sentiment. The S&P BSE Sensex fell 0.5% to 60,008.33 in Mumbai, while the NSE Nifty 50 Index declined by 0.6%. The benchmark index has now dropped for five of seven sessions and is off 3.7% its record level reached on Oct. 18. All but five of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of real estate companies.  Fitch Ratings kept a negative outlook on India’s sovereign rating, already at the lowest investment grade, citing concerns over public debt that’s the highest among similar rated emerging-market sovereigns.  While high-frequency data suggests India’s economic recovery is taking hold, central bank Governor Shaktikanta Das said at an event on Tuesday that the recovery is uneven. “Feeble global cues are weighing on sentiment,” Ajit Mishra, a strategist with Religare Broking, said in a note. He expects indexes to slide further but the pace of decline to be gradual with Nifty having support at 17,700-17,800 level. Shares of Paytm are scheduled to start trading on Thursday after the digital payment company raised $2.5b in India’s biggest initial share sale. Local markets will be closed on Friday for a holiday.  Reliance Industries contributed the most to Sensex’s decline, decreasing 2.1%. The index heavyweight has lost 5% this week, headed for the biggest weekly drop since June 27. In rates, Treasuries were steady with yields slightly richer across the curve and gilts mildly outperforming after paring early losses. Treasury yields except 20-year are richer by less than 1bp across curve with 30-year sector outperforming slightly; 10-year yields around 1.63% after rising as high as 1.647% in early Asia session. Focal points for U.S. session include 20-year bond auction -- against backdrop of Fed decision to not taper in the sector, made after last week’s poorly bid 30-year bond sale, and seven Fed speakers scheduled. The $23BN 20-year new issue at 1pm ET is first at that size after cuts announced this month; WI yield at 2.06% is 4bp richer than last month’s, which tailed the WI by 2.5bp. In Europe, gilts richen slightly across the short end, short-sterling futures fade an open drop after a hot inflation print. Peripheral spreads are marginally wider to core. In FX, the Bloomberg Dollar Spot Index drifted after earlier rising to its highest level in over a year, spurred by strong U.S. retail sales and factory output data Tuesday; the greenback traded mixed versus its Group-of-10 peers though most currencies were consolidating recent losses against the greenback. The pound reached its strongest level against the euro in nearly nine months after U.K. inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates. The Australian dollar hit a six-week low as third quarter wage data missed the central bank’s target, prompting offshore funds to sell the currency; the three-year yield fell back under 1%. The yen declined to its lowest level in more than four years as growing wagers of quicker policy normalization in the U.S. contrasted with the outlook in Japan, where interest rates are expected to be kept low. Super-long bonds fell. Volatility broke through the recent calm in currency markets, where the cost of hedging against volatility in the euro against the dollar over the next month climbed the most since the pandemic struck in March 2020. The move comes as traders bake in bets on faster rate hikes to curb inflation. The Turkish lira extended the week’s downward move, weakening another 2% against the dollar after comments from Erdogan sent the USDTRY hitting record highs of 10.5619 The Chinese yuan advanced to its highest level since 2015 against a basket of trading partners’ currencies following the dollar’s surge. Bloomberg’s replica of the CFETS basket index rises 0.3% to 101.9571, closer to the level that triggered a shock devaluation by the PBOC in 2015, testing the central bank’s tolerance before stepping in with intervention. In commodities, crude futures dropped as the market weighs the potential for a join U.S.-China stockpile-reserve release. WTI is down more than 1%, back on a $79-handle; Brent slips back toward $81.50, trading near the middle of this week’s range. Most base metals are under pressure with LME copper down as much as 1.4%. Spot gold adds $10 near $1,860/oz. European gas surged to the highest level in a month as delays to a controversial new pipeline from Russia stoked fears of a supply shortage with winter setting in. Cryptocurrencies remained lower after a tumble, with Bitcoin steadying around the $60,000 level. Looking at the day ahead now, and data releases include October data on UK and Canadian CPI, as well as US housing starts and building permits. Central bank speakers include ECB President Lagarde and the ECB’s Schnabel, the Fed’s Williams, Bowman, Mester, Waller, Daly, Evans and Bostic, and the BoE’s Mann. Finally, the ECB will be publishing their Financial Stability Review, and earnings releases today include Nvidia, Cisco, Lowe’s and Target. Market Snapshot S&P 500 futures little changed at 4,696.00 STOXX Europe 600 up 0.1% to 489.79 MXAP down 0.5% to 200.06 MXAPJ down 0.4% to 656.01 Nikkei down 0.4% to 29,688.33 Topix down 0.6% to 2,038.34 Hang Seng Index down 0.2% to 25,650.08 Shanghai Composite up 0.4% to 3,537.37 Sensex down 0.4% to 60,064.33 Australia S&P/ASX 200 down 0.7% to 7,369.93 Kospi down 1.2% to 2,962.42 Brent Futures down 0.8% to $81.79/bbl Gold spot up 0.5% to $1,859.93 U.S. Dollar Index little changed at 95.95 German 10Y yield little changed at -0.25% Euro little changed at $1.1310 Top Overnight News from Bloomberg Bond traders are bracing for a key test Wednesday as the Treasury looks to sell its first long-dated debt since inflation worries spooked buyers at last week’s poorly received 30-year auction Increasingly stretched prices in property and financial markets, risk-taking by non-banks and elevated borrowing pose a threat to euro-area stability, the European Central Bank warned Germany is giving investors a rare chance to grab some of Europe’s safest and positive-yielding debt. The country will sell one billion euros ($1.13 billion) of its longest-dated debt at 10:30 a.m. London on Wednesday. The country’s 30-year notes are currently trading with a yield 0.09%. It’s a paltry rate, but probably the last time for a while that Germany will offer the maturity ECB Governing Council member Olli Rehn says euro- area inflation is accelerating due to increasing demand pushing up the price of energy and supply bottlenecks, according to interview in Finland’s Talouselama magazine The yuan’s advance to a six-year high versus China’s trading partners this week has investors asking how far the central bank will let the rally run. The yuan extended gains on Wednesday against a basket of 24 currencies of the nation’s trading partners, bringing it close to the level that triggered a shock devaluation by the People’s Bank of China in 2015 Turkish President Recep Tayyip Erdogan vowed to continue fighting for lower interest rates, sending a clear signal to investors a day before the central bank sets its policy. The lira weakened A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed and struggled to sustain the positive lead from the US where better than expected Industrial Production and Retail Sales data spurred the major indices, in which the S&P 500 reclaimed the 4,700 level and briefly approached to within four points of its all-time high. ASX 200 (-0.7%) was led lower by underperformance in the top-weighted financials sector amid weakness in the largest lender CBA despite a 20% jump in quarterly cash profit, as operating income was steady and it noted that loan margins were significantly lower. Mining related stocks also lagged in Australia due to the recent declines in global commodity prices amid the stronger USD and higher US yields. Nikkei 225 (-0.4%) retraced its opening gains after disappointing Machinery Orders and miss on Exports which grew at the slowest pace in eight months, while the KOSPI (-1.2%) suffered due to virus concerns with daily infections at the second highest on record for South Korea. Hang Seng (-0.3%) and Shanghai Comp. (+0.4%) were varied with Hong Kong dragged lower by tech stocks including NetEase post-earnings, while the mainland was choppy as markets continued to digest the recent Biden-Xi meeting that was described by President Biden as a 'good meeting' and in which they discussed the need for nuclear “strategic stability” talks. US and China also agreed to provide access to each other’s journalists, although there were also comments from Commerce Secretary Raimondo that China is not living up to phase 1 trade commitments and it was reported that China is to speed up plans to replace US and foreign tech. Finally, 10yr JGBs were flat with demand hampered following the declines in T-notes, although downside was stemmed amid the flimsy sentiment across Asia-Pac trade and with the BoJ also in the market for JPY 925bln of JGBs mostly concentrated in 1-3yr and 5-10yr maturities. Top Asian News Asia Stocks Set to Snap Four-Day Advance as Kospi Leads Decline Gold Rises as Fed Officials Feed Debate on Inflation Response Deadly Toxic Air Chokes Delhi as India Clings to Coal Power PBOC May Start Raising Rates by 10bps Every Quarter in 2022: TD European equities (Stoxx 600 +0.1%) trade with little in the way of firm direction as the Stoxx 600 lingers around its ATH printed during yesterday’s session. The handover from the APAC session was mostly a softer one after the region failed to sustain the positive lead from the US which saw the S&P 500 approach within four points of its all-time high. Stateside, US futures are just as uninspiring as their European counterparts (ES flat) ahead of another busy day of Fed speak and pre-market earnings from retail names Target (TGT) and TJX Companies (TJK) with Cisco (CSCO) and NVIDIA (NVDA) due to report after-hours. Markets still await a decision on the next Fed Chair which President Biden said will come in around four days yesterday; as it stands, PredictIt assigns a circa 65% chance of Powell winning the renomination. Sectors in Europe have a marginal positive tilt with Media names outperforming peers alongside gains in Vivendi (+1.0%) after Italian prosecutors asked a judge to drop a case against Vivendi's owner and CEO for alleged market manipulation. Travel & Leisure names are the notable underperformer amid losses in sector heavyweight Evolution Gaming (-9.6%) who account for 14% of the sector with the Co. accused of taking illegal wagers. In terms of individual movers, Siemens Healthineers (+4.6%) is one of the best performers in the region after the Co. noted that revenues are on track to grow 6-8% between 2023 and 2025. UK Banking names such as Lloyds (+1.3%) and Natwest (+1.1%) have benefitted from the favourable rate environment in the UK with today’s inflation data further cementing expectations for a move in rates by the BoE next month. Conversely, this acted as a drag on the UK homebuilder sector at the open before moves were eventually scaled back. SSE (-4.5%) underperforms after announcing a GBP 12.5bln investment to accelerate its net zero ambitions. Top European News Epstein’s Paris Apartment Listed for $14 Million, Telegraph Says Volkswagen Shares Stall as Analysts Doubt Its EV Street Cred Germany to Move Ahead With Tighter Covid Curbs Amid Record Cases U.K. Urges EU Not to Start Trade War If Brexit Deal Suspended In FX, the Greenback extended Tuesday’s post-US retail sales and ip gains to set new 2021/multi-year highs overnight when the index hit 96.266 and several Dollar pairs probed or crossed psychological round numbers. However, the latest bull run has abated somewhat amidst some recovery gains in certain rival currencies and a general bout of consolidation ahead of housing data, another raft of Fed speakers and Usd 23 bn 20 year supply that will be of note after a bad debut for new long londs last week, not to mention tepid receptions for 3 and 10 year offerings prior to that. NZD/AUD - A marked change in the tide down under as the Aud/Nzd cross reverses sharply from around 1.0450 to sub-1.0400 and gives the Kiwi enough impetus to regain 0.7000+ status vs its US peer with extra incentive provided by NZ PM Ardern announcing that the entire country is expected to end lockdown and move to a new traffic light system after November 29, while Auckland’s domestic borders will reopen from December 15 for the fully vaccinated and those with negative COVID-19 tests. Conversely, the Aussie is struggling to stay within sight of 0.7300 against its US counterpart in wake of broadly in line Q3 wage prices that leaves the y/y rate still some way short of the 3% pace deemed necessary to lift overall inflation by the RBA. GBP/CAD - Sterling is striving to buck the overall trend with help from more forecast-topping UK data that should give the BoE a green light for lifting the Bank Rate in December, as headline CPI came in at 4.2% y/y, core at 3.4% and PPI prints indicate more price pressure building in the pipeline. Cable printed a minor new w-t-d peak circa 1.3474 in response before waning and Eur/Gbp fell below the prior y-t-d low and 0.8400, but is now back above awaiting more news on the Brexit front and a speech from one of the less hawkish MPC members, Mann. Elsewhere, the Loonie is hovering around 1.2550 vs the Greenback and looking toward Canadian inflation for some fundamental direction as oil prices continue to fluctuate near recent lows, but Usd/Cad may also be attracted to decent option expiry interest between 1.2540-55 in 1.12 bn. CHF/EUR/JPY - All straddling or adjacent to round numbers against the Dollar, but the Franc lagging below 0.9300 on yield differentials, while the Euro has recovered from a fresh 2021 trough under 1.1300 and Fib support at 1.1290 to fill a gap if nothing else, and the Yen just defended 115.00 irrespective of disappointing Japanese machinery orders and internals within the latest trade balance. In commodities, WTI and Brent benchmarks are pressured this morning but the magnitude of the action, circa USD 0.70/bbl at the time of writing, is less pronounced when compared to the range of the week thus far and particularly against last week’s moves. Newsflow has been slim and the downside action has arisen without fresh catalysts or drivers; note, participants are cognisant of influence perhaps being exerted by today’s WTI Dec’21 option expiry. To briefly surmise the morning’s action, Vitol executives provided bullish commentary citing limited capacity to deal with shocks and on that theme, there were reports of an explosion at an oil pipeline in Southern Iran, said to be due to aging equipment. This, alongside reports that Belarus is restricting oil flows to Poland for three-days for maintenance purposes, have not steadied the benchmarks. Elsewhere, last night’s private inventories were mixed but bullish overall, with the headline a smaller than expected build and gasoline a larger than expected draw. On gasoline, some desks posit that this draw may serve to increase pressure for a US SPR release, and as such look to today’s EIA release which is expected to print a gasoline draw of 0.575M. Moving to metals, spot gold and silver are firmer this morning but, in a similar vein to crude, remain well within familiar ranges as specific catalysts have been light and initial USD action has largely fizzled out to the index pivoting the U/C mark. More broadly, base metals are pressured as inventories of iron ore are at their highest for almost three years in China as demand drops, with this having a knock-on impact on coking coal, for instance. US Event Calendar 7am: Nov. MBA Mortgage Applications, prior 5.5% 8:30am: Oct. Building Permits, est. 1.63m, prior 1.59m, revised 1.59m 8:30am: Oct. Building Permits MoM, est. 2.8%, prior -7.7%, revised -7.8% 8:30am: Oct. Housing Starts MoM, est. 1.5%, prior -1.6%; Housing Starts, est. 1.58m, prior 1.56m DB's Henry Allen concludes the overnight wrap Even as inflation jitters remained on investors’ radars, that didn’t prevent risk assets pushing onto fresh highs yesterday, as investor sentiment was bolstered by strong economic data and decent corporate earnings releases. In fact by the close of trade, the S&P 500 (+0.39%) had closed just -0.02% beneath its all-time closing record, in a move that also brought the index’s YTD gains back above +25%, whilst Europe’s STOXX 600 (+0.17%) hit an all-time high as it posted its 16th gain in the last 18 sessions. Starting with the data, we had a number of positive US releases for October out yesterday, which echoed the strength we’d seen in some of the other prints, including the ISMs and nonfarm payrolls that had both surprised to the upside in the last couple of weeks. Headline retail sales posted their biggest gain since March, with a +1.7% advance (vs. +1.4% expected), whilst the measure excluding autos and gas stations was also up by a stronger-than-expected +1.4% (vs. +0.7% expected). Then we had the industrial production numbers, which showed a +1.6% gain in October (vs. +0.9% expected), though it’s worth noting around half of that increase was a recovery from Hurricane Ida’s effects. And that came against the backdrop of solid earnings results from Walmart and Home Depot as well earlier in the session. They saw Walmart raise their full-year guidance for adjusted EPS to around $6.40, up from $6.20-$6.35 previously, whilst Home Depot reported comparable sales that were up +6.1%. To be honest it was difficult to find much in the way of weak data, with the NAHB’s housing market index for November up to a 6-month high of 83 (vs. 80 expected). Amidst the optimism however, concerns about near-term (and longer-term) inflation pressures haven’t gone away just yet, and the 5yr US breakeven rose again, increasing +1.1bps yesterday to an all-time high of 3.21%. Bear in mind that just 12 days ago (before the upside CPI release) that measure stood at 2.89%, so we’ve seen a pretty sizeable shift in investor expectations in a very short space of time as they’ve reacted to the prospect inflation won’t be as transitory as previously believed. The increase was matched by a +1.3bps increase in nominal 5yr yields to a post-pandemic high of 1.27%. The 10yr yield also saw a slight gain of +1.9bps to close at 1.63%, and this morning is up a further +0.7bps. Against this backdrop, the dollar index (+0.58%) strengthened further to its highest level in over a year yesterday, though the reverse picture has seen the euro weaken beneath $1.13 this morning for the first time since July 2020. Speaking of inflation, there were fresh pressures on European natural gas prices yesterday, which surged by +17.81% to €94.19 per megawatt-hour. That’s their biggest move higher in over a month, and follows the decision from the German energy regulator to temporarily suspend the certification of the Nord Stream 2 pipeline, adding further short-term uncertainty to the winter outlook. UK natural gas futures (+17.15%) witnessed a similar surge, and their US counterparts were also up +3.19%. Elsewhere in the energy complex, Brent crude (+0.46%) oil prices moved higher as well. Overnight in Asia, equity indices are trading lower this morning including the CSI (-0.05%), the Nikkei (-0.45%) and the Hang Seng (-0.55%), though the Shanghai Composite (+0.19%) has posted a modest advance. There were also some constructive discussions in the aftermath of the Biden-Xi summit the previous day, with US national security adviser Jake Sullivan saying that the two had spoken about the need for nuclear “strategic stability” talks, which could offer the prospect of a further easing in tensions if they do come about. Looking forward, futures are indicating a muted start in US & Europe later on, with those on the S&P 500 (-0.03%) and the DAX (-0.15%) pointing to modest declines. Elsewhere, markets are still awaiting some concrete news on who might be nominated as the next Fed Chair, though President Biden did say to reporters that an announcement would be coming “in about four days”, so investors will be paying close attention to any announcements. Senator Sherrod Brown, who chairs the Senate Banking Committee, who earlier in the week noted a pick was imminent, followed up by proclaiming he was “certain” that the Senate would confirm either of Chair Powell or Governor Brainard. Staying on the US, as Congress waits for the Congressional Budget Office’s score on Biden’s social and climate spending bill, moderate Democratic Senator Manchin noted continued uncertainty about the bill’s anti-inflationary bona fides. Elsewhere, the impending debt ceiling has worked its way back into the spotlight, with Treasury Secretary Yellen saying that she’ll soon provide updates on how much cash the Treasury will have to pay the government’s bills. The market has started to price in at least some risk, with yields on Treasury bills maturing in mid-to-late December higher than neighbouring maturities, and the Washington Post’s Tony Romm tweeted yesterday that the new deadline that the Treasury was expected to share soon was on December 15. Turning to Germany, coalition negotiations are continuing between the centre-left SPD, the Greens and the liberal FDP, and yesterday saw SPD general secretary Lars Klingbeil state that “The goal is very clear, to have a completed coalition agreement in the next week”. We’ve heard similar comments from the Greens’ general secretary, Michael Kellner, who also said that “We aim to achieve a coalition agreement next week". One issue they’ll have to grapple with is the resurgence in Covid-19 cases there, and Chancellor Merkel and Vice Chancellor Scholz (who would become chancellor if agreement on a traffic-light coalition is reached) are set to have a video conference with regional leaders tomorrow on the issue. Staying on the pandemic, it’s been reported by the Washington Post that the Biden administration will announce this week that it plans to purchase 10 million doses of Pfizer’s Covid pill. The company will submit data for the pill to regulators before Thanksgiving. It’s not just the US that will benefit from Pfizer’s pill however, as the pharmaceutical company will also license generic, inexpensive versions of the pill to low- and middle-income countries, which should be a global boost in the fight against the virus. Looking at yesterday’s other data, the main release came from the UK employment numbers, which showed that the number of payrolled employees rose by +160k in October, whilst the unemployment rate in the three months to September fell to 4.3% (vs. 4.4% expected). That release was better than the Bank of England’s MPC had expected in their November projections, and sterling was the top-performing G10 currency yesterday (+0.06% vs. USD) as the statistics were seen strengthening the case for a December rate hike. In response to that, gilts underperformed their European counterparts, with 10yr yields up +2.7bps. That contrasted with yields on 10yr bunds (-1.4bps), OATs (-1.8bps) and BTPs (-2.6bps), which all moved lower on the day. Interestingly, that divergence between bunds and treasury yields widened further yesterday, moving up to 188bps, the widest since late-April. To the day ahead now, and data releases include October data on UK and Canadian CPI, as well as US housing starts and building permits. Central bank speakers include ECB President Lagarde and the ECB’s Schnabel, the Fed’s Williams, Bowman, Mester, Waller, Daly, Evans and Bostic, and the BoE’s Mann. Finally, the ECB will be publishing their Financial Stability Review, and earnings releases today include Nvidia, Cisco, Lowe’s and Target. Tyler Durden Wed, 11/17/2021 - 07:50.....»»

Category: dealsSource: nytNov 17th, 2021

3 Stocks to Watch That Recently Hiked Their Dividends

Microsoft Corporation (MSFT), Texas Instruments Incorporated (TXN) and Keurig Dr Pepper Inc. (KDP) hiked their dividends. Soaring inflation has been the biggest concern for the American economy that’s been affecting markets for months. The Fed has so far struggled to get a firm grip on rising inflation despite multiple rate hikes. On Sep 21, the Fed increased interest rates for the fourth time this year in its bid to control surging inflation.However, the crisis is far from over as the Fed has indicated more interest rate hikes in the coming months, or at least till sky-high commodity prices don’t cool off to the desired levels.Another Interest Rate HikeThe Fed, on Sep 21, hiked interest rates by 75 basis points, its fourth hike this year. This takes the total hike to 300 basis points so far this year to a target range of 3% to 3.25%. However, this is not the end as the struggle to tame rising inflation continues.The Fed has also hinted at raising interest rates by another 125 basis points by the year-end. That would take the benchmark interest rate to a midpoint of 4.4% by the end of this year. Moreover, the central bank has indicated that it doesn’t plan to cut interest rates till 2024.The move doesn’t come as a surprise given that Fed Chair Jerome Powell had earlier shared similar hawkish views toward hiking rates.Inflationary pressures have been taking a toll on stocks since the beginning of the year. Markets managed to end in the green only in March and July in the first eight months of the year. September is historically known as one of the worst-performing months for markets. This time it has been worse, with the month starting with severe volatility after the two-month-long summer rally evaporated in August.Investors were initially expecting a not-so-steep rate hike, which fueled the summer rally but the positive sentiment was dampened by the hotter-than-expected inflation reading in August. Powell added to the gloom by commenting that the central bank will continue to hike interest aggressively so long it gets full control over soaring inflation.The unexpected jump in the consumer price index in August gave Fed the perfect cover to go for another steep rate hike.In fact, Powell’s comments following Wednesday’s rate hike indicate further hikes in the coming months. The Fed’s aggressive monetary policy has instilled fears of an economic slowdown in the minds of investors.Higher interest rates mean a higher cost of borrowing, which increases the chances of an economic slowdown. Both are negative signs for the markets, which have already experienced volatility this year. Stock prices are still being affected by worries of an economic slowdown.Stocks to WatchGiven this situation, investors should exercise caution and continue holding dividend-paying stocks to protect their portfolios. We think it's a good idea to consider stocks that have recently hiked their dividend payouts. Four such companies are: Microsoft Corporation MSFT, Texas Instruments Incorporated TXN, Keurig Dr Pepper Inc. KDP.Microsoft Corporation is one of the largest broad-based technology providers in the world. MSFT dominates the PC software market, with more than 80% of the market share for operating systems.On Sep 20, 2022, Microsoft Corporation announced that its shareholders would receive a dividend of $0.68 per share on Dec 8, 2022. MSFT has a dividend yield of 1.02%. Over the past 5 years, Microsoft Corporation has increased its dividend six times, and its payout ratio is presently 27% of earnings. Check MSFT’s dividend history here.Microsoft Corporation Dividend Yield (TTM) Microsoft Corporation dividend-yield-ttm | Microsoft Corporation QuoteTexas Instruments Incorporated is an original equipment manufacturer of analog, mixed-signal and digital signal processing integrated circuits. TXN has manufacturing and design facilities, including wafer fabrication and assembly/test operations in North America, Asia and Europe.On Sep 15, 2022, Texas Instruments Incorporated declared that its shareholders would receive a dividend of $1.24 per share on Nov 15, 2022. TXN has a dividend yield of 2.77%. Over the past 5 years, Texas Instruments Incorporated has increased its dividend six times, and its payout ratio is presently 50% of earnings. Check TXN’s dividend history here.Texas Instruments Incorporated Dividend Yield (TTM) Texas Instruments Incorporated dividend-yield-ttm | Texas Instruments Incorporated QuoteKeurig Dr Pepper Inc. is a beverage and coffee company in the United States and Canada. KDP sells its products through at-home and away-from-home channels to retailers, including supermarkets, department stores, mass merchandisers, club stores and convenience stores; and restaurants, hospitality accounts, office coffee distributors and partner brand owners, as well as to consumers through its websites.On Sep 14, 2022, Keurig Dr Pepperannounced that its shareholders would receive a dividend of $0.20 per share on Oct 14, 2022. KDP has a dividend yield of 2%. Over the past 5 years, Keurig Dr Pepperhas increased its dividend three times, and its payout ratio is presently 47% of earnings. Check KDP’s dividend history here.Keurig Dr Pepper, Inc Dividend Yield (TTM) Keurig Dr Pepper, Inc dividend-yield-ttm | Keurig Dr Pepper, Inc 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 Texas Instruments Incorporated (TXN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2022

5 Solid ETFs Under $20 for Your Portfolio

Low-priced stocks could be attractive as these will enable them to buy more shares instead of just a handful of higher-priced shares for the same amount. Most investors want to put their money in equities but may not be able to afford large stakes in valuable companies with higher-priced stocks. For them, low-priced stocks could be attractive as these will enable them to buy more shares instead of just a handful of higher-priced shares for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.Additionally, stocks under $20 reap huge profits as an increase of as less as a dollar in share price adds 5% to the portfolio. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1. Further, most of the low-priced stocks have high levels of liquidity, giving these stocks an added advantage. This means that cash can be converted quickly and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra cost for investors.And guess what, the recent volatility, induced by renewed aggressive rate hikes by the Fed and global growth concerns, has provided investors a great opportunity to tap some of these stocks. The preference is not only limited to the stock world but can be felt in the ETF space. In fact, there is only a handful of ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that the choices are limited for investors who like to get a decent number of shares from their investment (read: Most Interesting New ETFs). So, let us dig into some of the ETFs that are below $20 and have AUM of more than $50 million to ensure enough liquidity. Further, these funds have a Zacks ETF Rank #2 (Buy) or 3 (Hold). These low-priced ETFs could lead to huge gains in the coming months based on market trends.Global X SuperDividend ETF SDIV – Last Closing Price: $8.86The appeal for dividend-focused ETFs has been on the rise as volatility grips the stock market. Soaring inflation and rising interest rates have sparked worries of a recession, resulting in a sharp-sell-off in high-growth stocks. Additionally, bouts of weak economic data across the globe are weighing on investor sentiment.  Global X SuperDividend ETF provides exposure to the 93 highest-dividend-paying equities around the world by tracking the Solactive Global SuperDividend Index. It has amassed $748.6 million in its asset base and sees a good trading volume of about 552,000 shares a day on average. Global X SuperDividend ETF has an expense ratio is 0.58% and carries a Zacks ETF Rank #3 with a Low risk outlook. It has lost about 23.7% so far this year.Invesco S&P SmallCap Energy ETF PSCE - Last Closing Price: $9.94The outlook for the energy sector looks promising amid waning demand. This is especially true given OPEC’s new output cut and the unrest in Libya that will continue to keep supply in check. Invesco S&P SmallCap Energy ETF offers exposure to the companies that are principally engaged in producing, distributing or servicing energy-related products, including oil and gas exploration and production, refining, oil services and pipelines. It tracks the S&P Small Cap 600 Capped Energy Index, holding 28 stocks in its basket (read: Should You Buy Energy ETFs On Dip?).Invesco S&P SmallCap Energy ETF has accumulated $130.3 million in its asset base and charges 29 bps in annual fees. It trades in an average daily volume of 237,000 shares and has a Zacks ETF Rank #2 with a High risk outlook. Invesco S&P SmallCap Energy ETF has jumped 36.7% so far this year.Invesco KBW High Dividend Yield Financial ETF KBWD – Last Closing Price: $17.34A rising rate environment is highly beneficial for the financial sector as it bolsters profits for banks, insurance companies, discount brokerage firms and asset managers. Additionally, financial stocks have become extremely cheap after a heavy sell-off in the first half of the year. Invesco KBW High Dividend Yield Financial ETF ETF follows the KBW Nasdaq Financial Sector Dividend Yield Index, which is a modified-dividend yield-weighted index of companies principally engaged in the business of providing financial services and products. It holds 40 stocks in its basket and has 2.59% in expense ratio.Invesco KBW High Dividend Yield Financial ETF has amassed $417.5 million in its asset base and trades in a volume of 79,000 shares a day on average. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook and has shed 10.4% so far this year (read: Fearing Stagflation? ETF Strategies to Win).The Global X Cloud Computing ETF CLOU – Last Closing Price: $17.27Demand for cloud computing services surged during the pandemic and is expected to grow further, as work, school, and social activities moved increasingly to digital experiences. Global X Cloud Computing ETF seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service, managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware. The ETF tracks the Indxx Global Cloud Computing Index.Global X Cloud Computing ETF holds 35 stocks in its basket with American firms accounting for 90.5% of assets. It has AUM of $641.3 million and trades in an average daily volume of 394,000 shares. The ETF charges 68 bps in annual fees and has a Zacks ETF Rank #2. It has tumbled nearly 33% this year.U.S. Global Jets ETF JETS - Last Closing Price: $17.91Travel ETFs will surge on optimism that consumers will continue flying this year despite higher fares. U.S. Global Jets ETF provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. The product holds 57 securities and charges 60 bps in annual fees.U.S. Global Jets ETF has gathered $2.5 billion in its asset base while seeing a heavy trading volume of nearly 5 million shares a day. JETS is down 15.1% this year and has a Zacks ETF Rank #2. 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 Invesco S&P SmallCap Energy ETF (PSCE): ETF Research Reports U.S. Global Jets ETF (JETS): ETF Research Reports Global X SuperDividend ETF (SDIV): ETF Research Reports Invesco KBW High Dividend Yield Financial ETF (KBWD): ETF Research Reports Global X Cloud Computing ETF (CLOU): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 13th, 2022

They Were Told They’d Find Good Tech Jobs. Now They’re Being Hounded for Thousands of Dollars

Tech boot camps dangled the prospect of well-paid jobs in tech, 'debt-free.' Students were left owing thousands instead The very idea that she, a Black person living in Alabama, could make $75,000 a year in the tech industry after just a 10-week boot camp is what drew Aaryn Johnson into Flockjay. The ad for the boot camp specializing in tech sales followed her around social media: “This is the bullet train you don’t want to miss! It’s recession-proof even in the midst of a Global Pandemic.” Even better, according to the company’s promotional material, students didn’t have to pay a cent in tuition to Flockjay until they landed a job that paid at least $40,000 a year. [time-brightcove not-tgx=”true”] It seemed too good to be true. Johnson assumed the scheme was fake until one day she saw on Twitter that Black celebrities like Serena Williams and Will Smith had invested in Flockjay—and that the Walnut, California–based startup pledged to help people from underrepresented backgrounds get into the tech industry. When Johnson started an application and then abandoned it, a Flockjay sales rep called her and made it sound like the program was exclusive, she says, but that she had a good shot at getting in, because she’d worked in sales in the past. “They said, ‘You’re going to kill it; you’re going to make so much money.’ ” When she learned that Flockjay was about to close admissions for the class, Johnson completed her application, signed an enrollment agreement, and began the program in August 2021. Flockjay delivered on little of what it promised, Johnson says. The curriculum was so easy that her 7-year-old nephew could have done it, she says. Students were taught how to make posts on LinkedIn—something most all of them knew—including a homework assignment to post about how much they were enjoying Flockjay’s program. Classes had them act out selling tech products to one another, much in the same way children pretend to sell things at a grocery store, with no simulation as to what it would actually be like in the real world. Within Johnson’s first two weeks of the program, the representative who had urged her to join was laid off, along with half of Flockjay’s staff. The result was that the one-on-one coaching students were promised was effectively removed from the program. Johnson had entered the lawless arena of tech boot camps; These camps are among thousands of unaccredited schools that pitch their services to students through heavy marketing spends and often don’t deliver on the promises made in their advertising pitches. Unaccredited schools have long flourished in the U.S., but this new wave of schools does something different: attracting students by offering a relatively new funding model called an income share agreement (ISA). They pitch these ISAs as a way to access education without taking out a loan, but students like Johnson soon find out that these agreements can leave them owing a lot of money without the good career prospects they were promised. Nor are these students eligible for any of the Biden Administration’s planned federal loan forgiveness programs, because ISAs are offered not by the U.S. government but by private companies. Now, a year after enrolling, Johnson is getting hounded by Meratas, the company responsible for collecting on her Flockjay tuition, despite the fact that Johnson says she did not receive the education Flockjay promised. She finished the course, since the company had pledged to match her with hiring partners once she graduated, but after waiting for weeks to be connected with a company, she hustled and found her own job in sales. She never mentioned Flockjay to her new employer. She doesn’t make anywhere near the $75,000 salary the company mentioned in its promotions. Her sales job, while technically in the technology industry, is basically telemarketing, she says: “This is literally the most soul-sucking job I’ve had in my entire life.” Flockjay was cited in October of 2020 by California’s Bureau for Private Postsecondary Education for operating without approval, Johnson has since learned, and ordered to cease advertising to students and enrolling them. The company has not complied. Blair, the company that gave Johnson the money for her tuition, no longer works with Flockjay; they have turned over her financial debt to Meratas. “Their shtick was that it was about getting Black people into tech—but over the 10 weeks, they didn’t train us for any real-life situation,” says Johnson. “There were so many people who tried to get jobs after and could not.” Boot-camp boom In the turbulent economy of the pandemic era, few industries seem as attractive as the tech sector, where people can earn high salaries, work remotely, and feel with some degree of certainty that they’re in a growing field. But tech can also seem opaque to outsiders. After all, it’s much harder to understand what tech employees do all day than it is to picture what happens in a car factory. Boot camps like Flockjay attract students by promising to demystify tech and get students high-paying jobs without having to take on the debt of attending a four-year college. Business has been booming. Around 100,000 people were enrolled in tech boot camps in 2021, according to the research firm HolonIQ, a fivefold increase since 2015. These businesses generated $1.2 billion in revenue in 2020, six times what they did in 2015. Boot camps like Flockjay have flourished over the last few years in part because they partner with companies that offer ISAs, which give students upfront money for tuition if they agree to repay the money once they’re earning a certain wage. Students can either fork over a certain percentage of their salary or a dedicated lump sum every month until they’ve paid back the amount they’ve borrowed—or more, depending on the agreement. ISAs have been used at accredited schools, like Purdue University, but they’re especially popular for nonaccredited schools like boot camps, which often promote these financing arrangements in their sales pitches, since their students cannot access federal student loan dollars. On the surface, the symbiotic relationship between boot camps and ISA providers seems like a smart way to get people into technology. Boot camps are expensive, with tuition ranging from $3,000 to $15,000, and ISAs enable students to pay that tuition without taking out private student loans, which usually have high interest rates and fees. ISAs often behave as servicers, providing students the money that allow boot camps to operate, and then handling the details of repayment so that schools can focus on education. ISAs have better terms than private loans, but not as much flexibility as federal student loans. If boot camps didn’t exist, ISAs might struggle to find a market. “There was a lot of hope that this new emerging high-tech world would save us.” ISA proponents say the financial product allies students, the school, and the ISA provider, since each has a vested interest in a student graduating and making a good salary. “Because a Flockjay education can be financed via an income share agreement, the incentives of the school and the student are highly aligned—Flockjay is a blueprint for College 2.0,” Romeen Sheth, a Flockjay investor, wrote on Medium in 2019, explaining why he had invested in the company. (Sheth did not respond to a request for comment for this story.) But groups that advocate on behalf of students say ISAs are not the cure-all solution that proponents say they are, even as the companies continue to sell students the promise of a swanky future in the high-flying world of tech. The example of Flockjay, showered with praise and funding by venture capitalists and celebrities, even as students say the company ultimately took their money and delivered little in return, shows the risk of allowing both ISAs and for-profit tech schools to operate without regulation. “There was a lot of hope that this new emerging high-tech world would save us,” says Ben Kaufman, director of research and investigations at the Student Borrower Protection Center, which advocates for students, and which provided support to Flockjay students who had complaints about the company. “But there’s a long history of fly-by-night con men setting up for-profit educational enterprises, and then finding ever more exotic and dangerous forms of credit to facilitate them.” Flockjay isn’t the only company that has produced crops of angry students. Three students sued the coding boot camp Lambda School in 2021, alleging that the school misrepresented its job-placement rates and how its ISA worked. They reached a confidential settlement in July, but a fourth such claim remains in court. A lawsuit filed this summer in Atlanta alleges that an online programming boot camp called Clever Programmer charged students tens of thousands of dollars for services it did not deliver. And Washington State filed a lawsuit against tech sales camp Prehired, saying its ISAs are invalid because the company operated without a license, and that the company misled students about its programs. Prehired has denied the allegations in the complaint. Boot camps and ISAs are arguably creating a new generation of debtors, even as the nation grapples with how to handle its existing student debt crisis. President Biden said last month that he planned to wipe away up to $20,000 in federal student loan debt for some borrowers, and earlier this year, the Department of Education said it would forgive billions worth of loans given to students who attended schools like Corinthian Colleges Inc. that it found had misrepresented borrower’s employment prospects. But these boot camps and the ISAs that enable them may be creating some of the same problems—and debt burdens—that the Biden administration is seeking to solve. There’s not a whole lot that Flockjay alums like Johnson can do about their complaints. Some students filed a notice with California’s Workforce and Development Agency in July, suggesting they would file a lawsuit against Flockjay if the agency does not take action. Many more students are like Johnson—embarrassed that they signed up for Flockjay, and just wanting to move on. “This was a scam, but you feel stupid because you fell for it,” she says. Flockjay did not respond to questions for this story, but the company did provide a statement, attributed to Bryant Lau, its head of demand. “We stand by the success our hundreds of graduates have had and the incredibly hard work of our staff when we ran our sales academy,” it says. Meratas did not respond to a request for comment. Not all boot-camp students have stories like Johnson’s. There are many boot camps that do provide a solid tech-focused education, and that have helped students get high-paying tech jobs. These often teach specific skills, such as programming languages like Python, or computer-science skills like encryption and system architecture. Educational programs that are not accredited can still provide students useful skills that will prepare them for the job market. But research indicates that students with industry-recognized credentials like a certificate and degree—credentials that Flockjay and many other tech sales boot camps don’t offer—are most useful for preparing students for the job market. The lure of ‘debt-free’ college To say there’s a student debt crisis in America is a vast understatement. Income-sharing agreements have sprung up as an alternative to taking on this debt. The pitch: ISAs shift the risks of poor workforce outcomes from students to lenders, since lenders only get repaid if the students find a good-paying job. “This is true ‘debt-free’ college,” former Indiana governor Mitch Daniels wrote in 2015, when pitching ISAs as a solution to the student debt crisis. Daniels launched one of the first and most high-profile ISAs at Purdue University, where he was then president, in 2016. The program, called “Back a Boiler,” gave students a portion of their tuition in exchange for the students’ agreeing to pay back a percentage of their future income for a period of time after they graduated. The program partnered with a startup called Vemo Education, which in 2017 raised $7.4 million from venture-capital firms. (In 2022, Purdue suspended its Back a Boiler program amid complaints that it had misled students about how much money they’d owe after graduating. Daniels also announced in June that he was stepping down as Purdue’s president.) ISAs have long been popular at private universities in Europe and Latin America, and U.S. entrepreneurs began founding ISA companies as early as 2012 to fill the gap between federal student loans and private loans, which often have high interest rates and inflexible payback terms. Many of the earliest ISA companies, including Upstart and Pave, have since switched to offering traditional loans. In 2019, $250 million in income-share agreements were created, and 40 colleges and boot camps either offered or were developing ISA programs, according to Edly, an education lending platform, which estimated before the pandemic began that $500 million would be generated in 2020. Flockjay talked about the potential merits of ISAs as part of its funding pitch to investors. The angle paid off; in 2019, Flockjay received funding from startup accelerator Y Combinator; Dreamers VC, the venture capital fund co-founded by Will Smith; and Serena Williams’ investment firm Serena Ventures, which Williams has recently said she plans to focus on when she retires from professional tennis. (Serena Ventures did not respond to requests for comment. A Dreamers VC representative says that Flockjay was one of the few boot camps proactively engaging in communication with California regulators.) “It’s really smoke and mirrors they use to trap people in expensive debt that lasts longer than they think it will.” Advocates like the Student Borrower Protection Center (SBPC) say the way ISAs and boot camps became popular—by marketing themselves as a debt-free alternative to college—was misleading. “THIS IS NOT A LOAN,” a Flockjay deferred-tuition agreement seen by TIME says, and other ISAs clearly state that they are not loans. But ISAs behave very much like loans, with similar terms and fees, and sometimes require borrowers to pay back much more money than they’ve originally borrowed. ISAs often have payment caps that limit the amount a student has to repay, but these can be three times as high as the amount borrowed, according to the SBPC. In some cases, if borrowers want to pay off their ISA early, they have to pay the amount of the payment cap as a penalty, rather than the initial tuition amount—as was the case with a Purdue student who took out an ISA for $15,000 and was told she’d have to pay $37,500 if she wanted to close her contract, according to the Indianapolis Star. “The products have this facial element of seeming really simple and elegant,” says Kaufman, of the SBPC, “but it’s really smoke and mirrors they use to trap people in expensive debt that lasts longer than they think it will.” And while student-borrower advocates agree that ISAs are probably a better alternative than private student loans, they say that any product pitched as a money-making operation to investors won’t be a good deal for students. Federal student loans do not earn the government profits. “The whole premise is that this will generate a profit for somebody, whether it’s an investor or a boot camp,” says Jessica Thompson, a vice president at the Institute for College Access and Success. “Since when does anybody think that students are going to come out on the better end of that deal?” Neither ISAs nor unaccredited boot camps are closely regulated, and that’s created many of the problems students like Johnson have encountered. Students can take out ISAs for schools that don’t offer a good educational product and mislead them about student outcomes—allegations made in numerous lawsuits against boot camps—and then still be required to pay them back. Flockjay, for instance, told students in promotional materials that the average full-time job offer from companies on its platform was $75,000. Yet according to the company’s own 2021 enrollment agreement, out of 114 students who began the program in 2019, only 52 were eligible for graduation, and of those 52, just 22 were in jobs making between $45,000 and $50,000. The rest were making less than $45,000 or didn’t report their salary information. Students like Johnson and Brianna Kirby, a Black woman who started the program in June 2021, say there were many more discrepancies between what Flockjay initially promised and what it delivered. Though these complaints are more focused on the quality of Flockjay’s educational product than the terms of its deferred tuition agreement they signed with Blair (now enforced by Meratas), students say they agreed to the tuition terms because they were told they would make good money after graduation. They say they are now saddled with debt without the benefits they expected. Courtesy Brianna KirbyBrianna Kirby started the Flockjay program in June 2021. Flockjay’s enrollment agreement said the company would give students coaching for interviews and perfecting their résumés, and that its career-services team would act as a liaison between hiring partners and graduates, but after the August 2021 layoffs, most of the career-services team was gone. The enrollment agreement required students to schedule mock interviews with the career-service team, but after the layoff, students would sign in to scheduled mock interviews and no Flockjay staff would ever show up, according to online messages TIME has viewed between Kirby and other students. The enrollment agreement prohibited students from looking for jobs on their own for a set period of time after graduation, so that Flockjay could match them with hiring partners, who paid the company a fee, but when those hiring partners didn’t materialize, students were stuck with no permitted way to find work. The résumé coach assigned to Kirby frequently entered spelling and other errors into her résumé. When students were sent assignments to perfect their résumés, these often weren’t graded on time, Kirby says, even though this significantly slowed down the job -search process. And students were asked to complete a “Capstone Project” to promote Flockjay and recruit new students, even though Flockjay was supposed to be teaching students business-to-business, not business-to-consumer sales; the winning students received an a $100 prize, according to graduates who talked to the Student Borrower Protection Center. After the August layoffs, students in Kirby’s and Johnson’s classes began to discuss the lax student services on Slack, wondering if they could take legal action. “I’ll be honest with you, if I wasn’t financially obligated I could care less about this whole ordeal,” one student wrote in the Slack channel. “However, I am stuck $7k.” After talking with other students about how they felt let down by Flockjay, Kirby and Johnson both closed down the bank accounts to which they had given the company access. (California law says that a note of debt for an educational program is not enforceable if the institution did not have approval to operate when that note was executed; it’s unclear how this would affect the debt of students who live in other states.) Like many other students, Kirby ended up finding a job on her own after graduation, without the help of Flockjay. She does not make anywhere near $75,000. Meratas has been sending her so many emails that she’s started marking them as spam. “Flockjay didn’t make good on their contract with us; they target vulnerable marginalized communities, and left us in the wings with no transparency or communication,” she says. “Now we’re stuck making full payments despite feeling shorted.” One former Flockjay worker says she thinks the company’s focus on increasing its student base is what led to its problems. Lynn Meadors was hired as a Flockjay résumé writer in early 2021. When she began, Flockjay had six classes of graduates, each around 25 students, but each month, the classes got bigger and bigger, she says. By the time she left, in November 2021, the classes were about four times the size they’d been in the beginning. That’s despite the company’s having about half the staff it had before August of that year. Meadors believes Flockjay was trying to add as many students as possible to increase its revenue. “Students were being recruited primarily because they could check a box or fill a seat in the class,” she says, “rather than because they had the potential to be successful.” When students didn’t complete assignments, staff would be encouraged to graduate them anyway. Because Flockjay’s “partner companies” had to pay them a fee whenever the companies hired a student Flockjay had introduced to them, students were told not to seek jobs on their own, so Flockjay could get the commission. “I do think there were a lot of predatory aspects of Flockjay,” Meadors says. “They made it sound like if you went through Flockjay, you were almost guaranteed to find employment, but I know many students who have not found work or who have had to accept jobs in totally different fields and are still now paying Flockjay.” Most of the students were people of color, Meadors says, and Flockjay’s model of getting current students to recruit new ones was successful at making people feel comfortable signing up, even if class quality was declining. Students told her they’d joined because they saw friends or friends of family members posting about their experience, or saw ads from alumni of color that said how successful they’d become in tech. “The thought that any person who entered the program could have a successful tech career is flawed,” Meadors says. “In reality, the majority of people were not successful.” Previous Flockjay students have reported better experiences with the program. Brenna Redpath’s son went through Flockjay in 2020, and she says he flourished in the program. He’s now working in tech sales and makes $80,000, she says, a path that motivated Redpath to enroll in Flockjay in August 2021. Her son’s class was about one-third the size that hers was, she says. Her son had a career coach dedicated to helping him find a job; Redpath says most of the career counselors who were supposed to be available to her had been laid off, with only about two for every 100 students. Redpath, who is 56, had a few interviews after graduating from Flockjay, but she did not find a tech job. She has since found work at a nonprofit that has nothing to do with the tech industry. But since she is making more than $40,000, she and her husband have been anxiously eyeing their bank account, which they did not close down because it’s linked to many of their other monthly payments. She worries Meratas will start collecting soon on her ISA. “I believe in the mission of Flockjay,” says Redpath, “but I watched them not deliver for people who could use it.” Policing a new financial product Since they’re structured differently from loans, ISAs have been difficult for regulators to handle. Regulations often require that lenders disclose the amount of interest a loan has accrued, for example—something ISA providers say would be difficult to calculate. Until the Consumer Financial Protection Bureau entered into a consent order with Better Future Forward, a nonprofit ISA provider, in 2021, some ISA providers weren’t even certain they had to adhere to the Truth in Lending Act, which governs which disclosures student loan borrowers receive. Since the consent order requiring the nonprofit to follow the Truth in Lending Act and the Consumer Financial Protection Act only addresses Better Future Forward and its ISAs, many providers say they still don’t know what federal regulations apply to their own ISAs. Since 2014, Sen. Marco Rubio (R-FL) has introduced numerous Congressional bills that would regulate ISAs, but they have never gone anywhere. This year is no exception—in July, Rubio and three colleagues introduced a bipartisan bill they say would help regulate ISAs. The bill would prevent ISA contracts from being longer than 20 years, and would allow students making below a certain income to be exempt from making payments toward their ISA. The bill is endorsed by Better Future Forward’s CEO Kevin James and Purdue’s president, ISA champion Daniels. But SBPC’s Kaufman says it would “enshrine into law all the worst aspects of ISAs,” and allow providers to continue to claim that these agreements aren’t loans. It may be difficult for the industry to grow until policymakers create a system of regulatory oversight that prevents abuse of ISAs, says James, of Better Future Forward. He argues that used correctly, ISAs can be a powerful tool. Better Future Forward, for instance, offers ISAs only to certain students who attend certain handpicked accredited universities in Minnesota, Wisconsin, and Illinois. The company has worked with regulators in an attempt to create new laws that would make sure that ISAs could be discharged in bankruptcy, unlike student loans, and that students don’t have to repay if they make below a certain income. The U.S. higher educational system needs programs that expand access to financial support and that are built around students’ success, James says. Without access to ISAs, students could further become trapped in debt, since the current loans system is broken, he says. The loan-forgiveness programs the Biden Administration is offering “are patches on a broken system—doing little to ensure history won’t repeat itself,” James wrote in a June 2022 paper laying out his preferred regulatory approach. Since there is little meaningful federal regulation, ISA companies have to comply with different regulations from 50 different states, making it even harder for them to operate, according to the CEO of one company that has recently stopped providing ISAs, and which is not authorized to speak on the record because of pending litigation. The startups that offer ISAs don’t have a lot of capital, and can either spend their money on ensuring they comply with every state-level regulation, or they can spend it on its educational product, or on marketing. “Clear rules would have probably been the best thing that could have happened to us,” the CEO says. A lack of regulation has forced many ISA companies to pivot to other business models, which leaves students with few options other than private loans, which have extremely high interest rates. Indeed, many of the companies that have tried to offer ISAs in the past decade have since left the market because of a lack of regulation. Flockjay itself has since pivoted from tech boot camps, and says it is now focused on helping its graduates and other tech sales workers get better at the jobs they already have. The company is now pitching this as a new service to former students, even though students say they were told they’d receive ongoing alumni support for life as part of the program they had already paid for. The example of Flockjay students indicates that the state regulation is not particularly effective. Though California’s Bureau for Private and Postsecondary Education (BPPE) fined Flockjay $15,000 in October of 2020 for operating without state approval, a year later the BPPE lowered the fine to $10,000—roughly equivalent to the tuition of 1.25 students. The BPPE did not take any further regulatory action against Flockjay. The school still does not have approval to operate in the state of California. California’s Department of Consumer Affairs, which oversees the BPPE, said in a statement that Flockjay appealed its citation for operating without approval; when its appeal was denied, the school submitted evidence in November 2021 that it was no longer operating. The regulator does not confirm, discuss, or comment on investigations, the statement said. BPPE refers matters related to financing to the Department of Financial Protection and Innovation (DFPI.). In a statement, DFPI said: “It is the DFPI’s stance that ISAs issued by schools not licensed or registered with BPPE are unenforceable and cannot be serviced. In August 2021, Meratas, which took over servicing Flockjay’s ISAs in June, entered into a consent order with the DFPI. The consent order states that Meratas will not service any ISAs “that have been determined or declared unenforceable or void by the DFPI or any regulatory agency.” But students including Kirby, Johnson, and Redpath say they are getting emails from Meratas trying to collect on their Flockjay ISAs. They say they’ve also been offered “discounted tuition” offers, in which their debts will be wiped out if they pay $6,000 right away. In August, Redpath emailed Flockjay asking to speak to someone “who can have a conversation about the contractual problem of Flockjay holding teaching for my batch while legally being banned from doing so by the Department of Education.” She noted in the email that many students were unhappy about the lack of career support services, and that their class was three times bigger than previous classes had been. She received an email back the next day. “You can continue to defer your tuition payments until you get a job exceeding $40,000/annually,” a Flockjay customer-success manager wrote. “Per the DTA [deferred tuition agreement] this is only deferred until you get any job.” —With reporting by Simmone Shah.....»»

Category: topSource: timeSep 8th, 2022

Futures Flat In Muted End To Turbulent Week With All Eyes On Payrolls

Futures Flat In Muted End To Turbulent Week With All Eyes On Payrolls US futures dropped on Friday, ending a third straight week of declines, as investors eyed a key jobs report that will be pivotal for this month’s Fed rate hike decision. S&P futures fell 0.2% at 730 a.m. ET, with the underlying cash index down 2.2% this week. Nasdaq 100 futures fell 0.3%, with the tech-heavy index down 2.6% in the previous four days. The dollar index slipped from a record high and the euro strengthened. 10Y yield traded slightly lower, at 3.25%, following yesterday's spike. In pre-market trading, Lululemon jumped 10% after raising its full-year outlook. Meanwhile, Bed Bath & Beyond fell as much as 6%, putting the home-goods retailer on track for a weekly loss following its survival plan earlier in the week.  Analysts raise PTs on the stock, though some flag higher inventory levels as a note of bearishness. Here are other notable movers: Procept BioRobotics (PRCT US) initiated at overweight by Wells Fargo, highlighting the potential of the company’s AquaBeam Robotic System, a therapy for prostate gland enlargement JPMorgan cuts its ratings on Dow and LyondellBasell (LYB US) to neutral from overweight, saying the petrochemicals companies are “probably not the best places to put new money to work.” Shares in Addentax (ATXG US), a Chinese garment-maker, drop as much as 40% in US premarket trading, set to extend yesterday’s 95% plunge into a second day. US semiconductor- related stocks could be active on Friday after Broadcom gave a robust sales forecast for the current quarter, calming worries that spending on infrastructure is slowing The outlook for stocks has soured since mid-August after traders ramped up bets that the Fed will continue its aggressive monetary tightening, hurting the economy in the process. The S&P 500 has erased $2 trillion in market capitalization in the past five days, and has given up half of its gains made in the summer rally. Meanwhile, tech stocks have succumbed to rising rates, which are a headwind to the expensive growth sector. “We don’t have a lot of reasons to be bullish in this type of environment for the next couple of weeks and months,” Meera Pandit, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “Yet when we think about the longer term perspective and the longer term investor, these are the types of level that can be fruitful in the long run.” US stocks had outflows of $6.1 billion in the week to Aug. 31 - the biggest exodus in 10 weeks - according to a Bank of America's Michael Hartnett, adding that investors expect  “fast inflation shock, slow recession shock” as nominal growth continues to be boosted by surging consumer prices, fiscal stimulus, large household savings and the impact of the war in Ukraine. Next up on investor minds is the August jobs report in under an hour, which is expected to show healthy payrolls growth following a stronger-than-expected US manufacturing report. This is how Goldman traders framed what to expect (full preview here): "we are still in a bad is good and vice versa set up for US stocks as Fed has made it clear that they want to see some froth exit the labor market in tandem with cooling inflation: i) Strong print here will clearly make 75bps much more likely on 9/21; ii) Inline print of 300k(ish) will keep pressure on this tape...anything close to last month’s shocking print of 528k would lead to real risk unwind into the wknd (I think at least a 200bp sell off). iii) Sweet spot for stocks tomorrow is a 0 – 100k headline reading...should get a 100+bp rally for S&P in this scenario after this recent drawdown. If we happen to get a negative number an even sharper rally", and the pivot will be right back on the Q1 calendar. “The risk of having another additional 75-basis-points hike is high and also to have a big rally on the real rates” depending on the outcome of the jobs report, said Claudia Panseri, a global equity strategist at UBS Global Wealth Management. “Volatility in the equity market will remain quite high until the picture on inflation becomes more clear than it is right now,” she told Bloomberg Television. In Europe, the Euro 50 rose 0.9%, with Germany's DAX outperforming peers, adding 1.5%, IBEX lags, rising 0.2%. Autos, financial services and energy are the strongest-performing sectors. Here are the biggest Europen movers: Nokia shares are up as much as 1.4% on Friday, adding to a weekly gain and outperforming the wider markets decline as the communications company will join the Euro Stoxx 50 benchmark Ashmore shares gain as much as 5.5%, reversing a small decline at the open, with Panmure Gordon upgrading the emerging markets fund manager to buy from hold following its FY results Smith & Nephew rises as much as 4.9%, extending a weekly gain. RBC says investors are viewing stock’s “historically low valuation” against orthopedic peers as a “buying opportunity.” Segro and Tritax Big Box gain 2.5% and 2.2%, respectively, after Shore Capital upgrades the REITs, saying downside risks for Segro are “fairly priced,” and the risk- reward balance for Tritax is more even UK homebuilders fall and are among the worst performers in the Stoxx 600 after HSBC cut its ratings on seven stocks, saying the UK is on the “cusp of a housing downturn” Sectra shares are down as much as 6.6% after the Swedish medical technology company presented its latest earnings, which included a drop in operating profit Alliance Pharma falls as much 11%, most since July, as the UK’s competition watchdog seeks to disqualify seven of the firm’s directors, including CEO Peter Butterfield Proximus falls to fresh record low, declining as much as 4.3% after Morgan Stanley resumes at underweight in note citing structural market headwinds and an unsupportive valuation Kofola CeskoSlovensko shares drop 2.5% after rising costs prompted the Czech producer of soft beverages to reduce its dividend proposal and rein in guidance Compleo Charging Solutions falls as much as 4% after Berenberg downgrades to hold and lowers its price target by 80%, citing resignation of the company’s co-founder Checrallah Kachouh Earlier in the session, Asian stocks fell, on course for their worst week in more than two months, as the dollar hit a new high amid worries about the Federal Reserve’s aggressive rate-hike path and as lockdowns continued in China.  The MSCI Asia Pacific Index declined as much as 0.7%, set for a weekly loss of nearly 4%. TSMC and other tech stocks contributed the most to the benchmark’s drop as Treasury yields climbed, sending the Bloomberg Dollar Spot Index to a record high.  Equity gauges in Hong Kong led declines in the region, dragged by the banking and tech sectors. Meanwhile, shares in Japan fell as the yen slipped to a 24-year-low against the dollar.  Fresh lockdowns in China are also weighing on sentiment, putting the Asian stock benchmark on track for its third-straight weekly decline. The sell-off reflects broad concerns of an economic slowdown amid weaker manufacturing data in the region’s major tech exporters. “Dollar momentum sees no sign of breaking,” Saxo Capital Markets strategists including Redmond Wong wrote in a note. “Fresh Covid lockdowns in China, in particular, the full lockdown of Chengdu and extended restriction in Shenzhen, have caused some demand concerns.”  Investors will keep a keen eye on the US August jobs report due later Friday to gauge the Fed’s next move in its September meeting.  While weak sentiment has kept Asian shares hovering near their two-year lows, hedge-fund giant Man Group said Asian stocks are set to outshine peers next year. The investment firm is betting on defensive stocks in India and Southeast Asia, Andrew Swan, Man GLG’s head of Asia ex-Japan equities, said in an interview Japanese stocks fell as investors awaited key US employment figures and assessed the yen’s decline to a 24-year low against the dollar. The Topix Index dropped 0.3% to 1,930.17 as of the market close in Tokyo, while the Nikkei 225 was virtually unchanged at 27,650.84. Sony Group contributed the most to the Topix’s decline, decreasing 1.1%. Out of 2,169 stocks in the index, 738 rose and 1,307 fell, while 124 were unchanged. “The US jobs report won’t be very positive no matter what’s out,” said Tatsushi Maeno, a senior strategist at Okasan Asset Management. “If it’s strong, the FOMC will lean toward a 0.75% rate hike and on the other hand, if it’s weak, there could be talk of a recession." India’s benchmark equities index closed slightly higher, after swinging between gains and losses several times throughout the session, as investors tried to gauge the impact of the US Federal Reserve’s hawkish stance in a week marked by volatility.     The S&P BSE Sensex rose 0.1% to 58,803.33 in Mumbai, but ended lower for a second consecutive week. The NSE Nifty 50 Index was little change on Friday. Housing Development Finance Corp and HDFC Bank provided the biggest support to the Sensex, which saw 19 of its 30 member stocks ending lower.  Thirteen of the 19 sector indexes compiled by BSE Ltd. declined, led by a measure of oil and gas companies.  “The effect of Jackson Hole is still revolving across financial markets, with a soaring dollar and falling equities as the main themes,” Prashanth Tapse, an analyst at Mehta Securities, wrote in a note.  In FX, the greenback fell against all of its Group-of-10 peers except the yen. The euro rose a fourth day in five against the greenback, to edge above parity. The pound languished near the lowest since March 2020 versus the dollar. Investors awaited the results of a vote to choose the country’s next prime minister on Monday, with expected winner Liz Truss aiming to cut taxes and increase borrowing. The Norwegian krone outperformed, and rebounded from a six-week low versus the greenback, amid a recovery in oil prices before an OPEC+ meeting on supply at which Saudi Arabia could push for output cuts. The yen weakened past 140 per dollar after a slight rally in Asian trading faded. In rates, treasuries were little changed while European bonds slipped. The 10-year Treasury yield held steady near 3.26%; while gilts 10-year yield is up 2.6bps around 2.90% and bunds 10-year yield is up 2bps to 1.58%. In commodities, WTI crude futures rebound 3% to around $89, within Thursday’s range; oil pared gains after news that the Group of Seven most industrialized countries is poised to agree to introduce a price cap for global purchases of Russian oil, while Russia looks set to resume gas supplies through its key pipeline. Gold rose $6 to around $1,704.  Meanwhile, zinc headed for its biggest weekly loss in over a decade on concern Chinese demand will be hamstrung by new virus restrictions. Bitcoin has reclaimed the USD 20k mark but the upward move is yet to gain any real traction amid the broader contained price action. Looking to the day ahead now, the main highlight will be the US jobs report for August. Otherwise on the data side, there’s US factory orders for July and Euro Area PPI for July. Market Snapshot S&P 500 futures little changed at 3,969.25 Gold spot up 0.4% to $1,704.52 MXAP down 0.5% to 154.28 MXAPJ down 0.5% to 506.44 Nikkei little changed at 27,650.84 Topix down 0.3% to 1,930.17 Hang Seng Index down 0.7% to 19,452.09 Shanghai Composite little changed at 3,186.48 Sensex up 0.4% to 59,025.66 Australia S&P/ASX 200 down 0.2% to 6,828.71 Kospi down 0.3% to 2,409.41 STOXX Europe 600 up 0.7% to 410.47 German 10Y yield little changed at 1.58% Euro up 0.3% to $0.9980 U.S. Dollar Index down 0.25% to 109.42 Top Overnight News from Bloomberg Under pressure from central bankers determined to quash inflation even at the cost of a recession, global bonds slumped into their first bear market in a generation. The Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds has fallen more than 20% from its 2021 peak, the biggest drawdown since its inception in 1990 The ECB remains behind the curve on tackling record euro- zone inflation and will have to act more forcefully than previously envisaged to wrest control of prices, according to a survey of economists Consumers’ expectations for inflation in three years rose to 3% in July from 2.8% in June, European Central Bank says in statement summarizing the results of its monthly survey. Russia looks set to resume gas supplies through its key pipeline to Europe, a relief for markets even as fears persist about more halts this winter. Grid data indicate that flows will resume on Saturday at 20% of capacity as planned German exports and imports both fell in July as surging prices and the war in Ukraine threaten to send Europe’s largest economy into a recession. The trade surplus shrank to 5.4 billion euros ($5.4 billion) from 6.2 billion euros in June, as exports dropped by 2.1% and imports by 1.5% A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were indecisive with price action relatively rangebound after the mixed lead from the US and with the region lacking firm commitment as participants await the upcoming US NFP jobs data. ASX 200 was lacklustre as earnings releases quietened and with strength in financials offset by losses across the commodity-related sectors. Nikkei 225 traded subdued amid underperformance in large industrials although losses in the index were stemmed by retailers after several reported strong August sales. Hang Seng and Shanghai Comp were mixed as Hong Kong underperformed amid notable losses in developers and with the mainland choppy but ultimately kept afloat after the PBoC recently cut rates on its Standing Lending Facility by 10bps from August 15th and after several officials pledged measures. Top Asian News PBoC official Ruan said monetary policy is to further improve cross-cyclical adjustments and maintain stable and moderate credit development, while they will keep liquidity reasonably ample. PBoC will also better coordinate structural and aggregate policy tools but will avoid flood-like stimulus and keep prices stable. Furthermore, the PBoC said China has not taken excessive monetary policy stimulus since the pandemic, leaving room for subsequent policy adjustments and that balanced consumer prices also create favourable conditions for monetary policy adjustments, according to Reuters. PBoC adviser Wang said banks need to increase financial support for infrastructure and that infrastructure is restricted by local government debt levels, while Wang added that they need to ensure property companies' financing needs are met, according to Reuters. China's securities regulator official said they will promote new legislation for overseas listings and will implement the China-US audit agreement, as well as continue strengthening communication with foreign institutional investors, according to Reuters. China's banking regulator official said they will steadily resolve the risks faced by small and medium-sized financial institutions, while they will improve monitoring and disposal of debt risks of large companies, according to Reuters. Japanese Finance Minister Suzuki said it is important for currencies to move stably reflecting economic fundamentals, while he noted that recent FX moves are big and they will take appropriate action on FX if necessary. Suzuki also stated that they are watching FX with a sense of urgency and will brief the media after the G7 finance ministers meeting tonight. European bourses are firmer across the board as hawkish yield action in the EZ has eased from yesterday's recent peaks, Euro Stoxx 50 +0.8%. Stateside, futures are contained and flat with all focus on the NFP report. Alphabet's Google (GOOG) is planning to accept the use of third-party payment services on its smartphone app in national such as Japan and India but not the US, according to the Nikkei Top European News British Chambers of Commerce said the UK is already in the midst of a recession and it expects the UK economy to decline for two more periods following the contraction in Q2, while it also sees inflation to reach 14% later this year EU warned UK Foreign Secretary Truss against triggering Article 16 and said they will refuse to engage in serious talks on reforms to the post-Brexit deal unless she takes the “loaded gun” of unilateral legislation off the table German Economy Gets Another Growth Warning as Trade Volumes Drop Russian Gas Link Set to Restart as Traders Weigh Further Halts ECB Says Consumers Now See Inflation in Three Years at 3% A Hot Jobs Report Could Send Bitcoin to $15,000, Hedge Fund Says Citi Favors Bets on 75Bps Hikes at Each of Next Two ECB Meetings FX DXY's overnight pullback has picked up pace in early European hours. The EUR stands as the best performer alongside reports that Nord Stream 1 flows are expected to resume on Saturday. Non-US dollars are all modestly firmer to varying degrees, whilst JPY fails to benefit from the dollar weakness. Yuan shrugged off another notably firmer-than-expected CNY fixing overnight. Fixed Income Comparably contained session overall thus far though Bunds are holding at the lower end of a 85 tick range in limited newsflow pre-NFP. Currently, the Bund low is circa. 10 ticks above 147.00, with yesterday’s 146.78 trough in focus and then 145.97/87 thereafter. Gilts and USTs are very similar thus far in that both benchmarks are essentially unchanged. Commodities WTI Oct and Brent Nov futures are firmer on the day amid a softer Dollar and narrowing prospects of an imminent Iranian Nuclear deal. Spot gold edges higher as the Dollar remains weak, with the yellow metal back on a 1,700/oz+. Base metals are mixed LME copper softer around the USD 7,500/t. US Event Calendar 08:30: Aug. Change in Nonfarm Payrolls, est. 298,000, prior 528,000 Change in Private Payrolls, est. 300,000, prior 471,000 Change in Manufact. Payrolls, est. 15,000, prior 30,000 Unemployment Rate, est. 3.5%, prior 3.5% Labor Force Participation Rate, est. 62.2%, prior 62.1% Underemployment Rate, prior 6.7% Average Hourly Earnings YoY, est. 5.3%, prior 5.2% Average Hourly Earnings MoM, est. 0.4%, prior 0.5% Average Weekly Hours All Emplo, est. 34.6, prior 34.6 10:00: July Durable Goods Orders, est. 0%, prior 0%; July -Less Transportation, est. 0.3%, prior 0.3% 10:00: July Factory Orders, est. 0.2%, prior 2.0% 10:00: July Cap Goods Orders Nondef Ex Air, prior 0.4% 10:00: July Factory Orders Ex Trans, est. 0.4%, prior 1.4% DB's Jim Reid concludes the overnight wrap If I'm not here on Monday it's not impossible that I've been eaten by a snake or a small crocodile, or poisoned by a tarantula. For our twins' 5th birthday party this weekend we've hired a professional reptile handler to come round and show 30-40 overexcitable kids some interesting animals. If I'm not eaten or bitten I'm a bit worried he won't do the full register on the way out and I'll be left with a huge lizard hiding in my bed. All I can say is that for my 5th birthday party we just had pin the tail on the donkey and a few stale sandwiches. Life was so much simpler then. Markets are pretty complicated at the moment with investors not being quite able to decide whether the newsflow was bad or good yesterday for risk assets. We went to both extremes with the US rallying back into positive territory by the close (S&P 500 +0.30% having been -1.23% just after Europe logged off). As the US starts it's day a bit later we'll have a fresh payroll print to throw into the mix which could be the swing factor between 50 and 75bps at the September Fed meeting. Last month’s strong print ratcheted up expectations that the Fed could hike by 75bps for a third meeting in a row, and markets are still pricing that as the more likely outcome than 50bps, with futures now pricing in +67.7bps worth of hikes. In terms of what to expect today, our US economists are looking for +300k growth in nonfarm payrolls, which should be enough to keep the unemployment rate at its current 3.5%. Ahead of that, the US labour market data we got yesterday was pretty good, continuing the run of decent releases over recent days. Initial jobless claims for the week through August 27 unexpectedly fell back to 232k (vs. 248k expected), and the previous week was also revised down by -6k. That’s the third week in a row that the jobless claims have fallen, marking a change from the mostly upward trend we’ve seen since late March. On top of that, the ISM manufacturing release also surpassed expectations, remaining at 52.8 (vs. 51.9 expected), with the employment component at a 5-month high of 54.2 (vs. 49.5 expected). Treasuries lost significant ground on the day, even before the data, with the 2yr yield rising +1bps to hit another post-2007 high of 3.50%, whilst the 10yr yield rose +6bps to 3.25%. The moves were driven by higher real yields across the curve, with the 5yr real yield hitting a 3-year high of 0.849%. It was a similar story in Europe too, where yields on 10yr bunds (+2.2bps), OATs (+2.5bps) and BTPs (+3.3bps) rose. Those European moves came as investors grew increasingly confident that the ECB would hike by 75bps at some point this year, which was aided by the latest data that showed Euro Area unemployment fell to a new low of 6.6% in July. That’s the lowest level since the single currency’s formation, and means that the latest data is showing that the Euro Area simultaneously has the highest inflation and the lowest unemployment of its existence. As discussed at the top, US equities turned round late in the session with the Nasdaq nearly making it back into the green (-0.26%) as well as the S&P after being -2.28% at 6pm London time. This was too late to save the European session as the STOXX 600 (-1.80%) took a significant hit. Sentiment was pretty downbeat from the outset after the lockdown of the Chinese city of Chengdu (population 21m) risked further disruption to supply chains and global economic demand. That said, the energy situation continued to develop in a positive direction, with German power prices for next year coming down by a further -9.11% to €523.40 per megawatt-hour. In fact they have halved since their intraday peak on Monday when they hit €1050, which just shows how amazingly volatile this market is right now. The EU is considering various interventions to deal with the current turmoil, including price caps and windfall taxes, and Commission President Von der Leyen is set to outline the measures in her State of the Union address on September 14. Staying on commodities, the decline in oil prices continued yesterday thanks to fears of further Chinese lockdowns and hawkish central banks. Brent crude was down -4.28% to $92.36/bbl, which is a substantial decline since its closing level on Monday of $105.09/bbl. As we go to print, crude oil prices are showing some recovery with Brent futures +1.91% higher at $94.12/bbl. There was a similar negative pattern among industrial metals, with copper (-2.96%) down for a 5th day running on the back of those same fears about demand. Meanwhile in the precious metal space, gold (-0.79%) slipped below $1700/oz, while hitting its lowest since July intraday as markets priced higher interest rates, thus raising the opportunity cost of holding a non-interest-bearing asset. Over in the FX space, a number of new milestones were reached yesterday, most notably a rise in the dollar index (+0.91%) to levels not seen since 2002. The greenback was supported yesterday by the strong data that added to expectations the Fed would keep hiking into next year, although the reverse picture was that the Euro fell back beneath parity against the dollar, and the Japanese yen fell to 140 per dollar for the first time since 1998. In Asia’ morning trade, the Japanese yen further weakened, touching 140.26 per US dollar. Here in the UK, sterling also fell just beneath the $1.15 mark in trading for the first time since March 2020. In Asia this morning, the Nikkei (-0.21%), the Hang Seng (-0.58%), and the CSI (-0.20%) are trading lower with the Shanghai Composite (+0.28%) bucking the trend. Elsewhere, the Kospi (+0.04%) is struggling to gain traction after South Korea’s headline inflation slowed after six months of accelerating (more below). Moving ahead, US stock futures are fairly flat with contracts on the S&P 500 (-0.08%) and NASDAQ 100 (-0.04%) treading water. Early morning data showed that Korea’s inflation eased to +5.7% y/y in August (v/s +6.1% expected) from +6.3% in July as energy prices eased. MoM prices dropped -0.1% in August (v/s +0.3% expected) after rising +0.5% in the prior month thus providing some comfort to the Bank of Korea (BoK) in its yearlong tightening cycle. Rounding off yesterday's data, there was plenty to digest from the global manufacturing PMIs, although they mostly confirmed the picture from the flash readings we’d already got. In the Euro Area, the reading came in at 49.6 (vs. flash 49.7), and the US had a 51.5 reading (vs. flash 51.3). The UK had a stronger revision up to 47.3 (vs. flash 46), but it was still in contractionary territory and the lowest since May 2020. Elsewhere, German retail sales grew by +1.9% (vs. -0.1% expected). To the day ahead now, and the main highlight will be the US jobs report for August. Otherwise on the data side, there’s US factory orders for July and Euro Area PPI for July.   Tyler Durden Fri, 09/02/2022 - 07:52.....»»

Category: blogSource: zerohedgeSep 2nd, 2022

FTSE Review: Cineworld’s Horror Story Continues, While Abrdn Is Set To Leave The Big League

The FTSE All Share Index Quarterly Review is based on yesterday’s closing prices and is due to be announced this evening (Wednesday 31st August) by FTSE Russell, with changes effective after the close on Friday 16th September. Cineworld Group plc (LON:CINE) is set to leave the FTSE All Share Index as its horror story continues […] The FTSE All Share Index Quarterly Review is based on yesterday’s closing prices and is due to be announced this evening (Wednesday 31st August) by FTSE Russell, with changes effective after the close on Friday 16th September. Cineworld Group plc (LON:CINE) is set to leave the FTSE All Share Index as its horror story continues Struggling furniture maker Made.Com Group PLC (LON:MADE) also is heading out of the FTSE All Share Asset manager Abrdn PLC (LON:ABDN), Hikma Pharmaceuticals Plc (LON:HIK) and Howden Joinery Group Plc (LON:HWDN) are set to leave the FTSE 100 Harbour Energy PLC (LON:HBR), F&C Investment Trust PLC (LON:FCIT) and wound care specialist Convatec group look set to join FTSE 100 Go-Ahead Group plc (LON:GOG), Puretech Health PLC (LON:PRTC), NextEnergy Solar Fund Ltd (LON:NESF) and Bluefield Solar Income Fund Ltd (LON:BSIF) look set to be promoted from the FTSE Small Cap to the FTSE 250 Door manufacturer Tyman PLC (LON:TYMN), and lender Provident Financial plc (LON:PFG), are among the companies which are likely to leave the FTSE 250 Homeserve plc (LON:HSV) looks set to vault into the FTSE 100 temporarily, replacing cyber firm Avast PLC (LON:AVST) after its takeover goes through – but the home repairs company will also soon be taken private. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more   Cheap UK assets, volatility in financial markets, the cost-of-living crisis and a structural shift in the movie industry are all factors behind the moves expected to be announced in the latest FTSE quarterly review. Based on yesterday’s closing prices it appears Abrdn’s time in the FTSE 100 limelight is drawing to an end for now, as the investment company looks set for demotion, hit by volatility in financial market and seen as “behind the curve” in its ESG fund offerings. The horror story continues for Cineworld as it prepares for bankruptcy with its latest share slide propelling it out of the FTSE All Share. This index represents around 98% of the UK market, so Cineworld’s exit from this wide pool demonstrates just how far its star has fallen. It’s been weighed down by its huge debts after Covid played out as a highly depressing scene for the industry with revenue streams drying up as the might of the streaming giants ate into ticket sales. HomeServe is set to jump back into the FTSE 100 earlier than the official reshuffle as it is set to leap into the place vacated by Avast, due to its takeover by US cyber giant NortonLifeLock. But its extra time in the top-flight is expected to be limited for HomeServe as it in turn awaits takeover by Canada’s Brookfield Asset Management. Go-Ahead group is also expected to jump into the FTSE 250, but it’s also likely to be a short lived stint given that the transport operator has also agreed to a buy-out offer from an Australian and Spanish consortium. As suitors continue to circle UK assets, amid a weak pound and worries about the health of the economy, the risk is that more listed companies will be erased from indices. The cost-of-living crisis also looms large in this reshuffle with Howdens Joinery, door and window firm Tyman and furniture maker looking set for relegation from their positions. This is partly due to worries that increasingly squeezed household budgets will slow the pace of purchases and renovations.” Abrdn - Set To Be Relegated From The FTSE 100 Huge geopolitical uncertainty, sky high inflation and worries about economic growth have been challenging for the asset management sector, and Abrdn’s weaker performance in this environment looks set to propel it out of the big league. Operating profits came in lower than expected as fund flows reduced further. But this isn’t just a recent problem, assets have been walking out the door for years. It’s Environmental, Social and Governance (ESG) options currently lag peers, and demand for ESG investments is on the rise, which puts it in a tricky position. It’s been trying to keep revenue moving in the right direction through acquisitions. It now owns Interactive Investor, which should provide a relatively stable source of assets for the group given its one of the UK's biggest direct-to-consumer investment platforms. The majority of the funds abrdn manages have been able to deliver investment returns ahead of their benchmark – which is a key requirement if fund investors are to be tempted back. Hikma Pharma - Set To Be Relegated From The FTSE 100 Pharmaceutical company Hikma Pharma is in the drop zone after growth ground to a halt and its chief executive headed for the door. Amid the pile up of disappointing news was the slashing of guidance for revenues and margins in its key genetics medicines division. However, there were still a few rosier developments, with forecasts increased for its branded products and the injectables part of the business is still expected to follow the slightly higher trajectory laid out in April. But weakness may continue until a long-term replacement is found for Siggi Olafsson given that the executive chair and former CEO Said Darwazah, has only stepped into the breach temporarily. Howdens - Demotion From The FTSE 100 “There were high hopes that the shift in consumer behaviour brought about by the pandemic would be long term and the focus on doing up homes would continue as people continued to race for more space amid new hybrid ways of working. But worries are rising that amid the cost-of-living crisis consumers will put off launching fresh new renovation schemes unless absolutely necessary and that’s led to falls in Howden’s valuation, making it a potential contender for demotion from the FTSE 100, after only joining the index earlier in the spring. The red-hot housing market is also seeing tentative signs of cooling off with rates set to continue to rise amid painful inflation. However, Britain’s housing stock is ageing and that should provide some resilience particularly with the fresh focus on energy efficiency which could provide added impetus for renovations.’’ AVAST Set To Leave FTSE 100 While Homeserve Is Set To Join Temporarily “The London market may be showing signs of some short-term resilience but private equity firms are set to keep circling around the bargain bin, picking up firms discarded by investors. After the Competition and Markets Authority provisionally approved the takeover deal of cyber security firm Avast by US giant NortonLifeLock, the deal is expected to go through assuming final approval is given on 12 September, which will see Avast removed from the index. HomeServe, the Walsall based British multinational home emergency repairs and improvements business will temporarily move back into the FTSE 100. But it will be scratched from the index once its takeover by Brookfield Asset Management goes through in the next few months. These exits from the London market are unlikely to be the last, given how much interest there has been in UK assets from overseas buyers. The risk to capital markets is that competition and innovation could suffer if corporate concentration continues to rise. Retail investors who are unable to access private markets may also lose out because they won’t be able to share in the returns of as many companies in the economy, with some of the better opportunities going private.” Harbour Energy – Set To Enter The FTSE 100 North Sea oil and gas producer Harbour Energy headed downstream out of the FTSE 100 at the last reshuffle after worries about the windfall tax ricocheted around the stock. Harbour Energy is the reincarnation of Premier Oil formed via a reverse takeover by recently listed Chrysaor. But the share price has climbed back up, helped by the elevated price of fossil fuels which pushed half-year profits up to $1.49bn up from £120 million a year ago. The energy price levy will still be relatively onerous for the company, compared to larger producers given the majority of its production in hubs are in the UK. The full year tax liability is expected to be in the region of $300 million but it’s not deterring investment in the UK market, with new projects in the pipeline.” Convatec – Set To Enter The FTSE 100 “Medical company Convatec specialises in wound and skin care and demand for its products is expected to increase amid a rising number of surgical procedures globally and new initiatives for treatment. It’s battled cost inflation but its profit’s performance has still be pretty hardy, despite the headwinds. As populations age around the world, the ailments of the elderly such as leg ulcers are expected to provide brisk business for the company. Its product range extends to continence and critical care products, which are also expected to increase in demand as demographics change and medical professionals update care requirements.’’ F&C Investment Trust - Set To Enter The FTSE 100 “Although the F&C Investment Trust hasn’t escaped the recent market volatility, it’s resilience with its share price up 10% over the past six months makes it another contender for entry into the FTSE 100. The Trust aims to secure long-term growth in capital and income from an international diversified portfolio of listed equities, as well as unlisted securities and private equity.” PureTech Health - Set To Enter The FTSE 250 “The reshuffle could prove to be a revolving door for Biotech company PureTech Health as it’s in position to head back into the FTSE 250 after exiting the index at the last review. It had been a casualty of investors’ increasingly cautious approach to risk. The nature of the product pipeline makes the results quite volatile, and sentiment has rebounded highlighting how the broad spectrum of drugs should help offer longer term resilience.” Next Energy Solar and BlueField Solar - Set To Enter The FTSE 250 Despite the volatility facing the financial markets, there is still strength in the appetite for renewable energy stocks, with NextEnergy Solar Fund and BlueField Solar set to enter the FTSE 250. Next Energy Solar is a specialised solar and energy storage climate impact fund which has been boosted after its sustainability credentials were recognised under new European regulations known as the EU taxonomy. It has also managed to do a deal for more subsidised solar contracts in the UK, under the government-backed low carbon contracts company and it’s reported a rise in its net asset value amid an increase in power forecasts assumptions. BlueField Solar has also seen its net asset value rise and the Guernsey-based investment company has also won fresh contracts in the UK, with a 15-year duration, for sites in Northamptonshire, Hampshire and Norfolk. Tyman – Set To Leave The FTSE 250 Tyman the door and window manufacturer could be heading for the exit just months after it entered the FTSE 250. It had benefited from a robust demand for repairs, renovations and new build homes in its key markets, but there are concerns that demand could shift down a gear as interest rates continue to rise and the housing market cools. There are also worries about consumer confidence and a dwindling appetite for non-essential spending. A house makeover might be nice to have, but with budgets set for an even bigger squeeze, investors are concerned that Tyman could see a sharp slowdown in revenues. Provident Financial – Set To Exit The FTSE 250 Provident Financial looks set to be heading out of the FTSE 250 after worries about the cost-of-living crisis rise and it was forced to wind down its doorstep lending unit following a surge of complaints. Although the costs of the winding down have fallen, and business remained relatively robust in its credit card arm, concerns are growing across the sector about future potential spike in bad loans as consumer struggle to make payments amid soaring prices. Cineworld – Looks Set To Exit The FTSE All Share Index Cineworld has struggled to grab hold of fresh financial lifelines, and is looking at bankruptcy options, unable to survive the post pandemic floodwaters in its current form. Crawling back to profitability after being sideswiped by Covid was always going to require almost superhero levels of effort and with the blockbuster pipeline drying up, its options are very limited. The surge in streaming services might have been good news for movie fans confined to their homes and has helped support the big studios, but for the cinema industry it came as a double blow. Even when social distancing measures eased, not enough movie goers booked seats, forcing the company into an even more precarious position. Losing its position in the FTSE All Share Index is another twist in the Covid horror story for Cineworld, with its future now highly uncertain.” – Set To Leave The FTSE All Share Index “Bigger ticket items like furniture are much harder to shift as many consumers who are facing squeezed budgets are tightening the purse strings. A plush new sofa may be nice to have but it’s far from essential expenditure, when grocery bills are rising so fast. Retailer is now considering an equity raise to strengthen its balance sheet amid volatile trading conditions. It had already highlighted that it was hard to attract new customers while hanging onto decent margins and expected gross sales to fall from between 15% and 30% this year. With the extent of its slide in fortunes becoming clear, its share price is down 93% year to date, and it looks set to drop out of the FTSE All Share. Other Movements Expected In The Upcoming Reshuffle XP Power, Greencore and Chrysalis Investments look set to be relegated from the FTSE 250. It’s likely there will be two new entries into the FTSE All Share: Industrials REIT and Warehouse REIT. About by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.....»»

Category: blogSource: valuewalkAug 31st, 2022

Tverberg: Why No Politician Is Willing To Tell Us The Real Energy Story

Tverberg: Why No Politician Is Willing To Tell Us The Real Energy Story Authored by Gail Tverberg via Our Finite World blog, No politician wants to tell us the real story of fossil fuel depletion. The real story is that we are already running short of oil, coal and natural gas because the direct and indirect costs of extraction are reaching a point where the selling price of food and other basic necessities needs to be unacceptably high to make the overall economic system work. At the same time, wind and solar and other “clean energy” sources are nowhere nearly able to substitute for the quantity of fossil fuels being lost. This unfortunate energy story is essentially a physics problem. Energy per capita and, in fact, resources per capita, must stay high enough for an economy’s growing population. When this does not happen, history shows that civilizations tend to collapse. Figure 1. World fossil fuel energy consumption per capita, based on data of BP’s 2022 Statistical Review of World Energy. Politicians cannot possibly admit that today’s world economy is headed for collapse, in a way similar to that of prior civilizations. Instead, they need to provide the illusion that they are in charge. The self-organizing system somehow leads politicians to put forward reasons why the changes ahead might be desirable (to avert climate change), or at least temporary (because of sanctions against Russia). In this post, I will try to try to explain at least a few of the issues involved. [1] Citizens around the world can sense that something is very wrong. It looks like the economy may be headed for a serious recession in the near term. Figure 2. Index of consumer sentiment and news heard of company changes as reported by the University of Michigan Survey of Consumers, based on preliminary indications for August 2022. Consumer sentiment is at an extraordinarily low level, worse than during the 2008-2009 great recession according to a chart (Figure 2) shown on the University of Michigan Survey of Consumers website. According to the same website, nearly 48% of consumers blame inflation for eroding their standard of living. Food prices have risen significantly. Over the past year, the cost of car ownership has escalated, as has the cost of buying or renting a home. The situation in Europe is at least as bad, or worse. Citizens are worried about possibly “freezing in the dark” this winter if electricity generation cannot be maintained at an adequate level. Natural gas supplies, mostly purchased from Russia by pipeline, are less available and high-priced. Coal is also high-priced. Because of the fall of the Euro relative to the US dollar, the price of oil in euros is as high as it was in 2008 and 2012. Figure 3. Inflation-adjusted Brent crude oil price in US dollars and euros, in chart by the US Energy Information Administration, as published in EIA’s August 2022 Short Term Energy Outlook. Many other countries, besides those in the Eurozone, are experiencing low currencies relative to the dollar. Some examples include Argentina, India, Pakistan, Nigeria, Turkey, Japan, and South Korea. China has problems with developers of condominium homes for its citizen. Many of these homes cannot be delivered to purchasers as promised. As a protest, buyers are withholding payments on their unfinished homes. To make matters worse, the prices of condominium homes have started to fall, leading to a loss of value of these would-be investments. All of this could lead to serious problems for the Chinese banking industry. Even with these major problems, central banks in the US, the UK and the Eurozone are raising target interest rates. The US is also implementing Quantitative Tightening, which also tends to raise interest rates. Thus, central banks are intentionally raising the cost of borrowing. It doesn’t take much insight to see that the combination of price inflation and higher borrowing costs is likely to force consumers to cut back on spending, leading to recession. [2] Politicians will avoid talking about possible future economic problems related to inadequate energy supply. Politicians want to get re-elected. They want citizens to think that everything is OK. If there are energy supply problems, they need to be framed as being temporary, perhaps related to the war in Ukraine. Alternatively, any issue that arises will be discussed as if it can easily be fixed with new legislation and perhaps a little more debt. Businesses also want to minimize problems. They want citizens to place orders for their goods and services, without the fear of being laid off. They would like the news media to publish stories saying that any economic dip is likely to be very mild and temporary. Universities don’t mind problems, but they want the problems to be framed as solvable ones that will offer their students opportunities for jobs that will pay well. A near-term, unsolvable predicament is not helpful at all. [3] What is wrong is a physics problem. The operation of our economy requires energy of the correct type and the right quantity. The economy is something that grows through the “dissipation” of energy. Examples of dissipation of energy include the digestion of food to give energy to humans, the burning of fossil fuels, and the use of electricity to power a light bulb. A rise in world energy consumption is highly correlated with growth in the world economy. Falling energy consumption is associated with economic contraction. Figure 4. Correlation between world GDP measured in “Purchasing Power Parity” (PPP) 2017 International $ and world energy consumption, including both fossil fuels and renewables. GDP is as reported by the World Bank for 1990 through 2021 as of July 26, 2022; total energy consumption is as reported by BP in its 2022 Statistical Review of World Energy. In physics terms, the world economy is a dissipative structure, just as all plants, animals and ecosystems are. All dissipative structures have finite lifespans, including the world economy. This finding is not well known because academic researchers seem to operate in ivory towers. Researchers in economic departments aren’t expected to understand physics and how it applies to the economy. In fairness to academia, the discovery that the economy is a dissipative structure did not occur until 1996. It takes a long time for findings to filter through from one department to another. Even now, I am one of a very small number of people in the world writing about this issue. Also, economic researchers are not expected to study the history of the many smaller, more-localized civilizations that have collapsed in the past. Typically, the population of these smaller civilizations increased at the same time as the resources used by the population started to degrade. The use of technology, such as dams to redirect water flows, may have helped for a while, but eventually this was not enough. The combination of declining availability of high quality resources and increasing population tended to leave these civilizations with little margin for dealing with the bad times that can be expected to occur by chance. In many cases, such civilizations collapsed after disease epidemics, a military invasion, or a climate fluctuation that led to a series of crop failures. [4] Many people have been confused by common misunderstandings regarding how an economy really works. [a] Standard economics models foster the belief that the economy can continue to grow without a corresponding increase in energy supply. When economic models are designed with labor and capital being the important inputs, energy supply doesn’t seem to be needed, at all. [b] People seem to understand that legislation capping apartment rents will stop the building of new apartments, but they do not make the same connection with steps taken to hold down fossil fuel prices. If efforts are made to bring down the prices of fossil fuels (such as raising interest rates and adding oil from the US petroleum reserves to increase total oil supply), we need to expect that extraction will be adversely affected. One article reports that Saudi Arabia does not seem to be using recent record profits to quickly raise reinvestment to the level that seemed to be required a few years ago. This suggests that Saudi Arabia needs prices that are quite a bit higher than $100 per barrel in order to take significant steps toward extracting the country’s remaining resources. This would seem to contradict published reserves that, in theory, take current prices into consideration. Reuters reports that Venezuela has reneged on its promise to send more oil to Europe, under an oil for debt deal. It wants oil product swaps instead, since it is lacking in its ability to make finished products from its oil itself. It would take a long run of prices much higher than today’s level for Venezuela to be able to sufficiently invest in infrastructure to do such refining. Venezuela reports the highest oil reserves in the world (303.8 thousand million barrels), even higher than Saudi Arabia’s reported 297.5 thousand million barrels, but neither country can be counted on to take major steps to raise supply. Similarly, there have been reports that US shale drillers are not investing to keep production growing, despite what seem to be sufficiently high prices. There are simply too many issues. The cost of new investment is very high, outside of the already drilled sweet spots. Also, there is no guarantee the price will stay high. There are also supply line issues, such as whether appropriate steel drilling pipes and fracking sand will be available, when needed. [c] Published information suggests that there is a huge amount of fossil fuels remaining to be extracted, given today’s level of technology. If we assume that technology will get better and better, it is easy to believe that any fossil fuel limit is hundreds of years in the future. The way the economy works, the extraction limit is really an affordability issue. If the cost of extraction rises too high, relative to what people around the world have for spendable income, production will stop because demand (in terms of what people can afford) will drop too low. People will tend to cut back on discretionary spending, such as vacation travel and meals in restaurants, cutting back on demand for fossil fuels. [d] How “demand” works is poorly understood. Very often, researchers and the general public assume that demand for energy products will automatically remain high. A surprisingly large share of demand is tied to the need for food, water, and basic services such as schools, roads, and bus service. Poor people require these basics just as much as rich people do. There are literally billions of poor people in the world. If the wages of poor people fall too low relative to the wages of rich people, the system cannot work. Poor people find that they must spend nearly all their income on food, water and housing. As a result, they have little left to pay taxes to support basic governmental services. Without adequate demand from poor people, the prices of commodities tend to fall too low to encourage reinvestment. The majority of fossil fuel use is by commercial and industrial users. For example, natural gas is often used in making nitrogen fertilizer. If the price of natural gas is high, the price of fertilizer will rise higher than farmers are willing to pay for the fertilizer. Farmers will cut back on fertilizer use, reducing yields for their crops. The farmers’ own costs will be lower, but there will be less of the desired crops grown, perhaps indirectly raising overall food prices. This is not a connection that economic modelers build into their models. The lockdowns of 2020 show that governments can indeed ramp up demand (and thus prices) for energy products by sending out checks to citizens. We are now seeing that the approach seems to produce inflation rather than more energy production. Also, countries without energy resources of their own may see their currencies fall with respect to the US dollar. [e] It is not true that energy types can easily be substituted for one another. In energy modeling, such as in calculating “Energy Return on Energy Invested,” a popular assumption is that all energy is substitutable for other energy. This isn’t true, unless a person accounts for all of the details of the transition, and the energy needed to make such a transition possible. For example, intermittent electricity, such as that generated by wind turbines or solar panels, is not substitutable for load-following electricity. Such intermittent electricity is not always available when people need it. Some of this intermittency is very long-term. For example, wind-generated electricity may be low for more than a month at a time. In the case of solar energy, the problem tends to be storing up enough electricity during summer months for use in winter. A naive person might assume that adding a few hours of battery backup would fix intermittency problems, but such a fix turns out to be very inadequate. If people are not to freeze in the dark in winter, longer-term solutions are needed. One standard approach is to use a fossil fuel system to fill in the gaps when wind and solar are not available. The catch, then, is that the fossil fuel system really needs to be a year-around system, with trained staffing, pipelines and adequate fuel storage. A modeler needs to consider the need to build a whole double system instead of a single system. Because of intermittency issues, electricity from wind and solar only substitute for fuels (coal, natural gas, uranium) that operate our current system. Publications often talk about the cost of intermittent electricity being at “grid parity” when its temporary cost seems to match the cost of grid electricity, but this is matching “apples and oranges.” The cost comparison needs to be in comparison to the average cost of fuel for plants producing electricity, rather than to electricity prices. Another popular assumption is that electricity can be substituted for liquid fuels. For example, in theory, every piece of farm equipment could be redesigned and rebuilt to be based on electricity, rather than diesel, which is typically used today. The catch is that there would need to be an enormous number of batteries built and eventually disposed of for this transition to work. There would need also need to be factories to build all this new equipment. We would need an international trade system operating extraordinarily well, to find all the raw materials. Likely, there would still not be enough raw materials to make the system work. [f] There is a great deal of confusion about expected oil and other energy prices, as an economy reaches energy limits. This issue is closely related to [4][d], with respect to the confusion about how energy demand works. A common assumption among analysts is that “of course” oil prices will rise, as limits are approached. This assumption is based on the standard supply and demand curve used by economists. Figure 5. Standard economic supply and demand curve from Wikipedia. Description of how this curve works: The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product. The issue is that the availability of inexpensive energy products very much affects demand as well as supply. Jobs that pay well are only available if inexpensive energy products can leverage human labor. For example, surgeons today perform robotic surgery, requiring, at a minimum, a stable source of electricity for each operation. Furthermore, the equipment used in the surgery is created using fossil fuels. Surgeons also use anesthetic products that require fossil fuels. Without today’s fancy equipment, surgeons would not be able to charge nearly as much they do for their services. Thus, it is not immediately obvious whether demand or supply would tend to fall faster, if energy supply should hit limits. We know that Revelation 18:11-13 in the Bible provides a list of a number of commodities, including humans sold as slaves, for which prices dropped very low at the time of the collapse of ancient Babylon. This suggests that at least sometimes during prior collapses, the problem was too low demand (and too low prices), rather than too low supply of energy products. [5] The International Energy Agency and politicians around the world have recommended a transition to the use of wind and solar to try to prevent climate change for quite a few years. This approach seemed to have the approval of both those concerned about too much burning of fossil fuels causing climate change and those concerned about too little fossil fuel energy causing economic collapse. A rough estimate of what the decline in energy supply might look like under the rapid shift to renewables proposed by politicians is shown in Figure 6. Figure 6. Estimate by Gail Tverberg of World Energy Consumption from 1820 to 2050. Amounts for earliest years based on estimates in Vaclav Smil’s book Energy Transitions: History, Requirements and Prospectsand BP’s 2020 Statistical Review of World Energy for the years 1965 to 2019. Energy consumption for 2020 is estimated to be 5% below that for 2019. Energy for years after 2020 is assumed to fall by 6.6% per year, so that the amount reaches a level similar to renewables only by 2050. Amounts shown include more use of local energy products (wood and animal dung) than BP includes. If a person understands the connection between energy consumption and the economy, such a rapid drop in energy supply looks like something that would likely be associated with economic collapse. The goal of politicians seems to be to keep citizens from understanding how awful the situation really is by reframing the story of the decline in energy supply as something politicians and economists have chosen to do, to try to prevent climate change for the sake of future generations. The rich and powerful can see this change as a good thing if they themselves can profit from it. When there is not enough energy, the physics of the situation tends to lead to increasing wage and wealth disparities. Wealthy individuals see this outcome as a good thing: They can perhaps personally profit. For example, Bill Gates has amassed about 270,000 acres of farmland in the United States, including newly purchased farmland in North Dakota. Furthermore, politicians see that they can have more control over populations if they can direct citizens in a way that will use less energy. For example, bank accounts can be linked to some type of social credit score. Politicians will explain that this is for people’s own good–to prevent the spread of disease or to prevent undesirables from using too much of the available resources. One way of dramatically reducing energy consumption is by mandating shutdowns in an area, purportedly to prevent the spread of Covid-19, as China has been doing recently. Such shutdowns can be explained as being needed to stop the spread of disease. These shutdowns can also help hide other problems, such as not having enough fuels to prevent rolling blackouts of electricity. [6] We are living in a truly unusual time, with a major energy problem being hidden from view. Politicians cannot tell the world how bad the energy situation really is. The problem with near-term energy limits has been known since at least 1956 (M. King Hubbert) and 1957 (Hyman Rickover). The problem was confirmed in the modeling performed for the 1972 book, The Limits to Growth by Donella Meadows and others. Most high-level politicians are aware of the energy supply issue, but they cannot possibly talk about it. Instead, they choose to talk about what would happen if the economy were allowed to speed ahead without limits, and how bad the consequences of that might be. Militaries around the world are no doubt well aware of the fact that there will not be enough energy supplies to go around. This means that the world will be in a contest for who gets how much. In a war-like setting, we should not be surprised if communications are carefully controlled. The views we can expect to hear loudly and repeatedly are the ones governments and influential individuals want ordinary citizens to hear. Tyler Durden Wed, 08/24/2022 - 21:00.....»»

Category: blogSource: zerohedgeAug 24th, 2022

Futures Flat After Hawkish Fed Comments, Dollar Ascent Resumes

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

Category: blogSource: zerohedgeAug 24th, 2022

ATRenew Inc. Reports Unaudited Second Quarter 2022 Financial Results

SHANGHAI, Aug. 24, 2022 /PRNewswire/ -- ATRenew Inc. ("ATRenew" or the "Company") (NYSE:RERE), a leading technology-driven pre-owned consumer electronics transactions and services platform in China, today announced its unaudited financial results for the second quarter ended June 30, 2022.  Second Quarter 2022 Highlights Total net revenues grew by 14.9% to RMB2,145.7 million (US$320.3 million) from RMB1,867.7 million in the second quarter of 2021. Loss from operations was RMB168.2 million (US$25.1 million), compared to RMB507.3 million in the second quarter of 2021. Adjusted loss from operations (non-GAAP)[1] was RMB42.3 million (US$6.3 million) compared to an adjusted loss from operations of RMB51.0 million in the second quarter of 2021. Total Gross Merchandise Volume ("GMV[2]") increased by 10.3% to RMB8.6 billion from RMB7.8 billion in the second quarter of 2021. GMV for product sales increased by 15.8% to RMB2.2 billion from RMB1.9 billion in the second quarter of 2021. GMV for online marketplaces increased by 8.5% to RMB6.4 billion from RMB5.9 billion in the second quarter of 2021. Number of consumer products transacted[3] remained flat at 7.8 million compared to the second quarter of 2021. [1] See "Reconciliations of GAAP and Non-GAAP Results" for more information. [2] "GMV" represents the total dollar value of goods distributed to merchants and consumers through transactions on the Company's platform in a given period for which payments have been made, prior to returns and cancellations, excluding shipping cost but including sales tax. [3] "Number of consumer products transacted" represents the number of consumer products distributed to merchants and consumers through transactions on the Company's PJT Marketplace, Paipai Marketplace and other channels the Company operates in a given period, prior to returns and cancellations, excluding the number of consumer products collected through AHS Recycle; a single consumer product may be counted more than once according to the number of times it is transacted on PJT Marketplace, Paipai Marketplace and other channels the Company operates through the distribution process to end consumer. Mr. Kerry Xuefeng Chen, the Founder, Chairman, and Chief Executive Officer of ATRenew, commented, "Despite the challenges posed by the COVID-19 resurgence, our quarterly revenue surpassed the guidance we provided, as our team proactively adjusted our operations to adapt to changes. Although our business is facing short-term headwinds from the pandemic, we firmly believe that the demand for electronic device recycling, trade-in, and other value-added services will grow concurrently with the long-term development of the circular economy in China. Going forward, we will continue to focus on executing our city-level integration strategy while constantly increasing the penetration of our recycling offerings. At the same time, we will maintain our investment in automation to improve cost efficiency. Furthermore, we will increase strategic investment in category expansion and corresponding capabilities while continuing to provide consumers with more diverse and convenient recycling services." Mr. Rex Chen, the Chief Financial Officer of ATRenew, added, "The pandemic has disrupted domestic consumption and adversely impacted our self-operated store business as well as marketplace transactions. Facing such challenges, we responded nimbly by adjusting our operating strategy and implementing cost control measures. As a result, our losses narrowed compared with the same period of last year. Since June, when cities including Shanghai and Beijing resumed normal production and daily life, our self-operated recycling and trade-in businesses went on a visible path to recovery. In addition, as of June 30, 2022, we have sufficient cash reserves to support our business in the face of a dynamic operating environment. Looking ahead, we plan to tap into new categories and further generate synergies from our city-level integration strategy. We look forward to expanding our market share and delivering long-term value to shareholders and society." Second Quarter 2022 Financial Results REVENUE Total net revenues increased by 14.9% to RMB2,145.7 million (US$320.3 million) from RMB1,867.7 million in the same period of 2021. Net product revenues increased by 15.6% to RMB1,854.1 million (US$276.8 million) from RMB1,603.4 million in the same period of 2021. The increase was primarily attributable to an increase in the sourcing volume and the corresponding sales of pre-owned consumer electronics through Paipai Marketplace and the Company's overseas channels. Net service revenues increased by 10.3% to RMB291.6 million (US$43.5 million) from RMB264.3 million in the same period of 2021. The increase was primarily due to the increases in transaction volume and monetization capability of PJT Marketplace. OPERATING COSTS AND EXPENSES Operating costs and expenses decreased by 2.2% to RMB2,327.4 million (US$347.5 million) from RMB2,379.4 million in the same period of 2021. Merchandise costs increased by 18.5% to RMB1,653.8 million (US$246.9 million) from RMB1,395.4 million in the same period of 2021. The increase was primarily due to the growth in product sales. Fulfillment expenses decreased by 0.1% to RMB275.2 million (US$41.1 million) from RMB275.5 million in the same period of 2021. The decrease was primarily due to the decrease of share-based compensation expenses as the Company recognized more expenses with IPO condition in the same period of last year which was offset by the increases in operation center related expenses and personnel cost which were in line with the Company's business growth. Selling and marketing expenses decreased by 7.2% to RMB293.4 million (US$43.8 million) from RMB316.3 million in the same period of 2021. The decrease was primarily due to (i) a decrease in sales promotion and coupon expenses as a cost control measure during the resurgence of the COVID-19 variants; and (ii) the decrease of share-based compensation expenses as the Company recognized more expenses with IPO condition in the same period of last year. General and administrative expenses decreased by 85.4% to RMB45.2 million (US$6.8 million) from RMB310.3 million in the same period of 2021. The decrease was primarily due to the decrease of share-based compensation expenses as the Company recognized more expenses resulting from share-based awards granted with an IPO condition in the second quarter of 2021. Technology and content expenses decreased by 27.1% to RMB59.7 million (US$8.9 million) from RMB81.9 million in the same period of 2021. The decrease was primarily due to the decrease in the recognition of share-based compensation expenses resulting from options granted to employees with an IPO condition compared to the second quarter of 2021. LOSS FROM OPERATIONS Loss from operations decreased by 66.8% to RMB168.2 million (US$25.1 million) from RMB507.3 million in the same period of 2021. Adjusted loss from operations (non-GAAP), excluding amortization of intangible assets and deferred cost resulting from assets and business acquisitions and recognition of share-based compensation expenses resulting from options and restricted stock units granted to employees, decreased by 17.1% to RMB42.3 million (US$6.3 million) from RMB51.0 million in the same period of 2021. NET LOSS Net loss was RMB125.3 million (US$18.7 million), compared to RMB505.7 million in the same period of 2021. Adjusted net loss (non-GAAP)[1] was RMB13.2 million (US$2.0 million), compared to RMB59.7 million in the same period of 2021. BASIC AND DILUTED NET LOSS PER ORDINARY SHARE Basic and diluted net loss per ordinary share were RMB0.78 (US$0.12), compared to RMB13.47 in the same period of 2021. Adjusted basic and diluted net loss per ordinary share (non-GAAP)[1] were RMB0.08 (US$0.01), compared to RMB1.59 in the same period of 2021. CASH AND CASH EQUIVALENTS, RESTRICTED CASH, SHORT-TERM INVESTMENTS AND FUNDS RECEIVABLE FROM THIRD PARTY PAYMENT SERVICE PROVIDERS Cash and cash equivalents, restricted cash, short-term investments and funds receivable from third party payment service providers increased to RMB2,594.1 million (US$387.3 million) as of June 30, 2022, from RMB2,421.9 million as of December 31, 2021. Business Outlook For the third quarter of 2022, the Company currently expects its total revenues to be between RMB2,500.0 million and RMB2,550.0 million. This forecast only reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change. Environment, Social, and Governance On June 9, 2022, ATRenew published its second annual environmental, social, and governance ("ESG") report (the "Report") incorporating the Task Force on Climate-related Financial Disclosures recommendations, a framework set by the G20's Financial Stability Board, for the first time. In the Report, the Company explores the climate-change-related opportunities and challenges it faces in its operation and reuse of pre-owned electronic devices through the perspectives of governance, strategy, risk management, and metrics and targets. In order to help quantify its commitment to ESG, the Company has leveraged the Circular Footprint Formula for the first time to disclose its contribution of 464,000 metric tons of green-house gas emission reductions through reusing pre-owned mobile phones in 2021. Recent Development On December 28, 2021, ATRenew announced a share repurchase program, effective immediately, to repurchase up to US$100 million of its shares over a twelve-month period. During the second quarter 2022, the Company repurchased 2,881,811 American depositary shares ("ADSs") in the open market at an average price of US$3.14 per ADS, with a total cash consideration of US$9.0 million. As at the end of the second quarter 2022, the Company repurchased a total of 7,635,651 ADSs for approximately US$31.5 million under its share repurchase program. Conference Call Information The Company's management will hold a conference call on Wednesday, August 24, 2022, at 08:00 A.M. Eastern Time (or 08:00 P.M. Beijing Time on Wednesday, August 24, 2022) to discuss the financial results. Listeners may access the call by dialing the following numbers:  International: 1-412-317-6061 United States Toll Free: 1-888-317-6003 Mainland China Toll Free: 4001-206115 Hong Kong Toll Free: 800-963976 Access Code: 7639205 The replay will be accessible through August 31, 2022, by dialing the following numbers: International: 1-412-317-0088 United States Toll Free: 1-877-344-7529 Access Code: 6668246 A live and archived webcast of the conference call will also be available at the Company's investor relations website at About ATRenew Inc. Headquartered in Shanghai, ATRenew Inc. operates a leading technology-driven pre-owned consumer electronics transactions and services platform in China under the brand ATRenew. Since its inception in 2011, ATRenew has been on a mission to give a second life to all idle goods, addressing the environmental impact of pre-owned consumer electronics by facilitating recycling and trade-in services, and distributing the devices to prolong their lifecycle. ATRenew's open platform integrates C2B, B2B, and B2C capabilities to empower its online and offline services. Through its end-to-end coverage of the entire value chain and its proprietary inspection, grading, and pricing technologies, ATRenew sets the standard for China's pre-owned consumer electronics industry. Exchange Rate Information This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.6981 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of June 30, 2022. Use of Non-GAAP Financial Measures The Company also uses certain non-GAAP financial measures in evaluating its business. For example, the Company uses adjusted loss from operations, adjusted net loss and adjusted net loss per ordinary share as supplemental measures to review and assess its financial and operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Adjusted loss from operations is loss from operations excluding the impact of share-based compensation expenses and amortization of intangible assets and deferred cost resulting from assets and business acquisitions. Adjusted net loss is net loss excluding the impact of share-based compensation expenses, amortization of intangible assets and deferred cost resulting from assets and business acquisitions, fair value change in warrant liabilities and tax effects of amortization of intangible assets and deferred cost resulting from assets and business acquisitions. Adjusted net loss per ordinary share is adjusted net loss attributable to ordinary shareholders divided by weighted average number of shares used in calculating net loss per ordinary share. The Company presents non-GAAP financial measures because they are used by the Company's management to evaluate the Company's financial and operating performance and formulate business plans. The Company believes that adjusted loss from operations and adjusted net loss help identify underlying trends in the Company's business that could otherwise be distorted by the effect of certain expenses that are included in loss from operations and net loss. The Company also believes that the use of non-GAAP financial measures facilitates investors' assessment of the Company's operating performance. The Company believes that adjusted loss from operations and adjusted net loss provide useful information about the Company's operating results, enhance the overall understanding of the Company's past performance and future prospects and allow for greater visibility with respect to key metrics used by the Company's management in its financial and operational decision making. The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP financial measures is that they do not reflect all items of income and expense that affect the Company's operations. Share-based compensation expenses, amortization of intangible assets and deferred cost resulting from assets and business acquisitions, fair value change in warrant liabilities and tax effects of amortization of intangible assets and deferred cost resulting from assets and business acquisitions have been and may continue to be incurred in the Company's business and is not reflected in the presentation of non-GAAP financial measures. Further, the non-GAAP measures may differ from the non-GAAP measures used by other companies, including peer companies, potentially limiting the comparability of their financial results to the Company's. In light of the foregoing limitations, the non-GAAP financial measures for the period should not be considered in isolation from or as an alternative to loss from operations, net loss, and net loss attributable to ordinary shareholders per share, or other financial measures prepared in accordance with U.S. GAAP. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, which should be considered when evaluating the Company's performance. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "Reconciliations of GAAP and Non-GAAP Results." Safe Harbor Statement This press release contains statements that may constitute "forward-looking" statements pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to" and similar statements. Among other things, quotations in this announcement, contain forward-looking statements. ATRenew may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about ATRenew's beliefs, plans and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: ATRenew's strategies; ATRenew's future business development, financial condition and results of operations; ATRenew's ability to maintain its relationship with major strategic investors; its ability to provide facilitate pre-owned consumer electronics transactions and provide relevant services; its ability to maintain and enhance the recognition and reputation of its brand; general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in ATRenew's filings with the SEC. All information provided in this press release is as of the date of this press release, and ATRenew does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Investor Relations Contact In China:ATRenew Inc.Investor RelationsEmail: In the United States:ICR LLC.Email: atrenew@icrinc.comTel: +1-212-537-0461   ATRENEW INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share and otherwise noted) As of December 31, As of June 30, 2021 2022 RMB RMB US$ ASSETS Current assets: Cash and cash equivalents 1,356,342 1,215,953 181,537 Restricted cash 150,000 — — Short-term investments 510,467 1,030,682 153,877 Amount due from related parties, net 410,088 139,043 20,759 Inventories 478,751 673,444 100,543 Funds receivable from third party payment service providers 405,095 347,468 51,876 Prepayments and other receivables, net 840,102 697,237 104,095 Total current assets 4,150,845 4,103,827 612,687 Non-current assets: Long-term investments 241,527 234,457 35,004 Property and equipment, net 103,843 115,467 17,239 Intangible assets, net 1,075,811 913,693 136,411 Goodwill 1,803,415 1,819,926 271,708 Other non-current assets 127,321 91,234 13,619 Total non-current assets 3,351,917 3,174,777 473,981 TOTAL ASSETS 7,502,762 7,278,604 1,086,668 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings 94,999 146,370 21,852 Accounts payable 41,311 66,894 9,987 Contract liabilities 211,964 304,867 45,516 Accrued expenses and other current liabilities 296,627 387,508 57,853 Accrued payroll and welfare.....»»

Category: earningsSource: benzingaAug 24th, 2022

Futures Plunge, Yields Roar Higher As Bear-Market Rally Slams Brick Wall On $2.1 Trillion Op-Ex

Futures Plunge, Yields Roar Higher As Bear-Market Rally Slams Brick Wall On $2.1 Trillion Op-Ex The combination of plunging bitcoin prices, the (latest) bursting of the meme bubble courtesy of Ryan Cohen's historic pump and dump, rising Fed warnings that another 75bps rate hike is coming amid fears next week's Jackson Hole meeting will be a hawkano, rising oil prices and TSY yields at the highest level in a month, and mix it all in on a day when there is absolutely no liquidity (one day after the lowest volume of the year) as $2.1 trillion in options expire... ... and you get a perfect storm that has sent futures tumbling 40 points or 0.93%, but another confirmation that BofA's Michael Hartnett is the best strategist on Wall Street (while his peers are nothing more than broken records). Nasdaq 100 futures slumped 1.2% by 7.30 a.m. in New York as the yield on the 10-year Treasury climbed about 5 basis points to 2.95%, the highest level in one month amid divergent signals from Fed officials over the size of the next interest-rate hike. The tech-heavy index is set to end the week lower after four weeks of gains; the Nasdaq 100 underperformed this week in the face of rising bond yields as higher rates weigh on the present value of future profits, hurting growth stocks with the highest valuations. The dollar headed for the biggest weekly rally since June 2021 and bitcoin plunged by $2,000 overnight, crashing below $21,500. In premarket trading, Bed Bath & Beyond shares crashed 45%, after plunging more than 20% during the regular session, after top investor Ryan Cohen pulled the biggest pump and dump in history. Cryptocurrency-exposed stocks like Coinbase and Riot Blockchain also slid amid a broad selloff across digital tokens.  Coinbase (COIN US) fell 7%, Marathon Digital (MARA US) -11%, Riot Blockchain (RIOT US) -9%. Here are other notable premarket movers: Applied Materials (AMAT US) rose as much as 1.4%, with analysts positive on the chip equipment maker’s results, saying it saw a strong performance amid a tough macroeconomic backdrop, though some brokers nudged down their price targets. Morgan Stanley analysts cut their price target on Meta Platforms (META US), saying the social media giant’s shift toward Reels and declining user-engagement rates pose a risk to its revenue growth. The stock was down 1.7%. (BILL US) surged 21% after fiscal 4Q results from the infrastructure software firm that analysts said were “perfect” alongside guidance that “blew away” expectations. StoneCo (STNE US) dropped 9% after the Brazilian payments firm reported adjusted net for the second quarter that missed the average analyst estimate. Traders have also turned cautious toward risk assets ahead of the Fed’s annual symposium next week in Jackson Hole. Beyond that, inflation and employment figures will also be closely monitored before the central bank’s highly anticipated interest-rate decision in September. Additionally, on Thursday two Fed voting members - St. Louis’s James Bullard and Kansas City’s Esther George - emphasized that the US central bank will continue to raise interest rates until inflation eased back to its 2% target although their views diverged on how big the Fed’s September move should be. This is notable since traders had continued piling into stocks and bonds, completely ignoring the Fed's repeated jawboning and dismissing the risk of a more aggressive Fed as they expect it to ease the pace of rate hikes while inflation pulls back from its peak, according to Bank of America strategists. US stocks saw $9.2 billion of inflows in the week through Aug. 17 BofA's Michael Hartnett wrote in a note. “The Fed would, in order to get inflation down to the 2% target, have to crush the economy,” said Ann-Katrin Petersen, a senior investment strategist at BlackRock Investment Institute. In order to bolster growth, the Fed will at some point “accept to live with inflation. This dovish pivot is not likely in the very near term, in contrast to what markets seem to be expecting right now, but this dovish pivot may come in 2023,” she told Bloomberg Television. In Europe, the Stoxx 50 fell 0.8%. FTSE 100 outperforms, dropping 0.2%, Travel, real estate and autos are the worst-performing sectors. Italy's FTSE MIB lags, dropping 1.4%.  after a right-wing coalition led by Brothers of Italy party was seen reaching 49.8% level in voting intentions for Italy’s lower house of parliament for September election, according to a Tecne poll on August 18. Center-left bloc at 30%; Five Star Movement at 10.2%; Centrist coalition at 4.8%; Other parties at 5.2%. Here are some of the biggest European movers today: Just Eat Takeaway shares soar as much as 38% in Amsterdam trading, the most ever, after the food delivery firm agreed to sell its 33% stake in iFood for as much as EU1.8b Holmen rises as much as 5.3% on 2Q earnings that beat consensus on adjusted operating profit, net sales and operating profit. The report was strong, but expected, Jefferies writes Kingspan gains as much as 8.6% after 1H results from the Irish insulation supplier that Goodbody says were ahead of expectations U-blox surges as much as 16% after the Swiss semiconductor company lifted FY revenue and Ebit outlooks that it previously raised in May, citing a record- high order book Mobilezone rises as much as 5.3%, the most intraday since March, as analysts note the Swiss firm’s robust 1H earnings and confirmation of guidance in the face of powerful FX headwinds Joules plunges as much as 41% after the UK apparel retailer forecast an FY adjusted pretax loss significantly bigger than market views. Liberum cut its rating on the stock to hold from buy Bachem drops as much as 3.9% after Baader published a note saying the company’s first-half results due on Aug. 25 may be a trigger for a downward revision to consensus falls as much as 12% after the Polish distributor of tires, tools and bikes reported a 70% y/y drop in 2Q net income due to higher costs and lower sales of tires Hypoport declines as much as 12% after Metzler downgrades to sell on a slowdown in growth for its Europace unit and as the company’s insurance application “fails to convince” at this stage Earlier in the session, Asian stocks headed for their first weekly drop in five, as renewed concerns about growth in China -- the region’s biggest economy -- damped investor sentiment.   The MSCI Asia Pacific Index retreated as much as 0.7%, set for a decline of more than 1% this week. Meanwhile, a gauge of China stocks listed in Hong Kong posted its worst week in August, losing 2%. Shares in South Korea and India were among the region’s worst performers Friday. Concerns about China’s growth resurfaced as the country planned more fiscal stimulus over a gloomy outlook and as banks were expected to lower borrowing costs next week. Goldman Sachs, Nomura and Citi further cut their growth estimates for China’s gross domestic product earlier this week as a power supply crunch adds more uncertainty to the outlook. “Regulatory issues and sluggish economic recovery are behind the weak performance of stocks in Hong Kong as many of the stocks listed there are related to the real estate sector and regulations,” said Kim Kyung Hwan, a China equity strategist at Hana Financial Investment in Seoul. “There are lingering concerns that China’s economic fundamentals may take an L-shaped recovery and the government’s intervention in the property crisis may be delayed,” he added.  Improved appetite for haven assets was also reflected in the dollar, which rose to the highest in nearly a month following a Bloomberg News report that China’s President Xi Jinping and Russia’s leader Vladimir Putin will attend the G-20 summit in Indonesia later this year.  All but two sectoral indexes declined in Asia’s key benchmark, with health care and financials the biggest losers. Samsung Electronics and NetEase were among the biggest drags on the measure, with the latter tumbling on profit-taking following earnings results.  Caution also prevailed with next week expected to be the busiest period for quarterly earnings announcements from MSCI Asia Pacific Index members. Chinese tech giants Meituan and Inc. are among the more than 300 companies set to release results In FX, the Bloomberg Dollar Spot Index advanced for a third day and the greenback strengthened against all of its Group-of-10 peers. The pound fell to a one-month low while the euro was steady against the dollar. UK retail sales volumes unexpectedly rose 0.3% last month, but the cost of those sales increased more rapidly by 1.3%. UK consumer confidence fell to a record low as concerns about a recession increased and soaring inflation tightened a squeeze on household finances. GfK said its gauge of confidence declined 3 points to minus 44 in August. The New Zealand dollar was weighed by comments from RBNZ Governor Adrian Orr that the central bank would “retain optionality” over the pace of future rate increases. The yen is headed for its biggest weekly decline in two months as hawkish comments from Fed officials spurred bets for another outsized rate hike. Options traders are finally betting on a rise in the dollar-yen currency pair after staying bearish for two months, as they await cues from the next week’s Jackson Hole symposium by the Federal Reserve. In rates, Treasuries held losses into early US session, leaving yields cheaper by up to 6bp across front-end of the curve, following wider gilt-led selloff after stronger-than-forecast UK retail sales figures in July. US yields cheaper by 6bp to 3.5bp across the curve with front- end led losses flattening 2s10s, 5s30s by around 1bp each; 10- year yields around 2.95%, trading 8.5bp and 7bp richer in the sector vs. gilts and bunds. Bunds and Italian bonds declined for a fourth day, the longest streak since June and July respectively, as 125bps of ECB hikes were briefly priced by year-end, or two half-point increases.  Money markets ramped up ECB tightening wagers following hawkish Fed talk and stronger-than-forecast UK retail sales figures in July.  Peripheral spreads widen to Germany with 10y BTP/Bund adding 2.3bps to 224.3bps. WTI trades within Thursday’s range, falling 1.4% to trade around $89. Spot gold falls roughly $4 to trade around $1,754/oz. Spot silver loses 1.4% around $19. Most base metals trade in the red; LME tin falls 1.2%, underperforming peers. LME nickel outperforms, adding 0.8%. Luckily, there is nothing on today's calendar. Central bank speakers include Richmond Fed President Barkin, and earnings releases include Deere & Company. Market Snapshot S&P 500 futures down 0.9% to 4,250.00 STOXX Europe 600 down 0.6% to 437.98 MXAP down 0.6% to 161.10 MXAPJ down 0.5% to 524.13 Nikkei little changed at 28,930.33 Topix up 0.2% to 1,994.52 Hang Seng Index little changed at 19,773.03 Shanghai Composite down 0.6% to 3,258.08 Sensex down 1.3% to 59,517.87 Australia S&P/ASX 200 little changed at 7,114.46 Kospi down 0.6% to 2,492.69 German 10Y yield little changed at 1.18% Euro little changed at $1.0084 Gold spot down 0.3% to $1,752.91 U.S. Dollar Index up 0.19% to 107.69 Top Overnight News from Bloomberg China’s efforts to stomp out a lucrative carry trade by banks in the nation’s bond market and divert cash to the real economy is meeting with limited success. The spread between the 10-year yield and the overnight borrowing rate remained around 140 basis points, even though the latter rose for four straight days amid the central bank’s cash withdrawals. That means banks can still make a profit by funding from each other in the interbank market and purchasing government bonds A larger-than-forecast £4.9 billion ($5.8 billion) UK budget deficit in July took the total for 2022-23 so far to £55 billion pounds -- £3 billion more than officials forecast in March Investors continued piling into stocks and bonds, dismissing the risk of a more aggressive Federal Reserve as they expect it to ease the pace of rate hikes while inflation pulls back from its peak, according to Bank of America Corp. strategists. Global equity funds attracted $7.9 billion in the week through Aug. 17, strategists led by Michael Hartnett wrote in a note, citing EPFR Global data The right-wing coalition led by Giorgia Meloni’s Brothers of Italy party neared a landmark level of support, registering 49.8% of voter approval for Italy’s Sept. 25 election, in a survey by the Tecne research institute A more detailed look at global markets courtesy of Newsquawk APAC stocks lacked firm direction despite the mild tailwinds from the US where sentiment was somewhat underpinned by mostly encouraging data. ASX 200 just about kept afloat amid outperformance in energy on recent oil price gains although the upside was limited by weakness in financials and amid another influx of earnings results. Nikkei 225 returned to flat territory beneath the 29k level after early momentum petered out. Hang Seng and Shanghai Comp were indecisive amid a lack of macro drivers and with newsflow dominated by earnings, while markets await a cut to the benchmark lending rates early next week. Top Asian News Indonesia May Impose Nickel Export Tax in 2022, Jokowi Says H.K. Home Prices Could Fall 10% After HSBC, StanChart Hike Rates Hong Kong Monetary Authority Deputy CEO Edmond Lau Resigns Moody’s Reviews Huarong AMC’s Ratings for Downgrade Some Country Garden, CIFI USD Notes Set for Record Weekly Gains Modi to Be Challenged by Local Leaders in 2024 India Elections European bourses are under modest pressure, Euro Stoxx 50 -0.6%, in a session of limited newsflow with focus on continuing hawkish price action. Stateside, given the hawkish action, NQ -1.0% is the incremental underperformer ahead of commentary from 2024 voter Barkin. China's CPCA forecast shows August passenger car sales lifting MM to 1.88mln (prev. 1.77mln), latest COVID outbreak is expected to have a relatively limited impact on the auto market. Deere & Co (DE) Q2 2022 (USD): EPS 6.16 (exp. 6.69), Revenue 14.1bln (exp. 12.78bln); FY view Net 7.0-7.2bln (prev. 7.0-7.4bln, exp. 7.1bln). Top European News Gas Heading for Another Weekly Rise Intensifies Europe’s Pain Germany’s Drive to Replace Russian Gas Can’t Rely on Canada Germany Risks a Factory Exodus as Energy Prices Bite Hard Food Banks for Pets Show UK Inflation Reaching Cats and Dogs Londoners Wake to Transit Headaches as Strike Hobbles City FX Dollar continues to reign as risk sentiment sours again and yields ratchet higher, DXY up to 107.930 and close to mid-July high just shy of 108.000 Euro remains relatively resistant amidst further EGB retracement and strong Eurozone inflation data, EUR/USD sub-1.0100, but above 1.0050. No retail therapy for Sterling as wider UK economic worries weigh on the Pound, Cable under 1.1900 and EUR/GBP eyeing 0.8500. NZ trade data fails to give Kiwi a lift as deficit remains wide, NZD/USD hovering above 0.6200. Yen shrugs off Japanese CPI as UST-JGB spreads widen further, USD/JPY touches 136.76 before waning. Loonie and Nokkie undermined by softer oil prices as former awaits Canadian retail sales for independent impetus, USD/CAD 1.2950+, EUR/NOK around 9.8500 Yuan retreats as Moody’s joins list of those downgrading forecasts for Chinese growth this year, USD/CNY over 6.8100 and USD/CNH almost 6.8300 overnight. Fixed Income Only dead cat bounces in debt as hawkish Central Bank and hot inflation vibes persist. Bunds through trendline support to 152.61 and 10 year yield above 1.15% Fib resistance. Gilts probing 113.00 vs 113.45 at best and T-note towards base of 118-11/118-29+ range . Commodities Under broad pressure given USD strength with crude curtailed as it awaits another JCPOA response; benchmarks lower by circa. USD 1.50/bbl, vs USD 7/bbl ranges for the week. Spot gold clipped by the USD, though only by just over USD 5/oz compared to weekly parameters of over USD 50/oz; broader metals in-fitting in limited newsflow. China's daily coal output +19.4% YY, between August 1st and 17th, via the Energy Administration. US Event Calendar Nothing major scheduled DB's Tim Wessel concludes the overnight wrap Filling in again from Stateside much like the rumored involvement of yank Elon Musk in the English product Manchester United. The metaphor does not have much life beyond that, however. Despite what you may have heard, I am not a billionaire nor do I have any designs on going to space, while on the product side, the EMR has a chance of success this year. Taking the developments by time zones. In Europe, yields crept slightly higher on the now familiar formula of tighter expected ECB policy and concerns about energy pricing. On the former, in a Reuters interview, the ECB’s Schnabel said that “The concerns we had in July have not been alleviated... I do not think this outlook has changed fundamentally.” She also said that “I would not exclude that, in the short run, inflation is going to increase further”. The ECB’s Kazaks also echoed this, saying that “we will continue to increase interest rates” so as to prevent inflation becoming entrenched. Markets continue to fully price in another 50bp move at the next meeting in September, with 52bps currently priced in, so some probability of an even larger hike. On the energy front, price pressures continue to get worse, where natural gas futures closed at a record high of €241 per megawatt-hour, with year-ahead German power registering a fresh record of their own, closing at €540 per megawatt-hour. In line with what we’ve covered, Germany is offering fiscal support to alleviate price pressures, as German Chancellor Scholz announced a temporary VAT cut on natural gas from 19% to 7%, which will apply for 18 months from October 1. It’s worth plugging our team’s latest gas supply monitor again, link here to stay on top of the latest. All told, the yield move was rather modest, with 10yr bunds +1.9bps higher, outpacing increases in OATs (+1.7bps) and BTPs (+0.4bps), which helped support risk assets on the day. For their part, equities also posted a modest gain, as the STOXX 600 climbed +0.39%, the DAX gained +0.52%, and the CAC increased +0.45%. In the US, it was another day of mixed, but supportive data on balance. Initial jobless claims fell to 250k (vs. 264k expected). Continuing claims, which our US econ team has identified as one of the best leading indicators for recessionary risk, also came in below expectations at 1437k (vs. 1455k). Reminder, our team has found that when the rolling 4-week average of continuing claims increases around 11% above the last year’s nadir, near-term recession risk increases. That warning level would be around 1456k, still some ways above the 4-week average of 1413k. Indeed, one need go back to the first week of April to find any individual print, let alone moving average, that has breached 1456k, and that was as claims were still falling, only to hit their lows in late May. Elsewhere in data, the Philadelphia Fed Business Outlook surprised to the upside at 6.2, versus expectations of -5.0 and a prior print of -12.3. On the downside, housing activity continued to be strangled by Fed tightening, with existing home sales falling to a 4.81m pace (vs. 4.86m expectations), their lowest since the summer of 2020’s stilted homebuying season. There was a suite of Fed officials on the tape yesterday. Across speakers, they still sounded a resolute tone around current inflationary ills, but offered different prescriptions for the path of policy going forward. On one end, San Francisco Fed President Daly expressed support for a 50bp hike to the fed funds target range at the September FOMC, with policy rates getting “a little” above 3% by then end of this year, reserving the right to go higher if the data call for that. St. Louis Fed President Bullard played the customary foil, preferring to hike rates 75bps in September, getting policy closer to 4% by year-end. Bullard noted that the Fed “shouldn’t drag out process of raising rates”. Splitting the difference, Kansas City President George noted it was too early to declare victory over inflation, so the case for continued hikes remained strong, even if the Committee had to be mindful of what the lagged impact of tightening may look like, echoing the July meeting minutes. Finally, Minneapolis President Kashkari was ambivalent about the prospects of a soft landing, saying he didn’t know if the Fed could bring inflation back to target without a recession given he couldn’t count on supply side expansion, particularly in the labor market. Like other speakers, he re-emphasized breaking inflation’s back was urgent. In short, nothing explicitly new from Fed speakers, so it holds that Chair Powell’s Jackson Hole remarks next Friday, August 26, (confirmed by the Fed yesterday), along with the inflation and employment data before the September FOMC are the key events for policy over the near-term. Yields on 2yr Treasuries fell -8.8bps, while increased +2.7bps, while 10yr yields were -1.5bps lower, driving the 2s10s yield curve to its steepest level in more than two weeks at -32bps. Like their European counterparts, US equities were similarly subdued, with the S&P 500 gaining +0.23%. Energy shares climbed +2.53%, following a +3.14% increase in Brent crude oil, but otherwise sector dispersion was rather narrow between Tech gaining +0.49% and Real Estate lagging at -0.75%. On the war in Ukraine, talks with President Zelenskiy, UN Secretary General Guterres, and Turkish President Erdogan were staged in Lviv. Following the meeting, Turkey is set to evaluate the talks with President Putin, cementing Turkeys status as the key interlocutor between Ukraine and Russia. Reports from the meeting suggested diplomatic progress seemed possible, and our team took it as a positive that both sides appeared to be open to indirect communication, though much work remains. Asian stock markets are mixed this morning following a quiet US session. The Nikkei (+0.10%) and the Hang Seng (+0.46%) are trading in positive territory while the Shanghai Composite (-0.28%), the CSI (-0.27%) and the Kospi (-0.10%) are trading lower. US equity futures are likewise sleepy, with the S&P 500 (-0.08%) and NASDAQ (-0.08%) flitting around zero. Japan’s headline inflation rose +2.6% y/y in July, in line with market expectations and against a +2.4% rise in June, edging past the Bank of Japan's 2% inflation goal for a fourth straight month. The increase in core CPI (+2.4% y/y from +2.2% in June) was the sharpest in about seven and half years. To the day ahead now, and data releases include UK retail sales and German PPI for July. Central bank speakers include Richmond Fed President Barkin, and earnings releases include Deere & Company. Tyler Durden Fri, 08/19/2022 - 08:02.....»»

Category: blogSource: zerohedgeAug 19th, 2022

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

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

Category: dealsSource: nytAug 12th, 2022

Global Markets Slump With Terrified Traders Tracking Pelosi"s Next Move

Global Markets Slump With Terrified Traders Tracking Pelosi's Next Move Forget inflation, stagflation, recession, depression, earnings, Biden locked up in the basement with covid, and everything else: today's it all about whether Nancy Pelosi will start World War 3 when she lands in Taiwan in 3 hours. US stocks were set for a second day of declines as investors hunkered down over the imminent (military) response by China to Pelosi's Taiwan planned visit to Taiwan, along with the risks from weakening economic growth amid hawkish central bank policy. Nasdaq 100 contracts were down 0.7% by 7:30a.m. in New York, while S&P 500 futures fell 0.6% having fallen as much as 1% earlier. 10Y yields are down to 2.55% after hitting 2.51% earlier, while both the dollar and gold are higher. Elsewhere around the world, Europe's Stoxx 600 fell 0.6%, with energy among the few industries bucking the trend after BP hiked its dividend and accelerated share buybacks to the fastest pace yet after profits surged. Asian stocks slid the most in three weeks, with some of the steepest falls in Hong Kong, China and Taiwan. Among notable movers in premarket trading, Pinterest shares jumped 19% after the social-media company reported second-quarter sales and user figures that beat analysts’ estimates, and activist investor Elliott Investment Management confirmed a major stake in the company. US-listed Chinese stocks were on track to fall for a fourth day, which would mark the group’s longest streak of losses since late-June, amid the rising geopolitical tensions. In premarket trading, bank stocks are lower amid rising tensions between the US and China. S&P 500 futures are also lower, falling as much as 0.9%, while the 10-year Treasury yield falls to 2.56%. Cowen Inc. shares gained as much as 7.5% after Toronto-Dominion Bank agreed to buy the US brokerage for $1.3 billion in cash. Meanwhile, KKR’s distributable earnings fell 9% during the second quarter as the alternative-asset manager saw fewer deal exits amid tough market conditions. Here are some other notable premarket movers: Activision Blizzard (ATVI US Equity) falls 0.6% though analysts are positive on the company’s plans to roll out new video game titles after it reported adjusted second-quarter revenue that beat expectations. While the $68.7 billion Microsoft takeover deal remains a focus point, the company is building out a “robust” pipeline, Jefferies said. Arista Networks (ANET US) analysts said that the cloud networking company’s results were “impressive,” especially given supply-chain constraints, with a couple of brokers nudging their targets higher. Arista’s shares rose more than 5% in US after-hours trading on Monday after the company’s revenue guidance for the third quarter beat the average analyst estimate. Avis Budget (CAR US) saw a “big beat” on low Americas fleet costs and strong performance for its international segment, Morgan Stanley says. The rental-car firm’s shares rose 5.5% in US after-hours trading on Monday, after second-quarter profit and revenue beat the average analyst estimate. Snowflake (SNOW US) falls 5.3% after being cut at BTIG to neutral from buy, citing field checks that show a potential slowdown in product revenue growth in the coming quarters. Clarus Corp. (CLAR US) should continue to see “outsized demand” from the “mega-trend” of people seeking the great outdoors, Jefferies says, after the sports gear manufacturer reported second-quarter sales that beat estimates. Clarus’s shares climbed 9% in US postmarket trading on Monday. Cryptocurrency-exposed stocks are lower in US premarket trading as Bitcoin falls for the third consecutive session as global markets and cryptocurrencies remain pressured over deepening US-China tension. Coinbase (COIN US) falls 2.3% while Marathon Digital (MARA US) drops 3.3%. Transocean (RIG US) rises 18% in US premarket trading after 2Q Ebitda beat estimates, with other positives including a new contract and a 2-year extension of a revolver. US-listed Chinese stocks are on track to fall for a fourth day, which would mark the group’s longest streak of losses since end-of-June, amid geopolitical tensions related to House Speaker Nancy Pelosi’s expected visit to Taiwan. Alibaba (BABA) falls 2.5% and Baidu (BIDU US) dips 2.7% ZoomInfo Technologies analysts were positive on the software firm’s raised guidance and improved margins, with Piper Sandler saying the firm is “in a class of its own.” The shares rose more than 11% in US after-hours trading, after closing at $37.73. Pelosi is expected to land in Taiwan on Tuesday, the highest-ranking American politician to visit the island in 25 years, a little after 10pm local time evening in defiance of Chinese threats. China, which regards Taiwan as part of its territory, has vowed an unspecified military response to a visit that risks sparking a crisis between the world’s biggest economies. “There is no way people will want to put on risk right now with this potential boiling point,” said Neil Campling, head of tech, media and telecom research at Mirabaud Securities. The potential ramifications of Pelosi’s planned visit “are huge.” The growing tensions are the latest addition to a myriad of challenges facing equity investors going into the second half of the year. Fears of a US recession as the Federal Reserve tightens policy to tame soaring inflation have weighed on risk assets. US manufacturing activity continued to cool in July, with the data highlighting softer demand for merchandise as the economy struggles for momentum. In the off chance we avoid world war, there will be a shallow recession that could start by the end of the year, according to Rupert Thompson, chief investment officer at Kingswood Holdings. Meanwhile, the market is too optimistic about the path of monetary policy and “the risk is the Fed goes further than the markets are building in in terms of hiking,” Thompson said in an interview with Bloomberg Television. Goldman Sachs strategists also said it was too soon for stock markets to fade the risks of a recession on expectations of a pivot in the Fed’s hawkish policy. On the other hand, JPMorgan strategists said the outlook for US equities is improving for the second half of the year on attractive valuations and as the peak in investor hawkishness has likely passed. “Although the activity outlook remains challenging, we believe that the risk-reward for equities is looking more attractive as we move through the second half,” JPMorgan’s Marko Kolanovic wrote in a note dated Aug. 1. “The phase of bad data being interpreted as good is gaining traction, while the call of peak Federal Reserve hawkishness, peak yields and peak inflation is playing out.” Markets are also bracing for commentary on the US interest-rate outlook from Chicago Fed President Charles Evans and St. Louis Fed President James Bullard. In Europe, tech, financial services and travel are the worst-performing sectors. Euro Stoxx 50 falls 0.8%. FTSE 100 is flat but outperforms peers. Here are some of the biggest European movers today: BP shares rise as much as 4.8% on earnings. The oil major’s quarterly results look strong with an earnings beat, dividend hike and increased buyback all positives, analysts say. OCI rises as much as 8.6%, the most since March, on its latest earnings. Analysts say the results are ahead of expectations and the fertilizer firm’s short-term outlook remains robust. Maersk shares rise as much as 3.7% after the Danish shipping giant boosted its underlying Ebit forecast for the full year. Analysts note the boosted guidance is significantly above consensus estimates. Greggs shares rise as much as 4% after the UK bakery chain reported an increase in 1H sales. The 1H results are “solid,” while the start to 2H is “robust,” according to Goodbody. Delivery Hero shares gain as much as 3.8%. The stock is upgraded to overweight from neutral at JPMorgan, which said many of the negatives that have weighed on the firm are starting to turn. Rotork gains as much as 4%, the most since June 24, after beating analyst expectations for 1H 2022. Shore Capital says the company shows “good momentum” in the report. Credit Suisse shares decline as much as 6.4% after its senior debt was downgraded by Moody’s, and its credit outlook cut by S&P, while Vontobel lowered the PT following “disappointing” 2Q earnings. Travis Perkins shares drop as much as 11%, the most since March 2020. Citi says the builders’ merchant’s results are “slightly weaker than expected,” with RBC noting shortfalls in sales and Ebita. DSM shares drop by as much as 4.9% as Citi notes weak free cash flow after company reported adjusted Ebitda for the second quarter up 5.3% with FY22 guidance unchanged. UK homebuilders fall after house prices in the country posted their smallest increase in at least a year, indicating that the property market is starting to cool, with Crest Nichols dropping as much as 5.2%. Wind-turbine stocks fall in Europe after Spain’s Siemens Gamesa cut sales and margin guidance, with Siemens Energy dropping as much as 6.1%, with Vestas Wind Systems down as much as 4.7%. Earlier in the session, Asian stocks fell as traders braced for a potential escalation of US-China tensions given a possible visit by US House Speaker Nancy Pelosi to Taiwan. The MSCI Asia Pacific Index dropped as much as 1.4%, poised for its worst day in five weeks. All sectors, barring real estate, were lower with chipmaker TSMC and China’s tech stocks among the biggest drags on the regional measure. Pelosi is expected to arrive in Taipei late on Tuesday. Beijing regards Taiwan as part of its territory and has promised “grave consequences” for her trip. Benchmarks in Hong Kong, China and Taiwan were among the laggards in Asia, slipping at least 1.4% each. Japan’s Topix declined as the yen received a boost from safe-haven demand.  还没打就见血了。4400个股票受伤。 Chinese stocks collapsed in the shadow of a looming conflict. 4400 of 4800 stocks hurt. — Hao HONG 洪灝, CFA (@HAOHONG_CFA) August 2, 2022 “I do expect a negative feedback loop into China-related equities especially those related to the semiconductor and technology sectors as Pelosi’s potential visit to Taiwan is likely to harden the current frosty US-China tech war,” said Kelvin Wong, analyst at CMC Markets (Singapore). Pelosi’s controversial trip is souring a nascent revival in risk appetite in the region that saw the MSCI Asia gauge rise in July to cap its best month this year. China’s economic slowdown continues to weigh on sentiment, as authorities said this year’s economic growth target of “around 5.5%” should serve as a guidance rather than a hard target.  Japanese equities fell as the yen soared to a two month high over concerns of US-China tensions escalating with US House Speaker Nancy Pelosi expected to visit Taiwan on Tuesday.  The Topix fell 1.8% to 1,925.49 as of the market close, while the Nikkei declined 1.4% to 27,594.73. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 2.6%. Out of 2,170 shares in the index, 227 rose and 1,903 fell, while 40 were unchanged. Pelosi would become the highest-ranking American politician to visit Taiwan in 25 years. China views the island as its territory and has warned of consequences if the trip takes place. “The relationship between the US and China was just about to enter into a period of review, with a move from the US to reduce China tariffs,” said Ikuo Mitsui a fund manager at Aizawa Securities. That could change now as a result of Pelosi’s visit, he added Meanwhile, Australia’s S&P/ASX 200 index erased an earlier loss of as much as 0.7% to close 0.1% higher after the Reserve Bank’s widely-expected half-percentage point lift of the cash rate to 1.85%. The index wiped out a loss of as much as 0.7% in early trade. The RBA’s statement was “not as hawkish as anticipated and the lower growth forecast suggests the RBA is aware of both the domestic and international drags on the economy,” said Kerry Craig, global market strategist at JPMorgan.  “We expect the RBA will continue to push interest rates back to a neutral level this year given the successive upgrades to the inflation outlook, but 2023 looks to be a much less eventful year for the RBA,” Craig said.  Banks and consumer discretionary advanced to boost the index, while miners and energy shares declined.   In New Zealand, the S&P/NZX 50 index rose less than 0.1% to 11,532.46. Indian stock indexes are on course to claw back this year’s losses on steady buying by foreigners. The S&P BSE Sensex closed little changed at 58,136.36 in Mumbai, after falling as much as 0.6% earlier in the day. The measure is now just 0.2% away from turning positive for the year. The NSE Nifty Index too is a few ticks away from moving into the green. Nine of the BSE Ltd.’s 19 sector sub-indexes advanced on Tuesday, led by power and utilities companies.  Foreigners bought local shares worth $836.2 million in July, after pulling out a record $33 billion from the Indian equity market since October. July was the first month of net equity purchases by foreign institutional investors, after nine months of outflows. Still, “choppiness would remain high due to the upcoming RBI policy meet outcome and prevailing earnings season,” Ajit Mishra, vice-president for research at Religare Broking Ltd. wrote in a note. “Participants should continue with the buy-on-dips approach.” The Reserve Bank of India is widely expected to raise interest rates for a third straight time on Friday. Of the 33 Nifty companies that have reported results so far, 18 have beaten the consensus view while 15 have trailed. Of the 30 shares in the Sensex index, 16 rose, while 14 fell. IndusInd Bank and Asian Paints were among the key gainers on the Sensex, while Tech Mahindra Ltd. and mortgage lender Housing Development Finance Corp were prominent decliners.  In FX, the Bloomberg dollar spot index rises 0.1%. JPY and CAD are the strongest performers in G-10 FX, NOK and AUD underperforms, after Australia’s central bank hiked rates by 50 basis-points for a third straight month and signaled policy flexibility. USD/JPY dropped as much as 0.9% to 130.41, the lowest since June 3, in the longest streak of daily losses since April 2021. Leveraged accounts are adding to short positions on the pair ahead of Pelosi’s visit, Asia-based FX traders said. In rates, treasuries extended Monday’s rally in early Asia session as 10-year yields dropped as low as 2.514% amid escalating US-China tension over Taiwan. Treasury yields were richer by up to 5bp across long-end of the curve, where 20-year sector continues to outperform ahead of Wednesday’s quarterly refunding announcement, expected to make extra cutbacks to the tenor. US 10-year yields off lows of the day around 2.55%, lagging bunds by 4bp and gilts by 4.5bp. US stock futures slumped given risk adverse backdrop, adding support into Treasuries while bunds outperform as traders scale back ECB rate hike expectations. The yield on the two-year German note, among the most sensitive to rate hikes, fell as low as 0.17%, its lowest since May 16. Gilts also gained across the curve. Bund curve bull-steepens with 2s10s widening ~2 bps. Gilt and Treasury curves mostly bull-flatten. Australian bonds soared after RBA delivered a third- straight 50bp rate hike as expected, but gave itself wriggle room to slow the pace of tightening in the coming months. In commodities, WTI trades within Monday’s range, falling 0.6% to trade around $93, while Brent falls below $100. Spot gold is little changed at $1,779/oz. Base metals are mixed; LME nickel falls 2% while LME zinc gains 0.6%. Bitcoin remains under modest pressure and has incrementally lost the USD 23k mark, but remains comfortably above last-week's USD 20.6k trough. Looking to the day ahead now and there is a relatively short list of economic indicators to watch, including June JOLTS report and total vehicle sales (July) for the US, UK’s July Nationwide house price index and July PMI for Canada. Given the apparent uncertainty about the direction of the Fed in markets, many will be awaiting Fed’s Bullard, Mester and Evans, who will speak throughout the day. And in corporate earnings, it will be a busy day featuring results from BP, Caterpillar, Ferrari, Marriott, KKR, Uber, S&P Global, Occidental Petroleum, Electronic Arts, Gilead Sciences, Advanced Micro Devices, Starbucks, Airbnb, PayPal, Marathon Petroleum. Market Snapshot S&P 500 futures down 0.6% to 4,096.50 STOXX Europe 600 down 0.5% to 435.13 MXAP down 1.3% to 159.73 MXAPJ down 1.3% to 516.82 Nikkei down 1.4% to 27,594.73 Topix down 1.8% to 1,925.49 Hang Seng Index down 2.4% to 19,689.21 Shanghai Composite down 2.3% to 3,186.27 Sensex little changed at 58,120.97 Australia S&P/ASX 200 little changed at 6,998.05 Kospi down 0.5% to 2,439.62 German 10Y yield little changed at 0.74% Euro down 0.3% to $1.0231 Brent Futures down 0.6% to $99.44/bbl Gold spot down 0.1% to $1,770.93 U.S. Dollar Index up 0.15% to 105.61 Top Overnight News from Bloomberg Oil Steadies Before OPEC+ as Traders Weigh Up Market Tightness China Slaps Export Ban on 100 Taiwan Brands Before Pelosi Visit Pozsar Says L-Shaped Recession Is Needed to Conquer Inflation Pelosi’s Taiwan Trip Raises Angst in Global Financial Markets Taiwan Risk Joins Long List of Reasons to Shun China Stocks Biden Says Strike in Kabul Killed a Planner of 9/11 Attacks Biden Team Tries to Blunt China Rage as Pelosi Heads for Taiwan The Best and Worst Airlines for Flight Cancellations GOP Plans to Deploy Obscure Rule as Weapon Against Spending Bill US to Stop TSMC, Intel From Adding Advanced Chip Fabs in China US Anti-Terrorism Operation in Afghanistan Kills Al-Qaeda Leader They Quit Goldman’s Star Trading Team, Then It Raised Alarms Sinema’s Silence on Manchin’s Deal Keeps Everyone Guessing Manchin Side-Deal Seeks to Advance Mountain Valley Pipeline A more detailed look at global markets courtesy of Newsquawk APAC stocks followed suit to the weak performance across global counterparts as tensions simmered amid Pelosi's potential visit to Taiwan. ASX 200 was initially pressured ahead of the RBA rate decision where the central bank hiked by 50bp, as expected, although most of the losses in the index were pared amid a lack of any hawkish surprises in the statement and after the central bank noted it was not on a pre-set path. Nikkei 225 declined amid a slew of earnings and continued unwinding of the JPY depreciation. Hang Seng and Shanghai Comp underperformed due to the ongoing US-China tensions after reports that House Speaker Pelosi will arrive in Taiwan late on Tuesday despite the military threats by China, while losses in Hong Kong were exacerbated by weakness in tech and it was also reported that Chinese leaders said the GDP goal is guidance and not a hard target which doesn't provide much confidence in China's economy. Top Asian News Tourism Jump to Power Thai GDP Growth to Five-Year High in 2023 China in Longest Streak of Liquidity Withdrawals Since February Singapore Says Can Tame Wild Power Market Without State Control India’s Zomato Appoints Four CEOs, to Change Name to Eternal Taiwan Tensions Raise Risks in One of Busiest Shipping Lanes Japan Trading Giants Book $1.7 Billion Russian LNG Impairment     Japan Proposes Record Minimum Wage Hike as Inflation Hits European bourses are pressured as the general tone remains tentative ahead of Pelosi's visit to Taiwan, Euro Stoxx 50 -0.9%; note, FTSE 100 -0.1% notably outperforms following earnings from BP +3.0%. As such, the Energy sector bucks the trend which has the majority in the red and a defensive bias in-play. Stateside, futures are similarly downbeat and have been drifting lower amid the incremental updates to Pelosi and her possible Taiwan arrival time of circa. 14:30BST/09:30ET; ES -1.0%. Apple (AAPL) files final pricing term sheet for four-part notes offering of up to USD 5.5bln, according to a filing. Top European News Ukraine Sees Slow Return of Grain Exports as World Watches Ruble Boosts Raiffeisen’s Russian Unit Despite Credit Halt DSM 2Q Adj. Ebitda Up; Jefferies Sees ‘Muted’ Reaction Credit Suisse Hit by More Rating Downgrades After CEO Reboot Man Group Sees Assets Decline for First Time in Two Years Exodus of Young Germans From Family Nest Is Getting Ever Bigger FX Yen extends winning streak through yet more key levels vs Buck and irrespective of general Greenback recovery on heightened US-China tensions over Taiwan USD/JPY breaches support around 131.35 and probes 130.50 before stalling, but remains sub-131.00 even though the DXY hovers above 105.500 within a 105.030-710 range. Aussie undermined by risk aversion and no hawkish shift by RBA after latest 50bp hike; AUD/USD nearer 0.6900 having climbed to within a few pips of 0.7050 on Monday. Kiwi holds up better with AUD/NZD tailwind awaiting NZ jobs data, NZD/USD hovering just under 0.6300 and cross closer to 1.1000 than 1.1100. Euro and Pound wane after falling fractionally short of round number levels vs Dollar, EUR/USD back under 1.0250 vs 1.0294 at best, Cable pivoting 1.2200 from 1.2293 yesterday. Loonie and Franc rangy after return from Canadian and Swiss market holidays, USD/CAD straddling 1.2850 and USD/CHF rotating around 0.9500. Yuan off lows after slightly firmer PBoC midpoint fix, but awaiting repercussions of Pelosi trip given Chinese warnings about strong reprisals, USD/CNH circa 6.7700 and USD/CNY just below 6.7600 vs 6.7950+ and 6.7800+ respectively. South Africa's Eskom says due to a shortage of generation capacity, Stage Two loadshedding could be implemented at short notice between 16:00-00:00 over the next three days. Fixed Income Taiwan-related risk aversion keeps bonds afloat ahead of relatively light pm agenda before a trio of Fed speakers. Bunds hold above 159.00 within 159.70-158.57 range, Gilts around 119.50 between 119.70-20 parameters and T-note nearer 122-02 peak than 121-17+ trough. UK 2032 supply comfortably twice oversubscribed irrespective of little concession. Commodities WTI Sept and Brent Oct futures trade with both contracts under the USD 100/bbl mark as the participants juggle a myriad of major factors, incl. the JTC commencing shortly. Spot gold is stable and just below the 50-DMA at USD 1793/oz while base metals succumb to the broader tone. A source with knowledge of last month's meeting between President Biden and Saudi King Salman said the Saudis will push OPEC+ to increase oil production at their meeting on Wednesday and that the Saudi King made the assurance to President Biden during their face-to-face meeting July 16th, according to Fox Business's Lawrence. US Senator Manchin "secured a commitment" from President Biden, Senate Majority Leader Schumer and House Speaker Pelosi for completion of the Mountain Valley Pipeline, according to 13NEWS. US Event Calendar July Wards Total Vehicle Sales, est. 13.4m, prior 13m 10:00: June JOLTs Job Openings, est. 11m, prior 11.3m 10:00: Fed’s Evans Hosts Media Breakfast 11:00: NY Fed Releases 2Q Household Debt and Credit Report 13:00: Fed’s Mester Takes Part in Washington Post Live Event 18:45: Fed’s Bullard Speaks to the Money Marketeers DB's Jim Reid concludes the overnight wrap In thin markets, US House Speaker Nancy Pelosi's visit to Taiwan today for meetings tomorrow (as part of her tour of Asia) could be the main event. She's scheduled to land tonight local time which will be mid-morning US time. She'll be the highest ranking US politician to visit in 25 years. Expect some reaction from the Chinese and markets to be nervous. Meanwhile to dial back rising tensions, the White House has urged China to refrain from an aggressive response as speaker Pelosi’s visit does not change the US position toward the island. As the headline confirming her visit was going ahead broke, 10 year US Treasuries immediately fell a handful of basis point from 2.69% (opened at 2.665%) and continued falling to around 2.58% as Europe retired for the day, roughly where it closed (-6.8bps). Breakevens led most of the move. 2 year notes actually held in which inverted the curve a further -6.12bps and to the lowest this cycle at -30.84bps. Remember that August is the best month of the year for fixed income (see my CoTD last week here for more on this) so the month has started off in line with the textbook. This morning 10yr USTs yields have dipped another -3bps to 2.55%, some 14bps lower than when Pelosi stopover was first confirmed 18 hours ago. 2yr yields have slightly out-performed with the curve just back below -30bps again. Lower yields initially helped to lift equities yesterday, with the Nasdaq being up more than a percent at one point before falling with the rest of the market and closing -0.18%. The S&P 500 was -0.28% and dragged lower by energy (-2.17%). The latter came as crude prices moved substantially lower, with WTI losing -4.91% and Brent (-3.97%) dipping below $100 per barrel as well. Growth concerns, partly due to the weekend and yesterday’s data from China, and partly due to the US risk off yesterday, were mainly to blame. These worries filtered through other commodities as well, including industrial metals and agriculture. For the latter, Ukraine’s first grain shipment since the war began was a contributing factor. European gas was a standout, notching a +5.2% gain as the relentless march continues. In an overall risk-off market, staples (+1.21%) were the only sector meaningfully advancing on the day, followed by discretionary (+0.51%) stocks. Meanwhile, real estate (-0.90%), financials (-0.89%) and materials (-0.82%) dragged the index lower. Although yesterday’s earnings stack was light, today’s line up includes BP, Starbucks, Airbnb and PayPal. Asian equity markets opened sharply lower this morning on the fresh geopolitical tensions between the US and China over Taiwan. Across the region, the Hang Seng (-2.96%) is leading losses after yesterday’s data showed that Hong Kong slipped into a technical recession as Q2 GDP shrank by -1.4%, contracting for the second consecutive quarter as global headwinds mount. Mainland China stocks are also sliding with the Shanghai Composite (-2.90%) and CSI (-2.33%) trading deep in the red whilst the Nikkei (-1.59%) is also in negative territory. Elsewhere, the Kospi (-0.77%) is also weak in early trade. Outside of Asia, DMs stock futures point to a lower restart with contracts on the S&P 500 (-0.38%), NASDAQ 100 (-0.40%) and DAX (-0.50%) all turning lower. As we go to print, the RBA board has raised rates by another 50 basis points to 1.85%. Their economic forecasts seem to have been lowered and they have now said monetary policy is "not on a pre-set path" which some are already interpreting as possibly meaning 25bps instead of 50bps at the next meeting. Aussie 10yr yields dropped 7-8bps on the announcement and 10bps on the day. Back to yesterday, and the important US ISM index, on balance, painted a slightly more comforting picture than it could have been – although the index slowed to the lowest since June 2020. The headline came in above the median estimate on Bloomberg (52.8 vs 52.0). We did see a second month in a row of below-50 score for new orders, but a fall in prices paid from 78.5 to 60.0, the lowest since August 2020, offered some respite to fears about price pressures. Similarly, a rise in the employment gauge from 47.3 to 49.9, beating estimates, was also a positive. The manufacturing PMI was revised down a tenth from the preliminary reading which didn't move the needle. JOLTS today will be on my radar given it's been the best measure of US labour market tightness over the past year or so. Also Fed hawks Mester (lunchtime US) and Bullard (after the closing bell) will be speaking today. Turning to Europe, price action across sovereign bond markets was driven by dovish repricing of ECB’s monetary policy, in contrast to the US where the front end held up. A cloudier growth outlook from yesterday’s European data releases helped drive yields lower – retail sales in Germany unexpectedly contracted in June (-1.6% vs estimates of +0.3%) and Italy’s manufacturing PMI slipped below 50 (48.5 vs 49.0 expected). So Bund yields fell -3.8bps, similar to OATs (-3.1bps). The decline was more pronounced in peripheral yields and spreads, with BTPs (-12.9bps) in particular dropping below 3% for the first time since May of this year, perhaps on further follow through from last week's story that the far right party leading the polls aren't planning to break EU budget rules. Spreads have recovered the lost ground from Draghi's resignation announcement now. Weaker economic data overpowered the effect of lower yields and sent European stocks faded into the close after being higher most of the day with the STOXX 600 eventually declining -0.19%. The Italian market outperformed (+0.11%) for the reasons discussed above. Early this morning, data showed that South Korea’s July CPI inflation rate rose to +6.3% y/y, hitting its highest level since November 1998 (v/s +6.0% in June), in line with the market consensus. The strong inflation data comes as the Bank of Korea (BOK) mulls further interest rate hikes at its next policy meeting on August 25. To the day ahead now and there is a relatively short list of economic indicators to watch, including June JOLTS report and total vehicle sales (July) for the US, UK’s July Nationwide house price index and July PMI for Canada. Given the apparent uncertainty about the direction of the Fed in markets, many will be awaiting Fed’s Bullard, Mester and Evans, who will speak throughout the day. And in corporate earnings, it will be a busy day featuring results from BP, Caterpillar, Ferrari, Marriott, KKR, Uber, S&P Global, Occidental Petroleum, Electronic Arts, Gilead Sciences, Advanced Micro Devices, Starbucks, Airbnb, PayPal, Marathon Petroleum. Tyler Durden Tue, 08/02/2022 - 08:05.....»»

Category: personnelSource: nytAug 2nd, 2022

Futures Reverse Losses, Rise To Session Highs Ahead Of Data, Fed Juggernaut

Futures Reverse Losses, Rise To Session Highs Ahead Of Data, Fed Juggernaut Whether it's because Goldman forecast over $11 billion in "forced" buying every day this week between the end of the buyback blackout period and systematic purchases amid the sliding VIX, or because hopes of an imminent recession prompted more expectations of a Fed pivot after Friday's drop led to oversold conditions amid record bearishness, but this morning US equity futures have moved higher ahead of what will be an extremely busy week with 30% of the S&P reporting earnings including big tech, the US revealing if Q2 GDP was negative thus pushing the US into a recession, and the Fed hiking another whopping 75bps. Or perhaps the optimistic sentiment came out of China where Chinese property stocks rallied after a reported move by Beijing to establish a fund to support developers fueled optimism about a turnaround for the struggling sector.  Whatever the reason, stocks and US equity futures reversed earlier declines on Monday and traded near session highs with S&P 500 and Nasdaq 100 futures rising 0.6% and 0.5% respectively, while European stocks extended gains after their best week since May, rising 0.5%. Treasury yields advanced and a dollar gauge slipped. Oil also reversed earlier losses and last traded 0.9% higher. The S&P 500 posted its biggest weekly gain in a month last week and is on a pace for its largest monthly increase since October. Stocks have gotten a lift as the corporate earnings season began with better-than-feared reports and as investors bet that a lot of the negative economic news was priced in. Among notable movers in premarket trading, shares in companies that focus on antivirals and vaccines jumped after the head of the World Health Organization said the monkeypox outbreak is a public health emergency of international concern. Cryptocurrency-exposed stocks, on the other hand, fell as Bitcoin slipped back under $22,000 amid a wider cryptocurrency selloff.  Here are some other notable premarket movers: Watch Amazon (AMZN US) stock as its price target was trimmed at Oppenheimer (outperform), with the brokerage “conservatively” reducing its second-half 2021 e- commerce estimates as consumer spending slows after stable summer trends. Keep an eye on Integra LifeSciences (IART US) as Morgan Stanley initiated coverage of the stock with a recommendation of equal-weight, saying “visibility into pipeline-driven growth remains in the early stages.” Watch Ivanhoe Electric (IE US) as its shares were initiated with an outperform rating at BMO, with the broker touting the mining firm’s “notable” portfolio of copper exploration assets and technology. Keep an eye on Snap (SNAP US) as Morgan Stanley cut the recommendation on the stock to underweight from overweight, saying that the social media platform’s “ad business is less developed” than previously thought. Focus this week is on reports from the giga tech companies including Google parent Alphabet Inc., Apple., Meta Platforms Inc. and Inc. Stock prices already reflect a lot of bad news, with the Nasdaq 100 down 24% this year. While earnings season got under way with several companies citing high inflation and a strong dollar as the reason for cutting full-year profit forecasts, UBS Global Wealth Management strategists said the results are turning out to be better than feared as consumer spending remains resilient. Goldman Sachs strategists agreed with UBS that S&P 500 revenues would be pressured by a stronger greenback in this season. There are also plenty of skeptics about the market’s recent strength. Strategists at BlackRock Inc. and Morgan Stanley warned that challenging economic data suggests stocks could see more declines. “For as long as central banks don’t acknowledge any impact on growth from their aggressive rate hike, we don’t want to chase any bear market rebound,” said Wei Li, global chief investment strategist at BlackRock Investment Institute. Fresh economic statistics could point to “ever-tightening policy and rate-hiking signals,” she said on Bloomberg TV. Meanwhile, Wall Street's uber-bear, Morgan Stanley strategist Michael Wilson said it was too early for stocks to price in a pause in the Fed’s policy even as recession fears grow. His counterpart Mislav Matejka at JPMorgan Chase on the other hand, said bets of peaking inflation could lead to a pivot in the Fed’s policy and improve the outlook for equities in the second half of the year. Besides earnings, all eyes this week will be on the Fed’s two-day policy meeting, with a decision on interest rates on Wednesday. Economists predict the central bank will hike rates by another 75 basis points after last month delivering its biggest increase since 1994. The Fed's decision this week, along with earnings from the likes of Google’s Alphabet Inc. and technology titan Apple Inc., will help to clarify the outlook for a one-month-old rebound in stocks. Prices already reflect a lot of bad news, with the Nasdaq 100 down 24% this year. “We still see further downside for risky assets as recession fears accumulate and central banks remain committed to fighting inflation at the expense of growth,” wrote Eric Robertsen, chief strategist at Standard Chartered Bank Plc. In Europe, the Euro Stoxx 600 rose 0.2% with Spain's IBEX outperforming peers, adding 0.5%. Banks, telecoms and insurance are the strongest-performing sectors. German business confidence deteriorated to the worst level since the early months of the pandemic on growing concerns that record inflation and limited energy supplies from Russia will throw Europe’s biggest economy into a downturn. Here are the other notable European movers: Ryanair shares fluctuated between gains and losses as the budget airline reported a quarterly earnings beat but analysts flagged ongoing uncertainty in its outlook. Faurecia jumps as much as 8.3% after Forvia, the auto-supplier formed out of the French company and Germany’s Hella, reported first-half results and confirmed full-year guidance. Bechtle shares jump as much as 6.4% after the IT services firm reported preliminary second-quarter revenue that beat consensus estimates. Oddo BHF says the results were “impressive” in the face of a weakening macro environment. Verbund climbs as much as 3.3% and hits a record high of EUR109.70 after the Austrian power company was upgraded to overweight from equal-weight at Barclays. The bank analysts view company share price as unreflective of power-price rally. Richemont shares climb as much as 2.5%, outperforming other luxury stocks, after Miss Tweed reports that the Cartier owner is getting closer to a deal with Farfetch on the online fashion retailer YNAP. Volkswagen preference shares drop as much as 4.6% in Frankfurt after Porsche AG boss Oliver Blume was named CEO of the German carmaker. Bernstein and Jefferies are divided on what Blume’s appointment means for the company. Philips shares fall as much as 12% after the Dutch medtech firm published earnings which Jefferies says were “significantly below” consensus estimates and cut its guidance. Uniper falls as much as 11% as JPMorgan cut the stock to underweight. The downgrade leaves the stocks with six sell ratings, one buy and nine analysts advising to hold. Majority- owner Fortum’s shares were down as much as 8.4%. Kuehne + Nagel shares fall as much as 5.4% despite results beat, with analysts saying lower volumes across air and sea as well as a pricing decline is negative for sentiment and expecting past quarters’ momentum to slow. Earlier in the session, equities across Asia Pacific fell Monday, as investors took a risk-off approach ahead of the Federal Reserve’s monetary-policy decision later this week.  The MSCI Asia Pacific Index slipped as much as 0.8%, poised to snap a five-day winning streak, as energy and consumer-discretionary shares declined the most. Chinese tech stocks slid even as the State Council reiterated a call for measures to support healthy development of the Internet platform economy.  Benchmarks in the Philippines, Japan and China led declines, while measures for Thailand and South Korea bucked the downtrend. Risk appetite has soured as investors await another Fed interest-rate hike of at least 75 basis points this week. Earnings releases of US big-tech companies will also be closely analyzed to gauge global growth momentum. Data released on Friday showed a contraction in US business activity for the first time since 2020, escalating fears the economy is headed into a recession. “Big week ahead with the Fed likely to go ahead with another jumbo rate hike and 30% of S&P 500 companies reporting earnings this week -- including the big tech,” said Charu Chanana, market strategist at Saxo Capital Markets. “Investors are being cautious and closing their positions ahead of the slew of risk events.” China’s economic slowdown and a stronger dollar remain key overhangs for Asian corporates. The MSCI Asia gauge is still nearly 30% lower from a 2021 peak, even as some money managers consider the recent selloff in Chinese stocks as a blip.   Japanese stocks declined, with the Nikkei 225 ending a seven-day winning streak, after US stocks fell on disappointing earnings from social-media firms and as concerns of a global slowdown continue to weigh on investor sentiment. The Topix Index fell 0.7% to 1,943.21 as of market close Tokyo time, while the Nikkei declined 0.8% to 27,699.25. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 2.7%. Out of 2,170 shares in the index, 836 rose and 1,224 fell, while 110 were unchanged. “Stocks were soaring for seven straight days last week as well, so there could be a fair amount of selling,” said Naoki Fujiwara chief fund manager at Shinkin Asset Management.  In Australia, the S&P/ASX 200 index was little changed to close at 6,789.90 after a volatile session. Gains in materials and industrials stocks were offset by declines in healthcare and technology shares. EML Payments was the worst performer after the Irish Central Bank said it identified shortcomings in components of the remediation program of EML’s Irish subsidiary PFS Card Services. Insurance Australia Group was the best performer, rising the most since August.  In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,198.68 In FX, the Bloomberg dollar spot index fell 0.2%, sliding against most of its Group-of-10 peers. Investors are monitoring weaker economic data amid expectations the Federal Reserve will inflict more pain on the economy to get inflation under control. It’s set to raise rates for a fourth straight meeting this week. JPY and NZD are the weakest performers in G-10 FX, SEK and NOK outperform. TRY lags EMFX, weakens 0.6%.  “We are not yet ready to change our strong dollar call” as the Fed is likely to continue hiking in the second half, Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a note to clients. “US economic data have been weakening but we do not think a recession is imminent. We believe the US economy remains the most resilient” In rates, the US Treasury curve steepened as long-end leads yields were cheaper on the day: US yields were cheaper by more than 7bp across long-end of the curve, steepening 5s30s by ~4bp, 2s10s by ~3bp on the day; 10-year yields around 2.81%, cheaper by more than 5bp vs Friday’s close and underperforming bunds by 3bp in the sector. Recession fears ratcheted higher Friday after US data showed business activity contracted in July for the first time in more than two years. Final coupon auctions of May-July quarter begin with $45b 2-year note sale at 1pm ET, followed by 5-year notes Tuesday and 7-year sale on Thursday. Preliminary estimates for corporate supply this week are $15b to $20b, expected to be front-loaded before Wednesday’s Fed policy announcement. Focal points of US session include 2-year note auction, while new activity may be sidelined before Wednesday’s Fed decision. Bunds, gilts both outperform Treasuries over European morning. Bunds bear-flatten. Gilts bear- steepen. Peripheral spreads are mixed to Germany; Italy widens, Spain tightens and Portugal tightens. In commodities, WTI rose 0.9% higher to trade near $94.76, after sliding at the open. Brent also rose near $104.51. Base metals are mixed; LME tin falls 1.8% while LME copper gains 0.2%. Spot gold rises roughly $2 to trade near $1,729/oz. Wheat climbed as commodity markets evaluated a Russian missile strike on Odesa’s sea port that threatened to test a fledgling agreement to unblock Ukrainian grain exports from the Black Sea. Bitcoin remains under pressure and is yet to convincingly reclaims the USD 22k mark, after slipping to USD 21.75k overnight. The busy economic data slate this week includes June Chicago Fed national activity index (8:30am) and July Dallas Fed manufacturing activity (10:30am); this week also includes consumer confidence, new home sales, durable goods orders, 2Q GDP, personal income/spending (includes PCE deflator), MNI Chicago PMI and University of Michigan sentiment Market Snapshot S&P 500 futures little changed at 3,967.25 STOXX Europe 600 down 0.1% to 425.16 MXAP down 0.5% to 158.83 MXAPJ down 0.3% to 519.58 Nikkei down 0.8% to 27,699.25 Topix down 0.7% to 1,943.21 Hang Seng Index down 0.2% to 20,562.94 Shanghai Composite down 0.6% to 3,250.39 Sensex down 0.5% to 55,771.23 Australia S&P/ASX 200 little changed at 6,789.90 Kospi up 0.4% to 2,403.69 German 10Y yield little changed at 1.04% Euro little changed at $1.0207 Gold spot up 0.1% to $1,728.88 U.S. Dollar Index down 0.11% to 106.62 Top Overnight News from Bloomberg Markets are looking tentative at the start of a busy week that includes a Fed policy meeting and much data. The dollar faded earlier gains and stocks traded softly in the green The Federal Reserve will most likely fail to tame inflation without driving the economy into a ditch, according to the results of the latest MLIV Pulse survey Stocks and US equity futures wavered Monday amid concerns about a dimming economic outlook and possible recession While last week’s price action suggests that earnings downgrades have been well-priced, a more hawkish than expected Fed could spill the apple cart. Inflation data, European gas and Chinese Covid-19 developments are also a source of risk The pound’s woes run deep, and whoever becomes 10 Downing Street’s newest resident will inherit a maelstrom of economic problems A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly lower with the tech sector in the region hit following the Stateside sectoral performance.    ASX 200 saw the gains in its Metals & Mining sector offset by a selloff in Tech. Nikkei 225 underperformed following the JPY strength seen on Friday, whilst the KOSPI outpaced peers. Hang Seng was lower following reports China is said to be mulling categorising US-listed Chinese firms into three groups based on the sensitivity of data held by the firms, but the property sector outperformed amid reports that China is planning to set up a real estate fund. Shanghai Comp was also softer but monkeypox-related stocks soared after the WHO declared monkeypox a global health emergency. Top Asian News China is reportedly imposing COVID "closed loops" on major Shenzhen companies which include Foxconn (2354 TW), BYD (1211 HK), CNOOC (0833 HK) and Huawei (002502 SZ), via Bloomberg. China is said to be mulling categorising US-listed Chinese firms into three groups based on the sensitivity of data held by the firms, according to FT sources. Neither the EU nor China believes that conditions are ripe for the implementation of the China-EU Comprehensive Investment Agreement, according to Chinese sources cited by SGH Macro. China reportedly plans to set up a real estate fund worth up to USD 44bln, according to REDD cited by Reuters. Hong Kong is reportedly planning to cut hotel quarantine times, according to Sing Tao Daily. The Sakurajima volcano on Japan's western major island of Kyushu has erupted with the alert level raised to 5 - the highest, according to Sky News. No damage has been reported but volcanic stones could be seen raining down up to 1.5 miles away from the site, according to NHK. China’s securities regulator said in a statement it has not researched a plan for a three-tiered system to help Chinese companies avoid US delisting, according to CNBC. European bourses are firmer across the board as the initially cautious tone amid soft-Ifo and weekend developments dissipated amid USD-downside and constructive Kremlin remarks; Euro Stoxx 50 +0.3%. US futures are modestly firmer, ES +0.5%, as we kick off the busiest week of earnings for Q2 and in the run-up to the FOMC. Tesla (TSLA) discloses a USD 170mln impairment loss resulting from changes to the carrying value of Bitcoin during H1 (ending June 30th). Increases FY22-24 CapEx to USD 6-8bln/yr (prev. 5-7bln). Top European News Italy's far-right Brothers of Italy party is reportedly struggling to find ministerial candidates, according to The Times. A survey by DIHK of 3,500 firms in Germany found that 16% are scaling back production or partially pausing business operations amid high energy prices, via Reuters. Fitch affirmed Hungary at "BBB"; outlook Stable; affirmed Ireland at "AA"; outlook stable. Central Banks ECB's Lagarde said the ECB will raise rates for as long as it takes to bring inflation back to target, according to an interview via Funke Mediengruppe. ECB's Nagel said it is better to start with a bigger hike and is confident that ECB's TPI would survive legal challenges, according to Handelsblatt. He added that future rate hikes are to depend on data, and we still see positive growth in 2022 and 2023. He said TPI is to be used in exceptional circumstances. ECB's Holzmann said the ECB may accept a "light recession" if the outlook for CPI rises, according to an interview via ORF. Holzmann said the ECB is to consider the economic situation before another big hike and said economic growth is slowing and that has brought in caution. ECB's Kazaks says large interest rate hikes may not be over; too weak EUR is a "problem". The hike in September needs to be quite "significant" and should be open to larger hikes. BoJ's Takata (new member) says the BoJ is able to keep monetary policy easy, but are facing new challenges such as dwindling bank margin and impact on market function. BoJ's Tamura (new member) says Japan may soon see positive cycle commence, with wages increasing with inflation. If this occurred, exit from easy policy would become focus of discussions. FX DXY down again ahead of the Fed on Wednesday as risk appetite recovers broadly, index slips further from 107.00 to 106.240. Euro underpinned by hawkish ECB commentary and supportive Russian gas supply vibe to the extent that bleak German Ifo survey findings are shrugged off, USD/USD probes 1.0250 where hefty option expiry interest sits (1.86bln). Aussie derives traction from spike in iron ore prices, AUD/USD through 0.6950 and towards circa 1bln option expiries at 0.7000 strike. Franc and Yen underperform as bond yields rebound firmly from recent lows, USD/CHF around 0.9625 and USD/JPY 136.00+ vs Friday lows of 0.9600 and 135.57. Yuan welcomes PBoC notice of recovery in support of cultural and tourism sectors plus reports of Chinese real estate fund, USD/CNH and USD/CNY both sub-6.7500 compared to highs at 7.7667 and 6.7577 respectively. Lira laments deterioration in Turkish manufacturing confidence, USD/TRY just shy of 17.8400. AUD/USD -- Although spot rally stalled at 50-DMA, additional attempts can’t be ruled out amid bullish momentum. That said, further resistance at 0.6996, June 20 high should be respected EUR/USD -- Needs to close above 38.2% Fibonacci to put in a short-term low. Otherwise further visits below parity remain in play USD/JPY -- Close below ascending channel support speaks to further losses, which look to be corrective in nature NZD/USD -- A relief rally from this point would be limited to the 50% level of the June/July range, which comes in near the 0.6316, 50-day moving average Fixed Income Debt futures flip then flop in choppy fashion amidst hawkish ECB rhetoric and encouraging news from Russia on EU gas supplies. Bunds rebound to 154.86 before retreat to 153.78, Gilts recoil from 117.48 to 117.02 and 10 year T-note within a 120-02+/119-21 range Downbeat German Ifo survey and mixed UK CBI industrial orders vs business optimism largely ignored 2 year note supply looms and may be interesting as a gauge of investor demand ahead of the Fed Commodities Crude benchmarks began the session on the back foot, amidst the generally cautious APAC mode where participants were digesting multiple updates including Russia/Ukraine, Nord Stream, China/US and reiterations from Biden. However, a seeming USD-driven move lifted the benchmarks back towards session highs amid a concerted risk move following Kremlin commentary. US President Biden said gasoline prices are still too high and is working to make sure gasoline prices move with oil prices and said companies should use profits to boost output, according to Reuters. LME will not ban Nornickel's metal as the Russian firm is not under UK sanctions, according to Reuters sources. Chicago wheat, corn and soybean futures rose at the open, possibly on the back of reports that the Ukrainian port of Odessa was hit by Russian missiles less than 24 hours after the signing of the grains agreement in Turkey. Malaysia's Commodities Minister said crude palm oil prices are likely to remain weak for most of Q3 2022 as Jakarta lifts the exports levy; but prices are expected to be higher in Q4 amid the resumption of Indonesia's palm oil export levy, via Reuters. Spot gold has found support from the declining USD, lifting to USD 1733.70/oz, though upside is capped by the broader risk tone with the yellow metal yet to test Friday’s USD 1738.99/oz best. US Event Calendar 08:30: June Chicago Fed Nat Activity Index, est. -0.03, prior 0.01, revised -0.19 10:30: July Dallas Fed Manf. Activity, est. -22.0, prior -17.7 DB's Jim Reid concludes the overnight wrap I've never been to a wedding before where there is not a nervous bride or groom worried about what scandal might be dredged up about the groom in the speeches. However that changed at my colleague Henry's wedding on Saturday as I couldn't find anything incriminating about him from anyone. And boy did I ask. The nearest I got was that maybe he may have hit someone with a cricket bat once and it might have been an accident. Overall, a wonderful and wholesome wedding. Congratulations to my co-author Henry and his lovely wife Beth. If last week was all things European (Gas, Italy and the ECB), this week mostly belongs to the US with the highlight being the FOMC concluding on Wednesday. Unless we hear otherwise in a newspaper, they are expected to raise rates 75bps, but we’ll go through some of the nuances below. An important US Q2 GDP number on Thursday will tell us whether we’re in a technical recession or not (DB at -0.6%, Atlanta Fed tracker -1.6%). Expect lots and lots of headlines if we are. In case you thought it was safe to take your eye off Europe though, be warned that Thursday and Friday sees multiple Q2 GDP and CPI releases. Don’t forget as well that Putin has suggested that if the turbine is not back early this week then gas flow may fall to 20% capacity even though originally this turbine wasn’t expected to be needed until September. So watch out for gas politics. Elsewhere we have US durable goods (Wednesday), consumer confidence numbers (tomorrow), spending and income data (including the important core PCE deflator), and final consumer confidence numbers with the important revisions to inflation expectations to round out a big macro week on Friday. The micro will also be significant with 166 S&P 500 and 197 Stoxx 600 companies reporting. The full day by day calendar will appear at the end as per usual for a Monday but we’ll spend most of time previewing the Fed before we briefly review Asia and last week. Our economics team expect +75bps this week (to 2.375%) followed by +50bps hikes in September and November, with a further +25bps in December until a terminal rate of 4.1% is reached which is notably above ever lower market pricing of 3.3%. There won’t be new economic projections in this meeting so all focus will be on how the Fed guides us in a world where no-one should really believe central bank forward guidance anymore as it’s proved very unreliable over the last year. However the market will still devour clues as to whether the committee are leaning towards 50 or 75 for September. To be fair there are two CPIs before then so it’s likely the Fed don’t really know at the moment. In terms of the press conference, it will be interesting to see how Powell navigates the line between tackling inflation and supporting growth. The market is increasingly pricing a more dovish pivot at some point early in 2023 so all eyes on how firm Powell is that inflation is the number one priority or whether he looks set to blink on growth weakness. Turning to corporate earnings, it will be a busy week filled with results from the BigTech, oil majors and key consumer-focussed companies. Starting with the former, Microsoft, Alphabet (tomorrow), Meta (Wednesday), Apple and Amazon (Thursday) all report. Notable hardware tech firms reporting include NXP Semiconductors (today), Texas Instruments (tomorrow), SK Hynix, Qualcomm, Lam Research (Wednesday), Samsung, Intel (Thursday) and Sony (Friday). In commodities, oil majors Shell, Total Energies (Thursday), Exxon and Chevron (Friday) will be among the largest companies reporting. Utilities will be in focus too amid energy concerns in Europe, with results due from Iberdrola (Wednesday), Enel, EDF and EDP (Thursday). Finally, key players in materials like Rio Tinto (Wednesday), Vale and Anglo American (Thursday) will also report. Industrial highlights include Raytheon Technologies (tomorrow) and Honeywell (Thursday). In healthcare, Pfizer, Merck and Sanofi (Thursday) will release. Major automakers releasing include General Motors (tomorrow), Mercedes-Benz, Ford (Wednesday) and Volkswagen (Thursday). In staples and food, the spotlight will be on Coca-Cola, McDonald's, Unilever and Mondelez (tomorrow), Kraft Heinz (Wednesday), Nestle and AB InBev on Thursday and Procter & Gamble and Colgate-Palmolive on Friday. Asian equity markets are slipping at the start of a key week as concerns about a global economic slowdown is sapping risk appetite in the region. The Hang Seng (-0.97%) is the largest underperformer amid a drop in Chinese listed technology stocks with the Nikkei (-0.77%), Shanghai Composite (-0.71%) and CSI (-0.63%) also trading in negative territory. Elsewhere, the Kospi (+0.50%) is bucking the trend. Outside of Asia, stock futures in the DM world are edging lower in the US with contracts on the S&P 500 (-0.15%) and NASDAQ 100 (-0.15%) slightly weaker. DAX futures (-0.87%) are catching down to a weaker US close on Friday. Elsewhere, Oil prices gave up earlier gains with Brent futures now -0.54% down at $102.64/bbl and WTI futures (-0.63%) at $94.10/bbl as I type. Recapping last week now and we saw another major week for news-flow and volatility. The ECB surprised markets with a 50bp hike only for lacklustre data and political risks to send yields lower over the course of the week. The +50bps from the ECB came alongside their new anti-fragmentation tool, the Transmission Protection Instrument (TPI). One wonders whether central banks will eventually run out of letters for all their bailout vehicles and have to create a new alphabet. In terms of the TPI, markets were skeptical about its parameters, ultimately leaving 10yr BTP spreads +13.9bps wider to German bunds over the week. However maybe it would have been hard to rally in a week where the resignation of Prime Minister Draghi eventually proved irreversible thus exposing the country, and Europe, to fresh elections and the prospects of populists in power again. The turn in growth and political sentiment left year-end 2022 ECB policy pricing only +3.0bps higher over the week. Most of that action took place on Friday after poor PMIs, when 2yr bunds fell -22.3bps, bringing them -1.4bps lower on the week. The declines were larger further out the curve, driving a recessionary signaling flattening, with 10yr bunds -10.2bps lower on the week, and -19.2bps on Friday alone. The back-and-forth energy brinksmanship left European natural gas futures a marginal +0.99% higher on the week, with some larger intraweek swings. The fact that gas went back to pre maintenance 40% capacity was a positive but Germany (and much of Europe) lives day-by-day to see what Putin does next on gas supplies. The US certainly saw a rolling over of growth expectations towards the end of last week, where a combination of poor business optimism, increasing jobless claims, and a large services PMI miss (47.0 versus expectations of 52.7) drove yields lower as investors priced in an easier Fed policy path. 2yr Treasuries fell -15.2bps (-11.7bps Friday) while 10yrs were -16.5bps lower (-12.bps Friday), driven by a -14.7bp decline in real yields given the easier Fed policy path (-16.7bps Friday). The parallel shock left 2s10s little changed, but still deeply inverted at -22.bps, closing inverted for its 14th day in a row. Terminal fed funds retreated to around 3.3% from 3.5% the week before, all setting the stage for a big FOMC this week when inflation is still raging. This morning in Asia, yields on 10yr USTs have edged +2.91bps higher to 2.78% as I type. This is after touching 3.08% immediately after the ECB less than 48 business hours ago. Easier expected policy proved a boon to equity prices, where the STOXX 600, DAX, and CAC climbed +2.88% (+0.31% Friday), +3.02% (+0.05% Friday), and +3.00% (+0.25% Friday), respectively. In the US, easier policy pushed equities higher as well, through a back-and-forth positive/negative packed earnings schedule, ultimately bringing the S&P 500 +2.55% higher (-0.93% Friday). Given the easier policy path, tech and mega-caps outperformed over the week, with the NASDAQ up +3.33% (-1.87% Friday) and the FANG+ up +5.02% despite a large -2.94% drawdown Friday. After all that no rest this week in a busy week with holidays likely to reduce liquidity.   Tyler Durden Mon, 07/25/2022 - 08:01.....»»

Category: personnelSource: nytJul 25th, 2022

Futures, Oil Jump As Record Dollar Rally Fizzles

Futures, Oil Jump As Record Dollar Rally Fizzles US futures and European stocks advanced, shaking off data that showed China’s economy expanded slowest pace since the initial 2020 Wuhan outbreak amid pervasive lockdowns... ... while the dollar’s record surge stalled at the end of a week in which markets have been whipsawed by shifting expectations for monetary tightening by the Federal Reserve and worries over global economic growth. S&P futures traded at session highs, rising 0.38% or 14 points to 3807.50 signaling a higher open for US stocks after Wall Street closed with a small drop as investors dialed back expectations of how aggressively the Fed will hike interest rates to combat inflation. Europe's Estoxx50 gained 1% in quiet trading while Asian stocks closed mixed after lower-than-forecast China GDP data. Oil reversed recent losses which briefly dragged it below the 200DMA, and was also near session highs, up 3% even as WTI is poised to end the week below $100 a barrel for the first time since April.  Commodity metals remained under pressure, with copper touching below $7,000/t, its lowest level in 20 months, as growth data from China fueled concern around the demand outlook for commodities while gold tested support at $1,700/oz. Treasuries rose and the the yield curve between two-year and 10-year maturities remained inverted, something viewed as recession signal. The Bloomberg Dollar Spot Index dipped from a record high. In premarket trading, Wells Fargo dropped after missing analysts’ second-quarter profit estimates, adding to worries about the outlook for corporate profits after disappointing results yesterday from JPMorgan Chase & Co. and Morgan Stanley. Here are some other notable premarket movers: Pinterest (PINS US) shares surge as much as 16% in premarket trading after the Wall Street Journal reported that activist investor Elliott Management has acquired a stake in the social- media company. Codexis (CDXS US) tumbles 21% in premarket trading after the enzyme engineering company cut its sales guidance for the year and reported preliminary quarterly revenue that trailed the average estimate. Vonage (VG US) rises 7% in premarket trading after Ericsson receives all the necessary approvals from regulators to buy the cloud-based communications provider. Solar stocks could be active on Friday after Senator Joe Manchin told Democratic leaders he wouldn’t support new spending on climate measures or tax increases. First Solar (FSLR US) falls 2% in premarket trading. Investors are evaluating how hawkish the Fed must be to curb inflation and the likely toll on the economy. Bets on a one-percentage-point July rate hike have been scaled back after the latest commentary pointed toward 75 basis points; a retail sales miss in this morning's data should take a 100bps rate hike off the table. “It seems most market operators are buying the news after selling the rumor of more monetary tightening brought by a higher US CPI,” said Pierre Veyret, a technical analyst at ActivTrades. Investors now expect a 0.75-1% rate hike from the Fed at the end of the month, he said adding that the tightening cycle is projected to end with the benchmark rate at about 3.2% in 2023, with monetary policy then seen as easing to combat slower economic conditions. The pace of monetary tightening along with ebbing liquidity still threatens to stir more market volatility after steep losses for stocks and bonds in 2022. In his latest comments, Fed Governor Christopher Waller backed raising rates by 75 basis points this month, nixing Nomura's base case of a 100bps rate hike, though he said he could go bigger if warranted by the data. St. Louis Fed President James Bullard echoed some of those comments, saying he favored hiking by the same amount. “We need liquidity to dry up in order to reduce inflation,” Erin Gibbs, chief investment officer at Main Street Asset Management, said on Bloomberg Radio. “It’s a challenge, it’s a difficult situation, transition. I don’t envy the Federal Reserve, but we’ve known there has been too much money out there and that’s why we’re here in this position.” In Europe, the Stoxx 50 rallied 1.2%. DAX outperforms adding 1.7%. Autos, energy and retailers are the strongest-performing sectors, while luxury stocks got hit after data showed China’s economy grew at the slowest pace since the country was first hit by the coronavirus outbreak two years ago. LVMH led the declines in European luxury stocks while Richemont and Burberry slide as China’s Covid Zero policy weighs on results. Louis Vuitton owner LVMH down 2.2%, while Birkin handbag maker Hermes and watch maker Swatch fall 1.1% and 3.1%, respectively, as China is a key market for luxury houses. Italy’s benchmark index rallied after the country’s president rejected an offer from Mario Draghi to resign as prime minister. Here are the biggest European equity movers: European automakers and car-parts suppliers lead gains in Europe with the Stoxx 600 Autos sub-index up as much as 3.8%. BofA analysts say current sector concerns are overdone. Uniper gains as much as 12% on Friday as Goldman Sachs upgraded the stock and progress was said to be made on its rescue package. Fortum, which owns 75% of Uniper, up 3.4%. Fevertree shares fall as much as 33%, the most on record, after the high-end tonic maker cut its outlook for the year. RBC said the profit warning raises questions about the company’s pricing power and long-term earnings potential, while UBS pointed to concerns about the “visibility on 2022 and beyond.” Burberry shares drop as much as 7%, the most since March 4, after the British fashion brand surprised investors by reporting a weak 1Q in the Americas. The operating environment in China remains “extremely volatile,” according to Morgan Stanley. Richemont shares fall as much as 6%, the most since May 20, with the 1Q sales beat not enough to quell investor concern over the broader macro-economic backdrop, including what Citigroup calls an “uncertain recovery in China.” TomTom shares gained as much as 9.8%, most since Feb. 7, after company reported “satisfactory results given challenging circumstances,” writes ING. Hapag-Lloyd shares drop as much as 7.1% after Morgan Stanley cuts its recommendation to underweight from equal-weight on expectations that demand for containers will decline in 2023. Direct Line shares rise as much as 3.6% following a 12% drop for the motor insurer in the prior session. Berenberg upgrades its rating to buy, saying the decline has created an opportunity, while JPMorgan cuts its ratings on both Direct Line and peer Admiral. Rio Tinto shares fall as much as 2.9% in London after the miner’s 2Q production report, with the company noting headwinds from a global economic slowdown and China’s Covid outbreaks. Aston Martin shares jump as much as 28%, reversing an early decline, after the luxury car-maker announces a funding package. Friday’s gain is the biggest since May 2020. Earlier in the session, Asian stocks declined as renewed fear of a crackdown on enterprises battered Chinese internet names while traders assessed the market impact from weaker-than-expected China growth data and corporate earnings.  The MSCI Asia Pacific Index fell as much as 0.6%, on track for a weekly decline. Alibaba dragged down the Asian benchmark and the Hang Seng Tech Index following a report that said some company executives were summoned for talks by authorities in Shanghai in connection with the theft of a vast police database. All but two sectors slipped.  Stocks in China declined after data showed that the world’s second-largest economy grew 0.4% in the second quarter, the slowest pace since the country was first hit by the coronavirus outbreak two years ago. While the lower-than-expected expansion extended hopes that Beijing would maintain its easing stance, the latest figure puts its GDP target out of reach. According to Jack Siu, Greater China chief investment officer at Credit Suisse, the government’s current fiscal stimulus on tax rebate and the front loading of special purpose bonds issuance should bring 2022 GDP to 4.8%. READ: Fresh Scrutiny of Alibaba Sends China Tech Stocks Into Tailspin “While disappointing growth data gave views that the current easing stance would be maintained, traders are waiting for the government’s further response as banks, property and other sectors are hit by regulations and growth concerns,” said Kim Kyung Hwan, a Chinese equity strategist at Hana Financial Investment. Asian stocks are poised for their worst week in about a month amid worries about resurging virus cases in China and a possible global recession. Central banks in the region and elsewhere have been tightening their policy to curb high inflation, with decisions by Singapore and the Philippines surprising investors earlier in the week. Japan’s Nikkei 225 rose as the yen held near a fresh 24-year low, remaining close to 140 per dollar.  The Nikkei 225 advanced 0.5% to 26,788.47 at the 3 p.m. close in Tokyo, while the Topix index was virtually unchanged at 1,892.50. Out of 2,170 shares in the index, 745 rose and 1,334 fell, while 91 were unchanged. “The yen’s depreciation to 139 yen provided support, but there is a limit to that,” said Mamoru Shimode, chief strategist at Resona Asset Management. In Australia, the S&P/ASX 200 index fell 0.7% to close at 6,605.60, dragged lower by miners and energy stocks as commodities from iron ore to copper declined. Pendal was the worst performer after reporting net outflows for the third quarter of A$4.2 billion. Iron ore miners dropped on weaker prices for the steelmaking ingredient. Goldman analysts also cut their rating on peer BHP, while Rio Tinto warned of headwinds emerging from a global economic slowdown and China’s Covid-19 outbreaks. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,122.61. In FX, the Bloomberg Dollar Spot Index slumped with AUD and NZD the weakest performers in G-10 FX, while CHF and SEK outperform. The euro held above parity, rising to session highs as US traders walked in. Sterling hovered near a two-year low against the US dollar, which remains broadly supported by demand for the safe-haven greenback. Markets will be keeping an eye on a debate between UK Conservative party candidates later in the day for a steer on who could become the country’s next prime minister. The Aussie weakened for a second day after Westpac trimmed its forecast for RBA rate hikes, and iron-ore prices tumbled. The yen rose from a 24-year low as risk sentiment was subdued amid weak Chinese economic data and concerns over aggressive policy tightening in the US. In rates, Treasuries rose, led by the belly, while gilts jumped at the open and bunds extended gains. Treasuries were slightly richer across the curve with front-end lagging, mildly flattening 2s10s and 2s5s spreads. Yields richer by 2bp to 3bp across the curve with 10-year around 2.93%, trading broadly inline with bunds and outperforming Italian bonds by 4bp. Peripheral spreads widen to Germany with 10y BTP/Bund adding 6.5bps to 213.4bps. Italian bonds yields rose at the front end of the curve as political uncertainty prevailed: indeed, the focus remains on Italian bonds after President Sergio Mattarella rejected Prime Minister Mario Draghi’s resignation late Thursday. US session includes a packed data slate and three Fed speakers before blackout ahead of July 27 policy meeting.  In commodities, crude futures rose. WTI trades within Thursday’s range, adding 0.3% to trade near $96.05. Brent rises 0.7% near $99.83. Metals remain under pressure, with copper touching below $7,000/t and gold testing support at $1,700/oz. To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for June, along with the Empire State manufacturing survey for July, and the University of Michigan’s preliminary consumer sentiment index for July. Central bank speakers include the ECB’s Rehn, and the Fed’s Bostic and Bullard. Earnings releases include UnitedHealth Group, Wells Fargo, BlackRock and Citigroup. Finally, G20 finance ministers and central bank governors will be meeting in Indonesia. Market Snapshot S&P 500 futures little changed at 3,795.50 STOXX Europe 600 up 0.9% to 410.06 MXAP down 0.5% to 153.77 MXAPJ down 0.8% to 505.79 Nikkei up 0.5% to 26,788.47 Topix little changed at 1,892.50 Hang Seng Index down 2.2% to 20,297.72 Shanghai Composite down 1.6% to 3,228.06 Sensex up 0.1% to 53,490.31 Australia S&P/ASX 200 down 0.7% to 6,605.57 Kospi up 0.4% to 2,330.98 German 10Y yield little changed at 1.11% Euro little changed at $1.0026 Gold spot down 0.4% to $1,702.69 US Dollar Index little changed at 108.58 Top Overnight News from Bloomberg China’s economy grew at the slowest pace since the country was first hit by the coronavirus outbreak two years ago, making Beijing’s growth target for the year increasingly unattainable as economists downgrade their forecasts further. The 0.4% expansion in GDP reported for the second quarter, when dozens of cities including Shanghai and Changchun imposed lockdowns, was the second weakest ever recorded With Italy on the brink of chaos, Mario Draghi has less than a week to forge some difficult compromises with the populists in his government that have reluctantly backed him for the past 18 months The ECB will unveil an unlimited bond-buying tool next week to help markets better adjust to steeper and faster interest-rate increases than previously thought, economists surveyed by Bloomberg say Copper is heading for its steepest weekly decline since the early months of the coronavirus pandemic, with fears mounting of a recession that could destroy global demand for industrial commodities A more detailed looked at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed after the 100bps Fed rate hike bets unwound and with headwinds from China's GDP miss. ASX 200 was dragged lower by the mining sector amid losses in Rio Tinto shares despite an increase in its quarterly output and shipments, as it also warned of headwinds to its business and higher costs. Nikkei 225 swung between gains and losses but was ultimately higher intraday amid recent currency weakness and with index heavyweight Fast Retailing boosted by strong 9-month results. Hang Seng and Shanghai Comp. were indecisive after disappointing Chinese growth data which showed weaker than expected GDP and Industrial Production, although Retail Sales surprisingly expanded and the Unemployment Rate declined. Top Asian News PBoC injected CNY 100bln via 1-year MLF vs CNY 100bln maturing with the rate kept at 2.85%. China's Foreign Minister Wang also commented that China-Australia relations currently face challenges and opportunities, while he added that China is willing to recalibrate relations in the spirit of mutual respect, according to Reuters. China NBS official said downward pressure on the domestic economy increased substantially during Q2 and that the foundation for a sustained economic recovery is not solid, while the economy is facing shrinking demand and supply shock, according to Reuters. China's Huaiyuan county has announced a lockdown amid COVID, according to local TV; 151 prelim cases were reported on July 14th, according to CCTV. China Traders Pile Into Carry Trades While Easy Money Lasts Telkom Indonesia Jumps Most in Seven Months on 2Q Bet MTN in Talks to Buy Rival Telkom in Cash & Shares: M&A Snapshot SK Hynix Is Said to Weigh Slashing Spending by 25% in 2023 European bourses are firmer across the board, as initial jittery performance dissipated with participants looking to US data and Fed speak. US futures are in the green, but only modestly so, and have been relatively contained awaiting further guidance from upcoming Fed  officials on the 75bp/100bp discussion. UnitedHealth Group Inc (UNH) Q2 2022 (USD): Adj. EPS 5.57 (exp. 5.20/4.98 GAAP), Revenue 80.30bln (exp. 79.68bln). BlackRock Inc (BLK) Q2 2022 (USD): EPS 7.06 (exp. 7.90) Revenue 4.53bln (exp. 4.65bln). AUM 8.49tln (exp. 8.86tln). Net inflows 89.57bln (exp. 116.78bln). Top European News ECB's Rehn says ECB likely to go 25bps in July and 50bps in September. Note, the ECB is in its quiet period at the moment. Burberry Upbeat on Outlook But Concerns About China Remain Aston Martin Stock Jumps as Carmaker’s Fundraising Calms Nerves Euro Extreme Bearish Bets Have Room to Grow on NatGas Shut Off UBS Wealth Sees 15% Downside for European Stocks in Recession FX Dollar in need of consumption or production boost after two Fed hawks lean against 100bp hike expectations that were becoming embedded for forthcoming FOMC meeting, DXY retreats through 108.500 after setting new 2022 peak at 109.290 yesterday. Franc outpaces fellow majors as yields retreat and curves re-steepen, while retaining bid against Euro, USD/CHF sub-0.9800 vs high near 0.9900 on Thursday, EUR/CHF depressed largely under 0.9850. Aussie underperforms as Chinese GDP data disappoints and iron ore dumps in response; AUD/USD top heavy above 0.6750, AUD/NZD reverses around 1.1000 handle. Loonie pares declines from new y-t-d low vs Greenback as crude prices stabilise, USD/CAD close to 1.15bln option expiries at the 1.3100 strike compared to 1.3200+ high yesterday. Euro attempts to consolidate back on a par with Buck after fleeting if not false break below. Yuan nurses losses after further depreciation on growth concerns and latest Covid lockdowns -Usd/Cnh and Usd/Cny slip from overnight peaks circa 6.7840 and 6.7690 respectively. Fixed Income Bonds back off following further retracement from lows on less hawkish Fed vibes that prompted bull re-steepening Bunds sub-153.00 vs new 153.80 WTD peak, Gilts under 116.00 from 116.39 and 10 year T-note midway between 118-29+/118-13 stalls BTPs stage impressive recovery to 124.30 from 121.96 trough on Thursday awaiting next chapter in Italian political drama Commodities Crude benchmarks are firmer, tracking sentiment, but cognizant of the Saudi-Biden meeting though an immediate production increase is not anticipated; WTI +USD 0.20/bbl. The US is not expecting Saudi Arabia to immediately boost oil production, US eyes the next OPEC+ meeting, according to a US official cited by Reuters. UAE says it wants more stable oil markets, will abide by OPEC+ decision; idea of a confrontational approach re. Iran is not something they buy into, via Reuters. Spot gold remains pressured near, but yet to breach, the USD 1700/oz handle; despite a pull-back in the USD as sentiment turns incrementally more constructive. US Event Calendar 08:30: June Import Price Index YoY, est. 11.4%, prior 11.7%; MoM, est. 0.7%, prior 0.6% June Export Price Index YoY, est. 19.9%, prior 18.9%; MoM, est. 1.2%, prior 2.8% 08:30: June Retail Sales Advance MoM, est. 0.9%, prior -0.3% June Retail Sales Ex Auto MoM, est. 0.7%, prior 0.5% June Retail Sales Ex Auto and Gas, est. 0.1%, prior 0.1% June Retail Sales Control Group, est. 0.3%, prior 0% 08:30: July Empire Manufacturing, est. -2.0, prior -1.2 09:15: June Industrial Production MoM, est. 0.1%, prior 0.2%, revised 0.1% June Capacity Utilization, est. 80.8%, prior 79.0%, revised 80.8% June Manufacturing (SIC) Production, est. -0.1%, prior -0.1% 10:00: May Business Inventories, est. 1.4%, prior 1.2% 10:00: July U. of Mich. Sentiment, est. 50.0, prior 50.0; Expectations, est. 47.0, prior 47.5; Current Conditions, est. 53.7, prior 53.8 1 Yr Inflation, est. 5.3%, prior 5.3% 5-10 Yr Inflation, est. 3.0%, prior 3.1% DB's Jim Reid concludes the overnight wrap The last 24 hours have seen another major risk-off move in financial markets, with worries about a potential recession getting fresh support from a weak round of US bank earnings as we kick off the latest results season, followed by much weaker than expected Chinese GDP growth in Q2. To be honest, it was hard to find an asset class where recession signals weren’t flashing red, with yesterday seeing the S&P 500 (-0.30%) lose ground for a 5th consecutive session, peripheral bond spreads widen in Europe, and oil prices seeing their lowest intraday levels since Russia’s invasion of Ukraine began. In terms of the specific moves, equities declined across the board yesterday with the S&P 500’s losses led by energy and the more cyclical sectors. Banks were a major contributor to that, and JPMorgan (-3.49%) suffered, hitting a 20-month low after their earnings missed expectations and they announced the suspension of share buybacks, whilst Morgan Stanley (-0.39%) saw investment banking revenue down -55% on the previous year. European equities also suffered significant losses, with the STOXX 600 coming down -1.53% on the day. However, the final losses by the US close were far from where they had been at the open, with the S&P 500 recovering from intraday losses of -2.11% after the FOMC’s resident hawks walked back the prospects of a super-sized 100bps hike in July, and signalled that a 75bp increase remained preferable despite the CPI beat. Tech shares were a particular beneficiary, and the NASDAQ managed to eke out a +0.03% gain by the close as a result. In terms of the comments, Governor Waller said that “with the CPI data in hand, I support another 75-basis point increase”. However, he did say that if upcoming retail sales and housing data were “materially stronger than expected it would make me lean towards a larger hike”. And then St Louis Fed President Bullard was quoted in a Nikkei interview that he “would advocate 75 basis points again at the next meeting.” In response, futures dialled back their expectations for a 100bp move, with pricing moving down from a peak of +94bps not long before Waller’s remarks came out, to +82.5bps by the close of trade. Those remarks helped trigger a recovery among US Treasuries, with the 2yr yield falling back from an intraday high of 3.27% to end the day at 3.13%, and this morning it’s fallen further to 3.12%. Yield curves also steepened on the back of the remarks, although the 2s10s curve (+4.9bps yesterday) still remains well in inversion territory at -18.1bps as we go to press. Yields on 10yr Treasuries were up +2.6bps yesterday to 2.96%, although this morning have also fallen back to 2.94%. Today we’ll get further comments from Atlanta Fed President Bostic, St Louis Fed President Bullard and San Francisco President Daly, which will be important as today is the last day before the FOMC’s blackout period begins ahead of their next meeting, so all eyes will be on their thoughts about a 100bps move. Over in Europe, Italian assets lost significant ground yesterday amidst ongoing political turmoil in the country. Prime Minister Draghi tried to tender his resignation after the Five Star Movement boycotted a confidence vote in the Senate, saying that “The loyalty agreement that was the foundation of my government has gone missing”, but President Mattarella rejected it, and it’s uncertain what exactly will happen next. Draghi is set to address parliament next week, although early elections remain a possibility if an agreement is unable to be reached. In terms of the market reaction, Italy’s FTSE MIB underperformed all the other major European indices, with a -3.44% decline that leaves the index at its lowest level since November 2020 just before Pfizer announced their positive vaccine news. Meanwhile the spread of 10yr Italian yields over bunds widened +7.7bps to 206bps yesterday, which is their highest level in nearly a month. That theme of widening spreads was echoed on the credit side too, where iTraxx Crossover widened +22.2bps to 626bps, which is its highest level since April 2020. Yields on 10yr bunds themselves were up +3.3bps. That negative tone has persisted in Asia overnight after China’s Q2 GDP data showed economic growth slowed to just +0.4% year-on-year in Q2 (vs. +1.2% expected). On a quarter-on-quarter basis, there was even a -2.6% contraction (vs. -2.0% expected), which marks the first quarterly contraction since Q1 2020 when the Covid-19 pandemic started. The data for June alone was better however, with retail sales up +3.1% year-on-year (vs. +0.3% expected), and industrial production up +3.9% year-on-year (vs. +4.0% expected). Separately, China have reported their highest number of daily Covid-19 cases in 7 weeks, with 432 infections yesterday, of which 165 were in Guangxi province. A number of equity indices have lost ground against that backdrop, including the CSI 300 (-0.05%), the Shanghai Comp (-0.24%) and the Hang Seng (-1.19%), although the Kospi (+0.22%) and the Nikkei (+0.58%) have advanced, whilst Brent crude oil prices are back above $100/bbl. US and European equity futures are also pointing to a positive start, with those on the S&P 500 (+0.32%), the NASDAQ 100 (+0.41%) and the DAX (+0.99%) all up. Yesterday’s other data releases didn’t exactly help sentiment either, with US producer price inflation beating expectations as well at a monthly +1.1% (vs. +0.8% expected), although core inflation did fall to +0.4% (vs. +0.5% expected). That pushed the headline year-on-year PPI reading up to +11.3% (vs. +10.7% expected), and core fell to +8.2% as expected. Separately, the weekly initial jobless claims for the week through July 9 came in at 244k (vs. 235k expected), which is their highest level since November. Furthermore, the 4-week moving average of claims rose to 235.75k, which was its highest level since December. Instead, the main positive news came from the continuing claims data for the week through July 2, which fell to 1331k (vs. 1380k expected). Here in the UK, the second ballot of Conservative MPs took place yesterday as they select their next leader and the country’s next Prime minister. Former Chancellor Sunak remained in the lead with 101 votes, but trade minister Penny Mordaunt maintained her momentum with an increase to 83 votes, whilst Foreign Secretary Truss won 64 votes. There are now just 5 candidates remaining with the next ballot scheduled for Monday, and there are also a couple of TV debates taking place before then, so there’s still the potential for things to change over the weekend. To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for June, along with the Empire State manufacturing survey for July, and the University of Michigan’s preliminary consumer sentiment index for July. Central bank speakers include the ECB’s Rehn, and the Fed’s Bostic and Bullard. Earnings releases include UnitedHealth Group, Wells Fargo, BlackRock and Citigroup. Finally, G20 finance ministers and central bank governors will be meeting in Indonesia. Tyler Durden Fri, 07/15/2022 - 07:57.....»»

Category: personnelSource: nytJul 15th, 2022