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U.S. moves to cut Huawei off from global chip suppliers as China eyes retaliation

The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies [HWT.UL], spurring fears of Chinese retaliation and hammering shares of U.S. producers of chipmaking equipment......»»

Category: topSource: reutersMay 15th, 2020

How Ukraine Fits Into The Global Jigsaw

How Ukraine Fits Into The Global Jigsaw Authored by Alasdair Macleod via GoldMoney.com, Ukraine is part of a far bigger geopolitical picture. Russia and China want US hegemonic influence in the Eurasian continent marginalised. Following defeats for US foreign policy in Syria and Afghanistan and following Brexit, Putin is driving a wedge between America and the non-Anglo-Saxon EU. Due to global monetary expansion, rising energy prices are benefiting Russia, which can afford to squeeze Germany and other EU states dependent on Russian natural gas. The squeeze will only stop when America backs off. Being keenly aware that its dominant role in NATO is under threat, America has been trying to escalate the Ukraine crisis to suck Russia into an untenable occupation. Putin won’t fall for it. The danger for us all is not a boots-on-the-ground war — that’s likely to only involve the pre-emptive attacks on military installations Putin initiated last night — but a financial war for which Russia is fully prepared. Both sides probably do not know how fragile the Eurozone banking system is, with both the ECB and its national central bank shareholders already having liabilities greater than their assets. In other words, rising interest rates have broken the euro system and an economic and financial catastrophe on its eastern flank will probably trigger its collapse. The bigger picture is Mackinder’s World Island The developing tension over Ukraine is part of a bigger picture — a struggle between America and the two Eurasian hegemons, Russia and China. The prize is ultimate control over Mackinder’s World Island. Halford Mackinder is acknowledged as the founder of geopolitics: the study of factors such as geography, geology, economics, demography, politics, and foreign policy and their interaction. His original paper was entitled “The Geographical Pivot of History”, presented at the Royal Geographical Society in 1905 in which he first formulated his Heartland Theory, which extended geopolitical analysis to encompass the entire globe. In this and a subsequent paper (Democratic Ideals and Reality: A study in the Politics of Reconstruction, 1919) he built on his Heartland Theory, and from which his famous quote has been passed down to us: “Who rules East Europe commands the World Island [Eurasia]; Who rules the World Island rules the World”. Stalin was said to have been interested in this theory, and while it is not generally admitted, the leaders and administrations of Russia, China and America are almost certainly aware of Mackinder’s theory and its implications. We cannot know if the Russian and Chinese leaders and administrations are avid Mackinder fans, but their partnership in the Shanghai Cooperation Organisation is consistent with his World Island Theory. Since commencing as a post-Soviet, post-Mao security agreement between Russia and China founded in 2001 to suppress Islamic fundamentalism, the SCO has evolved into a political and economic intergovernmental organisation, which with its members, observer states, and dialog partners accounts for over 3.5 billion people, half the world’s population. The symbiotic relationship between resource rich Russia and the industrial Chinese ties the whole SCO together. China’s development of the Asian land mass holds the promise of dramatic improvements in everyone’s living conditions. And consistent with the World Island Theory, Chinese money now dominates the whole of sub-Saharan Africa, the Middle East and South-East Asian nations, particularly those controlled and influenced by the Chinese diaspora. China’s influence also spreads to South America through organisations such as BRICS (B is for Brazil) and Chile for copper and other metals. While the Sino-Russian partnership dominates the World Island economically, America has only gradually been expelled from Asian affairs. Its post 9/11 campaigns in the Middle East destabilised that region, creating fuel for America’s enemies and appalling refugee calamities for her European allies to this day. Her withdrawal from resource-rich Afghanistan was merely the last domino to fall. She retains political influence in Western Europe and South-East Asia only, though her military and intelligence presence is still widespread. Today, America’s actions are those of a hegemon whose time is passing. By the UK opting for Brexit, American influence over the European Union through its security and political partnership with the UK has been diminished. Its grip on European affairs through NATO is being undermined by both Turkey’s determination to shift its interests into the Turkic regions of Central Asia, and the EU’s determination to establish its own defence arrangements. The irrelevance of NATO for the future defence of Western Europe is now becoming apparent to the Russians, and it must be hard for them to resist speeding its decline. The cold war in the Pacific is all about containing China. While Taiwan’s future and China’s attempts to establish naval bases in the South China Seas hog the headlines, China’s trade influence in the region continues to increase. After President Trump withdrew America from the planned Trans-Pacific Partnership, the TTP was replaced by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership which came into force in December 2018, whose eleven signatories have combined economies representing 13.4% of world GDP. This makes it one of the largest free trade areas by GDP and includes Australia and New Zealand. Even the UK has formally applied to join (it qualifies as a Pacific nation through its dependencies in the region), so that three of the US security “five eyes” members will be part of the CPTPP. China also applied to join the CPTPP last September. For now, China’s membership of the CPTPP is in doubt. US allies in the partnership, including Japan, are insisting on various obstructive provisions. But in that well-worn hackneyed metaphor, China is the elephant in the room, and it is hard to see the CPTPP holding out against her membership for ever. For now, China can chip away at it by separate free trade agreements with selected CPTPP members, with whom it is already in bilateral trade. Whatever America’s desire to retain political and military control over the Pacific may be, the economics of trade will eventually diminish that influence. And while sabres are being rattled over Taiwan and Pacific atolls, Russia is putting pressure on Europe to put an end to American dominated defence arrangements at the other end of the World Island. Observers of the greatest of the great games would be right to look at current developments over Ukraine in the context of Mackinder’s heartland theory. Understand that, and you have a grasp of Putin’s reasoning. Driving American influence out of the Eurasian continent has been his objective ever since America reneged on her agreement not to advance NATO any closer to Russia following the ending of the old USSR. Ukraine is caught in the middle Both Russia and the Anglo-Saxons are ramping up the rhetoric over Ukraine. Until recently, Ukraine itself had seen little evidence of any truth in Western propaganda, asking for it to be toned down because all this war talk is increasing its likelihood and ruining the economy. Meanwhile the EU mainstream just wants peace and natural gas. Concern is being expressed in some quarters that all this talk of war might become self-fulfilling — like the first World War. In this case, it is generally agreed by military strategists that Putin would be mad to take over Ukraine. He certainly has the fire power, and Ukraine is cast like a Belgium on the Steppes, with two ethnic groups and whose main purpose seems to be to allow foreign occupation and passage for foreign troops. But holding on to Ukraine against the peoples’ will, when there is an immensely long border over which dissidents can be provided with arms and anti-Russian propaganda is another matter. Russian occupation is likely to be limited to defending Donbas and Luhansk now that Russia has formally recognised their right to self-determination. Without firing a shot, the Russian military has moved the border a hundred miles into formally Ukrainian territory. But that is where an occupying invasion is likely to stop and is not to be confused with the pre-emptive strikes against military bases and airfields today. These moves are there to apply increasing pressure for a diplomatic settlement. So, what is it that Putin wants? Basically, he wants America to get out of Eastern Europe. And following Brexit, as America’s poodle he sees no reason why Britain should be there either. And having his thumb over various gas pipes into Europe, he is squeezing Germany and the other EU NATO members into his way of thinking. Ukraine comes in the wake of America’s disastrous evacuation of Afghanistan, which followed the failure of her attempt to remove Syria’s Assad. It is rumoured that US intelligence services organised the failed coup in Kazakhstan, which was quickly subdued by Russian troops. So, from Putin’s point of view, American policy with respect to the Eurasian land mass has failed, he has America on the run, and he will want to capitalise on its retreat. Meanwhile America, which has ruled western Europe through NATO following WW2, finds it hard to come to terms with its setbacks and needs to get back on the front foot. Presumably, by ramping up fears of a Russian invasion, the Biden administration hoped that either Putin would back down or be tricked into attacking Ukraine. If he had backed down, that would be a diplomatic victory and allow America to rebuild its presence in Kiev. If Putin invades and occupies Ukraine, America can help make life extremely difficult for an occupying force. Either way, it would mark the end of American policy failures on the Eurasian continent. Britain, as always, merely toes the American line. But Putin is no fool. He is destroying Ukraine’s economy. He has his thumb on Nord Stream 1 and 2. And Germany has too many commercial and financial interests in both Russia and Eastern Europe for this not to hurt. Germany also hosts the main railhead for China’s silk road. If Germany kowtows to America, will America then put pressure on her to cut ties with China? This is the geopolitical reality Germany and all mainland Europeans must now face. The new German Chancellor must decide: does he back America, sacrifice Germany’s economic potential and see energy costs soar, or does he recognise the economic realities of the Russia—China partnership and the enormous opportunities it provides for the long run? Russia, America, and Germany are the principal actors whose decisions will decide the outcome of the Ukrainian situation. An escalation into a non-nuclear conflict and Russian occupation of Ukraine will only suit the Americans, confirming that their presence is the guarantee of national security. Ukraine has become a virtual battleground. Ukraine’s geographical position, between the liberated central European states and Russia ensured that it would become central to the continuing rivalry between Russia and America. Since the fall of the Soviet Union, Ukraine has been determined to forge its path independent of Russia as a sovereign nation. But its starting point was difficult, with its eastern provinces predominantly Russian, while the western regions were more central European. The Orange and Maidan Revolutions in 2004 and 2014 respectively were proxy struggles between America and Russia. While America allegedly chucked billions into its Ukrainian interests, in 2014 Russia responded by taking over Crimea and fomented rebellions in Luhansk and Donetsk. By capturing Crimea and fostering two breakaway provinces, Putin had won this territorial battle in an ongoing war. Other than these eastern provinces, most Ukrainians have desperately tried to avoid their country becoming a Russian colony. They wanted to apply for EU membership, which was rejected by Russian-backed President Yanukovych in 2013, leading to the Maidan Revolution and Yanukovych fleeing the country to Russia. Ukraine has also sought the protection of NATO, which has provoked Putin to put a stop to American influences marching eastwards. While Ukraine never left the headlines, the US moved its focus to Syria later in 2014.The eventual failure to oust Assad, who drew on Russian help, was followed by Afghanistan. Ukraine is now back in the headlines, this time at the behest of Russia. Putin is now proactively leading this conflict instead of quietly letting America make all the mistakes and rolling with the punches, representing a major change in Russian strategy. It implies that Putin perceives America to be off balance, and he sees it as the time for a winning move. Putin has prepared his defences carefully. US politicians called for Russia to be cut out of SWIFT after the Crimean invasion. Since then, Russia has developed Mir, a payment system for electronic fund transfers, and a SWIFT equivalent known as SPFS — System for transfer of Financial Messages, with agreements linking SPFS to other payment systems in China, India, Iran, and member nations of the Eurasian Economic Union. The Central Bank of Russia has strengthened the commercial banking network. And it has also reduced its dollar exposure as much as possible by investing in gold and euros instead, which means less reserves are held as deposits in the US banking system and invested in US bonds. From these actions, Putin has signalled that he is aware that the danger to Russia is more likely to be a financial war, rather than a physical one. As President Biden said, to have American troops on the ground fighting the Russians is a world war and will not happen. In that sense the Ukraine, over which Russia retains an energy stranglehold, is a virtual battleground for a proxy war. Financial considerations In examining the strengths and weakness of the principal parties, we must first confirm who they are: Russia, America, and the EU. And in the EU, principally it is Germany, but all member states will be affected. As argued above, Russia’s real objective is to get America out of Europe, and Putin’s strategy is to drive a wedge between America and the EU, and in particular its industrial powerhouse, Germany. Plans to split America from Europe go back to Putin’s earlier days, with the construction of Nord Stream to bypass Ukraine with which Russia’s Gazprom was in dispute. Delivering 55bn billion cubic meters of natural gas annually, the first Nord Stream was completed in 2012. A second pipeline. Nord Stream 2, which is ready to go online, doubles this capacity. American pressure on Germany to delay the operation of Nord Stream 2 follows the dollar’s debasement from March 2020 in particular, when the Fed reduced interest rates to zero and instituted QE of $120bn every month. The effect has been to undermine the dollar’s purchasing power for nearly all commodities, including energy. Consequently, a combination of dollar debasement, winter demand and the absence of extra supply from Russia has created an energy crisis not just for Germany, but all EU members. Germany is particularly hard hit, with its producer prices index up 25% year-on-year at the end of January. Germany cannot go along with an escalation of financial sanctions against Russia at a time when its industry is struggling with other rising production costs. Not only is her trade with Russia substantial, but she has banking and financial interests in Central Europe, Eastern Europe, and Russia, which could be destabilised by American-led attempts to restrict payments. Despite Chancellor Scholz’s initial support for EU sanctions Germany is likely to be indecisive, torn between competing demands from a collapsing economy and pressure from NATO. By withholding regulatory permission for Nord Stream 2 he has demonstrated that instead of regarding his electors’ interests as paramount, he has given in to NATO pressure. This weakness on Olaf Scholz’s part is consistent with the indecisive socialism of his Social Democratic Party and Germany’s continuing guilt trip following two world wars. Recognising the importance of Germany and its likely indecision, President Macron of France seized the political opportunity to mediate between Russia and the EU, which suits the Russian cause. Macron simply provided another channel for Putin’s message about NATO: get the US out of Europe and the EU should be responsible for its own defence. And given Macron’s ambitions for France in Europe he is likely to see it as an opportunity to enable France to take the lead in the EU’s future defence arrangements after the Ukraine situation has blown over. That will be down the road, but for now the EU is standing firm behind US and UK sanction proposals. Sanctions rarely work. They merely encourage the sanctioned to dig deeper into their own intellectual and entrepreneurial resources and work hard to find ways round them. Russia will merely sell its gas elsewhere: at these high prices harm is minimal, and they can afford to restrict supplies through Ukraine, the Yamal-Europe and Turk-stream pipeline supplies. It might be sensible for Russia to allow flows through Nord Stream 1 to continue for now, holding its restriction as a backup threat. European gas prices will likely rise even further, providing a price windfall for Russia. The tweet below, from Russian President Medvedev implies European gas prices will double from here. The apparent lack of understanding of economic and financial consequences for the EU by the EU leadership is a wild card danger. The economic and financial exposure of Germany to its eastern neighbours has already been mentioned, but other EU members are similarly exposed. Furthermore, the reckless inflationary policies of the ECB have undermined the financial health of the entire euro system to the point where even on the current rise in bond yields, the ECB and all the national central banks (with only three minor exceptions) have liabilities greater than their assets. The whole eurozone is a mountain of financial disasters balanced on an apex over which it is set to topple. We cannot say for sure that Ukraine will be the last straw for the euro system, but we can point to political ignorance of this instability. Any dissenting central banker (and there could be some, particularly at the Bundesbank) has no influence at the political level. We must assume that none of the major political players in this tragedy are aware of the financial and economic crisis in Europe waiting to be triggered. And if the Russians have made a mistake, it will be in their accumulation of euro reserves, which will turn out to be worthless when the euro system collapses. Financial sanctions against individual oligarchs have probably already been anticipated and avoiding action been taken by them: oligarchs are not dumb. Sanctions against Russian banks will have also been anticipated and will probably inflict less damage on them than on their counterparties in the EU banking system, particularly if SWIFT comes under pressure to suspend Russian banking access. Not only Ukraine, but the whole of the EU, for which Russia supplies over 40% of its natural gas, is being squeezed. We can be reasonably sure that the Russian government has war-gamed this situation in advance. Inflation, gold, and unintended consequences The situation today is very different from that of 2014 at the time of the Maidan revolution, with the world massively increasing government debt and currency in circulation since then. At the time of the Crimean take-over, commodity prices were declining from their peak in 2011, and following Crimea, they fell sharply with negative consequences for the Russian economy. The expansion of world currencies is now driving commodity and energy prices higher due to their purchasing power is declining. Figure 2 shows how a basket of commodities has increased in price since the Fed reduced its funds rate to the zero bound and instituted QE at $120bn per month. In those 22 months commodity prices have risen by 127% by this measure. When all commodity prices rise at the same time it is due to currency debasement, which is what has happened here. Within the broader commodity context, energy price increases have been particularly acute, with Russia being a major beneficiary, leading to a substantial surplus on its balance of trade. It has been a long-term ambition of the Sino-Russian partnership not just to expel America from the World Island but to reduce dependency on dollars as well. While trade between Russia and China is increasingly settled in their own currencies, so long as the dollar has credibility for settling international transactions it will still dominate trade for the other nations in the Eurasian landmass. The fiat alternative for Russia has been the euro, which partly explains why Russia has accumulated them in her foreign currency reserves. But since 2014, the stability of the euro system has deteriorated to the point where the currency is no longer a credible alternative to the US dollar. We cannot be sure if this is understood in the Kremlin. But there has always been a Plan B, which is the accumulation of physical gold. There is evidence that official reserves in China and Russia understate the true position. Following the enactment of regulations in 1983 whereby the Peoples Bank was appointed sole responsibility for the acquisition of China’s gold and silver reserves, I have estimated that the State accumulated as much as 20,000 tonnes of gold before permitting the public to own gold, for which purpose the Shanghai Gold Exchange was established in 2002. Since then, the SGE has delivered a further 20,000 tonnes from its vaults into public hands, though some of this will have been returned as scrap. The Chinese state has retained the exclusive right to mine and refine gold, even importing doré from abroad. China is now the largest gold mine producer in the world by far, continuing to add over tonnes annually to total above ground stocks (last year’s dip to 350 tonnes was due to covid), which are all ringfenced in China. These policies, as well as anecdotal evidence suggests that my earlier estimate of state-owned gold of 20,000 tonnes was realistic. Russia has been relatively late in adding to her gold reserves, having officially accumulated 2,298 tonnes. But being only second to China as a gold mine producer at 330 tonnes, it is likely that following earlier financial sanctions that Russia has accumulated undeclared gold reserves as well. Additionally, we can see that all the SCO members and their associates have increased their declared gold reserves by 75% since 2014. Plan B therefore appears to be to back fiat roubles and renminbi with gold in the event of a Western fiat currency meltdown. The West has no such plan. America’s fifty-one-year denial of and attempted demotion of gold as the ultimate money appears to have left it short: otherwise it could have returned Germany’s gold on demand instead of trying to spin it out over a number of years. Furthermore, Western central banks routinely lease and swap their gold, leading to double counting of reserves and lack of clarity over ownership. We can be sure that neither Russia nor China indulge in these practices. The consequence of these disparities is to weaponize gold’s monetary status, turning it into a nuclear weapon in a financial war. If, say, during NATO-led attempts to destabilise the rouble Russia was to declare another 6,000 tonnes to match America’s unaudited figure and for China to revise its reserves to stabilise the renminbi, it would probably result in a run against the dollar. It would be a sure-fire way for the Asian hegemons to destroy US economic and military power. Therefore, ultimately, the US and its five-eyes allies cannot win a financial war. When China and Russia planned their financial defences, this golden umbrella made sense, and the security services in America would have been aware of it, if not the full implications. But things have changed, particularly the debasement of all major currencies, including the renminbi. China has an old-fashioned cyclical property crisis on her hands and can only think to print her way out of trouble. Together with the Fed, the ECB, and the Bank of Japan, the Peoples Bank has expanded its balance sheet recklessly, and all together they have increased from $5 trillion equivalent in 2007 to over $31 trillion today, with their rate of expansion being particularly high from March 2020. The consequences for their currencies’ purchasing power are becoming obvious now, turbocharging Russia’s strategy with respect to European energy supply. What few politicians appear to be aware of, and we should include Putin in this, is the fragile state of the major central banks. Having loaded their balance sheets up with fixed-interest government debt, falling market values for these bonds are eliminating central banks’ margin of assets over liabilities. While the Fed, the Bank of Japan and the Bank of England can turn to their governments for recapitalisation, embarrassing though that may be, the ECB has no such recourse. The ECB’s shareholders are the national central banks in the euro system. And they in turn, except for Ireland’s, Malta’s, and Slovenia’s central banks, all have liabilities easily exceeding their assets. The euro system is already insolvent, and Russian action on energy supplies could tip the whole currency system over the edge. Given the Russian Central Bank’s reserve holding of euros, we can call that an unintended consequence. Tyler Durden Fri, 02/25/2022 - 02:00.....»»

Category: personnelSource: nytFeb 25th, 2022

Big Marijuana Stock Profits in Surprising Places

You can still get in on the ground floor of the marijuana market, which will only get hotter as more states and countries move toward legalization. Ben Rains shows several ways to invest before the floodgates open. Legal marijuana is a smoking hot growth industry in the U.S., Canada, and beyond. The global cannabis market is projected to soar from $20.5 billion back in 2020 to $90.4 billion by 2026.¹ And these estimates are likely conservative, as the U.S. moves closer to wide-ranging federal legalization and European nations, including economic powerhouse Germany, prepare to do the same in 2022.The best part about investing in legal marijuana right now is that despite all of the progress, there are ample opportunities to get in right near the ground floor given where we are in the legal lifecycle. Plus, many top pot stocks are trading near all-time lows heading into the new year, after they were beaten down in 2021, along with other former covid high-flyers and growth stocks.Still in the Early InningsThe legal recreational cannabis market has come a long way in the last few years. Yet the growth runway remains massive. Eighteen states have legalized adult-use marijuana as of December—up from zero in 2011. Meanwhile, Canada is one of only a couple countries to legalize marijuana nationally and it did so in 2018.Luckily, more U.S. states are poised to join the legal ranks in 2022, while others could add to the number of medical marijuana states to help take the country well above the current 36 states. Crucially, multiple bills are circulating around Washington, D.C. right now that aim to introduce sweeping Federal marijuana legalization, which will be an overnight game-changer and supercharge the space and the stocks.Even Republicans, the party historically opposed to legal weed, have started to roll out their own legalization proposals including one high-profile effort introduced in November. All of this is to say that Washington appears ready to enact some form of Federal legalization soon.The heightened political drive follows increased bipartisan support that matches the polling data—68% of U.S. adults are in favor of legal marijuana, including 50% of Republicans. Legalization at the national level will open the floodgates for U.S. growers to list on the NYSE and the Nasdaq, and for money to pour in from established players far outside the current pot space looking to cash in and make a big splash.Before those floodgates open, savvy investors are starting to focus on companies that are direct plays within the booming marijuana industry. These stocks are primed to continue growing and receiving institutional investment both before and after federal legalization.Continued . . .------------------------------------------------------------------------------------------------------Marijuana Stocks? There’s Never Been a Better TimeToday we’re on the verge of bipartisan marijuana legislation at the Federal level. Once the bill is passed, money is likely to flow into current and brand-new stocks at a rate that has never been seen in this industry.Thirty-six states plus D.C. have already legalized medicinal marijuana and 18 states plus D.C. made recreational use legal. There’s no stopping this trend, and now is the time to join the rush for profits. Global sales are predicted to skyrocket from $20.5 billion back in 2020 to $90.4 billion by 2026.Zacks recently closed marijuana trades of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months. Plus, new stocks are being lined up that could greatly surpass these gains.²See Zacks' latest pot stocks now >>------------------------------------------------------------------------------------------------------Don’t Touch the Plant Only Canadian marijuana growers can list on U.S. exchanges given the current standing of cannabis at the Federal level. Fortunately, outside of growers and pure-play pot companies, an array of stocks and industries provide access to legal marijuana because they maintain just enough distance from cannabis.Don’t touch the plant stocks also theoretically provide greater stability amid the current legal grey area in the U.S. The growing niche within pot investing includes real estate investment trusts, suppliers and equipment makers, tech firms, product safety and testing operations, pharmaceutical giants, and beyond.Hydroponics & High-Tech Farming Marijuana, even with all of the complicated new ways to consume it, is a plant. Therefore, the companies that directly support the growing of cannabis are some of the most straightforward and essential of the don’t touch the plant stocks.Today’s cannabis companies run grow operations that more often resemble high-tech, spotless computer chip factories than anything close to a farm. Hydroponic gardening or farming, which simply means growing without the use of soil, by utilizing formulated, mineral nutrient solutions in water, is front and center of modern cannabis cultivation.Marijuana is planted in an inert growing media and constantly supplied with nutrient-rich solutions, oxygen, and water, while light, temperature, and carbon dioxide levels are carefully controlled through various gadgets and other devices. Hydroponics allows for year-round growing, larger yields, and nearly complete control of the process.The global hydroponics market, which spans from multi-billion dollar operations to home grows, reportedly hit around $10 billion in 2020, and it's expected to reach well over $20 billion before the end of the decade. Many public hydroponics and indoor farming companies have posted 60% or higher revenue growth over the last several years.Plus, large institutional investors are pouring money into hydroponics stocks, with most holding at least 50% institutional ownership, compared to pure-play pot stocks that are closer to 15% or less.Real Estate Expansion Huge, high-tech marijuana growers require tons of capital and cash to start and operate. Yet, marijuana’s classification under federal law makes running successful U.S. pot businesses complex and cumbersome, especially when it comes to money. Most local and national banks don’t want anything to do with the legal marijuana market because of all the various state laws and expensive compliance standards.A few companies have helped fill the void for firms that don’t have access to traditional banking services. This backdrop enables cannabis-focused real estate investment trusts or REITs to essentially lend millions of dollars to cannabis companies that don’t have easy access to other sources of capital and collect extremely high interest rates for doing so, on long-term agreements. And like all REITs, they are required to distribute 90% of their taxable income to shareholders.Cannabis Tech Technology dominates our lives and the market, so of course, it plays a vital role in legal pot. There are multiple companies that sell cannabis-specific software to help growers, dispensaries, and others operate more effectively and efficiently in the highly-regulated space.Various publicly traded companies offer solutions for compliance, data, taxation, payments, plant tracking, and much more. The opportunity for expansion is huge in the marijuana tech world and a few companies are in the midst of rapid consolidation to try to capture more market share ahead of U.S. federal legalization that will likely require increasingly stringent guidelines.Extracting Profits from Plants The transition from the black market to labs and hydroponics ushered in the age of endless, hyper-specific marijuana strains. Outside of traditional flower that’s smoked, tons of growth is coming from edible products, oils, and other highly concentrated forms of cannabis.In order to transform cannabis plants and marijuana buds into new-age consumption methods, from concentrates to topical creams, detailed and varied extraction processes must be completed. There are various extraction methods that must be performed repeatedly and precisely, often on a massive scale.Extraction is growing more crucial given the global scope and the increasing demand for non-flower products, which includes widely popular non-psychoactive CBD products.Marijuana Testing  Medical-grade and adult-use cannabis products sold in legal markets are required by law to be clearly labeled with ingredients, cannabinoid levels, dosage recommendations, and tons of other information. Like all industries, from food to medicine, tons of testing is involved at various stages of the cultivation process.Cannabis testing is a potentially huge segment and it will garner even more attention at the national level, especially amid a rise in laced black market drugs. The broader field includes regulatory compliance, quality control, research, and beyond. There are currently multiple cannabis testing companies out there, and a few publicly traded names stand out through their exposure to other areas outside of marijuana.Pharmaceuticals and Biotech Far outside of medical marijuana exists the nascent world of cannabis-based medicine. There are a few stocks making waves in this growing field. One such public company sells the first prescription, plant-derived cannabis-based medicine approved by the FDA and the European Commission.The drug is used in the treatment of seizures associated with various syndromes in patients one year or older. Another more home-run style stock has attracted investment for its potential first-in-class therapeutics targeting the endocannabinoid system that aims to address needs in multiple diseases and conditions, including anorexia, cancer, pain, and inflammation.Multiple Opportunities for Investors As mentioned, this space looks to explode from $20.5 billion in 2020 to $90.4 billion by 2026. Yet only a few growers, pharmaceuticals, financial firms, suppliers - both established and start-ups - are the true innovators and offer historic profit potential.So if you don't want to devote constant attention and painstaking analysis to find these often little-known tickers, we can find them for you.Today, as the legalized marijuana floodgates are about to open, you’re invited to take part in our portfolio service Zacks Marijuana Innovators.This approach is responsible and vigilant, but we look for aggressive growth. Recently, we closed gains of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months.²Right now you can follow the live buys and sells inside Marijuana Innovators, and be among the first to get in on new buys that I’m lining up.Bonus Report: Speaking of industries with explosive growth potential, when you check our marijuana recommendations you are also invited to download our Special Report, One Semiconductor Stock Stands to Gain the Most. From 35 semiconductor stocks, you can get an early look at Zacks’ top pick during today’s chip shortage crisis.We can’t let everyone in on our marijuana portfolio, so your chance to gain access must end at midnight this Sunday, December 26. Sorry, no extensions.See Zacks' Marijuana Innovators Trades and Bonus Semiconductor Report Now >>Good Investing,Ben RainsEditorBen Rains develops strategies that enable investors to profit from the growing legal market in the U.S. and beyond. Ben uses his extensive experience and concentrated industry study to direct our unique portfolio service, Zacks Marijuana Innovators.¹ Source for marijuana industry growth estimate: Research and Markets ² The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position.  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 To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga Much of the overnight session was a snooze fest with stocks drifting first higher then lower after surging on Tuesday, as the narrative meandered from "omicron fears ease" optimism to "vaccines won't work" pessimism, before futures took a sudden leg lower, dropping into the red just after 530am ET, following news that UK's Boris Johnson would introduce new restrictions in England to curb Omicron spread, sparking fears that Omicron is more dangerous that expected (and than futures reflected). However, this episode of pessimism proved short-lived because just an hour later, the WSJ confirmed that Omicron is really just a pitch for covid booster shots when it reported that even though the covid vaccine loses significant effectiveness against Omicron in an early study, this is miraculously reversed with a booster shot as three doses of the vaccine were able to neutralize the variant in an initial laboratory study, and the companies said two doses may still protect against severe disease. Futures quickly shot up on the news, spiking above the gamma "all clear" level of 4,700 in a move best summarized with the following chart. And so, after going nowhere, S&P futures climbed for a third day, last seen 12 points, or 0.3% higher, just around 4,700 after rising the most since March on Tuesday. Europe’s Stoxx 600 Index rose following the biggest jump in more than a year. In addition to the omicron soap opera, which as we noted yesterday turns out was just one staged covid booster shot advertisement (because Pfizer and Moderna can always do with a bigger yacth), sentiment was also lifted by Chinese authorities' reversal to "easing mode" and aggressive efforts to limit the fallout from property market woes which lifted risk assets in Asia even as key debt deadlines at China Evergrande Group and Kaisa Group Holdings Ltd. passed without any sign of payment. "Clearly in the very short term uncertainty has risen over the Omicron virus... but overall at this stage we do not believe it will derail the macro picture in the medium-term," said Jeremy Gatto, multi-asset portfolio manager at Unigestion. Treasury yields were little changed after rising across the curve Tuesday. The VIX spiked first on the FT news, then dropped back into the red, while the dollar was flat and crude rose after turning red. Besides macro, micro was also in play and here are some other notable premarket movers Apple (AAPL US) ticks 1% higher in premarket trading following a Nikkei report that the tech giant told suppliers to speed up iPhone output for Nov.-Jan, citing people it didn’t identify. Amazon.com (AMZN US) shares in focus after an Amazon Web Services outage is wreaking havoc on the e-commerce giant’s delivery operation Stitch Fix (SFIX US) tumbles 25% in U.S. premarket trading after a 2Q forecast miss that analysts called “surprising,” while customer additions also disappointed Pfizer (PFE US) shares drop 2% in U.S. premarket trading after an early study showed that the company’s vaccine provides less immunity to the omicron variant Dare Bioscience (DARE US) soars 41% in premarket trading after Xaciato gets FDA approval for treating bacterial vaginosis EPAM Systems (EPAM US) soars 8% in premarket after S&P Dow Jones Indices said co. will replace Kansas City Southern in the S&P 500 effective prior to the opening of trading on Dec. 14 Goodyear Tire & Rubber (GT US) upgraded to buy from hold and target boosted to Street-high $32 from $29 at Deutsche Bank with the company seen as a major beneficiary from the shift to electric vehicles. Shares up 4.3% in premarket trading NXP Semiconductor (NXPI US) shares slide 2.2% in U.S. premarket trading after the chipmaker got a new sell rating at UBS Dave & Buster’s (PLAY US) gained 3.5% postmarket after the dining and entertainment company reported EPS that beat the average analyst estimate and authorized a $100 million share buyback program "Every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won't be the curveball to throw the recovery off course," wrote Deutsche Bank strategist Jim Reid in a note to clients. In Europe, the Stoxx Europe 600 Index initially drifted both higher and lower then bounced 0.3% on the favorable Pfizer and BioNTech news one day after posting its bigger surge in a year. European benchmark index earlier rose as much as 2%, dropped 2.1%. Health care sub-index leads gains, rising 1.2%, followed by travel stocks. The Stoxx 600 closed 2.5% higher on Tuesday, biggest gain since November 2020 Earlier in the session, Asia stocks also rose for a second day as concerns about the omicron variant and China’s economic slowdown eased. The MSCI AsiaPacific Index climbed as much as 0.9% after capping its biggest one-day gain in more than three months on Tuesday. Technology and health-care shares provided the biggest boosts. Benchmarks in New Zealand and India -- where the central bank held rates at a record low -- were among the day’s best performers. “The biggest point appealing to investors is that the Omicron variant doesn’t seem to be too fatal,” which is encouraging to those who had been going short to close out their positions, said Tomoichiro Kubota, a senior market analyst at Matsui Securities in Tokyo. “Worry that the Chinese economy will lose its growth momentum has subsided quite a bit.” Thus far, Omicron cases haven’t overwhelmed hospitals while vaccine developments indicate some promise in dealing with the variant. While vaccines like the one made by Pfizer and BioNTech SE may be less powerful against the new strain, protection can be fortified with boosters. The two-day rally in the Asian stock benchmark marks a sharp turnaround following weeks of declines since mid-November. Stocks in China also climbed for a second day. The nation’s central bank said Monday it will cut the amount of cash most banks must keep in reserve from Dec. 15, providing a liquidity boost and helping restore investor confidence In FX, news on the Omicron variant rippled through G-10 currencies after a report the Pfizer vaccine could neutralize the Omicron variant boosted risk appetite. The pound underperformed other Group-of-10 peers, extending declines after reports that the U.K. government is poised to introduce new Covid-19 restrictions.  A gauge of the dollar’s strength fluctuated as Treasuries pare gains and stocks rally after a report that said Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. EUR/USD rose 0.1% to 1.1277; USD/NOK falls as much as 0.8% to 8.9459, lowest since Nov. 25 Sterling fell against the euro and the dollar, as traders pare bets on the path of Bank of England rate hikes following reports that the U.K. could introduce fresh Covid-19 restrictions such as working from home and vaccine passports for large venues. Money markets pare rate hike bets, with just six basis points of interest rate hikes priced in for the BOE meeting next week. GBP/USD falls as much as 0.6% to 1.3163, testing the key level of 1.3165, the 38.2% Fibonacci retracement of gains since March 2020. EUR/GBP gains as much as 0.7% to 0.85695, the highest since Nov. 11. “The market will probably see this as more U.K. specific and therefore an issue for the pound at least in the short term,” said Stuart Bennett, FX strategist at Santander. In rates, Treasuries were mixed with markets reacting in a risk-on manner to the Dow Jones report that Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. Yields remain richer by less than 1bp across long-end of the curve while front-end trades cheaper on the day, flattening curve spreads. Session’s focal points include $36b 10-year note reopening at 1pm ET, following Tuesday’s strong 3-year note auction. Treasury 10-year yields around 1.475%, near flat on the day; gilts outperform slightly after Financial Times report that further Covid restrictions will be announced imminently to curb the variant’s spread. U.S. 2-year yields were cheaper by 1bp on the day, rose to new 2021 high following Pfizer vaccine report; 2s10s spread erased a flattening move In commodities, crude futures turned red, WTI falling 0.8%, popping back below $72. Spot gold holds Asia’s modest gains, adding $8 to trade near $1,792/oz. Looking at the day ahead, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Market Snapshot S&P 500 futures up 0.2% to 4,693.75 STOXX Europe 600 little changed at 480.55 MXAP up 0.7% to 194.84 MXAPJ up 0.6% to 632.78 Nikkei up 1.4% to 28,860.62 Topix up 0.6% to 2,002.24 Hang Seng Index little changed at 23,996.87 Shanghai Composite up 1.2% to 3,637.57 Sensex up 1.8% to 58,654.25 Australia S&P/ASX 200 up 1.3% to 7,405.45 Kospi up 0.3% to 3,001.80 Brent Futures down 0.5% to $75.04/bbl Gold spot up 0.3% to $1,790.33 U.S. Dollar Index down 0.17% to 96.20 German 10Y yield little changed at -0.38% Euro up 0.2% to $1.1286 Brent Futures down 0.5% to $75.04/bbl Top Overnight News from Bloomberg The omicron variant of Covid-19 must inflict significant damage on the euro-area economy for European Central Bank Governing Council member Martins Kazaks to back additional stimulus “The current phase of higher inflation could last longer than expected only some months ago,” ECB vice president Luis de Guindos says at event The earliest studies on omicron are in and the glimpse they’re providing is cautiously optimistic: while vaccines like the one made by Pfizer Inc. and BioNTech SE may be less powerful against the new variant, protection can be fortified with boosters U.K. Prime Minister Boris Johnson is set to announce new Covid-19 restrictions in England, known as “Plan B,” to stop the spread of the Omicron variant, the Financial Times reported, citing three senior Whitehall officials familiar with the matter. French economic activity will continue to rise in December, despite another wave of the Covid-19 pandemic and fresh uncertainty over the omicron variant, according the Bank of France The Kingdom of Denmark will sell a sovereign green bond for the first time next month to help the Nordic nation meet one of the world’s most ambitious climate targets Tom Hayes, the former UBS Group AG and Citigroup Inc. trader who became the face of the sprawling Libor scandal, has lost his bid to appeal his U.K. criminal conviction Poland is poised for a hefty increase in interest rates after a spike in inflation to a two- decade high convinced central bankers that spiraling price growth isn’t transitory. Of 32 economists surveyed by Bloomberg, 20 expect a 50 basis-point hike to 1.75% today and 10 see the rate rising to 2%. The other two expect a 25 basis-point increase Australia is weighing plans for a central bank-issued digital currency alongside the regulation of the crypto market as it seeks to overhaul how the nation’s consumers and businesses pay for goods and services Bank of Japan Deputy Governor Masayoshi Amamiya dropped a strong hint that big firms are in less need of funding support, a comment that will likely fuel speculation the BOJ will scale back its pandemic buying of corporate bonds and commercial paper A detailed summary of global markets courtesy of Newsquawk Asian equity markets traded positively as the region took impetus from the global risk momentum following the tech-led rally in the US, where Apple shares rose to a record high and amid increased optimism that Omicron could be less dangerous than prior variants. This was after early hospitalisation data from South Africa showed the new variant could result in less severe COVID and NIH's Fauci also suggested that Omicron was 'almost certainly' not more severe than Delta, although there were some slight headwinds in late Wall Street trade after a small study pointed to reduced vaccine efficacy against the new variant. The ASX 200 (+1.3%) was underpinned in which tech led the broad gains across sectors as it found inspiration from the outperformance of big tech stateside, and with energy bolstered by the recent rebound in underlying oil prices. The Nikkei 225 (+1.4%) conformed to the upbeat mood although further advances were capped after USD/JPY eased off the prior day’s highs and following a wider-than-expected contraction to the economy with the final annualised Q3 GDP at -3.6% vs exp. -3.1%. The Hang Seng (+0.1%) and Shanghai Comp. (+1.2%) were less decisive and initially lagged behind their peers as sentiment was mired by default concerns due to the failure by Evergrande to pay bondholders in the lapsed 30-day grace period on two USD-denominated bond payments and with Kaisa Group in a trading halt after missing the deadline for USD 400mln in offshore debt which didn’t bode well for its affiliates. Furthermore, China Aoyuan Property Group received over USD 650mln in repayment demands and warned it may not be able to meet debt obligations, while a subdued Hong Kong debut for Weibo shares which declined around 6% from the offer price added to the glum mood for Hong Kong’s blue-chip tech stocks, as did reports that China is to tighten rules for tech companies seeking foreign funding. Finally, 10yr JGBs languished after spillover selling from T-notes and due to the heightened global risk appetite, but with downside stemmed by support at the key psychological 152.00 level and amid the presence of the BoJ in the market today for over JPY 1.0tln of JGBs. Top Asian News China Clean Car Sales Spike as Consumers Embrace Electric Gold Edges Higher as Traders Weigh Vaccine Efficacy, Geopolitics Paint Maker Avia Avian Falls in Debut After $763 Million IPO Tokyo Prepares to Introduce Same-Sex Partnerships Next Year Equities in Europe shifted to a lower configuration after a mixed open (Euro Stoxx 50 -0.7%; Stoxx 600 -0.1%) as sentiment was dented by rumours of tightening COVID measures in the UK. Markets have been awaiting the next catalyst to latch onto for direction amidst a lack of fresh fundamentals. US equity futures have also been dented but to a lesser extent, with the YM (-0.1%) and ES (Unch) straddling behind the NQ (+0.2%) and RTY (+0.2%). Sources in recent trade suggested an 85% chance of the UK implementing COVID Plan B, according to Times' Dunn; reports indicate such restrictions could be implemented on Thursday, with the potential for an announcement today. In terms of the timings, the UK cabinet is penciled in for 15:45GMT and presser for 17:30GMT on Plan B, according to BBC's Goodall. Note, this will not be a formal lockdown but more so work-from-home guidance, vaccine passports for nightlife and numerical restrictions on indoor/outdoor gatherings. APAC closed in the green across the board following the tech-led rally in the US. The upside overnight was attributed to a continuation of market optimism after early hospitalisation data from South Africa showed the new variant could result in less severe COVID, albeit after a small study pointed to reduced vaccine efficacy against the new variant. Participants will be closely watching any updates from the vaccine-makers, with the BioNTech CEO stating the drugmaker has data coming Wednesday or Thursday related to the new COVID-19 variant, thus markets will be eyeing a potential update this week ahead of the Pfizer investor call next Friday. Back to European, the UK’s FTSE 100 (Unch) and the Swiss SMI (+0.8%) are largely buoyed by their defensive stocks, with sectors seeing a defensive formation, albeit to a slightly lesser extent vs the open. Healthcare retains its top spot closely followed by Food & Beverages, although Personal & Household Goods and Telecoms have moved down the ranks. On the flip side, Retail, Banks and Travel & Leisure trade at the bottom of the bunch, whilst Tech nursed some earlier losses after opening as the lagging sector. In terms of individual movers, Nestle (+1.8%) is bolstered after announcing a CHF 20bln share repurchase programme alongside a stake reduction in L'Oreal (+1.0%) to 20.1% from 23.3% - worth some EUR 9bln. L’Oreal has shrugged off the stake sale and conforms to the firm sectoral performance across the Personal & Household Goods. Meanwhile, chip names are under pressure after Nikkei sources reported that Apple (+0.8% pre-market) was forced to scale back the total output target for 2021, with iPhone and iPad assembly halted for several days due to supply chain constraints and restrictions on the use of power in China, multiple sources told Nikkei. STMicroelectronics (-1.7%) and Infineon (-5.0%) are among the losers, with the latter also weighed on by a broker downgrade at JPM. Top European News ECB’s Kazaks Sets High Bar for Omicron-Driven Extra Stimulus Biden Is Left Guessing Over Putin’s Ultimate Aim in Ukraine Byju’s Buys Austria’s GeoGebra to Bolster Online Math Courses Scholz Elected by Parliament to Take Charge as German Chancellor In FX, the Dollar index continues to hold above 96.000, but bounces have become less pronounced and the range so far today is distinctly narrower (96.285-130) in fitting with the generally restrained trade in pairings within the basket and beyond, bar a few exceptions. Price action suggests a relatively muted midweek session unless a major game-changer arrives and Wednesday’s agenda does not bode that well in terms of catalysts aside from JOLTS and the BoC policy meeting before the second leg of this week’s refunding in the form of Usd 36 bn 10 year notes. AUD/EUR - Notwithstanding the largely contained currency moves noted above, the Aussie is maintaining bullish momentum on specific factors including strength in iron ore prices and encouraging Chinese data plus PBoC easing that should have a positive knock-on effect for one of its main trading partners even though diplomatic relations between the two nations are increasingly strained. Aud/Usd has also cleared a couple of technical hurdles on the way up to circa 0.7143 and Aud/Nzd is firmer on the 1.0500 handle ahead of the RBA’s latest chart pack release and a speech by Governor Lowe. Elsewhere, the Euro has regained composure after its sub-1.1250 tumble on Tuesday vs the Buck and dip through 0.8500 against the Pound, but still faces psychological resistance at 1.1300 and the 21 DMA that comes in at 1.1317 today, while Eur/Gbp needs to breach the 100 DMA (0.8513) convincingly or close above to confirm a change in direction for the cross from a chart perspective. CHF/CAD/JPY/GBP/NZD - All sitting tight in relation to their US counterpart, with the Franc paring some declines between 0.9255-30 parameters and the Loonie straddling 1.2650 in the run up to the aforementioned BoC that is widely seen as a non-event given no new MPR or press conference, not to mention the actual changes in QE and rate guidance last time. Nevertheless, implied volatility is quite high via a 63 pip breakeven for Usd/Cad. Meanwhile, Sterling lost grip of the 1.3200 handle amidst swirling speculation about the UK reverting to plan B and more Tory MPs calling for PM Johnson to resign, the Yen is rotating around 113.50 eyeing broad risk sentiment and US Treasury yields in context of spreads to JGBs, and the Kiwi is lagging after touching 0.6800 awaiting independent impetus from NZ manufacturing sales for Q3. SCANDI/EM - The Nok extended its advantage/outperformance against the Sek as Brent rebounded towards Usd 76/brl in early trade and Riksbank’s Jansson retained reservations about flagging a repo rate hike at the end of the forecast horizon, while the Mxn and Rub also initially derived some support from oil with the latter also taking on board latest hawkish talk from the CBR. However, the Cny and Cnh are outpacing their rivals again with some assistance from a firmer PBoC midpoint fix to hit multi-year peaks vs the Usd and probe 6.3500 ahead of option expiry interest at 6.3000 and a Fib retracement at 6.2946, in stark contrast to the Try that is unwinding recent recovery gains with no help from the latest blast from Turkish President Erdogan - see 10.00GMT post in the Headline Feed for more. Conversely, the Czk has taken heed of CNB’s Holub underscoring tightening signals and expectations for the next rate convene and the Pln and Brl are anticipating hikes from the NBP and BCB. In commodities, crude futures have been hit on the prospect of imminent COVID-related measures in the UK, albeit the measures do not involve lockdowns. Brent and WTI front month futures slipped from European highs to breach APAC lows. The former dipped below USD 74.50/bbl from a USD 76.00/bbl European peak while its WTI counterpart tested USD 71.00/bbl from USD 72.50/bbl at best. Overnight the benchmarks traded on either side the USD 75/bbl mark and just under USD 72/bbl after the weekly Private Inventories printed a larger-than-expected draw (-3.6mln vs exp. -3.1mln), albeit the internals were less bullish. Yesterday also saw the release of the EIA STEO, cut its 2021 world oil demand growth forecast by an insignificant 10k BPD but raised the 2022 metric by 200k BPD – with the IEA and OPEC monthly reports poised to be released next week. On the vaccine front, a small preliminary study of 12 people showed a 40x reduction in neutralization capacity of the Pfizer vaccine against Omicron, but early hospitalisation data from South Africa showed the new variant could result in less severe COVID. BioNTech CEO said they have data coming in on Wednesday or Thursday related to the new Omicron variant. The geopolitical space is also worth keeping on the radar, with US President Biden yesterday warning Russian President Putin that gas exports via Nord Stream 2 will be targeted and more troops will be deployed if he orders an invasion of Ukraine. Further, reports suggested, an Indian army helicopter crashed in Tamil Nadu, with Chief of Defence staff reportedly on board, according to Sputnik. Note, Tamil Nadu is located towards the south of the country and away from conflict zones. Elsewhere spot gold was supported by the overnight pullback in the Dollar, but the recent risk aversion took the yellow metal above the 100 DMA around USD 1,790/oz, with nearby upside levels including the 200 DMA (1,792/oz) and the 50 DMA (1,794/oz). Copper prices meanwhile consolidated within a tight range, with LME copper holding onto a USD 9,500/t handle (just about). Dalian iron ore extended on gains in a continuation of the upside seen in recent trade. US Event Calendar 7am: Dec. MBA Mortgage Applications, prior -7.2% 10am: Oct. JOLTs Job Openings, est. 10.5m, prior 10.4m DB's Jim Reid concludes the overnight wrap A reminder that we are currently conducting our special 2022 survey. We ask about rates, equities, bond yields and the path of covid in 2022, amongst other things, and also return to a festive question we asked in 2019, namely your favourite ever Christmas songs. The link is here and it’ll be open until tomorrow. All help filling in very much appreciated. My optimism for life has been shattered this morning. Not from the markets or the virus but just as I woke this morning England cricketers finally surrendered and collapsed in a heap on the first day of the Ashes - one the oldest international rivalries in sport. It was all I could do not to turn round and go back to bed. However out of duty I’m soldering on. After the twins nativity play went without incident yesterday, this morning it’s Maisie’s turn. Given she’s in a wheelchair at the moment she can’t get on stage so they’ve given her a solo singing spot at the start. I’m going so I can bring a bucket for all my wife’s tears as she sings!! If I shed a tear I’ll pretend it’s because of the cricket. The global market rebound continued to gather strength yesterday as investors became increasingly optimistic that the Omicron variant wouldn’t prove as bad as initially feared. To be honest, it was more the absence of bad news rather than any concrete good news helping to drive sentiment. Late in the US session we did see some headlines suggesting that the Pfizer vaccine may provide some defence against Omicron but also that the new variant does evade some of the immunity produced by this vaccine. This report of the small study (12 people!!) from South Africa lacked substance but you could take positives and negatives from it. More information is clearly needed. For the markets though, every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won’t be the curveball to throw the recovery off course. Indeed, to get a sense of the scale of the market rebound, both the S&P 500 and the STOXX 600 in Europe have now clocked in their strongest 2-day performances of 2021 so far, with the indices up by +3.27% and +3.76% respectively since the start of the week. Meanwhile, the VIX fell below 25 for the first time in a week. On the day, the S&P 500 (+2.07%) put in its strongest daily performance since March, whilst the STOXX 600 (+2.45%) saw its strongest daily performance since the news that the Pfizer vaccine was successful in trials back in November 2020. Once again the gains were incredibly broad-based, albeit with cyclical sectors leading the way. The Nasdaq (+3.03%) outperformed the S&P 500 for the first time in a week as tech shares led the rally. Small cap stocks also had a strong day, with the Russell 2000 up +2.28%, on the back of Omicron optimism. This recovery in risk assets was also seen in the bounceback in oil prices, with Brent crude (+3.23%) and WTI (+3.68%) now both up by more than $5.5/bbl since the start of the week, which puts them well on the way to ending a run of 6 consecutive weekly declines. For further evidence of this increased optimism, we can also look at the way that investors have been dialling back up their estimates of future rate hikes from the Fed, with yesterday seeing another push in this direction. Before the Omicron news hit, Fed fund futures were fully pricing in an initial hike by the June meeting, but by the close on the Monday after Thanksgiving they’d moved down those odds to just 61% in June, with an initial hike not fully priced until September. Fast forward just over a week however, and we’re now not only back to pricing in a June hike, but the odds of a May hike are standing at +78.8%, which is actually higher than the +66.1% chance priced before the Omicron news hit. A reminder that we’re just a week away now from the Fed’s next decision, where it’s hotly anticipated they could accelerate the pace at which they’ll taper their asset purchases. With investors bringing forward their bets on monetary tightening, front-end US Treasury yields were hitting post-pandemic highs yesterday, with the 2yr Treasury yield up +5.8bps to 0.69%, a level we haven’t seen since March 2020. Longer-dated yield increases weren’t as large, with the 10yr yield up +3.9bps to 1.47%, and the 5s30s curve flattened another -1.8bps to 54.4bps, just above the post-pandemic low of 53.7bps. Over in Europe there was similarly a rise in most countries’ bond yields, with those on 10yr bunds (+1.4bps), OATs (+1.0bps) and BTPs (+4.4bps) all moving higher, though incidentally, the 5s30s curve in Germany was also down -2.2bps to its own post-pandemic low of 50.0bps. One pretty big news story that markets have been relatively unperturbed by so far is the rising tensions between the US and Russia over Ukraine. Yesterday saw a video call between US President Biden and Russian President Putin. The US readout from the call did not offer much in the way of concrete details, but if you’re looking for any optimistic news, it said that both sides tasked their teams with following up. Setting the background for the call, there were reports immediately beforehand that the US was considering evacuating their citizens and posturing to stop Nord Stream 2 if Russia invaded Ukraine. The Ruble appreciated +0.42% against the dollar, and is now only slightly weaker versus the dollar on the week. Overnight in Asia stocks are trading mostly higher led by the Nikkei (+1.49%), CSI (+1.11%), Shanghai Composite (+0.86%) and the KOSPI (+0.78%) as markets respond positively to the Pfizer study mentioned at the top. The Hang Seng (-0.12%) is lagging though. In Japan, the final Q3 GDP contracted -3.6% quarter on quarter annualised against consensus expectations of -3.1% on lower consumer spending than initially estimated. In India, the RBI left the key policy rate unchanged for the ninth consecutive meeting today while underscoring increasing headwinds from the Omicron variant. Futures markets indicate a positive start in the US and Europe with S&P 500 (+0.41%) and DAX (+0.12%) futures trading in the green. Back on the pandemic, despite the relative benign news on Omicron, rising global case counts mean that the direction of travel is still towards tougher restrictions across a range of countries. In fact here in the UK, we saw the 7-day average of reported cases move above 48,000 for the first time since January. In terms of fresh restrictions, yesterday saw Canada announce that they’d be extending their vaccine mandate, which will now require employees in all federally regulated workplaces to be vaccinated, including road transportation, telecommunications and banking. In Sweden, the government is preparing a bill that would see Covid passes introduced for gyms and restaurants, while Poland put further measures in place, including remote schooling from December 20 until January 9, while vaccines would become mandatory for health workers, teachers and uniformed services from March 1. One move to ease restrictions came in Austria, where it was confirmed shops would be reopening on Monday, albeit only for those vaccinated, while restaurants and hotels would reopen the following week. If you see our daily charts you’ll see that cases in Austria have dropped sharply since the peaks a couple of weeks ago, albeit still high internationally. In DC, Congressional leaders apparently agreed to a deal that would ultimately lead to the debt ceiling being increased, after some procedural chicanery. Senate Majority Leader McConnell voiced support for the measure, which is a good sign for its ultimate prospects of passing, but it still needs at least 10 Republican votes in the Senate to pass. McConnell indicated the votes would be there when the Senate ultimately takes it up, which is reportedly set to happen this week. The House passed the measure last night. Yields on Treasury bills maturing in December fell following the headlines. Looking ahead, today will mark the end of an era in Germany, as Olaf Scholz is set to become Chancellor in a Bundestag vote later on, marking an end to Chancellor Merkel’s 16-year tenure. That vote will simply be a formality given the three parties of the incoming coalition (the centre-left SPD, the Greens and the liberal FDP) have a comfortable majority between them, and the new cabinet will feature 7 SPD ministers, 5 Green ministers, and 4 from the FDP. Among the positions will include Green co-leader Robert Habeck as Vice Chancellor, Green co-leader Annalena Baerbock as foreign minister, and FDP leader Christian Lindner as finance minister. Running through yesterday’s data, the US trade deficit narrowed to $67.1bn in October (vs. $66.8bn expected), marking its smallest level since April. Meanwhile in the Euro Area, the latest Q3 growth estimate was left unchanged at +2.2%, but both Q1 and Q2’s growth was revised up a tenth. Over in Germany, industrial production grew by a stronger-than-expected +2.8% in October (vs. +1.0% expected), with the previous month’s contraction also revised to show a smaller -0.5% decline. In addition, the expectations component of the December ZEW survey fell by less than expected to 29.9 (vs. 25.4 expected), but the current situation measure fell to a 6-month low of -7.4 (vs. 5.7 expected). To the day ahead now, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Tyler Durden Wed, 12/08/2021 - 07:58.....»»

Category: blogSource: zerohedgeDec 8th, 2021

Covid Woes And Supply Chain Issues Among The Drivers In FTSE Reshuffle

The FTSE All Share Index Quarterly Review is based on closing prices today and is due to be announced on Wednesday 1 December, with the changes effective after the close on Friday 17 December. Q3 2021 hedge fund letters, conferences and more A sparky performance by Electrocomponents pushes it into a prime position to move into […] The FTSE All Share Index Quarterly Review is based on closing prices today and is due to be announced on Wednesday 1 December, with the changes effective after the close on Friday 17 December. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more A sparky performance by Electrocomponents pushes it into a prime position to move into the FTSE 100. Dechra pharma, another FTSE 100 contender has clawed opportunity from the soaring popularity for pets. Cyber Security firm DarkTrace set to slip out of the FTSE 100 following a share slide as the lock-in IPO period ended. Johnson Matthey’s position in the FTSE 100 looks shaky after it abandoned its battery plans. Supply chain issues plague electrical retailer AO World as it looks set to slide from FTSE 250. Petershill Partners eyes up a FTSE 250 position and fresh acquisitions of private equity assets. Fresh Covid woes hit The Restaurant Group as it looks set to slide out of the FTSE 250. Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown summarises the runners and riders: Electrocomponents – Contender To Enter The FTSE 100 "The sparky performance by Electrocomponents plc (LON:ECM), with adjusted pre-tax profits up 91% for the first half of the year, has led to a surge in its share price, pushing it into a prime position to move into FTSE 100 territory. The vast range of industrial and electronics products held by the distributor is partly behind its success, as well as its smooth online operations fulfilling the lucrative business-to-business segment. It’s not been immune from higher transport and labour costs, and global supply chain issues, but it appears to have deftly managed its inventory and kept margins intact. Although there are likely to be further cost pressures ahead, Electrocomponents appears in a robust position, particularly given that demand for electrical parts shows little sign of waning." Dechra Pharma - Contender To Enter The FTSE 100 "Dechra Pharmaceuticals plc (LON:DPH) has clawed opportunity from the soaring popularity for pets during the pandemic. Its share price has bounded upwards and it is a prime contender to take a walk into the FTSE 100. With so many more people working from home, it’s been an ideal opportunity to settle in a new furry friend and Dechra is in the business of keeping them healthy throughout their lifetimes. Demand for the pharmaceutical company’s veterinary products has been strong, with full year results showing pre-tax profits almost doubling. There is a risk that with incomes facing a squeeze from rising inflation, spending per head could decline, so there could be headwinds to navigate. But other results from pet orientated companies indicate that demand for pets doesn’t seem to be falling away, which bodes well for future revenues streams." Darktrace – Likely To Be Demoted From The FTSE 100 "Cyber security firm Darktrace PLC (LON:DARK) made a stealthy entry into the top-flight at the last reshuffle, but it’s a leading contender to leave the blue chip index given that shares have fallen by 52% since reaching a record high in September. This appears to be down to the end of the lock-up period following its IPO, with big chunks of new shares flooding the market prompting the falls. Darktrace is not alone in being a former IPO darling, now experiencing the pain of a rapid deceleration in its share price. Its successful launch in the spring was seen as a coup for the London market, and if it exits the top-flight it will leave a big tech gap in the FTSE 100. However, given ongoing growth reported by the company and some pretty upbeat trading updates, it may not stay outside the top-flight for long.  There is growing demand for sophisticated technology to counter the growing armies of cyber criminals and Darktrace uses AI to scan regular business operations and detect tiny irregularities, providing an early warning system of cyber-attacks. The ongoing shift to digital is likely to keep opening up new opportunities and markets for Darktrace as firms scale up their operations to meet demand, whilst trying to ensure their systems stay secure." Johnson Matthey – Likely To Be Demoted From The FTSE 100 "Investors are clearly worried about Johnson Matthey PLC (LON:JMAT)’s strategy for the future and amid this uncertainty, the company risks sliding out of the FTSE 100. The engineering company’s decision to abandon plans to become a battery supplier by selling off its eLNO business saw shares slide, because this appeared to be JMAT’s answer to the shift towards electric vehicles and away from combustion engines, for which it makes catalytic converters. Management says it will focus on other potential growth avenues, but ultimately the group will be starting from scratch as it looks for new opportunities alongside the new greener auto industry. Although catalytic converters won’t be rendered obsolete immediately, the clock is ticking and as the transition to electric vehicles speeds up, Johnson Matthey will need to quickly find a new sense of direction." AO World – Likely To Be Demoted From The FTSE 250 "Online electrical retailer AO World PLC (LON:AO) was well set up to capitalise on the accelerated shift to e-commerce during the first stages of the pandemic, with profits soaring as demand for white goods and IT equipment bounded higher. But the company has come down to earth with a bump, falling to a £10 million half year loss, sending shares plummeting, and this dramatic reversal of fortunes is likely to see it kicked out of the FTSE 250. Its rapid growth seems to have been part of the problem, given that it hasn’t had as much time to build up deep relationships with suppliers, so when the supply crunch hit for electrical goods, it was lower down on the list of priorities. Higher labour and transport costs exacerbated by the shortage of drivers have also dented margins, given that it’s so reliant on its delivery network to make sales and provide after care. A quick turnaround is unlikely given that the company has warned that the crucial Christmas trading period will be tough, with supply chain issues lingering, so AO World may find it hard to climb back up the ladder into FTSE 250 territory for some time." The Restaurant Group – Likely To Be Demoted From The FTSE 250 "As fears about the Omicron variant swirl, there are fresh concerns that restrictions could be tightened on hospitality firms and The Restaurant Group PLC (LON:RTN) hasn’t escaped this fresh round of volatility. Although shares are up marginally today, they have fallen by 35% over the past month as investors worry that despite a big round of cost cutting and the slimming down of its restaurant footprint, a big bounce back in fortunes remains elusive.  Although its star brand Wagamama is dishing out fast food as fast as it can make it to crowds queuing outside restaurants or ordering in from home, its airport concessions arm has struggled with a 53% fall in like-for-like sales at the last quarterly reading, as tourism has been slow to recover. Like many other firms in the sector the company is also facing the challenges of higher costs and wage pressures, amid a shortage of staff and those problems look set to linger." Provident Financial - Contender For The FTSE 250 "Provident Financial plc (LON:PFG), the sub-prime firm known for specialising in credit cards, online loans and consumer car finance is likely to gain a foothold in the FTSE 250 after its valuation recovered as it’s pivoted the business. The company called time on its doorstep lending business earlier this year as part of its attempt to climb out of a financial black hole, after being forced to pay compensation for mis-selling its products. Shifting its business model away from riskier high interest loans towards a mid-cost credit model is now more of a focus for the company and it’s a direction of travel investors have embraced. Although the shine has come off the share price in recent days, which may be partly due to fears that if the new variant leads to another downturn, the potential for bad loans could increase, shares are still up by 41% over the past six months." Petershill Partners – Contender For The FTSE 250 "Petershill Partners PLC (LON:PHLL) only started trading on the London Stock Exchange in September but already it’s a leading contender to step into the FTSE 250. Petershill owns minority stakes in a range of alternative asset managers such as venture capital firms and private equity companies, many of which had been managed by Goldman Sachs for a decade or more.  Assets under management at the investment firm increased by 8% in the third quarter, and it has its eye on fresh prizes with new acquisitions being sized up. Petershill has capitalised on the hunger for private equity investments in an era of ultra-low rates, enabling firms to borrow cheaply to finance takeovers.  With an increase in interest rates looming there is a risk that appetite for such assets may wane, and that might partly account for a slight nudging downwards in the share price over the past month." About Hargreaves Lansdown Over 1.67 million clients trust us with £138.0 billion (as at 30 September 2021), making us the UK’s number one platform for private investors. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month. Updated on Nov 30, 2021, 12:19 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 30th, 2021

Inside the New Basketball League Paying High Schoolers Six-Figure Salaries

A lot is riding on Overtime Elite’s fate Most high school hoops players across America—if they’re lucky—travel to their games in a yellow school bus. They might—if they’re lucky—compete in front of the local junior college scout. But members of Overtime Elite, the new professional basketball league for 16-to-19-year old stars, arrive in style, to play before a far more influential audience. On a crisp autumn morning in Atlanta, more than two dozen Overtime Elite (OTE) pros, who make at least six-figure salaries, stepped off a stretch limo bus, one by one. The players entered the brand-new 103,000 sq.-ft. facility built by Overtime, a five-year-old digital sports media startup that developed a huge following after posting Zion Williamson’s high school dunks on Instagram. Waiting for them at OTE’s inaugural “pro day”: some 60 pro scouts, including reps from 29 out of 30 NBA teams, sitting along the sideline and behind the baskets. They leafed through the scouting packet provided by OTE, which included information like the wingspan and hand width of each player plus advanced statistics on their performances during preseason scrimmages, whispering to one another about which ones they were excited to see. [time-brightcove not-tgx=”true”] Andrew Hetherington for TIMEEmmanuel Maldonado, Ryan Bewley, Bryce Griggs, Jalen Lewis of Overtime Elite taking a quick break from warm ups at the practice courts at the OTE arena. Andrew Hetherington for TIMEPlayers stretch next to practice courts at the OTE arena. As the league’s coaching staff led players through NBA-style drills, the scouts eyed Amen and Ausar Thompson, a set of rangy 6-ft. 7-in. twins from Florida who skipped their senior year of high school to join OTE. The brothers made clever dribble moves, before driving down the lane to throw down thunderous dunks. “The Thompson twins are obviously top talents,” says ESPN draft guru Jonathan Givony, who was also in Atlanta for the OTE pro day. “Those guys are ready to be seriously considered as NBA draft picks.” OTE made a strong first impression, but the evaluators universally agreed that not all of the 26 OTE players in the gym were bound for the NBA. Given the supply of global talent chasing that dream, and the precious few spots available, elementary math suggests such an outcome is all but impossible. The coaching came across as high-level. Anton Marshand, a scout for the Cleveland Cavaliers, expects to make frequent trips to Atlanta this season. “For us to be able to evaluate them now and see their growth over time, that’s the key,” says Marshand. “It’s a pro environment.” Andrew Hetherington for TIMEAmen Thompson (#1) of Team OTE on the show court at the OTE arena. Andrew Hetherington for TIMEAusur Thompson and Amen Thompson chat after practice. OTE is launching at a landmark moment in the history of American sports. For decades, talented teenagers in fields like acting and music could monetize their unique gifts by signing lucrative, life-changing financial agreements. But archaic rules and attitudes largely kept athletes from doing the same, preventing them from cashing in until they reached major pro leagues like the NFL or the NBA. Those restrictions are now going the way of the peach basket. In June, the Supreme Court captured these shifting assumptions concerning athletic amateurism in a ruling that prevents the NCAA from capping education-related benefits. In a scathing concurring opinion, Justice Brett Kavanaugh wrote that the business model of the NCAA, an organization that has long kept college athletes from being paid—despite the millions in revenue many of them generate for their institutions—would be “flatly illegal in almost any other industry in America.” About a week later, the NCAA, with public opinion and the highest court in the land turning against its outdated notions of amateurism, relented, and allowed college athletes to profit off their names, images and likenesses. Read More: Why The NCAA Should Be Terrified Of Supreme Court Justice Kavanaugh’s Concurrence Naturally, businesses—many of them upstart tech platforms—have stepped into the fray, hoping to turn a profit by helping young athletes cash in on new opportunities. Brands like Icon Source, INFLCR and PWRFWD are promising to open up sponsorship opportunities, build social media presence and sell the merchandise of college athletes. A company called Opendorse aims to connect athletes with sponsorship opportunities—not unlike, say, how Uber connects drivers with riders, or Airbnb matches hosts and vacationers. With the loosening of name, image and likeness, or NIL, restrictions, Opendorse expects to quadruple its annual revenue in 2021 to more than $20 million. Tim Derdenger, a professor at the Carnegie Mellon Tepper School of Business, estimates that the NIL market for college athletes alone could reach more than $1 billion in five years. But by betting on the popularity of high school basketball players, Overtime is taking a more radical, and potentially transformative, approach. Overtime’s pitch to players: forget college basketball. OTE promises to pay six-figure salaries and offer access to high-level coaching and skill development in a sports-academy setting, to prepare athletes for a pro career. OTE has also hired teachers and academic administrators so that players can secure their high school diplomas. The operation has financial backing from an All-Star investor lineup, which includes Jeff Bezos’ Bezos Expeditions fund, Drake, Reddit co-founder Alexis Ohanian and a slew of NBA players like Kevin Durant, Carmelo Anthony and Trae Young. In March, Overtime raised $80 million. Andrew Hetherington for TIMEPlayers take classes at a WeWork space in the Buckhead neighborhood of Atlanta. Andrew Hetherington for TIMEBryce Griggs and TJ Clark leave the locker room on to the OTE practice courts in Atlanta. Signing with OTE isn’t a decision players take lightly. Under current NCAA rules, athletes with OTE contracts are classified as professional players who have forfeited any eligibility to play college basketball, an enterprise that, despite all its flaws, is a proven path to lifelong educational benefits and the NBA. If an OTE player does not make it to the NBA or secure a professional gig overseas, Overtime is pledging to kick in $100,000 to pay for a student’s college education. “You can’t beat that,” says Bryson Warren, a would-be high school junior from Arkansas who’s eligible for the 2024 NBA draft. “At the end of the day, I can still be a doctor and make NBA money.” For some, however, the OTE deal sounds almost too good to be true. At pro day, the same scouts who looked up to the ceiling of OTE’s airplane-hangar-size structure in wonder, asked the same question: How is OTE going to survive? The sports landscape is littered with failed professional leagues. Overtime has spent millions on a school, a coaching and basketball operations and performance staff rivaling that of NBA teams, not to mention salaries and housing for its players and a massive new structure. Dan Porter, Overtime’s CEO and co-founder, has heard all the skepticism. “Everyone wonders, What’s the business model?” he says. Porter points to OTE’s late-October opening weekend of games as a sign of the league’s promise: he says OTE content generated 23 million views, and 8.8 million total engagements, across social media. Andrew Hetherington for TIMEJai Smith of Team Elite makes his pre-game entrance on the inaugural night of games at the show court at the OTE arena. What’s more, now that top prospects can sign lucrative sponsorship deals while at proven collegiate powers like Duke, Kentucky, and Kansas, OTE may have to increase salary offers, further driving up its costs. And if Overtime’s marketing prowess helps the players build enough of a social media following to make OTE profitable, will that focus on building brands deter from their athletic development? OTE’s bottom line alone can’t thrive; the company needs to produce NBA draft picks. “We told kids when we recruited them,” says OTE director of scouting Tim Fuller, “our national championship is when you shake [NBA commissioner] Adam Silver’s hand.” A lot is riding on OTE’s fate. Success has potential to create economic empowerment and more options for young, mostly Black athletes who for far too long have been funneled into a system that mostly enriches white coaches and administrators, but not them. It could spawn copycats across sports (with the unintended consequence of further igniting the hyperspecialized, hypercompetitive $19 billion youth sports feeder system that often offers parents a false sense of their kids’ pro potential). OTE’s failure, however, might not cost just Bezos and Drake a rounding error of their overall wealth. Much worse, this disruptive idea could derail dreams. A new model OTE placed its recruiting call to Troy Thompson in the spring, at a fortuitous time. Troy’s twin sons, Amen and Ausar, had just played nearly 30 games over five weeks on the AAU circuit, where overuse injuries are becoming more common. The boys, who were based in Florida, had traveled to Illinois, Wisconsin, Arizona, Missouri and Georgia during this swing. They were able to showcase their ability, but the twins barely had time to practice on the all too common travel sports grind. Were they actually improving? “OTE called right when my mind was going, ‘O.K., I’ve got to find a way to slow this thing down,’” says Troy. The OTE offer—a six-figure salary, plus the emphasis on player development in an academy setting—sounded attractive. “It’s like we’re getting to fast-forward their dreams,” says Troy, who works in security. Ausar was on board. Amen, however, took a little more convincing. “He’s hardheaded,” Ausar says of his twin brother, who was sitting next to him during an OTE post–pro day brunch of pancakes, shrimp, lobster, grits and potatoes, served at a Georgia Tech off-campus apartment complex that houses the OTE players. (It abuts a golf course, and includes a leafy courtyard and a pool.) Amen was looking forward to chasing another high school state title. He had always dreamed of playing college basketball, even as a “one-and-done” player who enters the NBA draft after freshman year. Kansas, Florida, Auburn and Alabama had already offered the twins basketball scholarships, and Kentucky had reached out with interest. “It’s just what I’ve known,” Amen says of college basketball. “And it’s shown to be proven.” After “a million conversations,” says Amen, he was on board. He ultimately thought he had outgrown scholastic competition. In Atlanta, the Thompsons mention to TIME that they have just missed their final high school homecoming. But Amen insists he’s still going to prom. “I’m just going to walk in,” says Amen. He quickly realizes party crashing won’t be so simple. “As soon as I left the school, they didn’t let me shoot in the gym anymore,” says Amen. “So, actually, I will need to have a date [from the school] to prom.” Adjusting to Atlanta took some time. At first, Troy says, his sons complained about the OTE curfew. According to OTE’s dean of athlete experience and culture, former 10-year NBA veteran Damien Wilkins, during the week players must be in the residence building at 10 p.m., and in their apartments at 11 p.m. But Amen and Ausar have gotten accustomed to the rules, and they insist they have no regrets about forgoing their senior year of high school, and the potential to win a national championship in college, to join OTE. Troy believes them. “I guess they’re loving it where they are,” he says. “Because, guess what? Dad hardly ever gets a phone call.” The OTE weekday starts around 9 a.m. when the players arrive—on the limo bus—at school. (Starting in early November, classes will be held at the OTE facility; before then, while building construction was being completed, the classes took place at a WeWork space in Atlanta’s Buckhead neighborhood.) On an October day, one group of students are solving radical expressions in math; in social studies, a trio of players listen to a lecture about English colonial labor systems. A skeleton stands in a common area: the science teacher is reviewing anatomy. Students work on their “persuasive essays,” which they must turn into a 30–60 second commercial spot. Ausar, reading from a marble notebook, touts the benefits of water aerobics: “Who doesn’t love fun times in the pool?” Amen has picked stretching. “Remember, stretching over stress,” Amen says, snapping his fingers and pointing to the camera. Andrew Hetherington for TIMEPlayers take classes at a WeWork space in the Buckhead neighborhood of Atlanta. Andrew Hetherington for TIMEOvertime Elite players relax between classes at the WeWork space. Academics last around 3.5 to 4 hours a day, before the players grab lunch and head to basketball practice. Class sizes are small: the student-teacher ratio rarely exceeds 4 to 1. OTE’s academic head, Maisha Riddlesprigger—Washington, D.C’s. 2019 principal of the year—has heard too many times for her liking the assumption that OTE’s academic component serves as window dressing. “I think that comes from this deficit mindset that you can’t be an athlete and a scholar at the same time,” says Riddlesprigger. Veteran educator Marcus Harden, OTE’s senior administrator for academics and development, admits he worried that these high school juniors and seniors with healthy bank accounts and pro basketball ambitions would tune out classwork. And while some OTE players are more invested in school than others—fighting student phone-scrolling habits in class is an ongoing battle—Harden insists that overall, the students have exceeded expectations. “We would be negligent if we sent them out into the world with fake diplomas,” says Harden. “Even with the short day, I can say we’re doing this with integrity.” For the sake of students who might not make it in basketball, OTE must deliver on this promise. Still, former NBA player Len Elmore, a Harvard Law School grad and current senior lecturer at Columbia University’s sports management program, worries that even if the players who get injured or don’t pan out do return to college, they still might be worse off—savings accounts notwithstanding. “Come on, we’re talking about 17- and 18-year-olds who now have fizzled out at their dream,” says Elmore. “And now you expect them to go to a college that they were recruited by, or that they could have been recruited by, and enroll and go to class and watch other guys playing college basketball, knowing that they could have done that? That to me could also create some mental health issues.” ‘It’s lit’ When Porter, the OTE CEO, was head of digital at superagency WME in 2016, he spotted a shift in the way Gen-Z and younger millennials consumed sports content. Young people were less interested in sitting in front of a TV to watch live basketball or football games. They craved stories, personalities and highlights. They wanted it on demand, on their mobile devices, specifically on the social media platforms that spoke best to them, like Instagram. Porter co-founded Overtime late that year, focusing at first on high school basketball. A proprietary technology allowed videographers to shoot clips in gyms across the country and upload them to the cloud; the company’s social media editors fired off their favorite highlights. Williamson, who despite being built like an offensive lineman could throw down 360-degree slams on his comically inferior schoolboy competition, emerged as Overtime’s first star. The company built a young digitally-native cult following that has grown to more than 50 million followers across Instagram, TikTok, Snapchat, YouTube and other platforms. “If you are an ESPN or a traditional publisher, you can’t appeal to a young audience with a bunch of traditional sports programming,” says Porter. “You also can’t go on your accounts, and be like, ‘It’s lit,’ and a bunch of 50-year-old guys who are looking to figure out who they are going to start on their fantasy team are like, ‘I don’t understand what this is.’” Read more: As College Athletes Finally Start Cashing In, Entrepreneurs Big And Small Also Look To Score Overtime has since branched out into e-commerce, as well as longer-form programming, like a documentary about current Chicago Bears rookie quarterback Justin Fields that lives on YouTube (and attracted some 426,000 views). Blue-chip companies like Gatorade, McDonald’s and Nike have advertised on the platform; Rocket Mortgage sponsored a post in which Miami Dolphins rookie wide receiver Jaylen Waddle looks for houses in South Florida. When Overtime was recruiting former Sacramento Kings and Philadelphia 76ers exec Brandon Williams to run OTE’s basketball operations, Williams, who was previously unfamiliar with the brand, knew he needed to consider the offer when his 10-year-old son gushed over the Overtime stickers that were sitting on his desk—he told Dad Overtime was kind of a big deal. Later, when some little kid spotted Williams wearing an Overtime shirt at an airport, the boy curved his hands into an “O”—a reference to the Overtime logo—as if approving Williams’ youth cred. Andrew Hetherington for TIMEBryce Griggs of OTE with the ball during the inaugural night of games in the show court at the OTE arena. Andrew Hetherington for TIMEThe OTE bench watches the game at the show court at the OTE arena A few factors coalesced to give birth to Overtime Elite. For one thing, Porter got weary of hearing feedback from college basketball programs that they appreciated Overtime giving their recruits exposure on the high school level, since the schools could then capitalize on their popularity. “I’m like, ‘That’s good for you, but that’s not very good for me,’” says Porter. An Overtime-branded league could keep personalities in the company’s ecosystem and give the startup a valuable piece of intellectual property. And the experience of another early Overtime star, current Charlotte Hornets point guard LaMelo Ball, opened Porter’s eyes. Ball spent one of his high school years—and part of the season he would have typically spent in college before becoming eligible for the NBA draft—playing overseas in Lithuania and Australia. He became the third overall pick of the 2020 NBA draft, and won last season’s rookie of the year honors. To Porter, Ball’s experience proved that talented players were willing to try a different path to the NBA. Former NBA commissioner David Stern, who passed away in January 2020, initially told Porter and Overtime’s other co-founder, Zack Weiner, that they were crazy. Overtime already had a compelling core business, and Stern knew from experience the hassles of running a sports league. But Stern eventually came around to the idea; his son, Eric, is one of OTE’s investors. Overtime Elite has signed multiyear, multimillion-dollar sponsorship agreements with Gatorade and State Farm. Both companies have prominent signage at the 1,100-seat “OTE Arena,” which is also part of the 103,000-sq.- ft. structure in Atlanta. OTE’s showcase court, which hosted its first set of games on Oct. 29, features LED lights and a Jumbotron. Topps is producing trading cards for OTE players; Porter says that “hundreds of thousands of dollars’” worth of cards have already sold, and that they should start appearing in Walmart, and hopefully Target, in December or January. Some NFT initiatives are sure to follow. OTE is not live-streaming games yet—Porter wants to create scarcity and buzz—but the content team is creating a mix of highlight packages and an episodic behind-the-scenes docuseries on the players. Overtime—which has yet to turn a profit—expects annual revenue to reach up to $300 million in five years, with Overtime Elite bringing in about a third of that haul. The company, and its investors, are betting that Overtime’s built-in brand notoriety and audience will differentiate OTE from other upstart sports leagues that have failed. “We don’t have that same kind of cold-start problem,” says Porter. ‘Dunk lines for content’ But the high stakes aren’t limited to Overtime’s bottom line. Players are placing their futures in the company’s hands, which puts the onus on OTE’s basketball development staff to ensure that, at worst, each player receives at least a lucrative pro offer overseas. The players do have impressive tools at their disposal. During one practice, for example, a biomechanical engineering Ph.D. rushes to tuck a microchip into the shorts of a few players: this technology allows OTE’s four-person analytics and data science team, led by applied math PhD. and former Philadelphia 76ers researcher Ivana Seric, to track how far and fast players move during practices. This information allows the coaches to better control wear and tear. Cameras atop each shot clock on the OTE practice courts can show, for example, how far to the left or right players are missing their shots. They can adjust accordingly. A 10-person on-court coaching staff, led by former UConn coach Kevin Ollie (who won the 2014 men’s national championship with the Huskies) fans out at four different baskets during practice, allowing players to work on team concepts, like defending screens and pick-and-rolls, and individual skills (they take ample corner threes and floaters, both key tricks of the NBA trade). Like any upstart, however, OTE has experienced hiccups. When Porter came to visit the academic session, a couple of players were unafraid to point out to him that the flimsy boxed roast beef and cheese sandwiches served for lunch—they may have fit it at the Fyre Festival—were subpar nourishment before practice. “This looks scary,” Porter admitted, eyeing the sandwich. “I wouldn’t eat it.” OTE launched in March, and settled on Atlanta as its home in May, meaning the facility, which comes chock-full of amenities like two oversize bathtubs for recovery and a players’ lounge and NFL-size weight room—as well as classroom and office space—needed to be constructed in five months. A few days before OTE’s opening games Halloween weekend, Ollie shouted instructions at practice over hardhats’ drilling; construction detritus forced one door to remain open, allowing a cool Georgia draft to accompany the players on the practice floor. Andrew Hetherington for TIMEKevin Ollie, Head Coach and Director of Player Development of the OTE coaches Team Elite during the inaugural night of games at the show court at the OTE arena. Andrew Hetherington for TIMEYoung fans in the stands watch the action at the OTE arena. While OTE deserves credit for executing its vision so quickly, it could be trying too much too soon. “They’re kind of building the parachute after they jumped out of the plane here,” says Dr. Marcus Elliott, founder and director of P3, a southern California-based sports science institute that provides advanced biomechanical analyses of elite athletes. Ollie was unhappy with this team’s effort at the first practice after pro day—and let the players know it. The energy was far from NBA-level, he told them. This scolding didn’t stop some of the players from lining up near a basket afterward, to show off their leaping ability for Overtime’s ubiquitous cameras. “Dunk lines for content,” said an OTE staffer who was looking on. Dunk lines for content. You probably couldn’t find a more fitting phrase to encapsulate the year 2021 in sports media and culture. Or a more spot-on reminder that kids are placing their basketball gifts in the hands of a digital marketing juggernaut. “I see the potential of this disruption to lead to a much more just and better world for these young athletes,” says Elliott. “But I also see lots of peril. It’s not about getting paid 100 grand to play as a 16- or 17-year-old. It’s about getting your second or third contract in the NBA. And those are challenging and sophisticated blueprints to put together. And so the fact that their DNA has nothing to do with development, that’s concerning.” Andrew Hetherington for TIMEA player hangs onto the net at the OTE practice courts. Overtime insists all incentives align. The company has hired experts like Ollie and the data scientists because the growth of OTE’s business hinges on the Thompson twins, and others, achieving their basketball dreams. After practice, Amen watches film with an OTE assistant coach; Ausar takes part in a small group shooting session that ends at 6 p.m. They both know that to make it to the next level, they must improve on their outside shooting. “I’m going to be in the gym,” says Ausar. “I have nothing better to do. I don’t do anything in Atlanta. I just chill in my room and watch basketball.” Amen and Ausar have talked to each other about backup careers; they both believe they’d be solid hoops commentators. But that can wait. When asked where they both see themselves in two years, neither brother hesitates. Nor do any of the OTE players when asked about their futures. “The NBA.”.....»»

Category: topSource: timeNov 9th, 2021

Frenzied Futures Rally Fizzles As All Eyes Turn To Fed"s Taper Announcement

Frenzied Futures Rally Fizzles As All Eyes Turn To Fed's Taper Announcement US futures and European bourses retreated slightly from record highs as investors weighed the ever worsening supply crunch and virus curbs in China against strong earnings with all eyes turning to the conclusion of the Fed's 2-day meeting tomorrow, when Powell will announce the launch of a $15BN/month taper. At 7:20 a.m. ET, Dow e-minis were up 7 points, or 0.02%, S&P 500 e-minis were down 0.50 points, or 0.01%, and Nasdaq 100 e-minis were down 28.75 points, or 0.18%. Iron-ore futures tumbled on shrinking steal output in China. Tesla led premarket losses in New York. Investors paused to reflect on a rally that’s taken U.S. and European stocks to record highs. With a post-pandemic supply crunch stoking inflation and pushing central banks to tighten monetary policy, they have begun to question valuations. Economic recovery is also under strain as countries from China to Bulgaria report rising Covid cases. Both the S&P 500 Index and the Dow have been scaling new peaks as U.S. companies post another stellar quarter for earnings. Of the 295 companies in the equity benchmark that have reported results, 87% have either met or surpassed estimates. Dow futures slipped after the underlying gauge briefly surged past the 36,000 mark on Monday. Russell 2000 contracts rose. Bonds from Europe to the U.S. jumped after Australia signaled patience with rate increases despite abandoning Yield Curve Control due to "economic improvement." Yields on the two-year and five-year Treasuries fell as the RBA joined global central banks inching closer to policy tightening. However, the central bank’s insistence on remaining patient with rate hikes pushed traders to pare back hawkish bets in Australia as well as in global bond markets during European hours. “The Fed meeting could still shake the markets, because even though we know the concrete outcome of the meeting, which is the opening bell of the QE tapering, the risks remain tilted to the hawkish side,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “Still, investors prefer seeing the glass half full.” In early trading, Tesla tumbled 5%, retreating from a gamma-squeeze record on Monday after Elon Musk said the carmaker hasn’t yet signed a contract with Hertz Global for Model 3 sedans. Chegg slumped 32% after the online-education company cut revenue forecasts and its results missed estimates, prompting a raft of downgrades. Clorox rose 1.6% after the bleach maker posted upbeat first-quarter results. Simon Property Group added 4.2% after the mall operator raised its 2021 forecast for profit and quarterly dividend. Pfizer gained 2.4% after the drugmaker boosted (get it "boosted"?) its full-year sales forecast for the company’s COVID-19 vaccine to $36 billion. Here are some of the biggest U.S. movers today: Tesla drops as much as 6.9% in premarket trading after closing at a record on Monday after Elon Musk said the electric vehicle-maker hasn’t yet signed a contract with Hertz Global. Chegg slumps 31% after the online education company slashed revenue forecasts and posted quarterly results that missed estimates. Novavax gains 5.3%, signaling an extension of Monday’s 16% rally, amid optimism over Covid vaccine approvals. Triterras tumbles as much as 20% after the short seller target said it encountered an “unanticipated delay in the finalization” of an independent audit of its financial statements. Teva Pharmaceutical Industries depositary receipts rise 7.7% and Endo International (ENDP US) gains 6.3% after the firms joined other former opioid makers in scoring a litigation win. Geron gains 4.5% and and SAB Bio (SABS US) soars 39% after Baird starts coverage of both with outperform ratings. Cryptocurrency-related stocks gained in premarket trading on Tuesday, as Bitcoin climbed and Etherium hit a record high.    NXT-ID up 38.18% premarket, Marathon Digital +4.0%, Riot Blockchain +2.9%, Bit Digital +2.5%, Canaan +3.2%, Coinbase +2.0%, MicroStrategy +1.5% While stocks continue to trade in a world of their own, just shy of all time highs, bond and currency markets are bracing for the Fed to announce a tapering of asset purchases as an initial step to eventually raising interest rates to contain inflation. Equity markets, on the other hand, are focusing on earnings growth and valuations. Meanwhile, mixed data on the global economic revival is further clouding the picture as the pandemic is making a comeback in parts of the world. “We expect volatility in financial markets to remain high as not only the Fed, but other central banks around the world, extract liquidity to combat the rise in inflation,” Lon Erickson, portfolio manager at Thornburg Investment Management, wrote in a note. Despite Fed rhetoric, “we’ve started to see the market price in earlier policy rate moves, perhaps losing confidence in the ‘transitory’ nature of inflation.” In Europe, the Stoxx Europe 600 Index slid 0.1% from a record reached on Monday, led lower by miners and travel companies. Spain's IBEX and the UK FTSE 100 dropped 0.6%. DAX outperforms. BP dropped 2.8% in London even as the oil giant announced an additional $1.25 billion buyback. HelloFresh jumped 14%, the most this year, after the German meal-kit company raised its full-year outlook. Basic-materials stocks were the weakest of 20 sector indexes in Europe as falling iron ore and steel prices weigh on miners and steel producers. Here are some of the biggest European movers today: HelloFresh shares surge as much as 16%, their best day since Dec. 2020, with analysts positive on the meal-kit maker’s guidance hike. Jefferies says that the company’s 3Q results included “little not to like.” Demant shares rise as much as 6.5%, the most intraday since March 23, after the hearing-aid maker raised its earnings forecast and topped estimates. Fresenius SE shares gain as much as 6.5% after reporting 3Q earnings slightly ahead of analyst estimates, with Jefferies saying the focus lies on the company’s cost-savings efforts and future plans for Kabi. Fresenius Medical shares up as much as 4.5% after posting 3Q earnings. Company’s FY22 recovery is “key to share price development from here,” according to Jefferies. Sinch shares drop as much as 17%, the most on record, after reporting 3Q results which showed organic growth slowing down, a trend Handelsbanken expects to worsen. Standard Chartered shares fall as much as 9.5%, the most since March 2020, as the lender’s third-quarter margins disappointed amid suppressed Asia rates and analysts flagged weakness in its retail operations. Flutter shares drop as much as 9% in London, the most intraday since March 2020, after the gaming company cut its profit outlook on unfavorable sporting results and a regulatory change in the Netherlands. Analysts expect ex-U.S. earnings consensus to fall. Steel makers underperform, with Kloeckner -5.3%, ArcelorMittal -2.9%, ThyssenKrupp -2.5%, Salzgitter -2.5% Asian stocks dipped, led by Chinese shares on concerns about the impact of measures to curb Covid-19 infections, while financials underperformed ahead of key central bank decisions this week. The MSCI Asia Pacific Index erased earlier gains of as much as 0.4% to fall 0.2% in afternoon trading. Blue-chip financial stocks including China Merchants Bank and Westpac Banking were among the biggest drags. Traders are focused on this week’s U.S. Federal Reserve meeting amid concerns about elevated inflation. Sentiment turned sour after authorities in Beijing halted classes at 18 schools amid Covid-19 resurgence. China’s benchmark CSI 300 Index fell 1%, while Hong Kong’s Hang Seng Index reversed an earlier gain of 1.9% to close in negative territory.  China’s CSI 300 Index falls by as much as 1.9% after Beijing’s suspension of classes across 18 schools heightened concerns over the impact of the recent Covid-19 outbreak. China Tourism Group Duty Free slumped as much as 9.8%, the worst performer in the benchmark and one of its biggest drags. The Shanghai Composite Index also extends decline to 1.9% while the ChiNext Index pares a 1.2% gain to trade little changed. “Investors are worried that Beijing’s virus measures may cool down China’s economic activities and hamper its recovery,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong. Asian stocks rose on Monday, a turnaround after a drop of 1.5% during last week, the worst such performance since early October. Shares have been whipsawed by ongoing concern over supply-chain constraints impacting industries such as technology and auto making. Investors are also parsing through earnings data, with more than half of the companies on MSCI’s Asia gauge having reported results.  “At this level, it can be said that investors are no longer pessimistic but are not yet hopeful either,” Olivier d’Assier, head of APAC applied research at Qontigo, wrote in a note.  Japanese stocks fell, halting a two-day rally, as some investors adjusted positions after the market jumped yesterday.  The Topix index slid 0.6% to 2,031.67 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.4% to 29,520.90.  Mitsui & Co. contributed most to the Topix’s loss, decreasing 4%. Out of 2,181 shares in the index, 538 rose and 1,583 fell, while 60 were unchanged. Both the Topix and Nikkei 225 gained more than 2% on Monday after the ruling coalition secured an election victory that was better than many had expected. Japan’s stock market will be closed Wednesday for a national holiday. Australian stocks slide, with the S&P/ASX 200 index falling 0.6% to close at 7,324.30, after the Reserve Bank of Australia abandoned a bond-yield target, following an acceleration in inflation that spurred traders to price in higher borrowing costs. Banks and miners slumped, while real estate and consumer discretionary stocks climbed. Goodman Group was the biggest gainer after the company raised its full-year guidance. Insurance Australia Group tumbled after the firm cut its reported insurance margin forecast for the full year.  In New Zealand, the S&P/NZX 50 index fell 0.3% to 12,992.50. In rates, Treasuries were higher across both the front-end and belly of the curve, led by bull-steepening gains across European bonds with peripherals outperforming. Treasury yields were lower by 2bp-3bp across front-end of the curve, steepening 2s10s by that amount with 10-year little changed around 1.55%; German 10-year is lower by ~4bp, U.K. by ~1bp. Aussie front-end rallied during Asia session after the RBA abandoned its yield target but maintained its bond buying pace; euro-zone money markets subsequently pared the amount of ECB policy tightening that’s priced in. European fixed income rallied with curves bull steepening. Belly of the German curve outperforms, trading ~2-3bps richer to gilts and USTs respectively. Peripheral spreads tighten; long-end Italy outperforms, narrowing ~6bps near 170bps. In FX, the Bloomberg Dollar Spot Index inched up and the greenback advanced versus all its Group-of-10 peers apart from the yen; Treasury yields fell by up to 3bps as the curve bull- steepened. The euro hovered around $1.16 while Italian bonds and bunds jumped, snapping three days of declines and tracking short-end Australian debt. The Australian dollar declined against all Group-of-10 peers and Australian short-end bond yields fell after the central bank dispensed with its bond-yield target and damped expectations of interest-rate hikes.  One-week volatility in the Australian dollar dropped a second day as spot pulls back from its 200-DMA of 0.7556 after the central bank’s policy decision. The pound fell for a third day, to nearly a three-week low, as investors weighed up the possibilities for the Bank of England’s policy meeting on Thursday. The yen strengthened ahead of a local holiday in Japan and amid souring market sentiment. In commodities, crude futures hold a narrow range with WTI near $84 and Brent stalling near $85. Spot gold drift close to $1,795/oz. The base and ferrous metals complex remains under pressure: LME nickel and zinc drop ~1%, iron ore down over 6%. Looking at the day ahead now, and the data highlights include the October manufacturing PMIs for the Euro Area, Germany, France and Italy. Central bank speakers will include the ECB’s Elderson and de Cos, whilst today’s earnings releases include Pfizer, T-Mobile, Estee Lauder and Amgen. Finally, there are US gubernatorial elections in Virginia and New Jersey. Virginia is the more interesting race from a macro perspective: a big, diverse state that has bounced between Democratic and Republican candidates on the national stage. So it could provide the first read of American voter sentiment heading into next year’s mid-terms. Market Snapshot S&P 500 futures little changed at 4,605.25 STOXX Europe 600 down 0.2% to 477.90 MXAP down 0.2% to 198.29 MXAPJ down 0.2% to 646.50 Nikkei down 0.4% to 29,520.90 Topix down 0.6% to 2,031.67 Hang Seng Index down 0.2% to 25,099.67 Shanghai Composite down 1.1% to 3,505.63 Sensex down 0.3% to 59,984.88 Australia S&P/ASX 200 down 0.6% to 7,324.32 Kospi up 1.2% to 3,013.49 German 10Y yield little changed at -0.14% Euro little changed at $1.1603 Brent Futures up 0.5% to $85.17/bbl Gold spot down 0.1% to $1,791.04 U.S. Dollar Index little changed at 93.89 Top Overnight News from Bloomberg Federal Reserve policy makers are expected to announce this week that they will start scaling back their massive asset-purchase program amid greater concern over inflation, economists surveyed by Bloomberg said President Emmanuel Macron backed away from his imminent threat to punish the U.K. for restricting the access of French fishing boats to British waters, saying he would give negotiations more time The Reserve Bank of Australia’s dovish policy statement and downplaying of the inflation threat is likely to reignite a steepening of the yield curve from near the flattest in a year. The spread between three- and 10-year yields jumped as much as 10 basis points on Tuesday after central bank Governor Philip Lowe cooled expectations for any near-term interest-rate increase even though the RBA scrapped its yield- curve control policy A more detailed look at global markets courtesy of Newsquawk Asian equities traded mixed as upcoming risk events kept participants cautious and offset the momentum from the US, where stocks began the month on the front foot in a continuation of recent advances to lift the major indices to fresh record highs. Nonetheless, ASX 200 (-0.6%) was pressured by underperformance in the top-weighted financials sector and notable weakness in mining names, while quasi holiday conditions due to the Melbourne Cup in Australia’s second most populous state of Victoria and the crucial RBA policy announcement in which it maintained the Cash Rate Target at 0.10% but dropped the April 2024 government bond yield target and tweaked its guidance, further added to the cautious mood. Nikkei 225 (-0.4%) was lacklustre as it took a breather from the prior day’s surge after stalling just shy of the 29,600 level and with the index not helped by a slight reversal of the recent beneficial currency flows. Hang Seng (-0.3%) and Shanghai Comp. (-1.4%) were varied as the former initially atoned for yesterday’s losses led by strength in tech and biotech including Alibaba shares with its Singles Day sales event underway. In addition, Hong Kong participants were seemingly unfazed by the recent weaker than expected GDP for Q3 as the data showed it narrowly averted a technical recession, although the gains were later wiped out and the mainland suffered following another substantial liquidity drain and with Chinese commodity prices pressured including iron futures which hit limit down. Finally, 10yr JGBs were flat with price action muted despite the subdued mood for Tokyo stocks and with the presence of the BoJ in the market for over JPY 1tln of JGBs in mostly 1yr-5yr maturities, doing little to spur demand. Top Asian News Bank of Korea Minutes Show Majority Sees Need for Rate Hike China’s Gas Prices Are Surging Just as Coal Market Cools Off China Shares Fall as Shut Schools Spark Concern on Virus Curbs SMBC Nikko Is Working With Securities Watchdog on Investigation Bourses in Europe have now adopted more of a mixed picture (Euro Stoxx 50 +0.1%; Stoxx 600 -0.2%) Stoxx 600 following the lacklustre cash open and downbeat APAC handover. US equity futures meanwhile are somewhat mixed with the RTY (+0.2%) narrowly outperforming the ES (-0.1%), YM (Unch), and NQ (-0.2%) – with the latter also seeing some pressure from Tesla (-6.0% pre-market) after CEO Musk said no deal was signed yet with Hertz and that a deal would have zero impact on Tesla's economics. Back to Europe, a divergence is evident with the DAX 40 (+0.4%) outpacing amid post-earnings gains from HelloFresh (+14%), Fresenius SE (+4.6%) and Fresenius Medical Care (+2.0%). The FTSE 100 (-0.5%) meanwhile lags with the Dec futures and cash both under 7,250 – with the index pressured by heft losses in some of its heaviest sectors. Basic resources sit at the foot of the bunch due to softer base metal prices across the board, which saw Dalian iron ore futures hit limit down at least twice in the overnight session. Travel & Leisure closely follows as sector heavyweight Flutter Entertainment (~23% weighting) slipped after cutting guidance. Oil & Gas and Banks closely follow due to the recent declines in crude (and BP post-earnings) and yields respectively. On the flip side, some of the more defensive sectors stand at the top of the leader board with Healthcare and Food & Beverages the current winners. In terms of other individual movers, THG (-6.1%) resides near the bottom of the Stoxx 600 second-largest shareholder BlackRock (9.5% stake) is reportedly planning to sell 55mln shares equating to around 4% of its holding. It’s also worth noting Apple (-0.1% pre-market) has reportedly reduced iPad production to feed chips to the iPhone 13, according to Nikkei sources; iPad production was reportedly -50% from Apple's original plans, sources added. In terms of broad equity commentary, Credit Suisse remains overweight value in Europe, whilst raising US small caps to overnight and reducing the UK to underweight. Looking at the rationale, CS notes that European value tend to outperform while inflation expectations or Bund yields rise. US small caps meanwhile have underperformed almost all macro drivers, whilst earnings momentum takes a turn for the better. Finally, CS argues UK small caps are much more cyclical than large caps and could face further tailwinds from UK’s macro landscape and with some tightening potentially on the table this week. Top European News BP Grows Buyback as Profit Rises on Higher Prices, Trading Ferrexpo Drops as Credit Suisse Downgrades on Lower Pricing OPEC+ Gets a Warning From Japan Before Key Supply Meeting THG Extends Decline as Key Shareholder BlackRock Reduces Stake In FX, the Aussie has reversed even more sharply from its recent core inflation and yield induced highs in wake of the RBA policy meeting overnight and confirmation of the moves/tweaks most were expecting. To recap, YCT was officially withdrawn after the Bank allowed the 3 year target rate to soar through the 0.1% ceiling and guidance on rates being held at the same level until 2024, at the earliest, was also withdrawn and replaced by a more flexible or conditional timeframe when inflation is sustainably in the 2-3% remit range. However, Governor Lowe retained a decidedly dovish tone in the aftermath, pushing back against more aggressive market pricing for tightening and stressing that it is entirely plausible that the first increase in the Cash Rate will not be before the maturity of the current April 2024 target bond, though it is also plausible that a hike could be appropriate in 2023 and there is genuine uncertainty as to the timing of future adjustments in the Cash Rate. Aud/Usd is now closer to 0.7450 than 0.7550 and the Aud/Nzd cross nearer 1.0400 than the round number above with added weight applied by weakness in copper and iron ore prices especially (latter hit limit down on China’s Dallian exchange). Meanwhile, the Kiwi also felt some contagion after a drop in NZ building consents and as attention turns to the Q3 HLFS report, with Nzd/Usd eyeing 0.7150 having got to within pips of 0.7200 only yesterday. EUR/DXY - Technical forces seem to be having an influence on direction in Eur/Usd amidst somewhat mixed Eurozone manufacturing PMIs as the headline pair topped out precisely or pretty much bang on a 50% retracement of the reversal from 1.1692 to 1.1535 at 1.1613 and subsequently probed the 21 DMA that comes in at 1.1598 today. Moreover, the Euro appears reliant on hefty option expiry interest for support given 1.9 bn rolling off at 1.1585 if it cannot reclaim 1.1600+ status, as the Dollar regroups and trades firmer against most majors, bar the Yen. Indeed, in stark contrast to Monday, the index has bounced off a marginally deeper sub-94.000 low between tight 93.818-985 confines, albeit in cautious, choppy pre-FOMC mood. CHF/CAD/GBP - No traction for the Franc via firmer than forecast Swiss CPI or a faster pace of consumption, while the Loonie is on the defensive ahead of Canadian building permits and Sterling is still on a softer footing awaiting the BoE on Thursday alongside what could be a make or break meeting in France where UK Brexit Minister Frost is due to tackle the fishing dispute face-to-face with Secretary of State for European Affairs Beaune. Usd/Chf is straddling 0.9100, Usd/Cad is hovering around 1.2400, Cable pivots 1.3650 and Eur/Gbp is probing 0.8500. JPY - As noted above, the Yen is bucking the broad G10 trend with gains vs the Greenback amidst appreciably softer US Treasury and global bond yields, as Usd/Jpy retreats from 114.00+ peaks to test support circa 113.50. In commodities, WTI and Brent front-month futures are moving sideways ahead of the OPEC+ meeting on Thursday, whereby expectations are skewed towards an unwind of current curbs by 400k BPD despite outside pressure for the group to further open the taps. Ministers, including de-facto heads Russia and Saudi, have been vocal in their support towards a maintained pace of production hikes. There have also been reports of Angola and Nigeria struggling to keep up with the output hikes, which may further dissuade the producer to further ramp up output. The morning also saw macro commentary from BP, whereby the CFO suggested global oil demand has returned to levels above 100mln BPD. The Co. expects oil prices to be supported by continued inventory draw-down, with the potential for additional demand from gas to oil switching. OPEC+ decision making on production levels continues to be a key factor in oil prices and market rebalancing. Gas markets were very strong in the quarter and BP expect the market to remain tight during the period of peak winter demand. In the fourth quarter industry refining margins are expected to be lower compared to the third quarter driven by seasonal demand. WTI Dec trades on either side of USD 84/bbl and Brent on either side of USD 85/bbl. Elsewhere, spot gold and silver are relatively flat with the former in close proximity to its 200 DMA (1,790/oz), 100 DMA (1,785/oz), 50 DMA (1,780/oz) and 21 DMA (1,778/oz). Over to base metals, Dalian iron ore futures were in focus overnight after prices hit limit down at least twice and nearly hit 1yr lows amid high supply and lower demand, with the latter namely a function of China cutting steel output forecasts. LME copper meanwhile has clambered off worst levels (USD 9,430/t) but remains just under USD 9,500/t as prices track sentiment. US Event Calendar Oct. Wards Total Vehicle Sales, est. 12.5mm, prior 12.2mm DB's Jim Reid concludes the overnight wrap The RBA press conference is still going onas we type this but the key outcome has been that they’ve abandoned the 0.1% target for the April 2024 bond. However they seem to be making it clear in the presser that their expectation is only that rate hikes might creep into 2023 rather than 2024 previously. The governor has said that market expectations of hikes in 2022 are “a complete overreaction to recent inflation data”. So they are trying to pull back the market expectations that ran away from them last week. The reality is that they’ll now be hostage to the data. They don’t expect inflation to be a big problem going forward but time will tell. Yield moves have been relatively subdued but are generally lower with a small steepening seen. 2y (-0.2bps), 3y (-4.5bps) and 5y (-3.3bps) are falling but with the 10y (+0.3bps) steadier. Ahead of the RBA, risk assets got the month off to a strong start as investors awaited tomorrow’s all-important Federal Reserve meeting conclusion. However there was little sign of caution in equities as a range of global indices advanced to all-time records yesterday, including the S&P 500 (+0.18%), the NASDAQ (+0.63%), the STOXX 600 (+0.71%), and the MSCI World Index (+0.50%). Energy (+1.59%) and consumer discretionary (+1.46%) were the clear outperformers in the S&P, with Tesla (+8.49%) doing a lot of the work of boosting the latter sector. While it’s a busy week for earnings, only 2 S&P companies reported during trading hours yesterday, so it didn’t materially drive sentiment. 11 more companies reported after hours, with 7 beating earnings estimates. Elsewhere, the Dow Jones actually crossed the 36,000 mark in trading for the first time. Readers of a certain age may remember an infamous book published in 1999 called “Dow 36,000” during the dot com bubble, which predicted the Dow would more than triple over the next 3-5 years to that level. In reality, even the half way mark of 18k wasn’t reached until late-2014, and of course it took 22 years to get to yesterday’s 36k milestone. So a good case study of the heady optimism many had back then. We’ll see if yesterday’s milestones are the first step on the path to Dow 100k, but one asset inching its way to $100 in oil, with yesterday seeing a fresh recovery in many commodity prices after their declines last week. Both WTI (+0.57%) and Brent crude (+0.39%) posted gains, with copper (+0.58%) also seeing a modest advance. Agricultural prices set fresh records, with wheat prices (+3.17%) climbing above $8/bushel in intraday trading for the first time since 2012. It may be a pretty busy macro week with the Fed, BoE and the US jobs report, but the OPEC+ meeting on output this Thursday could also be a vital one for the global economy in light of the resurgence in energy prices lately. We’ve already heard some frustration at the group from a number of countries, with President Biden saying this Sunday at the G20 that “I do think that the idea that Russia and Saudi Arabia and other major producers are not gonna pump more oil so people can have gasoline to get to and from work for example, is … not right”. So one to keep an eye on, with potentially big implications for inflation and hence central banks. Staying on an inflation theme, investors got a further glimpse of ongoing supply chain issues from the ISM manufacturing print as well yesterday. The overall reading for October actually came in slightly above expectations at 60.8 (vs. 60.5 expected), but the prices paid order similarly rose to 85.7 (vs. 82.0 expected) in its second successive monthly increase. Bear in mind it’s been above the 80 mark for all but one month so far this year, and there were further signs of supply-chain issues from the supplier delivery time measure, which hit a 5-month high of 75.6. With markets attuned to inflation and the potential for plenty of central bank action this week, sovereign bonds came under further pressure yesterday on both sides of the Atlantic, even if they finished well off the yield highs. Yields on 10yr Treasuries ended the session up +0.7 bps to 1.56%, which comes as markets are almost pricing an initial full hike from the Fed by the time of their June 2022 meeting. However we were off the day’s high of 1.60%. Meanwhile in Europe, yields on 10yr bunds (+0.4 bps), OATs (+0.3 bps) and gilts (+2.8 bps) moved higher as well, but interestingly we also saw peripheral sovereign bond spreads closing in on their highest levels for some time. Indeed by the close of trade yesterday, the gap between Italian (+4.4 bps) and Spanish (+2.2 bps) 10yr yields over bunds had widened to their biggest level in almost a year. Meanwhile, 10yr breakevens widened +4.5 bps in the UK and +2.0 bps in Germany. US breakevens were the outlier, narrowing -7.5 bps to 2.51% and now -18.0 bps below the highs reached just a week ago. In Asia, the Nikkei 225 (-0.56%) and the Shanghai Composite (-0.62%) are trading lower, while the Hang Seng (+0.74%) and the KOSPI (+1.36%) are edging higher. Some of the news weighing on Chinese stocks are surging gas prices, which reached a record high today. Elsewhere, the S&P 500 futures (-0.22%) is down this morning and the 10y US Treasury is at 1.55% (-0.9bps). Heads of state gave their opening salvos at COP26 yesterday. The biggest commitment came from Indian Prime Minister Narendra Modi, who said the world’s third-biggest emitter will have zero net pollution by 2070, while also making more near-term commitments to increase reliance on non-fossil fuel energy sources. Looking at yesterday’s other data, German retail sales unexpectedly fell by -2.5% in September (vs. +0.4% expected). However, the final UK manufacturing PMI for October was revised up a tenth from the flash reading to 57.8. Over in the US though, there was a downward revision to 58.4 (vs. flash 59.2). To the day ahead now, and the data highlights include the October manufacturing PMIs for the Euro Area, Germany, France and Italy. Central bank speakers will include the ECB’s Elderson and de Cos, whilst today’s earnings releases include Pfizer, T-Mobile, Estee Lauder and Amgen. Finally, there are US gubernatorial elections in Virginia and New Jersey. Virginia is the more interesting race from a macro perspective: a big, diverse state that has bounced between Democratic and Republican candidates on the national stage. So it could provide the first read of American voter sentiment heading into next year’s mid-terms. Tyler Durden Tue, 11/02/2021 - 07:52.....»»

Category: dealsSource: nytNov 2nd, 2021

Futures Meltup To New All Time High As November Begins With A Bang

Futures Meltup To New All Time High As November Begins With A Bang US futures and European stocks rose to a new record high to start the historically stellar month of November... ... and Asian markets jumped amid positive earnings surprises and as concerns of a global stagflation and central bank policy error faded for a few hours (they will return shortly). TSLA melted up by another $35BN in market cap "because gamma." S&P 500 futures climbed 0.4% after the cash index posted the biggest monthly gain since last November. Treasury Secretary Janet Yellen expressed confidence in the continuing recovery from the pandemic, helping spur gains in equity markets. Health-care shares rallied in Europe. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting to announce the start of tapering (which will then lead to rate hikes next July according to Goldman). Oil rebounded on fresh supply concerns. In addition to the now absolutely batshit insane meltup in Tesla, which won't end until the SEC cracks down on gamma squeeze manipulation, other mega-cap technology stocks such as Google, Meta, Microsoft, Amazon.and Apple, aka oddly enough GAMMA, traded mixed. Exxon and Chevron added about 0.7% each as JP Morgan raised its price target on the oil majors following their strong quarterly results last week. Major Wall Street banks gained between 0.2% and 0.8%. The broader S&P 500 financials sector slipped last week, breaking a three-week winning streak. Lucid Group Inc. rose 4.8% in premarket, extending its advance from last week, after the new U.S. tax plan included a proposal to make EV tax credits more widely available. Harley-Davidson Inc jumped 8.2% after the European Union removed retaliatory tariffs on U.S. products including whiskey, power boats and company’s motorcycles. Here are the most notable pre-market movers: Tesla shares rise 2.3% in U.S. premarket trading after their biggest monthly gain in almost a year in October ABVC BioPharma jumps more than 700% as thelittle known biotechnology company garners attention from retail traders on social media Ocugen and Zosano (ZSAN US) are some other top gainers among retail trader stocks in premarket A largely upbeat earnings season has helped investors look past a mixed-macro economic picture, with the benchmark S&P 500 and the tech-heavy Nasdaq recording their best monthly performance since November 2020 in October. Of the 279 S&P 500 companies that have reported quarterly results, 87% have met or exceeded estimates. Among members of Europe’s Stoxx 600 index, 68% surpassed expectations. On the economic data front, readings on October factory activity data from IHS Markit and ISM are due after market open, followed by non-farm payrolls on Friday. Focus is now on the Fed’s two-day policy meeting which concludes at 2pm on Nov 3, where the central bank will announce the tapering of its $120 billion monthly bond buying program by $15 billion. With recent U.S. data showing inflation pressures building, the market has also started pricing in rate hikes next year. November and December tend to be among the strongest months for stocks and any hawkish tilt in the Fed’s message could catch equities by surprise.  Meanwhile, Biden’s economic agenda seemed to be on track as Democratic lawmakers worked to overcome their differences on a $1.75 trillion social-spending plan. “Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalization.” European stocks hit the afterburner out of the gate with the Euro Stoxx 50 adding as much as 1% before drifting off best levels. FTSE MIB and IBEX outperform, FTSE 100 lags slightly. Banks, construction and travel are the strongest sectors; tech the sole Stoxx 600 sector in the red. Barclays Plc fell 1.5%. Chief Executive Officer Jes Staley stepped down amid a U.K. regulatory probe into how he characterized his ties to the financier and sex offender Jeffrey Epstein. Asian stocks were poised to snap a three-day decline thanks to a rally in Japanese equities, which got a boost from an election victory for the country’s ruling party and Prime Minister Fumio Kishida.  The MSCI Asia Pacific Index advanced as much as 0.6%, while Japan’s benchmark Topix and the blue-chip Nikkei 225 Stock Average each added more than 2%. Sony Group, Toyota Motor and Tokyo Electron were among the single-largest contributors to the regional measure’s rise. By sector, industrials and information-technology companies provided the biggest boosts.  Japan’s ruling Liberal Democratic Party defied worst-case scenarios to secure a majority by itself in a closely-watched election Sunday. Analysts said the outcome signals political stability, paving the way for economic stimulus to be executed as anticipated (see Street Wrap).  “Indicators of market activity show that there will be a positive market impact to the election, as although it was not greatly different than expectations, the LDP clearly surpassed some of the more dire polls of last week and there will not likely be any party shake-up in the intermediate-term,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management wrote in a note.  The market is also “reacting positively” to Friday’s share-price gains in the U.S., Vail said. Futures on the S&P 500 rose during Asian trading hours after the underlying gauge added 0.2%.  Asia’s regional benchmark capped a weekly drop of 1.5%, its worst such performance since early October, as disappointing results weighed on big technology stocks. More than half of the companies on the MSCI Asia Pacific Index have reported results for the latest quarter with about 37% posting a positive surprise, according to data compiled by Bloomberg. Australia's S&P/ASX 200 index rose 0.6% to 7,370.80, recouping some losses after Friday’s 1.4% plunge. Health and consumer discretionary stocks contributed the most to the benchmark’s gain. WiseTech was among the top performers, snapping a four-day losing streak. Westpac was the worst performer after the bank delivered a smaller share buyback than some had expected. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,030.31. In rates, fixed income trades heavy with gilts leading the long end weakness. Treasuries were slightly cheaper on the long-end of the curve as S&P 500 futures exceed last week’s record highs. Yields are cheaper by 2bp to 2.5bp from belly out to long-end, with front-end slightly outperforming and steepening 2s10s spread by 1.7bp; 10-year yields around 1.58% with gilts underperforming by 1.1bp, Italian bonds by 3.5bp. Gilts and Italian bonds lag, with Bank of England rate decision due Thursday. In the U.S., weekly highlights include refunding announcement and FOMC Wednesday and Friday’s October jobs report. Bund and gilt curves bear steepen with gilts ~1bps cheaper to bunds. Peripheral spreads swing an early tightening to a broad widening to core with Italy the weakest performer. Overnight futures and options flows included block seller in 5-year note futures (3,900 at 3:09am ET) and a buyer of TY Week 1 129.00 puts at 3 on 10,000, says London trader. In FX, the Bloomberg dollar index held a narrow range. SEK and CHF top the G-10 score board, GBP lags with cable snapping below 1.3650. TRY outperforms EMFX peers. The BBDXY inched up and the greenback traded mixed against its Group-of-10 peers, with many of the risk-sensitive currencies leading gains The pound retraced some losses against the dollar, after dipping earlier in the European session. The yield on 2-year gilts hit the highest since May 2019. Financial markets are almost fully pricing in a 15-basis point increase in the Bank of England’s benchmark lending rate on Nov. 4, while economists increasingly share that view, even as they see the decision as a far closer call. A record share of U.K. businesses are expecting to increase prices, adding to the inflationary pressures confronting Bank of England policy makers ahead of their meeting on Thursday Australian bonds extended opening gains as traders positioned for the Reserve Bank’s policy decision Tuesday. The Aussie fell, tracking losses in iron ore prices following a weak China PMI, which showed signs of further weakness in October The yen fell for a second day after the ruling Liberal Democratic Party retained its outright majority in a lower-house election, reinforcing bets for fiscal stimulus and reforms. Hedge funds boosted net short positions on the yen to the most since January 2019, raising the risk of a squeeze should risk appetite deteriorate suddenly and demand for havens rise The Turkish lira edged higher after Turkish President Recep Tayyip Erdogan said he had “positive” talks with U.S. President Joe Biden In commodities, crude futures drift higher. WTI adds 40c to trade near $84; Brent rises ~1% near $84.50. Spot gold is quiet near $1,786/oz. Base metals are mixed: LME nickel and tin outperform, zinc lags. Looking at today's calendar, earnings continue on Monday with PG&E and ON Semiconductor reporting pre-market, and NXP Semiconductors post-market. We also get the latest Mfg PMI print and the October Mfg ISM print. Market Snapshot S&P 500 futures up 0.3% to 4,612.25 STOXX Europe 600 up 0.8% to 479.40 MXAP up 0.4% to 198.04 MXAPJ down 0.3% to 645.49 Nikkei up 2.6% to 29,647.08 Topix up 2.2% to 2,044.72 Hang Seng Index down 0.9% to 25,154.32 Shanghai Composite little changed at 3,544.48 Sensex up 1.3% to 60,079.40 Australia S&P/ASX 200 up 0.6% to 7,370.78 Kospi up 0.3% to 2,978.94 Brent Futures up 0.3% to $83.95/bbl Gold spot down 0.0% to $1,783.20 U.S. Dollar Index little changed at 94.14 German 10Y yield little changed at -0.091% Euro up 0.1% to $1.1571 Top Overnight News from Bloomberg House Democratic leaders are pushing hard to get Biden’s package finalized, with votes on both that bill and a smaller infrastructure plan this week -- the latest in a string of self- imposed deadlines. The Senate, which already approved the public-works bill, is likely to vote on the larger package later in the month Leaders of the Group of 20 countries agreed on a climate deal that fell well short of what some nations were pushing for, leaving it to negotiators at the COP26 summit in Glasgow this week to try to achieve a breakthrough The U.K. said it will trigger legal action against France within 48 hours unless a dispute over post-Brexit fishing rights is resolved, as the growing spat threatens to overshadow the United Nations’ climate summit Treasury Secretary Janet Yellen said she believes Federal Reserve Chair Jerome Powell has taken “significant action” in the wake of revelations over the personal investments of U.S. central-bank policy makers; Yellen dismissed recent moves in the bond market that have signaled concern about monetary policy makers squelching economic growth, and expressed confidence in the continuing recovery from the Covid-19 pandemic The U.S. and the European Union have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year Asia-Pac bourses traded mostly higher amid tailwinds from last Friday's fresh record highs in the US where Wall St. topped off its best monthly performance YTD, but with some of the advances in the region capped as participants digested mixed Chinese PMI data and ahead of this week’s slew of key risk events including crucial central bank policy announcements from the RBA, BOE and FOMC, as well as the latest NFP jobs data. ASX 200 (+0.8%) was led higher by the consumer-related sectors amid a reopening play after Australia permitted fully vaccinated citizens to travel internationally again and with several M&A related headlines adding to the optimism including the Brookfield-led consortium acquisition of AusNet Services and Seven West Media’s takeover of Prime Media. Conversely, the largest weighted financials sector failed to join in on the spoils with Westpac shares heavily pressured following its FY results which fell short of analyst estimates despite more than doubling on its cash earnings. Nikkei 225 (+2.5%) was the biggest gainer with the index underpinned by favourable currency flows and following the general election in which the ruling LDP maintained a majority in the lower house although won fewer seats than previously for its slimmest majority since 2012, while the KOSPI (+0.4%) was kept afloat but with upside limited by slightly softer than expected trade data. Hang Seng (-1.5%) and Shanghai Comp. (+0.1%) were subdued amid a slew of earnings releases and following mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts with the former at a second consecutive contraction, although Caixin Manufacturing PMI was more encouraging and topped market consensus. Finally, 10yr JGBs initially declined amid gains in stocks and recent pressure in T-notes due to rate hike bets with analysts at Goldman Sachs bringing forward their Fed rate hike calls to July 2022 from summer 2023 citing inflation concerns, although 10yr JGBS then recovered despite the mixed results from the 10yr JGB auction which showed a higher b/c amid lower accepted prices and wider tail in price. Top Asian News Japan’s Kishida Mulls Motegi for LDP Secretary General: Kyodo Home Sales Slump; Another Bond Deadline Looms: Evergrande Update Two Thirds of China’s Top Developers Breach a ‘Red Line’ on Debt Hedge Fund Quad Sells Memory Stocks Citing Demand Uncertainty European equities (Stoxx 600 +0.6%) have kicked the week off on the front-foot with the Stoxx 600 printing a fresh all-time-high. The handover from the APAC session was a largely constructive one with the Nikkei 225 (+2.6%) the best in class for the region amid favourable currency flows and the fallout from the Japanese general election which saw the ruling LDP party maintain a majority in the lower house. Elsewhere, performance for the Shanghai Composite (-0.1%) and Hang Seng (-0.9%) was less impressive amid a slew of earnings releases and mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts. US equity index futures are trading on a firmer footing (ES +0.5%) ahead of Wednesday’s FOMC announcement and Friday’s NFP data. The latest reports from Washington suggest that House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. Back to Europe, a recent note from JPM stated that Q3 European earnings “are coming in well ahead of expectations in aggregate”, adding that results are healthy when considering the “trickier operating backdrop”. Sectors in the region are higher across the board with Auto names top of the leaderboard. Renault (+3.3%) sits at the top of the CAC 40 with the name potentially gaining some reprieve from agreement to resolve the US-EU steel and aluminium trade dispute (something which the Co. has previously noted as a negative). Also following the resolution, Thyssenkrupp (+2.8%) and Salzgitter (+4.5%) are both trading notably higher. Barclays (-2.0%) shares are seen lower after news that CEO Staley is to step down with immediate effect following the investigation into his relationship with sex offender Jeffrey Epstein; Barclays' Global Head of Markets, Venkatakrishnan is to take over. UK homebuilders (Persimmon -2.1%, Taylor Wimpey -1.9%, Barratt Developments -1.9%, Berkeley Group -1.7%) are softer on the session amid concerns that the sector could fall victim to higher mortgage rates given the shape of the UK yield curve. Ryanair (+1%) shares are higher post-earnings which saw the Co. continue its recovery from the pandemic, albeit still expects a loss for the year. Furthermore, the board is considering the merits of retaining its standard listing on the LSE. Finally, BT (+4.2%) is the best performer in the Stoxx 600 ahead of earnings on Thursday with press reports suggesting that the Co. could announce that its GBP 1bln cost savings target will be met a year earlier than the guided March 2023. Top European News SIG Proposed Offering for EU300m Senior Secured Notes Due 2026 Delivery Hero’s Turkey Unit CEO Nevzat Aydin to Step Down Goldman Sachs Says ‘Lost Decade’ Is Looming for 60/40 Portfolios URW Sells Stake in Paris Triangle Tower Project to AXA IM Alts In FX, the Greenback is holding above 94.000 in index terms and gradually ground higher after pausing for breath and taking some time out following its rapid resurgence last Friday to eclipse the 94.302 month end best at 94.313 before waning again. Hawkish vibes going into the FOMC are underpinning the Dollar and helping to offset external factors that are less supportive, including ongoing strength in global stock markets on solid if not stellar Q3 earnings and economic recovery from COVID-19 lockdown or restricted levels. Hence, the DXY is keeping its head above the round number and outperforming most major peers within and beyond the basket, awaiting Markit’s final manufacturing PMI, the equivalent ISM and construction spending ahead of the Fed on Wednesday and NFP on Friday. JPY/AUD - Little sign of relief for the Yen from victory by Japan’s ruling LDP part at the weekend elections as the 261 seat majority secured is down from the previous 276 and the tightest winning margin since 2012. Moreover, Security General Amari lost his constituency and new PM Kishida concedes that this reflects the public’s adverse feelings towards the Government over the last 4 years. Usd/Jpy is eyeing 114.50 as a result and the Aussie is looking precarious around 0.7500 against the backdrop of weakness in commodity prices even though perceptions for the upcoming RBA have turned markedly towards the potential for YCT to be withdrawn following firm core inflation readings and no defence of the 0.1% April 2024 bond target. NZD/EUR/CHF/CAD/GBP - All narrowly mixed vs their US counterpart, and with the Kiwi also taking advantage of the aforementioned apprehension in the Aud via the cross, while the Euro has pared declines from just under 1.1550, but still looks top-heavy into 1.1600. Elsewhere, the Franc is pivoting 0.9160 and 1.0600 against the Euro with more attention on a rise in Swiss sight deposits at domestic banks as evidence of intervention than a fractionally softer than expected manufacturing PMI, the Loonie is keeping afloat of 1.2400 ahead of Markit’s Canadian manufacturing PMI and Sterling is striving to stay above 1.3600, but underperforming vs the Euro circa 0.8470 amidst the ongoing tiff between the UK and France over fishing rights. SCANDI/EM - Robust Swedish and Norwegian manufacturing PMIs plus broad risk appetite is underpinning the Sek and Nok, in contrast to the Cnh and Cny following disappointing official Chinese PMIs vs a more respectable Caixin print, but the EM laggard is the Zar in knock-on reaction to Gold’s fall from grace on Friday, increasingly bearish technical impulses and SA energy supply issues compounded by Eskom’s load-shedding. Conversely, the Try has pared some declines irrespective of a slowdown in Turkey’s manufacturing PMI as the CBRT conducted a second repo op for Lira 27 bn funds maturing on November 11 at 16%. In commodities, WTI and Brent are firmer this morning with gains of between USD 0.50-1.00/bbl, this upside is in-spite of a lack of fundamental newsflow explicitly for the complex and is seemingly derived from broader risk sentiment, as mentioned above. Nonetheless, Energy Ministers are beginning to give commentary ahead of Thursday’s OPEC+ event and so far Angola, Kuwait and Iraq officials have voiced their support for the planned 400k BPD hike to production in December. This reiteration of existing plans is in opposition from calls from non-OPEC members such as the US and Japan that the group should look to increase production quicker than planned, in a bid to quell rising prices. Separately, Saudi Aramco reported Q3 earnings over the weekend in which its net profit doubled given strong crude prices and sales volumes improving by 12% QQ; subsequently, some analysts have highlighted the possibility for a end-2021 special dividend. Elsewhere, base metals are mixed and fairly contained in-spite of the EU and US announcing an agreement to resolve the ongoing aluminium and steel trade dispute. While spot gold and silver are modestly firmer this morning as the yellow metal remains contained after its slip from the USD 1800/oz mark in the tail-end of last week. Currently, spot gold is pivoting its 100-DMA at USD 1786 with the 50- and 200-DMAs residing either side at USD 1780/oz and USD 1791/oz respectively. US Event Calendar 9:45am: Oct. Markit US Manufacturing PMI, est. 59.2, prior 59.2 10am: Oct. ISM Manufacturing, est. 60.5, prior 61.1 10am: Sept. Construction Spending MoM, est. 0.4%, prior 0% DB's Jim Reid concludes the overnight wrap Welcome to November. I had three halloween parties over the weekend which is probably more than the entire number I went to before I had kids. I still have some spooky make up on this morning that I just couldn’t get off from last night. So there’s a reason alone to zoom into the call at 3pm today. As it’s the 1st of November Henry is about to publish our monthly performance review. It was a hectic month of higher inflation expectations and commodities, and also the best S&P 500 month of the year. Bonds underperformed across the board but these small negatives masked great volatility and stress under the surface, especially in the last week. See the report that should be out in the next 30-60mins. With all due respect to our readers in Australia, I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes the most important event of the week could be the RBA meeting tomorrow. 2 year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond. I’ve absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I’ve always disliked the forward guidance era as it encourages markets to pile on to much riskier, one way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change. It's unclear if the full implications of last week’s carnage at the global front end has yet been cleared out. There is lots of speculation about large unwinds, big stop losses etc. Liquidity was also awful last week. Much might depend on central banks this week. Make no mistake though there is considerable pain out there. The latest this morning in Aussie rates is that the 2y yield is down around -7bps while the 10y yield is down -19.0bps. So we wait with baited breath for tomorrow. Elsewhere in Asia, the Nikkei 225 (+2.42%) is charging ahead this morning as Japan’s Liberal Democratic Party kept its majority after lower house elections, thus boosting optimism about a potential fiscal stimulus. Elsewhere, the KOSPI (+0.43%) and the Shanghai composite (+0.07%) are outperforming the Hang Seng (-1.10%). In terms of data, China’s official manufacturing PMI fell from 49.6 to 49.2 (49.7 expected), not helped by commodities price rises and electricity shortages. The non-manufacturing PMI also fell to 52.4 from 53.2 (consensus 53). The Caixin manufacturing PMI did beat at 50.6 this morning (consensus 50). In terms of virus developments in the region, Shanghai Disneyland is closed amid recent COVID outbreaks, while Singapore is adding ICU beds in response to high levels of serious cases. The S&P 500 mini futures is up +0.23% this morning, the US 10y Treasury is at 1.56% (+1.2bps). It’s strange to have a likely Fed taper announcement on Wednesday be third billing for the week but the BoE on Thursday might be the next most important meeting as it’s still a finely judged call as to whether they hike this week or not. DB (preview here) think they will raise rates by 15bps with two 25bps hikes in February and May. They’ll also end QE a month earlier than planned. So over to the third billing, namely the Fed. They will announce a well flagged taper on Wednesday. In line with recent guidance, DB expect that the Fed will announce monthly reductions of $10bn and $5bn of Treasury and MBS purchases, respectively. With the first cut to purchases coming mid-November, this will bring the latest round of QE to a conclusion in June 2022. The Fed has some flexibility with this timetable but it will be interesting to hear how much Powell pushes back on markets that price in two hikes in 2022, including one almost fully priced for before the taper ends. If markets attacked the Fed in the same way they have the RBA the global financial system would have a lot of issues so it’s a fine balance for the Fed. They won’t want to push back too aggressively on market pricing given the uncertainty but they won’t want an outright attack on forward guidance. Moving on, a lowly fourth billing will be reserved for US payrolls on Friday. DB expect the headline gain (+400k forecast, consensus +425k vs. +194k previously) to modestly outperform that of private payrolls (+350k vs. +317k) and for the unemployment rate to fall by a tenth to 4.7% and average hourly earnings to post another strong gain (+0.4% vs. +0.6%) amidst still-elevated hours worked (34.8hrs vs. 34.8hrs). Outside of all this excitement, we have the COP26 which will dominate all your news outlets. The other main data highlight are the global PMIs (today and Wednesday mostly) which will give insight into how the economic recovery has progressed in the first month of Q4 with the surveys shedding light onto how inflation is affecting suppliers. There is lots more in store for us this week but see the day by day calendar at the end for the full run down The market also enters the second half of the 3Q earnings season. There are 168 S&P 500 and 85 Stoxx 600 companies reporting this week with 52% of the S&P 500 and 48% of the STOXX 600 having already reported. DB’s Binky Chadha published an update on earnings season over the weekend (link here). In the US, the size of the earnings beat has declined over the course of the season and is on track to hit 7%, well below the record 14-20% range post pandemic. Excluding the lumpy loan-loss reserve releases by banks, the beat is even lower at 5%, bringing it back in line with the historical norm. Quarterly earnings are on track to be down sequentially from Q2 to Q3 by -1.1% (qoq seasonally adjusted), the first drop since Q2 2020. The flat to down read of earnings is broad based across sector groups. Forward consensus estimates have fallen outside of the Energy sector. The S&P 500 nevertheless has seen one of the strongest earning season rallies on record. See much more in Binky’s piece. This week’s highlights include NXP Semiconductors, Zoom, and Tata Motors today before Pfizer, T-Mobile, Estee Lauder, BP, Mondelez, Activision Blizzard, and AP Moller-Maersk tomorrow. Then on Wednesday we’ll hear from Novo Nordisk, Qualcomm, CVS, Marriott, Albemarle, and MGM resorts. Thursday sees reports from Toyota, Moderna, Square, Airbnb, Uber, and Deutsche Post and then a busy Friday with Alibaba Group, Dominion Energy, Honda, and Mitsubishi. Looking back now and reviewing last week in numbers, it was a week of heightened intraday volatility within rates, as markets brought forward the expected timing of central bank policy actions across advanced economies while revising down growth expectations. Position stop outs almost certainly played a role as the magnitude of the moves were out of sync with macro developments while FX and equity markets were not nearly as volatile. Global front end rates started moving in earnest on Wednesday, following the Bank of Canada’s surprise decision to end net asset purchases, while bringing forward the timing of liftoff, which sent 2yr Canadian bonds more than +20bps higher. In the following days, the RBA opted not to defend their yield curve control target, and ECB President Lagarde did not use her press conference to provide much of a forceful pushback on recent repricing. All told, almost every DM economy saw their 2 yr bond selloff, including the US (+4.4 bps, +0.8 bps Friday), UK (+4.9 bps, +5.9 bps Friday), Germany (+5.2 bps, +3.2 bps Friday), Canada (+23bps) and Australia (+65bps). The long end went the other direction in the core countries, with many curves twist flattening over the week as negative growth sentiment weighed on the back end. Nominal 10yr yields declined -6.2 bps (-2.8 bps Friday) in the US, -11.1 bps (+2.5 bps Friday) in the UK, and were flat in Germany (+3.0 bps Friday). Unlike the rest of October, the decline in nominal yields coincided with declining inflation breakevens (albeit from historically high levels), with 10yr breakevens declining -5.2 bps (-0.6 bps Friday) in the US, -25.4 bps (-8.5 bps Friday) in the UK, and -16.3 bps (-11.5 bps Friday) in Germany. Note that outside the core there were some bond markets that moved higher in yield with 10yr bonds in Canada (+7bps), Australia (+30bps) and Italy (+19bps) all higher for different reasons. Some of the bond moves above don’t do the intra-day volatility any justice though. Elsewhere Crude oil prices dipped to close out what was otherwise another very good month, with Brent and WTI -1.34% (+0.07% Friday) and -0.23% (+0.92% Friday) lower. Meanwhile, equity markets marched to the beat of a different drum. The S&P 500 (+1.33%, +0.19% Friday), Nasdaq (+2.71%, +0.33% Friday), and DJIA (+0.40%, +.25% Friday) all set new all-time highs, while the STOXX 600 increased +0.77% (+0.07% Friday), cents below the all-time high set in August. Generally strong earnings relative to a worried market prior to the season again supported equity markets. Calls were replete with mentions of supply chain woes and labour shortages though, but companies sounded an optimistic note on end-user demand. Many big tech stocks reported, to more mixed results than the broader index. Alphabet and Microsoft beat on both revenue and earnings, Facebook and Apple missed analyst revenue estimates, while Amazon and Twitter missed revenue and earnings estimates. Ford and Caterpillar, two bellwethers particularly exposed to current supply chain and labour maladies, fared especially well. So far this season 279 companies have reported, with 206 beating on revenue and 237 beating on earnings Out of D.C., after prolonged negotiations within the Democratic Party, US President Biden unveiled a new social and climate spending framework, containing $1.75 trillion in spending measures as well as revenue-raising offsets. Once the text is finalized, it should enable a vote on the social spending package as well as the separately-negotiated bi-partisan infrastructure bill. More is likely to come this week. Tyler Durden Mon, 11/01/2021 - 07:59.....»»

Category: smallbizSource: nytNov 1st, 2021

Take our return-to-office survey to help us understand how employees feel about their companies" remote work policies

How do remote work and return-to-office policies impact employees? We want to hear from workers worldwide. Insider Many companies have been working remotely for over a year. Now it's time for them to decide when and how to return, and the first policies are being announced. Have an opinion? Take our survey. Do you miss the office? Share your opinion in our global survey Should you bring your employees to the office five or two days a week?Who should decide on the time and date of return to the office: management boards, teams, or employees themselves? Offices are (probably) coming back Global companies already have the first answers. For now, they agree on one thing: they want to open offices as soon as possible. The date moves every month.In early September this year, Google announced that it would be January 2022. Earlier it spoke of October 2021, and even earlier about September and July.Other tech giants are also planning to reopen their offices early next year. Facebook, Apple, Uber, and Roblox all set the new date for January. Asana and Lyft chose February, and Airbnb selected September 2022.After it didn't follow its announcement to open offices in early October this year, Microsoft does not want to announce a new return date at all. As for companies outside the tech industry, Goldman Sachs employees have been in the office since June this year, and Nike and Starbucks employees will head back to the office from January 2022.Only the vaccinated can enterIf there is one thing American employers agree on in return-to-office policies, it's vaccination. Back in July this year, Facebook, Google, Amazon, and Microsoft did not require employees to be vaccinated against COVID-19. Today the same companies treat vaccinating office staff as mandatory. This is the case with Google (from July 28), Facebook, Twitter, Lyft, Uber, Cisco, Microsoft, Adobe, VMware, Twilio, and Asana.One of the few big tech companies that has yet to make COVID-19 vaccination mandatory is Apple. Beginning November 1, unvaccinated office workers in this company must undergo a COVID-19 test every time they enter their office door, and the vaccinated ones must take one rapid test per week. By October 24, all employees must inform the iPhone manufacturer of their vaccination status and show proof.Do you miss the office? Share your opinion in our global survey Apple will soon be forced to change its policy on compulsory vaccination, though. US President Joe Biden ordered government contractors to fully vaccinate their employees by December 6, and Apple sells its products to the US administration through a dedicated sales channel.Is working in the office an opportunity or an obligation?The main line of dispute on hybrid work is around flexibility - should employees be given the choice between working in the office and working from home? There is no consent among companies here. The social network Twitter gives the greatest freedom among tech corporations. In May 2020, at the height of the pandemic, CEO Jack Dorsey announced to employees that they could work remotely "forever". Offices were treated as an option for those willing. Among large corporations, this seems to be the exception rather than the rule. Facebook, Google, Microsoft, Uber, Revolut, Spotify, KPMG, EY, JP Morgan, HSBC, Unilever, and Disney have all announced hybrid work as company policy.For now, these plans only exist on paper. Some employees are openly protesting against being forced to work in the office. As recently reported by Vox and The Verge, over 7,000 Apple employees participate regularly in an internal corporate Slack group called "remote work advocacy," where workers discuss their frustrations with management on the issue, and how other companies are offering more flexible arrangements. The group's conversations with CEO Tim Cook on remote work leak to the press regularly, proving how important and sensitive the subject is for tech talent.Employers change their minds about working from homeThe pressure on employers to adopt fully flexible work is growing. Amazon CEO Andy Jassy announced a new policy in mid-October stating that workers will be able to perform their tasks from home full time, and how many days they come into the office will be up to their team director to decide. Labor market analysts note that Amazon has just started a huge recruiting campaign for 40,000 corporate and tech positions which will constitute a 20% rise in staffing. Remote work could potentially become a bargaining chip in the fight for specialists.Do you miss the office? Share your opinion in our global survey The research firm Gartner recently asked 10,000 digital workers in the US, Europe and Asia about what is important to them at work and what helps them to be more productive. 43% of specialists mentioned flexibility of working hours, and 30% of them indicated that they are more effective when they spend less time commuting or do not commute to the office at all.In late September, PwC became the first of the big four accounting and consulting companies to offer permanent remote work to willing customer service staff, affecting 40,000 people in the US alone. PwC employees who choose to work from home permanently will have to come to the offices at least three days a month for scheduled in-person meetings, key team meetings, client visits, or learning sessions.PwC makes no secret that its flexible attitude to work from home is motivated by the desire to retain and attract talent, and in mid-June this year, the company, which employs 295,000 people worldwide, announced a plan to recruit 100,000 new workers (70-75,000 from outside the US). Share your opinion with usThe future model of work is being shaped in front of our eyes. As the Amazon and PwC examples show, offering employees real flexibility in their choice of work options can be a calling card for the most innovative employers in the months to come. What's your opinion? What should be the future work model for you and your company?Share your opinion in our global survey about returning to the office. There are 17 questions that will take you no more than 5-7 minutes to answer.In return, you will receive a report with research results and expert comments. We'll also invite you to an exclusive webinar where you will learn how the world's most progressive companies are resolving their return-to-office dilemmas. Do you miss the office? Share your opinion in our global surveyRead the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 25th, 2021

Futures Flat As Bitcoin Nears All-Time High, Yen Tumbles To 4 Year Low

Futures Flat As Bitcoin Nears All-Time High, Yen Tumbles To 4 Year Low US index futures were little changed as investors weighed the start of the earnings season against growing stagflation, tightening, energy crisis, China property and supply risks. S&P 500 futures were flat after the cash index edged closer to a record on Tuesday, rising above 4,500. Contracts on the Nasdaq 100 were also unchanged after the main index rallied for the past five days. At 7:30 a.m. ET, Dow e-minis were down 8 points, or 0.02%, S&P 500 e-minis were down 1 point, or 0.03%, and Nasdaq 100 e-minis were up 5 points, or 0.03%. Oil was down and the dollar steadied. Bitcoin traded just shy of its all time high overnight, and was last seen around $64,000. The S&P closed higher on Tuesday with the biggest boosts from the technology and healthcare sectors amid optimism about solid third-quarter earnings season. The index is just 0.4% below its early September record close, while the Dow Jones Industrials average is 0.5% below its all-time high reached in mid-August. "Earlier this month, stagflation was the buzzword on Wall Street. But now excessive pessimism is receding, especially after strong U.S. retail sales data on Friday," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "Tech shares and other high-growth shares that would have been sold on rising bond yields are rallying, which clearly shows that there is now strong optimism on upcoming earnings." The positive mood saw U.S. bond yields rising further, with the 10-year U.S. Treasuries yield climbing to 1.67% , a high last seen in May. Shorter yields dipped, however, with the two-year yield slipping to 0.404% from Monday's peak of 0.448% as traders took profits for now from bets that the U.S. Federal Reserve will turn hawkish at its upcoming policy meeting in early November. Investors expect the Fed to announce tapering of its bond buying and money markets futures are pricing in one rate hike later next year. "The Fed is likely to become more hawkish, probably tweaking its language on its assessment that inflation will be transient. While the Fed will maintain tapering is not linked to a future rate hike, the market will likely try to price in rate hikes and flatten the yield curve," said Naokazu Koshimizu, senior strategist at Nomura Securities. In premarket trading, Tesla edged 0.4% lower in the run up to its quarterly results after markets close, with investors awaiting details on its performance in China. Anthem rose 0.6% as the second largest health U.S. insurer raised its profit outlook for 2021 after beating third-quarter profit estimates. United Airlines Holdings gained 1.6% after the carrier reported a smaller quarterly loss than a year ago on travel rebound. Ford gained 1.9% after Credit Suisse upgraded the U.S. automaker’s stock to ‘outperform’ on EV transition. Oil majors Exxon Mobil and Chevron Corp slipped 0.7% and 0.6%, respectively, tracking crude prices. Meanwhile, Chinese technology ADRs climbed as jitters in the wake of President Xi Jinping’s regulatory crackdowns fade. Netflix’s global sensation “Squid Game” helped lure more customers than expected, the world’s largest streaming service said as it predicted a packed lineup would further boost signups through the end of the year. Its shares, however, fell 2.7% after hitting a record high earlier this month and gaining 18.2% year-to-date. Here are some of the other biggest U.S. movers today: Chinese tech stocks listed in the U.S. rally in premarket with Hong Kong peers as jitters in the wake of President Xi Jinping’s regulatory crackdowns fade; Pinduoduo (PDD US) +1.7%; Didi (DIDI US) +1.3% Alibaba (BABA US) jumped 6.7% in Hong Kong after reports that founder Jack Ma has traveled abroad for the first time in a year United Airlines (UAL US) gains 2% in U.S. premarket trading after the airline posted a narrower loss than expected despite the impact of the coronavirus delta variant. Cowen notes that 3Q was better than expected and also ahead of management’s last guidance from early September Novavax (NVAX US) shares fall as much as 25% in U.S. premarket trading after Politico reported a potential delay in registering its Covid-19 vaccine candidate with the U.S. Food and Drug Administration in connection with inadequate purity levels Vinco Ventures (BBIG US) shares slump 15% in premarket trading after the company reported the resignations of Chief Executive Officer Christopher Ferguson and Chief Financial Officer Brett Vroman Ford (F US) shares gain 1.7% premarket after Credit Suisse upgrades to outperform with joint Street-high target of $20 following a significant turnaround over the past year Stride (LRN US) gained 7.9% Tuesday postmarket after the education company forecast revenue for the full year that beat the highest analyst estimate WD-40 (WDFC US) sank 10% in postmarket trading after forecasting earnings per share for 2022 that missed the average analyst estimate Omnicom (OMC US) fell 3% in postmarket trading after third quarter revenue fell short of some analyst estimates Canadian National (CNI US) U.S.-listed shares rose 4.6% in postmarket trading after reporting adjusted earnings per share for the third quarter that beat the average analyst estimate Akero Therapeutics (AKRO US) shares rose as much as 12% in Tuesday extended trading after co. said the U.S Verizon Communication, Abbott Laboratories, Tesla Inc, Kinder Morgan and IBM are set to report their earnings later in the day.  Analysts expect S&P 500 earnings to rise 32.4% from a year earlier, according to Refinitiv data, while also keeping a close eye on growth outlook from companies that are faced with rising costs, labor shortages and supply chain disruptions. “Investor response to the latest set of earnings reports has been a touch hit and miss with supply chain issues dogging both Procter and Gamble and Philip Morris,” wrote Danni Hewson, financial analyst at AJ Bell in a client note. “After six quarters of beating earnings expectations, the focus may now shift to forward guidance for 2022 and away from the likely better than expected results for this quarter,” Clive Emery, a multi asset fund manager at Invesco said in a note. “If CEOs are more conservative, this could dent market pricing – especially after such strong moves in equity markets over the last 18 months.” In Europe, stocks were also little changed as gains in food and beverage stocks offset losses in miners which are some of the region’s steepest decliners as base metals slip after China launched a blitz of measures to tackle the energy crisis. The Stoxx Europe 600 basic resources index drops 2% as of 10:56am in London, worst performance among Stoxx 600 sectors. Here are some of the biggest European movers today: Falck Renewables shares rise as much as 15% after Infrastructure Investments Fund agreed to buy Falck SpA’s 60% stake in the company at EU8.81/share. IIF will launch a mandatory cash tender offer for Falck Renewables’ remaining share capital after the transaction. Husqvarna shares advance as much as 7.7%, the most intraday since May 2020, after reporting 3Q operating profit that Pareto Securities says is “substantially” stronger than expected. Getinge shares jump as much as 8.1% to a record high, leading the OMX Stockholm 30 index, after 3Q earnings which Handelsbanken (hold) says showed “impressive” order intake and operating leverage. Deliveroo shares jump as much as 4.9% to their highest level since Sept. 30, after the U.K. online food delivery firm hikes its growth forecast, which Jefferies says is an “aspiration” for players in the sector. Nestle shares advance as much as 3.9% after the world’s largest food company increased its sales outlook for the year. This along with the lack of a negative margin update “should be enough to reassure,” according to Citigroup. AutoStore Holdings shares jumped as much as 15% in its Oslo trading debut after pricing shares at the top end of the marketed range as an online shopping boom and labor shortages drive up demand for its automated warehouse robots. Kering SA shares tumbled as much as 5.8% after slowing growth at Gucci, its biggest brand, put more pressure on the label’s new collection to deliver a strong holiday season. Antofagasta shares slump as much as 6.3%, most intraday for two months, after the miner guides for lower copper production next year. Citi and Morgan Stanley analysts say 2022 outlook came in below expectations Kuehne + Nagel shares fall as much as 4.7% to their lowest level in five months after working- capital concerns outweighed a 3Q earnings beat for Swiss logistics operator. Earlier in the session, Asian stocks advanced with Hong Kong-listed tech shares extending their rally to a fourth day, buoyed by encouraging U.S. earnings and growing optimism that the strictest of China’s new regulations on tech firms may already be announced.  The MSCI Asia Pacific Index rose as much as 0.7%, powered by Alibaba Group Holding Ltd., which closed up 6.7%. The equity gauge also climbed after Johnson & Johnson raised its profit forecast and Netflix Inc. reported a jump in subscribers. Hong Kong and Australia were among the top-performing markets.  “Asian stocks appear to be taking their cue from the U.S. earnings season and are being bought on the back of the nascent technical confirmation,” said Justin Tang, the head of Asian research at United First Partners. The regional benchmark has gained 5% over the past two weeks as the earnings season progresses and inflation and supply chain worries ease. The measure is close to surpassing its 100-day moving average. Coal stocks listed in mainland China slumped after the nation’s top economic planner said it’s studying ways to intervene in the coal market as the government tries to rein in rising prices and curtail shortfalls. Meanwhile, expectations are falling that China’s central bank will ease monetary policy by cutting the amount of cash banks have to hold in reserve, according to a front-page story from the central bank’s own newspaper. Japanese equities eked out a second day of gains, driven by advances in telecommunications providers. Banks were also among the biggest boosts to the Topix, which rose less than 0.1%. SoftBank Group and Fast Retailing were the largest contributors to a 0.1% gain in the Nikkei 225. U.S. equities extended a rally on Tuesday as solid corporate results helped counter concerns stemming from elevated inflation. In Australia, the S&P/ASX 200 index rose 0.5% to 7,413.70, its highest close since Sept. 16. Banks boosted the index as a subgauge of financials hit a four-year peak. Kogan.com rallied after the company reported gross sales for the first quarter of A$330.5 million vs. A$273 million y/y. Whitehaven plunged after China’s top economic planner said it is studying ways to intervene in the coal market as the government tries to rein in rising prices and curtail shortfalls. In New Zealand, the S&P/NZX 50 index rose 0.4% to 13,114.24 In FX, the Bloomberg dollar index is little changed in London trade following yesterday’s slide and the greenback traded mixed against its Group-of-10 peers. The Treasury curve held on to yesterday’s steepening as the 2-year yield fell a second day, while the 10- year yield was steady after earlier rising to 1.67% for the first time since May. Norway’s krone was the worst G-10 performer as it fell from the European open, after yesterday reaching a four-month high versus the dollar. The pound slipped, reversing modest gains, after the U.K.’s September inflation reading came in lower than expectations; still, it’s well beyond the Bank of England’s target and it’s the last before the rate decision in November. Australia’s led G-10 gains and the sovereign bond curve bear steepened, tracking yesterday’s Treasury moves. The yen fell to weakest level in almost four years as traders added to bets on Fed rate hikes and rising oil prices boosted concern about the Japanese trade deficit. China’s offshore yuan extends its overnight softness after a weaker than expected fixing, with USD/CNH 0.25% higher. In rates, treasuries were narrowly mixed and off lows reached during Asia session after being led higher during European morning by gilts, where short maturities outperform. The 10-year TSY yield touched 1.67%, the highest level since May. The treasury futures rally stalled after a block sale in 10-year contracts, apparently fading strength. Treasury curve pivots around a little-changed 10-year sector, with front-end yields slightly richer on the day, long-end slightly cheaper; 5s30s, steeper by 2bp, extends rebound from Monday’s multimonth low; U.K. 10-year yield is lower by nearly 4bp. U.S. session includes 20-year bond auction.   Bunds and gilts ground higher in quiet trade, with curves having a small steepening bias. Long end USTs cheapen 1bp, gilts richen ~2.5bps at the short end. Peripheral spreads are marginally tighter to Germany. Italy’s green BTP syndication is well received with final books over EU48b. European equities fade a small opening dip to trade little changed. Price action is quiet, V2X drops toward 16 In commodities, crude futures drift lower. WTI drops 0.9% near $82.20, Brent is 1% lower holding above $84. Spot gold slowly extends Asia’s gains, rising $9 to trade near $1,780/oz. Most base metals are under pressure with LME copper and aluminum underperforming peers. In cryptocurrencies, bitcoin stood at $64,068, near its all-time peak of $64,895 as the first U.S. bitcoin futures-based exchange-traded fund began trading on Tuesday Looking at the day ahead now, and data releases include the UK and Canadian CPI readings for September, alongside the German PPI reading for the same month. From central banks, the Fed will be releasing their Beige Book, and we’ll hear from the Fed’s Bostic, Kashkari, Evans, Bullard and Quarles, as well as the ECB’s Villeroy, Elderson, Holzmann and Visco. Finally, today’s earnings releases include Tesla, Verizon Communications, Abbott Laboratories, NextEra Energy and IBM. Market Snapshot S&P 500 futures little changed at 4,509.50 MXAP up 0.4% to 200.82 MXAPJ up 0.5% to 661.79 Nikkei up 0.1% to 29,255.55 Topix little changed at 2,027.67 Hang Seng Index up 1.4% to 26,136.02 Shanghai Composite down 0.2% to 3,587.00 Sensex down 0.6% to 61,343.39 Australia S&P/ASX 200 up 0.5% to 7,413.67 Kospi down 0.5% to 3,013.13 STOXX Europe 600 little changed at 468.88 German 10Y yield rose 8.5 bps to -0.115% Euro little changed at $1.1628 Brent Futures down 0.9% to $84.32/bbl Gold spot up 0.5% to $1,777.33 U.S. Dollar Index little changed at 93.80 Top Overnight News from Bloomberg Business Secretary Kwasi Kwarteng said there won’t be a fresh lockdown of the U.K. economy even as Covid-19 cases tick upwards and Prime Minister Boris Johnson warns of a difficult winter ahead The recovery in France and in Europe “remains very strong,” Bank of France Governor Francois Villeroy de Galhau says on Wednesday during a National Assembly finance committee hearing The yen’s tough year is only going to get tougher as a rising tide of oil prices and global yields threatens to send Japan’s currency past 115 per dollar for the first time since 2017 PBOC Deputy Governor Pan Gongsheng says financial activities by China’s property sector and financial market prices are gradually becoming normal, China Business News reports, citing a speech at a forum in Beijing Sinic Holdings Group Co. became the latest Chinese real estate firm to default as investors wait to see whether China Evergrande Group Inc. will meet overdue interest payments on dollar bonds this week A more detailed look at global markets from Newsquawk Asian equity markets traded mostly positive as the region took its cue from the extended gains on Wall Street where sentiment was underpinned amid encouraging earnings results and with some hopes for a breakthrough on reconciliation as the White House and Democrats continued deliberations. ASX 200 (+0.5%) was led higher by outperformance in tech and with nearly all of its sectors in the green, while there were also gains seen in some of the blue-chip miners and across the big four banks. Nikkei 225 (+0.1%) was lifted by the weaker currency and following better than expected Exports and Imports data, although the index stalled just shy of the 29.5k level, while KOSPI (-0.5%) failed to hold on to opening gains with confirmation from North Korea that it fired a new submarine launched ballistic missile on Tuesday. Hang Seng (+1.4%) and Shanghai Comp. (-0.1%) were varied whereby Hong Kong was boosted by tech and health care with Alibaba leading the advances after it recently unveiled China’s most advanced chip and with its founder Jack Ma travelling abroad for the first time in over a year who is currently on a study tour in Spain. Conversely, the mainland was subdued alongside weakness in domestic commodity prices and despite a firmer liquidity effort by the PBoC, while the central bank provided no surprises in maintaining its benchmark Loan Prime Rates unchanged for the 18th consecutive month and a PBoC-backed paper also noted that expectations for a RRR cut during Q4 have eased. Finally, 10yr JGBs were lower amid spillover selling from global peers and recent curve steepening in US which desks attributed to positioning and upcoming supply, although the downside for JGBs was limited by the presence of the BoJ in the market for nearly JPY 1.4tln of JGBs heavily concentrated in 1yr-10yr maturities. Top Asian News Abu Dhabi’s Top Fund Backs Indonesia’s Largest Internet Firm Singapore Category E COE Price Rises to Highest Since Oct. 2013 China’s Liu He Says Property Market Risks Are Controllable: 21st Rio’s New CEO Starts Turnaround With $7.5 Billion Climate Pledge It’s been a choppy start to the session for European equities (Euro Stoxx 50 flat; Stoxx 600 flat) as opening losses were quickly trimmed after the cash open. Stocks in Europe were unable to benefit from the constructive APAC handover, which itself benefitted from a strong Wall St close as stocks in the US gained for a fifth consecutive session. As it stands, US equity index futures are relatively flat as indices succumb to the choppy price action with events on Capitol Hill not providing much guidance for price action as lawmakers strive to reach a deal on spending by the end of the week. Back to Europe and sectoral performance is somewhat mixed with clear outperformance in the Food & Beverage sector as earnings from Swiss heavyweight Nestle (+3.2%) provides support and prompts upside in the SMI (+0.7%). Nestle reported a beat on 9M revenues and raised FY guidance amid performance of coffee and pet food sales, whilst noting that it increased pricing in a “responsible manner” during Q3. Elsewhere in Switzerland, Roche (-1.0%) also beat on revenues and raised guidance but was unable to benefit from a lift in its share price. To the downside, Basic Resources lag amid softness in some base metals prices as well as a production update from Antofagasta (-4.2%) and a broker downgrade for Rio Tinto (-4.0%). Retail names are also trading on a softer footing after Q3 earnings from Kering (-4.0%) saw the Co. report a decline in consolidated revenues and note that performance for Gucci was hit by a resurgence of COVID-19 cases in Asia. H&M (-2.7%) is also weighing on the sector after a broker downgrade at Morgan Stanley. Elsewhere, Deliveroo (+3%) is seeing upside today after the Co. upgraded Gross Transaction Value (GTV) growth guidance. Additionally, in what has been a tough week for the Co., IAG (-3.6%) is seeing further losses after being downgraded at Peel Hunt. Finally, updates from the likes of materials name Akzo Nobel (supply chain woes) and semiconductor ASML (revenues fell short of expectations) have sent their shares lower by 1.5% and 1.7% respectively. Top European News Weidmann to to Step Down as Bundesbank Chief at End of Year Credit Suisse Dodges Bigger Fine With Debt-Forgiveness Vow Vinci Up After Reporting Higher 9m Sales; Guidance Confirmed Covid Tests Boost Roche Growth Once Again, Lifting Outlook In FX, the Index has recovered from yesterday's decline, which saw a base at 93.500 – matching the 32.8% Fib retracement of the September move, with the Index now eyeing the 21 DMA at 93.917 ahead of 94.000. The main stateside development has been on the fiscal front, where President Biden told Democrat lawmakers he believed they could secure an agreement for a tax and spending proposal valued at USD 1.75tln-1.90tln, whilst US progressive Democratic Rep. Jayapal said she feels even more optimistic after the White House meeting. As Republicans fully opposed Biden's plans, all Democrat votes are needed in the Senate, whilst only a few can be spared in the House. As a reminder, Congress set an Oct 31st deadline for the passage. Negotiations are expected to wrap up as soon as this week. Ahead, the stateside docket is quiet aside from several Fed regulars after the European close. NZD, AUD, CAD - The Kiwi stands as the current outperformer in a continuation of the strength seen as bets mount for a steeper RBNZ OCR hike at the upcoming meeting in light of the CPI metrics earlier this week. The NZD/USD pair also sees some technical tailwinds after failing to convincingly breach 0.7150 to the downside overnight. AUD/USD meanwhile eyes 0.7500 to the upside from a 0.7466 base with some potential support seen as China taps into Aussie coal amid surging demand. USD/CAD dips below 1.2350 but remains within yesterday's 1.2309-76 range ahead of Canadian CPI later – with headline Y/Y expected to tick higher to 4.3% from 4.1%. EUR, GBP - Both flat vs the Dollar and against each other. Sterling saw some mild weakness as UK CPI narrowly missed expectations at 3.1% vs exp. 3.2% for the headline Y/Y, in turn prompting market pricing to ease a touch as the dust settled – with the implied rate for the 4th Nov meeting modestly under 25bps vs 25.71bps heading into the release. That being said, the slight miss is likely not to provide enough ammunition for the BoE doves, whilst the hawks will likely continue to warn the dangers of persistently high inflation – ultimately not settling the debate on the MPC regarding how soon it should raise rates. GBP/USD fell back under its 100 DMA (1.3805) from a 1.3814 high. From a technical standpoint, aside from yesterday's 1.3833 peak, the pair sees the 200 DMA at 1.3846. EUR/USD meanwhile rebounded off its 21 DMA (1.1615) but remains under 1.1669 high, having seen little reaction to the unrevised Y/Y final EZ CPI metrics, although the M/M metrics were revised slightly higher as expected. Elsewhere, it is worth noting that ECB-hawk Weidmann has submitted his resignation to the Bundesbank and the ECB ahead of next week's Governing Council confab. JPY - The JPY is relatively flat intraday, but overnight price action was interesting as USD/JPY drifted to a high of 114.69, with participants recently flagging barriers just ahead of 115.00. Some have also cited Gatobi demand, where accounts In commodities, WTI and Brent Dec futures are marginally softer on the day in a continuation of the downward trajectory during US hours yesterday. WTI has dipped below USD 82/bbl (vs high USD 82.60/bbl) while its Brent counterpart hovers around USD 84.50/bbl (vs high USD 85.20/bbl). The subdued prices come amid a larger-than-expected build in Private inventories, although the internals were bullish, with the DoEs headline expected to print a build of some 1.8mln bbls. Elsewhere, the Iraqi energy minister has been vocal throughout the session, saying he expects oil prices to reach USD 100/bbl in Q1 and Q2 2022 – in contrast to comments he made last week which suggested that oil price is unlikely to increase further; whilst he also recently noted oil prices between USD 75-80/bbl is a fair price for producers and consumers. The Iraqi minister today said it is preferable for long-term oil prices between USD 75-85/bbl, and OPEC+ is now discussing ways to balance oil prices but no decision has yet been made to add more production above the agreed levels. Elsewhere, following India’s call on OPEC yesterday to lower prices, India’s HPCL executive says current oil prices are high for India; USD 60-70/bbl is comfortable and high oil prices may impact demand growth. Over to metals spot gold resides around its 50 DMA at USD 1,778/oz while spot silver eyes USD 24/bbl to the upside. Overnight, China’s coal intervention saw prices slump – with thermal coal futures hitting limit down and coke futures opening lower by 9%. LME copper prices are also softer, with the contract briefly dipping under USD 10k/t overnight. US Event Calendar 7am: Oct. MBA Mortgage Applications, prior 0.2% Oct. 20-Oct. 22: Sept. Monthly Budget Statement, est. -$59b, prior -$124.6b 2pm: U.S. Federal Reserve Releases Beige Book DB's Jim Reid concludes the overnight wrap Whilst inflation concerns are still very much bubbling under the surface of markets, risk appetite strengthened further yesterday thanks in no small part to decent earnings reports. There are no signs of widespread erosions of margins at the moment. Perhaps there is so much money sloshing about that for now prices are broadly being passed on. We’ll get a better picture of this as the earnings season develops. Indeed, the selloff from September feels like an increasingly distant memory now, with the S&P 500 (+0.74%) advancing for a 5th consecutive session to leave the index just 0.38% beneath all-time closing high from early September. Earlier Europe’s STOXX 600 (+0.33%) also moved higher. In the US, earnings supported sentiment yet again. 10 of the 11 companies reporting during New York trading beating estimates, whilst all 4 of the after-hours reporting beat as well. That brings the total number of reporters for the season thus far to 57, 50 of whom have beat earnings expectations. Most sectors were higher yesterday, with health care (+1.31%), utilities (+1.26%), and energy (+1.14%) leading the way; only consumer discretionary (-0.29%) lagged. We even saw the FANG+ index (+1.56%) of megacap tech stocks hit a new record ahead of Tesla’s earnings today, whilst the NASDAQ (+0.72%) was also up for a 5th consecutive session. Equities may be brushing off the inflation stories for now but they are hardly going away, as yesterday saw oil prices climb to fresh multi-year highs. Brent Crude was up +0.89% to close above $85/bbl for the first time since 2018, whilst WTI (+0.63%) similarly advanced to close just shy of $83/bbl, a mark not reached since 2014. And investor expectations of future inflation are still moving higher in many places, with the Euro Area 5y5y forward inflation swap up +4.0bps to 1.90%, also the highest level since 2014. Against this backdrop, sovereign bonds continued to selloff on both sides of the Atlantic, even though investors slightly pared back some of their Monday bets on near-term rate hikes by the Fed and the BoE. 10yr yields moved higher across the board, with those on Treasuries up +3.7bps to 1.64%, their highest closing level since early June, just as those on bunds (+4.3bps), OATs (+4.3bps) and BTPs (+4.8bps) similarly moved higher. It was a more divergent picture at the 2yr horizon however, with those on 2yr Treasuries down -3.0bps after five days of increases, whereas those on gilts were up +1.0bps. Watch out for UK inflation numbers shortly after this hits your inboxes although this may be the calm (due to base effects) before the inflationary storm in the coming months. From central banks, we had the latest global hike yesterday in Hungary, where the base rate was raised by 15bps to 1.80%, in line with consensus expectations, with Deputy Governor Virag saying afterwards that this monetary tightening was set to carry on into next year. However, we did get some pushback to recent market pricing from ECB chief economist Lane, who said that “If you look at market pricing of the forward interest rate curve, I think it’s challenging to reconcile some of the market views with our pretty clear rate forward guidance”. This didn’t really hit fixed income but it did see the euro pare back some of its gains against the US dollar yesterday, ending the session up just +0.08%, down from an intraday high of +0.51%. Asian equities have followed those moves higher overnight, with the Hang Seng (+1.71%), Nikkei (+0.27%), CSI (+0.08%) and Shanghai Composite (+0.03%) all trading higher, although the KOSPI (-0.11%) has lost ground. China’s property market continues to be in focus after home prices fell -0.08% in September, which is their first monthly decline since April 2015. Separately, Chinese coal futures (-8.00%) have snapped a run of 8 consecutive gains this morning after the country’s National Development and Reform Commission said that it wanted to ensure a rise in coal output to 12m tons per day, and that they would also be looking at other measures to intervene in the market. Outside of Asia, equity futures are pointing slightly lower, with those on the S&P 500 down -0.03%. The pandemic hasn’t been a major influence on markets in recent weeks but there may be some initial signs that the global decline in cases that we’ve seen since late August has stopped. Looking at data from John Hopkins University, the rolling weekly change in confirmed cases has ticked up on each of Saturday, Sunday and Monday. And although we shouldn’t over-interpret a few days’ numbers, we had already seen the rate of decline slow for 3 successive weeks now, which was probably to be expected given the time of year. We’re certainly coming up to a key period where a more indoor northern hemisphere life will combine with waning vaccine effectiveness to test the resolve of the authorities to maintain relatively restriction-free economies. Boosters may be key here. Once we get past this winter things may get easier particularly with new medicines in the pipeline like the viral pill from Merck that trials showed reduced hospitalisations and deaths by around half. On the data front, US housing starts fell to an annualised rate of 1.555m in September (vs. 1.615m expected), whilst building permits also fell to an annualised rate of 1.589m (vs. 1.680m expected). The previous month’s numbers were also revised down for both. Finally in the US, after an acrimonious weekend, Senators Sanders and Manchin expressed optimism they could agree on a framework for the next reconciliation bill by the end of the week in bilateral negotiations, which is set to contain a number of President Biden’s key legislative goals. To the day ahead now, and data releases include the UK and Canadian CPI readings for September, alongside the German PPI reading for the same month. From central banks, the Fed will be releasing their Beige Book, and we’ll hear from the Fed’s Bostic, Kashkari, Evans, Bullard and Quarles, as well as the ECB’s Villeroy, Elderson, Holzmann and Visco. Finally, today’s earnings releases include Tesla, Verizon Communications, Abbott Laboratories, NextEra Energy and IBM. Tyler Durden Wed, 10/20/2021 - 07:59.....»»

Category: smallbizSource: nytOct 20th, 2021

Futures Top 4,500 As Market Meltup Accelerates

Futures Top 4,500 As Market Meltup Accelerates Over the weekend, a Goldman flow trader explained why it expected a powerful market meltup to emerge in coming days, and this time Goldman was right because after trading at 4317 just one week ago, spoos are now almost 200 points higher, rising above 4500 this morning after a powerful ramp pushed US equity futures and global markets as an upbeat profit forecast from Johnson & Johnson which boosted (get it "boosted") its Revenue and EPS guidance, added to the positive momentum in corporate earnings generated by big banks last week and helped counter concerns about elevated inflation. At 715 a.m. ET, Dow e-minis were up 183 points, or 0.52%, S&P 500 e-minis were up 22.75 points, or 0.51%, and Nasdaq 100 e-minis were up 61.75 points, or 0.40%. Treasury yields were unchanged at 1.60% and the dollar slumped to a 4 week low. In premarket trading Johnson & Johnson - whose covid vaccine will soon be "mixed and matched" with mRNA platforms - rose 1.7% after it raised its 2021 adjusted profit forecast, even as it stuck to its outlook of $2.5 billion in sales from its COVID-19 vaccine this year. Walmart rose 2% after Goldman Sachs added the world’s largest retailer to its “Americas Conviction List”. Travelers Cos Inc rose 2.7% after the property and casualty insurer beat estimates for third-quarter profit. Large-cap FAAMG names all rose between 0.3% and 0.7%. Netflix Inc rose 0.1% ahead of its quarterly results later in the day, where it is expected to report blowout guidance for subscriber growth on the back of Squid Games. Here are some of the biggest U.S. movers today: Crypto stocks in spotlight as Bitcoin continued its climb toward all-time highs, bolstered by optimism over the launch of the first Bitcoin futures exchange-traded fund in the U.S. on Tuesday Hive Blockchain (HIVE US) +1.8%, Riot Blockchain (RIOT US) +2.3%, Marathon Digital (MARA US) +0.9%, Bitfarms (BITF US) +3.9% AgEagle Aerial Systems (UAVS US) shares rise as much as 16% in U.S. premarket after the provider of drones, sensors and software entered into a definitive agreement to buy Sensefly from Parrot at a valuation of $23m in cash and stock Steel Dynamics (STLD US) +1.5% in U.S. premarket trading after it reported 3Q adj. EPS above average analyst estimate Frontline (FRO US) jumps 6.5% in U.S. premarket trading, helped by rising oil prices Apple (AAPL US) marginally higher Tuesday premarket after analysts were upbeat on the company following an event where it showcased a revamp of its MacBook Pro laptops, along with new audio products EverQuote (EVER US) shares slipped Monday postmarket after co. cut 3Q revenue outlook TaskUS (TAS US) fell 6.8% Monday postmarket after holders offered shares via Goldman Sachs, JPMorgan Markets have taken comfort from robust earnings, but also grappling with the prospect of tightening monetary policy to quell price pressures. As Bloomberg notesm, traders are waiting to see if a slate of Federal Reserve speakers this week will try to calm the jitters stemming from the scaling back of pandemic-era policy support. “The world is watching interest rates more closely than it has for some time -- and rightly so, the moves have been emphatic, especially in the short-term maturities,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note. He added it’s “impressive how resilient and calm markets are in the face of the rates repricing.” Still, the recent bounce in the Nasdaq 100 index has failed to shoo away the bears, with net short positions on the tech-heavy benchmark higher than at the peak of the pandemic, Citigroup strategists said. J&J, P&G, Philip Morris, Netflix and United Airlines are scheduled to report today. “We’ve seen companies post some fairly decent beats,” said Michael Hewson, chief market analyst at CMC Markets in London. “While it’s been notable that most have cited concerns about rising costs, as well as supply-chain disruptions, we haven’t seen many significant profit downgrades yet.” In Europe, gains for mining companies outweighed a retreat for the travel industry, lifting the Stoxx Europe 600 Index up 0.2%. Danone dropped 2.2% in Paris after the French food giant reported sales that were overall in line with expectations, but warned of rising costs of milk, packaging and transportation. Ericsson AB fell after sales were hit by supply chain issues.  Miners and oil & gas are the strongest sectors, healthcare and travel underperform. Here are some of the biggest European movers today: Moneysupermarket.com shares climb as much as 8.9% after the British price comparison website posted its 3Q update and announced the acquisition of cashback site Quidco for GBP101m in cash. Hochschild gains as much as 6.8% after the silver miner said it plans to spin off the rare earths project it bought two years ago and list the new company in Canada. Software AG drops as much as 14%, the most since 2014, after the company cut its FY bookings growth guidance in the Digital Business segment, which analysts highlight as a negative. Bachem falls as much as 11% to CHF745 after placing 750,000 new shares at CHF778 apiece to raise CHF584m for growth. Beijer Ref trades down as much 7.2% after the cooling and heatings systems manufacturer missed analyst estimates on both sales and profit in 3Q. Earlier in the session, Asian equities gained, buoyed by a rebound in technology shares listed in Hong Kong and elsewhere in the region amid better-than-expected earnings and lower valuations. The MSCI Asia Pacific Index climbed as much as 1%, as TSMC and Alibaba provided some of the biggest boosts. The Hang Seng Tech Index rose to its highest since Sept. 13, as Chinese authorities are said to be considering opening up access for content on Tencent and ByteDance platforms to search engines such as Baidu. “Markets are currently adjusting their expectations around regulatory risks,” said Jun Rong Yeap, market strategist at IG Asia.  Most benchmarks in the region were in the green as the earnings season comforted edgy investors, who are keenly watching inflation figures, supply chain bottlenecks and China’s growth slowdown. The Asian measure crossed above a key technical level that it’s been flip-flopping around for most of 2021. Some material and energy stocks took a breather, even as supply shortages and strong demand cause a price surge for raw materials. Profits for Asian oil refiners have shot back up to pre-pandemic levels as the shortage of gas and coal sparks a rush to secure alternative supplies. “The policy misstep, which I think is unlikely, is for central banks to confuse themselves by saying there’s inflation because of us, as aggregate demand is way too strong and so let’s fix a supply chain, Covid-driven pickup in costs by tightening monetary policies,” Ajay Kapur, head emerging markets strategy at BofA Global Research told Bloomberg Television. In a notable development, China Evergrande Group’s main onshore unit paid interest due Tuesday on a yuan bond, Reuters reported, citing four people with knowledge of the matter. Japanese equities rose, powered by advances in technology stocks as cyclicals fell. Electronics makers and telecommunications providers were the biggest boosts to the Topix, which gained 0.4%. Fast Retailing and SoftBank Group were the largest contributors to a 0.7% rise in the Nikkei 225. Australian stocks snapped a 3-day winning streak as banks, miners declined. The S&P/ASX 200 index fell 0.1% to close at 7,374.90, edging lower after three consecutive days of advances. Mining stocks and banks were the biggest drags on the benchmark. Appen was among the top performers, extending gains for a fifth straight session. Chalice Mining retreated, snapping a four-day winning streak. Higher interest rates would remove some of the heat from the nation’s property market, though it would come at the cost of fewer jobs and weaker wages growth, the Reserve Bank of Australia said in minutes of its October meeting released Tuesday.  In New Zealand, the S&P/NZX 50 index rose 0.5% to 13,065.92. “We are going to get a lot of information on whether margins are being squeezed by these shortages and higher prices and wages continuing to go up,” JoAnne Feeney, Advisors Capital Management partner and portfolio manager, said on Bloomberg Television. She added the delta-plus Covid variant could be among sources of volatility in the next few months. In rates, Treasury yields fell, led by the front end; Bund yields were also lower but by less than U.S. peers. Yields are richer by 2bp-3bp across front-end of the curve, cheaper by ~1bp across long-end, with 2s10s, 5s30s spreads steeper by 2bp-3bp; 10-year is little changed at 1.597%, with bunds, gilts lagging by ~2bp. Daily ranges remain narrow while bunds and gilts underperform. Stock index futures are rising, lifting S&P 500 futures to highest level in more than a month.  In FX, the Bloomberg Dollar Spot Index plunged as the dollar steepened its losses throughout the day; the greenback fell versus all of its Group-of-10 peers and risk-sensitive antipodean and Scandinavian currencies were the best performers.  The euro advanced a fifth consecutive day against the greenback to touch an almost three-week high of $1.1663. Options suggest the euro will rise above a string of resistance levels that it faces in the spot market. Australian and New Zealand dollars both advanced to the strongest in more than a month as lower Treasury yields dragged down the U.S. currency. Australia’s sovereign bonds rebounded after minutes from the nation’s latest central bank meeting prompted a rollback of early rate-hike bets. The central bank said it is committed to maintaining a supportive policy until actual inflation is sustainably within its 2%-3% target range. The yen snapped a three-day decline aided by falling U.S. yields and as traders saw the recent losses as excessive; Japan’s 20-year debt sale drew the lowest bid-to-cover ratio since 2015. In commodities, oil gained as Russia signaled that it won’t go out of its way to offer European consumers extra gas to ease the current energy crisis unless it gets regulatory approval to start shipments through the controversial Nord Stream 2 pipeline. Spot gold rallied, clawing back half of Friday’s losses to trade near $1,780/oz. Base metals are well bid. LME nickel and tin outperform, both rising over 2%. Looking at the day ahead, and we’ll hear from an array of central bank speakers, including the BoE’s Governor Bailey, Pill and Mann, the ECB’s Rehn, Centeno, Elderson, Panetta and Lane, along with the Fed’s Daly, Barkin, Bostic and Waller. Otherwise, US Data releases including September’s housing starts and building permits, and earnings today include Johnson & Johnson, Procter & Gamble, Netflix, Philip Morris International and BNY Mellon. Market Snapshot S&P 500 futures up 0.2% to 4,488.50 STOXX Europe 600 up 0.2% to 467.87 MXAP up 1.0% to 200.25 MXAPJ up 1.2% to 658.33 Nikkei up 0.7% to 29,215.52 Topix up 0.4% to 2,026.57 Hang Seng Index up 1.5% to 25,787.21 Shanghai Composite up 0.7% to 3,593.15 Sensex up 0.5% to 62,070.31 Australia S&P/ASX 200 little changed at 7,374.85 Kospi up 0.7% to 3,029.04 Brent Futures up 0.4% to $84.63/bbl Gold spot up 1.0% to $1,782.67 U.S. Dollar Index down 0.36% to 93.61 German 10Y yield rose 4.7 bps to -0.155% Euro up 0.4% to $1.1652 Top Overnight News from Bloomberg Bank of France Governor Francois Villeroy de Galhau says there is no reason to raise rates next year as inflation will come back below ECB’s 2% target, according to France Info radio interview U.S. Treasuries, European sovereigns, U.K. gilts and emerging-market credit are all set to lose money over the 12 months through September as dwindling coupons provide little cushion against rising yields, according to forecasts from Bloomberg Intelligence. Adding to the potentially toxic environment for bonds is the prospect of major central banks unwinding debt purchases and raising interest rates U.K. Prime Minister Boris Johnson promised to find a solution to Brexit’s Northern Ireland Protocol, a sign that a compromise will be reached with the European Union in a dispute that had threatened to spiral into a trade war. Bitcoin continued its climb toward all-time highs, bolstered by optimism over the upcoming launch of the first Bitcoin futures exchange-traded fund in the U.S. by asset manager ProShares China’s property and construction industries contracted in the third quarter for the first time since the start of the pandemic, weighed by a slump in real estate China’s central bank has room to cut the amount of cash banks must hold in reserve in order to boost liquidity and support economic growth, a government adviser said Contagion effects on inflation from the recent surge in energy prices can’t be excluded, but they are not the most likely scenario, Riksbank Deputy Governor Martin Floden says in parliamentary hearing A more detailed look at global markets courtesy of Newsquawk Asian equity markets were kept afloat with the region encouraged after the mostly positive lead from US, where equity markets shrugged off the hawkish calls on global rates and big tech gained including Apple which benefitted following its hardware event. ASX 200 (-0.1%) was initially marginally higher as tech mirrored the outperformance of the sector stateside and with notable gains in property stocks, although the advances in the index were capped and upside faded ahead of resistance at the 7,400 level and due to weakness in mining-related stocks following yesterday’s cooldown in commodity prices, as well as lower production results from BHP. Nikkei 225 (+0.7%) was underpinned as exporters benefitted from favourable currency flows, while the KOSPI (+0.7%) was also firmer with the index unfazed by the latest North Korean projectile launches which were said to be ballistic missiles and therefore banned under UN Security Council resolutions. Hang Seng (+1.5%) and Shanghai Comp. (+0.7%) adhered to the upbeat mood with Hong Kong the biggest gainer in the region amid strength across a broad range of sectors aside from energy due to the recent pullback in oil and with casino names also underwhelmed by weaker Q3 Macau gaming revenue compared with the prior quarter. Finally, 10yr JGBs nursed some of yesterday’s losses after global counterparts also found reprieve from the latest bout of bond selling pressure but with the recovery only marginal amid the mostly positive risk tone and following mixed results from the 20yr JGB auction. Top Asian News Alibaba Unveils One of China’s Most Advanced Chips Secretive Body Leads Xinjiang’s AI Policing, Report Finds China’s Central Bank Should Cut RRR, Government Adviser Says China’s Curbs on Fertilizer Exports to Worsen Global Price Shock European equities (Euro Stoxx 50 +0.1%; Stoxx 600 +0.2%) trade with an upside in an attempt to claw back some of yesterday’s losses with fresh macro impulses relatively light since Monday’s close. The Asia-Pac session was predominantly firmer with indices kept afloat by the mostly positive lead from the US and performance in the tech sector. As it stands, US equity index futures are marginally firmer with performance across the majors relatively even (ES +0.4%) as markets await a slew of large-cap earnings. In terms of market commentary, JP Morgan notes that global EPS revisions remain plentiful as sell-side analysts’ global EPS upgrades continue to outnumber EPS downgrades. That said, JPM is of the view that the trend is slowing. In terms of the sector breakdown, analysts note that Defensive Sectors show improving EPS revisions, whilst Global Cyclicals sectors such as Technology, Financials, Energy, Industrials and Discretionary dominate the largest upgrades. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources amid upside in underlying commodity prices. Elsewhere, Retail names also outperform peers with some of the French luxury names such as Kering, LVMH and Hermes trying to claw back some of yesterday’s post-Chinese GDP losses with the former set to release earnings after-hours. To the downside, the Telecoms sector sits in modest negative as Ericsson (-0.3%) acts as a drag post-Q3 results. In terms of individual movers, Pearson (+3.6%) stands at the top of the Stoxx 600 after being upgraded at Credit Suisse, whilst Iberdrola (+3.2%) is also a notable gainer amid news that it is to invest USD 8.3bln into a North Sea wind farm complex – its largest global investment. Laggards include Teamviewer (-4.8%) following a broker downgrade at Exane, whilst broker action has also hampered IAG (-3.5%). In terms of large cap earnings, Danone (-1%) shares are seen lower after flagging rising costs and a slowdown in sales growth. Top European News European Gas Prices Drop on Windy and Mild Weather Forecasts Most of Barclays’ U.S. Workers Now Back in Office, Staley Says Poland Escalates Rule-of-Law Dispute, Risking EU Recovery Money Goldman Sachs Investment Banker Joins Nordic Venture Fund Hadean In FX, a downbeat session for the Dollar thus far as the index retreats further from the 94.000 mark to extend the lower bound of a two-week range. There has been little in terms of fundamental catalysts to trigger the selloff as yields remain elevated (albeit off recent highs), and market sentiment remains tentative. State-side, there is a lack of developments Capitol Hill, with US President Biden stating that he is "right now" going to try for a deal with Moderate Democratic Senator Manchin, while it was separately reported that Senator Manchin said he does not see how a deal on Biden's agenda will happen by October 31st. The DXY is more interesting from a technical standpoint after falling just short of the 100 WMA (94.213) during yesterday's session to a high of 94.174 and losses exacerbated overnight by a breach of support at the 21 DMA (98.879) – with the line acting as firm support over the past three consecutive trading sessions. The next levels to the downside naturally reside at the 93.500 mark – with clean air seen until the psychological mark. Below that, the September 28th low resides at 93.360, followed by the 50 DMA at 93.242 and the 27th Sept base at 93.206. Ahead, the data docket remains light, but Fed speak is abundant, although from regulars. AUD, NZD, CAD - The antipodeans top the G10 chart, with the NZD the marked outperformer as participants mull stepper RBNZ rate hikes following yesterday's hot Kiwi CPI metrics. ANZ Bank brought forward its forecast for the RBNZ to lift the OCR to a neutral rate of 2% by August 2022 from a prior forecast of a neutral rate by the end of 2022. NZD/USD surpassed its 200 DMA - which matches the 0.7100 psychological level (vs low 0.7079). The pair now probes 0.7150 with some potential resistance seen at 0.7156 (September 10th high), 0.7167 (September 6th high), and 0.7170 (September 3rd high). The Aussie meanwhile saw a relatively mundane RBA minutes release, but the AUD optimism is likely spurred by the rebound in base metals. AUD/USD found support at its 100 DMA (0.7406) and inches closer towards 0.7450. Gains in the CAD are still somewhat hampered by the slide in crude prices yesterday; nonetheless, USD/CAD re-eyes levels last seen in July. EUR, GBP, JPY - All benefit from the softer Dollar, although the Sterling fares slightly better as BoE market pricing provides further tailwinds; markets are currently assigning a 78% probability of a 25bps hike at the November 4th confab. HBSC weighed in this morning and suggested the economic fundamentals do not appear to have changed sufficiently to warrant the recent market move, with market pricing looking too aggressive given the balance of supply and demand in their view. This followed GS and JPM reeling in their BoE hike forecasts yesterday. GBP/USD extends upside above 1.3800 and topped its 100 DMA situated at 1.3809. On the UK docket, BoE’s Mann and Chief Economic Pill could provide some more meat on the bones following Governor Bailey’s weekend remarks. EUR/USD was bolstered above its 21 DMA (1.1620) and posts gains north of 1.1650 at the time of writing, with the pair also eyeing chunky OpEx with EUR 1.3bln between 1.1600-15 and EUR 581mln between 1.1670-75. EUR/GBP meanwhile tests 0.8450 to the downside from a current 0.8463 high. USD/JPY has pulled back after failing to breach resistance just ahead of the 114.50 mark, with the softer Buck bringing the pair back towards the 114.00 ahead – with Friday's base at 113.63. In commodities, WTI and Brent front-month futures are nursing yesterday’s wounds and prices remain elevated despite a lack of fresh catalysts and with the macro landscape little changed as of late. The themes remain a) OPEC+ supply, b) supply crunch in the natural gas, LNG, electricity, and coal markets and c) winter demand. Elsewhere, the White House said it is continuing to press OPEC members to address the oil supply issue and is also addressing logistics of supply. Furthermore, the White House will use every lever at its disposal and the FTC is also looking at possible price gouging. WTI Nov extends gains above USD 83/bbl (vs 82.05/bbl low) while Brent Dec aims at USD 85/bbl (vs low 83.83/bbl). Elsewhere, metals have been spurred by the retreat in the Dollar, with spot gold topping its 50 DMA (1,778/oz) after testing its 21 DMA (1,760/oz) overnight, with the yellow metal also seeing its 200 and 100 DMAs at 1,793/oz and 1,794/oz respectively. Over to base metals, Dalian iron ore futures snapped a four-day losing streak, with iron ore shipments departing from Australia and Brazil lower W/W according to Mysteel data. Copper prices meanwhile are buoyed with the LME future holding onto comfortable gains north of USD 10k/t. US Event Calendar 8:30am: Sept. Building Permits MoM, est. -2.4%, prior 6.0%, revised 5.6% 8:30am: Sept. Housing Starts MoM, est. -0.2%, prior 3.9% 8:30am: Sept. Building Permits, est. 1.68m, prior 1.73m, revised 1.72m 8:30am: Sept. Housing Starts, est. 1.61m, prior 1.62m DB's Jim Reid concludes the overnight wrap At home we have recently bought a wooden bench for our kitchen table with the names of our three kids carved into the seats. We are pretty confident that there’ll be no need for more names. The problem was though that we chose an elegant, flamboyant font. The twins have just started to learn how to recognise and write their own names with the school having a very strict letter formation. As such last night when we were discussing it, young James refused to accept that this was his name on the bench and was hysterical with anger screaming that the bench needed to go as it was wrong. He kept on shouting “that’s not my name”. Nothing could persuade him otherwise. I thought I was defusing the situation by playing the famous Ting Tings song “that’s not my name” on the kitchen speakers but this just made matters far worse just before bedtime. So if anyone wants a bench with Edward, Maisie and James carved into it let me know as it’s causing a lot of grief at home. It seems like rate hikes are increasingly being carved into markets at the moment as Bank of England Governor Bailey’s hawkish Sunday comments that we discussed yesterday set the tone for the last 24 hours. Rates opened very weak across the globe but a similar pattern broke out to that seen over the last couple of weeks where higher yields have either brought in fresh bond buyers or markets have decided that the higher rate story is enough of a potential risk-off or negative growth story that dip buying mentality sets in. So yields have been a bit 3 steps higher, two steps lower over the last couple of weeks even though the inflation data has been largely one way higher. It was the UK that saw the most seismic shifts yesterday after Governor Bailey’s comments, with yields on 2yr UK gilts (+13.1bps) seeing their biggest daily move higher since August 2015, and the 2s10s curve (-9.8bps) flattening by the most since the height of the pandemic in March 2020. Markets are now pricing in a move in the Bank Rate up to around 0.45% by the December meeting (from 0.1%), and up to around 0.95% by the June meeting, around 15-30bps more priced in across the next several meetings from Friday’s close. So tomorrow’s CPI release from the UK will be interesting in light of this but it will likely be the calm before the storm given favourable base effects and with other pipeline inflation items yet to feed into the data. You can get a sense of how the UK is moving much faster than others in its rate hike pricing in that the spread between 2yr gilts and treasury yields is now at its widest in favour of gilt yields since late 2014. Yields on shorter maturities saw the most sustained movement elsewhere as well as investors began to anticipate imminent rate hikes. In fact, by the close of trade yesterday, markets were just shy of pricing in 2 Fed hikes by the end of 2022, which is some way ahead of the Fed’s dot plot from last month, when half the members didn’t see any hikes until at least 2023. Indeed, December 2022 Eurodollar futures have increased some 40 basis points over the last month, whilst September 2022 futures have increased more than 20 basis points. 10yr Treasury yields climbed +3.0 to 1.600%, with the rise entirely driven by higher real yields (+4.6bps). They were at 1.625% at the session highs, though. Those movements were echoed in the Euro Area, although the main difference to the US and the UK was that higher inflation breakevens rather than real rates drove the moves higher in yields. By the close of trade, yields on 10yr bunds (+2.1bps), OATs (+2.2bps) and BTPs (+3.0bps) had all moved higher even if again a few bps off the highs for the session. On the inflation side, the 10yr German breakeven hit a post-2013 high of 1.85%, just as the 5y5y forward inflation swap for the Euro Area was up +4.5bps to 1.91%, its highest closing level since 2014. The prospect of faster rate hikes put a dampener on equities, especially earlier in the day, though the S&P 500 (+0.34%) recovered to close just -1.13% beneath its all-time closing high from early September. Cyclical industries led the index higher, with the FANG+ index of megacap tech stocks (+1.99%) seeing a strong outperformance as all but 1 of its 10 constituents moved higher on the day. It was a different story in Europe however, where the STOXX 600 fell -0.50% in line with the losses elsewhere on the continent. At the sectoral level, energy was the outperformer in Europe but faded into the US close. After 8 successive weekly advances for WTI oil prices, yesterday saw it hit fresh multi-year highs (again…) intraday, gaining as much as +1.89% during the London session. However WTI made an about turn after the London close, and ultimately finished only slightly higher (+0.19%) on the day. Elsewhere, Bitcoin increased +3.31% yesterday and is up another +1.95% this morning to $62,564, bringing it within 1.5% of its own all-time closing high back in April and 3.6% beneath its all-time intraday high. The cryptocurrency has rallied in recent weeks as news picked up that the first US bitcoin ETF would be approved. Later today the ProShares ETF is expected to start trading, offering US retail investors a new avenue to trade the world’s largest cryptocurrency. The ETF will offer exposure to bitcoin futures contracts rather than “physical” bitcoin. Stocks are trading higher in Asia overnight, with the Hang Seng (+1.30%), CSI (+1.01%), Shanghai Composite (+0.74%), the Nikkei (+0.73%) and the KOSPI (+0.61%) all advancing thanks to an outperformance from technology stocks. For now at least, positive earnings are outweighing the impact from the prospect of faster than expected interest rate hikes. However, the issues stemming from Evergrande will continue to remain in focus as the developer has a Yuan bond interest due today. Outside of Asia, futures are pointing towards modest gains at the open, with those on the S&P 500 (+0.06%) and the DAX (0.11%) moving higher. Turning to the pandemic, the continued decline in global cases over the last couple of months and the lack of new variants has rather taken it off the front business pages of late. That said, there were a few concerning indications yesterday when it came to the health picture. Firstly, China is dealing with a fresh cluster in its northwestern provinces, with further positive tests reported overnight. Second, there are signs that we could be facing a more severe flu season as we approach winter in the northern hemisphere, with the Walgreens Boots Alliance reporting that flu cases are 23% higher in the US relative to a year ago. Third, there were some questions from the UK, as former US FDA Commissioner Scott Gottlieb wrote on Twitter on Sunday that given the recent rise in UK cases and the “delta-plus” variant, that there should be “urgent research” to discover if it was more transmissible or had partial immune evasion. Finally, New Zealand (which had been pursuing a zero-Covid strategy in the past) reported a record 94 cases yesterday as Auckland remains in lockdown. There wasn’t a massive amount of data yesterday, though US industrial production fell -1.3% in September (vs. +0.1% expected), and the August number was also revised down half a percentage point to now show a -0.1% contraction. Partly that was thanks to the continuing effects of Hurricane Ida, which contributed around 0.6 percentage point of the overall drop in production, but the contraction also reflected supply-chain issues (eg auto chip shortages). Otherwise, the NAHB housing market index for October unexpectedly rose to 80 (vs. 75 expected). To the day ahead now, and we’ll hear from an array of central bank speakers, including the BoE’s Governor Bailey, Pill and Mann, the ECB’s Rehn, Centeno, Elderson, Panetta and Lane, along with the Fed’s Daly, Barkin, Bostic and Waller. Otherwise, US Data releases including September’s housing starts and building permits, and earnings today include Johnson & Johnson, Procter & Gamble, Netflix, Philip Morris International and BNY Mellon. Tyler Durden Tue, 10/19/2021 - 07:50.....»»

Category: dealsSource: nytOct 19th, 2021

Futures Surge As Banks Report Stellar Earnings; PPI On Deck

Futures Surge As Banks Report Stellar Earnings; PPI On Deck US equity futures, already sharply higher overnight, jumped this morning as a risk-on mood inspired by stellar bank earnings, overshadowed concern that supply snarls. a China property crunch, a tapering Fed and stagflation will weigh on the global recovery. Nasdaq futures jumped 1%, just ahead of the S&P 500 which was up 0.9%. 10-year Treasury yields ticked lower to about 1.5%, and with the dollar lower as well, oil jumped. Bitcoin and the broader crypto space continued to rise. Shares in Morgan Stanley, Citi and Bank of America jumped as their deal-making units rode a record wave of M&A. On the other end, Boeing shares fell more than 1% after a Dow Jones report said the plane maker is dealing with a new defect on its 787 Dreamliner. Here are some of the biggest other U.S. movers today: Occidental (OXY US) rises 1.6% in U.S. premarket trading after it agreed to sell its interests in two Ghana offshore fields for $750m to Kosmos Energy and Ghana National Petroleum Plug Power (PLUG US) rises 3.3% premarket, extending gains from Wednesday, when it announced partnership with Airbus SE and Phillips 66 to find ways to harness hydrogen to power airplanes, vehicles and industry Esports Entertainment (GMBL US) shares rise 16% in U.S. premarket trading after the online gambling company reported its FY21 results and reaffirmed its FY22 guidance Perrigo  (PRGO US) gains 2.8% in premarket trading after Raymond James upgrades to outperform following acquisition of HRA Pharma and recent settlement of Irish tax dispute AT&T (T US) ticks higher in premarket trading after KeyBanc writes upgrades to sector weight from underweight, saying it seems harder to justify further downside from here Avis Budget (CAR US) may be active after getting its only negative rating among analysts as Morgan Stanley cuts to underweight with risk/reward seen pointing toward downside OrthoPediatrics (KIDS US) dipped 2% Wednesday postmarket after it said 3Q revenue was hurt by the surge in cases of Covid-19 delta variant and RSV within children’s hospitals combined with staff shortage Investors continue to evaluate the resilience of economic reopening to supply chain disruptions, a jump in energy prices and the prospect of reduced central bank support. In the earnings season so far, executives at S&P 500 companies mentioned the phrase “supply chain” about 3,000 times on investor calls as of Tuesday -- far higher than last year’s then-record figure. “Our constructive outlook for growth means that our asset allocation remains broadly pro-risk and we continue to be modestly overweight global equities,” according to Michael Grady, head of investment strategy and chief economist at Aviva Investors. “However, we have scaled back that position marginally because of growing pains which could impact sales and margins.” Europe's Stoxx 600 index reached its highest level in almost three weeks, boosted by gains in tech shares and miners. The Euro Stoxx 50 rose over 1% to best levels for the week. FTSE 100 rises 0.75%, underperforming at the margin. Miners and tech names are the strongest sectors with only healthcare stocks in small negative territory. Here are some of the biggest European movers today: THG shares advance as much as 10%, snapping a four-day losing streak, after a non-executive director bought stock while analysts at Goldman Sachs and Liberum defended their buy recommendations. Steico gains as much as 9.9%, the most since Jan., after the insulation manufacturer reported record quarterly revenue, which Warburg says “leaves no doubt” about underlying market momentum. Banco BPM climbs as much as 3.6% and is the day’s best performer on the FTSE MIB benchmark index; bank initiated at buy at Jefferies as broker says opportunity to internalize insurance business offers 9%-16% possible upside to 2023 consensus EPS and is not priced in by the market. Hays rises as much as 4.3% after the recruiter posted a jump in comparable net fees for the first quarter. Publicis jumps as much as 3.7%, the stock’s best day since July, with JPMorgan saying the advertising company’s results show a “strong” third quarter, though there are risks ahead. Kesko shares rise as much as 6.1%. The timing of this year’s third guidance upgrade was a surprise, Inderes says. Ubisoft shares fall as much as 5.5% after JPMorgan Cazenove (overweight) opened a negative catalyst watch, citing short-term downside risk to earnings ahead of results. Earlier in the session, Asian stocks advanced, boosted by a rebound in technology shares as traders focused on the ongoing earnings season and assessed economic-reopening prospects in the region. The MSCI Asia Pacific Index gained as much as 0.7%, as a sub-gauge of tech stocks rose, halting a three-day slide. Tokyo Electron contributed the most to the measure’s climb, while Taiwan Semiconductor Manufacturing Co. closed up 0.4% ahead of its earnings release. India’s tech stocks rose following better-than-expected earnings for three leading firms in the sector. Philippine stocks were among Asia’s best performers as Manila began easing virus restrictions, which will allow more businesses in the capital to reopen this weekend. Indonesia’s stock benchmark rallied for a third-straight day, as the government prepared to reopen Bali to tourists. READ: Commodities Boom, Tourism Hopes Fuel Southeast Asia Stock Rally Ilya Spivak, head of Greater Asia at DailyFX, said FOMC minutes released overnight provided Asian markets with little direction, which may offer some opportunity for recouping recent losses. The report showed officials broadly agreed last month they should start reducing pandemic-era stimulus in mid-November or mid-December. U.S. 10-year Treasury yields stayed below 1.6%, providing support for tech stocks.  “Markets seemed to conclude the near-term narrative is on pause until further evidence,” Spivak said. Shares in mainland China fell as the country reported factory-gate prices grew at the fastest pace in almost 26 years in September. Singapore’s stock benchmark pared initial losses as the country’s central bank unexpectedly tightened policy. Hong Kong’s equity market was closed for a holiday In rates, Treasuries were steady to a tad higher, underperforming Bunds which advanced, led by the long end.  Fixed income is mixed: gilts bull steepen with short dates richening ~2.5bps, offering only a muted reaction to dovish commentary from BOE’s Tenreyro. Bunds rise with 10y futures breaching 169. USTs are relatively quiet with 5s30s unable to crack 100bps to the upside. Peripheral spreads widen slightly. In FX, the Turkish lira was again the overnight standout as it weakened to a record low after President Recep Tayyip Erdogan fired three central bankers. The Bloomberg Dollar Spot Index fell and the greenback slipped against all of its Group-of-10 peers apart from the yen, with risk-sensitive and resource-based currencies leading gains; the euro rose to trade above $1.16 for the first time in a week.  The pound rose to more than a two-week high amid dollar weakness as traders wait for a raft of Bank of England policy makers to speak. Sweden’s krona temporarily came off an almost eight-month high against the euro after inflation fell short of estimates. The euro dropped to the lowest since November against the Swiss franc as banks targeted large option barriers and leveraged sell-stops under 1.0700, traders said; Currency traders are responding to stagflation risks by turning to the Swiss franc. The Aussie advanced to a five-week high versus the greenback even as a monthly jobs report showed employment fell in September; the jobless rate rose less than economists forecast. The kiwi was a among the top performers; RBNZ Deputy Governor Geoff Bascand said inflation pressures were becoming more persistent China’s yuan declined from a four-month high after the central bank signaled discomfort with recent gains by setting a weaker-than-expected reference rate. In commodities, crude futures extend Asia’s gains with WTI up ~$1 before stalling near $81.50. Brent regains a $84-handle. Spot gold drifts through Wednesday’s highs, adding $4 to print just shy of the $1,800/oz mark. Base metals are well bid with LME copper and aluminum gaining as much as 3%.  Looking at the day ahead, we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Market Snapshot S&P 500 futures up 0.6% to 4,382.50 STOXX Europe 600 up 0.9% to 464.38 MXAP up 0.7% to 196.12 MXAPJ up 0.6% to 642.66 Nikkei up 1.5% to 28,550.93 Topix up 0.7% to 1,986.97 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite little changed at 3,558.28 Sensex up 0.7% to 61,190.63 Australia S&P/ASX 200 up 0.5% to 7,311.73 Kospi up 1.5% to 2,988.64 Brent Futures up 1.0% to $83.98/bbl Gold spot up 0.2% to $1,796.13 U.S. Dollar Index down 0.25% to 93.84 German 10Y yield fell 1.5 bps to -0.143% Euro little changed at $1.1615 Brent Futures up 1.0% to $84.13/bbl Top Overnight News from Bloomberg A flattening Treasury yield curve signals increasing concern Federal Reserve efforts to keep inflation in check will derail the recovery in the world’s largest economy China’s factory-gate prices grew at the fastest pace in almost 26 years in September, potentially adding to global inflation pressure if local businesses start passing on higher costs to consumers. Turkish President Recep Tayyip Erdogan fired monetary policy makers wary of cutting interest rates further, driving the lira to record lows against the dollar with his midnight decree Singapore’s central bank unexpectedly tightened its monetary policy settings, strengthening the local dollar, as the city-state joins policymakers globally concerned about risks of persistent inflation Shortages of natural gas in Europe and Asia are boosting demand for oil, deepening what was already a sizable supply deficit in crude markets, the International Energy Agency said A tropical storm that’s lashing southern China mixed with Covid-related supply chain snarls is causing a ship backlog from Shenzhen to Singapore, intensifying fears retail shelves may look rather empty come Christmas A more detailed look at global markets courtesy of Newsquawk A constructive mood was seen across Asia-Pac stocks with the region building on the mild positive bias stateside where the Nasdaq outperformed as tech and growth stocks benefitted from the curve flattening, with global risk appetite unfazed by the firmer US CPI data and FOMC Minutes that suggested the start of tapering in either mid-November of mid-December. The ASX 200 (+0.5%) traded higher as tech stocks found inspiration from the outperformance of US counterparts and with the mining sector buoyed by gains in underlying commodity prices. The Nikkei 225 (+1.5%) was the biggest gainer amid currency-related tailwinds and with the latest securities flow data showing a substantial shift by foreign investors to net purchases of Japanese stocks during the prior week. The KOSPI (+1.5%) conformed to the brightening picture amid signs of a slowdown in weekly infections, while the Singapore’s Straits Times Index (+0.3%) lagged for most of the session following weaker than expected Q3 GDP data, and after the MAS surprisingly tightened its FX-based policy by slightly raising the slope of the SGD nominal effective exchange rate (NEER). The Shanghai Comp. (U/C) was initially kept afloat but with gains capped after slightly softer than expected loans and financing data from China and with participants digesting mixed inflation numbers in which CPI printed below estimates but PPI topped forecasts for a record increase in factory gate prices, while there was also an absence of Stock Connect flows with participants in Hong Kong away for holiday. Finally, 10yr JGBs were higher after the recent curve flattening stateside and rebound in T-notes with the US longer-end also helped by a solid 30yr auction, although gains for JGBs were capped amid the outperformance in Tokyo stocks and mostly weaker metrics at the 5yr JGB auction. Top Asian News Chinese Developer Shares Fall on Debt Crisis: Evergrande Update Japan’s Yamagiwa Says Abenomics Fell Short at Spreading Wealth China Seen Rolling Over Policy Loans to Keep Liquidity Abundant Malaysia’s 2020 Fertility Rate Falls to Lowest in Four Decades Bourses in Europe have modestly extended on the upside seen at the European cash open (Euro Stoxx 50 +1.1%; Stoxx 600 +0.9%) in a continuation of the firm sentiment experienced overnight. US equity futures have also conformed to the broader upbeat tone, with gains seen across the ES (+0.7%), NQ (+0.8%), RTY (+0.8%) and YM (+0.7%). The upside comes despite a lack of overly pertinent newsflow, with participants looking ahead to a plethora of central bank speakers. The major indices in Europe also see a broad-based performance, but the periphery narrowly outperforms, whilst the SMI (Unch) lags amid the sectorial underperformance seen in Healthcare. Overall, the sectors portray somewhat of a cyclical tilt. The Basic Resources sector is the clear winner and is closely followed by Tech and Financial Services. Individual moves are scarce as price action is largely dictated by the macro picture, but the tech sector is led higher by gains in chip names after the world's largest contract chipmaker TSMC (+3.1% pre-market) reported strong earnings and upgraded its revenue guidance. Top European News German 2021 Economic Growth Forecast Slashed on Supply Crunch U.K. Gas Shipper Stops Supplies in Another Blow to Power Firms Christmas Toy Shortages Loom as Cargo Clogs a Major U.K. Port Putin Is Back to Building Financial Fortress as Reserves Grow In FX, the Dollar and index by default have retreated further from Tuesday’s 2021 peak for the latter as US Treasury yields continue to soften and the curve realign in wake of yesterday’s broadly in line CPI data and FOMC minutes that set the schedule for tapering, but maintained a clear differential between scaling down the pace of asset purchases and the timing of rate normalisation. Hence, the Buck is losing bullish momentum with the DXY now eying bids and downside technical support under 94.000 having slipped beneath an early October low (93.804 from the 5th of the month vs 93.675 a day earlier) and the 21 DMA that comes in at 93.770 today between 94.090-93.754 parameters before the next IJC update, PPI data and a heavy slate of Fed speakers. NZD/AUD - No real surprise that the Kiwi has been given a new lease of life given that the RBNZ has already taken its first tightening step and put physical distance between the OCR and the US FFR, not to mention that the move sparked a major ‘sell fact’ after ‘buy rumour’ reaction. However, Nzd/Usd is back on the 0.7000 handle with additional impetus via favourable tailwinds down under as the Aud/Nzd cross is now nearer 1.0550 than 1.0600 even though the Aussie is also taking advantage of the Greenback’s fall from grace to reclaim 0.7400+ status. Note, Aud/Usd may be lagging somewhat on the back of a somewhat labour report overnight as the employment tally fell slightly short of expectations and participation dipped, but the jobless rate fell and full time jobs rose. Moreover, RBA Deputy Governor Debelle repeated that circumstances are different for Australia compared to countries where policy is tightening, adding that employment is positive overall, but there is not much improvement on the wage front. CAD/GBP/CHF - The next best majors in terms of reclaiming losses vs their US counterpart, with the Loonie also encouraged by a firm bounce in oil prices and other commodities in keeping with a general recovery in risk appetite. Usd/Cad is under 1.2400, while Cable is now over 1.3700 having clearly breached Fib resistance around 1.3663 and the Franc is probing 0.9200 for a big figure-plus turnaround from recent lows irrespective of mixed Swiss import and producer prices. EUR/JPY - Relative laggards, but the Euro has finally hurdled chart obstacles standing in the way of 1.1600 and gradually gathering impetus to pull away from decent option expiry interest at the round number and just above (1.5 bn and 1 bn 1.1610-20), and the Yen regrouping around the 113.50 axis regardless of dovish BoJ rhetoric. In short, board member Noguchi conceded that the Bank may have little choice but to extend pandemic relief support unless it becomes clear that the economy has returned to a pre-pandemic state, adding that more easing may be necessary if the jobs market does not improve from pent-up demand, though he doesn't see and immediate need to top up stimulus or big stagflation risk. In commodities, WTI and Brent front month futures are continuing the grind higher seen since the European close yesterday as the risk tone remains supportive and in the aftermath of an overall bullish IEA oil market report. The IEA upgraded its 2021 and 2022 oil demand forecasts by 170k and 210k BPD respectively, which contrasts the EIA STEO and the OPEC MOMR – with the former upping its 2021 but cutting 2022 forecast, whilst the OPEC MOMR saw the 2021 demand forecast cut and 2022 was maintained. The IEA report however noted that the ongoing energy crisis could boost oil demand by 500k BPD, and oil demand could exceed pre-pandemic levels in 2022. On this, China has asked Russia to double electricity supply between November-December. The morning saw commentary from various energy ministers, but perhaps the most telling from the Russian Deputy PM Novak who suggested Russia will produce 9.9mln BPD of oil in October (in-line with the quota), but that Russia has no problem in increasing oil output which can go to 11.3mln BPD (Russia’s capacity) and even more than that, but output will depend on market situation. Long story short, Russia can ramp up output but is currently caged by the OPEC+ pact. WTI Nov extended on gain about USD 81/bbl to a current high of USD 81.41/bbl (vs 80.41/bbl low) while its Brent counter topped USD 84.00/bbl to a USD 84.24/bbl high (vs 83.18/bbl low). As a reminder, the weekly DoEs will be released at 16:00BST/11:00EDT on account of the Columbus Day holiday. Gas prices have also moved higher in intraday, with the UK Nat Gas future +5.5% at the time of writing. Returning to the Russian Deputy PM Novak who noted that Nord Stream 2 will be ready for work in the next few days, still expects certification to occur and commercial supplies of gas via Nord Stream 2 could start following certification. Elsewhere, spot gold and silver have been drifting higher as the Buck wanes, with spot gold topping its 200 DMA (1,7995/oz) and in striking distance of its 100 DMA (1,799/oz) ahead of the USD 1,800/oz mark. Over to base metals, LME copper is again on a firmer footing, owing to the overall constructive tone across the market. Dalian iron ore meanwhile fell for a second straight day in a continuation of the downside seen as Beijing imposed tougher steel output controls for winter. World Steel Association also cut its global steel demand forecast to +4.5% in 2021 (prev. forecast +5.8%); +2.2% in 2022 (prev. forecast 2.7%). US Event Calendar 8:30am: Sept. PPI Final Demand MoM, est. 0.6%, prior 0.7%; YoY, est. 8.6%, prior 8.3% 8:30am: Sept. PPI Ex Food and Energy MoM, est. 0.5%, prior 0.6%; YoY, est. 7.1%, prior 6.7% 8:30am: Sept. PPI Ex Food, Energy, Trade MoM, est. 0.4%, prior 0.3%; YoY, est. 6.5%, prior 6.3% 8:30am: Oct. Initial Jobless Claims, est. 320,000, prior 326,000; Continuing Claims, est. 2.67m, prior 2.71m 9:45am: Oct. Langer Consumer Comfort, prior 53.4 Central Banks 8:35am: Fed’s Bullard Takes Part in Virtual Discussion 9:45am: Fed’s Bostic Takes Part in Panel on Inclusive Growth 12pm: New York Fed’s Logan Gives Speech on Policy Implementation 1pm: Fed’s Barkin Gives Speech 1pm: Fed’s Daly Speaks at Conference on Small Business Credit 6pm: Fed’s Harker Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Inflation dominated the conversation yet again for markets yesterday, after another upside surprise from the US CPI data led to the increasing realisation that we’ll still be talking about the topic for some time yet. Equities were pretty subdued as they looked forward to the upcoming earnings season, but investor jitters were evident as the classic inflation hedge of gold (+1.87%) posted its strongest daily performance since March, whilst the US dollar (-0.46%) ended the session as the worst performer among the G10 currencies. Running through the details of that release, headline US consumer prices were up by +0.4% on a monthly basis in September (vs. +0.3% expected), marking the 5th time in the last 7 months that the figure has come in above the median estimate on Bloomberg, though core prices were in line with consensus at +0.2% month-over-month. There were a number of drivers behind the faster pace, but food inflation (+0.93%) saw its biggest monthly increase since April 2020. Whilst some pandemic-sensitive sectors registered soft readings, housing-related prices were much firmer. Rent of primary residence grew +0.45%, its fastest pace since May 2001 and owners’ equivalent rent increased +0.43%, its strongest since June 2006. These housing gauges are something that Fed officials have signposted as having the potential to provide more durable upward pressure on inflation. The CPI release only added to speculation that the Fed would be forced to hike rates earlier than previously anticipated, and investors are now pricing in almost 4 hikes by the end of 2023, which is over a full hike more than they were pricing in just a month earlier. In response, the Treasury yield curve continued the previous day’s flattening, with the prospect of tighter monetary policy seeing the 2yr yield up +2.0bps to a post-pandemic high of 0.358%, whilst the 10yr decreased -4.0bps to 1.537%. That move lower in the 10yr yield was entirely down to lower real rates, however, which were down -7.4bps, suggesting investors were increasingly concerned about long-term growth prospects, whereas the 10yr inflation breakeven was up +3.3bps to 2.525%, its highest level since May. Meanwhile in Europe, 10yr sovereign bond yields took a turn lower alongside Treasuries, with those on bunds (-4.2bps), OATs (-4.0bps) and BTPs (-2.3bps) all falling. Recent inflation dynamics and issues on the supply-side are something that politicians have become increasingly attuned to, and President Biden gave remarks last night where he outlined efforts to address the supply-chain bottlenecks. This followed headlines earlier in the session that major ports in southern California would move to a 24/7 schedule to unclog delivery backlogs, and Mr. Biden also used the opportunity to push for the passage of the infrastructure plan. That comes as it’s also been reported by Reuters that the White House has been speaking with US oil and gas producers to see how prices can be brought lower. We should hear from Mr. Biden again today, who’s due to give an update on the Covid-19 response. On the topic of institutions that care about inflation, the September FOMC minutes suggested staff still remained optimistic that inflationary pressures would prove transitory, although Committee members themselves were predictably more split on the matter. Several participants pointed out that pandemic-sensitive prices were driving most of the gains, while some expressed concerns that high rates of inflation would feed into longer-term inflation expectations. Otherwise, the minutes all but confirmed DB’s US economists’ call for a November taper announcement, with monthly reductions in the pace of asset purchases of $10 billion for Treasuries and $5 billion for MBS. Markets took the news in their stride immediately following the release, reflecting how the build-up to this move has been gradually telegraphed through the year. Turning to equities, the S&P 500 managed to end its 3-day losing streak, gaining +0.30% by the close. Megacap technology stocks led the way, with the FANG+ index up +1.13% as the NASDAQ added +0.73%. On the other hand, cyclicals such as financials (-0.64%) lagged behind the broader index following flatter yield curve, and JPMorgan Chase (-2.64%) sold off as the company’s Q3 earnings release showed muted loan growth. Separately, Delta Air Lines (-5.76%) also sold off along with the broader S&P 500 airlines index (-3.51%), as they warned that rising fuel costs would threaten earnings over the current quarter. European indices posted a more solid performance than the US, with the STOXX 600 up +0.71%, though the sectoral balance was similar with tech stocks outperforming whilst the STOXX Banks index (-2.05%) fell back from its 2-year high the previous session. Overnight in Asia equities have put in a mixed performance, with the KOSPI (+1.17%) and the Nikkei (+1.01%) moving higher whilst the Shanghai Composite (-0.25%) and the CSI (-0.62%) have lost ground. Those moves follow the release of Chinese inflation data for September, which showed producer price inflation hit its highest in nearly 26 years, at +10.7% (vs. +10.5% expected), driven mostly by higher coal prices and energy-sensitive categories. On the other hand, the CPI measure for September came in slightly below consensus at +0.7% (vs. +0.8% expected), indicating that higher factory gate prices have not yet translated into consumer prices. Meanwhile, equity markets in the US are pointing to a positive start later on with S&P 500 futures up +0.32%. Of course, one of the drivers behind the renewal of inflation jitters has been the recent surge in commodity prices across the board, and we’ve seen further gains yesterday and this morning that will only add to the concerns about inflation readings yet to come. Oil prices have advanced yet again, with Brent Crude up +0.69% this morning to be on track to close at a 3-year high as it stands. That comes in spite of OPEC’s monthly oil market report revising down their forecast for world oil demand this year to 5.8mb/d, having been at 5.96mb/d last month. Elsewhere, European natural gas prices were up +9.24% as they continued to pare back some of the declines from last week, and a further two energy suppliers in the UK collapsed, Pure Planet and Colorado Energy, who supply quarter of a million customers between them. Otherwise, copper (+4.4x%) hit a 2-month high yesterday, and it up a further +1.01% this morning, Turning to Brexit, yesterday saw the European Commission put forward a set of adjustments to the Northern Ireland Protocol, which is a part of the Brexit deal that’s caused a significant dispute between the UK and the EU. The proposals from Commission Vice President Šefčovič would see an 80% reduction in checks on animal and plant-based products, as well as a 50% reduction in paperwork by reducing the documentation needed for goods moving between Great Britain and Northern Ireland. It follows a speech by the UK’s David Frost on Tuesday, in which he said that Article 16 of the Protocol, which allows either side to take unilateral safeguard measures, could be used “if necessary”. Mr. Frost is due to meet with Šefčovič in Brussels tomorrow. Running through yesterday’s other data, UK GDP grew by +0.4% in August (vs. +0.5% expected), and the July number was revised down to show a -0.1% contraction (vs. +0.1% growth previously). The release means that GDP in August was still -0.8% beneath its pre-pandemic level back in February 2020. To the day ahead now, and on the calendar we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Tyler Durden Thu, 10/14/2021 - 08:29.....»»

Category: blogSource: zerohedgeOct 14th, 2021

Futures Reverse Losses Ahead Of Key CPI Report

Futures Reverse Losses Ahead Of Key CPI Report For the second day in a row, an overnight slump in equity futures sparked by concerns about iPhone sales (with Bloomberg reporting at the close on Tuesday that iPhone 13 production target may be cut by 10mm units due to chip shortages) and driven be more weakness out of China was rescued thanks to aggressive buying around the European open. At 800 a.m. ET, Dow e-minis were up 35 points, or 0.1%, S&P 500 e-minis were up 10.25 points, or 0.24%, and Nasdaq 100 e-minis were up 58.50 points, or 0.4% ahead of the CPI report due at 830am ET. 10Y yields dipped to 1.566%, the dollar was lower and Brent crude dropped below $83. JPMorgan rose as much as 0.8% in premarket trading after the firm’s merger advisory business reported its best quarterly profit. On the other end, Apple dropped 1% lower in premarket trading, a day after Bloomberg reported that the technology giant is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units due to prolonged chip shortages. Here are some of the biggest U.S. movers today: Suppliers Skyworks Solutions (SWKS US), Qorvo (ORVO) and Cirrus Logic (CRUS US) slipped Tuesday postmarket Koss (KOSS US) shares jump 23% in U.S. premarket trading in an extension of Tuesday’s surge after tech giant Apple was rebuffed in two patent challenges against the headphones and speakers firm Qualcomm (QCOM US) shares were up 2.7% in U.S. premarket trading after it announced a $10.0 billion stock buyback International Paper (IP US) in focus after its board authorized a program to acquire up to $2b of the company’s common stock; cut quarterly dividend by 5c per share Smart Global (SGH US) shares rose 2% Tuesday postmarket after it reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate Wayfair (W US) shares slide 1.8% in thin premarket trading after the stock gets tactical downgrade to hold at Jefferies Plug Power (PLUG US) gains 4.9% in premarket trading after Morgan Stanley upgrades the fuel cell systems company to overweight, saying in note that it’s “particularly well positioned” to be a leader in the hydrogen economy Wall Street ended lower in choppy trading on Tuesday, as investors grew jittery in the run-up to earnings amid worries about supply chain problems and higher prices affecting businesses emerging from the pandemic. As we noted last night, the S&P 500 has gone 27 straight days without rallying to a fresh high, the longest such stretch since last September, signaling some fatigue in the dip-buying that pushed the market up from drops earlier this year. Focus now turn to inflation data, due at 0830 a.m. ET, which will cement the imminent arrival of the Fed's taper.  "A strong inflation will only reinforce the expectation that the Fed would start tapering its bond purchases by next month, that's already priced in," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Yet, a too strong figure could boost expectations of an earlier rate hike from the Fed and that is not necessarily fully priced in." The minutes of the Federal Reserve's September policy meeting, due later in the day, will also be scrutinized for signals that the days of crisis-era policy were numbered. Most European equities reverse small opening losses and were last up about 0.5%, as news that German software giant SAP increased its revenue forecast led tech stocks higher. DAX gained 0.7% with tech, retail and travel names leading. FTSE 100, FTSE MIB and IBEX remained in the red. Here are some of the biggest European movers today: Entra shares gain as much as 10% after Balder increases its stake and says it intends to submit a mandatory offer. Spie jumps as much as 10%, the biggest intraday gain in more than a year, after the French company pulled out of the process to buy Engie’s Equans services unit. Man Group rises as much as 8.3% after the world’s largest publicly traded hedge fund announced quarterly record inflows. 3Q21 net inflows were a “clear beat” and confirm pipeline strength, Morgan Stanley said in a note. Barratt Developments climbs as much as 6.3%, with analysts saying the U.K. homebuilder’s update shows current trading is improving. Recticel climbs 15% to its highest level in more than 20 years as the stock resumes trading after the company announced plans to sell its foams unit to Carpenter Co. Bossard Holding rises as much as 9.1% to a record high after the company reported 3Q earnings that ZKB said show strong growth. Sartorius gains as much as 5.9% after Kepler Cheuvreux upgrades to hold from sell and raises its price target, saying it expects “impressive earnings growth” to continue for the lab equipment company. SAP jumps as much as 5% after the German software giant increased its revenue forecast owing to accelerating cloud sales. Just Eat Takeaway slides as much as 5.8% in Amsterdam to the lowest since March 2020 after a 3Q trading update. Analysts flagged disappointing orders as pandemic restrictions eased, and an underwhelming performance in the online food delivery firm’s U.S. market. Earlier in the session, Asian stocks posted a modest advance as investors awaited key inflation data out of the U.S. and Hong Kong closed its equity market because of typhoon Kompasu. The MSCI Asia Pacific Index rose 0.2% after fluctuating between gains and losses, with chip and electronics manufacturers sliding amid concerns over memory chip supply-chain issues and Apple’s iPhone 13 production targets. Hong Kong’s $6.3 trillion market was shut as strong winds and rain hit the financial hub.  “Broader supply tightness continues to be a real issue across a number of end markets,” Morgan Stanley analysts including Katy L. Huberty wrote in a note. The most significant iPhone production bottleneck stems from a “shortage of camera modules for the iPhone 13 Pro/Pro Max due to low utilization rates at a Sharp factory in southern Vietnam,” they added. Wednesday’s direction-less trading illustrated the uncertainty in Asian markets as traders reassess earnings forecasts to factor in inflation and supply chain concerns. U.S. consumer price index figures and FOMC minutes due overnight may move shares. Southeast Asian indexes rose thanks to their cyclical exposure. Singapore’s stock gauge was the top performer in the region, rising to its highest in about two months, before the the nation’s central bank decides on monetary policy on Thursday. Japanese stocks fell for a second day as electronics makers declined amid worries about memory chip supply-chain issues and concerns over Apple’s iPhone 13 production targets.  The Topix index fell 0.4% to 1,973.83 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.3% to 28,140.28. Toyota Motor Corp. contributed the most to the Topix’s loss, decreasing 1.3%. Out of 2,181 shares in the index, 608 rose and 1,489 fell, while 84 were unchanged. Japanese Apple suppliers such as TDK, Murata and Taiyo Yuden slid. The U.S. company is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units as prolonged chip shortages hit its flagship product, according to people with knowledge of the matter Australian stocks closed lower as banks and miners weighed on the index. The S&P/ASX 200 index fell 0.1% to close at 7,272.50, dragged down by banks and miners as iron ore extended its decline. All other subgauges edged higher. a2 Milk surged after its peer Bubs Australia reported growing China sales and pointed to a better outlook for daigou channels. Bank of Queensland tumbled after its earnings release. In New Zealand, the S&P/NZX 50 index rose 0.2% to 13,025.18. In rates, Treasuries extended Tuesday’s bull-flattening gains, led by gilts and, to a lesser extent, bunds. Treasuries were richer by ~2bps across the long-end of the curve, flattening 5s30s by about that much; U.K. 30-year yield is down nearly 7bp, with same curve flatter by ~6bp. Long-end gilts outperform in a broad-based bull flattening move that pushed 30y gilt yields down ~7bps back near 1.38%. Peripheral spreads widen slightly to Germany. Cash USTs bull flatten but trade cheaper by ~2bps across the back end to both bunds and gilt ahead of today’s CPI release. In FX, the Bloomberg Dollar Spot Index fell by as much as 0.2% and the greenback weakened against all of its Group-of-10 peers; the Treasury curve flattened, mainly via falling yields in the long- end, The euro advanced to trade at around $1.1550 and the Bund yield curve flattened, with German bonds outperforming Treasuries. The euro’s volatility skew versus the dollar shows investors remain bearish the common currency as policy divergence between the Federal Reserve and the European Central Bank remains for now. The pound advanced with traders shrugging off the U.K.’s weaker-than-expected economic growth performance in August. Australia’s sovereign yield curve flattened for a second day while the currency underperformed its New Zealand peer amid a drop in iron ore prices. The yen steadied after four days of declines. In commodities, crude futures hold a narrow range with WTI near $80, Brent dipping slightly below $83. Spot gold pops back toward Tuesday’s best levels near $1,770/oz. Base metals are in the green with most of the complex up at least 1%. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Market Snapshot S&P 500 futures up 0.1% to 4,346.25 STOXX Europe 600 up 0.4% to 459.04 MXAP up 0.2% to 194.60 MXAPJ up 0.4% to 638.16 Nikkei down 0.3% to 28,140.28 Topix down 0.4% to 1,973.83 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite up 0.4% to 3,561.76 Sensex up 0.8% to 60,782.71 Australia S&P/ASX 200 down 0.1% to 7,272.54 Kospi up 1.0% to 2,944.41 Brent Futures down 0.4% to $83.12/bbl Gold spot up 0.5% to $1,768.13 U.S. Dollar Index down 0.23% to 94.30 German 10Y yield fell 4.2 bps to -0.127% Euro little changed at $1.1553 Brent Futures down 0.4% to $83.12/bbl Top Overnight News from Bloomberg Vladimir Putin wants to press the EU to rewrite some of the rules of its gas market after years of ignoring Moscow’s concerns, to tilt them away from spot-pricing toward long-term contracts favored by Russia’s state run Gazprom, according to two people with knowledge of the matter. Russia is also seeking rapid certification of the controversial Nord Stream 2 pipeline to Germany to boost gas deliveries, they said. Federal Reserve Vice Chairman for Supervision Randal Quarles will be removed from his role as the main watchdog of Wall Street lenders after his title officially expires this week. The EU will offer a new package of concessions to the U.K. that would ease trade barriers in Northern Ireland, as the two sides prepare for a new round of contentious Brexit negotiations. U.K. Chancellor of the Exchequer Rishi Sunak is on course to raise taxes and cut spending to control the budget deficit, while BoE Governor Andrew Bailey has warned interest rates are likely to rise in the coming months to curb a rapid surge in prices. Together, those moves would mark a simultaneous major tightening of both policy levers just months after the biggest recession in a century -- an unprecedented move since the BoE gained independence in 1997. Peter Kazimir, a member of the ECB’s Governing Council, was charged with bribery in Slovakia. Kazimir, who heads the country’s central bank, rejected the allegations A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed following the choppy performance stateside with global risk appetite cautious amid the rate hike bets in US and heading into key events including US CPI and FOMC Minutes, while there were also mild headwinds for US equity futures after the closing bell on reports that Apple is set to reduce output of iPhones by 10mln from what was initially planned amid the chip shortage. ASX 200 (unch.) was little changed as gains in gold miners, energy and tech were offset by losses in financials and the broader mining sector, with softer Westpac Consumer Confidence also limiting upside in the index. Nikkei 225 (-0.3%) was pressured at the open as participants digested mixed Machinery Orders data which showed the largest M/M contraction since February 2018 and prompted the government to cut its assessment on machinery orders, although the benchmark index gradually retraced most its losses after finding support around the 28k level and amid the recent favourable currency moves. Shanghai Comp. (+0.4%) also declined as participants digested mixed Chinese trade data in which exports topped estimates but imports disappointed and with Hong Kong markets kept shut due to a typhoon warning. Finally, 10yr JGBs were steady with price action contained after the curve flattening stateside and tentative mood heading to upcoming risk events, although prices were kept afloat amid the BoJ’s purchases in the market for around JPY 1tln of JGBs predominantly focused on 1-3yr and 5-10yr maturities. Top Asian News Gold Edges Higher on Weaker Dollar Before U.S. Inflation Report RBA Rate Hike Expectations Too Aggressive, TD Ameritrade Says LG Electronics Has Series of Stock-Target Cuts After Profit Miss The mood across European stocks has improved from the subdued cash open (Euro Stoxx 50 +0.5%; Stoxx 600 +0.3%) despite a distinct lack of newsflow and heading into the official start of US earnings season, US CPI and FOMC minutes. US equity futures have also nursed earlier losses and trade in modest positive territory across the board, with the NQ (+0.5%) narrowly outperforming owing to the intraday fall in yields, alongside the sectorial outperformance seen in European tech amid tech giant SAP (+4.7%) upgrading its full FY outlook, reflecting the strong business performance which is expected to continue to accelerate cloud revenue growth. As such, the DAX 40 (+0.7%) outperformed since the cash open, whilst the FTSE 100 (-0.2%) is weighed on by underperformance in its heavyweight Banking and Basic Resources sectors amid a decline in yields and hefty losses in iron ore prices. Elsewhere, the CAC 40 (+0.3%) is buoyed by LMVH (+2.0%) after the luxury name topped revenue forecasts and subsequently lifted the Retail sector in tandem. Overall, sectors are mixed with no clear bias. In terms of individual movers, Volkswagen (+3.5%) was bolstered amid Handelsblatt reports in which the Co was said to be cutting some 30k jobs as costs are too high vs competitors, whilst separate sources suggested the automaker is said to be mulling spinning off its Battery Cell and charging unit. Chipmakers meanwhile see mixed fortunes in the aftermath of sources which suggested Apple (-0.7% pre-market) is said to be slashing output amid the chip crunch. Top European News The Hut Shares Swing as Strategy Day Feeds Investor Concern U.K. Economy Grows Less Than Expected as Services Disappoint Man Group Gets $5.3 Billion to Lift Assets to Another Record Jeff Ubben and Singapore’s GIC Back $830 Million Fertiglobe IPO In FX, the Dollar looks somewhat deflated or jaded after yesterday’s exertions when it carved out several fresh 2021 highs against rival currencies and a new record peak vs the increasingly beleaguered Turkish Lira. In index terms, a bout of profit taking, consolidation and position paring seems to have prompted a pull-back from 94.563 into a marginally lower 94.533-246 range awaiting potentially pivotal US inflation data, more Fed rhetoric and FOMC minutes from the last policy meeting that may provide more clues or clarity about prospects for near term tapering. NZD/GBP - Both taking advantage of the Greenback’s aforementioned loss of momentum, but also deriving impetus from favourable crosswinds closer to home as the Kiwi briefly revisited 0.6950+ terrain and Aud/Nzd retreats quite sharply from 1.0600+, while Cable has rebounded through 1.3600 again as Eur/Gbp retests support south of 0.8480 yet again, or 1.1800 as a reciprocal. From a fundamental perspective, Nzd/Usd may also be gleaning leverage from the more forward-looking Activity Outlook component of ANZ’s preliminary business survey for October rather than a decline in sentiment, and Sterling could be content with reported concessions from the EU on NI customs in an effort to resolve the Protocol impasse. EUR/CAD/AUD/CHF - Also reclaiming some lost ground against the Buck, with the Euro rebounding from around 1.1525 to circa 1.1560, though not technically stable until closer to 1.1600 having faded ahead of the round number on several occasions in the last week. Meanwhile, the Loonie is straddling 1.2450 in keeping with WTI crude on the Usd 80/brl handle, the Aussie is pivoting 0.7350, but capped in wake of a dip in Westpac consumer confidence, and the Franc is rotating either side of 0.9300. JPY - The Yen seems rather reluctant to get too carried away by the Dollar’s demise or join the broad retracement given so many false dawns of late before further depreciation and a continuation of its losing streak. Indeed, the latest recovery has stalled around 113.35 and Usd/Jpy appears firmly underpinned following significantly weaker than expected Japanese m/m machinery orders overnight. SCANDI/EM - Not much upside in the Sek via firmer Swedish money market inflation expectations and perhaps due to the fact that actual CPI data preceded the latest survey and topped consensus, but the Cnh and Cny are firmer on the back of China’s much wider than forecast trade surplus that was bloated by exports exceeding estimates by some distance in contrast to imports. Elsewhere, further hawkish guidance for the Czk as CNB’s Benda contends that high inflation warrants relatively rapid tightening, but the Try has not derived a lot of support from reports that Turkey is in talks to secure extra gas supplies to meet demand this winter, according to a Minister, and perhaps due to more sabre-rattling from the Foreign Ministry over Syria with accusations aimed at the US and Russia. In commodities, WTI and Brent front-month futures see another choppy session within recent and elevated levels – with the former around USD 80.50/bbl (80.79-79.87/bbl) and the latter around 83.35/bbl (83.50-82.65/bbl range). The complex saw some downside in conjunction with jawboning from the Iraqi Energy Minster, who state oil price is unlikely to increase further, whilst at the same time, the Gazprom CEO suggested that the oil market is overheated. Nonetheless, prices saw a rebound from those lows heading into the US inflation figure, whilst the OPEC MOMR is scheduled for 12:00BST/07:00EDT. Although the release will not likely sway prices amidst the myriad of risk events on the docket, it will offer a peek into OPEC's current thinking on the market. As a reminder, the weekly Private Inventory report will be released tonight, with the DoE's slated for tomorrow on account of Monday's Columbus Day holiday. Gas prices, meanwhile, are relatively stable. Russia's Kremlin noted gas supplies have increased to their maximum possible levels, whilst Gazprom is sticking to its contractual obligations, and there can be no gas supplies beyond those obligations. Over to metals, spot gold and silver move in tandem with the receding Buck, with spot gold inching closer towards its 50 DMA at 1,776/oz (vs low 1,759.50/oz). In terms of base metals, LME copper has regained a footing above USD 9,500/t as stocks grind higher. Conversely, iron ore and rebar futures overnight fell some 6%, with overnight headlines suggesting that China has required steel mills to cut winter output. Further from the supply side, Nyrstar is to limit European smelter output by up to 50% due to energy costs. Nyrstar has a market-leading position in zinc and lead. LME zinc hit the highest levels since March 2018 following the headlines US Event Calendar 8:30am: Sept. CPI YoY, est. 5.3%, prior 5.3%; MoM, est. 0.3%, prior 0.3% 8:30am: Sept. CPI Ex Food and Energy YoY, est. 4.0%, prior 4.0%; MoM, est. 0.2%, prior 0.1% 8:30am: Sept. Real Avg Weekly Earnings YoY, prior -0.9%, revised -1.4% 2pm: Sept. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap So tonight it’s my first ever “live” parents evening and then James Bond via Wagamama. Given my daughter (6) is the eldest in her year and the twins (4) the youngest (plus additional youth for being premature), I’m expecting my daughter to be at least above average but for my boys to only just about be vaguely aware of what’s going on around them. Poor things. For those reading yesterday, the Cameo video of Nadia Comanenci went down a storm, especially when she mentioned our kids’ names, but the fact that there was no birthday cake wasn’t as popular. So I played a very complicated, defence splitting 80 yard through ball but missed an open goal. Anyway ahead of Bond tonight, with all this inflation about I’m half expecting him to be known as 008 going forward. The next installment of the US prices saga will be seen today with US CPI at 13:30 London time. This is an important one, since it’s the last CPI number the Fed will have ahead of their next policy decision just 3 weeks from now, where investors are awaiting a potential announcement on tapering asset purchases. Interestingly the August reading last month was the first time so far this year that the month-on-month measure was actually beneath the consensus expectation on Bloomberg, with the +0.3% growth being the slowest since January. Famous last words but this report might not be the most interesting since it may be a bit backward looking given WTI oil is up c.7.5% in October alone. In addition, used cars were up +5.4% in September after falling in late summer. So given the 2-3 month lag for this to filter through into the CPI we won’t be getting the full picture today. I loved the fact from his speech last night that the Fed’s Bostic has introduced a “transitory” swear jar in his office. More on the Fedspeak later. In terms of what to expect this time around though, our US economists are forecasting month-on-month growth of +0.41% in the headline CPI, and +0.27% for core, which would take the year-on-year rates to +5.4% for headline and +4.1% for core. Ahead of this, inflation expectations softened late in the day as Fed officials were on the hawkish side. The US 10yr breakeven dropped -1.9bps to 2.49% after trading at 2.527% earlier in the session. This is still the 3rd highest closing level since May, and remains only 7bps off its post-2013 closing high. Earlier, inflation expectations continued to climb in Europe, where the 5y5y forward inflation swap hit a post-2015 high of 1.84%. Also on inflation, the New York Fed released their latest Survey of Consumer Expectations later in the European session, which showed that 1-year ahead inflation expectations were now at +5.3%, which is the highest level since the survey began in 2013, whilst 3-year ahead expectations were now at +4.2%, which was also a high for the series. The late rally in US breakevens, coupled with lower real yields (-1.6bps) meant that the 10yr Treasury yield ended the session down -3.5bps at 1.577% - their biggest one day drop in just over 3 weeks. There was a decent flattening of the yield curve, with the 2yr yield up +2.0bps to 0.34%, its highest level since the pandemic began as the market priced in more near-term Fed rate hikes. In the Euro Area it was a very different story however, with 10yr yields rising to their highest level in months, including among bunds (+3.5bps), OATs (+2.9bps) and BTPs (+1.0bps). That rise in the 10yr bund yield left it at -0.09%, taking it above its recent peak earlier this year to its highest closing level since May 2019. Interestingly gilts (-4.0bps) massively out-performed after having aggressively sold off for the last week or so. Against this backdrop, equity markets struggled for direction as they awaited the CPI reading and the start of the US Q3 earnings season today. By the close of trade, the S&P 500 (-0.24%) and the STOXX 600 (-0.07%) had both posted modest losses as they awaited the next catalyst. Defensive sectors were the outperformers on both sides of the Atlantic. Real estate (+1.34%) and utilities (+0.67%) were among the best performing US stocks, though some notable “reopening” industries outperformed as well including airlines (+0.83%), hotels & leisure (+0.51%). News came out after the US close regarding the global chip shortage, with Bloomberg reporting that Apple, who are one of the largest buyers of chips, would revise down their iPhone 13 production targets for 2021 by 10 million units. Recent rumblings from chip producers suggest that the problems are expected to persist, which will make central bank decisions even more complicated over the coming weeks as they grapple with increasing supply-side constraints that push up inflation whilst threatening to undermine the recovery. Speaking of central bankers, Vice Chair Clarida echoed his previous remarks and other communications from the so-called “core” of the FOMC that the current bout of inflation would prove largely transitory and that underlying trend inflation was hovering close to 2%, while admitting that risks were tilted towards higher inflation. Atlanta Fed President Bostic took a much harder line though, noting that price pressures were expanding beyond the pandemic-impacted sectors, and measures of inflation expectations were creeping higher. Specifically, he said, “it is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply-chain disruptions — will not be brief.” His ‘transitory swear word jar’ for his office was considerably more full by the end of his speech. As highlighted above, while President Bostic spoke US 10yr breakevens dropped -2bps and then continued declining through the New York afternoon. In what is likely to be Clarida’s last consequential decision on monetary policy before his term expires, he noted it may soon be time to start a tapering program that ends in the middle of next year, in line with our US economics team’s call for a November taper announcement. In that vein, our US economists have updated their forecasts for rate hikes yesterday, and now see liftoff taking place in December 2022, followed by 3 rate increases in each of 2023 and 2024. That comes in light of supply disruptions lifting inflation, a likely rise in inflation expectations (which are sensitive to oil prices), and measures of labour market slack continuing to outperform. For those interested, you can read a more in-depth discussion of this here. Turning to commodities, yesterday saw a stabilisation in prices after the rapid gains on Monday, with WTI (+0.15%) and Brent Crude (-0.27%) oil prices seeing only modest movements either way, whilst iron ore prices in Singapore were down -3.45%. That said it wasn’t entirely bad news for the asset class, with Chinese coal futures (+4.45%) hitting fresh records, just as aluminium prices on the London Metal Exchange (+0.13%) eked out another gain to hit a new post-2008 high. Overnight in Asia, equity markets are seeing a mixed performance with the KOSPI (+1.24%) posting decent gains, whereas the CSI (-0.06%), Nikkei (-0.22%) and Shanghai Composite (-0.69%) have all lost ground. The KOSPI’s strength came about on the back of a decent jobs report, with South Korea adding +671k relative to a year earlier, the most since March 2014. The Hong Kong Exchange is closed however due to the impact of typhoon Kompasu. Separately, coal futures in China are up another +8.00% this morning, so no sign of those price pressures abating just yet following recent floods. Meanwhile, US equity futures are pointing to little change later on, with those on the S&P 500 down -0.12%. Here in Europe, we had some fresh Brexit headlines after the UK’s Brexit minister, David Frost, said that the Northern Ireland Protocol “is not working” and was not protecting the Good Friday Agreement. He said that he was sharing a new amended Protocol with the EU, which comes ahead of the release of the EU’s own proposals on the issue today. But Frost also said that “if we are going to get a solution we must, collectively, deliver significant change”, and that Article 16 which allows either side to take unilateral safeguard measures could be used “if necessary”. Elsewhere yesterday, the IMF marginally downgraded their global growth forecast for this year, now seeing +5.9% growth in 2021 (vs. +6.0% in July), whilst their 2022 forecast was maintained at +4.9%. This masked some serious differences between countries however, with the US downgraded to +6.0% in 2021 (vs. +7.0% in July), whereas Italy’s was upgraded to +5.8% (vs. +4.9% in July). On inflation they said that risks were skewed to the upside, and upgraded their forecasts for the advanced economies to +2.8% in 2021, and to +2.3% in 2022. Looking at yesterday’s data, US job openings declined in August for the first time this year, falling to 10.439m (vs. 10.954m expected). But the quits rate hit a record of 2.9%, well above its pre-Covid levels of 2.3-2.4%. Here in the UK, data showed the number of payroll employees rose by +207k in September, while the unemployment rate for the three months to August fell to 4.5%, in line with expectations. And in a further sign of supply-side issues, the number of job vacancies in the three months to September hit a record high of 1.102m. Separately in Germany, the ZEW survey results came in beneath expectations, with the current situation declining to 21.6 (vs. 28.0 expected), whilst expectations fell to 22.3 (vs. 23.5 expected), its lowest level since March 2020. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Tyler Durden Wed, 10/13/2021 - 08:13.....»»

Category: blogSource: zerohedgeOct 13th, 2021

Futures Rebound From Overnight Slide As Oil Keeps Rising

Futures Rebound From Overnight Slide As Oil Keeps Rising US equity-index futures erased earlier declines, rebounding from a loss of as much as 0.8% helped by the start of the European session and easing mounting concerns about stagflation from rising energy prices, signs of widening regulatory scrutiny by China, and the upcoming third-quarter earnings which is expected to post a sharply slower pace of growth and beats than recent record quarters. At 730am ET, Dow e-minis were up 5 points, or 0.1%, S&P 500 e-minis were up 7.25 points, or 0.16%, and Nasdaq 100 e-minis were up 46.75points, or 0.31%. Oiil rose 0.3% to $83.86/bbl while the dollar dipped and 10Y yield drifted back under 1.60%. Gains in tech stocks kept Nasdaq futures afloat on Tuesday, while energy names rose as Brent resumed gains, trading around $84/bbl on expectations that a power crisis from Asia to Europe will lift demand and tighten global balances. Higher oil prices and supply chain disruptions have set off alarm bells for businesses and consumers ahead of the third-quarter reporting season that kicks off on Wednesday with JPMorgan results.  "We believe that market participants could stay concerned over high energy prices translating into further acceleration in inflation, and thereby faster tightening by major central banks," said Charalambos Pissouros, head of research at JFD Group. In the pre-market, Tesla rose 0.7% after data showed the electric vehicle maker sold 56,006 China-made vehicles in September, the highest since it started production in Shanghai about two years ago. Oil firms including Exxon Mobil and Chevron Corp gained 0.1% and 0.3%, respectively, as Brent crude hit a near-three year high on energy crunch fears. Here are the notable movers: China’s Internet sector is one of the “most undervalued” in Morningstar’s coverage, says Ivan Su, an analyst, adding that Tencent (TCEHY US) and Netease (NTES US) are top picks MGM Resorts (MGM US) rises 2% in U.S. premarket trading after stock was upgraded to outperform from neutral and price target more than doubled to a Street-high $68 at Credit Suisse Quanterix (QTRX US) jumped 20% in Monday postmarket trading after the digital-health company announced that its Simoa phospho-Tau 181 blood test has been granted breakthrough device designation by the U.S. FDA as an aid in diagnostic evaluation of Alzheimer’s disease Relay Therapeutics (RLAY US) fell 7% in Monday postmarket trading after launching a $350 million share sale via Goldman Sachs, JPMorgan, Cowen, Guggenheim Securities Westwater Resources (WWR US) rose as much as 26% in Monday postmarket trading after its board of directors approved construction of the first phase of a production facility in Alabama for battery ready graphite products TechnipFMC (FTI US) in focus after co. was awarded a substantial long-term charter and services contract by Petrobras for the pipelay support vessel Coral do Atlântico Fastenal, which was one of the first companies to report Q3 earnings, saw its shares fall 2.4% in premarket trading on Tuesday, after the industrial distributor said the Covid-related boost was fading. The company said growth in the quarter was slightly limited by either slower expansion or contraction in sales of certain products related to the pandemic, when compared to the previous year quarter. While there was an uptick in sales of certain Covid-related supplies, the unit price of many products was down significantly, the company said in a statement.  Third-quarter sales and profit were in line with the average analyst estimate "While investors want to believe the narrative that stock markets can continue to move higher, this belief is bumping up against the reality of how the continued rise in energy prices, as well as supply-chain pressures, are likely to impact company profit margins,” said Michael Hewson, chief market analyst at CMC Markets in London. In Europe, losses led by basic resources companies and carmakers outweighed gains for utilities and tech stocks, pulling the Stoxx Europe 600 Index down 0.1%. Metals miner Rio Tinto was among the worst performers, dropping 2.7%. European equities climbed off the lows having lost over 1% in early trade. Euro Stoxx 600 was down -0.35% after dropping as much as 1.3% initially, led by basic resources companies and carmakers outweighed gains for utilities and tech stocks. The DAX is off 0.3%, FTSE 100 underperforms in a quiet morning for news flow. Miners, banks and autos are the weakest sectors after China reported a sharp drop in auto sales; utilities, tech and real estate post modest gains. European tech stocks slide, with the Stoxx Tech Index dropping as much as 1.4% in third straight decline, as another broker downgrades TeamViewer, while Prosus and chip stocks come under pressure. TeamViewer shares fall as much as 5.1% after Deutsche Bank downgrades the remote software maker to hold from buy following recent guidance cut. Asian stocks fell, halting a three-day rally as uncertainty over earnings deepened amid elevated inflation, higher bond yields and the risk of a widening Chinese crackdown on private industry. The MSCI Asia Pacific Index slid as much as 1.2%, led by technology and communication shares. Alibaba plunged 3.9% following a rally over the past week, while Samsung Electronics tumbled to a 10-month low after at least five brokers slashed their price targets, as China’s power crisis is seen worsening supply-chain disruptions. “Given the run-up in tech so far, it’s not difficult for investors to harvest profits first before figuring out if techs can maintain their growth when yields rise,” said Justin Tang, head of Asian research at United First Partners. Shares in Hong Kong and the mainland were among the worst performers after Chinese authorities kicked off an inspection of the nation’s financial regulators and biggest state-run banks in an effort to root out corruption. The MSCI Asia Pacific Index is down 12% from a February peak, with a global energy crunch lifting input prices and the debt crisis at China Evergrande Group weighing on the financial sector. Investors are waiting to see how this impacts earnings, according to Jun Rong Yeap, a market strategist at IG Asia.  “Increasing concerns on inflation potentially being more persistent have started to show up,” he said. “This comes along with the global risk-off mood overnight, as investors look for greater clarity from the earnings season on how margins are holding up, along with the corporate economic outlook.” Japan’s Topix index also fell, halting a two-day rally, amid concerns about a global energy crunch and the possibility of a widening Chinese crackdown on private industry. The Topix fell 0.7% to 1,982.68 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.9% to 28,230.61. SoftBank Group Corp. contributed the most to the Topix’s drop, decreasing 2.4%. Out of 2,181 shares in the index, 373 rose and 1,743 fell, while 65 were unchanged. “Market conditions were improving yesterday, but pushing for higher prices got tough when the Nikkei 225 approached its key moving averages,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.  The Nikkei’s 75-day moving average is about 28,500 and the 200-day moving average is about 28,700, so some investors were taking profits, he said. Japan’s spot power price increased to the highest level in nine months, as the global energy crisis intensifies competition for generation fuel before the winter heating season. In FX, the Bloomberg Dollar Spot Index reversed an overnight gain as the greenback slipped against all of its Group-of-10 peers. Risk sensitive Scandinavian currencies led gains, followed by the New Zealand and Australian dollars. The pound was little changed while speculators ramped up wagers on sterling’s decline at the fastest rate in more than two years, Commodity Futures Trading Commission data show, further breaking the link between anticipated rate increases and currency gains. The yen steadied after three days of declines. The Turkish lira extended its slide to a record low after President Recep Tayyip Erdogan hinted at a possible military offensive into neighboring Syria. Fixed-income was quiet by recent standards: Treasury futures were off lows of the day, improving as S&P 500 futures pare losses during European morning, and as cash trading resumed after Monday’s holiday. The 10Y yield dipped from 1.61% to 1.59% after hitting 1.65% based on futures pricing on Monday, but the big mover was on the front end, where 2-year yields climbed as much as 4bps to 0.35% the highest level since March 2020 reflecting increased expectations for Fed rate hikes, as Treasury cash trading resumed globally. Two coupon auctions during U.S. session -- of 3-and 10-year notes -- may weigh on Treasuries however.  Treasury and gilt curves bull-flatten with gilts outperforming at the back end. Bunds have a bull-steepening bias but ranges are narrow. Peripheral spreads tighten a touch with long-end Italy outperforming peers. In commodities, Crude futures drift higher in muted trade. WTI is up 0.25% near $80.70, Brent trades just shy of a $84-handle. Spot gold remains range-bound near $1,760/oz. Base metals are mixed with LME lead and nickel holding small gains, copper and aluminum in the red. Looking at the day ahead, central bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September which came in at 99.1, below last month's 100.1. The IMF will be releasing their latest World Economic Outlook. Market Snapshot S&P 500 futures little changed at 4,351.50 STOXX Europe 600 down 0.6% to 454.90 MXAP down 0.9% to 194.41 MXAPJ down 1.0% to 635.42 Nikkei down 0.9% to 28,230.61 Topix down 0.7% to 1,982.68 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite down 1.2% to 3,546.94 Sensex little changed at 60,149.85 Australia S&P/ASX 200 down 0.3% to 7,280.73 Kospi down 1.4% to 2,916.38 German 10Y yield fell 6 bps to -0.113% Euro up 0.1% to $1.1565 Brent Futures up 0.4% to $84.01/bbl Gold spot up 0.2% to $1,757.84 U.S. Dollar Index little changed at 94.29 Top Overnight Headlines from Bloomberg The EU drew record demand for its debut green bond, in the sector’s biggest-ever offering. The bloc registered more than 135 billion euros ($156 billion) in orders Tuesday for a sale of 12 billion euros of securities maturing in 2037 Investors are dumping negative-yielding debt at the fastest pace since February as concerns about inflation and reduced central bank stimulus propel global interest rates higher French President Emmanuel Macron unveiled a 30-billion-euro ($35 billion) plan to create the high-tech champions of the future and reverse years of industrial decline in the euro area’s second-largest economy British companies pushed the number of workers on payrolls above pre-coronavirus levels last month, an indication of strength in the labor market that may embolden the Bank of England to raise interest rates. As the Biden administration and governments around the world celebrate another advance toward an historic global tax accord, an obscure legal question in the U.S. threatens to tear it apart Chinese property developers are suffering credit rating downgrades at the fastest pace in five years, as a recent slump in new-home sales adds to concerns about the sector’s debt woes German investor confidence declined for a fifth month in October, adding to evidence that global supply bottlenecks and a surge in inflation are weighing on the recovery in Europe’s largest economy Social Democrat Olaf Scholz’s bid to succeed Angela Merkel as German chancellor is running into its first test as tensions emerge in talks to bridge policy differences with the Greens and pro-business Free Democrats A more detailed breakdown of global markets from Newsquawk Asian equity markets traded mostly lower following the indecisive mood stateside where the major indices gave back initial gains to finish negative amid lingering inflation and global slowdown concerns, with sentiment overnight also hampered by tighter Beijing scrutiny and with US equity futures extending on losses in which the Emini S&P retreated beneath its 100DMA. ASX 200 (-0.3%) was subdued as weakness in energy, tech and financials led the declines in Australia and with participants also digesting mixed NAB business survey data. Nikkei 225 (-0.9%) was on the backfoot after the Japan Center for Economic Research noted that GDP contracted 0.9% M/M in August and with retailers pressured after soft September sales updates from Lawson and Seven & I Holdings, while the KOSPI (-1.4%) was the laggard on return from holiday with chipmakers Samsung Electronics and SK Hynix subdued as they face new international taxation rules following the recent global minimum tax deal. Hang Seng (-1.4%) and Shanghai Comp. (-1.3%) adhered to the downbeat picture following a continued liquidity drain by the PBoC and with Beijing scrutinising Chinese financial institutions’ ties with private firms, while default concerns lingered after Evergrande missed yesterday’s payments and with Modern Land China seeking a debt extension on a USD 250mln bond to avoid any potential default. Finally, 10yr JGBs eked minimal gains amid the weakness in stocks but with demand for bonds limited after the recent subdued trade in T-note futures owing to yesterday’s cash bond market closure and following softer results across all metrics in the 30yr JGB auction. Top Asian News Alibaba Stock Revival Halted on Concerns of Rising Bond Yields Iron Ore Rally Pauses as China Steel Curbs Cloud Demand Outlook China’s Star Board Sees Rough Start to Fourth Quarter: ECM Watch Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ European bourses kicked the day off choppy but have since drifted higher (Euro Stoxx 50 -0.4%; Stoxx 600 Unch) as the region remains on standby for the next catalyst, and as US earnings season officially kicks off tomorrow – not to mention the US and Chinese inflation metrics and FOMC minutes. US equity futures have also nursed earlier losses and reside in relatively flat territory at the time of writing, with broad-based performance seen in the ES (Unch), NQ (+0.2%), RTY (-0.2%), YM (Unch). From a technical standpoint, some of the Dec contracts are now hovering around their respective 100 DMAs at 4,346 for the ES, 14,744 for the NQ, whilst the RTY sees its 200 DMA at 2,215, and the YM topped its 21 DMA at 34,321. Back to Europe, cash markets see broad-based downside with the SMI (-0.1%) slightly more cushioned amid gains in heavyweight Nestle (+0.6%). Sectors kicked off the day with a defensive bias but have since seen a slight reconfiguration, with Real Estate now the top performer alongside Food & Beverages, Tech and Healthcare. On the flip side, Basic Resources holds its position as the laggard following yesterday's marked outperformance and despite base metals (ex-iron) holding onto yesterday's gains. Autos also reside at the bottom of the bunch despite constructive commentary from China's Auto Industry Body CAAM, who suggested the chip supply shortage eased in China in September and expected Q4 to improve, whilst sources suggested Toyota aims to make up some lost production as supplies rebound. In terms of individual movers, GSK (+2.3%) shares spiked higher amid reports that its USD 54bln consumer unit has reportedly attracted buyout interest, according to sources, in turn lifting the FTSE 100 Dec future by 14 points in the immediacy. Elsewhere, easyJet (-1.9%) gave up its earlier gains after refraining on guidance, and despite an overall constructive trading update whereby the Co. sees positive momentum carried into FY22, with H1 bookings double those in the same period last year. Co. expects to fly up to 70% of FY19 planned capacity in FY22. In terms of commentary, the session saw the Germany ZEW release, which saw sentiment among experts deteriorate, citing the persisting supply bottlenecks for raw materials and intermediate products. The release also noted that 49.1% of expects still expect inflation to rise further in the next six months. Heading into earnings season, experts also expect profits to go down, particularly in export-tilted sectors such a car making, chemicals and pharmaceuticals. State-side, sources suggested that EU antitrust regulators are reportedly likely to open an investigation into Nvidia's (+0.6% Pre-Mkt) USD 54bln bid from Arm as concessions were not deemed sufficient. Top European News Soybeans Near 10-Month Low as Supply Outlook Expected to Improve EasyJet Boosts Capacity as Travel Rebound Gathers Pace Currency Traders Are Betting the BOE Is About to Make a Mistake Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ In FX, the Buck has reclaimed a bit more lost ground in consolidatory trade rather than any real sign of a change in fundamentals following Monday’s semi US market holiday for Columbus Day and ahead of another fairly light data slate comprising NFIB business optimism and JOLTS. However, supply awaits the return of cash Treasuries in the form of Usd 58 bn 3 year and Usd 38 bn 10 year notes and Fed commentary picks up pace on the eve of FOMC minutes with no less than five officials scheduled to speak. Meanwhile, broad risk sentiment has taken a knock in wake of a late swoon on Wall Street to give the Greenback and underlying bid and nudge the index up to fresh post-NFP highs within a 94.226-433 band. NZD/AUD - A slight change in fortunes down under as the Kiwi derives some comfort from the fact that the Aud/Nzd has not breached 1.0600 to the upside and Nzd/Usd maintaining 0.6950+ status irrespective of mixed NZ electric card sales data, while the Aussie takes on board contrasting NAB business conditions and confidence readings in advance of consumer sentiment, with Aud/Usd rotating either side of 0.7350. EUR/CAD/GBP/CHF/JPY - All rangy and marginally mixed against their US counterpart, as the Euro straddles 1.1560, the Loonie meanders between 1.2499-62 with less fuel from flat-lining crude and the Pound tries to keep sight of 1.3600 amidst corrective moves in Eur/Gbp following a rebound through 0.8500 after somewhat inconclusive UK labour and earnings data, but hardly a wince from the single currency even though Germany’s ZEW survey missed consensus and the institute delivered a downbeat assessment of the outlook for the coming 6 months. Elsewhere, the Franc continues to hold within rough 0.9250-90 extremes and the Yen is striving to nurse outsize losses between 113.00-50 parameters, with some attention to 1 bn option expiries from 113.20-25 for the NY cut. Note also, decent expiry interest in Eur/Usd and Usd/Cad today, but not as close to current spot levels (at the 1.1615 strike in 1.4 bn and between 1.2490-1.2505 in 1.1 bn respectively). SCANDI/EM - The Nok and Sek have bounced from lows vs the Eur, and the latter perhaps taking heed of a decline in Sweden’s registered jobless rate, but the Cnh and Cny remain off recent highs against the backdrop of more Chinese regulatory rigour, this time targeting state banks and financial institutions with connections to big private sector entities and the Try has thrown in the towel in terms of its fight to fend off approaches towards 9.0000 vs the Usd. The final straw for the Lira appeared to be geopolitical, as Turkish President Erdogan said they will take the necessary steps in Syria and are determined to eliminate threats, adding that Turkey has lost its patience on the attacks coming from Syrian Kurdish YPG controlled areas. Furthermore, he stated there is a Tal Rifaat pocket controlled by YPG below Afrin and that an operation could target that area which is under Russian protection. However, Usd/Try is off a new ATH circa 9.0370 as oil comes off the boil and ip came in above forecast. In commodities, WTI and Brent front-month futures are choppy and trade on either side of the flat mark in what is seemingly some consolidation and amid a distinct lack of catalysts to firmly dictate price action. The complex saw downticks heading into the European cash open in tandem with the overall market sentiment at the time, albeit the crude complex has since recovered off worst levels. News flow for the complex has also remained minimal as eyes now turn to any potential intervention by major economies in a bid to stem the pass-through of energy prices to consumers heading into winter. On that note, UK nat gas futures have been stable on the day but still north of GBP 2/Thm. Looking ahead, the weekly Private Inventory data has been pushed back to tomorrow on account of yesterday's Columbus Day holiday. Tomorrow will also see the release of the OPEC MOMR and EIA STEO. Focus on the former will be on any updates to its demand forecast, whilst commentary surrounding US shale could be interesting as it'll give an insight into OPEC's thinking on the threat of Shale under President Biden's "build back better" plan. Brent Dec trades on either side of USD 84/bbl (vs prev. 83.13-84.14 range) whilst WTI trades just under USD 81/bbl after earlier testing USD 80/bbl to the downside (USD 80-80.91/bbl range). Over to metals, spot gold and silver hold onto modest gains with not much to in the way of interesting price action, with the former within its overnight range above USD 1,750/oz and the latter still north of USD 22.50/oz after failing to breach the level to the downside in European hours thus far. In terms of base metals, LME copper is holding onto most of yesterday's gains, but the USD 9,500/t mark seems to be formidable resistance. Finally, Dalian and Singapore iron ore futures retreated after a four-day rally, with traders citing China's steel production regaining focus. US Event Calendar 6am: Sept. SMALL BUSINESS OPTIMISM 99.1,  est. 99.5, prior 100.1 10am: Aug. JOLTs Job Openings, est. 11m, prior 10.9m 11:15am: Fed’s Clarida Speaks at IIF Annual Meeting 12:30pm: Fed’s Bostic Speaks on Inflation at Peterson Institute 6pm: Fed’s Barkin Interviewed for an NPR Podcast DB's Jim Reid concludes the overnight wrap It’s my wife’s birthday today and the big treat is James Bond tomorrow night. However, I was really struggling to work out what to buy her. After 11.5 years together, I ran out of original ideas at about year three and have then scrambled round every year in an attempt to be innovative. Previous innovations have seen mixed success with the best example being the nearly-to-scale oil portrait I got commissioned of both of us from our wedding day. She had no idea and hated it at the closed eyes big reveal. It now hangs proudly in our entrance hall though. Today I’ve bought her a lower key gamble. Some of you might know that there is a US website called Cameo that you can pay famous people to record a video message for someone for a hefty fee. Well, all her childhood heroes on it were seemingly too expensive or not there. Then I saw that the most famous gymnast of all time, Nadia Comăneci, was available for a reasonable price. My wife idolised her as a kid (I think). So after this goes to press, I’m going to wake my wife up with a personalised video message from Nadia wishing her a happy birthday, saying she’s my perfect ten, and praising her for encouraging our three children to do gymnastics and telling her to keep strong while I try to get them to play golf instead. I’m not sure if this is a totally naff gift or inspired. When I purchased it I thought the latter but now I’m worried it’s the former! My guess is she says it’s naff, appreciates the gesture, but calls me out for the lack of chocolates. Maybe in this day and age a barrel of oil or a tank of petrol would have been the most valuable birthday present. With investor anticipation continuing to build ahead of tomorrow’s CPI release from the US, yesterday saw yet another round of commodity price rises that’s making it increasingly difficult for central banks to argue that inflation is in fact proving transitory. You don’t have to be too old to remember that back in the summer, those making the transitory argument cited goods like lumber as an example of how prices would begin to fall back again as the economy reopened. But not only have commodity aggregates continued to hit fresh highs since then, but lumber (+5.49%) itself followed up last week’s gains to hit its highest level in 3 months. Looking at those moves yesterday, it was a pretty broad-based advance across the commodity sphere, with big rises among energy and metals prices in particular. Oil saw fresh advances, with WTI (+1.47%) closing above $80/bbl for the first time since 2014, whilst Brent Crude (+1.53%) closed above $83/bbl for the first time since 2018. Meanwhile, Chinese coal futures (+8.00%) hit a record after the flooding in Shanxi province that we mentioned in yesterday’s edition, which has closed 60 of the 682 mines there, and this morning they’re already up another +6.41%. So far this year, the region has produced 30% of China’s coal supply, which gives you an idea as to its importance. And when it came to metals, aluminium prices (+3.30%) on the London Metal Exchange rose to their highest level since the global financial crisis, whilst Iron Ore futures in Singapore jumped +7.01% on Monday, and copper was also up +2.13%. The one respite on the inflation front was a further decline in natural gas prices, however, with the benchmark European future down -2.73%; thus bringing its declines to over -47% since the intraday high that was hit only last Wednesday. With commodity prices seeing another spike and inflation concerns resurfacing, this proved bad news for sovereign bonds as investors moved to price in a more hawkish central bank reaction. Yields in Europe rose across the continent, with those on 10yr bunds up +3.0bps to 0.12%, their highest level since May. The rise was driven by both higher inflation breakevens and real rates, and leaves bund yields just shy of their recent post-pandemic closing peak of -0.10% from mid-May. If they manage to surpass that point, that’ll leave them closer to positive territory than at any point since Q2 2019 when they last turned negative again. It was a similar story elsewhere, with 10yr yields on OATs (+2.6bps), BTPs (+3.9bps) and gilts (+3.1bps) likewise reaching their highest level in months. The sell-off occurred as money markets moved to price in further rate hikes from central banks, with investors now expecting a full 25 basis point hike from the Fed by the end of Q3 2022. It seems like another era, but at the start of this year before the Georgia Senate race, investors weren’t even pricing in a full hike by the end of 2023, whereas they’re now pricing in almost 4. So we’ve come a long way over 2021, though pre-Georgia the consensus CPI forecast on Bloomberg was just 2.0%, whereas it now stands at 4.3%, so it does fit with the story of much stronger-than-expected inflation inducing a hawkish response. Yesterday’s repricing came alongside a pretty minimal -0.15% move in the Euro versus the dollar, but that was because Europe was also seeing a similar rates repricing. Meanwhile, the UK saw its own ramping up of rate hike expectations, with investors pricing in at least an initial 15bps hike to 0.25% happening by the December meeting in just two months’ time. Overnight in Asia, stocks are trading in the red with the KOSPI (-1.46%), Shanghai Composite (-1.21%), Hang Seng (-1.20%), the Nikkei (-0.93%) and CSI (-0.82%) all trading lower on inflation concerns due to high energy costs and aggravated by a Wall Street Journal story that Chinese President Xi Jinping is increasing scrutiny of state-run banks and big financial institutions with inspections. Furthermore, there were signs of a worsening in the Evergrande debt situation, with the firm missing coupon payments on a 9.5% note due in 2022 and a 10% bond due in 2023. And there were fresh indications of a worsening situation more broadly, with Sinic Holdings Group Co. saying it doesn’t expect to pay the principal or interest on a $250m bond due on October 18. Separately in Japan, Prime Minister Fumio Kishida said on Monday that he will raise pay for public workers and boost tax breaks to firms that boost wages to try and improve the country’s wealth distribution. Back to yesterday, and the commodity rally similarly weighed on thin-volume equity markets, though it took some time as the S&P 500 had initially climbed around +0.5% before paring back those gains to close down -0.69%. Before the late US sell-off, European indices were subdued, but the STOXX 600 still rose +0.05%, thanks to an outperformance from the energy sector (+1.49%), and the STOXX Banks Index (+0.13%) hit a fresh two-year high as the sector was supported by a further rise in yields. On the central bank theme, we heard from the ECB’s chief economist, Philip Lane, at a conference yesterday, where he said that “a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation.” So clearly making a distinction between a more persistent pattern of wage inflation, which comes as the ECB’s recent forward guidance commits them to not hiking rates “until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon”, as well as having confidence that “realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term”. Turning to the political scene, Brexit is likely to be in the headlines again today as the UK’s Brexit negotiator David Frost gives a speech in Lisbon where he’s expected to warn that the EU’s proposals on the Northern Ireland Protocol are insufficient. That comes ahead of a new set of proposals that are set to come from the EU tomorrow, with the two sides disagreeing on the extent of border controls required on trade from Northern Ireland with the rest of the UK. Those controls were put in place as part of the Brexit deal to prevent a hard border being put up between Northern Ireland and the Republic of Ireland, whilst also preserving the integrity of the EU’s single market. But the UK’s demands for adjustments have been met with opposition by the EU, and speculation has risen that the UK could trigger Article 16, which allows either side to take unilateral safeguard measures, if the protocol’s application “leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade”. On the data front, there wasn’t much data to speak of with the US holiday, but Italy’s industrial production contracted by -0.2% in August, in line with expectations. To the day ahead now, andcentral bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September. In Europe, there’s also UK unemployment for August and the German ZEW Survey for October. Lastly, the IMF will be releasing their latest World Economic Outlook.     Tyler Durden Tue, 10/12/2021 - 07:56.....»»

Category: personnelSource: nytOct 12th, 2021

Futures Fade Rally With Congress Set To Avert Government Shutdown

Futures Fade Rally With Congress Set To Avert Government Shutdown US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China's official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged. All the three major indexes are set for a monthly drop, with the benchmark S&P 500 on track to break its seven-month winning streak as worries about persistent inflation, the fallout from China Evergrande’s potential default and political wrangling over the debt ceiling rattled sentiment. The index was, however, on course to mark its sixth straight quarterly gain, albeit its smallest, since March 2020’s drop. The rate-sensitive FAANG stocks have lost about $415 billion in value this month after the Federal Reserve’s hawkish shift on monetary policy sparked a rally in Treasury yields and prompted investors to move into energy, banks and small-cap sectors that stand to benefit the most from an economic revival. Among individual stocks, oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members. Virgin Galactic shares surged 9.7% in premarket trading after the U.S. aviation regulator gave the company a green-light to resume flights to the brink of space. Perrigo climbed 14% after reporting a settlement in a tax dispute with Ireland.  U.S.-listed Macau casino operators may get a boost Thursday after Macau Chief Executive Ho Iat Seng said the region will strive to resume quarantine-free travel to Zhuhai by Oct. 1, the start of the Golden Week holiday, if the Covid-19 situation in Macau is stable. Here are some of the other biggest U.S. movers today: Retail investor favorites Farmmi (FAMI US) and Camber Energy (CEI US) both rise in U.S. premarket trading, continuing their strong recent runs on high volumes Virgin Galactic (SPCE US) shares rise 8.9% in U.S. premarket trading after the U.S. aviation regulator gave co. a green-light to resume flights to the brink of space Perrigo (PRGO US) rises 15% in U.S. premarket trading after reporting a settlement in a tax dispute with Ireland. The stock was raised to buy from hold at Jefferies over the “very favorable” resolution Landec (LNDC US) shares fell 17% in Wednesday postmarket trading after fiscal 1Q revenue and adjusted loss per share miss consensus estimates Affimed (AFMD US) rises 4.3% in Wednesday postmarket trading after Stifel analyst Bradley Canino initiates at a buy with a $12 price target, implying the stock may more than double over the next year Herman Miller (MLHR US) up ~2.8% in Wednesday postmarket trading after the office furnishings maker posts fiscal 1Q net sales that beat the consensus estimate Orion Group Holdings (ORN US) shares surged as much as 43% in Wednesday extended trading after the company disclosed two contract awards for its Marine segment totaling nearly $200m Kaival Brands (KAVL US) fell 18% Wednesday postmarket after offering shares, warrants via Maxim An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering. “Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.” Still, president Joe Biden’s agenda remains at risk of being derailed by divisions among his own Democrats, as moderates voiced anger on Wednesday at the idea of delaying a $1 trillion infrastructure bill ahead of a critical vote to avert a government shutdown. The big overnight economic news came from China whose September NBS manufacturing PMI fell to 49.6 from 50.1 in August, the first contraction since Feb 2020, likely due to the production cuts caused by energy constraints. Both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreased in September. The NBS non-manufacturing PMI rebounded to 53.2 in September from 47.5 in August on a recovery of services activities as COVID restrictions eased. However, the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month: expect far worse number in the months ahead unless China manages to contain its energy crisis. Europe’s Stoxx 600 Index advanced 0.3%, trimming a monthly loss but fading an earlier gain of 0.9%, led by gains in basic resources companies as iron ore climbed, with the CAC and FTSE 100 outperforming at the margin. Technology stocks, battered earlier this week, also extended their rebound.  Miners, oil & gas and media are the strongest sectors; utility and industrial names lag. European natural gas and power markets hit fresh record highs as supply constraints persist. Perrigo jumped 13.8% after the drugmaker agreed to settle with Irish tax authorities over a 2018 issue by paying $1.90 billion in taxes Asian stocks were poised to cap their first quarterly loss since March 2020 as Chinese technology names fell and as investors remained wary over a recent rise in U.S. Treasury yields.  The MSCI Asia Pacific Index is set to end the September quarter with a loss of more than 5%, snapping a winning streak of five straight quarters. A combination of higher yields, Beijing’s corporate crackdown and worry over slowing economic growth in Asia’s biggest economy have hurt sentiment, bringing the market down following a brief rally in late August.  The Asian benchmark rose less than 0.1% after posting its worst single-day drop in six weeks on Wednesday. Consumer discretionary and communication services groups fell, while financials advanced. The Hang Seng Tech Index ended 1.3% lower as Beijing announced new curbs on the sector, while higher yields hurt sentiment toward growth stocks.  “Because there’s growing worry over U.S. inflation, we need to keep an eye on the potential risks, globally,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “Also, there’s the Evergrande issue. The market is in a wait-and-see mode now, with a focus on whether the group will be able to make future interest rate payments.”  Benchmarks in Thailand and Malaysia were the biggest losers, while Indonesia and Australia outperformed. Japan’s Topix and the Nikkei 225 Stock Average slipped for a fourth day as investors weighed Fumio Kishida’s election victory as the new ruling party leader. Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors braced for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup survey said a 20% pullback in stocks is more likely than a 20% rally. In rates, Treasuries were slightly cheaper across the curve, off session lows as stock futures pare gains. 10-year TSY yields were around 1.53%, cheaper by 1.2bp on the day vs 2.3bp for U.K. 10-year; MPC-dated OIS rates price in ~65bps of BOE hikes by December 2022. Gilts lead the selloff, with U.K. curve bear-steepening as BOE rate-hike expectations continue to ramp up. Host of Fed speakers are in focus during U.S. session, while month-end extension may serve to underpin long-end of the curve.   A gauge of the dollar’s strength headed for its first drop in five days as Treasury yields steadied after a recent rise, and amid quarter-end flows. The Bloomberg Dollar Spot Index fell as the dollar steady or weaker against most of its Group-of-10 peers. The euro hovered around $1.16 and the pound was steady while Gilts inched lower, underperforming Bunds and Treasuries. Money markets now see around 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That means they’re betting the key rate will rise to 0.75% next year from 0.1% currently. The Australian dollar led gains after it rose off its lowest level since August 23 amid exporter month-end demand and as iron ore buyers locked in purchases ahead of a week-long holiday in China. Norway’s krone was the worst G-10 performer and slipped a fifth day versus the dollar, its longest loosing streak in a year. In commodities, oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading. European gas prices meanwhile hit a new all time high. Looking at the day ahead, one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Market Snapshot S&P 500 futures up 0.7% to 4,379.00 STOXX Europe 600 up 0.6% to 457.59 MXAP little changed at 196.85 MXAPJ up 0.3% to 635.71 Nikkei down 0.3% to 29,452.66 Topix down 0.4% to 2,030.16 Hang Seng Index down 0.4% to 24,575.64 Shanghai Composite up 0.9% to 3,568.17 Sensex down 0.3% to 59,239.76 Australia S&P/ASX 200 up 1.9% to 7,332.16 Kospi up 0.3% to 3,068.82 Brent Futures up 0.4% to $78.98/bbl Gold spot up 0.4% to $1,732.86 U.S. Dollar Index little changed at 94.27 German 10Y yield fell 0.5 bps to -0.212% Euro little changed at $1.1607 Top Overnight News from Bloomberg U.K. gross domestic product rose 5.5% in the second quarter instead of the 4.8% earlier estimated, official figures published Thursday show. The data, which reflected the reopening of stores and the hospitality industry, mean the economy was still 3.3% smaller than it was before the pandemic struck. China has urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some home buyers, another signal that authorities are worried about fallout from the debt crisis at China Evergrande Group. The U.S. currency’s surge is helping the Chinese yuan record its largest gain in eight months on a trade-weighted basis in September. It adds to headwinds for the world’s second- largest economy already slowing due to a resurgence in Covid cases, a power crisis and regulatory curbs. The Swiss National Bank bought foreign exchange worth 5.44 billion francs ($5.8 billion) in the second quarter, part of its long-running policy to alleviate appreciation pressure on the franc   A few members of the Riksbank’s executive board discussed a rate path that could indicate a rate rise at the end of the forecast period, Sweden’s central bank says in minutes from its Sept. 20 meeting French inflation accelerated in September as households in the euro area’s second-largest economy faced a jump in the costs of energy and services. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded somewhat varied with the region indecisive at quarter-end and as participants digested a slew of data releases including mixed Chinese PMI figures. ASX 200 (+1.7%) was underpinned by broad strength across its industries including the top-weighted financials sector and with the large cap miners lifted as iron ore futures surge by double-digit percentages, while the surprise expansion in Building Approvals also helped markets overlook the 51% spike in daily new infections for Victoria state. Nikkei 225 (+0.1%) was subdued for most of the session after disappointing Industrial Production and Retail Sales data which prompted the government to cut its assessment of industrial output which it stated was stalling. The government also warned that factory output could decline for a third consecutive month in September and that October has large downside risk due to uncertainty from auto manufacturing cuts. However, Nikkei 225 then recovered with the index marginally supported by currency flows. Hang Seng (-1.0%) and Shanghai Comp. (+0.4%) diverged heading into the National Day holidays and week-long closure for the mainland with tech names in Hong Kong pressured by ongoing regulatory concerns as China is to tighten regulation of algorithms related to internet information services. Nonetheless, mainland bourses were kept afloat after a further liquidity injection by the PBoC ahead of the Golden Week celebrations and as markets took the latest PMI figures in their strides whereby the official headline Manufacturing PMI disappointed to print its first contraction since February 2020, although Non-Manufacturing PMI and Composite PMI returned to expansionary territory and Caixin Manufacturing PMI topped estimates to print at the 50-benchmark level. Top Asian News S&P Points to Progress as Bondholders Wait: Evergrande Update Bank Linked to Kazakh Leader Buys Kcell Stake After Share Slump Goldman Sachs Names Andy Tai Head of IBD Southeast Asia: Memo What Japan’s Middle-of-the-Road New Leader Means for Markets The upside momentum seen across US and European equity futures overnight stalled, with European cash also drifting from the best seen at the open (Euro Stoxx 50 +0.1%; Stoxx 600 +0.4%). This follows somewhat mixed APAC handover, and as newsflow remains light on month and quarter-end. US equity futures are firmer across the board, but again off best levels, although the RTY (+0.8%) outperforms the ES (+0.4%), YM (+0.4%) and NQ (+0.5%). Back to Europe, the periphery lags vs core markets, whilst the DAX 40 (-0.3%) underperforms within the core market. Sectors in Europe are mostly in the green but do not portray a particular risk bias. Basic Resources top the chart with aid from overnight action in some base metals, particularly iron, in turn aiding the large iron miners BHP (+2.2%), Rio Tinto (+3.4%) and Anglo American (+2.9%). The bottom of the sectors meanwhile consists of Travel & Leisure, Autos & Parts and Industrial Goods & Services, with the former potentially feeling some headwinds from China’s travel restrictions during its upcoming National Day holiday. In terms of M&A, French press reported that CAC-listed Carrefour (-1.3%) is reportedly looking at options for sector consolidation, and talks are said to have taken place with the chain stores Auchan, with peer Casino (Unch) also initially seeing a leg higher in sympathy amid the prospect of sector consolidation. That being said, Carrefour has now reversed its earlier upside with no particular catalyst for the reversal. It is, however, worth keeping in mind that regulatory/competition hurdles cannot be ruled out – as a reminder, earlier this year, France blocked the takeover of Carrefour by Canada’s Alimentation Couche-Tard. In the case of a successful deal, Carrefour will likely be the acquirer as the largest supermarket in France. Sticking with M&A, Eutelsat (+14%) was bolstered at the open amid source reports that French billionaire Patrick Drahi is said to have made an unsolicited takeover offer of EUR 12.10/shr for Eutelsat (vs EUR 10.35 close on Wednesday), whilst the FT reported that this offer was rejected. Top European News European Banks Dangle $26 Billion in Payouts as ECB Cap Ends U.K. Economy Emerged From Lockdown Stronger Than Expected In a First, Uber Joins Drivers in Strike Against Brussels Rules EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links In FX, The non-US Dollars are taking advantage of the Greenback’s loss of momentum, and the Aussie in particular given an unexpected boost from building approvals completely confounding expectations for a fall, while a spike in iron ore prices overnight provided additional incentive amidst somewhat mixed external impulses via Chinese PMIs. Hence, Aud/Usd is leading the chasing pack and back up around 0.7200, Usd/Cad is retreating through 1.2750 and away from decent option expiry interest at 1.2755 and between 1.2750-40 (in 1.3 bn and 1 bn respectively) with some assistance from the latest bounce in crude benchmarks and Nzd/Usd is still trying to tag along, but capped into 0.6900 as the Aud/Nzd cross continues to grind higher and hamper the Kiwi. DXY/GBP/JPY/EUR/CHF - It’s far too early to call time on the Buck’s impressive rally and revival from recent lows, but it has stalled following a midweek extension that propelled the index to the brink of 94.500, at 94.435. The DXY subsequently slipped back to 94.233 and is now meandering around 94.300 having topped out at 94.401 awaiting residual rebalancing flows for the final day of September, Q3 and the half fy that Citi is still classifying as Dollar positive, albeit with tweaks to sd hedges for certain Usd/major pairings. Also ahead, the last US data and survey releases for the month including final Q2 GDP, IJC and Chicago PMI before another raft of Fed speakers. Meanwhile, Sterling has gleaned some much needed support from upward revisions to Q2 UK GDP, a much narrower than forecast current account deficit and upbeat Lloyds business barometer rather than sub-consensus Nationwide house prices to bounce from the low 1.3600 area vs the Greenback and unwind more of its underperformance against the Euro within a 0.8643-12 range. However, the latter is keeping tabs on 1.1600 vs its US peer in wake of firmer German state CPI prints and with the aforementioned Citi model flagging a sub-1 standard deviation for Eur/Usd in contrast to Usd/Jpy that has been elevated to 1.85 from a prelim 1.12. Nevertheless, the Yen is deriving some traction from the calmer yield backdrop rather than disappointing Japanese data in the form of ip and retail sales to contain losses under 112.00, and the Franc is trying to do the same around 0.9350. SCANDI/EM - The tables have been turning and fortunes changing for the Nok and Sek, but the former has now given up all and more its post-Norges Bank hike gains and more as Brent consolidates beneath Usd 80/brl and the foreign currency purchases have been set at the same level for October as the current month. Conversely, the latter has taken heed of a hawkish hue to the latest set of Riksbank minutes and the fact that a few Board members discussed a rate path that could indicate a rise at the end of the forecast period. Elsewhere, the Zar looks underpinned by marginally firmer than anticipated SA ppi and private sector credit, while the Mxn is treading cautiously ahead of Banxico and a widely touted 25 bp hike. In commodities, WTI and Brent futures are choppy but trade with modest gains heading into the US open and in the run-up to Monday’s OPEC+ meeting. The European session thus far has been quiet from a news flow standpoint, but the contracts saw some fleeting upside after breaking above overnight ranges, albeit the momentum did not last long. Eyes turn to OPEC+ commentary heading into the meeting, which is expected to be another smooth affair, according to Argus sources. As a reminder, the group is expected to stick to its plan to raise output by 400k BPD despite outside pressure to further open the taps in a bid to control prices. Elsewhere, as a mild proxy for Chinese demand, China’s Sinopec noted that all LNG receiving terminals are to be operated at full capacity. WTI trades on either side of USD 75/bbl (vs low USD 74.54/bbl), while its Brent counterpart remains north of USD 78/bbl (vs low USD 77.66/bbl). Turning to metals, spot gold and silver continue to consolidate after yesterday’s Dollar induced losses, with the former finding some support around the USD 1,725/oz mark and the latter establishing a floor around USD 21.50/oz. Over to base metals, Dalian iron ore futures rose to three-week highs amid pre-holiday Chinese demand and after Fortescue Metals Group halted mining operations at a Pilbara project. Conversely, LME copper is on a softer footing as the Buck holds onto recent gains. US Event Calendar 8:30am: 2Q PCE Core QoQ, est. 6.1%, prior 6.1% 8:30am: 2Q GDP Price Index, est. 6.1%, prior 6.1% 8:30am: 2Q Personal Consumption, est. 11.9%, prior 11.9% 8:30am: Sept. Continuing Claims, est. 2.79m, prior 2.85m 8:30am: 2Q GDP Annualized QoQ, est. 6.6%, prior 6.6% 8:30am: Sept. Initial Jobless Claims, est. 330,000, prior 351,000 9:45am: Sept. MNI Chicago PMI, est. 65.0, prior 66.8 Central Bank speakers 10am: Fed’s Williams Discusses the Fed’s Pandemic Response 10am: Powell and Yellen Appear Before House Finance Panel 11am: Fed’s Bostic Discusses Economic Mobility 11:30am: Fed’s Harker Discusses Sustainable Assets and Financial... 12:30pm: Fed’s Evans Discusses Economic Outlook 1:05pm: Fed’s Bullard Makes Opening Remarks at Book Launch 2:30pm: Fed’s Daly Speaks at Women and Leadership Event Government Calendar 10am ET: Treasury Secretary Yellen, Fed Chair Powell appear at a House Financial Services Committee hearing on the Treasury, Fed’s pandemic response 10:30am ET: Senate begins voting process for continuing resolution that extends U.S. government funding to December 3 10:30am ET: Senate Commerce subcommittee holds hearing on Facebook, Instagram’s influence on kids with Antigone Davis, Director, Global Head of Safety, Facebook 10:45am ET: House Speaker Nancy Pelosi holds weekly press briefing DB's Jim Reid concludes the overnight wrap I’ll be getting my stitches out of my knee today and will have a chance to grill the surgeon who I think told me I’ll probably soon need a knee replacement. I say think as it was all a bit of a medicated blur post the operation 2 weeks ago. These have been a painfully slow 2 weeks of no weight bearing with another 4 to go and perhaps all to no avail. As you can imagine I’ve done no housework, can’t fend much for myself, or been able to control the kids much over this period. I’m not sure if having bad knees are grounds for divorce but I’m going to further put it to the test over the next month. In sickness and in health I plea. Like me, markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours following their latest selloff, with equities bouncing back a bit and sovereign bond yields taking a breather from their recent relentless climb. It did feel that we hit yield levels on Tuesday that started to hurt risk enough that some flight to quality money recycled back into bonds. So the next leg higher in yields (which I think will happen) might be met with more risk off resistance, and counter rallies. The latest moves came amidst relatively dovish and supportive comments from central bank governors at the ECB’s forum yesterday, but sentiment was dampened somewhat as uncertainty abounds over a potential US government shutdown and breaching of the debt ceiling, after both houses of Congress could not agree on a plan to extend government funding. Overnight, there have been signs of progress on the shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3, with the Senate set to vote on the measure this morning.However, we’re still no closer to resolving the debt ceiling issue (where the latest estimates from the Treasury Department point to October 18 as the deadline), and tensions within the Democratic party between moderates and progressives are threatening to sink both the $550bn bipartisan infrastructure bill and the $3.5tn reconciliation package, which together contain much of President Biden’s economic agenda. We could see some developments on that soon however, as Speaker Pelosi said yesterday that the House was set to vote on the infrastructure bill today. Assuming the vote goes ahead later, this will be very interesting since a number of progressive Democrats have said that they don’t want to pass the infrastructure bill without the reconciliation bill (which contains the administration’s other priorities on social programs). This is because they fear that with the infrastructure bill passed (which moderates are keen on), the moderates could then scale back the spending in the reconciliation bill, and by holding out on passing the infrastructure bill, this gives them leverage on reconciliation. House Speaker Pelosi and Majority Leader Schumer were in the Oval Office with President Biden yesterday, and a White House statement said that Biden spoke on the phone with lawmakers and engagement would continue into today. So an important day for Biden’s agenda. Against this backdrop, risk assets made a tentative recovery yesterday, with the S&P 500 up +0.16% and Europe’s STOXX 600 up +0.59%. However, unless we get a big surge in either index today, both indices remain on track for their worst monthly performances so far this year, even if they’re still in positive territory for Q3 as a whole. Looking elsewhere, tech stocks had appeared set to pare back some of the previous day’s losses, but a late fade left the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have offered investors poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%). Similarly, while they initially staged a recovery, small caps in the Russell 2000 (-0.20%) continued to struggle. One asset that remained on trend was the US dollar. The greenback continued its climb yesterday, with the dollar index increasing +0.61% to close at its highest level in over a year, exceeding its closing high from last November. Over in sovereign bond markets, the partial rebound saw yields on 10yr Treasuries down -2.1bps at 1.517%, marking their first move lower in a week. And there was much the same pattern in Europe as well, where yields on 10yr bunds (-1.4bps), OATs (-1.3bps) and BTPs (-3.1bps) all moved lower as well. One continued underperformer were UK gilts (+0.3bps), and yesterday we saw the spread between 10yr gilt and bund yields widen to its biggest gap in over 2 years, at 120bps. Staying on the UK, the pound (-0.81%) continued to slump yesterday, hitting its lowest level against the dollar since last December, which comes as the country has continued to face major issues over its energy supply. Yesterday actually saw natural gas prices take another leg higher in both the UK (+10.09%) and Europe (+10.24%), and the UK regulator said that three smaller suppliers (who supply fewer than 1% of domestic customers between them) had gone out of business. This energy/inflation/BoE conundrum is confusing the life out of Sterling 10 year breakevens. They rose +18bps from Monday morning to Tuesday lunchtime but then entirely reversed the move into last night’s close. This is an exaggerated version of how the world’s financial markets are puzzling over whether breakevens should go up because of energy or go down because of the demand destruction and central bank response. Central bankers were in no mood to panic yesterday though as we saw Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appear on a policy panel at the ECB’s forum on central banking. There was much to discuss but the central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.” Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.40%), and the Hang Seng (-1.08%) both losing ground, whereas the Kospi (+0.41%) and the Shanghai Composite (+0.30%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected), marking its lowest level since the height of the Covid crisis in February 2020. The non-manufacturing PMI held up better however, at a stronger 53.2 (vs. 49.8 expected), although new orders were beneath 50 for a 4th consecutive month. Elsewhere, futures on the S&P 500 (+0.50%) and those on European indices are pointing to a higher start later on, as markets continue to stabilise after their slump earlier in the week. Staying on Asia, shortly after we went to press yesterday, former Japanese foreign minister Fumio Kishida was elected as leader of the governing Liberal Democratic Party, and is set to become the country’s next Prime Minister. The Japanese Diet will hold a vote on Monday to elect Kishida as the new PM, after which he’ll announce a new cabinet, and attention will very soon turn to the upcoming general election, which is due to take place by the end of November. Our Chief Japan economist has written more on Kishida’s victory and his economic policy (link here), but he notes that on fiscal policy, Kishida’s plans to redistribute income echo the shift towards a greater role for government in the US and elsewhere. There wasn’t a massive amount of data yesterday, though Spain’s CPI reading for September rose to an above-expected +4.0% (vs. 3.5% expected), so it will be interesting to see if something similar happens with today’s releases from Germany, France and Italy, ahead of the Euro Area release tomorrow. Otherwise, UK mortgage approvals came in at 74.5k in August (vs. 73.0k expected), and the European Commission’s economic sentiment indicator for the Euro Area rose to 117.8 in September (vs. 117.0 expected). To the day ahead now, and one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Tyler Durden Thu, 09/30/2021 - 07:49.....»»

Category: blogSource: zerohedgeSep 30th, 2021

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80 For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech "general" refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors. The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390. Rising bond yields prompted a shift from growth to cyclical stocks in the United States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields. The premarket selloff was led by semiconductor stocks which tracked similar falls for European peers, as a rising 10-year Treasury yield puts pressure on the tech sector. Applied Materials Inc. led a slump in chip stocks in New York premarket trading while Nvidia was down 2.6%, AMD -2.1%, Applied Materials -2.9%, Micron -1.6%. Meanwhile retail trader favorite meme stock Naked Brand Group, an underwear and swimwear retailer, rises again after having surged 40% in the past two trading sessions after Chairman Justin Davis-Rice said in a letter to shareholders that he believes the company has found a “disruptive” potential acquisition in the clean technology sector. Frequency Electronics also soared after being awarded a contract by the Office of Naval Research to develop an atomic clock. Chinese stocks listed in the U.S. were mixed and semiconductor stocks declined. Here are some of the other notable U.S. movers today: iPower (IPW US) shares rise as much as 61% in U.S. premarket trading after the online hydroponics equipment retailer posted 4Q and FY21 earnings Alibaba (BABA US) rises 2.5% in U.S. premarket trading after the company’s shares listed in Hong Kong rose, adding to the Hang Seng Tech Index’s gains Frequency Electronics (FEIM US) soars 20% in U.S. premarket trading after being awarded a contract by the Office of Naval Research to develop an atomic clock Concentrix (CNXC) jumped 5.9% in Monday after hours trading after setting its first dividend payment and buyback program since being spun off from from Synnex in December Brookdale Senior Living (BKD US) shares fell in extended trading on Monday after announcing a $200 million convertible bond offering Altimmune (ALT US) rose as much as 4.2% in Monday postmarket trading on plans to announce results for an early stage study of ALT-801 in overweight people on Tuesday Ziopharm Oncology (ZIOP US) fell in extended trading after company said it cut about 60 positions, or a more than 50% reduction in personnel, to extend its cash runway into 1H 2023 Montrose Environmental Group (MEG US) was down 2.8% Monday postmarket after offering shares via JPMorgan, BofA Securities, William Blair The main catalyst for the stock selloff was the continued drop in Treasurys which sent the 10-year Treasury rising as high as 1.55% while shorter-dated rates surged toward pre-pandemic levels. This in turn was driven by the relentless meltup in commodities: overnight Brent roared above $80 a barrel - on its way to Goldman's revised $90 price target - on louder signs that demand is running ahead of supply and depleting inventories as the world finds itself in an unprecedented energy crisis. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed. Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing. As Bloomberg notes, traders have begun reassessing valuations amid multiplying global risks, while Fed officials have communicated increasingly hawkish signals in recent days as supply-chain bottlenecks threaten to keep inflation elevated. China’s growth slowdown which saw Goldman lower its q/q Q3 GDP forecast to a flat 0.0%, and a debt crisis in the nation’s property market.have also fueled the risk-off shift. "Central bankers have set out how they want to normalize monetary policy for some time,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “That process could start soon. The realization of this has the potential to provoke some volatility in rates and equities." Elsewhere, European stocks also declined with the Stoxx Europe 600 dragged down most by technology shares. Europe’s Stoxx Tech Index drops as much as 2.8% to a five-week low after falling 1.5% on Monday having previously touched its highest level since 2000 earlier in the month. Single-stock downgrades also weighed. Stocks which performed particularly well this year are among the biggest fallers, with chip equipment makers BE Semi -4.6% and ASML -4.4%, and chipmaker Nordic Semi down 4.2%. Among other laggards, Logitech drops as much as 8.5% after being downgraded to underweight at Morgan Stanley. Earlier in the session, Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares.  The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark. “The climb in yields led to the selling of growth stocks that have been strong, with investors rotating into names that are sensitive to business cycles - not unlike what happened in U.S. equities,” said Shutaro Yasuda, an analyst at Tokai Tokyo Research Center.  Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance. Australia’s equity benchmark was among the biggest losers in Asia Tuesday, dragged down by losses in mining and healthcare stocks. Still, broad-based gains in oil explorers and refiners helped mitigate the Asian market’s retreat. In South Korea, importers and distributors of liquefied petroleum gas and liquefied natural gas rallied as the price of natural gas jumped. The future of Evergrande is being forensically scrutinized by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company's wealth management unit. Without making reference to Evergrande, the People's Bank of China (PBOC) said Monday in a statement posted to its website that it would "safeguard the legitimate rights of housing consumers". Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country's manufacturing sector and associated supply chains. Analysts cautioned the ongoing blackouts could affect the country's listed industrial stocks. "What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets," Tai Hui, JPMorgan Asset Management's Asian chief market strategist told Reuters. "Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting." In rates, as noted above, the selloff in Treasuries gathered pace in Asia, early Europe session leaving yields cheaper by 3.5bp to 5.5bp across the curve with 20s and 30s extending above 2% and 10-year through 1.50%. Treasury 10-year yields traded around 1.53%, cheaper by 4.5bp on the day after topping at 1.55%, highest since mid-June; in front- and belly, 2- and 5-year yields remain near cheapest levels in at least 18 months; in 10-year sector, gilts lag by 3bp vs. Treasuries while German yields are narrowly richer. Gilts underperformed further, where long-end yields are cheaper by up to 7.5bp on the day. Treasury futures volumes over Asia, early European session were at more than twice usual levels, with most activity seen in 10-year note contract; eurodollar futures volumes were also well above recent average. With recent aggressive move higher in yields, threat of convexity hedging has exacerbated moves as rate hike premium continues to filter into the curve after last week’s FOMC. Auctions conclude Tuesday with 7-year note sale, while busy Fed speaker slate includes Fed Chair Powell. In FX, the Bloomberg dollar index reached the highest level in more than a month as rising energy costs drove up Treasury yields for a fourth session. The dollar gained against all its peers; Japan’s currency slid for a fifth day against the greenback before a speech Tuesday from Fed Chair Jerome Powell who will say inflation is elevated and is likely to remain so in coming months, according to prepared remarks. Treasury two-year yields rose to the highest since March 2020. “Dollar-yen saw the clearest expression of Treasury yield increases and we attributed this divergence to the surge in energy prices,” says Christopher Wong, senior foreign-exchange strategist at Malayan Banking in Singapore. U.S. natural gas futures soared to their highest since February 2014 on concern over tight inventories. Brent oil topped $80 a barrel amid signs demand is outrunning supply. The euro slipped to hit its lowest level since Aug. 20, nearing the year-to-date low of $1.1664. The Treasury yield curve bear steepened; euro curves followed suit, with the yield on U.K. 10-year notes soaring past 1% for the first time since March 2020 on the prospects for Bank of England policy tightening. In commodities, Crude futures extend Asia’s gains. WTI rises as much as 1.6% to highs of $76.67 before stalling. Brent holds above $80. Spot gold trades around last week’s lows near $1,740/oz. Base metals are mixed: LME aluminum outperforming, rising as much as 1.1%; nickel and copper are in the red. Looking at the day ahead, one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Market Snapshot S&P 500 futures down 0.7% to 4,403.50 STOXX Europe 600 down 1.2% to 456.83 MXAP down 0.4% to 200.06 MXAPJ down 0.4% to 641.05 Nikkei down 0.2% to 30,183.96 Topix down 0.3% to 2,081.77 Hang Seng Index up 1.2% to 24,500.39 Shanghai Composite up 0.5% to 3,602.22 Sensex down 1.4% to 59,209.94 Australia S&P/ASX 200 down 1.5% to 7,275.55 Kospi down 1.1% to 3,097.92 Brent Futures up 0.8% to $80.15/bbl Gold spot down 0.4% to $1,742.61 U.S. Dollar Index up 0.20% to 93.57 German 10Y yield rose 2.7 bps to -0.196% Euro down 0.1% to $1.1681 Top Overnight News from Bloomberg Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories As the dust settles on Germany’s election, control over the finances of Europe’s largest economy could fall to a 42-year-old former tech entrepreneur who wants to lower taxes and tighten spending Wells Fargo agreed to pay $37 million in penalties and forfeiture to settle U.S. claims that it overcharged almost 800 commercial customers that used its foreign exchange services, the latest in a series of scandals at the bank A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed following on from a Wall Street lead where value outperformed growth and tech suffered as yields rose. ASX 200 (-1.5%) was the laggard with losses in healthcare, gold miners and tech frontrunning the declines which dragged the index beneath 7300. Nikkei 225 (-0.2%) was lacklustre and briefly approached 30k to the downside but then bounced off worse levels amid a softer currency, while the KOSPI (-1.1%) also declined following a suspected North Korean ballistic missile launch and with a recent South Korean court order to sell seized Mitsubishi Heavy assets as compensation for wartime forced labour, threatening a flare up of tensions between Japan and South Korea. Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were underpinned after the PBoC continued to inject liquidity ahead of the approaching National Day holidays and with Hong Kong led higher by strength in property names after the PBoC stated it will safeguard legitimate rights and interests of housing consumers which also provided Evergrande-related stocks further reprieve from their recent sell-off. Finally, 10yr JGBs retreated on spillover selling from T-notes after yields rose on the back of further Fed taper rhetoric and with prices not helped by the uninspiring 2yr and 5yr auctions stateside, while weaker results at the 40yr JGB auction also provided a headwind for prices. Top Asian News Top-Performing Global Luxury Stock Seen Cooling After 680% Gain China Power Price Hike Sought Amid Supply Crunch: Energy Update Macau Evacuates Airport Quarantine Hotel After Outbreak Iron Ore Dips Again as China Power Crisis Adds to Steel Curbs Bourses in Europe extended on the losses seen at the cash open and trade lower across the board (Euro Stoxx 50 -1.7%; Stoxx 600 -1.7%) as sentiment retreated from a mixed APAC handover as month-end looms alongside tier 1 data and a slew of central bank speakers. US equity futures have also succumbed to the mood in Europe alongside the surge in global yields – which takes its toll on the NQ (-1.5%) vs the ES (-0.8%), YM (-0.4%) and RTY (-0.3%). From a more technical standpoint, ESZ1 fell under its 50 DMA (4,431) and tested the 4,400 level to the downside, whilst NQZ1 briefly fell under 15k and the YMZ1 inches towards its 100 DMA (34,489). Back to Europe, the FTSE 100 (-0.4%) sees losses to a lesser extent vs its European peers as energy prices and yields keep the index oil giants and banks supported – with some of the top gainers including Shell (+2.8%), BP (+2.1%). Sectors in Europe are predominantly in the red, but Oil & Gas buck the trend. Sectors also portray more of a defensive bias, whilst the downside sees Tech, Real Estate, and Travel & Leisure at the foot of the bunch, with the former hit by the rise in yields, which sees the US 10yr further above 1.50%, the 20yr above 2.00% and the UK 10yr hitting 1.00% for the first time since March 2020. In terms of individual movers, Smiths Group (+3.8%) is at the top of the Stoxx 600 following encouraging earnings. ING (+0.3%) holds onto gains after sources noted SocGen's (-0.6%) interest in ING's retail banking arm. Finally, chip-maker ASM International (-3.5%) has succumbed to the broader tech weakness despite upping its guidance and announcing capacity expansion by early 2023. Top European News U.K. 10-Year Yield Rises Past 1% for First Time Since March 2020 Goldman’s Petershill Unit Valued at $5.5 Billion in U.K. IPO Go-Ahead Sinks as U.K. Takes Over Southeastern Rail Franchise Hedge Funds and Private Equity Are Targeting European Soccer In FX, It took a while for the index to breach resistance ahead of 93.500, but when US Treasuries resumed their bear-steepening run and the intensity of the moves in futures and cash picked up pace the break beyond the half round number was relatively quick and decisive. Indeed, the DXY duly surpassed its post-FOMC peak (93.526) and a prior recent high from August 19 (93.587) on the way to reaching 93.619 amidst almost all round Dollar gains, as 5, 10, 20 and 30 year yields all rallied through or further above psychological levels (such as 1%, 1.5% and 2% in the case of the latter two maturities). However, petro and a few other commodity currencies are displaying varying degrees of resilience in the face of general Greenback strength that is compounded by buy signals for September 30 rebalancing on spot month, quarter and half fy end. Ahead, trade data, consumer confidence, more regional Fed surveys, speakers and the 7 year auction. NZD/CHF/JPY/AUD - The Kiwi was already losing altitude above 0.7000 vs its US counterpart and 1.0400 against the Aussie on Monday, so the deeper retreat is hardly surprising to circa 0.6975 and 1.0415 awaiting some independent impetus that may come via NZ building consents tomorrow. Meanwhile, the Franc has recoiled towards 0.9300 in advance of comments from SNB’s Maechler and the Yen continues to suffer on the aforementioned rampant yield and steeper curve trajectory on top of a more pronounced 1+ sd portfolio hedge selling requirement vs the Buck, with Usd/Jpy meandering midway between 110.94-111.42 parameters irrespective of renewed risk aversion due to same bond rout dynamic. Back down under, Aud/Usd has faded from around 0.7311 to the low 0.7260 area, though holding up a bit better in wake of not quite as weak as forecast final retail sales overnight. CAD/EUR/GBP - All softer against their US rival, but the Loonie putting up a decent fight with ongoing help from WTI crude that has now topped Usd 76.50/brl, and Usd/Cad also has decent option expiry interest to keep an eye on given 1.2 bn rolling off at 1.2615 and an even heftier 3 bn at 1.2675 compared to current extremes spanning 1.2693-1.2652. Elsewhere, the Euro has lost its battle to stay afloat of multiple sub-1.1700 lows even though EGBs are tumbling alongside USTs and the same goes for Sterling in relation to the 1.3700 handle irrespective of the 10 year Gilt touching 1% for the first time since March 2020. SCANDI/EM - Brent’s advances on Usd 80 brl have been offset to an extent by soft Norwegian retail sales data, as the Nok pares more of its post-Norges Bank gains, while the Sek looks somewhat caught between stalls following a recovery in Swedish consumption, but big swing in trade balance from surplus to larger deficit. However, the Try is taking no delight from the costlier price of oil or remarks from Turkey’s Deputy Finance Minister contending that interest rates can move lower by reducing the current account and budget deficits, or conceding that Dollarisation is a problem and steps need to be taken to enhance confidence in the Lira. Conversely, the Cnh and Cny are still holding a firm line following another net injection of 2 week funds from the PBoC and the Governor saying that China will lengthen the period for the implementation of normal monetary policy, adding that it has conditions to keep a normal and upward yield curve, as it sees no need to purchase assets at present. In commodities, WTI and Brent futures have extended on the gains seen during APAC hours, which saw the Brent November contract topping USD 80/bbl, albeit the volume and open interest has migrated to the December contract – which topped out just before the USD 80/bbl mark. WTI November meanwhile advanced past the USD 76/bbl mark to a current peak at USD 76.67/bbl (vs low USD 75.21/bbl). Desks have been attributing the leg higher to tight supply – with the UK fuel situation further deteriorating amid a shortage of drivers coupled with panic buying. It's worth bearing in mind that the demand side of the equation has also seen supportive, with the US announcing the lifting of international travel curbs recently alongside the economic resilience to the Delta variant heading into the winter period. Traders would also be keeping an eye on the electricity situation in China, which in theory would provide tailwinds for diesel demand via generators, although this could be offset by a slowdown in economic activity due to power outages. There has also been growing noise for OPEC+ to hike output beyond the monthly plan of 400k BPD, with some African nations also struggling to ramp up production due to maintenance issues and lack of investments. Ministers recently noted that the plan would be maintained at next week's confab. As a reminder, the OPEC World Oil Outlook is set to be released at 13:30BST/08:30EDT, although the findings may be stale given the recent developments in crude dynamics. Major banks have also provided commentary on Brent following Goldman Sachs' bullish call recently, with Barclays upping its forecast for both benchmarks due to supply deficits, whilst Morgan Stanley maintained its forecast but suggested that the USD 85/bbl Brent scenario clearly exists. MS also noted that oil inventories continue to draw at high rates and suggest that the market is more undersupplied than generally perceived; the analysts see the market undersupplied into 2022 amid its expectation for further OPEC discipline. Nat gas also remains in focus, with prices +11% at one point, whilst Russia's Kremlin said Russia remains the safeguard of natural gas to Europe and Gazprom is ready to discuss new gas supply contracts with increased volumes to meet rising European demand. It's also worth being aware of the increasing likelihood of state intervention at these levels as nations attempt to save or at least cushion consumers and company margins. Elsewhere, precious metals are under pressure as the Buck remains buoyant, with spot gold still under USD 1,750/oz as it inches closer to the 11th August low of USD 1,722/oz. Spot silver remains within recent ranges above USD 22/oz. Overnight Chinese nickel and tin prices extended losses with traders citing subdued demand, whilst coking coal and coke futures leapt on tight supply. US Event Calendar 8:30am: Aug. Advance Goods Trade Balance, est. -$87.3b, prior -$86.4b, revised -$86.8b 8:30am: Aug. Retail Inventories MoM, est. 0.5%, prior 0.4%; Wholesale Inventories MoM, est. 0.8%, prior 0.6% 9am: July S&P CS Composite-20 YoY, est. 20.00%, prior 19.08% 9am: July S&P/CS 20 City MoM SA, est. 1.70%, prior 1.77% 9am: July FHFA House Price Index MoM, est. 1.5%, prior 1.6% 10am: Sept. Conf. Board Consumer Confidence, est. 115.0, prior 113.8 Expectations, prior 91.4 Present Situation, prior 147.3 10am: Sept. Richmond Fed Index, est. 10, prior 9 Central Bank Speakers 9am: Fed’s Evans Makes Welcome Remarks at Payments Conference 10am: Powell and Yellen Appear Before Senate Banking Panel 1:40pm: Fed’s Bowman Speaks at Community Bank Event 3pm: Fed’s Bostic Discusses the Economic Outlook 7pm: Fed’s Bullard Discusses U.S. Economy and Monetary Policy DB's Jim Reid concludes the overnight wrap What a difference a week makes. You hardly hear the word Evergrande now. We asked in a flash poll last week whether we would still be talking about it in a month or whether it would be a distant memory by then. Maybe we should have narrowed the time frame to a week! We’ve quickly moved on to rate hikes and rising bond yields as the topic de jour. A further rise in the Bloomberg Commodity Spot Index (+1.87%) to a fresh high for the decade helped reinforce the move. Indeed, sovereign bond yields moved higher once again yesterday amidst a sharp rise in inflation expectations, with those on 10yr Treasury yields rising +3.6bps to 1.487%, their highest level in over 3 months. Meanwhile the 2yr yield rose +0.8bps to 0.278%, its highest level since the pandemic began, which comes on the back of last week’s Fed meeting that prompted investors to price in an initial rate hike from the Fed by the end of 2022. The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier. We were waiting for the wind to blow in this country to get alternatives back on stream and boy did it blow yesterday but with no impact yet on gas prices. Lower real rates dampened the rise in yields across the continent, though yields on 10yr bunds (+0.5bps), OATs (+0.9bps), BTPs (+1.3bps) and gilts (+2.7bps) had all moved higher by the close of trade. Those spikes in commodity prices were evident more broadly yesterday, with energy prices in particular seeing a major increase. Brent crude oil prices were up +1.84% to $79.53/bbl, marking their highest closing level since late-2018, and this morning in trading they have now exceeded the $80/bbl mark with a further +0.94% increase. It was much the same story for WTI (+1.99%), which closed at $75.45/bbl, which was its own highest closing level since 2018 too. And those pressures in UK natural gas prices we mentioned above were seen across Europe more broadly, where futures were up +8.92%. With yields moving higher and inflationary pressures growing stronger, tech stocks struggled significantly yesterday, with the NASDAQ down -0.52%. The megacap tech FANG+ index fell -0.15% on the day, but was initially down as much as -1.7% in early trading. The NASDAQ underperformed the S&P 500, which was only down -0.28%, but that masked significant sectoral divergences, with interest-sensitive growth stocks struggling, just as cyclicals more broadly posted fresh gains. More specifically, energy (+3.43%), bank (+2.29%) and autos (+2.19%) led the S&P, while biotech (-1.65%) and software (-1.39%) shares were among the largest laggards. European equities were also pretty subdued, with the STOXX 600 down -0.19%, though the DAX was up +0.27% following the results of the German election, which removed the tail risk outcome of a more left-wing coalition featuring the SPD, the Greens and Die Linke. Staying on the political scene, we are now less than 72 hours away from a potential US government shutdown as it stands. As was expected, Republicans in the Senate blocked the House-passed measure to fund the government for another 2 months and raise the debt ceiling for 2 years. While Democrats have not put forward their alternative strategy if Republicans refuse to vote to lift the debt ceiling, their only option would be to attach it to the budget reconciliation plan that currently makes up much of the Biden economic agenda. In an effort to keep all party members on board, Speaker Pelosi moved the vote on the $550bn bipartisan infrastructure bill to Thursday in order to give all sides more time to finish the larger budget bill and pass both together. It is a going to be a very busy Thursday, since Congress will have to also pass the funding bill that day. Republicans and Democrats already agree on a funding bill to keep the government open that does not include the debt ceiling increase so it is just a matter of how exactly the debt ceiling provision goes through without a Republican Senate vote. Overnight in Asia, equity indices are seeing a mixed performance. On the one hand, most of the region including the Nikkei (-0.24%) and KOSPI (-0.80%) are trading lower as investors begin to price in tighter monetary policy from the Fed. However, the Hang Seng (+1.50%), Shanghai Composite (+0.53%) and CSI (0.38%) have all advanced after the People’s Bank of China said that they would ensure a “healthy property market”. Looking forward, US equity futures are pointing to little change, with those on the S&P 500 down just -0.05%, and 10yr Treasury yields have risen +1.9bps this morning to trade above 1.50% again. Back to the German election, where the aftermath yesterday saw various party leaders assess the results and stake their claims to participate in a new coalition. As a reminder, the SPD came in first place with 25.7%, but the CDU/CSU weren’t far behind on 24.1%, making it mathematically possible for either to form a government in a coalition with the Greens and the FDP. The SPD’s chancellor candidate, Finance Minister Olaf Scholz, appealed for the Greens and FDP to join him in forming a government, and told the media that he wanted to form a coalition before Christmas. Meanwhile Green co-leader Robert Habeck said that “Of course there is a certain priority for talks with the SPD and the FDP”, but said that this didn’t mean they wouldn’t speak with the CDU/CSU either. As the SPD were calling for an alliance, the tone sounded more negative from the CDU’s leadership, even though Armin Laschet said that he had not given up on the idea of forming a government. Notably, Laschet said that no party was able to draw a clear mandate from the result, including the SPD, and this echoed remarks from the CSU leader Markus Söder, who said that the conservatives had no mandate to form a government, though they could “make an offer out of a sense of responsibility for the country.” Meanwhile, attention will turn to the FDP and the Greens to see which way they’re leaning when it comes to forming a government. FDP leader Lindner said that he would hold preliminary talks with the Greens, after which they would be open to invitations from either the SPD or the CDU/CSU for further discussions. Back on the UK, there was an interesting speech from BoE Governor Bailey yesterday, where he echoed the line from the MPC minutes last week, saying that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainable over the medium-term”. However, he also said that their view was that “the price pressures will be transient”, and that “monetary policy will not increase the supply of semi-conductor chips … nor will it produce more HGV drivers.” He then further added that tighter policy “could make things worse in this situation by putting more downward pressure on a weakening recovery of the economy”. So a bit of a mixed message of backing rate hike expectations but warning about its impact on growth. Over in the US we heard from a host of Fed speakers with Governor Brainard saying that while “employment is still a bit short of the mark” of “substantial further progress”, she expects that the labour market will recover enough to start tapering asset purchases soon. Separately on the inflation debate, Minneapolis Fed President Kashkari argued that this year’s pickup in US inflation has been a byproduct of the supply disruptions associated with Covid and that policy makers should not react to it just yet. He cited the need to get US employment back up as the Fed’s “highest priority”. New York Fed President Williams agreed with his colleague, saying that “this process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede.” And Chicago Fed President Evans is even worried about downside inflation risks, as he is " more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.” Lastly, news came out yesterday that Boston Fed President Rosengren will retire this week due to health concerns. He was due to step down in June regardless as there is a mandatory retirement age of 65. Dallas Fed President Kaplan also announced his retirement yesterday, which will take effect October 8th. Both officials have drawn scrutiny in recent days stemming from their recent disclosure of trading activity over the last year, though the activity did not violate the Fed’s ethics code even as Fed Chair Powell announced an official review of those rules. The Boston Fed President will be a voting member on the FOMC next year, and the Dallas Fed President in 2023. Running through yesterday’s data, the preliminary reading for US durable goods orders in August showed growth of +1.8% (vs. +0.7% expected), and the previous month was also revised up to show growth of +0.5% (vs. -0.1% previously). Meanwhile core capital goods orders grew by +0.5% (vs. +0.4% expected), and the previous month’s growth was revised up two-tenths. Finally, the Dallas Fed’s manufacturing activity index for September came in at 4.6 (vs. 11.0 expected) – its lowest reading since July 2020. To the day ahead now, and one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Tyler Durden Tue, 09/28/2021 - 07:52.....»»

Category: blogSource: zerohedgeSep 28th, 2021

NASDAQ Drops 2.5% as Money Moves Out of Tech

NASDAQ Drops 2.5% as Money Moves Out of Tech The markets remained mixed heading into a new week on Monday, but technology really got shellacked as investors are more interested in recovery names at the moment. Contrary to what we saw throughout the pandemic, the NASDAQ has been lagging its counterparts recently. However, today’s pullback was on a different level as the index plunged 2.46% (or more than 340 points) to 13,533.05. That’s the worst session of February and second steepest loss of the year so far (after the 2.61% drop on January 27). Unsurprisingly, the FAANGs took it especially hard, including Apple (AAPL, -2.98%), Amazon (AMZN, -2.13%), Alphabet (GOOG, -1.73%) and Netflix (NFLX, -1.19%). And for good measure, we also saw big declines from former high-flyers Tesla (TSLA, -8.55%) and Microsoft (MSFT, -2.68%). The S&P has its own problems as today marked its fifth straight session in the red. The broad index, which also has heavy exposure to tech, slipped 0.77% to 3876.50. Meanwhile, the Dow not only managed to close in the green on Monday, but it also staged an impressive comeback after dropping well over 100 points earlier in the day. It was up 0.09% (or about 27 points) to 31,521.69. The Dow was the only major index to finish in the green last week… though it did so barely by rising only 0.1%. The S&P slipped 0.7% over the four days, while the NASDAQ dropped 1.6%. Despite all the good stuff out there (e.g. stimulus, vaccines, a strong earnings season); investors are a bit wary of rising bond yields and higher inflation right now. They see this as a good time to move money out of the flashy tech names and into areas that should benefit from the economy reopening. Of course, the big concern is the Fed raising rates faster than expected, which means all eyes will be on Chair Jerome Powell’s testimonies in front of Congress this week. He’ll certainly reiterate the Committee’s support for the economy, but no one knows what this skittish market will focus on. Mr. Powell will be in front of the Senate Banking Committee tomorrow and then the House Financial Services Committee on Wednesday. And let’s not forget that this week will also see hundreds more earnings reports as this better-than-expected season continues.   Today's Portfolio Highlights: Headline Trader: Shares of Uber (UBER) dropped sharply after the ride-sharing staple reported mixed quarterly results earlier this month. However, Dan thinks this company is poised to come out of this pandemic stronger than ever. He’s very impressed with its rapid acceleration into the delivery space through Uber Eats and soon Postmates. In fact, the delivery segment grew by 224% year over year, which was just what was needed during this pandemic. Furthermore, the editor thinks that rising margins and its growing presence internationally bode well for the future. To sum it all up, Dan sees UBER as being perfectly positioned between recovery and growth, so he added the stock on Monday with a 6% allocation. Make sure to read the full write-up for much more. Surprise Trader: Ever since going public in mid-2019, Grocery Outlet (GO) has been beating the Zacks Consensus Estimate. This operator of ‘small-box’ stores (15K – 20K square feet) topped by 117% last time for its sixth consecutive positive surprise. Now this Zacks Rank #2 (Buy) has a positive Earnings ESP of 5.6% for the quarter coming after the bell on Tuesday, March 2. Dave added GO on Monday with a 12.5% allocation and also sold Century Communities (CCS) for a nice 15.6% return in less than three weeks. See the full write-up for more on today’s action. TAZR Trader: Even with the vaccines entering the country’s bloodstream, we’re still going to need covid testing for the foreseeable future. That was Kevin’s idea behind buying Quidel (QDEL) last year before the rollout began, and it’s the same today. He recently received some support from a major brokerage firm, which reiterated an “outperform” rating on QDEL while stating that “demand continues to outstrip supply”. The editor thought this was a good time to buy more QDEL. Read the full write-up for more specifics on this move, along with comments on Square (SQ) ahead of earnings. Blockchain Innovators: You may not think that stainless steel products manufacturer ZK International (ZKIN) would have much blockchain exposure. However, a closer look uncovers xSigma, a wholly-owned subsidiary with a decentralized finance platform dubbed “DEX”. That platform runs on the Ethereum blockchain using xSigma’s SIG coin, which is backed by the US dollar. Dave added ZKIN on Monday and warns that it’s a “highly speculative” name, which has worked out well for this portfolio in the past. The editor also ended the “frustrating ride” of International Money Express (IMXI) by the selling the name today for a 7.1% return in under five months. See the complete commentary for more on today’s moves. Technology Innovators: All the ‘chip shortage’ stories out there had Brian thinking about increasing exposure to the space. And it just so happens that there’s an open space in the portfolio AND a Zacks Rank #1 (Strong Buy) from that area. Therefore, the editor added Vishay Intertechnology (VSH) on Monday, which is a global manufacturer and supplier of semiconductors and passive components. The company has beaten the Zacks Consensus Estimate three times and matched once in the past four quarters, amassing an average surprise of 66% over that time. As the high Zacks Rank attests, earnings estimates for VSH are on the rise. Brian also thinks the valuation is attractive. Get more in-depth on this new addition in the full write-up. Commodity Innovators: The country’s recent cold spell plus snowstorms failed to lift ProShares Ultra Bloomberg Natural Gas (BOIL), so Jeremy sold the name on Monday and moved into a new position that will thrive while energy prices stay elevated. The editor added EnLink (ENLC), which provides midstream energy services. The natural gas chart is still bullish, and ENLC is involved in the gathering, treating, processing, transmission, distribution, supply and marketing of that commodity. Jeremy was impressed when the stock held its ground after dipping to its 50-day and really appreciates its 9% dividend. Plus, ENLC is getting some love from a major firm, which recently upgraded the stock. Read the full write-up for more on today’s moves. Black Box Trader: This week's adjustment included only one change. The portfolio sold U.S. Steel (X) for a 3.9% return and replaced it by adding Vista Outdoor (VSTO). In addition, this service had one of the Top 5 performers of the day among all ZU names as Olin Corp. (OLN) rose 5.3%. Read the Black Box Trader’s Guide to learn more about this computer-driven service. Have a Good Evening, Jim Giaquinto Recommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

U.S. moves to cut off Huawei from chip suppliers

The Trump administration moved Friday to block shipments of semiconductors to Huawei Technologies from global chipmakers. As Fred Katayama reports, the action is sure to ramp up tensions with China......»»

Category: videoSource: reutersMay 15th, 2020

U.S. moves to cut Huawei off from global chip suppliers

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action ramping up tensions with China......»»

Category: topSource: reutersMay 15th, 2020

Exclusive: U.S. moves to cut Huawei off from global chip suppliers

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China......»»

Category: topSource: reutersMay 15th, 2020

2 Auto Replacement Parts Stocks on the Right Track Amid Industry Odds

In an otherwise gloomy industry, Genuine Parts (GPC) and LKQ Corp (LKQ) appear better-positioned, thanks to their strategic buyouts and investor-friendly moves. The Zacks Automotive- Replacement Parts industry is reeling under chip crunch and supply chain disruptions, which are likely to limit sales. Additionally, increasing cost of raw materials, adverse foreign exchange translations and high research and development expenses are clipping margins. Seemingly, the only silver lining is the increasing longevity of vehicles. In an otherwise gloomy industry, Genuine Parts Company GPC and LKQ Corporation LKQ appear better-positioned, thanks to their strategic buyouts and investor-friendly moves.About the IndustryThe Zacks Automotive - Replacement Parts industry comprises companies that engage in the production, marketing and distribution of replacement components for the automotive aftermarket. The industry players offer replacement systems, components, equipment and parts to repair as well as accessorize vehicles. A few of the important auto replacement components include engine, steering, drive axle, suspension, brakes and gearbox parts. The auto replacement market is somewhat less exposed to business downturns as consumers are more inclined to spend on replacement parts to maintain their vehicles rather than splurge on new ones. Consumers can either opt for repairing vehicles on their own or can avail professional services for the same. The industry is undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.Key Themes Deciding the Industry's FateCommodity Inflation & Forex Woes: Costs of raw materials like steel and non-ferrous metals are on the rise. Commodity inflation is not likely to abate anytime soon and will act as a major speed bump for quite some time. Industry players acknowledge that the increasing cost of raw materials is set to impact their margins. Further, most industry participants have a global presence, which makes them more vulnerable to forex woes. Adverse foreign currency translations are also likely to impact earnings and margins. Rising Operational Costs: The industry is bearing high costs for developing technologically advanced auto components amid the soaring popularity of electric vehicles, which is likely to weigh on profits further. With the technology shift in full swing, industry players must develop and upgrade their offerings to remain on par with the evolving trends in the automotive market. The new features and upgrades call for high capex and research and development expenses, which are likely to limit operating margins and cash flows.Supply Chain Snarls: The industry is battling semiconductor shortage— a byproduct of COVID-19 that only worsened with the Russia-Ukraine war. The deficit of microchips is hindering the business operations of the industry participants and the chip crunch is not likely to end anytime soon, in turn resulting in lost revenues. Logistical challenges and disruptions in the supply chain systems are clouding the prospects of the industry.Aging Vehicles: One comforting prospect of the industry is the increasing average age of vehicles. The average age of U.S. vehicles has hit a new record of 12.2 years. In a bid to ensure the long-term functioning of the aging vehicles, customers will more likely spend on repairs, thereby driving the business of auto replacement and repair companies. Also, amid economic uncertainty, customers are more likely to opt for repairing old vehicles rather than splurging on expensive new vehicles.Zacks Industry Rank Paints Gloomy PictureThe Zacks Automotive – Replacements Parts industry is a seven-stock group within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #185, which places it in the bottom 26% of around 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since April, the industry’s earnings estimates for 2022 have moved south by 3.5%.Despite the industry’s dim near-term outlook, we will present two stocks worth considering for your portfolio. But before that, let's look at the industry’s stock market performance and current valuation.Industry's Decline Narrower than S&P 500 & SectorThe Zacks Automotive – Replacement Parts industry has outpaced the Auto, Tires and Truck sector and Zacks S&P 500 composite over the past year. The industry has declined 1.3% against the sector and the S&P 500’s decline of 45.8% and 15.1%, respectively.One-Year Price PerformanceIndustry's Current ValuationSince automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. Based on trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 9.27X compared with the S&P 500’s 12.21X and the sector’s trailing-12-month EV/EBITDA of 13.43X. Over the past five years, the industry has traded as high as 15.08X, as low as 6.76X and at a median of 10.02X, as the chart below shows.EV/EBITDA Ratio (Past Five Years)2 Stocks to Keep a Close Eye OnGenuine Parts: Atlanta-based Genuine Parts distributes auto and industrial replacement parts across the United States, Canada, Mexico, Australia, New Zealand, Singapore, Indonesia, France, the United Kingdom, Germany and Poland. The KDG and Inneco acquisitions have bolstered the company’s Industrial segment. Other strategic bolt-on acquisitions, including Winparts, Rare Spares, PartsPoint and Alliance Automotive Group are adding to the top-line growth of the Automotive segment. GPC’s dividend aristocrat status boosts investors’ confidence. The company envisions 2022 free cash flow in the band of $1.2-$1.4 billion, calling for a surge from $992 million generated in 2021.The Zacks Consensus Estimate for GPC’s 2022 and 2023 sales implies year-over-year growth of 16% and 2.5%, respectively. The consensus mark for 2022 and 2023 earnings signals a year-over-year improvement of 18% and 6%, respectively. Genuine Parts— currently carrying a Zacks Rank #2 (Buy) and having a Value Score of A—topped earnings estimates in the trailing four quarters.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: GPCLKQ Corp: Headquartered in Illinois, LKQ is one of the leading providers of replacement parts, components and systems. The buyouts of Bumblebee Batteries, Elite Electronics, Green Bean Battery, SeaWide Marine Distribution, Greenlight and Fabtech Industries have bolstered the firm’s product offerings as well as sales. Low leverage and high liquidity of the firm increase its financial flexibility and lower default risk. As a show of its solid cash flow generation ability and balance sheet strength, the company recently hiked its dividend by 10% from the prior payout and boosted buyback by $1 billion. Between the period of initiating the stock buyback program in late October 2018 to Sep 30, 2022, LKQ repurchased around $2.2 billion worth of stock.The Zacks Consensus Estimate for LKQ’s 2023 earnings per share is pegged at $4.18, implying 6.6% growth year over year.  The consensus mark for 2023 EPS has moved north by 2 cents a share to $4.18. The company surpassed earnings estimates in the last four quarters, the average surprise being 8%. LKQ currently carries a Zacks Rank #3 (Hold) and has a Value Score of A.Price and Consensus: LKQ Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Genuine Parts Company (GPC): Free Stock Analysis Report LKQ Corporation (LKQ): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks10 hr. 28 min. ago