U.S. steel industry prepares to deliver on Biden’s domestic steel mandate

Across the country, steel production is expected to increase due to a new federal mandate that prioritizes U.S. steel over foreign alternatives. Starting May 14, all federally funded infrastructure is required to use U.S.-made steel and iron......»»

Category: topSource: foxnewsMay 13th, 2022

5 Top-Performing Leveraged/Inverse ETFs of Q1

The appeal for leveraged and inverse-leveraged ETFs has increased as these fetch outsized returns on quick market turns in a short span. Wall Street was on a wild ride in the first quarter. The war in Ukraine, the resurgence of Coronavirus cases in China and inflationary pressure led to rounds of steep selling. But the Fed rate hike and people’s confidence that the economy will withstand the escalating tensions in Ukraine rekindled investors’ interest. Additionally, Fed Chair Jerome Powell showed confidence that the American economy is strong enough to withstand tighter monetary policy.In such a scenario, the appeal for leveraged and inverse-leveraged ETFs has increased as these fetch outsized returns on quick market turns in a short span. MicroSectors U.S. Big Oil Index 3X Leveraged ETN NRGU, Direxion Daily Metal Miners Bull 2X Shares MNM, Direxion Daily Aerospace & Defense Bull 3X Shares DFEN, Direxion Daily S&P Biotech Bear 3x Shares LABD and Daily Dow Jones Internet Bear 3X Shares WEBS have been outperforming and might continue their strong performance if sentiments remain the same.Leveraged and Inverse-Leveraged ETFsLeveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains a friend.However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).Investors should note that these products are suitable only for short-term traders as they are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than what they appear (see: all the Inverse Equity ETFs here).Still, ETF investors seeking to tap abrupt movements can go long or short in the near term.We have profiled the ETFs in detail below:MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU) – Up 157.7%MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies.MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $1.6 billion in its asset base, while trading in an average daily volume of 260,000 shares. Expense ratio comes in at 0.95%.Direxion Daily Metal Miners Bull 2X Shares (MNM) – Up 78.8%Direxion Daily Metal Miners Bull 2X Shares provides two times (2X or 200%) leveraged exposure to the S&P Metals and Mining Select Industry Index, which is designed to measure the performance of the equity securities of companies in industries of aluminum; coal & consumable fuels; copper; diversified metals & mining; gold; precious metals & minerals; silver; and steel (read: 5 Leveraged ETFs That Gained More Than 30% in March).Direxion Daily Metal Miners Bull 2X Shares has accumulated $18.7 million in its asset base since its inception in late December. It charges 95 bps in annual fees and trades in an average daily volume of 35,000 shares.Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN) – Up 25%Direxion Daily Aerospace & Defense Bull 3X Shares creates three times leveraged long position in the Dow Jones U.S. Select Aerospace & Defense Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 1.5 million shares.Direxion Daily Aerospace & Defense Bull 3X Shares has amassed AUM of $287.7 million in its asset base (read: Aerospace and Defense ETFs Rallying on Russia-Ukraine War).Direxion Daily S&P Biotech Bear 3x Shares (LABD) – Up 22.1%Direxion Daily S&P Biotech Bear 3x Shares seeks to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index, which includes the domestic companies from the biotechnology industry.Direxion Daily S&P Biotech Bear 3x Shares has amassed $67.4 million in its asset base and has an average daily volume of around 5 million shares. LABD charges investors 95 bps in annual fees.Daily Dow Jones Internet Bear 3X Shares (WEBS) – Up 21.4%Daily Dow Jones Internet Bear 3X Shares provides a three times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index.Daily Dow Jones Internet Bear 3X Shares has attracted $17.3 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 217,000 shares. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Direxion Daily S&P Biotech Bear 3X Shares (LABD): ETF Research Reports Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN): ETF Research Reports MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU): ETF Research Reports Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS): ETF Research Reports Direxion Daily Metal Miners Bull 2X Shares (MNM): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMar 30th, 2022

Futures Recover Overnight Losses After Torrid Thursday Rally As Uneasy Calm Returns

Futures Recover Overnight Losses After Torrid Thursday Rally As Uneasy Calm Returns After yesterday's furious gamma-squeeze rally, U.S. stock futures were slightly lower on the day, although near the overnight session highs as the ongoing Ukraine conflict and impact of Western sanctions continue to drive risk; sentiment was boosted after the Kremlin said that Ukraine’s neutrality offer is a move “toward positive” and following reports that China's president Xi held a phone call with Putin who said Russia is willing to conduct high-level negotiations with Ukraine. S&P futures were down 10 points to 0.25% at 7:30am, after paring earlier declines of more than 1%, with Nasdaq futures down -0.15% and Dow futures down 0.4%. Europe's Stoxx Europe 600 was in the green, and oil was steady after Bloomberg reported that oil importers in China are briefly pausing new seaborne purchases as they assess the potential implications of handling the shipments following the Ukraine invasion. Gold was steady, while Brent crude reached $100 a barrel and Treasuries rose. In the latest developments, Ukraine’s president Zelensky said Moscow-led forces were continuing attacks on military and civilian targets on the second day of their invasion. Leaders from the North Atlantic Treaty Organization will hold virtual talks on the alliance’s next steps starting at 3 p.m. in Brussels. Meanwhile, President Joe Biden imposed stiffer sanctions on Russia, promising to inflict a “severe cost on the Russian economy” that will hamper its ability to do business in foreign currencies after Moscow-led forces attacked military targets in Ukraine, triggering the worst security crisis in Europe since World War II. China urged Russia and Ukraine to negotiate to address problems, according to Chinese state TV.  Here is a full recap of the latest Ukraine developments: There were reports of heavy explosions rocking the Ukrainian capital of Kyiv and US Senator Rubio tweeted it appeared that at least three dozen missiles were fired at the Kyiv are in 40 minutes, while Ukrainian Foreign Minister Kuleba confirmed Russian rockets fired at Kyiv and President Zelensky also noted Russia resumed missile strikes at 04:00 local time/02:00GMT. Russia has not undertaken missile strikes on Kyiv, according to Russian press citing a source in the Defence Ministry. There is currently gunfire in Kyiv with Russians in the City, according to a reporter (08:45GMT/03:45EST) Gunfire has been heard near the government quarter of Kyiv, Ukraine, via LBC News (09:09GMT/04:09EST) Ukrainian military vehicles seized by Russian troops wearing Ukrainian uniforms, heading for Kyiv, defense official says - UNIAN, cited by BNO News. Russian paratroopers take control of Chernobyl nuclear power plant, according to the Ministry of Defence cited by Sputnik. Additionally, Ukraine nuclear agency says it is seeing higher radiation levels in Chernobyl; note, Sky News reports that the increase is insignificant and is due to military vehicles moving around the reactor. Ukraine President adviser says that Ukraine wants peace, if negotiations are still possible, they should be undertaken. Subsequently, Russian Foreign Minister Lavrov says that Ukraine President Zelenskiy is "lying" when he says he is prepared to discuss the neutral status of Ukraine; however, the Kremlin says it has taken note of Kyiv's willingness to discuss neutral status; will need to analyze this. Ukraine President Zelensky says the Russian assault is like a repeat of WW2, accuses Europe of an insufficient reaction, Europe can still stop the Russian aggression if they act quickly. Ukrainian President Zelensky has proposed Russian President Putin joins him at the negotiating table, according to Ria. In premarket trading, Block jumped after fourth-quarter sales beat consensus, while Coinbase dropped after warning that trading volume will decline in the first quarter. Zscaler slumped 13% after the security software company’s second-quarter results failed to live up to the most optimistic expectations, even though they beat estimates. Analysts slashed their price targets, including a new Street-low at Barclays. Here are some of the other notable U.S. premarket movers today: Block Inc. (SQ US) shares climb 15% in U.S. premarket trading after the firm posted fourth-quarter sales that beat Street consensus. Analysts say the results are a relief, supported by “impressive” Cash App figures. Coinbase Global Inc. (COIN US) shares were 1.6% lower in premarket trading after the biggest U.S. cryptocurrency exchange cautioned that trading volume will decline in the first quarter. Etsy (ETSY US) shares are up about 18% in premarket trading, after the e- commerce company reported fourth-quarter results that featured better-than-expected revenue and gross merchandise sales. It also gave a forecast. Beyond Meat (BYND US) shares dropped 10% in premarket as analyst questioned its profitability outlook and pricing strategy after the maker of plant-based foods forecast sales that missed market expectations. KAR Auction Services (CVNA US) climbs 50% in U.S. premarket after agreeing to sell its Adesa U.S. physical auction business to Carvana for $2.2 billion in cash. Truist Securities sees positive implications for both stocks. Farfetch (FTCH US) shares rally 27% in premarket trading after co. posted a smaller-than-expected 4Q loss. A prolonged conflict could deliver a major blow to global markets and slow the normalization of central bank policy that’s expected this year. Wall Street strategists cut their forecasts on European equities on concern that the war in Ukraine will hurt economic growth, with Goldman Sachs Group Inc. expecting virtually no full-year returns. A the same time, disruptions of raw materials and food could stoke already-high prices and heap pressure on central banks to act faster to curb inflation. Russia remains a commodity powerhouse and Ukraine is a major grain exporter. Markets still see around six quarter-point increases by the Federal Reserve, but bets on other central bank’s hiking cycles have been pared in recent days. “This conflict implies a further deterioration of the already tricky growth-inflation trade-offs central banks have been facing, making the upcoming decisions particularly hard,” Silvia Dall’Angelo, senior economist at the international business of Federated Hermes, wrote in a note to clients. “Downside growth risks from the geopolitical backdrop mean that they are likely to proceed gradually and cautiously.” Penalties by the U.S. and its allies spared Russia’s oil exports and avoided blocking access to the Swift global payment network. With flows of natural gas returning to Europe, prices reversed a record-breaking rally with the benchmark contract down as much as 28%. European stocks climbed as investors bought the dip after a volatile week led by developments on the Ukrainian front. Stocks trade at session highs after the Kremlin says that Ukraine’s neutrality offer is a move “toward positive” while oil slips to session low. U.S. futures decline. Euro Stoxx 50 rallies 1.2%. FTSE 100 outperforms, adding 1.8%, IBEX lags, adding 0.9%. CAC 40 up 1.3%. Utilities, real estate and food & beverages are the strongest sectors. Russia’s MOEX index rebounds, rising ~15%. Here are some of the biggest European movers today: European shares in sectors that were beaten down by Russia risk on Thursday rebound, with travel and basic resource stocks among the top gainers, as well as banks with exposure to eastern Europe. Bank Polska Kasa Opieki +14%, Dino Polska +7.3%, Polymetal International +7.5%, Wizz Air +5.8% The European utility sector leads gains among subindexes on the Stoxx 600, gaining about 5%, after European natural gas prices halted their rally rally, as Russian flows to the continent ramped up. Rightmove shares rise as much as 7.4% after the online property listings firm reported FY revenue growth of 48% from a year earlier. The results show encouraging momentum into 2022, Numis says. Pearson has its biggest gain in almost a year, rising 11% after results. Goldman Sachs notes the education publisher’s adjusted operating profit for FY22 was in line with market expectations. Freenet rises as much as 6.7% after results, the most since May, as analysts see positive profitability updates despite revenue weakness. Vallourec climbs as much as 20% after the French steel-pipe maker gave guidance that Oddo BHF calls “reassuring” in spite of incidents at a Brazil mine. Valeo falls as much as 12% in Paris after the French company set out targets for this year and 2025, with analysts noting 2022 guidance came in below expectations. BASF drops as much as 4.9% in Frankfurt after adjusted Ebit missed consensus and results show a squeeze on margins, Berenberg said. Swiss Re plunges as much as 8.4% after reporting results that missed analyst estimates. The insurer also proposed new targets that “don’t seem supportive enough,” Citi writes. Casino slumps as much as 17% to its lowest level in more than three decades after the French grocer reported FY results that Jefferies says showed “no progress” on deleveraging. An uneasy calm returned to Asia’s stock markets on Friday, as investors assessed the fallout of Russia’s invasion of Ukraine and the outlook for China’s tech sector. The MSCI Asia Pacific Index climbed as much as 1.2%, rallying from its worst drop in a year on Thursday. Weaker-than-expected U.S. sanctions on Russia supported market sentiment, helping lift tech and industrial shares. China’s tech stocks advanced even after Alibaba announced the slowest revenue growth since it went public.  Benchmarks in Japan and India were among the top performers. India’s Sensex turned from the biggest loser in Asia to the biggest winner on Friday. Hong Kong’s Hang Seng Index dropped as the city deals with record Covid-19 cases.  Asian equities “showed signs of excessive drops, so today’s rise appears to be a technical rebound,” Seo Jung-hun, a strategist at Samsung Securities, said by phone. “Markets will continue to face volatility as Russia-sparked risks, the Fed’s policy tightening and inflation issues still persist.” Federal Reserve Governor Christopher Waller said a half percentage-point increase in U.S. interest rates next month could be justified, although the Ukraine conflict has added to uncertainty. The Asian stock benchmark is set for its worst week this month, down almost 4%, and remains close to entering a bear market. Geopolitical risks, regulatory concerns for Chinese private enterprises and a relatively slower pace of earnings growth compared with the rest of the world are all weighing on sentiment Japanese equities climbed, sealing their first gain in six sessions, as blue chips led the charge following a late U.S. rally from the recent selloff in anticipation of Russia’s invasion of Ukraine. Electronics makers and telecoms were the biggest boosts to the Topix, which rose 1%. Tokyo Electron and SoftBank Group were the largest contributors to a 2% rise in the Nikkei 225. The yen retraced some of its 0.5% loss against the dollar overnight. “Expectations are spreading that the pace of rate hikes will be slowed down in the U.S. and Europe, considering the impact the Ukraine situation will have on the economy,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities In rates, treasuries were slightly cheaper across the curve, with yields higher by 1bp to 1.5bp from Thursday’s session close. U.S. 10-year yield around 1.975%, cheaper by 1bp on the day with bunds lagging a further 1bp following data including France CPI beat, while Estoxx rally 1.5%; gilts outperform by around 2bp vs. Treasuries. Treasuries pared an advance after Federal Reserve Governor Christopher Waller said a half percentage-point rate increase may be justified if economic data remain hot. European benchmark bonds traded steady to slightly lower. Gilts gained, led by the belly of the curve; Bank of England’s Huw Pill speaks later, with the pace of tightening in focus. IG dollar issuance slate empty so far; borrowers stepped away from debt sales Thursday leaving weekly total around $18b vs. $25b expected. German bunds bear-flatten on the back of a stronger-than-expected French CPI print, while money markets price as much as 42bps of ECB tightening in December, an increase of 5bps compared to Thursday. In FX, the Bloomberg Dollar Spot Index was little changed as the greenback traded mixed versus its Group-of-10 peers, though most currencies were confined to narrow ranges relative to yesterday’s moves. The Australian and New Zealand dollars led G-10 gains on short covering after Thursday’s plunge; The yen was also higher while the euro fell a third consecutive day to trade below $1.12 and the pound erased an early advance. Hedging costs in the major currencies turned south early Friday, but investors aren’t ready to shift bias into risk-on exposure. French consumer prices rose 4.1% in February from a year earlier versus 3.3% in January. That’s the strongest reading since the data series started in 1997. Economists had forecast a 3.7% advance. Currencies from the European Union’s east weakened against the euro and the dollar, but were far from levels reached Thursday. A gauge of one-week implied volatility in the dollar against the Taiwan dollar jumped to a six-month high on Friday while the Taiwan dollar slid to the weakest since October in the spot market. The conflict in Ukraine may raise the risk premium for China and Taiwan over the medium term, according to Morgan Stanley. In commodities, Brent trades around $99, while WTI slips below $93. Spot gold rises roughly $6 to trade near $1,910/oz.  European natural gas prices halt a record-breaking rally. Benchmark futures fell as much as 28%, after four consecutive days of gains. Most base metals trade in the red; LME aluminum falls 2.5%, underperforming peers. LME lead outperforms Looking at the day ahead, data highlights from the US include the personal income and personal spending data for January, preliminary durable goods orders and core capital goods orders for January, pending home sales for January, and the final University of Michigan consumer sentiment index for February. In Europe, we’ll also get the preliminary French CPI reading for February, and the Euro Area’s economic sentiment indicator for February. Market Snapshot S&P 500 futures down 1.1% to 4,237.75 MXAP up 1.0% to 181.44 MXAPJ up 0.8% to 593.50 Nikkei up 1.9% to 26,476.50 Topix up 1.0% to 1,876.24 Hang Seng Index down 0.6% to 22,767.18 Shanghai Composite up 0.6% to 3,451.41 Sensex up 2.5% to 55,878.05 Australia S&P/ASX 200 up 0.1% to 6,997.81 Kospi up 1.1% to 2,676.76 STOXX Europe 600 up 0.8% to 442.68 German 10Y yield little changed at 0.16% Euro down 0.2% to $1.1172 Brent Futures up 0.9% to $99.98/bbl Gold spot up 0.3% to $1,909.09 U.S. Dollar Index little changed at 97.18 Top Overnight News from Bloomberg Federal Reserve officials stuck to their resolve to raise interest rates next month despite uncertainty posed by Russia’s invasion of Ukraine, with at least one policy maker considering a half-point move Out of 18 potential red flags in Citi’s global Bear Market checklist, only seven are currently waving, far fewer than before bear markets of 2000 and 2007, strategists led by Beata Manthey wrote in a note. In Europe, the number of danger signs is only five, they said China’s Politburo vowed to strengthen macroeconomic policies to stabilize the economy this year, suggesting more support could be on the cards to boost growth ahead of a key leadership meeting later this year Russia still has about $300 billion of foreign currency held offshore - - enough to disrupt money markets if it’s frozen by sanctions or moved suddenly to avoid them China’s central bank ramped up its short-term liquidity injection in the banking system, providing support just as global markets are roiled by geopolitical tension A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks mostly gained after the firm rebound on Wall St. ASX 200 was capped amid a slew of earnings and with outperformance in tech offset by weakness in miners and financials. Nikkei 225 outperformed and reclaimed the 26k status with exporters underpinned by a more favourable currency. KOSPI gained with index heavyweight Samsung Electronics underpinned as it launched global sales of its flagship smartphone and latest tablet which have attracted record pre-orders. Hang Seng and Shanghai Comp. were mixed with the mainland underpinned after the PBoC boosted its daily liquidity operation which resulted in the biggest weekly cash injection in more than two years. although Hong Kong was constrained by losses in the energy majors and with financials subdued amid pressure in HSBC shares and after China Communist Party inspections on financial institutions. Top Asian News China Pledges Stronger Economic Policies to Stabilize Growth China Leaves Russia’s War Off Front Pages as Xi Stays Silent Currency Traders Remain Vigilant Even as Hedging Costs Retreat Asian Stocks Gain as China Tech, India Rebound; Hong Kong Drops European bourses are firmer and back in proximity to initial best levels after losing traction shortly after the cash open, Euro Stoxx 50 +1.3%; FTSE 100 +1.9% outperforms amid Basic Resources strength. US futures are lower across the board, ES -0.9%, after yesterday's significant intra-day reversal to close positive; albeit, action has been rangebound within the European morning. US SEC's EDGAR feed is reportedly down; fillings cannot be made. In Europe, sectors are all in the green featuring noted outperformance in Utilities and  Basic Resources, Energy remains firmer in-spite of the crude benchmarks pullback Top European News Wall Street Cuts European Stock Targets as War Prompts Outflows U.K. Takes Aim at Russia’s Opaque Embrace of London Property UBS Triggers Margin Calls as Russia Bond Values Cut to Zero What to Watch in Commodities: Ukraine Impact Roiling Markets In FX, Aussie regroups alongside broad risk sentiment and rebound in Aud/Nzd cross amidst mixed NZ consumption and trade data - Aud/Usd near 0.7200 vs sub-0.7100 low yesterday. Buck bases after abrupt reversal from new 2022 highs in DXY terms and residual rebalancing may underpin alongside underlying safe haven bid - index above 97.000 again vs 96.770 low and 97.740 y-t-d best. Rouble supported by ongoing CBR intervention via higher repo auction cap - Usd/Rub around 84.000 compared to almost 90.000 record peak. Yen and Gold off best levels, but both retain elements of safety premium - Usd/Jpy circa 115.35 and Xau/ Usd hovering above Usd 1900/oz In commodities, WTI and Brent have continued to pull back after overnight consolidation, Brent April notably below USD 99.00/bbl vs USD 101.99/bbl highs. Focus remains firmly on geopolitics (see section above) while participants are also attentive to next week's OPEC+ meeting. Japan's Industry Minister said they will appropriately deal with an oil release from national reserves in cooperation with relevant countries and the IEA. Spot gold is rangebound after an initial move higher failed to gather steam and hit resistance at USD 1922/oz. Goldman Sachs recently commented that the rally for gold has a lot further to go on the situation in Ukraine and prices and that prices could reach as high at USD 2,350/oz if there is a build in demand for ETF. Geopolitical updates US Senior US administration official said the US still has room to further tighten sanctions if Russian aggression accelerates further and is keeping the option open to impose import-export controls on less advanced mainline chips such as those used in the Russian auto industry. European Commission President von der Leyen said steps agreed by EU leaders include financial sanctions and they are targeting 70% of the Russian banking market, as well as key state owned companies including defence. Furthermore, the export ban will impact Russia's oil sector by making it impossible to upgrade refineries and EU is limiting Russia's access to key technologies such as semiconductors. EU Council President Michel says they are urgently preparing additional sanctions against Russia, via AFP; subsequently, a German gov't spokesperson says a discussion of third sanctions package against Russia is in its early stages. French President Macron said EU sanctions will be followed by French national sanctions on certain people which are to be announced later, while they will offer EUR 300mln of aid to Ukraine and military equipment, as well as target Belarus for penalties. Russian Central Bank said it will provide any support needed for sanctions-hit banks and that banks have been well prepared in advance, while Ukraine's Central Bank banned operations with RUB and BYR, as well as banned banks from making payments to entities in Russia and Belarus. Russia may retaliate for UK ban on Aeroflot flights to Britain, according to Tass citing the aviation authority; subsequently, Russia banned London registered craft from its airspace. Russian Parliamentary Upper Chamber speaker says that Russia has prepared sanctions to hit the weak points of the West, according to Interfax. Australian PM Morrison announced the nation is to impose further sanctions on Russian individuals and said it is unacceptable that China is easing trade restrictions with Russia at this time. Taiwan will join democratic countries to put sanctions on Russia for invasion of Ukraine and Japanese PM Kishida said they will immediately impose sanctions in Russia in three areas including the financial sector and military equipment exports, while Russia's envoy to Japan later said there will be a serious Russian response to Japanese sanctions. UK Defence Minister Wallace says we would like to cut Russia off from SWIFT; French Finance Minister Le Maire says the option of cutting Russia off from SWIFT remains an option, but it a last resort. India is reportedly exploring setting up INR trade accounts with Russia to soften the blow on India from Russian sanctions, according to Reuters sources. Central Banks Fed's Waller (voter) said it is too soon to judge how Ukraine conflict will impact the world or US economy and concerted action to rein in inflation is needed. Waller said rates should be raised by 100bps by mid-year and there is a strong case for a 50bps hike in March if incoming data indicates economy is still exceedingly hot, but added it is possible a more modest tightening is appropriate in wake of Ukraine attack , while he also stated the Fed should start trimming the balance sheet no later than the July meeting, according to Reuters. ECB's Lane said there would be a significant increase to 2022 inflation forecast amid the Ukraine crisis but hinted at inflation below target at end of horizon according to Reuters sources; Lane presented several scenarios: Mild scenario: no impact to EZ GDP; seen as unlikely; Middle scenario: 0.3-0.4ppts shaved off EZ GDP; Severe scenario: EZ hit by almost 1ppt. Note, sources cited by Reuters suggested these were rough calculations. BoE's Mann says all of the MPC agree that UK inflation is way above the BoE's goal; Mann added that domestic demand is strong and UK labour market is tight. BoE agents survey has been fundamental in guiding Mann's view on policy. US Event Calendar 8:30am: Jan. Personal Income, est. -0.3%, prior 0.3% 8:30am: Jan. Personal Spending, est. 1.6%, prior -0.6% 8:30am: Jan. Real Personal Spending, est. 1.2%, prior -1.0% 8:30am: Jan. Cap Goods Orders Nondef Ex Air, est. 0.3%, prior 0.3% 8:30am: Jan. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 1.3% 8:30am: Jan. -Less Transportation, est. 0.4%, prior 0.6% 8:30am: Jan. PCE Deflator MoM, est. 0.6%, prior 0.4%; PCE Deflator YoY, est. 6.0%, prior 5.8% 8:30am: Jan. PCE Core Deflator MoM, est. 0.5%, prior 0.5%; PCE Core Deflator YoY, est. 5.2%, prior 4.9%; 8:30am: Jan. Durable Goods Orders, est. 1.0%, prior -0.7% 10am: Feb. U. of Mich. Sentiment, est. 61.7, prior 61.7; Current Conditions, est. 68.5, prior 68.5; Expectations, est. 57.3, prior 57.4 10am: Feb. U. of Mich. 1 Yr Inflation, prior 5.0% 10am: Feb. U. of Mich. 5-10 Yr Inflation, prior 3.1% 10am: Jan. Pending Home Sales (MoM), est. 0.2%, prior -3.8%; YoY, est. -1.8%, prior -6.6% DB's Jim Reid concludes the overnight wrap It's been a pretty seismic 36 hours and at some points yesterday the outlook for markets and economies felt very bleak. However remarkably after an 8 dollar round trip that first sent Brent crude over $105/bbl, oil (+2.31% on the day) eventually closed last night at $99.08 (still the highest since 2014), and only around the levels seen just before Russia launched the invasion just over 24 hours ago. It's edged up again in the Asian session to $100.75 as I type but the fact that oil stopped going parabolically higher helped turn the whole market around yesterday. Indeed markets hit peak pessimism around lunchtime in Europe but Biden not yet putting sanctions on Energy or restricting Russian access to SWIFT seemed to cap off a more positive tone thereafter. Indeed the S&P and Nasdaq rose +4.23% and +7.04% respectively from the opening lows to close up +1.50% and +3.34% on the day. A remarkable turnaround. S&P 500 (-0.53%) and Nasdaq (-0.76%) futures are down again this morning but this is still clearly well off the lows. If this event is going to have a lasting macro and market impact it has to hit energy prices and for much of yesterday it looked like it was on course to aggressively do so, and to be fair still might. European natural gas will be one to watch today as it soared +63.89% at its peak yesterday, only to fade towards the close to be 'only' up +33.31%. On a bigger picture basis the events of this week have to be forcing governments to think of their energy security in much more detail than they have in the past. Will it also impact the green transition? Surely it makes it more urgent in the medium-term but tougher to stick with in the short-term. Much will depend on what happens next for energy prices. Clearly the West may still put sanctions on this Russian supply which will undoubtedly risk a renewed spike in energy. Diving into yesterday. The intraday turnaround in asset prices followed clarity on what the west’s next round of sanctions would look like. The sanctions were expanded to more connected individuals and entities, were designed to cut off high-tech exports crucial to Russian defense and tech industries, impinge Russia’s ability to raise capital on foreign markets by restricting access and freezing assets of some of their largest banks, and restrict Russia’s ability to deal in dollars, yen, and euros. The sanctions not applied, however, drove an intraday turn in risk assets and reversed measures of inflation compensation. Namely, President Biden noted the sanctions package was specifically designed to allow energy payments to continue, and that the US would release strategic oil reserves as needed to help ameliorate price pressures. Further, they did not cut off Russia’s access to the international payments system, SWIFT, though maintained the option of doing so. Before the rally back there was a complete rout in numerous markets yesterday, and when it came to Russian assets there was frankly a capitulation, with the MOEX equity index (-32.28%) shedding more than a third of its value in a single day (-45.06% at the session lows). Bloomberg wrote a piece saying that the worst single day equity loss in their database for any country’s index was Argentina’s -53.1% fall in January 1990. In total, there have been seven worst days in stock market history than -33.3%. For what it’s worth, those equity declines are the sort that would trigger circuit breakers if they happened elsewhere. For example we couldn’t see that for the S&P 500 in a single day, since trading rules stipulate that there’s a complete halt for the day once you get to a -20% loss. On top of that, the Russian Ruble -5.15% hit a record low against the US dollar, after suffering its worst daily performance since the height of the Covid crisis back in March 2020. And yields on 10yr Russian sovereign debt were up by +435.0bps to 15.23%. The STOXX 600 fell -3.28% as it reached its lowest level since last May, with major losses for the other European indices including the FTSE 100 (-3.88%), the CAC 40 (-3.83%) and the DAX (-3.96%). With investors pricing in a less aggressive reaction function from central banks, sovereign bonds saw a decent rally yesterday, having also been supported by the dash for haven assets. However the moves didn’t match the severity of the flight to quality shock, even at the worse point of the day, as the real return consequence of buying government bonds at a yields of 0-2% was all too apparent with inflation rife. There was some big ranges though. 10yr US real yields were -27.7bps lower and breakevens +14.4bps wider as news of the invasion, and commensurate stagflation fears hit. However, the intraday turn around led to much more modest closing levels, with 10yr real yields -4.2bps lower and breakevens +1.5bps higher. 10yr nominal Treasury yields settled -2.8bps lower on the day at 1.96%. At shorter tenors, 5yr breakevens also displayed a remarkable intraday roundtrip, finishing +1.4bps higher after having hit an intraday peak +24.8bps wider at +3.39%, which would have been the highest reading on record. In Europe the breakeven widening was more sustained, and the 10yr German breakeven actually managed to close above 2% for the first time in over a decade yesterday, having climbed +12.9bps to +2.10%. Meanwhile nominal yields on 10yr bunds (-5.8bps), OATs (-7.0bps) and gilts (-3.2bps) all moved lower. Energy prices are going to continue to keep central bankers awake at night, since they can’t do anything about the supply issues directly. More shocks will lead to both lower growth (absent fiscal suppprt) and higher inflation, with the risk being that you start to see second-round effects if higher inflation becomes entrenched. Notably, one of the ECB’s biggest hawks, Robert Holzmann of Austria, said in a Bloomberg interview that the conflict meant “It’s possible however that the speed may now be somewhat delayed.” That was music to the ears of peripheral sovereign debt in particular, which rallied strongly on the news, with the Italian spread over 10yr bunds moving from an intraday high of 178bps to close at 164.5bps. In Asia the Nikkei (+1.63%), Kospi (+1.15%), Shanghai Composite (+0.54%), and the CSI (+0.78%) all are higher in line with the second half rally yesterday. Meanwhile, the Hang Seng (-0.16%) is lower. In economic data, overall inflation for Tokyo rose +1.0% y/y in February, its fastest pace of growth since December 2019, on higher energy prices and after an upwardly revised +0.6% increase in January. Bloomberg estimates were for a +0.7% rise. Excluding fresh food, consumer prices in Japan advanced +0.5% in February y/y, accelerating from a +0.2% increase in January and outpacing a +0.4% gain expected by analysts. In central banks news, the People’s Bank of China (PBOC) beefed up liquidity by injecting 300 billion yuan ($47.4 bn) into the financial system via 7-day reverse repos, amid concerns over the Russia-Ukraine conflict. For the week, the PBOC injected a net 760 billion yuan – the biggest weekly cash offering since January 2020. Data releases understandably took a back seat yesterday, but we did get the weekly initial jobless claims from the US for the week through February 19, which fell to 232k (vs. 235k expected). We also saw the continuing claims for the week through February 12 fall to a half-century low of 1.476m, a level unseen since 1970. Otherwise, new home sales in January fell to an annualised rate of 801k (vs. 803k expected), and the second estimate of Q4’s GDP was revised up by a tenth from the initial estimate to an annualised +7.0%. To the day ahead now, and data highlights from the US include the personal income and personal spending data for January, preliminary durable goods orders and core capital goods orders for January, pending home sales for January, and the final University of Michigan consumer sentiment index for February. In Europe, we’ll also get the preliminary French CPI reading for February, and the Euro Area’s economic sentiment indicator for February. Tyler Durden Fri, 02/25/2022 - 07:57.....»»

Category: smallbizSource: nytFeb 25th, 2022

MillerKnoll, Inc. Reports Second Quarter Fiscal 2022 Results

ZEELAND, Mich., Jan. 4, 2022 /PRNewswire/ -- Strong demand drove quarterly orders of $1.2 billion; an increase of 83.9% over the prior year, up 26.4%* organically Our diversified go-to-market strategy helped drive growth in every segment Integration of the Knoll acquisition is progressing as planned; we remain confident in our ability to deliver $100 million of run rate cost synergies within two years of the closing, and now expect $120 million by the end of year three Webcast to be held Tuesday, January 4, 2022, at 5:30 PM ET Second Quarter Fiscal 2022 Financial Results (Unaudited) (Unaudited) Three Months Ended Six Months Ended (Dollars in millions, except per share data) November 27, 2021 November 28, 2020 % Chg. November 27, 2021 November 28, 2020 % Chg. Net Sales $ 1,026.3 $ 626.3 63.9 % $ 1,816.0 $ 1,253.0 44.9 % Gross Margin % 34.2 % 39.0 % N/A 34.6 % 39.4 % N/A Adjusted Gross Margin %* 34.6 % 39.0 % N/A 35.2 % 39.5 % N/A Operating Expenses $ 346.8 $ 173.2 100.2 % $ 677.1 $ 327.8 106.6 % Adjusted Operating Expenses* $ 294.4 $ 170.8 72.4 % $ 529.6 $ 326.6 62.2 % Operating Earnings (Loss) % 0.4 % 11.3 % N/A (2.7) % 13.3 % N/A Adjusted Operating Earnings %* 5.9 % 11.7 % N/A 6.0 % 13.5 % N/A Net (Loss) Earnings Attributable to MillerKnoll, Inc. $ (3.4) $ 51.3 N/A $ (64.9) $ 124.2 N/A (Loss) Earnings Per Share – Diluted $ (0.05) $ 0.87 N/A $ (0.92) $ 2.10 N/A Adjusted Earnings Per Share – Diluted* $ 0.51 $ 0.89 (42.7) % $ 1.00 $ 2.13 (53.1) % Orders $ 1,157.9 $ 629.7 83.9 % $ 2,074.4 $ 1,185.7 75.0 % Backlog $ 967.3 $ 403.4 139.8 % *Items indicated represent Non-GAAP measurements; see the reconciliations of Non-GAAP financial measures and related explanations below. To our shareholders: During the second quarter of fiscal year 2022 we reached exciting and symbolic milestones.  It was our first full quarter as MillerKnoll, our company name officially changed, and we began trading with our new stock ticker symbol, NASDAQ: MLKN. We are making excellent progress on our integration journey and remain confident that we will deliver our cost synergies target of $100 million within two years of closing. Furthermore, as our teams completed integration planning, they identified additional synergy opportunities and we now expect to increase run rate savings to $120 million by the end of year three. In bringing together the best of Herman Miller and Knoll, we've created a stronger and more resilient organization, built for long-term success. Second quarter demand shows the power of MillerKnoll and we are confident in our ability to drive continued growth and shareholder value.  Financial Results The following table highlights non-comparable items that impacted U.S. GAAP net earnings per diluted share, defined as earnings per diluted share adjusted, to exclude the impact of special charges, acquisition and integration-related expenses, expense related to debt extinguishment, and intangible asset amortization related to the Knoll acquisition. Three Months Ended Six Months Ended November 27,2021 November 28, 2020 November 27, 2021 November 28, 2020 (Loss) Earnings per Share - Diluted $ (0.05) $ 0.87 $ (0.92) $ 2.10 Non-comparable items: Add: Special charges, after tax — — — 0.01 Add: Amortization of purchased intangibles, after tax 0.16 — 0.52 — Add: Acquisition and integration charges, after tax 0.40 — 1.26 — Add: Debt extinguishment, after tax — — 0.14 — Add: Restructuring expenses, after tax — 0.02 — 0.02 Adjusted Earnings per Share - Diluted $ 0.51 $ 0.89 $ 1.00 $ 2.13 Weighted Average Shares Outstanding (to Calculate Adjusted Earnings per Share) – Diluted 75,304,752 59,267,398 70,803,483 59,043,928 Note: The adjustments above are net of tax. For the three and six months ended November 27, 2021, the tax impact of the adjustments were $0.20 and $0.51, respectively. For the three and six months ended November 28, 2020, the tax impact of the adjustments was immaterial. MillerKnoll Consolidated Results Second quarter consolidated net sales were $1.0 billion, reflecting an increase of 63.9% on a reported basis and 11.1% organically compared to prior year. Orders in the quarter of $1.2 billion were 83.9% higher than the prior year. Notably, order levels were up over prior year across all four reporting segments. On an organic basis, orders of $795.7 million reflected sequential improvement of 6.4% compared to the first quarter, and were up 26.4% over the prior year.  While order demand was strong, our ability to produce and ship orders was impacted in the near-term by continued global supply chain and labor supply disruptions. We estimate these disruptions adversely impacted net sales by approximately $50 million during the quarter. We continue to implement a range of countermeasures to combat these pressures, but expect to continue to feel their effects in the second half of this fiscal year.   Gross margin for the quarter was 480 basis points lower than the prior year, due largely to the impact of rising commodity prices, particularly steel, and other inflationary pressures including labor and transportation. The price increase we implemented in the first quarter helped mitigate some of these inflationary pressures. Additional price increases implemented in the second and third quarters are expected to help further offset these pressures.  Consolidated operating expenses for the quarter were $346.8 million, compared to $173.2 million in the prior year. Consolidated adjusted operating expenses of $294.4 million, were up $123.6 million from last year, primarily due to the inclusion of Knoll adjusted operating expenses of $99.1 million and additional variable selling expenses as a result of increased sales in the current year. We are managing operating expenses carefully and will continue to adapt based on evolving market dynamics.  Operating margin for the quarter was 0.4% compared to 11.3% during the prior year. On an adjusted basis, which excludes acquisition and integration-related charges of $57.2 million, consolidated operating margin was 5.9% compared to 11.7% in the prior year. Despite inflationary pressures, our Global Retail business delivered another strong quarter of profitability with adjusted operating margins of 11.3%. We reported a net loss per share of $0.05 for the quarter. Adjusted earnings per share were $0.51 in the quarter, compared to $0.89 in the prior year. At the end of our second quarter, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling $573.8 million. Using the Power of MillerKnoll and Delivering Cost Synergies We are making progress bringing Herman Miller and Knoll together, unleashing the power of our combined brands and delivering cost synergies. At the close of the second quarter, we had implemented $43 million in run rate savings. This meaningful progress toward our goal, and along with our robust integration roadmap, gives us confidence that we will achieve our planned cost synergies, even with inflationary and supply chain pressures.  During the quarter, we completed the work behind creating our new MillerKnoll organizational structure. This involved selecting talent and integrating the two teams into a new structure to execute our strategies and drive the business forward. Our new structure ensures we are capturing operational efficiencies across our collective of brands while strengthening the unique position of each individual brand to drive continued growth and create future development opportunities for our employees. The most compelling reason for creating MillerKnoll is the power of our combined portfolio and distribution network. MillerKnoll will have the largest and most capable dealer network in the world and together we will offer our customers the most comprehensive suite of products and services in the industry. Creating the MillerKnoll dealer network is our top priority and we are well on our way. Our first MillerKnoll dealer pilots in Texas and Arizona have been successful, and the learnings will inform the plan for operationalizing the network. We are on track with our plans to transition from the legacy Herman Miller and Knoll dealer networks to a unified MillerKnoll dealer network in the middle of calendar 2022.  As MillerKnoll, we also have a greater impact in our communities. November 2 was MillerKnoll's Global Day of Purpose. Our combined 11,000 employees took the day to give back to their communities in a variety of meaningful ways. It was an extraordinary culture-building moment for our organization and a testament to the good we can, and will, do together.  Driving Growth Across Geographies With a Diversified Go-To-Market Strategy That Combines Contract and Retail Retail Momentum Continues Second quarter Global Retail sales were up 18.2% and orders were up 20.6% compared to the prior year. This growth was fueled, in part, by investments we've made to drive customer acquisition and by continued assortment expansion. We are focused on improving our operational capabilities with new order management, planning and allocation, and point-of-sale systems coming later in the fiscal year.  Following the opening of our San Jose and San Francisco stores in the quarter, our total fleet of Herman Miller retail stores now stands at 13. These stores, which highlight Herman Miller's unmatched collection of ergonomic seating products, are an important entry point for customers experiencing our brands for the first time and we expect to build on our initial success with this concept through an expanded brick-and-mortar presence in 2022.   International Retail, which includes Herman Miller and HAY International, was another bright spot in the quarter, with sales up 22.1% and orders up 10.9% versus the prior year. We launched new Herman Miller websites in Germany and France, and both exceeded sales and orders expectations for the quarter. The Global Retail segment also felt the macro-economic pressures the industry is experiencing. We increased shipping fees on furniture and implemented a shipping fee on task seating. These actions helped offset freight costs without impacting demand. We also implemented targeted price increases across our retail product lineup in the second quarter to help offset inflationary pressures.   We entered the important holiday shopping season with momentum. The Retail team delivered our strongest performance during the Black Friday-Cyber Monday period. In addition, our gaming product sales were strong during this timeframe and throughout the second quarter. We will continue to drive growth in the gaming segment through new product introductions, regional expansion in Europe, and strategic partnerships. We expect the Retail business to continue delivering double-digit revenue growth and low teens operating margin in the near term. Longer term, we expect our growth investments in retail will enable further margin expansion from current levels. Growth initiatives in the second half of the fiscal year include upgrading our Herman Miller Japan and China eCommerce platforms, expanding our product assortment with a steady drumbeat of new products across our brands, including gaming, and expanding studios and stores.  Strong Demand Environment During the second quarter, we saw continued improvement in the demand environment in each of our other segments- Americas Contract, International Contract and Knoll. Americas Contract Americas Contract sales of $361.5 million increased 4.1% over the prior year. Business fundamentals in the Americas reflect continued improvement in the demand environment as organizations accelerated their return to the workplace. Order entry levels of $407.2 million were strong across all regions and sectors and were 29.3% higher than the prior year. The Americas segment felt the impact of supply chain and internal manufacturing capacity disruptions in the quarter, which impacted our ability to ship orders in the period. Our teams are actively working on initiatives to help mitigate these pressures, but we do expect them to remain a factor in our operations in the second half of the fiscal year. International Contract International Contract performance was strong across all geographies and brands in the quarter. Orders were up 30.3% and sales were up 23.3% over the prior year. Many regions met or exceeded pre-COVID performance as the global return to the workplace continued to accelerate through the quarter. Demand in Europe, including the UK, was especially strong, with orders in Europe up 42% over prior year. Cost pressure impacts have been less of a factor in the International Contract segment compared to Americas Contract segment. Global account activity drove a significant portion of the strong orders performance in this segment during the quarter, with significant wins in India and Japan. We expect this trend to continue as more customers bring employees back to the workplace in 2022. At the same time, we are seeing an increase in activity from local domestic companies which is driving new and sustained growth, especially in Australia and China.  With the global return to offices pacing ahead of the Americas, we are gaining a clearer picture of workplace design trends. More mature markets are leaning into floorplates with more collaborative spaces, while developing markets like India and China continue to favor a more traditional floorplate, albeit with a gradual shift to more collaborative spaces. HAY Contract's performance in Europe speaks to the demand for collaborative solutions in that region, with orders up 55% and sales up 48% from prior year. Knoll Knoll sales were up 5.3% and orders were up 29.6% versus the prior year. Both the Knoll workplace and residential categories grew in the quarter. Notably, Holly Hunt and Muuto both experienced record sales in the quarter. Through the pandemic, these two brands have demonstrated consistent growth across channels, including to-the-trade and consumer retail. This performance points to the power of our diversified strategy and strong business fundamentals. Applying Our Research and Firsthand Experience to Deliver Innovative Future of Work Solutions MillerKnoll is the global leader in providing adaptable solutions to create innovative, productive environments for the workplace and homes of our clients. We are sharing our firsthand experiences with hybrid workplaces and leveraging our global insight partnerships to inform the future of work.  While the world continues to grapple with the impacts of the pandemic, including new variants and regional surges in cases, leasing data indicates that companies are returning to the office. In our conversations with C-suite executives from a variety of industries, there is a strong desire among leaders to bring their teams back together for the purposes of culture building, collaboration, and problem-solving efficiency. Research also indicates that most people want the option to return to the office. According to Future Forum's consortium of companies working on the Future of Work, more than 80% of employees want access to an office, but not every day and not from 8:00 am to 5:00 pm. In fact, 76% of employees want more flexibility in where they can work, and far more, 93%, want flexibility in when they can work. Employers are recognizing their workplaces need to be reimagined as desirable and on-demand resources that are designed to meet the changed expectations of the post-pandemic workforce. We have the products, the services, and the tools to help them achieve their goals for their workplaces. Leveraging Our Competitive Advantages to Drive Growth and Create Value for Our Shareholders We believe in the power of design to solve problems. While we are facing many of the same headwinds as the rest of our industry, our people are delivering creative and sustainable solutions to overcome these challenges. We are leveraging our global distribution, production, design, and sales capabilities to combat supply chain issues, shipping delays, and inflationary pressures. We've ramped up production capacity in facilities closer to our customers and built inventory behind higher demand items. We are also leaning into the partnerships that exist across our collective of brands to increase global shipping capacity even during this period of extreme scarcity. Our pricing and discount strategies are helping to offset margin pressures – contract pricing increases began in Q1 and continued through the quarter, with Global Retail price increases to take effect in the third quarter.  We are innovating across our brands and leveraging our relationships with a global network of designers to bring new solutions such as the Knoll Iquo indoor/outdoor café chairs in partnership with Ini Archibong. Across MillerKnoll's expansive textile capability we introduced several new products this quarter, including Knoll's New Fundamentals Collection, and expanded Maharam's Textiles of the 20th Century series with the reissue of six of Alexander Girard's most enduring designs across three applications (upholstery, wallcoverings, and a hand-woven rug).  Outlook We expect sales in the third quarter of fiscal year 2022 to range between $1,010 million and $1,050 million. The mid-point of this range implies a revenue increase of 74% compared to the same quarter last fiscal year on a reported basis and 18% on an organic basis, excluding the impact of the Knoll acquisition. We anticipate earnings per share to be between $0.24 and $0.30 for the period. Our forecast for the third quarter also considers the near-term impacts of supply chain disruptions and inflationary pressures.  Designing the Future MillerKnoll is built for growth. We are powered by the most comprehensive portfolio of complementary brands in our industry. With our enhanced capabilities and the financial strength of our diversified business, we are well positioned to drive growth and increase value for all our stakeholders as we design our future as MillerKnoll.  We appreciate your continued support of our company and look forward to an exciting 2022 together.  Andi Owen Jeff Stutz President and Chief Executive Officer Chief Financial Officer Financial highlights for the three and six months ended November 27, 2021 follow: MillerKnoll, Inc. Condensed Consolidated Statements of Operations (Unaudited) (Dollars in millions, except per share and common share data) Three Months Ended Six Months Ended November 27, 2021 November 28, 2020 November 27, 2021 November 28, 2020 Net Sales $ 1,026.3 100.0 % $ 626.3 100.0 % $ 1,816.0 100.0 % $ 1,253.0 100.0 % Cost of Sales 675.7 65.8 % 382.1 61.0 % 1,187.9 65.4 % 758.8 60.6 % Gross Margin 350.6 34.2 % 244.2 39.0 % 628.1 34.6 % 494.2 39.4 % Operating Expenses 294.4 28.7 % 170.8 27.3 % 529.6 29.2 % 326.6 26.1 % Restructuring Expenses — — % 2.4 0.4 % — — % 1.2 0.1 % Acquisition and Integration Charges 52.4 5.1 % — — % 147.5 8.1 % — — % Operating Earnings (Loss)  3.8 0.4 % 71.0 11.3 % (49.0) (2.7) % 166.4 13.3 % Other Expenses, net 8.2 0.8 % 2.2 0.4 % 26.1 1.4 % 3.7 0.3 % (Loss) Earnings Before Income Taxes and Equity Income (4.4) (0.4) % 68.8 11.0 % (75.1) (4.1) % 162.7 13.0 % Income Tax (Benefit) Expense (3.4) (0.3) % 16.2 2.6 % (14.1) (0.8) % 36.9 2.9 % Equity (Loss) Income, net of tax (0.1) — % 0.2 — % — — % 0.4 — % Net (Loss) Earnings (1.1) (0.1) % 52.8 8.4 % (61.0) (3.4) % 126.2 10.1 % Net Earnings Attributable to Redeemable Noncontrolling Interests 2.3 0.2 % 1.5 0.2 % 3.9 0.2 % 2.0 0.2 % Net (Loss) Earnings Attributable to MillerKnoll, Inc. $ (3.4) (0.3) % $ 51.3 8.2 % $ (64.9) (3.6) % $ 124.2 9.9 % Amounts per Common Share Attributable to MillerKnoll, Inc. (Loss) Earnings Per Share – Basic ($0.05) $0.87 ($0.92) $2.11 Weighted Average Basic Common Shares 75,304,752 58,908,094.....»»

Category: earningsSource: benzingaJan 4th, 2022

Futures Flat Ahead Of Taper Accelerating Payrolls

Futures Flat Ahead Of Taper Accelerating Payrolls U.S. equity futures are flat, rebounding from an overnight slide following news that 5 "mild" Omicron cases were found in New York, and European stocks wavered at the end of a volatile week as traders waited for the latest jobs data to assess the likely pace of Federal Reserve tightening and accelerated tapering. Emini S&P futures traded in a narrow range, and were up 2 points or 0.04%, Nasdaq futures were flat,while Dow Jones futures were up 8 points. The dollar edged higher, along with the euro after ECB President Christine Lagarde said inflation will decline in 2022. Crude advanced after OPEC+ left the door open to changing the plan to raise output at short notice. S&P 500 and Nasdaq 100 contracts fluctuated after dip-buyers Thursday fueled the S&P 500’s best climb since mid-October, a sign that some of the worst fears about the omicron virus strain are dissipating. That said, concerns about omicron are overshadowing economic news for now with “a lot of noise and very little meaningful information,” said Geir Lode, head of global equities at Federated Hermes in London. “The prospect of a faster monetary policy tightening could -- and should probably -- lead to a clear market reaction,” he said. “It is also another argument for why we assume value stocks outperform growth stocks. At the moment, however, investors’ attention is elsewhere.” In the latest U.S. data, jobless claims remained low, suggesting additional progress in the labor market. Traders are awaiting today's big event - the November payrolls numbers, which could shape expectations for the pace of Fed policy tightening (full preview here). Bloomberg Economics expects a strong report, while the median estimate in a Bloomberg survey of economists predicts an increase of 550,000. “Assuming the omicron news remains less end-of-the-world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “That may nip the equity rally in the bud, while the dollar and U.S. yields could resume rising.” In premarket trading, Didi Global Inc. jumped more than 14% in U.S. premarket trading before reversing all gains, after the Chinese ride-hailing giant said it began preparations to withdraw from U.S. stock exchanges. U.S. antitrust officials sued to block chipmaker Nvidia’s proposed $40 billion takeover of Arm, saying the deal would hobble innovation and competition. Elon Musk’s offloading of Tesla Inc. shares surpassed the $10 billion mark as he sold stock in the electric-car maker for the fourth consecutive week. Here are some of the other biggest U.S. movers today: DocuSign (DOCU US) plunges 32% in premarket trading as the e-signature company’s quarterly revenue forecast missed analysts’ estimates. JPMorgan and Piper Sandler cut ratings. Marvell Technology (MRVL US) shares rise 18% in premarket after the semiconductor company’s fourth-quarter forecast beat analyst estimates; Morgan Stanley notes “an exceptional quarter” with surprising outperformance from enterprise networking, strength in 5G and in cloud. Asana (ASAN US) shares slump 14% in premarket trading after results, with KeyBanc cutting the software firm’s price target on a reset in the stock’s valuation. Piper Sandler said that slight deceleration in revenue and billings growth could disappoint some investors. Zillow Group (ZG US) shares rise 8.8% in premarket after the online real-estate company announced a $750 million share repurchase program and said it has made “significant progress” on Zillow Offers inventory wind- down. Stitch Fix (SFIX US) jumped in premarket after Morgan Stanley raised its rating to equal-weight from underweight. Smartsheet (SMAR US) rose in postmarket trading after the software company boosted its revenue forecast for the full year; the guidance beat the average analyst estimate. National Beverage Corp. (FIZZ US) gained in postmarket trading after the drinks company announced a special dividend of $3 a share. Ollie’s Bargain (OLLI US) plunged 21% in U.S. premarket trading on Friday, after the company’s quarterly results and forecast disappointed, hurt by supply-chain troubles. Smith & Wesson Brands (SWBI US) stock fell 15% in postmarket trading after adjusted earnings per share for the second quarter missed the average analyst estimate. In Europe, the Stoxx Europe 600 Index slipped as much as 0.2% before turning green with mining companies and carmakers underperforming and energy and utility stocks rising. Swedish Orphan Biovitrum AB fell as much as 26% after private-equity firm Advent International and Singapore wealth fund GIC abandoned their $7.6 billion bid to buy the drugmaker. Volatility across assets remains elevated, reflecting the Fed’s shift toward tighter monetary settings and uncertainty about how the omicron outbreak will affect global reopening. The hope is that vaccines will remain effective or can be adjusted to cope. New York state identified at least five cases of omicron, which is continuing its worldwide spread, while the latest research shows the risk of reinfection with the new variant is three times higher than for others. “The environment in markets is changing,” Steven Wieting, chief investment strategist at Citigroup Private Bank, said on Bloomberg Television. “Monetary policy, fiscal policy are all losing steam. It doesn’t mean a down market. But it’s not going to be like the rebound, the sharp recovery that we had for almost every asset in the past year.” Earlier in the session, Asian stocks held gains from the past two days as travel and consumer shares rallied after their U.S. peers rebounded and a report said Merck & Co. is seeking to obtain approval of its Covid-19 pill in Japan. The MSCI Asia Pacific Index was little changed after climbing as much as 0.3%, with Japan among the region’s best performers. South Korea’s benchmark had its biggest three-day advance since February, boosted by financial shares. Still, Asian stocks headed for a weekly loss as U.S. regulators moved a step closer to boot Chinese firms off American stock exchanges. The Hang Seng Tech Index slid as much as 2.7% to a new all time low, as Tencent Holdings and Alibaba Group Holding fell after Didi Global Inc. began preparations to withdraw its U.S. listing.  “While the risks of delisting have already been brought up previously, a step closer towards a final mandate seems to serve as a reminder for the regulatory risks in Chinese stocks,” said Jun Rong Yeap, a market strategist at IG Asia Pte. Asian stocks remain stuck near a one-year low, as the delisting issue damped sentiment already hurt by omicron and the Fed’s hawkish pivot. A U.S. payrolls report later today could give further clues on the pace of tightening Japanese equities rose, paring their weekly loss, helped by gains in economically sensitive names. Electronics makers reversed an early loss to become the biggest boost to the Topix, which gained 1.6%. Automakers and banks also gained, while reopening plays tracked a rebound in U.S. peers. Daikin and Recruit were the largest contributors to a 1% gain in the Nikkei 225, which erased a morning decline of as much as 0.6%. The Topix still dropped 1.4% on the week, extending the previous week’s 2.9% slide, amid concerns over the omicron coronavirus variant. Despite some profit-taking in tech stocks in the morning session, “the medium and long-term outlooks for these names continue to be really good,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “The spread of the omicron variant doesn’t mean an across-the-board selloff for Japanese stocks.” India’s benchmark equity index recorded a weekly advance, partly recovering from a sharp sell-off triggered by uncertainty around the new Covid variant, with investors focusing on the central bank’s monetary policy meeting from Monday.  The S&P BSE Sensex fell 1.3% to 57,696.46, but gained 1% for the week after declining for two weeks. The NSE Nifty 50 Index dropped 1.2%, the biggest one-day decline since Nov. 26. All but three of the 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of energy companies. “The focus seems to be shifting from premium Indian equities to relatively cheaper markets,” Shrikant Chouhan, head of retail equity search at Kotak Securities said in a note. The cautious mood in India was heightened by the “unenthusiastic” response to the IPO of Paytm, which was also the biggest public share sale in the country, and a resurgence of Covid concerns across Europe, he added.  Investors also focused on the country’s economic outlook, which is showing signs of improvement. Major data releases this week -- from economic expansion to tax collection -- showed robust growth. “Strong domestic indicators are playing a key role in driving the market amid negative global cues,” said Mohit Nigam, a fund manager with Hem Securities. But any further spread of the omicron strain in India may cap local equity gains, he said. Two cases of the new variant have been detected so far in the country. The market’s attention will shift to the Reserve Bank of India’s policy announcement on Dec. 8, after a three-day meeting from Monday. The panel is expected to leave record low interest rates unchanged as inflation remains within its target range. The economy faces new risks from the omicron variant after expanding 8.4% in the three months through September. Reliance Industries contributed the most to the Sensex’s decline, falling 3%. Out of 30 shares in the index, 26 fell and 4 gained. Australia stocks posted a fourth week of losses amid the Omicron threat even as the S&P/ASX 200 index rose 0.2% to close at 7,241.20, boosted by banks and miners. That trimmed the benchmark’s loss for the week to 0.5%, its fourth-straight weekly decline.  Corporate Travel was among the top performers, rising for a second session. TPG Telecom led the laggards, tumbling after media reports that founder David Teoh entered into an agreement to sell about 53.1 million shares in a block trade.  In New Zealand, the S&P/NZX 50 index was little changed at 12,676.50. In FX, the Bloomberg Dollar Spot Index advanced and the greenback was higher against all of its Group-of-10 peers, with risk-sensitive Scandinavian and Antipodean currencies the worst performers. Turkish lira swings back to gain against the USD after central bank intervention for the 2nd time in 3 days. The pound weakened and gilt yields fell after Bank of England policy maker Michael Saunders urged caution on monetary tightening due to the potential effects of the omicron variant on the economy. The euro fell below $1.13 and some traders are starting to use option plays to express the view that the currency may extend its drop in coming month, yet recover in the latter part of 2022. The Aussie dropped for a fourth day amid concern U.S. payroll data due Friday may add to divergence between RBA and Fed monetary policy. Australia’s sale of 2024 bonds saw yields drop below those in the secondary market by the most on record. The yen weakened for a second day as the prospects for a faster pace of Fed tapering fans speculation of portfolio outflows from Japan. In rates, Treasury yields ticked lower, erasing some of Tuesday jump after Fed officials laid out the case for a faster removal of policy support amid high inflation.  Treasurys followed gilts during European morning, when Bank of England’s Saunders said the omicron variant is a key consideration for the December MPC decision which in turn lowered odds of a December BOE rate hike. Treasury yields are richer by up to 1.5bp across 10-year sector which trades around 1.43%; gilts outperform by ~1bp as BOE rate- hike premium for the December meeting was pared following Saunders comments. Shorter-term Treasury yields inched up, and the 2-year yield touched the highest in a week Friday’s U.S. session features a raft of data headed by the November jobs report due 8:30am ET where the median estimate is 550k while Bloomberg whisper number is 564k; October NFP change was 531k Crude futures extend Asia’s modest gains advanced after OPEC+ proceeded with an output hike but left room for quick adjustments due to a cloudy outlook, making shorting difficult. WTI added on ~2.5% to trade near $68.20, roughly near the middle of the week’s range. Brent recovers near $71.50. Spot gold fades a small push higher to trade near $1,770/oz. Most base metals are well supported with LME aluminum and zinc outperforming.  Looking at the day ahead, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Market Snapshot S&P 500 futures little changed at 4,574.25 STOXX Europe 600 up 0.2% to 466.43 MXAP little changed at 192.06 MXAPJ down 0.5% to 625.64 Nikkei up 1.0% to 28,029.57 Topix up 1.6% to 1,957.86 Hang Seng Index little changed at 23,766.69 Shanghai Composite up 0.9% to 3,607.43 Sensex down 1.3% to 57,692.90 Australia S&P/ASX 200 up 0.2% to 7,241.17 Kospi up 0.8% to 2,968.33 Brent Futures up 3.3% to $71.97/bbl Gold spot down 0.1% to $1,767.28 U.S. Dollar Index up 0.14% to 96.29 German 10Y yield little changed at -0.37% Euro down 0.1% to $1.1286 Top Overnight News from Bloomberg “I see an inflation profile which looks like a hump” and “we know how painful it is,” ECB President Christine Lagarde says at event Friday. She also said that “when the conditions of our forward guidance are satisfied, we won’t be hesitant to act” and that an interest rate increase in 2022 is very unlikely The betting window is open in the fixed-income market as hedge funds and other traders hunt for mispriced risk heading into 2022 -- whether it’s predictions for accelerating inflation or rising interest rates The U.K. Municipal Bonds Agency aims to sell the first ethical bonds on behalf of local governments early next year. The body, set up to help U.K. councils access capital markets, is looking to issue a couple of sustainable bonds in the first quarter of 2022, according to officials advising on the sales. It expects to follow that with a pooled ethical bond to raise money for a group of different local authorities Low- income countries indebted to Chinese commercial and policy banks could buy specially-created Chinese government bonds and then use these as collateral to support the sale of new yuan debt, Zhou Chengjun, head of the People’s Bank of China’s finance research institute, wrote in an article published in the ChinaBond Magazine Chinese tech shares briefly touched their record lows in Hong Kong, as Didi Global Inc.’s announcement to start U.S. delisting and rising scrutiny on mainland firms traded there dealt a further blow to already soured sentiment The yuan is set to weaken for the first time in three years in 2022, as capital inflows are expected to slow amid a shrinking yield gap between China and the U.S., a Bloomberg survey shows Turkish inflation accelerated for a sixth month in November to the highest level in three years, driven by a slump in the lira that continues to cloud consumer price outlook A more detailed look at global markets courtesy of Newsquawk Asian equities eventually traded mostly higher following the cyclical-led rebound in the US, but with the mood in the region tentative as Omicron uncertainty lingered after further cases of the new variant were reported stateside and with the latest NFP data drawing near. ASX 200 (+0.2%) lacked direction as resilience in cyclicals was offset by underperformance in defensives and amid ongoing COVID-19 concerns which prompted the Western Australian government to widen its state border closure to include South Australia. Nikkei 225 (+1.0%) was initially subdued amid recent currency inflows and with SoftBank among the worst performers amid several negative headlines including the FTC suing to block the Nvidia acquisition of Arm from SoftBank, while the Japanese conglomerate also suffered from its exposure in “super app” Grab which tumbled 20% in its New York debut and with Didi to start delisting from the NYSE in favour of a Hong Kong listing, although the index eventually recovered losses in latter half of trade. Hang Seng (-0.1%) and Shanghai Comp. (+0.9%) were varied with US-listed Chinese companies pressured as the US SEC moved closer to delisting Chinese ADRs for failing to comply with disclosure requirements, while the mood across developers was also glum with Kaisa shares at a record low after its bond exchange offer to avert a default was rejected by bondholders and China Aoyuan Property Group slumped by double-digit percentages following its warning of an inability to repay USD 651.2mln of debt due to a liquidity crunch. Furthermore, participants digested the latest Caixin Services and Composite PMI data which slowed from the prior month, but both remained in expansion territory and with reports that advisors are to recommend lowering China’s economic growth target to 5.0%-5.5% or above 5%, fanning hopes for looser policy. Finally, 10yr JGBs gained and made another incursion above 152.00 with prices supported amid the cautious mood in Japan and with the BoJ also present in the market today for a total of JPY 1.05tln of JGBs heavily concentrated in 1yr-5yr maturities. Top Asian News Astra Said to Sink Advent’s $7.6 Billion Buyout of Biotech Sobi BOJ Is Said to See Omicron as Potential Reason to Keep Covid Aid Kaisa Swap Rejected, Developer Bonds Slide: Evergrande Update Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL The positivity seen heading into the European open dissipated as the session went underway, with the region seeing more of a mixed configuration in cash markets (Euro Stoxx 50 -0.1%; Stoxx 600 Unch) – with no clear drivers in the run-up to the US jobs report. The release will be carefully watching measures of labour market slack to gauge the progress towards the Fed's 'three tests' for rate hikes, whilst the Fed appears almost certain to announce a quickening in the pace of asset purchase tapering at its December meeting (Full NFP preview available in the Newsquawk Research Suite). The recent downside in Europe also seeps into the US futures, with the RTY (-0.2%), NQ (-0.2%) and ES (-0.3%) posting broad-based losses as things stand. Sectors have shifted from the earlier firm cyclical layout to one of a more defensive nature, with Healthcare, Food & Beverages, and Personal & Household Goods making their way up the ranks. Travel & Leisure still sits in the green but largely owed to sector heavyweight Evolution (+6.3%) as the group is to acquire its own shares in Nasdaq Stockholm. Oil & Gas sits as the current winner as crude markets claw back a bulk of this week's losses. On the flip side, Basic Resources are hit as iron ore tumbled overnight. In terms of individual movers, Dassault Aviation (+8.0%) shares soared after France signed a deal with the UAE worth some EUR 17bln. Allianz (+1.0%) stays in the green after entering a reinsurance agreement with Resolution Life and affiliates of Sixth Street for its US fixed index annuity portfolio, with the transaction to unlock USD 4.1bln in value. Top European News U.K. Nov. Composite PMI 57.6 vs Flash Reading 57.7 The Chance of a BOE Rate Hike This Month Has Fallen: BofA’s Wood AP Moller Holding Agrees to Buy Diagnostics Company Unilabs Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL In FX, it’s debatable whether this month’s US jobs data will carry as much weight as normal given that Fed rhetoric in the run up to the pre-FOMC blackout period has effectively signalled a faster pace of tapering and the likelihood of more hawkishly aligned dot plots. However, the latest BLS report could be influential in terms of shaping the tightening path once QE has been withdrawn, as markets continue to monitor unfolding COVID-19 developments with the main focus on vaccine efficacy against the new Omicron variant. In the meantime, Buck bulls have resurfaced to lift the index more firmly back above 96.000 and towards loftier levels seen earlier this week within a 96.075-324 range, eyeing Monday’s 96.448 peak ahead of the semi-psychological 96.500 mark and then the w-t-d best at 96.647 set the day after. Back to Friday’s agenda, Fed’s Bullard is due to speak and the services ISM rounds off the week. AUD/NZD - The high betas are bearing the brunt of Greenback gains, but also bearish technical forces as the Aussie and Kiwi both lose sight of key chart and simple round number levels that were keeping them afloat or declines relatively contained at least. Aud/Usd is now probing 0.7050 and a Fib retracement just above, while Nzd/Usd is hovering around 0.6775 as the Aud/Nzd cross holds in the low 1.0400 zone. JPY/CAD/CHF/GBP/EUR - All softer vs their US counterpart, with the Yen looking towards 113.50 for support with added protection from option expiry interest up to 113.60 in 1.1 bn, while the Loonie is relying on WTI to maintain recovery momentum before Canada and the US go head-to-head in the employment stakes. Usd/Cad is meandering in the low 1.2800 area as the crude benchmark regains Usd 68+/brl status from a sub-Usd 66.50 base and even deeper trough below Usd 62.50 in knee-jerk response to OPEC+ sticking to its output plan yesterday. Elsewhere, the Franc continues to straddle 0.9200, Sterling has retreated from 1.3300+ terrain again post-fractionally softer than forecast final UK services and composite PMIs, whilst a less hawkish speech from BoE hawk Saunders took Cable to a session low of 1.3255 and a 15bps Dec hike pricing fell from 51% to 26%. The Euro has also reversed from recent highs beyond 1.1300 amidst rather mixed Eurozone readings and pretty routine ECB rhetoric from President Lagarde plus GC members Knot, de Cos and de Guindos. In commodities, WTI and Brent front month futures continue to nurse losses seen earlier this week, with the post-OPEC downside completely erased alongside some more. To recap, oil contracts were under pressure from compounding COVID headlines at the start of the week and in the run-up to OPEC+ whereby ministers opted to keep production plans despite the Omicron variant and the recent SPR releases. Delving deeper into these themes, desks suggest that a dominant Omicron variant could actually be positive if the strain turns out to be milder than some of its predecessors – with the jury still out but initial reports from India and South Africa suggesting so. Regarding OPEC+, some oil traders suggest the move to maintain plans was more of a political strategy as opposed to an attempt to balance markets, with journalists also suggesting that tensions with the US have simmered down and the prospect of further SPR releases have significantly declined. Further, it's also worth bearing in mind that due to maintenance and underinvestment, the real output hike from OPEC+ producers will likely be under the 400k BPD. In terms of Iranian developments, updates have been less constructive, with sources suggesting that Iran is holding a tougher stance than during the June talks. Negotiations will break today and resume next week. Crude contracts are modestly lower on the week and well-off worst levels, with Brent Feb now back around USD 71.50/bbl (65.72-77.02 weekly range), while WTI Jan resides around USD north of USD 68/bbl (62.43-72.93/bbl). Elsewhere, spot gold and silver vary, with the former finding some overnight support around USD 1,766/oz as risk sentiment erred lower, whilst the cluster of DMAs remain around the USD 1,790-91/oz region. In terms of base metals, LME copper is flat on either side of USD 9,500/t. Overnight, Dalian iron ore futures fell amid a decline in mill demand, whilst China's steel hub Tangshan city is to launch a second-level pollution alert from December 3-10th, the local government said – providing further headwinds for iron demand. US Event Calendar 8:30am: Nov. Change in Nonfarm Payrolls, est. 550,000, prior 531,000 Nov. Change in Private Payrolls, est. 525,000, prior 604,000 Nov. Change in Manufact. Payrolls, est. 45,000, prior 60,000 8:30am: Nov. Unemployment Rate, est. 4.5%, prior 4.6% Nov. Underemployment Rate, prior 8.3% Nov. Labor Force Participation Rate, est. 61.7%, prior 61.6% 8:30am: Nov. Average Hourly Earnings YoY, est. 5.0%, prior 4.9% Nov. Average Hourly Earnings MoM, est. 0.4%, prior 0.4% Nov. Average Weekly Hours All Emplo, est. 34.7, prior 34.7 9:45am: Nov. Markit US Composite PMI, prior 56.5 Nov. Markit US Services PMI, est. 57.0, prior 57.0 10am: Oct. Factory Orders, est. 0.5%, prior 0.2% Oct. Factory Orders Ex Trans, est. 0.6%, prior 0.7% Oct. Durable Goods Orders, est. -0.5%, prior -0.5% Oct. Cap Goods Ship Nondef Ex Air, prior 0.3% Oct. Cap Goods Orders Nondef Ex Air, prior 0.6% 10am: Nov. ISM Services Index, est. 65.0, prior 66.7 DB's Jim Reid concludes the overnight wrap I got great news yesterday. It was the school Xmas Fayre last weekend and at one stall we had to guess the weight of the school duck that lives in their pond. I spent a long time analysing it outside and was trying to mentally compare it to the weights of my various dumbbells at home. I learnt yesterday that I’d won. My prize? A rubber duck for the bath. In more trivial news I also learnt I was voted no.1 analyst in four categories of the Global Institutional Investor Fixed Income Analyst awards for 2021. So many thanks for all who voted. It is very much appreciated. However in terms of physical mementoes of my achievements yesterday, all I actually have to show for it is a brown rubber duck. Guessing the weight of a duck is a walk in the park at the moment compared to predicting markets. Indeed it’s been a wild week. If you’ve managed to time all the various swings you can surely only have done it via a time machine. If you have done so without one though I will happily hand over my prized rubber duck. By the close of trade, the S&P 500 (+1.42%) had begun to recover following its worst 2-day performance in over a year. The VIX index of volatility ticked back down beneath the 30 mark again, but finished above 25 for the fourth day in five for the first time since December of last year. Meanwhile Oil plunged and then soared on OPEC+ news and curves continued to flatten as 2yr yields got back close to their pre-Omicron levels after a near 20bps round journey over the last week. I’m glad I’m a research analyst not a day trader, and that’s before we get to today’s payrolls print. We’ll start with Omicron, where yesterday predictably saw a number of new countries report confirmed cases for the first time, as well as a second case in the United States during market hours, this one with roots in New York City, which reported more than 11,300 new cases yesterday, the highest daily count since January. After the market closed, an additional five cases were identified in New York, which sent futures over -0.5% lower at the time. They are back to flat as we type possibly helped by a late deal and vote in Congress to fund the US government through to February 18th and avert a shutdown at midnight tonight. Back to the virus and governments continued to ramp up their defence measures, with Germany yesterday announcing a range of fresh restrictions as they grapple with the latest wave, including a requirement that you must either be vaccinated or have recovered from Covid in order to get into restaurants or non-essential stores. There’s also set to be a parliamentary vote on mandatory vaccinations, and incoming Chancellor Scholz said that he expected it to pass. In the US, President Biden announced new measures to fight the impending winter wave and spreading Omicron variant, including tighter testing guidelines for international visitors, wider availability of at home tests, whilst accelerating efforts to get the rest of the world vaccinated. Over in South Africa, the daily case count rose further yesterday, with 11,535 reported, up from 8,561 the previous day and 4,373 the day before that. So definitely one to keep an eye on as we look for clues about what this could mean for the world more broadly. That said, we’re still yet to get the all-important information on how much less or more deadly this might be, as well as how effective vaccines still are and the extent to which it is more transmissible relative to other variants. Back to markets, and the revival in risk appetite led to a fresh selloff in US Treasuries, with the 2yr yield up +6.7bps, and the 10yr yield up +3.7bps. Nevertheless, as mentioned at the top, the latest round of curve flattening has sent the 2s10s slope to its flattest since before the Georgia Senate seat runoff gave Democrats control of Congress. It’s now at just +82.0bps, whilst the 5s30s slope is now at flattest since March 2020, at +55.0bps. So a warning sign for those who believe in the yield curve as a recessionary indicator, albeit with some way to go before that flashes red. In Europe there was also a modest curve flattening, but yields moved lower across the board, with those on 10yr bunds (-2.6bps), OATs (-3.2bps) and BTPs (-5.6bps) all down by the close. Over in equities, there was a decent rebound in the US following the recent selloff, with the S&P 500 (+1.42%) posting a solid gain. It was a very broad-based advance, with over 90% of the index’s members moving higher for the first time since mid-October. Every S&P sector increased, which was enough to compensate for the noticeable lag in mega-cap shares, with the FANG index gaining just +0.15%. The STOXX 600 decreased -1.15%, though that reflected the fact Europe closed ahead of the big reversal in sentiment the previous session. Aside from Omicron, one of the other biggest stories yesterday was the decision by the OPEC+ group to continue with their production hike, which will add a further +400k barrels/day to global supply in January. The news initially sent oil prices sharply lower, with Brent crude falling to an intraday low beneath $66/bbl, before recovering to end the day back at $69.67/bl in light of the group saying that they could adjust their plans “pending further developments of the pandemic”, with the ability to “make immediate adjustments if required”. Even with the bounceback yesterday however, oil has been one of the worst-performing assets over recent weeks, with Brent hitting an intraday high of $86.7/bbl in late-October, followed by a November that marked its worst monthly performance since the pandemic began. Overnight in Asia stocks are trading mostly higher with the KOSPI (+0.86%), Shanghai Composite (+0.58%), CSI (+0.35%) and the Nikkei (+0.29%) up but with the Hang Seng (-0.74%) under pressure amid the ongoing regulatory clampdown in technology from China as Didi prepares to delist on US markets. Looking forward now, the main highlight on today’s calendar is the US jobs report for November, which comes less than two weeks’ away from the Fed’s meeting where they’ll decide on the pace of tapering. In terms of what to expect, our US economists are looking for nonfarm payrolls to grow by +600k, which would be the fastest pace of job growth since July, and that in turn would take the unemployment rate down to a post-pandemic low of 4.4%. Ahead of that, we had another decent weekly claims report (albeit that took place after the jobs report survey period), with the number for the week through November 26 coming in at a stronger-than-expected 222k (vs. 240k expected). The previous week’s number was also revised down -5k, sending the 4-week moving average down to its own post-pandemic low of 238.75k. Looking at yesterday’s other data releases, the Euro Area unemployment rate fell to a post-pandemic low of 7.3% in October, in line with expectations. However producer price inflation shot up even faster than anticipated to +21.9% (vs. 19.0% expected). To the day ahead now, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Tyler Durden Fri, 12/03/2021 - 07:55.....»»

Category: blogSource: zerohedgeDec 3rd, 2021

Algoma Steel Group Announces Fiscal 2022 Second Quarter Results

Record Second Quarter Revenue, Adjusted EBITDA and Free Cash Flow Driven by Higher Price Realizations and Cost Containment Initiatives Business Highlights and Fiscal 2022 to Fiscal 2021 Second Quarter Comparisons Consolidated revenue of $1.01 billion, up 168% from $377.0 million in the prior year quarter. Consolidated income from operations of $402.1 million, compared to loss of $24.7 million in the prior year quarter. Net income of $288.2 million, compared to a loss of $60.0 million in the prior year quarter. Adjusted EBITDA of $430.6 million and Adjusted EBITDA margin of 42.6%, compared to nil for each in the prior year quarter (See "Non-IFRS Measures" below). Cash flows generated from operations of $380.1 million, compared to a use of cash of $55.7 million in the prior year quarter. Shipments of 587,340 tons, compared to 516,294 tons in the prior year quarter. Announcement of fiscal third quarter 2022 guidance. SAULT STE. MARIE, Ontario, Nov. 11, 2021 (GLOBE NEWSWIRE) -- Algoma Steel Group Inc. (NASDAQ:ASTL, TSX:ASTL) ("Algoma" or "the Company"), a leading Canadian producer of hot and cold rolled steel sheet and plate products, today announced results for its fiscal second quarter ended September 30, 2021. Unless otherwise specified, all amounts are in Canadian dollars. Michael McQuade, the Company's Chief Executive Officer, said, "Our financial results for the fiscal second quarter demonstrate continued solid execution by our team, generating record revenue, Adjusted EBITDA, and cash flows due in part to the combination of higher realized steel prices and ongoing cost containment initiatives. These results contributed to our strong liquidity, which has positioned us to make two additional strategic announcements that we believe will increase value to our shareholders and provide competitive strategic growth." Mr. McQuade continued, "Calendar 2021 has been an incredible journey, and we expect that the final three months will be a truly transformative period for Algoma. Following our successful return to the public markets in October, we are excited to have announced today, under a separate release, that our board has authorized our investment in electric arc steelmaking. Additionally, the board has approved a plan to retire all of Algoma's outstanding senior secured long-term debt. This US$358 million debt reduction will leave us with a stronger balance sheet that we believe enhances our position, both operationally and financially, to make critical investments in our business that we expect will drive sales and create additional long-term value for our stakeholders." Second Quarter Fiscal 2022 Financial Results Second quarter revenue totaled $1.01 billion, up 168% from $377.0 million in the prior year quarter. As compared with the prior year quarter, steel revenue was $936.5 million, up 179% from $335.3 million.   Income from operations was $402.1 million, compared to a loss from operations of $24.7 million in the prior year quarter. The year over year increase was primarily due to an increase in the selling price of steel, partially offset by an increase in the purchase price of inputs, including iron ore, scrap and alloys. Net income in the second quarter was $288.2 million, compared to a net loss of $60.0 in the prior year quarter. The improvement was driven primarily by the factors described above under income from operations. Adjusted EBITDA in the second quarter was $430.6 million, compared with nil for the prior year quarter. This resulted in an Adjusted EBITDA margin of 42.6%. Average realized price of steel net of freight and non-steel revenue was $1,594 per ton, up 146% from $649 per ton in the prior year quarter. Cost per ton of steel products sold was $857, up 37% from $626 in the prior year quarter. Shipments for the second quarter increased by 14% to 587,340 tons, compared to 516,294 tons in the prior year quarter. See "Non-IFRS Measures" below for an explanation of Adjusted EBITDA and a reconciliation to Adjusted EBITDA". Outlook The outlook that follows constitutes forward-looking statements (as defined below) and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond our control. Please see "Cautionary Statement Regarding Forward-Looking Statements" below. In addition to the other assumptions and factors described in this news release, our outlook assumes continued high prices of steel, ongoing inflationary pressures on raw material inputs, labor, and logistics costs, and the absence of material changes in our industry or the global economy. The following statements supersede all prior statements made by us and are based on current expectations. Based on our current information regarding our operations and end markets, we currently expect the following for the third quarter of fiscal 2022: Shipments:                590 - 610k tons Adjusted EBITDA:        At least $450 million Conference Call and Webcast Details A webcast and conference call will be held on Friday, November 12, 2021 at 10:00 a.m. Eastern time to review the Company's second quarter results, discuss recent events, and conduct a question-and-answer session. The live webcast and archived replay of the conference call can be accessed on the Investors section of the Company's website at For those unable to access the webcast, the conference call will be accessible domestically or internationally by dialing 877-425-9470 or 201-389-0878, respectively. Upon dialing in, please request to join the Algoma Steel Second Quarter Conference Call. To access the replay of the call, dial 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13724855. Consolidated Financial Statements and Management's Discussion and Analysis The Company's unaudited condensed interim consolidated financial statements for the three and six months ended September 30, 2021, and Management's Discussion & Analysis thereon are available under the Company's profile on the Securities and Exchange Commission's EDGAR website at and under the Company's profile on SEDAR at Cautionary Statement Regarding Forward-Looking Statements This news release contains "forward-looking information" under applicable Canadian securities legislation and "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively, "forward looking statements"), including statements regarding Algoma's strategic objectives and outlook for the third quarter of fiscal 2022. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "pipeline," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including but not limited to: the risk that the benefits of the recently completed merger may not be realized; the risks that Algoma will be unable to realize its business plans and strategic objectives, including its investment in electric arc steelmaking and the retirement of certain secured long term debt; the risks associated with the steel industry generally; and changes in general economic conditions, including as a result of the COVID-19 pandemic. The foregoing list of factors is not exhaustive and readers should also consider the other risks and uncertainties set forth in the section entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in the prospectus filed by Algoma with the Securities and Exchange Commission and the Ontario Securities Commission in connection with the merger. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Algoma assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Non-IFRS Financial Measures To supplement our financial statements, which are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), we use certain non-IFRS measures to evaluate the performance of Algoma. These terms do not have any standardized meaning prescribed within IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of our financial performance from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Adjusted EBITDA, as we define it, refers to net (loss) income before amortization of property, plant, equipment and amortization of intangible assets, finance costs, interest on pension and other post-employment benefit obligations, income taxes, restructuring costs, impairment reserve, foreign exchange loss (gain), finance income, carbon tax, share based compensation related to performance share units and business combination adjustments. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue for the corresponding period. Adjusted EBITDA is not intended to represent cash flow from operations, as defined by IFRS, and should not be considered as alternatives to net earnings, cash flow from operations, or any other measure of performance prescribed by IFRS. Adjusted EBITDA, as we define and use it, may not be comparable to Adjusted EBITDA as defined and used by other companies. We consider Adjusted EBITDA to be a meaningful measure to assess our operating performance in addition to IFRS measures. It is included because we believe it can be useful in measuring our operating performance and our ability to expand our business and provide management and investors with additional information for comparison of our operating results across different time periods and to the operating results of other companies. Adjusted EBITDA is also used by analysts and our lenders as a measure of our financial performance. In addition, we consider Adjusted EBITDA margin to be a useful measure of our operating performance and profitability across different time periods that enhance the comparability of our results. However, these measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, net income, cash flow from operations or other data prepared in accordance with IFRS. Because of these limitations, such measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness. We compensate for these limitations by relying primarily on our IFRS results using such measures only as supplements to such results. See the financial tables below for a reconciliation of the non-IFRS financial measures reported herein. About Algoma Steel Group Inc. Based in Sault Ste. Marie, Ontario, Canada, Algoma is a fully integrated producer of hot and cold rolled steel products including sheet and plate. With a current raw steel production capacity of an estimated 2.8 million tons per year, Algoma's size and diverse capabilities enable it to deliver responsive, customer-driven product solutions straight from the ladle to direct applications in the automotive, construction, energy, defense, and manufacturing sectors. Algoma is a key supplier of steel products to customers in Canada and Midwest USA and is the only producer of plate steel products in Canada. The Company's mill is one of the lowest cost producers of hot rolled sheet steel (HRC) in North America owing in part to its state-of-the-art Direct Strip Production Complex ("DSPC"), which is the newest thin slab caster in North America with direct coupling to a basic oxygen furnace (BOF) melt shop. Algoma has achieved several meaningful improvements over the last several years that are expected to result in enhanced long-term profitability for the business. Algoma has upgraded its DSPC facility and recently installed its No. 2 Ladle Metallurgy Furnace. Additionally, the Company has cost cutting initiatives underway and is in the process of modernizing its plate mill facilities. Today Algoma is returning to its roots as a customer-focused, entrepreneurial company with the courage and growing capability to meet the industry's challenges head-on. It is investing in its people and processes, optimizing and modernizing so that it might continue to be your partner in steel. Selected Financial Information The following includes financial information prepared by management in accordance with IFRS. This financial information does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with Algoma Steel Group Inc's Consolidated Financial Statements and MD&A for the period ended September 30, 2021, which are available on the Company's website and on SEDAR ( and on EDGAR ( Algoma Steel Group Inc. Condensed Interim Consolidated Statements of Financial Position (Unaudited)       As at, September 30, 2021 March 31, 2021   expressed in millions of Canadian dollars       Assets       Current        Cash $ 366.6 $ 21.2      Restricted cash   3.9   3.9      Accounts receivable, net   445.7   274.6      Inventories, net   486.0   415.3      Prepaid expenses and deposits   101.7   74.6      Margin payments   58.3   49.4      Other assets   4.3   3.8     Total current assets $ 1,466.5 $ 842.8     Non-current        Property, plant and equipment, net $ 710.1 $ 699.9      Intangible assets, net   1.5   1.5      Parent company promissory note receivable   2.2   2.2      Other assets   5.4   7.5     Total non-current assets $ 719.2 $ 711.1     Total assets $ 2,185.7 $ 1,553.9     Liabilities and Shareholder's Equity       Current        Bank indebtedness $ - $ 90.1      Accounts payable and accrued liabilities   268.0   163.8      Taxes payable and accrued taxes   42.0   27.2      Current portion of long-term debt   15.1   13.6      Current portion of governmental loans   5.0   -      Current portion of environmental liabilities   3.2   4.5      Derivative financial instruments   67.2   49.4     Total current liabilities $ 400.5 $ 348.6     Non-current        Long-term debt $ 437.2 $ 439.3      Long-term governmental loans   85.5   86.4      Accrued pension liability   96.1   170.1      Accrued other post-employment benefit obligation   305.9   297.8      Other long-term liabilities   2.7   2.5      Environmental liabilities   36.8   35.4      Deferred income tax liabilities   74.6   -     Total non-current liabilities $ 1,038.8 $ 1,031.5     Total liabilities $ 1,439.3 $ 1,380.1     Shareholder's equity        Capital stock $ 409.5 $ 409.5      Accumulated other comprehensive income   84.8   9.5      Retained earnings (deficit)   242.8   (249.3 )    Contributed surplus   9.3   4.1     Total shareholder's equity $ 746.4 $ 173.8     Total liabilities and shareholder's equity $ 2,185.7 $ 1,553.9             Algoma ...Full story available on»»

Category: earningsSource: benzingaNov 11th, 2021

Biden Trade Rep Vows To Chart "New Course" On Trade With China While Copying Trump Playbook

Biden Trade Rep Vows To Chart "New Course" On Trade With China While Copying Trump Playbook Update (1025ET): Effectively confirming that President Biden is copying his entire China policy from his predecessor, President Trump, while feebly trying to pass it off as his own, President Biden's US Trade Rep, Katherine Tai, laid out her plans to confront her Chinese counterparts about their adherence (or lack thereof) to the "Part 1" Trade deal negotiated by President Trump, before laying out a history of anti-competitive state-direction and subsidization in China's economy that has helped to gut American manufacturing and other industries as well. After explaining how China undermined the American steel industry, destroying productivity and jobs, while citing semiconductors as the next target for state-directed development (benefitted, undoubtedly, by all the technology they can steal). Other industries from semiconductors to even agriculture, have also been impacted. Per Tai, Beijing has already spent $150 billion in subsidies on this. "These efforts have reinforced a zero-sum environment where China's success has come at the expense of other economies in the US," Tai said, sounding an awful lot like her predecessor, Robert Lighthizer. "This is why we need to take a new, and pragmatic approach to dealing with our economic relationship with China evolves, so too should our tactics to defend our interests." "Our strategy must address these concerns while also being flexible and agile that may confront future challenges from China that might arise," she added. As for the upcoming round of virtual talks, Tai said "in the coming days I intend to have frank discussions with my counterpart in China. They will include the Phase 1 agreement...I am committed to working through the many challenges ahead in this bilateral process in order to deliver meaningful results." As for whether she intends to launch a Section 301 investigation into whether the Chinese have been violating their promises made in the Phase 1 deal, Tai wouldn't confirm. Ultimately, the US is seeking to negotiate with Beijing about its industrial anti-competitive policies, but Tai said the Biden Admin's goal is "not to inflame trade tensions with China." Being a dutiful bureaucrat, Tai stopped to plug her boss's domestic agenda, saying "China has been investing in their infrastructure for decades, if we are going to compete we need to make similar investments at home." Ultimately, Tai says, the US will also work with its economic "partners" to help force China to abandon its anti-competitive, economically destructive practices. However... "Above all else, we must defend, to the hilt our economic interests and that means taking ll steps necessary to protect ourselves through the waves of damage over the years via unfair competition." "We must chart a new course to change the dynamic of our bilateral trade relationship." "And we will work with partners to strengthen rules for global trade." She continued. "There is a future where all of us in the global economy can grow and succeed, where prosperity is inclusive within our own borders, and across those borders too. The path we have been on, did not take us there." Whether there's any reason to hope for this, we simply can't say. Asking China to abandon its state-directed model of capitalism is certainly a tall order. Also, this new approach to China shouldn't be credited to Biden: Rising up to confront China was likely one of the key critical issues that set Trump apart and above during the 2016 campaign. And his trade negotiations with the Chinese took up nearly half of his first term. After taking a potshot at Trump, Tai's partner in the dialogue,  Bill Reinsch, Senior Adviser and Scholl Chair in International Business at CSIS, asked: "Can China be changed, or are we going to spend the next decade doing the impossible?" Before answering, Tai acknowledged that Trump deserves some credit here: "I don't think it's fair to say that I have characterized the last administration's policies as 'failed'..." Reinsch then followed up: "So basically, you're here to to enforce what Trump negotiated, right?" Tai admitted "that is the starting point, because that is the structure and that is the architecture of the trade relationship we have right now." Moving on to a discussion of the upcoming talks with her counterparts in Beijing, Tai acknowledged that per the Phase 1 agreement, "there are things that they committed to that they have not done." Finding out why those promises haven't been kept will be key. "I think we have to have really honest conversations with China about all of the elements of the Phase 1 agreement. These are commitments China made, and commitments that workers in certain sectors have worked to. "We will have to address where the relationship goes from the starting point." Somebody should probably tell her...when it comes to commitments related to state subsidies, cyber-espionage and other intrusions, Beijing doesn't exactly have a great track record. But at least she's willing to admit here that there's little possibility of the two sides starting negotiations on a second part of the trade framework. * * * As we previewed a few days ago, President Biden's US Trade Representative Katherine Tai is preparing to deliver a major speech outlining the Biden Administration's policies and diplomatic priorities regarding its relationship with China. The speech will be held ahead of talks where, Tai has said, she will confront the Chinese about promises from the "Phase 1" trade deal that allegedly haven't been kept. According to Reuters, Tai is expected to criticize China for not meeting its commitments and for abusing "global trading norms": "For too long, China's lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world." She also is expected to say that China made promises to American industries, especially agriculture, and that they must be kept. Tai is also expected to say that she intends to have 'frank conversations' with her counterpart in China. "That will include discussion over China's performance under the Phase One Agreement and we will also directly engage with China on its industrial policies." Tai will not rule out the use of any trade tools, to bring China into compliance with the deal, officials said, but did not offer a time frame for such actions. The deal is scheduled to expire at the end of 2021. She's also expected to pursue a virtual meeting with Chinese VP Liu He to discuss the trade deal "soon". Right now, the administration doesn't plan to try to pursue negotiations of a "Phase 2" deal. Readers can watch live below: Here's a description of the event, courtesy of CSIS: We are pleased to welcome Ambassador Katherine Tai, U.S. Trade Representative, to CSIS for a conversation on the Biden-Harris Administration’s trade agenda. Ambassador Tai previously served as Chief Trade Counsel and Trade Subcommittee Staff Director for the House Ways and Means Committee in the United States Congress. In this capacity, she played an important role in shaping U.S. trade law, negotiations strategies, and bilateral and multilateral agreements. As U.S. Trade Representative, Ambassador Tai serves as the president’s principal trade advisor, negotiator, and spokesperson on trade issues. She is responsible for developing U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries. Ambassador Tai will deliver a speech outlining the Biden-Harris Administration’s approach to the bilateral trade relationship with China. Following the speech, Ambassador Tai will participate in a conversation with Bill Reinsch, Senior Adviser and Scholl Chair in International Business at CSIS, followed by audience Q&A. We hope you will be able to join us for an engaging and informative discussion. * * * Finally, Rabobank's analysts had this to say: "And so back to Tai and either a US signal of détente and can-kicking, or of disengagement and ‘Yes, we can’ kicking. Politico suggests we should buckle up, with Tai telling them: "I would say that the 301 tariffs are a tool for creating the kind of effective policies, and [are] something for us to build on and to use in terms of defending to the hilt the interests of the American economy, the American worker and American businesses and our farmers, too." "She also challenges the notion that tariffs are ultimately paid by American consumers, saying it’s a more complicated calculation than many suggest. Now *there* is a kick to the guts of the neoclassical trade consensus!" Tyler Durden Mon, 10/04/2021 - 10:57.....»»

Category: worldSource: nytOct 4th, 2021

What Makes U.S. Steel (X) Stock a Solid Choice Right Now

U.S. Steel (X) benefits from strong end-market demand and higher domestic steel prices. Shares of United States Steel Corporation X have popped around 34% year to date. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.U.S. Steel currently sports a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.Let’s delve deeper into the factors that make this steel maker an attractive choice for investors right now.An OutperformerU.S. Steel’s shares have surged 205.4% over a year against the 104.5% rise of its industry. It has also outperformed the S&P 500’s 32.6% rise over the same period. Image Source: Zacks Investment Research Estimates Going UpOver the past two months, the Zacks Consensus Estimate for U.S. Steel for 2021 has increased around 22.9%. The consensus estimate for third-quarter 2021 has also been revised 15.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.Solid Growth ProspectsThe Zacks Consensus Estimate for 2021 earnings of $13.57 for U.S. Steel suggests year-over-year growth of 390.6%. Moreover, earnings are expected to register a 488.4% growth in the third quarter.Positive Earnings Surprise HistoryU.S. Steel has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 25.1%, on average.Upbeat ProspectsU.S. Steel recently announced upbeat guidance for third-quarter 2021. It expects record third-quarter results driven by its Best for All business model, strong reliability and quality performance, persistent customer demand as well as sustained rise in steel selling prices. The company expects adjusted EBITDA to be around $2 billion, which suggests an increase from the second quarter’s figure of roughly $1.3 billion.The company’s Flat-rolled segment is projected to deliver record EBITDA and EBITDA margin in the third quarter led by the increased flow-through of higher steel selling prices into its adjusted contracts, spot selling prices and continued strong customer demand. The segment’s assets continue to perform well, creating efficiencies across the segment and increasing the segment’s profitability.In the Mini Mill segment, third-quarter EBITDA and EBITDA margin are predicted to beat last quarter’s records on the back of higher steel selling prices and ongoing operating efficiencies.The company also expects the European segment to deliver record EBITDA and EBITDA margin driven by strong steel demand and higher steel prices. The Tubular segment is expected to benefit from higher prices as well as volumes, which will help negate the impact of inflated scrap input costs.U.S. steel prices have staged a strong recovery and hit record levels after plunging to pandemic-led multi-year lows in August 2020. The rebound has been driven by rising demand (especially in automotive and construction), tight supply conditions and higher raw material costs. The benchmark hot-rolled coil (“HRC”) prices have shot up more than four-fold from the lows witnessed in August 2020. HRC prices are currently hovering near the $2,000 per short ton level. As such, higher domestic steel prices should act as a catalyst for U.S. Steel. United States Steel Corporation Price and Consensus  United States Steel Corporation price-consensus-chart | United States Steel Corporation Quote Stocks to ConsiderOther top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, Nutrien Ltd. NTR and AdvanSix Inc. ASIX, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.Nucor has a projected earnings growth rate of 534.4% for the current year. The company’s shares have surged around 129% in a year.Nutrien has an expected earnings growth rate of 173.9% for the current year. The stock has also rallied around 68% over a year.AdvanSix has a projected earnings growth rate of 160.4% for the current year. The company’s shares have shot up around 212% in a year. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United States Steel Corporation (X): Free Stock Analysis Report Nucor Corporation (NUE): Free Stock Analysis Report AdvanSix Inc. (ASIX): Free Stock Analysis Report Nutrien Ltd. (NTR): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 29th, 2021

Steelmakers Capitalize Record Prices to Spend Big on New Mills

The recently announced multi-billion projects from major U.S. steel producers reflect the underlying strength in the domestic steel industry underpinned by strong demand and record-high prices. Record-high steel prices and an upswing in demand in the manufacturing sector have ushered in boom time for the steel industry. Some of the biggest names in this space are making big investment to establish new mega mills to leverage the industry’s bull run.Steel Boom Driving Spending SplurgeMajor American steel producers, Nucor Corp. NUE and United States Steel Corp. X recently announced plans to set up new mills in the United States.Nucor, on Monday, announced its plans to construct a state-of-the-art sheet mill having an annual capacity of 3 million tons. It is looking at locations in Ohio, Pennsylvania and West Virginia to build the mill.The company is spending roughly $2.7 billion on the new mill that will be able to produce hot-rolled sheet products with downstream processing. The construction is expected to take two years after the required regulatory approvals are obtained. The geographic position of the mill will allow it to serve Midwestern and Northeastern customers and ensure a significantly lower carbon footprint than nearby competitors.Nucor noted that the new mill will allow it to meet the growing need of many of its customers, especially in the automotive market. The sheet mill is the latest in a series of investments made by the Charlotte-based steel giant that are expected to contribute to profitable growth and strengthen its position as a low-cost producer. The company is on track with its other significant growth projects — the Brandenburg plate mill, the Generation 3 flexible galvanizing line at the Hickman sheet mill and the modernization and expansion of the Gallatin sheet mill in Kentucky.U.S Steel, last week, also said that it plans to spend $3 billion to build a new, three-million-ton mini mill flat-rolled facility in the United States. The planned mini mill will integrate two state-of-the-art electric arc furnaces (“EAF”) with differentiated steelmaking and finishing technology, including purchased equipment owned by the company. The continued adoption of mini mill technology will enhance the company’s ability to produce the next generation of highly-profitable proprietary sustainable steel solutions, including Advanced High Strength Steels.U.S. Steel expects to start construction of the mini mill in the first half of 2022 and commence production in 2024. The planned investment is a key step toward achieving the company's 2030 goal of reducing global greenhouse gas emissions intensity by 20% from the 2018 baseline.The newly announced multi-billion projects from these major steel producers reflect the underlying strength in the steel industry underpinned by solid demand and pricing fundamentals. Steel Dynamics, Inc. STLD is also progressing with the construction of its 3 million-ton state-of-the-art EAF flat roll steel mill in Sinton, TX with production expected to commence in fourth-quarter 2021.The U.S. steel industry came roaring back in 2021 after bearing the brunt of the pandemic last year, thanks to a strong revival in domestic demand and zooming steel prices.Coronavirus hurt demand for steel across major end-use markets such as construction and automotive during the first half of 2020. However, demand for steel started to pick up from the third quarter last year with the resumption of operations across major steel-consuming sectors, following the loosening of restrictions.American steel makers are seeing healthy order booking in automotive, notwithstanding the semiconductor crunch. Demand in the non-residential construction market and equipment also remains resilient.The demand rebound has contributed to the significant uptick in U.S. steel industry capacity utilization on the restart of idled capacity. U.S. steel prices are also on an upswing, driven by an upturn in demand and supply shortages partly due to the pandemic.The benchmark hot-rolled coil (“HRC”) prices are shooting higher on U.S. steel mills’ price hike actions, tight supply conditions, low steel imports and solid pent-up demand. Prices are hitting fresh highs, having shot up more than four-fold from the lows witnessed in August 2020 and also nearly doubled since the start of 2021. HRC prices have cruised above the $1,900 per short ton level as the upward momentum continues.The price rally is expected to continue in the coming months on solid demand and supply constraints, which is likely to be exacerbated by a series of planned mill outages and scheduled maintenance.U.S. Steel Industry Looks Set for A Solid Q3 Earnings SeasonRobust domestic demand and the price surge helped U.S. steel companies deliver strong results in the second quarter. These companies are benefiting from spread expansion as a significant spurt in HRC prices has more than offset higher ferrous scrap costs. Higher demand and a favorable pricing environment are likely to help U.S. steel producers to continue the momentum in the third quarter.Some of the prominent U.S. steel producers recently came up with an upbeat guidance for the September quarter. Nucor said that it expects to log record quarterly earnings in the third quarter, driven by strong demand across most of its end-markets and higher average selling prices. Steel Dynamics also sees record quarterly performance, supported by strong underlying steel demand and significant metal spread expansion, especially within the flat roll steel operations.U.S. Steel expects record third-quarter results driven by its Best for All business model, strong reliability and quality performance, persistent customer demand as well as sustained rise in steel selling prices. Olympic Steel, Inc. ZEUS, last month, said that it expects a strong third quarter on strong market dynamics and record-high prices.Nucor, Steel Dynamics and U.S. Steel each sports a Zacks Rank #1 (Strong Buy), while Olympic Steel has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank stocks here. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>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 Steel Dynamics, Inc. (STLD): Free Stock Analysis Report United States Steel Corporation (X): Free Stock Analysis Report Nucor Corporation (NUE): Free Stock Analysis Report Olympic Steel, Inc. (ZEUS): Free Stock Analysis Report To read this article on click here......»»

Category: topSource: zacksSep 23rd, 2021

Is Nucor (NUE) a Solid Growth Stock? 3 Reasons to Think " Yes "

Nucor (NUE) could produce exceptional returns because of its solid growth attributes. Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a great growth stock is not easy at all.That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.However, it's pretty easy to find cutting-edge growth stocks with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.Nucor (NUE) is on the list of such stocks currently recommended by our proprietary system. In addition to a favorable Growth Score, it carries a top Zacks Rank.Research shows that stocks carrying the best growth features consistently beat the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.Here are three of the most important factors that make the stock of this steel company a great growth pick right now.Earnings GrowthEarnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.While the historical EPS growth rate for Nucor is 30.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 17.4% this year, crushing the industry average, which calls for EPS growth of 13.5%.Cash Flow GrowthWhile cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.Right now, year-over-year cash flow growth for Nucor is 326.4%, which is higher than many of its peers. In fact, the rate compares to the industry average of 163.8%.While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 38.7% over the past 3-5 years versus the industry average of 29.2%.Promising Earnings Estimate RevisionsBeyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.The current-year earnings estimates for Nucor have been revising upward. The Zacks Consensus Estimate for the current year has surged 29.8% over the past month.Bottom LineNucor has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 because of the positive earnings estimate revisions.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.This combination indicates that Nucor is a potential outperformer and a solid choice for growth investors. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nucor Corporation (NUE): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 23rd, 2022


SAND SPRINGS, Okla., May 23, 2022 /PRNewswire/ -- Webco Industries, Inc. (OTC:WEBC) today reported results for our third quarter for fiscal year 2022, which ended April 30, 2022. For our third quarter of fiscal year 2022, we had a net income of $16.0 million, or $19.88 per diluted share, while in our third quarter of fiscal year 2021, we had net income of $6.5 million, $7.31 per diluted share.  Net sales for the third quarter of fiscal 2022 were $190.6 million, a 50.1 percent increase from the $127.0 million of net sales in last year's third quarter.  For the first nine months of fiscal year 2022, we generated a net income of $40.1 million, or $49.25 per diluted share, compared to a net income of $6.3 million, or $7.13 per diluted share, for the same period in fiscal year 2021.  Net sales for the first nine months of the current year amounted to $531.5 million, a 65.5 percent increase from the $321.1 million in sales for the same nine-month period of last year. In the third quarter of fiscal year 2022, we had income from operations of $21.0 million after depreciation of $3.5 million.  The third fiscal quarter of the prior year generated income from operations of $8.5 million after depreciation of $3.4 million.  Gross profit for the third quarter of fiscal 2022 was $33.5 million, or 17.6 percent of net sales, compared to $18.6 million, or 14.6 percent of net sales, for the third quarter of fiscal year 2021.    Our income from operations for the first nine months of fiscal year 2022 was $53.7 million, after depreciation expense of $10.5 million.  Income from operations in the first nine-month period of fiscal year 2021 was $9.0 million, after depreciation expense of $10.3 million.   Gross profit for the first nine-month period of fiscal 2022 was $97.0 million, or 18.3 percent of net sales, compared to $33.2 million, or 10.4 percent of net sales for the same period in fiscal year 2021. Dana S. Weber, Chief Executive Officer and Board Chair, stated, "Our recent results demonstrate the strength, agility and innovation of our Trusted Teammates combined with a commercial environment that provided a wide range of commercial successes.  The first two quarters of fiscal year 2021 reflect adverse impacts of the pandemic and low oil prices.  International events and domestic conditions have continued to produce volatility in raw material cost and influenced its availability.  Additionally, non-steel supplies and operating costs, as well as freight services, have increased in cost and continue to have availability challenges.  Labor costs likewise experienced increases. Where possible, we passed on the increased costs to our customers in the form of higher prices for our finished products.  Our strong balance sheet and liquidity position have positioned us well to successfully navigate and gain strength through this volatile environment.  We remain focused on financial strength and agility.  Our total cash and available credit on our revolver were $59.5 million at April 30, 2022, which we believe to be a competitive advantage." Selling, general and administrative expenses were $12.5 million in the third quarter of fiscal 2022 and $10.1 million in the third quarter of fiscal 2021.  SG&A expenses were $43.4 million in the first nine-month period of fiscal year 2022 and $24.3 million for the first nine-month period of fiscal year 2021.  SG&A expenses thus far in fiscal year 2022 reflect an increase in costs associated with increased profitability, such as company-wide incentive compensation and variable pay programs, although we have experienced inflation in wages and other expenses.  Interest expense was $0.8 million in the third quarter of fiscal year 2022 and $0.3 million in the same quarter of fiscal year 2021.  Interest expense was $2.1 million and $1.0 million in the first nine-month periods of the current and prior fiscal years, respectively.  The change in interest expense between the periods was primarily because we have higher debt levels due to greater working capital requirements.  Capital expenditures incurred amounted to $3.0 million in the third quarter of fiscal year 2022 and was $15.0 million for the first nine months of fiscal year 2022.  Our capital investments were focused on improving our efficiencies, yields, quality, and capabilities.  As of April 30, 2022, we had $11.8 million in cash, in addition to $47.7 million of available borrowing capacity under our $160 million senior revolving credit facility.  Availability on the revolver, which had $111.1 million drawn at April 30, 2022, was subject to advance rates on eligible accounts receivable and inventories.  Borrowing is up primarily due to increased working capital requirements associated with increased sales prices and inventory cost.  Our term loan and revolver mature in June 2025.  Accounting rules require asset-based debt agreements like our revolver to be classified as a current liability, despite its June 2025 maturity. Webco's stock repurchase program authorizes the purchase of up to $20 million of our outstanding common stock in private or open market transactions.  During the third quarter of fiscal year 2022, we repurchased 7,500 shares of the company's stock, bringing the total thus far in the current fiscal year to 50,100 shares.  Webco purchased 51,000 and 36,300 shares in fiscal years 2021 and 2020.   The repurchase plan may be extended, suspended, or discontinued at any time, without notice, at the Board's discretion.  Webco's mission is to continuously build on our strengths as we create a vibrant company for the ages.  We leverage on our core values of trust and teamwork, continuously building strength, agility, and innovation.  We focus on practices that support our brand, such that we are 100% engaged every day to build a forever kind of company for our Trusted Teammates, customers, business partners, investors, and community.  We provide high-quality carbon steel, stainless steel and other metal specialty tubing products designed to industry and customer specifications.  We have five tube production facilities in Oklahoma and Pennsylvania and eight value-added facilities in Oklahoma, Illinois, Michigan, Pennsylvania, and Texas, serving customers globally. Forward-looking statements: Certain statements in this release, including, but not limited to, those preceded by or predicated upon the words "anticipates," "appears," "available," "believe," "can," "consider," "expects," "forever," "hopes," "intends," "plans," "projects," "pursue,"  "should," "wishes," "would," or similar words may constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied herein. Such risks, uncertainties and factors include the factors discussed above and, among others: general economic and business conditions, including any global economic downturn; government policy or low hydrocarbon prices that stifle domestic investment in energy; competition from foreign imports, including any impacts associated with dumping or the strength of the U.S. dollar; political or social environments that are unfriendly to industrial or energy-related businesses; changes in manufacturing technology; banking environment, including availability of adequate financing; worldwide and domestic monetary policy; changes in tax rates and regulation; regulatory and permitting requirements, including, but not limited to, environmental, workforce, healthcare, safety and national security; availability and cost of adequate qualified and competent personnel; changes in import / export tariff or restrictions; volatility in raw material cost and availability for the Company, its customers and vendors; the cost and availability, including time for delivery, of parts and services necessary to maintain equipment essential to the Company's manufacturing activities; the cost and availability of manufacturing supplies, including process gasses; volatility in oil, natural gas and power cost and availability;  problems associated with product development efforts; appraised values of inventories that can impact available borrowing under the Company's credit facility; declaration of material adverse change ...Full story available on»»

Category: earningsSource: benzingaMay 23rd, 2022

Futures Jump After Biden Says Trump"s China Tariffs Under Consideration

Futures Jump After Biden Says Trump's China Tariffs Under Consideration US stock futures advanced for a second day after staging a furious rally late on Friday having slumped into a bear market just hours earlier, after President Joe Biden said China tariffs imposed by the Trump administration were under consideration, although concerns about hawkish central banks and record Covid cases in Beijing continued to weigh on the sentiment.  Contracts on the S&P 500 were up 1% by 7:15 a.m. in New York, trimming earlier gains of as much as 1.4% following remarks from Christine Lagarde that the European Central Bank is likely to start raising interest rates in July and exit sub-zero territory by the end of September which sent the euro sharply higher and hit the USD. Meanwhile, Beijing and Tianjin continue to ramp up Covid restrictions as cases climbed. Nasdaq futures also jumped, rising 1.1%. Europe rose 0.6% while Asian stocks closed mostly in the green, with Nikkei +1% and Hang Seng -1.2%. The dollar and Treasuries retreated, while bitcoin jumped to $30,500 as the crypto rout appears over. Traders interpreted Biden’s comments that he’ll discuss the US tariffs on Chinese imports with Treasury Secretary Janet Yellen when he returns from his Asia trip as a signal there could be a reversal of some Trump-imposed measures, sparking a risk-on rally.  “Today’s appetite for risk has been sparked by the US President’s announcement that trade tariffs imposed on China by the previous Trump administration will be discussed,” said Pierre Veyret, a technical analyst at ActivTrades. “Investors see this as a possible de-escalation of the trade war between the two economic superpowers, and this has revived trading optimism towards riskier assets.” Among the notable movers in premarket trading, VMware surged 19% after Bloomberg News reported that Broadcom is in talks to acquire cloud-computing company; Broadcom fell 3.5% in premarket trading. Here are some other notable premarket movers: Software stocks, such as Oracle (ORCL US), Splunk (SPLK US), ServiceNow (NOW US), Check Point Software Technologies (CHKP US), are in focus after the report on Broadcom and VMware setting up for a blockbuster tech deal. Antiviral and vaccine stocks rise in US premarket trading amid spreading cases of the monkeypox virus. SIGA Technologies (SIGA US) jumps 39%; Emergent BioSolutions (EBS US) rises 15%, Chimerix (CMRX US) gains 15%, Inovio Pharmaceuticals (INO US) +13% Dow (DOW US) shares fall as much as 1.3% premarket after Piper Sandler downgraded the chemicals maker to neutral from overweight, along with peer LyondellBasell (LYB US), amid industry concerns. TG Therapeutics (TGTX US) shares are down 3.3% premarket after falling 11% on Friday, when BofA started coverage on the biotech company with an underperform rating and $5 price target. Upwork (UPWK US) could be in focus as RBC Capital Markets analyst Brad Erickson initiates coverage of the stock with a sector perform recommendation, saying some near-term negatives for the online recruitment services firm are well discounted. US stocks have been roiled in the past two months by concerns the Fed's tightening will push the economy into a recession. A late-session rebound lifted the market from the session’s lows on Friday, though the S&P 500 still capped a seventh straight week of losses - the longest since 2001 - and briefly dipped into bear market territory, while the Dow dropped for 8 consecutive weeks, the longest stretch since 1923! “As we have seen time and time again recently, any attempted rallies appear to be short-lived with the backdrop of macroeconomic uncertainty, and any bullish breakouts have failed to endure with overall market sentiment biased toward the bears,” said Victoria Scholar, head of investment at Interactive Investor. The string of weekly losses has seen the S&P 500’s forward price-to-earnings ratio drop to 16.4, near the lowest since April 2020. This is below the average level of 17.04 times seen over the past decade, making the case for bargain hunters to step in. Separately, Biden said the US military would intervene to defend Taiwan in any attack from China, comments that appeared to break from the longstanding US policy of “strategic ambiguity” before they were walked back by White House officials. Meanwhile, his administration announced that a dozen Indo-Pacific countries will join the US in a sweeping economic initiative designed to counter China’s influence in the region. Minutes of the most recent Fed rate-setting meeting will give markets insight this week into the central bank’s tightening path. St. Louis Fed President James Bullard said the Fed should front-load an aggressive series of rate hikes to push rates to 3.5% at year’s end, which if successful would push down inflation and could lead to easing in 2023 or 2024 In Europe, the Stoxx 50 rose 0.3%. The FTSE 100 outperformed, adding 0.9%, FTSE MIB lags, dropping 1.1%. Energy, miners and travel are the strongest performing sectors. European energy shares vie with the basic resources sector to be the best-performing group in the Stoxx Europe 600 benchmark on Monday as oil stocks rise with crude prices, while Siemens Gamesa rallies after Siemens Energy made a takeover offer. Shell rises 1.7%, BP +2.4%, TotalEnergies +2.1%. Elsewgere, the Stoxx Europe Basic Resources sub-index rallies to the highest level since May 5 to lead gains in the wider regional benchmark on Monday as metals rise amid better demand outlook. Aluminum, copper and iron ore extended rebound after China cut borrowing rates last week, dollar weakened and as investors weighed outlook for lockdown relief in Shanghai. The euro rose to its highest level in four weeks and most of the region’s bonds fell after European Central Bank President Christine Lagarde said the ECB is likely to start raising interest rates in July and exit sub-zero territory by the end of September. Here are the most notable European movers: Siemens Gamesa shares gain as much as 6.7% after Siemens Energy made an offer to acquire the shares in the wind-turbine maker it does not own. Kingfisher shares advance as much as 4.9% after the B&Q owner reported 1Q sales that beat estimates and announced plans for a further GBP300m share buyback. Deutsche EuroShop shares jump as much as 44% after Oaktree and CURA offered to acquire the German retail property company in a deal valuing it at around EU1.39b. Moonpig Group gains as much as 14% as Jefferies analysts say its plan to buy Smartbox Group UK is a good use of the online greeting card company’s strong cash generation. Kainos Group shares jump as much as 25%, as Canaccord Genuity raises the stock’s rating to buy from hold following FY results, saying cost-inflation headwinds are priced in. Intertek shares fall as much as 5.3%, with Stifel cutting its rating on the company to hold from buy, saying none of the key elements of its positive thesis are still intact. Leoni shares drop as much as 7.3% after the wiring systems manufacturer said it was in advanced talks on further financing. Earlier in the session, Asian stocks were mixed as traders assessed Chinese authorities’ efforts to support the economy amid ongoing concerns over its Covid situation. The MSCI Asia Pacific Index was up 0.4%, supported by healthcare and industrials, after paring an early gain of as much as 0.7%. Japanese stocks outperformed and US index futures advanced.  Chinese shares slid after Beijing reported a record number of coronavirus cases, reviving concerns about lockdowns. Covid concerns offset any positive impact from last Friday’s greater-than-expected reduction in a key interest rate for long-term loans in an effort to counter weak demand. Investors may be turning more upbeat on Asian stocks, with the regional benchmark beating global peers last week by the most in more the two years, snapping a streak of six weekly losses. Still, the region faces the same worries about inflation and rising US interest rates that have been rattling markets around the world this year. “The energy crisis in the EU and policy tightening in the US, combined with China’s economic soft patch” are potential headwinds for Asian equities and may lead to “weak external demand for more export-oriented economies like Taiwan and Korea,” Soo Hai Lim, head of Asia ex-China equities at Barings, wrote in a note. Japanese equities climbed as US President Joe Biden’s comments during his visit to the country lifted market sentiment. Biden said a recession in the US isn’t inevitable, and reaffirmed close ties between the two countries. He also said China tariffs imposed by the Trump administration were under consideration, helping to lift regional stocks.  The Topix Index rose 0.9% to 1,894.57 as of market close, while the Nikkei advanced 1% to 27,001.52. Tokio Marine Holdings contributed the most to the Topix Index, increasing 7.6%. Out of 2,171 shares in the index, 1,681 rose and 415 fell, while 75 were unchanged. Defense stocks also got a boost after Prime Minister Fumio Kishida said President Biden supports Japan’s plan for an increase in its defense budget Stocks in India mostly declined after the central bank chief said the Reserve Bank is taking coordinated action with the country’s government to tackle inflation and a few interest rate hikes will be in store in coming months. His comments came soon after the government unveiled measures that will cost the exchequer $26 billion and will probably force the government to issue more debt to bridge the yawning budget deficit. The S&P BSE Sensex ended flat at 54,288.61 in Mumbai after giving up an advance of as much as 1.1%. The NSE Nifty 50 Index dropped 0.3%, its third decline in four sessions. Gauges of mid-sized and small stocks also plunged 0.3% and 0.6%, respectively. Out of the 30 stocks in the Sensex index, 20 advanced while 10 ended lower, with Tata Steel being the biggest drag. Eleven of 19 sector sub-indexes compiled by BSE Ltd. declined, led by metal stocks. Steel stocks plunged after the new rules imposed tariffs on export of some products. Auto and capital stocks were the best performers.  Investors remain wary of the policy decisions the central bank could take in the near-term to tackle in rising inflation, according to Arafat Saiyed, an analyst with Reliance Securities. “Changes in oil prices and amendments to import and export duties might play a role in assessing the market’s trajectory.” In rates, Treasuries dropped as investors debate the Federal Reserve’s tightening path amid mounting worries about an economic slowdown. US bonds were cheaper by 3bp-5bp across the curve with belly leading declines, underperforming vs front- and long-end, following weakness in bunds. 10-year yield around 2.83%, higher by ~5bp on day, and keeping pace with most European bond markets; belly-led losses cheapen 2s5s30s fly by ~1.5bp on the day. US IG credit issuance slate empty so far; $20b-$25b is expected this week, concentrated on Monday and Tuesday. European fixed income faded an initial push higher after Lagarde’s comments while money markets up rate-hike bets. Bund futures briefly trade above 154 before reversing, cash curve bear-flattens with the belly cheapening ~6bps. Peripheral spreads tighten to Germany, 10y Bund/BTP spreads holds above 200bps. In FX, the Bloomberg Dollar Spot Index fell as the greenback traded weaker against all of its Group-of-10 peers. The euro jumped to a session high of $1.0635 and bunds reversed an advance after ECB President Christine Lagarde said the central bank is likely to start raising interest rates in July and exit sub-zero territory by the end of September. The EUR was also bolstered by Germany IFO business confidence index rising to 93.0 in May vs estimate 91.4. The Aussie and kiwi were among the pest G-10 performers as they benefitted from Biden’s comments about the tariffs on China. Aussie was also supported after the Labor Party won the weekend election and is increasingly hopeful of gaining enough seats to form a majority government.  The pound advanced against the dollar, touching the highest level since May 5, amid broad-based greenback weakness. While asking prices rose to a new record for the fourth-straight month, there are signs the housing market is slowing, according to Rightmove. Yen steadied after gains last week as traders sought clues on the global economy. Japanese government bonds were mostly higher. The purchasing power of the yen fell to a fresh half-century low last month. In commodities, WTI rose 1.1% to trade just below $112. Most base metals are in the green; LME aluminum rises 1.4%, outperforming peers. LME nickel lags, dropping 4.2%. Spot gold climbs roughly $18 to trade around $1,865/oz Looking at today's calendar, at 830am we get the April Chicago Fed Nat Activity Index (est. 0.50, prior 0.44). CB speakers include the Fed's Bostic, ECB's Holzmann, Nagel and Villeroy and BoE's Bailey. Market Snapshot S&P 500 futures up 0.6% to 3,922.50 STOXX Europe 600 up 0.6% to 433.69 MXAP up 0.4% to 165.23 MXAPJ little changed at 539.33 Nikkei up 1.0% to 27,001.52 Topix up 0.9% to 1,894.57 Hang Seng Index down 1.2% to 20,470.06 Shanghai Composite little changed at 3,146.86 Sensex up 0.4% to 54,556.08 Australia S&P/ASX 200 little changed at 7,148.89 Kospi up 0.3% to 2,647.38 German 10Y yield little changed at 0.97% Euro up 0.5% to $1.0622 Brent Futures up 0.9% to $113.61/bbl Gold spot up 0.7% to $1,859.91 U.S. Dollar Index down 0.63% to 102.50 Top Overnight News from Bloomberg President Joe Biden said the US military would intervene to defend Taiwan in any attack from China, some of his strongest language yet seeking to deter Beijing from an invasion The Biden administration announced that a dozen Indo-Pacific countries will join the US in a sweeping economic initiative designed to counter China’s influence in the region, even as questions remain about its effectiveness The US Treasury Department is expected to tighten sanctions this week on Russia, threatening about $1 billion owed to bondholders for the rest of this year and putting the country once again on the edge of default The ECB is poised to get the power to oversee so-called transition plans by 2025, in which lenders map out their path to a carbon-neutral future. Yet several national officials who sit on the ECB’s supervisory board are skeptical that climate risks merit new rules to address them, and some are wary that the initiative exceeds the central bank’s mandate Russia is considering a plan to ease a key control on capital flows which has helped drive the ruble to the highest levels in four years as the rally is now threatening to hurt budget revenues and exporters Natural gas prices in Europe fell as much as 5.6% to the lowest level since the start of the war in Ukraine, as storage levels across the continent rise to near-normal levels As the biggest selloff in decades shook the world’s bond markets this year, some extraordinarily long-dated debt went into free fall, tumbling even more than Wall Street’s usual models predicted. To Jessica James, a managing director with Commerzbank AG in London, it wasn’t a surprise. In fact, it was validation A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed as momentum waned due to China's COVID woes and record Beijing infections. ASX 200 was just about kept afloat before ebbing lower after initial strength in mining names and the smooth change of government in Australia. Nikkei 225 advanced at the open with Tokyo said to be planning to revive its travel subsidy plan for residents. Hang Seng and Shanghai Comp were pressured by ongoing COVID concerns after Beijing extended its halt of dining in services and in-person classes for the whole city, as well as reporting a fresh record of daily COVID infections, while Shanghai restored its cross-district public transport on Sunday but ordered supermarkets and shops in the central Jingan district to shut and for residents to stay home until at least Tuesday Top Asian News Beijing reported 83 new symptomatic cases and 16 new asymptomatic cases for May 22nd with the city's total new cases at a new record, according to Bloomberg. It was also reported that thousands of Beijing residents were relocated to quarantine hotels due to a handful of infections, according to the BBC. Beijing is mulling easing its hotel quarantine requirement to one week in a hotel and one week at home from a previous hotel requirement of ten days and one week at home for international travellers, according to SCMP. Shanghai reported 570 new asymptomatic cases, 52 asymptomatic cases, 3 new COVID-related deaths and zero cases outside of quarantine, according to Reuters. Shanghai’s central district of Jingan will require all supermarkets and shops to close, while residents will be required to stay at home and conduct mass testing from May 22nd-24th, according to Reuters. China NHC Official says the COVID situation, overall, is showing a steady declining trend. Japanese PM Kishida said it is very disappointing that China is unilaterally developing areas in the East China Sea when borders are not yet set which Japan cannot accept, while it has lodged a complaint against China through diplomatic channels, according to Reuters. Japanese PM Kishida told US President Biden that they must achieve a free and open Indo-Pacific together, while President Biden said the US is fully committed to Japan's defence and that the IPEF will increase cooperation with other nations and deliver benefits to people in the region, according to Reuters. US-South Korea joint statement noted they agreed to discuss widening the scope and scale of joint military exercises and the US reiterated its commitment to defending South Korea with nuclear, conventional and missile defence, as well as reaffirmed its commitment to deploy strategic military assets in a timely and coordinated manner as necessary. The sides also condemned North Korea’s missile tests as a grave threat and agreed to relaunch a high-level extended deterrence strategy and consultation group at the earliest date, while they noted the path to dialogue with North Korea remains open and called for a resumption of negotiations, according to Reuters. US President Biden said the US-South Korea alliance has never been stronger and more vibrant. President Biden added they are ready to strengthen the joint defence posture to counter North Korea and are ready to work toward the complete denuclearisation of North Korea, while he offered vaccines to North Korea and said he would meet with North Korean leader Kim if he is serious, according to Reuters. South Korean President Yoon said North Korea is advancing nuclear capabilities and that US President Biden shares grave concerns regarding North Korea’s nuclear capabilities, while Yoon said they discussed the timing of possible deployment of fighter jets and bombers, according to Reuters. European bourses are mixed/modestly-firmer, Euro Stoxx 50 +0.3%, as the initial upside momentum waned amid fresh China COVID updates and hawkish ECB commentary. Note, the FTSE MIB is the noted underperformer this morning, -1.0%, amid multiple large-cap names trading ex-divided. Stateside, futures are firmer but similarly off best levels, ES +0.5%, with recent/familiar themes very much in focus ahead of a thin US-specific docket. XPeng (XPEV) Q1 2022 (USD): EPS -0.32 (exp. -0.30), Revenue 1.176bln (exp. 1.16bln); Vehicle Deliveries 34.56k, +159% YY. -2.8% in pre-market JPMorgan (JPM) has reaffirmed its adjusted expenses guidance; credit outlook remains positive; sees FY22 NII USD 56bln (prev. USD 53bln) Top European News EU’s infectious-disease agency is to recommend member states prepare strategies for possible vaccination programmes to counter increasing monkeypox cases, according to FT. It was also reported that Austria confirmed its first case of monkeypox and that Switzerland also confirmed its first case of monkeypox in the canton of Bern, according to Reuters. EU policymakers are reportedly renewing efforts to push for real-time databases of stock and bond trading information as they believe that a 'consolidated tape' will make EU exchanges more attractive for investors, according to FT. EU Commission has proposed maintaining EU borrowing limits suspension next year amid the war in Ukraine; expects to reinstate limits in 2024; Germany supports the suspension. Fixed Income Bunds and Eurozone peers underperform as ECB President Lagarde signals end of negative rates by September. 10 year German bond nearer 153.00 having topped 154.00, Gilts around 1/4 point below par after trading flat at best and T-note shy of 120-00 within 120-03+/119-21+ range. EU NG issuance covered 1.38 times and Austria announces leads for 2049 Green syndication. In FX Euro joins Kiwi at the top of G10 ranks as President Lagarde chimes with end of NIRP by Q3 guidance, EUR/USD sets fresh May peak near 1.0690. Bulk of NZIER shadow board believe RBNZ will deliver another 50bp hike on Wednesday, NZD/USD hovers comfortably above 0.6450 in the run up to NZ Q1 retail sales. DXY in danger of losing 102.000+ status as Euro revival boosts other index components. Aussie up with price of iron ore and extended Yuan recovery gains with change of PM and Government regime taken in stride; AUD/USD probes 0.7100, USD/CNH not far from Fib support sub-6.6500, USD/CNY a tad lower. Sterling eyes 1.2600 awaiting BoE Governor Bailey at a PM panel discussion, Loonie and Nokkie glean traction via firm WTI and Brent, USD/CAD under 1.2800, EUR/NOK beneath 10.3000. Lira languishing after CBRT survey showing higher end 2022 forecasts for Turkish CPI, current account deficit and USD/TRY circa 17.5690 vs just shy of 16.0000 at present. Commodities WTI and Brent are firmer and in-proximity to session highs amid USD action offsetting the earlier drift with risk sentiment/China's mixed COVID stance. Currently, the benchmarks are just off highs of USD 111.96/bbl and USD 114.34/bbl respectively, vs lows of 109.50 and 111.97 respectively. Saudi Arabia signalled it will stand by Russia as a member of OPEC+ amid mounting pressure from sanctions, according to FT. Iraq’s government aims to set up a new oil company in the Kurdistan region and expects to enter service contracts with local oil firms, according to Reuters. Iran’s Oil Minister agreed to revive the pipeline laying project to pump Iranian gas to Oman which was stalled for nearly two decades, according to IRNA. Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani said Iran’s leadership has matters under review regarding “the Iranian nuclear file” and said that pumping additional quantities of Iranian oil to the market will help stabilise crude prices and lower inflation, according to Al Jazeera TV. India cut its excise duty on petrol by INR 8/litre and diesel by INR 6/litre which will result in a revenue loss of about INR 1tln for the government, while Indian Finance Minister Sitharaman announced subsidies on cooking gas cylinders, as well as cuts to custom duties on raw materials and intermediaries for plastic products, according to Reuters. Indian oil minister says oil remaining at USD 110/bbl could lead to bigger threats than inflation, via CNBC TV18. Central Banks ECB's Lagarde says based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter; against the backdrop of the evidence I presented above, I expect net purchases under the APP to end very early in the third quarter. This would allow us a rate lift-off at our meeting in July, in line with our forward guidance. The next stage of normalisation would need to be guided by the evolution of the medium-term inflation outlook. If we see inflation stabilising at 2% over the medium term, a progressive further normalisation of interest rates towards the neutral rate will be appropriate. ECB President Lagarde indicated that July is likely for a rate increase as she noted that they will follow the path of stopping net asset purchases and then hike interest rates sometime after that which could be a few weeks, according to Bloomberg. Bundesbank Monthly Report: German GDP is likely to increase modestly in Q2 from current standpoint. Click here for more detail. RBI Governor Das says, broadly, they want to increase rates in the next few meetings, at least at the next one; cannot give a number on inflation at present, the next MPC may be the time to do so. CBRT Survey (May), end-2022 Forecasts: CPI 57.92% (prev. 46.44%), GDP Growth 3.3% (prev. 3.2%), USD/TRY 17.5682 (prev. 16.8481), Current Account Balance USD -34.34bln (prev. USD -27.5bln). US Event Calendar 08:30: April Chicago Fed Nat Activity Index, est. 0.50, prior 0.44 12:00: Fed’s Bostic Discusses the Economic Outlook 19:30: Fed’s George Gives Speech at Agricultural Symposium DB's Jim Reid concludes the overnight wrap After a stressful couple of hours in front of the football yesterday afternoon, there's not too much the market can throw at me this week to raise the heart rate any higher than it was for the brief moments that I thought Liverpool were going to win the Premier League from a very unlikely set of final day circumstances. However it is the hope that kills you and at least we have the Champions League final on Saturday to look forward to now. There will be a lot of market water to flow under the bridge before that. This all follows a fascinating end to last week with the S&P 500 in bear market territory as Europe went home for the weekend after the index had fallen -20.6% from its peak going into the last couple of hours of another brutal week. However a sharp late rally sent the index from c.-2.3% on the day to close +0.01%. There was no catalyst but traders clearly didn’t want to go home for the weekend as lightly positioned as they were. Regardless, this was the first time we’ve seen seven successive weekly declines in the index since the fallout from the dotcom bubble bursting in 2001. Watch out for my CoTD on this later. If you’re not on my daily CoTD and want to be, please send an email to to get added. For what it's worth the Dow saw the first successive 8 weekly decline since 1923 which really brings home the state of the current sell-off. After having a high conviction recession call all year for 2023, I can't say I have high conviction in the near-term. I don't expect that we will fall into recession imminently in the US or Europe and if that's the case then markets are likely to eventually stabilise and rally back. However if we do see a H2 2022 recession then this sell-off will likely end up at the more severe end of the historical recessionary sell-offs given the very high starting valuations (see Binky Chadha's excellent strategy piece here for more on this). However if I'm right that a 2023 recession is unavoidable then however much we rally back this year we'll be below current levels for equities in 12-18 months' time in my view. Given that my H2 2023 HY credit spread forecast is +850bp then that backs this point up. Longer-term if we do get a recession and inflation proves sticky over that period then equities are going to have a long period of mean reversion of valuations and it will be a difficult few years ahead. So the path of equities in my opinion depends on the recession timing and what inflation does when we hit that recession. Moving from pontificating about the next few years to now looking at what's coming up this week. The global preliminary PMIs for May tomorrow will be front and centre for investors following the growth concerns that have roiled markets of late. Central banks will also remain in focus as we will get the latest FOMC meeting minutes (Wednesday) and the US April PCE, the Fed's preferred inflation proxy, on Friday. An array of global industrial activity data will be another theme to watch. Consumer sentiment will be in focus too, with a number of confidence measures from Europe and personal income and spending data from the US (Friday). Corporates reporting results will include spending bellwethers Macy's and Costco. After last week’s retail earnings bloodbath (e.g. Walmart and Target) these will get added attention. On the Fed, the minutes may be a bit stale now but it’ll still be interesting to see the insight around the biases of 50bps vs 25/75bps hikes after the next couple of meetings. Thoughts on QT will also be devoured. Staying with the US, for the personal income and spending numbers on Friday, our US economists expect the two indicators to slow to +0.2% and +0.6% in April, respectively. The Fed’s preferred inflation gauge, the PCE, will be another important metric released the same day and DB’s economics team expects the April core reading to stay at +0.3%. Other US data will include April new home sales tomorrow and April durable goods orders on Wednesday. A number of manufacturing and business activity indicators are in store, too. Regional Fed indicators throughout the week will include an April gauge of national activity from the Chicago Fed (today) and May manufacturing indices from the Richmond Fed (tomorrow) and the Kansas City Fed (Thursday). In Europe, the May IFO business climate indicator for Germany will be out today, followed by a manufacturing confidence gauge for France (tomorrow) and Italy (Thursday). China's industrial profits are due on Friday. This week will also feature a number of important summits. Among them will be the World Economic Forum’s annual meeting in Davos that has now started and will run until next Thursday. It'll be the first in-person meeting since the pandemic began and geopolitics will likely be in focus. Meanwhile, President Biden will travel to Asia for the first time as US president and attend a Quad summit in Tokyo tomorrow. Details on the Indo-Pacific Economic Framework are expected. Finally, NATO Parliamentary Assembly’s 2022 Spring Session will be held in Vilnius from next Friday to May 30th. In corporate earnings, investors will be closely watching Macy's, Costco and Dollar General after this week's slump in Walmart and Target. Amid the carnage in tech, several companies that were propelled by the pandemic will be in focus too, with reporters including NVIDIA, Snowflake (Wednesday) and Zoom (today). Other notable corporates releasing earnings will be Lenovo, Alibaba, Baidu (Thursday) and XPeng (Monday). Overnight in Asia, equity markets are weak but US futures continue to bounce back. The Hang Seng (-1.75%) is the largest underperformer amid a fresh sell-off in Chinese listed tech stocks. Additionally, stocks in mainland China are also weak with the Shanghai Composite (-0.47%) and CSI (-0.99%) lower as Beijing reported record number of fresh Covid-19 cases, renewing concerns about a lockdown. Elsewhere, the Nikkei (+0.50%) is up in early trade while the Kospi (+0.02%) is flat. S&P 500 (+0.80%), NASDAQ 100 (+1.03%) and DAX (+0.96%) futures are all edging higher though and 10yr USTs are around +3.5bps higher. A quick review of last week’s markets now. Growth fears gripped markets while global central bankers retrenched their expectations for a strong dose of monetary tightening this year to combat inflation. The headline was the S&P 500 fell for the seventh straight week for the first time since after the tech bubble burst in 2001, tumbling -3.05% (+0.01% Friday), after back-and-forth price action which included an ignominious -4% decline on Wednesday, the worst daily performance in nearly two years. The index is now -18.68% from its YTD highs, narrowly avoiding a -20% bear market after a late rally to end the week, after dipping into intraday on Friday. Without one discreet driver, an amalgamation of worse-than-expected domestic data, fears about global growth prospects, and poor earnings from domestic retail giants that called into question the vitality of the American consumer soured sentiment. Indeed, on the latter point, consumer staples (-8.63%) and discretionary (-7.44%) were by far the largest underperformers on the week. European stocks managed to fare better, with the STOXX 600 falling -0.55% (+0.73% Friday) and the DAX losing just -0.33% (+0.72% Friday). The growth fears drove longer-dated sovereign bond yields over the week, with 10yr Treasuries falling -13.7bps (-5.6bps Friday). Meanwhile, the front end of the curve was relatively anchored, with 2yr yields basically unchanged over the week (-2.7bps Friday), and the amount of Fed hikes priced in through 2022 edging +3bps higher over the week to 2.75%, bringing 2s10s back below 20bps for the first time since early May. Chair Powell reiterated his commitment to bring inflation back to target, suggesting that getting policy rates to neutral did not constitute a stopping point if the Fed did not have “clear and convincing” evidence that inflation was falling. In Europe the front end was also weaker than the back end as Dutch central bank Governor Knot became the first General Council member to countenance +50bp hikes. 10yr yields didn't rally as much as in the US, closing the week at -0.4bps (-0.5bps Friday). The spectre of faster ECB tightening and slowing global growth drove 10yr BTPs to underperform, widening +15.2bps (+10.2bps Friday) to 205bps against bund equivalents. Gilts underperformed other sovereign bonds, with 10yr benchmarks selling off +14.9bps (+2.8bps Friday) and 2yr yields increasing +25.8bps (+1.6bps Friday). This came as UK CPI hit a 40yr high of 9.0% in April even if it slightly missed forecasts for the first time in seven months. Oil proved resilient to the growth fears rumbling through markets, with both brent crude (+0.90%, +0.46% Friday) and WTI futures (+2.48%, +0.91% Friday) posting modest gains over the week. Tyler Durden Mon, 05/23/2022 - 07:49.....»»

Category: blogSource: zerohedgeMay 23rd, 2022

Freedom And Sound Money: Two Sides Of A Coin

Freedom And Sound Money: Two Sides Of A Coin Authored by Thorsten Polleit via The Mises Institute, It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of right. So wrote Ludwig von Mises in The Theory of Money and Credit in 1912. And further: The sound-money principle has two aspects. It is affirmative in approving the market's choice of a commonly used medium of exchange. It is negative in obstructing the government's propensity to meddle with the currency system. Against this backdrop, modern day monetary systems appear to have been drifting farther and farther away from the sound money principle in the last decades. In all countries of the so-called free world, money represents nowadays a government controlled irredeemable paper, or "fiat," money standard. The widely held view is that this money system would be compatible with the ideal of a free society and conducive to sustainable output and employment growth. To be sure, there are voices calling for caution. Taking a historical viewpoint, Milton Friedman stated: The world is now engaged in a great experiment to see whether it can fashion a different anchor, one that depends on government restraint rather than on the costs of acquiring a physical commodity. Irving Fisher, evaluating past experience, wrote: "Irredeemable paper money has almost invariably proved a curse to the country employing it." The primary cause for concern rests on a key characteristic of government controlled paper money: the system's unrestrained ability to expand money and credit supply. In contrast, under the (freely chosen) gold standard, money (e.g., gold) supply was expected to increase as well over time, but only in proportion to how the economy expanded—i.e., an increase in money demand, brought about by an increase in economic activity, would bring additional gold supply to the market (by, for instance, increased mining which would become increasingly profitable). As such, the gold standard puts an "automatic break" on money expansion—the latter would be, at least in theory, related to the economy's growth trend. The government controlled fiat money system has no inherent limit to money and credit expansion. In fact, quite the opposite holds true: Central banks, the monopolistic suppliers of governments' money, have actually been deliberately designed to be able to change money and credit supply by actually any amount at any time. To prevent abuse of their unlimited power over the quantity of money supply, most central banks have been granted political independence over the past decades. This has been done in order to keep politicians who, in order to get reelected, from trading off the benefits of a monetary policy induced stimulus to the economy against future costs in the form of inflation. In addition, many central banks have been mandated to seek low and stable inflation—measured by consumer price indices—as their primary objective. These two institutional factors—political independency and the mandate to preserve the purchasing power of money—are now widely seen as proper guarantees for preserving sound money. Be that as it may, Mises's concerns appear as relevant as ever: The dissociation of the currencies from a definitive and unchangeable gold parity has made the value of money a plaything of politics…. We are not very far now from a state of affairs in which "economic policy" is primarily understood to mean the question of influencing the purchasing power of money. Whereas the objective to preserve the value of government controlled paper money appears to be a laudable one, the truth is that it is (virtually) impossible to deliver on such a promise. In fact, there are often overwhelming political-economic incentives for a society to increase its money and credit supply, if possible, in order to influence societal developments according to ideological preset designs rather than relying on free market principles. This very tendency is particularly evidenced by the fact that central banks are regularly called upon to take into account output growth and the economy's job situation when setting interest rates. And these considerations are what seem to cause severe problems in a paper money system if and when there is no clear-cut limit to money and credit expansion. To bring home this point, it is instructive to take a brief look at the relationship between credit and nominal output and "wealth" growth (which is defined here, for simplicity, as gross domestic product plus stock market capitalization). The figure below shows the annual changes of US nominal gross domestic product (GDP) and bank credit in percent from 1974 to the beginning of 2022. As can be seen, both series are positively correlated in the period under review: On average, rising output had been accompanied by rising bank credit and vice versa. It is actually an instructive illustration of the Austrian business cycle theory (ABCT), which holds that the expansion of bank credit is not only closely associated with a boom-and-bust cycle, affecting both real magnitudes and goods prices, but its driving force. Also from 1974 to the beginning of 2022, the following figure shows the US money stock in billions of US dollars and the S&P 500 stock market index. The rising money stock is basically the re of result of the expansion of bank credit—through which new money is created. As can be seen, the development of the money stock trends on the same wavelength as the stock market. Why? On the one hand, the increase in nominal GDP over time is reflected in rising values of corporate valuations. On the other hand, the rising money stock pushes goods prices up, including stock prices. In other words: The stock market performance is—sometimes more so, sometimes less so—attributable to the fiat-money-caused goods price inflation. From the end of 2019 to the first quarter 2022 the US central bank increased the money stock M2 by 43 percent, while the stock market gained 63 percent in the same period. As the increase in the money stock helped inflating nominal GDP, it also translated into (substantially) higher stock prices. In other words: The monetary expansion caused "asset price inflation." Looking at these charts, the message seems to be: The chronic increase in credit and money supply has, on average, been "quite positive" for output and wealth. However, this would be a rather shortsighted interpretation. For a fiat money system, the expansion of credit and money makes a few benefit at the expense of many others. What is more, its "invisible effect" is that it prevents all the economic success and the resulting distributive income and wealth effects that had occurred had there not been an issuance of additional credit and fiat money. As even classical economic theorists warn, a money- and credit-induced stimulus to the economy is (as the ABCT shows) short-lived and will eventually lead to inflation, as outlined by David Hume in 1742: Augmentation (in the quantity of money) has no other effect than to heighten the price of labour and commodities…. in the progress towards these changes, the augmentation may have some influence, by exciting industry, but after the prices are settled … it has no manner of influence. However, the today's intellectual conviction of the economic mainstream, which is dominated by Keynesian economics, is that by lowering interest rates the central bank can stimulate growth and employment. So it does not take wonder that, especially so in periods in which inflation is seen to be "under control," central banks are pressured into an "expansionary" monetary policy to fight recession. In fact, it is widely considered "appropriate" if monetary policy keeps borrowing costs at the lowest level possible. In the work of Mises one finds a well-founded criticism of this broadly held conviction. He writes: Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production. It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation. In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters. The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy. Mises also outlines what the propensity to lower interest rates and increasing money and credit supply does to the economy. The Austrian school's monetary theory of the trade cycle maintains that it is monetary expansion which is at the heart of the economies' boom and bust cycles. Overly generous supply of money and credit induces what is usually called an "economic upswing." In it's wake, economic growth increases and employment rises. With the liquidity flush, however, come misalignments, a distortion of relative prices, so the theoretical reasoning is. Sooner or later, the artificial money and credit-fueled expansion is unsustainable and turns into a recession. In ignorance and/or in failing to identify the very forces responsible for the economic malaise, namely excessive money and credit creation in the past, falling output and rising unemployment provoke public calls for an even easier monetary policy. Central banks are not in a position to withstand such demands if they do not have any "anchoring"—that is a (fixed) rule which restrains the increase in money and credit supply in day-to-day operations. In the absence of such a limit, central banks, confronted with a severe economic crisis, are most likely to be forced to trade off the growth and employment objective against the preserving the value of money—thereby compromising a crucial pillar of the free society. Seen against this backdrop, today's monetary policy actually resembles a lawless undertaking. The zeitgeist holds that "inflation targeting" (IT)—the so-called state-of-the-art concept, from the point of view of most central banks—will do the trick to prevent monetary policy from causing unintended trouble. In practice, however, IT does not have any external anchor. Under IT, it is the central bank itself that calculates inflation forecasts which, in turn, determine how the bank set interest rates; setting a quantitative limit to money and credit expansion is usually not seen as a policy objective. IT can thus hardly inspire confidence that it will mitigate the threat to the value of paper money stemming from governments (in the form of fraud/misuse) and/or politically independent monetary policy makers (in the form of policy mistakes). The return to "monetary policy without rule" began in the early 1990s, when various central banks abandoned monetary aggregates as a major guide post for setting interest rates. It was argued that "demand for money" had become an unstable indicator in the "short term" and that, as such, money could no longer be used as a yardstick in setting monetary policy, particularly so as policy makers were making interest rate decisions every few weeks. However, that guide post has not been replaced with anything since then. In view of the return of discretion in monetary policy, it might be insightful to quote Hayek's concern; namely, that inflation "is the inevitable result of a policy which regards all the other decisions as data to which the supply of money must be adapted so that the damage done by other measures will be as little noticed as possible." In the long run, such a policy would cause central banks to become "the captives of their own decisions, when others force them to adopt measures that they know to be harmful." Echoing the warning that Ludwig von Mises gave back in The Theory of Money and Credit, Hayek concluded: The inflationary bias of our day is largely the result of the prevalence of the short-term view, which in turns stems from the great difficulty of recognising the more remote consequences of current measures, and from the inevitable preoccupation of practical men, and particularly politicians, with the immediate problems and the achievements of near goals. What can we learn from all this? The inherent risks of today's paper money standard—the very ability of expanding the stock of money and credit at will by actually any amount at any time—are no longer paid proper attention: Putting a limit on the expansion of money and credit does not rank among the essential ingredients for "modern" monetary policy making. The discretionary handling of paper money thus increases the potential for a costly failure substantially. A first step for moving back towards the sound money principle—which is doing justice to the ideal of a free society—would be to make monetary policy limiting—e.g., stopping altogether—money supply growth. Tyler Durden Sun, 05/22/2022 - 09:20.....»»

Category: dealsSource: nytMay 22nd, 2022

Why Is Steel Dynamics (STLD) Down 18.8% Since Last Earnings Report?

Steel Dynamics (STLD) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. A month has gone by since the last earnings report for Steel Dynamics (STLD). Shares have lost about 18.8% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Steel Dynamics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.Steel Dynamics' Earnings and Sales Top Estimates in Q1Steel Dynamics logged a net income of $1.1 billion or $5.71 per share in first-quarter 2022, up from $430.5 million or $2.03 in the year-ago quarter.Barring one-time items, adjusted earnings per share came in at $6.02, topping the Zacks Consensus Estimate of $5.58.Net sales in the quarter increased roughly 57% year over year to a record $5,569.9 million. The figure beat the Zacks Consensus Estimate of $5,234.3 million.Segment HighlightsNet sales in the company's steel operations rose around 49.8% year over year to $3,762.5 million in the reported quarter. Operating income increased roughly 81.9% year over year to $1,166.9 million. The average product selling price for the unit rose around 50% year over year to $1,561 per ton in the reported quarter. The company had record steel shipments of around 2.9 million tons.The company's steel fabrication operations raked in sales of around $929.9 million, up around 261.9% year over year. The segment posted an operating income of $466.9 million compared with an operating income of $9.9 million in the year-ago quarter. The non-residential construction sector remained strong in the quarter, leading to a record order backlog with record forward pricing for the company's steel fabrication platform.Net sales in metals recycling operations increased almost 23.3% year over year to $579.6 million. Operating income decreased roughly 10.7% year over year to $48.1 million.Financial PositionSteel Dynamics ended the first quarter with cash and cash equivalents of $1,189.5 million, down from $1,245.2 million in the year-ago quarter. Long-term debt declined to $3,010.1 million from $3,016.2 million in the year-ago quarter.The company generated around $818.9 million of cash flow from operations in the first quarter.OutlookSteel Dynamics stated that it is confident that domestic steel consumption will continue to be strong this year and into 2023 based on the prevailing market conditions. Order entry activity continues to be strong across all of the company’s businesses. Steel prices are expected to be supported by strong demand, balanced customer inventory levels, and higher raw material costs.The company anticipates automotive, industrial, and energy sectors to remain strong steel consumers in 2022, with demand from the construction sector at the lead. The order backlog at its steel fabrication operations remains at record volume and forward pricing levels. This along with continued strong order activity and broad customer optimism supports strong overall demand dynamics for the construction industry. STLD projects that second-quarter 2022 consolidated earnings will represent another record quarterly performance. How Have Estimates Been Moving Since Then?It turns out, fresh estimates have trended upward during the past month.The consensus estimate has shifted 12.22% due to these changes.VGM ScoresCurrently, Steel Dynamics has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Steel Dynamics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months. 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 Steel Dynamics, Inc. (STLD): Free Stock Analysis Report To read this article on click here......»»

Category: topSource: zacksMay 21st, 2022

Futures Slide After Dismal Target Earnings, Plunging Mortgage Apps

Futures Slide After Dismal Target Earnings, Plunging Mortgage Apps The brief bear market rally in US stocks was set to end with a whimper following Tuesday’s strong dead cat bounce, after Fed Chair Jerome Powell gave his most hawkish remarks to date. Hope that China lockdowns would soon end turned to skepticism, as the yuan slumped after its biggest gain since October, while dismal guidance from Target - which warned that inflation was crushing margins - confirmed what Walmart said yesterday, namely that the US consumer is running on fumes. An 11% plunge in the latest weekly mortgage applications only reaffirmed that a hard-landing is inevitable and just a matter of time. Nasdaq 100 futures dropped 1%, while S&P 500 futures slipped 0.7% after US stocks surged on Tuesday. Treasury yields hit session highs, rising back to 3.0%, and the dollar snapped a three-day losing streak. Bitcoin got hammered again, sliding back under $30k. Among the biggest premarket movers, Target crashed 22% with Vital Knowledge calling its margin shortfall “more dramatic” than what Walmart posted on Tuesday, citing industry-wide macro problems. The retailer reduced its full-year forecast on operating income margin to about 6% of sales this year. It also reported first-quarter adjusted earnings per share that came in below expectations. Food and gas inflation is drawing money away from discretionary and general merchandise spending, forcing “aggressive” discounting to clear out product in the latter category, Vital’s Adam Crisafulli said in a note. Elsewhere in US premarket trading, Tesla slipped 1% after its price target was cut at Piper Sandler. Meanwhile, Twitter Inc. also traded slightly lower even as the social media platform’s board said it plans to enforce its $44 billion agreement to be bought by Elon Musk. Here are some other notable premarket movers: US tech hardware stocks may be in focus as Jefferies Group LLC strategists have turned bullish on the likes of IBM (IBM US), Cisco Systems (CSCO US) and Microchip Technology (MCHP US) after this year’s steep declines for US information technology shares National CineMedia (NCMI US) shares jump as much as 33% in US premarket trading after AMC Entertainment (AMC US) reported a 6.8% stake in the cinema advertising company. AMC shares gain 1.2% in premarket trading. DLocal Ltd. (DLO US) shares gain as much as 15% in US premarket trading after the Uruguay-based payment platform posted 1Q revenue that doubled from the year-earlier period and topped expectations. Doximity (DOCS US) shares fall as much as 19% in US premarket trading, after the online healthcare platform provider’s forecast for 1Q revenue missed the average analyst estimate, prompting analysts to slash their price targets on the stock. Penn National (PENN US) may be active on Wednesday as Jefferies raised the recommendation to buy from hold. The company’s shares rose 4% in premarket trading. On Tuesday, Powell said the Fed will keep raising interest rates until there is “clear and convincing” evidence that inflation is in retreat, which initially pushed stocks lower but then was faded as risk closed near session highs as nothing Powell said was actually new. The S&P 500 is emerging from the longest weekly slump since 2011 as investors have been gripped by fears of hawkish monetary policy and surging inflation driving the economy into a recession. As also discussed yesterday, Bank of America’s survey published yesterday showed that fund managers are the most underweight equities since May 2020 and are piling into cash. “This is one of the most challenging markets I have been in in my career,” Henry Peabody, fixed income portfolio manager at MFS Investment Management, said on Bloomberg Television. “I suspect at a certain point of time we’re going to have the liquidity of the markets challenged. They really haven’t been thus far.” As the Fed embarks on interest-rate hikes, frothy growth shares, including the tech sector, have suffered in particular as higher rates mean a bigger discount for the present value of future profits. This marks a major shift in investor outlook after tech stocks had been some of the market’s best performers for years. “Investor sentiment and confidence remain shaky, and as a result, we are likely to see volatile and choppy markets until we get further clarity on the 3Rs — rates, recession, and risk,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. Rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns. In what’s seen as his most hawkish remarks to date, Powell said that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. “We’ll have this kind of volatility as people jump in and look at opportunities to buy as markets decline,” Shana Sissel, director of investments at Cope Corrales, said on Bloomberg Television, referring to the Wall Street bounce. The Fed is going to struggle to achieve a soft economic landing, she added. In Europe, the Stoxx 600 Index was little changed, with energy stocks outperforming. Spain's IBEX outperformed, adding 0.5%. ABN Amro slumped almost 10% after the Dutch lender reported first-quarter results burdened by rising costs.  The Stoxx Europe 600 Basic Resources sub-index drops, underperforming other sectors in the broader regional benchmark on Wednesday as base metals ended a three-day rebound and as iron ore declined. Base metals paused a recovery from this year’s lows, with copper and aluminum stalling after hawkish remarks from Federal Reserve Chair Jerome Powell. Iron ore futures declined as investors weighed China’s faltering economy and the prospect of support measures amid a mixed outlook for steel demand. Basic resources index -0.6%, halting three days of gains; broader benchmark little changed. Siemens Gamesa jumped as much as 15% as Siemens Energy weighs a bid for the shares of the troubled Spanish wind-turbine maker it doesn’t already own. Here are the most notable movers: European oil and gas stocks rise amid higher crude prices and broker upgrades, while renewables rallied after Siemens Energy confirmed it was considering a buyout offer for Siemens Gamesa. Shell gains as much as 1.8%, BP +1.8%, Equinor +3.4%, Gamesa +15%, Vestas +7.7% Air France-KLM shares rise as much as 7.5% in Paris on news that container line CMA CGM intends to take a stake of up to 9% in the French carrier following the signing of a long-term strategic partnership in the air cargo market. Rockwool shares gain as much as 8.3%, most since Feb. 15, as the company boosts its sales in local currencies forecast for the full year. British Land shares rise as much as 4.2%, as the company’s results show a strong recovery and a good performance in the UK landlord’s portfolio, analysts say. Vistry shares climb as much as 8% with analysts saying the UK homebuilder’s trading update looks positive, particularly the robust momentum in its sales rate. The Stoxx Europe 600 Basic Resources sub-index drops, underperforming other sectors in the broader regional benchmark on Wednesday as base metals ended a three-day rebound and as iron ore declined. Rio Tinto slips as much as 1.5%, Antofagasta -2.7%, Anglo American -1.5% Prosus shares fall as much as 4.2% and Naspers sinks as much as 6.7% after Tencent reported first- quarter revenue and net income that both missed analyst expectations. TUI shares drop as much as 13% in London after the firm announced an equity raise in order to repay a chunk of government aid that helped see it through the coronavirus crisis. ABN Amro shares declined as much as 11% after the lender reported 1Q earnings that showed higher costs related to money laundering. Experian shares fall as much as 5.1% after the consumer-credit reporting company reported full-year results, with Citi saying organic growth missed consensus. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank. The pound weakened and gilt yields fell as traders speculated that the Bank of England will struggle to rein in inflation and avoid a recession. Elsewhere, the Biden administration is poised to fully block Russia’s ability to pay US bondholders after a deadline expires next week, a move that could bring Moscow closer to a default. Sri Lanka, meantime, is on the brink of reneging on $12.6 billion of overseas bonds, a warning sign to investors in other developing nations that surging inflation is set to take a painful toll. Earlier in the session, Asian stocks advanced for a fourth session as strong US economic data allayed worries about the global growth outlook, while Chinese equities slipped. The MSCI Asia-Pacific Index rose as much as 1%, extending its rebound from an almost two-year low reached last Thursday. Materials shares led the gains, with Australia’s BHP Group climbing 3.2%. Benchmarks in most markets were in the black, with Indonesia, Taiwan and Singapore chalking up gains of at least 1%.  Upbeat retail sales and industrial production data from the US underpinned sentiment, so much so that investors barely reacted to hawkish comments from Federal Reserve Chair Jerome Powell. He indicated that policy makers won’t hesitate to raise interest rates beyond neutral levels to contain inflation. Equities in China bucked the trend. Property shares paced the drop after data showed the decline in China’s new home prices accelerated in April, while tech shares also lost steam ahead of Tencent’s earnings which missed expectations and slumped. Local investors may be underwhelmed by a lack of details from Chinese Vice Premier Liu He’s fresh vow to support tech firms. Liu said the government will support the development of digital economy companies and their public listings, in remarks reported by state media after a symposium with the heads of some the nation’s largest private firms. Lee Chiwoong, chief economist at Mitsubishi UFJ Morgan Stanley Securities, said Liu’s comments point to an easing of the crackdown on internet firms. “The Chinese government is stepping up measures to support the economy following the slowdown,” Lee said.  “As bottlenecks stemming from lockdowns in Shanghai ease, that impact will gradually show up in the economy,” Lee added. “We should be able to clearly see an economic recovery in the second half of this year.” Japanese equities gained as investors assessed strong US economic data and comments by Federal Reserve Chair Jerome Powell on the outlook for interest rate hikes.  The Topix Index rose 1% to close at 1,884.69. Tokyo time, while the Nikkei advanced 0.9% to 26,911.20. Sony Group Corp. contributed the most to the Topix gain, increasing 2.9%. Out of 2,172 shares in the index, 1,345 rose and 749 fell, while 78 were unchanged. Chinese stocks erased losses intraday after earlier disappointment over a much-anticipated meeting between Vice Premier Liu He and some of the nation’s tech giants. Overnight, data showed US retail sales grew at a solid pace in April, while factory production rose at a solid pace for a third month. Australia's stocks also gained, with the S&P/ASX 200 index rising 1% to close at 7,182.70, extending its winning streak to a fourth day. Miners contributed the most to its advance. All sectors gained, except for consumer staples and financials. Eagers slumped after saying that its 1H profit will be lower than it was a year ago and flagged reduced new vehicle deliveries. Wage data was also in focus. Australian wages advanced at less than half the pace of consumer-price gains in the first three months of the year, reinforcing the RBA’s signal that it will stick to quarter-point hikes.  In New Zealand, the S&P/NZX 50 index rose 1.1% to 11,258.28 India’s benchmark equities index fell, snapping two sessions of gains, weighed by declines in engineering company Larsen & Toubro Ltd.    The S&P BSE Sensex dropped 0.2% to close at 54,208.53 in Mumbai, after rising as much as 0.9% earlier in the session. The NSE Nifty 50 Index fell 0.1% to 16,240.30.  Larsen & Toubro slipped 2% and was the biggest drag on the Sensex, which saw 17 of its 30 member stocks decline. Sixteen of 19 sectoral sub-indexes compiled by BSE Ltd. dropped, led by a gauge of realty shares.   State-run Life Insurance Corporation, which debuted Tuesday, rose 0.1% to 876 rupees, still below the issue price of 949 rupees. In earnings, of the 34 Nifty 50 firms that have announced results so far, 20 have either met or exceeded analyst estimates, while 14 have missed. Consumer goods company ITC Ltd. is scheduled to announce results on Wednesday. In FX, the Bloomberg Dollar Spot Index reversed an early loss and the greenback advanced versus all of its Group-of-10 peers apart from the yen. The pound was the worst G-10 performer, tracking Gilt yields lower and paring the previous day’s gains. A widely expected jump in UK inflation prompted investors to pare back bets on BOE rate hikes. Money markets are pricing around 120bps of BOE rate hikes by December, down from 130bps from the previous day. UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank. Consumer prices surged 9% in the year through April. The euro fell for the first day in four and weakened beyond $1.05. The Bund curve has twist flattened as traders bet on a faster pace of ECB tightening after Bank of Finland Governor Olli Rehn said there’s broad agreement among members of the Governing Council that policy rates should exit sub-zero terrain “relatively quickly.” That’s to prevent inflation expectations from becoming de- anchored, he said. The Aussie swung between gains and losses while Australia’s bonds trimmed earlier declines after a report showed wage growth last quarter was less than economists forecast. The wage price index climbed an annual 2.4% last quarter, trailing economists’ expectations and coming in well below headline inflation of 5.1%. The yen rose as US yields declined amid fragile risk sentiment. Japanese government bonds were mixed, with a decent five-year auction lending support while an overnight rise in global yields weighed on super-long maturities. In rates, Treasuries were under pressure, though most benchmark yields remained within 1bp of Tuesday’s closing levels. 10-year yields rose just shy of 3.00%, higher by less than 1bp with comparable bund yield +3.3bp and UK 10-year flat. TSY futures erased gains amid a series of block trades in 5- and 10-year note contracts starting at 5:20am ET, apparently selling flow. According to Bloomberg, six 5-year block trades and two 10-year block trades -- all 5,000 lots -- have printed since 5:20am, apparently seller-initiated as cash yields concurrently rebounded from near session lows. Wednesday’s $17b 20-year new-issue auction at 1pm ET may also weigh on the market. 20-year bond auction is this week’s only nominal coupon sale; WI yield ~3.37% exceeds all 20-year auction stops since then tenor was reintroduced in 2020, is ~27.5bp cheaper than last month’s result. Elsewhere, the UK yield curve bull-steepened with the short end richening ~5bps, while pound falls after inflation surged to a four-decade high. Money markets pare BOE rate-hike wagers. Bund curve bear-flattens while money markets bet on a faster pace of ECB tightening after ECB’s Rehn said the central bank needs to move quickly from negative rates. In commodities, WTI trades within Tuesday’s range, adding 1.6% to around $114. Most base metals are in the red; LME tin falls 1.5%, underperforming peers, LME aluminum outperforms, adding 1%. Spot gold is little changed at $1,815/oz. Looking to the day ahead now, and data releases include the UK and Canadian CPI readings for April, along with US data on housing starts and building permits for the same month. Central bank speakers include the Fed’s Harker and the ECB’s Muller. Earnings releases include Cisco, Lowe’s, Target and TJX. Finally, G7 finance ministers and central bank governors will be meeting in Germany. Market Snapshot S&P 500 futures down 0.5% to 4,065.50 STOXX Europe 600 down 0.2% to 438.11 MXAP up 0.8% to 164.43 MXAPJ up 0.7% to 539.81 Nikkei up 0.9% to 26,911.20 Topix up 1.0% to 1,884.69 Hang Seng Index up 0.2% to 20,644.28 Shanghai Composite down 0.2% to 3,085.98 Sensex up 0.3% to 54,469.39 Australia S&P/ASX 200 up 1.0% to 7,182.66 Kospi up 0.2% to 2,625.98 German 10Y yield little changed at 1.03% Euro down 0.4% to $1.0505 Brent Futures up 1.5% to $113.66/bbl Gold spot down 0.0% to $1,815.04 U.S. Dollar Index up 0.33% to 103.70 Top Overnight News from Bloomberg Sweden’s biggest pension company has begun buying government bonds amid a “paradigm shift” in the market that pushed yields to their highest level since 2018. The CIO views Treasuries as “quite attractive” after a prolonged period of razor-thin yields that forced the company into alternative and riskier asset classes to preserve returns across its $117 billion portfolio While outright China bulls may be hard to find, shifts in positioning at least point to improving sentiment. Bearish bets on stocks are being abandoned in Hong Kong, expectations for yuan volatility are falling, domestic equity traders have stopped unwinding leverage and foreigners have slowed their once-record exit from government bonds The EU is set to unveil a raft of measures ranging from boosting renewables and LNG imports to lowering energy demand in its quest to cut dependence on Russian supplies. The 195 billion-euro ($205 billion) plan due Wednesday will center on cutting red tape for wind and solar farms, paving the way for renewables to make up an increased target of 45% of its energy needs by 2030, according to draft documents seen by Bloomberg that are still subject to change A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed as the regional bourses only partially sustained the momentum from global peers. ASX 200 was led higher by outperformance in the mining and materials related sectors, while softer than expected wage price data reduced the prospects of a more aggressive RBA rate hike next month. Nikkei 225 briefly reclaimed the 27,000 level but retreated off its highs as participants digested GDP data which printed in negative territory, albeit at a narrower than feared contraction. Hang Seng and Shanghai Comp were subdued with large-cap tech stocks pressured in Hong Kong including despite beating earnings expectations and with Tencent bracing for the expected slowest revenue growth since its listing, while the mainland was hampered by the mixed COVID-19 situation as Shanghai registered a 4th consecutive day of zero transmissions outside of quarantine, although Beijing was said to lockdown some areas in its Fengtai district for 7 days. Top Asian News Shanghai authorities issued a new white list containing 864 financial institutions permitted to resume work, according to sources cited by Reuters. China, on May 20th, is to remove some COVID test requirements on travellers to China from the US, according to embassy. China's Foreign Ministry says the BRICS foreign ministers are to meet on May 19th. Goldman Sachs downgrades its 2022 China GDP growth forecast to 4.0% from 4.5%. European bourses are rangebound and relatively directionless, Euro Stoxx 50 U/C, taking impetus from a mixed APAC session which failed to sustain US upside. Stateside, futures are modestly softer and a firmer Wall St. close; ES -0.2%. Limited Fed speak due and near-term focus on retail earnings. Tencent (0700 HK) Q1 2022 (CNY): adj. net profit 25.5bln (exp. 26.4bln), Revenue 135.5bln (exp. 141bln). Lowe's Companies Inc (LOW) Q1 2023 (USD): EPS 3.61 (exp. 3.22/3.23 GAAP), Revenue 23.70bln (exp. 23.76bln). SSS: Lowe's Companies: -4.0% (exp. -2.5%); Lowe's Companies (US): -3.8% (exp. -3.7%). -0.2% in the pre-market Top European News UK Chancellor Sunak is reportedly mulling bringing forward the 1p income tax cut to the basic rate by one year, according to iNews citing Treasury insiders. Other reports suggest that Sunak is putting plans together to raise the warm home discount by hundreds of GBP in July ahead of lowering taxes in autumn to assist with the cost of living crisis, according to The Times. EU is to offer the UK new concessions on the Northern Ireland protocol but has threatened a trade war if UK PM Johnson refuses to agree to a compromise, according to The Telegraph. In FX Sterling slides to the bottom of the major ranks as fractionally sub-forecast UK CPI dampens BoE rate hike expectations; Cable reverses from just over 1.2500 to sub-1.2400, EUR/GBP nearer 0.8500 after dip below 0.8400 only yesterday. Hawkish Fed chair Powell helps Buck bounce ahead of US housing data, DXY towards the upper end of 103.770-180 range. Aussie hampered by softer than expected wage metrics that might convince the RBA to refrain from 40bp hike in June, AUD/USD heavy on the 0.7000 handle. Yen relatively resilient in wake of Japanese GDP showing less contraction in Q1 than feared, USD/JPY closer to 129.00 than 129.50. Euro loses momentum irrespective of comments from ECB’s Rehn echoing Summer rate hike guidance as final Eurozone HICP is tweaked down, EUR/USD fades from 1.0550+ to test support around 1.0500. Loonie treads cautiously before Canadian inflation metrics as oil prices come off the boil, USD/CAD back above 1.2800 within 1.2795-1.2852 range. In Fixed Income Gilts sharply outperform as UK CPI falls just shy pf consensus and dampens BoE tightening expectations. 10 year UK bond rebounds towards 119.50 from sub-119.00 lows, while Bunds lag below 152.50 and T-note under 119-00. Record high cover for 2052 German auction and low retention sets high bar for upcoming 20 year US offering. Central Banks ECB's Rehn says June forecasts are seen near the adverse scenario from March, first rate increase will likely take place in the summer. Many colleagues back stance for quick moves. ECB's de Cos says the end of APP should be finalised early in Q3, first hike shortly afterwards. Further rises could be made in subsequent quarters of medium-term outlook remains around target; the build-up of price pressures in EZ in recent months raises the likelihood of second-round effects, which have not strongly materialised. In commodities WTI and Brent are modestly supported after yesterday's lower settlement; currently, firmer by just over USD 1.00/bbl. Focus has been on the narrowing WTI/Brent spread, particularly going into US driving season; see link below for ING's views. US Energy Inventory Data (bbls): Crude -2.4mln (exp. +1.4mln), Cushing -3.1mln, Gasoline -5.1mln (exp. -1.3mln), Distillates +1.1mln (exp. unchanged). Spot gold and silver are modestly firmer but capped by a firmer USD, yellow metal just shy of USD 1820/oz. US Event Calendar 07:00: May MBA Mortgage Applications, prior 2.0% 08:30: April Building Permits MoM, est. -3.0%, prior 0.4%, revised 0.3% 08:30: April Housing Starts MoM, est. -2.1%, prior 0.3% 08:30: April Building Permits, est. 1.81m, prior 1.87m, revised 1.87m 08:30: April Housing Starts, est. 1.76m, prior 1.79m DB's Jim Reid concludes the overnight wrap Another reminder of my webinar replay from last week discussing our recession call for 2023 and an update on credit spreads. In it I said that while we have high conviction that HY spreads would be +850bp in H2 2023, the outlook over the next few weeks and months may actually be positive from this starting point. I would say I am nervous of that view but I still don't think that the real economic pain comes until deeper into 2023 when the lagged impact of an aggressive Fed starts to bite. Click here to view the webinar and to download the presentation. Good luck to Glasgow Rangers and Eintracht Frankfurt in tonight's Europa League final. These are not teams that any would have expected to reach this final and I will watch with stress free divided loyalties. My father's family were all from the former and supported Rangers while the latter play at the fabulously named Deutsche Bank Park. So good luck to both. I suspect I'll be less stress free in 11 days' time when Liverpool are out for revenge against Real Madrid in the Champions League Final. At the moment I’m feeling nervously optimistic. Talking of which, investor optimism has returned to markets over the last 24 hours as more positive data releases raised hopes that the US economy might be more resilient in the near-term than many have feared. The economic concerns won't go away, but stronger-than-expected numbers on retail sales and industrial production helped the S&P 500 (+2.02%) close at its highest level in over a week. Remember monetary policy acts with a lag and it would be very unusual historically if the data rolled over imminently. By this time next year it will likely be a very different story. The higher yield momentum was reinforced by a Powell speech after Europe went home but there was a steady march of slightly hawkish central bank speakers through the day. Before we review things keep an eye out for UK CPI just after this goes to press. The headline rate is expected to be a huge 9.1%. Expect a lot of headlines reporting of 40 year highs. With regards to Powell, most in focus was his claim that policy rates would rise above neutral if that was required to tame inflation. While the sentiment was not necessarily new, his explicit comment that neutral rates are “not a stopping point” garnered focus, noting that the Fed was looking for “clear and convincing evidence” that inflation was subsiding. The rates market have already priced terminal policy rates above the Fed’s estimate of neutral, but a combination of the risk on, and stronger data meant that equities could go up alongside yields. Earlier in the day we got a smattering of communications from Fed regional Presidents, none of which registered as materially but it reinforced the direction of travel after a month to date where markets have repriced the Fed lower. Indeed, even resident hawk, St Louis Fed President Bullard, reiterated Powell’s message in that the Fed was on course for 50bp hikes at the upcoming meetings and said that “I think we have a good plan for now”. Sovereign bonds had already sold off significantly ahead of all that Fedspeak, aided by the broader risk-on tone yesterday, but continued drifting higher through the US session. Yields on 10yr Treasuries closed +10.4bps to a one-week high of 2.99%, driven by a +7.9bps rise in real yields to 0.24%. The moves were more pronounced at the front-end however, and the 2yr yield rose by a larger +13.1bps as investors priced in a more aggressive path of hikes over the next 12 months after data showed the economy was performing stronger than the consensus had anticipated. In terms of the headlines, retail sales were up by +0.9% in April (vs. +1.0% expected), but the growth in March was revised up to +1.4% (vs. +0.5% previously). Retail sales excluding autos and gas were up by +1.0% as well (vs. +0.7% expected), whilst the industrial production number was another that came in above expectations at +1.1% (vs. +0.5% expected). Europe also had a large move in yields, which followed comments by Dutch central bank Governor Knot who became the first member of the Governing Council to openly float the idea of a 50bp hike. Although he said that “my preference would be to raise our policy rate by a quarter of a percentage point”, he said that “bigger increases must not be excluded” if data were to show inflation “broadening further or accumulating”. So even though he’s one of the more hawkish members of the council, that’s still a significant milestone in that larger moves are being openly discussed, and echoes what we saw with the Fed at the turn of the year when the policy trajectory became increasingly aggressive. Market pricing reflected that shift yesterday, and for the first time overnight index swaps were pricing in that the ECB would hike by more than 100bps by their December meeting and thus catching up with the DB House View. That growing belief behind additional hikes led to a fresh selloff in sovereign bonds, with those on 10yr bunds (+10.9bps), OATs (+10.5bps) and BTPs (+11.7bps) all moving higher. The biggest moves were seen from gilts (+15.0bps) however, which followed data that pointed to an increasingly tight labour market in the UK, and overnight index swaps nearly doubled the probability of a 50bp rate hike from the BoE in June, with the odds moving from 17% on Monday to 33% yesterday. Over in equities, stronger risk appetite led to a significant rebound yesterday, with the S&P 500 (+2.02%) hitting a one-week high, whilst the NASDAQ (+2.76%) saw an even larger rebound in spite of the simultaneous rise in yields. Walmart (-11.38%) was by far the worst performer in the S&P, which came as it cut its earnings per share forecast, which it now expected to decrease by 1%, relative to previous guidance that expected it to rise by the mid single-digits. But that was the exception, and every sector except consumer staples moved higher on the day, with the more cyclical areas leading the advance. Over in Europe the STOXX 600 (+1.22%) posted a strong performance of its own, bringing its advance to more than +5% since its recent closing low just over a week ago. Overnight in Asia, performance in regional stock indices is diverging partly on the back of economic data. Japan’s Q1 GDP (-1.0%) contracted less than expected (-1.8%), lifting the Nikkei (+0.50%) this morning. In China, though, rising covid cases and waning optimism about government’s support of tech companies weighed on the Shanghai composite (-0.37%) and the Hang Seng (-0.66%). New home prices (-0.30%) in the country also slid for an eighth month in a row. This slight souring of sentiment has extended to S&P 500 futures (-0.23%) with the US 10y yield edging back lower by -2.2bps. Elsewhere, tensions over Brexit ratcheted up again yesterday after UK Foreign Secretary Truss announced plans to introduce legislation that would override parts of the Northern Ireland Protocol. Truss said that the UK’s preference “remains a negotiated solution with the EU” and that the bill would contain an “explicit power to give effect to a new, revised Protocol if we can reach an accommodation”, but that “the urgency of the situation means we can’t afford to delay any longer.” Unsurprisingly the EU did not react happily, and Commission Vice President Šefčovič said in a statement that if the UK moved ahead with the bill, then “the EU will need to respond with all measures at its disposal.” Staying on the UK, the latest employment data out yesterday pointed to an increasingly tight labour market, with the unemployment rate falling to 3.7% in the three months to March (vs. 3.8% expected), which is the lowest it’s been since 1974. Furthermore, the number of vacancies was larger than the total number of unemployed for the first time, and the more up-to-date estimate of payrolled employees in April saw an increase of +121k (vs. +51k expected). Elsewhere in Europe, the latest estimate of Euro Area GDP growth in Q1 showed a bigger than expected expansion of +0.3% (vs. +0.2% previously). Elsewhere the chances of a Russian sovereign debt default increased, following the Treasury department confirming a temporary waiver that allowed Russia to pay US creditors would expire on May 25. Meanwhile, the US is reportedly considering a tariff on Russian oil in conjunction with European allies, as the saga about banning imports to Europe drags on. To the day ahead now, and data releases include the UK and Canadian CPI readings for April, along with US data on housing starts and building permits for the same month. Central bank speakers include the Fed’s Harker and the ECB’s Muller. Earnings releases include Cisco, Lowe’s, Target and TJX. Finally, G7 finance ministers and central bank governors will be meeting in Germany. Tyler Durden Wed, 05/18/2022 - 07:51.....»»

Category: blogSource: zerohedgeMay 18th, 2022

Commerce Cronyism: Inside Deals, Conflicts Of Interest And Chinese Connections

Commerce Cronyism: Inside Deals, Conflicts Of Interest And Chinese Connections By Peter Schweizer of the Gatestone Institute The Commerce Department is the fourth most lobbied federal office, behind only the Treasury Department, Health & Human Services, and the White House itself. It is more lobbied than the bigger budgeted Department of Defense and Department of Transportation, despite managing a far smaller budget. This is no accident, because Commerce makes what can be life-and-death decisions for particular industries and businesses. Yet the mission of this "hodgepodge" of administrative agencies, bureaus, and offices could not be more important. The Commerce Department's broad purpose is "to create the conditions for economic growth and opportunity." Through its Bureau of Industry and Security, Commerce regulates what are known as "dual use" technologies, which have potential military applications for foreign powers, another sore spot in the US-China relationship. The US Department of Commerce seldom grabs headlines or congressional scrutiny. It does not become "weaponized" against political opponents of the incumbent party. After the 2016 election, an article on Vox about incoming power-players of the Trump administration dismissed the department as a "hodgepodge of agencies," and a "Cabinet backwater." The US Department of Commerce makes what can be life-and-death decisions for particular industries and businesses, and is the fourth most lobbied federal office. Under current Secretary of Commerce Gina Raimondo, the department has loosened restrictions on Huawei, the Chinese telecom giant that Trump administration regulators had sanctioned, because of the company's ties to the Chinese government and particularly its military. Huawei has been identified as a security threat by the governments of Japan, Taiwan, France, Great Britain, the US, Australia, and Germany, among others. Pictured: Raimondo testifies at a Senate Commerce Committee hearing on April 27, 2022 in Washington, DC. (Photo by Tasos Katopodis/Getty Images) Yet the mission of this "hodgepodge" of administrative agencies, bureaus, and offices could not be more important. The Commerce Department's broad purpose is "to create the conditions for economic growth and opportunity." The department has an important role in setting and executing US domestic and international trade policy. It administers tariffs and even arms control, through its regulatory oversight of military exports. These functions receive quite a bit more attention than the activities of such workaday agencies as the National Weather Service, the Bureau of the Census, and the US Patent and Trademark Office. The Government Accountability Institute (GAI), (full disclosure: of which I am president) just released an investigative report called "Commerce Cronyism: Inside Deals, Conflicts of Interest & Chinese Connections," that takes a close look at this rarely scrutinized "backwater." We found that, as in most backwaters, a lot of strange things happen there. The Commerce Department is the fourth most lobbied federal office, behind only the Treasury Department, Health & Human Services, and the White House itself. It is more lobbied than the bigger budgeted Department of Defense and Department of Transportation, despite managing a far smaller budget. This is no accident, because Commerce makes what can be life-and-death decisions for particular industries and businesses. The trade war with China gave the Commerce Department tremendous influence over this critical policy area. The Trade Expansion Act of 1962 gave the Commerce Department authority to investigate the effect of imports on US national security. Effectively, the department creates the groundwork for tariffs. Through its Bureau of Industry and Security, Commerce regulates what are known as "dual use" technologies, which have potential military applications for foreign powers, another sore spot in the US-China relationship. As one aspect of its report, GAI investigated the personal financial benefits that accrued to the past several Secretaries of Commerce -- how they benefited their own interests through department decisions. GAI also found that China has learned how to tap into the Commerce Department for its own benefit. They have been doing it for years, across several different administrations, among Democrats and Republicans alike. Let's start with the current Secretary of Commerce, Gina Raimondo. A previous governor of Rhode Island, Raimondo comes with a background in finance. She founded the venture capital firm Point Judith Capital in 2000. She is worth roughly $10 million, based on her financial disclosure and as reported by Forbes magazine. Raimondo's husband, Andrew Moffit, spent 20 years at the consulting firm McKinsey & Co, leaving in 2020 to become "Chief People Officer" of a software company called PathAI. This company applies artificial intelligence and machine learning technology to the field of medical diagnostics. In February of this year, Moffit exercised his PathAI stock options and purchased at least $50,000 worth of its stock. He left his full-time job with the company and became instead its "strategic adviser," thus deepening his financial ties to the firm while creating an appearance of greater distance between his role with the company and his wife's duties as Commerce secretary. Artificial intelligence is the focus of the Commerce Department's Bureau of Industry and Security because it often has direct military applications, making it sensitive for US national security. Possible restrictions include the sharing of AI technology with foreign employees, an area in which Moffit could well be responsible as "Chief People Officer." In 2019, US-based venture capital firm Danhua Capital Management (doing business as DHVC) participated in a $60 million fundraising round for PathAI. DHVC not only has holdings in sensitive technology sectors, but also has ties to a Chinese state-owned entity. Therefore, DHVC's relationship with PathAI "could raise conflict-of-interest and/or national security concerns," according to GAI's report. Danhua is part of a pattern of companies established by the Chinese government in order to "penetrate" Silicon Valley, a Reuters report noted. In addition, Raimondo's department has loosened restrictions on Huawei, the Chinese telecom giant that Trump administration regulators had sanctioned, because of the company's ties to the Chinese government and particularly its military. Huawei's founder, Ren Zhengfei, is a party loyalist who urged his workers to "surge forward, killing as you go, to blaze us a trail of blood," in their efforts to sell Huawei products to the West. Huawei has been identified as a security threat by the governments of Japan, Taiwan, France, Great Britain, the US, Australia, and Germany, among others. Then there was Wilbur Ross, Secretary of Commerce under President Trump. Ross was a successful businessman with huge commercial ties to China. He had shipping companies that had major Chinese investment. In fact, Trump criticized him for being too soft on China while Ross ran the department. Wilbur Ross kept investments in companies directly affected by tariff policy, even as the Commerce Department handed out tariff exemptions and negotiated new trade agreements. Wendy Teramoto, his chief of staff, simultaneously served on the boards of some of these companies, GAI's report notes. According to our own 2018 analysis, 62 percent of the cargo carried into the US by one of Ross's shipping firms was South Korean steel for which Ross had helped to negotiate a tariff exemption. Before joining Commerce, Ross founded and chaired an auto parts company with operations around the world, including Mexico and China. Ross helped renegotiate the US's trade deal with Mexico and Canada, which lowered import duties on the automotive industry, and later refused to release the results of the Department's investigation into the effects of foreign imports on the domestic automotive industry. Before Ross, President Obama's Commerce Secretary was Penny Pritzker, part of the prominent Illinois family that is heir to the Hyatt Hotel fortune. In the years immediately before she was tapped by her fellow Chicagoan, Obama, Pritzker had focused on her own business ventures, launching PSP Capital Partners and Artemis Real Estate Partners, two investment firms. While she was Secretary of Commerce , buildings owned by Pritzker's companies were leased to Commerce Department agencies, such as the US Patent and Trademark Office, and to Commerce Department contractors. In 2015, the Clean Energy Trust, a Chicago-based not-for-profit supporting clean energy start-ups through business development, received $10 million of funding through a grant program administered by the Department of Commerce. It was the only Chicago-area group to receive such funding. Its board of directors was co-chaired at the time by Penny Pritzker's cousin, Nick Pritzker. GAI's report, which is available here, discusses a number of other issues, personalities, and programs that are of questionable merit but generate high interest from Washington insiders who see their potential. The cronyism of past and present Secretaries of Commerce is but one part of the story the report tells. It is worth your attention. *  *  * Peter Schweizer, President of the Governmental Accountability Institute, is a Gatestone Institute Distinguished Senior Fellow and author of the new book, Red Handed: How American Elites are Helping China Win. Tyler Durden Tue, 05/17/2022 - 21:05.....»»

Category: smallbizSource: nytMay 17th, 2022

Nucor (NUE) Inks Deal With KKR to Acquire C.H.I. for $3 Billion

Nucor's (NUE) deal is valued at $3 billion and is anticipated to be completed in June or soon thereafter. Nucor Corporation NUE entered into an agreement with an affiliate of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”) to acquire C.H.I. Overhead Doors (C.H.I.). C.H.I. is a leading manufacturer of overhead doors for residential and commercial markets in the United States and Canada.The deal is valued at $3 billion, which reflects roughly 13x C.H.I.'s estimated trailing 12-month EBITDA at the close. The deal is anticipated to be completed in June or soon thereafter, pending regulatory approvals and customary closing conditions. The deal will be immediately accretive to earnings in the first year of ownership.C.H.I. is involved in producing overhead door products for residential and commercial applications and rolling steel and rubber doors for commercial and industrial customers. The entity can maintain minimal inventory levels and realize industry-leading fulfilment times while providing direct delivery to customers leveraging a highly diversified national customer network of professional garage door dealers.The overhead door market is a growing $5-billion market with exposure in both residential and non-residential through new builds and repairs and remodel applications. The commercial overhead doors are used in warehousing and retail. These are the areas in which Nucor has focused its attention lately through other value-added products such as insulated metal panels and steel racking solutions. It is projected that the C.H.I. acquisition will also benefit from Nucor's recent paint line investments at its Hickman, AR, and Crawfordsville, IN, sheet mills.Shares of Nucor have gained 15.7% in the past year against a 14.2% decline of the industry.Image Source: Zacks Investment ResearchIn its last earnings call, the company stated that demand remains strong for steel and steel products in its end-use markets and expects 2022 will be another year of strong earnings and cash flow.Nucor envisions second-quarter 2022 as the most profitable quarter in its history, surpassing the earlier record set in the fourth quarter of 2021. Earnings are projected to be driven by higher profitability in the steel products segment on the back of strong demand in non-residential construction markets.The company also expects earnings in the steel mills segment to strengthen in the second quarter due to higher profitability at its sheet and plate mills. The raw materials segment is also forecast to deliver higher profits, driven by relatively higher selling prices for raw materials.Nucor Corporation Price and Consensus  Nucor Corporation price-consensus-chart | Nucor Corporation Quote Zacks Rank & Other Key PicksNucor currently sports a Zacks Rank #1 (Strong Buy).Some other top-ranked stocks in the basic materials space are Nutrien Ltd. NTR, Albemarle Corporation ALB and Cabot Corporation CBT.Nutrien has a projected earnings growth rate of 161.9% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 38.8% upward in the past 60 days.Nutrien’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, while missing once. It has delivered a trailing four-quarter earnings surprise of roughly 5.9%, on average. NTR has rallied around 66.1% in a year and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.Albemarle has a projected earnings growth rate of 175% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 85.8% upward in the past 60 days.Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has gained 42.1% in a year. The company flaunts a Zacks Rank #1.Cabot, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 19.5% for the current year. The Zacks Consensus Estimate for CBT's earnings for the current year has been revised 3.4% upward in the past 60 days.Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 10.4% over a year. Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nucor Corporation (NUE): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Cabot Corporation (CBT): Free Stock Analysis Report Nutrien Ltd. (NTR): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 17th, 2022

Watch These 4 Soft Drink Stocks to Get an Insight on Industry Trends

The Beverages - Soft Drinks industry witnesses headwinds from supply-chain disruptions and higher input costs. Innovative product introductions are likely to aid companies like KO, PEP, KDP and MNST. The Zacks Beverages – Soft Drinks industry has been witnessing continued pressure from higher supply-chain costs, including transportation and commodity costs, particularly steel and aluminum. Additionally, players are spending more on marketing and advertising to capture a share in the recovering markets. Elevated operating and other costs are likely to strain margins in the near term.However, industry players are poised to benefit from the introduction of innovative products to suit consumers’ needs like functional drinks and naturally prepared drinking options that support an active lifestyle. Industry participants have been steadfastly investing in product innovations to include healthy ingredients in beverages and introduce ready-to-drink variations. Players like The Coca-Cola Company KO, PepsiCo Inc. PEP, Keurig Dr Pepper Inc. KDP and Monster Beverage Corporation MNST are well-poised on robust innovation efforts.About the IndustryThe Zacks Beverages - Soft drinks industry comprises companies that manufacture, source, develop, market and sell non-alcoholic beverages. Soft drinks mainly include sparkling drinks, natural juices, enhanced water, sports and energy drinks, as well as dairy, and ready-to-drink tea and coffee beverages. Notably, some industry players like PepsiCo produce and sell handy food with flavored snacks, which complement their beverage portfolio. The companies sell products through a network of wholesalers and retailers that include supermarkets, department stores, mass merchandisers, club stores and other retail outlets. Some of them also offer products via company-owned or controlled bottling, independent bottling partners and partner brand owners.What's Shaping the Future of Beverages - Soft Drinks Industry?Raw Material Cost Inflation and Supply Constraints: The beverage industry is plagued with higher supply-chain costs, including higher commodity input costs and transportation expenses. Raw material cost inflation, particularly steel and aluminum, has led to increases in packaging costs. The ongoing supply constraints in the aluminum can industry have been other headwinds. The companies are also witnessing delays in the procurement of certain ingredients, both domestically and internationally, leading to shortages of some goods. The industry players have been facing freight inefficiencies as well as significant increases in domestic and international freight costs. Logistic issues, as well as higher input costs and freight inefficiencies, have resulted in higher cost of sales and operating expenses, impacting both gross and operating margins. Most players expect commodity cost inflation and higher transportation costs to persist in 2022.Industry Dynamics: The soft drinks industry has been witnessing transformed trends more than ever, as health-consciousness, personal well-being, natural ingredients, varied flavors and better taste experiences are changing consumers’ consumption patterns. There has been an increased consciousness for an active lifestyle and healthy eating habits, which have given prominence to natural, plant-based and organic ingredients in food and beverages. Soft drinks with no preservatives or added colors, low sugar content, and no artificial sweeteners are the clear choices nowadays. Drinks with plant extracts, natural fruit flavors and not-from-concentrate juices are also gaining popularity. Consumers are increasingly choosing “functional drinks” over their high-calorie counterparts, with a focus on ingredients like vitamins and minerals to support a balanced diet. Such trends have led soft drink companies to innovate to meet consumers’ needs, while introducing more healthy and naturally prepared drinking options. Industry players are vying to grab the market share in on-trend categories like tea, coffee, energy drinks, juices and sparkling water. Companies are adopting more transparency toward the disclosure of ingredients to gain consumers’ confidence. The industry players are also exploring ready-to-drink alcoholic beverages and CBD-infused drinks, which have been gaining popularity lately.Evolving Trends: The increased at-home consumption trend due to the coronavirus outbreak has led to the demand for more sustainable packaging, and functional and convenient beverage formats. While the away-from-home channel is gradually opening up, industry experts believe that at-home consumption trends will continue to have a share in the overall sales of beverage companies. Beverage companies have been witnessing robust volumes, driven by recovery across the majority of the markets, investments and the cycling of last year’s pandemic-led impacts. The return of normalcy in the away-from-home channel is anticipated to be a boon for soft drink makers, as the away-from-home channel accounts for the majority of their revenues.Zacks Industry Rank Indicates Bleak ProspectsThe Zacks Beverages - Soft Drinks industry is housed within the broader Consumer Staples sector. It carries a Zacks Industry Rank #233, which places it in the bottom 8% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull 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 a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for 2022 have declined 2.9%.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry vs. Broader MarketThe Zacks Beverages – Soft Drinks industry has outperformed the S&P 500 Index and the Consumer Staples sector in a year.The stocks in the industry have collectively gained 9% compared with the sector’s growth of 0.2% and against the S&P 500’s decline of 6%.One-Year Price Performance Industry's Current ValuationOn the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing soft drink stocks, the industry is currently trading at 22.54X compared with the S&P 500’s 17.02X and the sector’s 19.84X.Over the last five years, the industry has traded as high as 23.71X and as low as 18.52X, with a median of 22X, as the chart below shows.Price-to-Earnings Ratio (Past 5 Years) 4 Soft Drink Stocks to WatchNone of the stocks in the Zacks Beverages – Soft Drinks industry currently sport a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). We have highlighted four stocks with a Zacks Rank #3 (Hold) from the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here. Let’s take a look.Coca-Cola: The soft drink behemoth is poised to gain from strategic transformation and ongoing worldwide recovery. The streamlining of portfolio and accelerating investments to expand the digital presence position the company for growth in the long term. It has been witnessing a splurge in e-commerce, with the growth rate of the channel doubling in many countries. It is strengthening consumer connections and piloting numerous digital-enabled initiatives through fulfillment methods to capture online demand for at-home consumption.The company has been gaining from increased consumer mobility and the reopening of economies in several parts, leading to the reopening of the away-from-home channel. The improvement in the away-from-home volume is expected to result in a strong price/mix and margin acceleration across the company. The Zacks Consensus Estimate for its 2022 earnings has moved up 0.8% in the past 30 days. The company’s shares have gained 17.9% in the past year.Price and Consensus: KO PepsiCo: The stock of this Purchase, NY-based leading soft-drink company has risen 16.5% in the past year. Resilience and strength in the global snacks and foods business, as well as growth in the beverage category, have been aiding the company. It is poised to benefit from investments in brands, go-to-market systems, supply chain, manufacturing capacity and digital capabilities to build competitive advantages. Within the snacks/food business, Frito-Lay remains focused on offering more choices to meet customers’ changing needs and preferences. Some of these are expanding variety pack offerings, continuous flavor and brand innovation, and introducing healthier snacking alternatives.In the beverage category, PepsiCo expects strong growth and market share gains for energy drinks, driven by the increased depth and breadth of its portfolio, and improved distribution capabilities. The company continues to invest in its Zero Sugar products and other functional beverages in the carbonated and non-carbonated categories to offer more choices to consumers. The consensus estimate for the company’s 2022 EPS has moved down 0.4% in the past 30 days. Price and Consensus: PEP Keurig Dr Pepper: Packaged Beverages and Coffee Systems businesses have been driving sales for this beverage and coffee company based in the United States and Canada. Robust market share gains and in-market performances across categories and brands have been the growth drivers. The Packaged Beverages segment is witnessing improved volume/mix due to an increase in at-home consumption trends and strong market share growth.The company expects increased household penetration across hot and cold beverage portfolios to continue. Its market share growth is being supported by efficient marketing and product innovation strategies. The company is also investing in boosting distribution platforms and e-commerce operations. Shares of this producer, distributor and seller of a range of non-alcoholic ready-to-drink beverages have gained 2.3% in the past year. The consensus estimate for its 2022 EPS has been unchanged in the past 30 days.Price and Consensus: KDP Monster Beverage: The leading marketer and distributor of energy drinks and alternative beverages based in Corona, CA, remains committed to product launches and innovation to boost growth. Management is optimistic about strength in the energy drinks category, with the Monster Energy brand growing significantly. It remains on track to launch a number of additional products and product lines in domestic and international markets this year. Product launches across the Monster family are expected to drive the company’s overall top and bottom lines in the coming quarters.Management doesn’t expect any material impact of the COVID-19 pandemic on the functioning of its co-packers and bottlers/distributors, who manufacture and distribute products, respectively. The company has declined 7% in the past year. The Zacks Consensus Estimate for its 2022 earnings has declined 4.3% in the past seven days. Price and Consensus: MNST 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 CocaCola Company The (KO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 13th, 2022

Generac (GNRC) Launches Two Powermate Portable Generators

Generac (GNRC) introduces two Powermate generators for outdoor and indoor use. Generac Power Systems Inc. GNRC announces the launch of Powermate 4500-Watt Dual Fuel Portable Generator and the Powermate 7500-Watt Dual Fuel Portable Generator.Both generators are available for purchase online at The models are also available at a few select retail outlets.Generac added that the new flexible generators are designed to use for home as well as recreational purposes by consumers.Generac Holdings Inc. Price and Consensus  Generac Holdings Inc. price-consensus-chart | Generac Holdings Inc. QuoteThe Powermate 4500-Watt Dual Fuel Portable Generator has a starting power of 4,500 watts and a running power of 3,600 watts (gas), enabling it to power small electrical appliances at an outdoor location (picnic or campground) and certain power tools for home DIY work.The Powermate 7500-Watt Dual Fuel Portable Generator is also suitable for outdoor events and power tool use, with 7,500 starting watts and 6,000 running watts (gas).Both variants are designed to run either on gasoline or LP gas fuel.The generators are driven by Generac OHV engines, which deliver constant power for a variety of applications and have a simple dual-fuel dial that allows customers to choose between gasoline and LP gas. For simple travel, these include a steel frame and a compact design with integrated wheels and a handle.The generators are equipped with innovative co-sense technology that enables them to shut down if the surrounding carbon monoxide levels become dangerous.Headquartered in Waukesha WI, Generac is a leading manufacturer of power generation equipment, energy storage systems and other power products — including portable, residential, commercial and industrial generators. In addition, the company manufactures light towers, which provide temporary lighting solutions for various end markets, and commercial and industrial mobile heaters and pumps used in the oil & gas, construction and other industrial markets.GNRC reported first-quarter 2022 adjusted earnings of $2.09 per share, which beat the Zacks Consensus Estimate by 10%. However, the bottom line declined 12.2% year over year.Net sales increased 41% year over year to $1.14 billion and beat the consensus mark by 4.9%. Robust demand for Residential and Commercial & Industrial products and effective M&A strategies boosted Generac’s first-quarter performance.Key PicksGenerac currently has a Zacks Rank #3 (Hold).Some better-ranked stocks from the broader technology space are InterDigital IDCC, Vishay Intertechnology VSH and Pure Storage PSTG. InterDigital, Vishay Intertechnology and Pure Storage currently sport a Zacks Ranks #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $3.28 per share, increasing 5.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.13%. Shares of InterDigital have declined 14.6% in the past year.The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.96%. Shares of Vishay Intertechnology have declined 18.2% in the past year.The Zacks Consensus Estimate for Pure Storage’s fiscal 2023 earnings is pegged at 86 cents per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 30.9%.Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 99.2%. Shares of Pure Storage have gained 46.2% in the past year. Special Report: The Top 5 IPOs for Your Portfolio Today, you have a chance to get in on the ground floor of one of the best investment opportunities of the year. As the world continues to benefit from an ever-evolving internet, a handful of innovative tech companies are on the brink of reaping immense rewards - and you can put yourself in a position to cash in. One is set to disrupt the online communication industry. Brilliantly designed for creating online communities, this stock is poised to explode when made public. With the strength of our economy and record amounts of cash flooding into IPOs, you don’t want to miss this opportunity.>>See Zacks’ Hottest IPOs NowWant 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 InterDigital, Inc. (IDCC): Free Stock Analysis Report Vishay Intertechnology, Inc. (VSH): Free Stock Analysis Report Generac Holdings Inc. (GNRC): Free Stock Analysis Report Pure Storage, Inc. (PSTG): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 11th, 2022

Is Auto-Inflation The Key To Understanding Markets?

Is Auto-Inflation The Key To Understanding Markets? By Russell Clark of the Capital Flows and Asset Markets substack, The US auto industry and politics have been intertwined for nearly over 80 years. The Big Three Auto in the US was at the centre of FDR’s push for labour power in 1936. When FDR refused to break a strike at a Ford factory in Michigan, the signal of political support for labour over capital was unmistakeable. Previously all other Presidents had intervened on behalf of the company, and this set the stage for the big three to be unionised. In 1953, Charlie Wilson, President of General Motors, was nominated to be Secretary of Defence by Eisenhower, and in his confirmation hearing he was asked if he would be conflicted in his new role replied, “For years I have thought what was good for our country is good for General Motors and vice versa”, or more widely remembered as what is good for General Motors is good for the United States. The unionisation of the car industry stabilised the industry which during the Great Depression saw demand and pricing collapse. Prices remained stable in 1950s and 1960s before inflation saw new car prices surge. The question is does the recent surge in new car CPI hail a new political era? Before we look at what the future holds, let us understand how the pro-labour policies of FDR were unwound. The inflationary 1970s led to move away from protecting labour, and allowing consumers to buy from the cheapest producer available. This in particular helped the Japanese producers who exported from Japan and built a number of factories in the South that were not unionised. The Big Three with their unionised workforces could not compete, and saw market share collapse. This collapsing market share of the Big 3 has also underpinned an ever declining unionisation rates in the US, which was the likely aim of favouring international producers over domestic producers. A glass half full person sees free trade as being pro-consumer. A glass half empty person sees free trade as being anti-labour. Both are broadly correct. However, the US lost its long held title of being largest car market in the world to China back in 2009. If autos are a guide to inflation, then what is Chinese policy on auto inflation and on wage inflation in general? From a pure market economic standpoint, Chinese auto sales peaked in 2017, and since then the industry has been operating on a declining utilisation rate, which would imply that we should see deflation in the auto industry. In 2019 the Chinese Government acted to curb excess capacity in the auto industry, essentially making it impossible to open a new internal combustion engine factory (electric vehicle factories are still encouraged). The question is whether this increased government intervention is leading to rising car prices like it did in the 1970s in the US. Unfortunately, the Chinese car is not entirely transparent on car pricing. Large Chinese auto makers often control multiple brands, sometimes directly, sometimes as subsidiaries. The cleanest set of numbers I can find are from Great Wall Motors (GWM), a maker of SUVs. Using annual numbers we can see average selling price (ASP) and operating profit per unit. The numbers from 2021 show a jump in ASP, but falling operating profit implying that cost inflation and probably wage inflation is taking hold at least for GWM. To be honest, I am not totally happy with this metric, but it does tally up with other industries that I do have good data for, such as steel and cement, where government policy has had a decidedly FDR style ”inflation creation” bent. That leaves one last question. Will China export auto inflation to the rest of the world? One market where GWM has an reasonable export presence is Australia. Australia is also noteworthy in that is has no domestic auto factories (the last one closed in 2017) and is entirely dependent on imports. For the first time in 25 years, Australian motor vehicle CPI is turning higher. It should be noted that Japanese car maker are the dominant car companies in Australia. I originally thought food inflation would be the key product by which China would export its pro-inflation policies, but now it is beginning to look like autos could also be a key transmission area. Tyler Durden Sun, 05/08/2022 - 12:50.....»»

Category: blogSource: zerohedgeMay 8th, 2022

The Battery Boom Will Redraw Geopolitical Maps

The Battery Boom Will Redraw Geopolitical Maps Authored by Tsvetana Paraskova via, The vulnerability of global energy markets is once again back in focus due to Russia’s invasion of Ukraine. The race for a renewable future will come with its own geopolitical issues and could lead to new conflicts as new supply chains emerge. In March, President Biden introduced a plan to secure the strategic and critical materials necessary for the clean energy transition—such as lithium, nickel, cobalt, graphite, and manganese. Russia’s invasion of Ukraine has exposed, once again, the vulnerability of the global energy markets and economy to the actions of petrostates with the power to weaponize their energy resources for political purposes.   In the biggest shock to oil flows since the 1973 Arab oil embargo, the war in Ukraine and the hesitancy of Europe to immediately punish Putin threw into sharp relief the geopolitical power that countries with huge oil and gas resources currently hold.    The European Union’s response to Russia’s invasion of Ukraine is to wean off Russian energy as soon as possible and reduce overall fossil fuel consumption in the longer term in order to stop being beholden to malign actors for energy sources.  The mad dash to boost renewables and transport electrification, however, comes with its own set of geopolitical issues.  Countries that aren’t Saudi Arabia, Iraq, and Iran hold vast resources of the metals and minerals that will be critical to enabling a faster energy transition. But those resource holders also include Russia, China, and a host of African and South American nations still living “the resource curse”, where conflict, forced and child labor, and critically low environmental standards are undermining the “green” credentials of the clean energy transition. As developed economies look to lessen their dependence on fossil fuels and, by extension, on the political goals and whims of major oil and gas resource holders such as Russia and the members of OPEC, the geopolitical influence of the petrostates would likely wane over time. But a new geopolitical issue would rise—potential dependence on countries holding resources of critical minerals. And those countries include the likes of China and the Democratic Republic of Congo (DRC), for example.  Oil Wars  The geopolitics of oil resources has shaped the second half of the 20th century and continues to do so in the 21st century.  “Although the threat of "resource wars" over possession of oil reserves is often exaggerated, the sum total of the political effects generated by the oil industry makes oil a leading cause of war,” Jeff D. Colgan, Assistant Professor in the School of International Service at American University in Washington, D.C, wrote in a policy brief in the peer-reviewed journal International Security nearly a decade ago.  Since 1973, between one-quarter and one-half of interstate wars have been connected to one or more oil-related causal mechanisms, Colgan notes, adding that “No other commodity has had such an impact on international security.”  International and energy security continue to be influenced by fossil fuel resources a decade later.   Due to the high dependence on Russian oil by some of its members, the EU is debating how to implement an oil embargo on Moscow without plunging Europe into a recession and without fracturing a united EU front against Putin and his aggression in Ukraine.  Renewables Could Hold The Key To Energy Independence… Therefore, the EU is looking to switch to renewables faster, as a way to reduce fossil fuel consumption and reliance on Russia. “The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system,” European Commission President Ursula von der Leyen said in early March, announcing a goal to reduce EU demand for Russian gas by two-thirds before the end of this year.  “Renewables give us the freedom to choose an energy source that is clean, cheap, reliable, and ours. And instead of funding fossil fuel imports and Russian oligarchs, we can create jobs here,” European Commission Executive Vice-President for the European Green Deal, Frans Timmermans, said.   The EV revolution would also help reduce the geopolitical power of petrostates.   “The ability to electrify transportation and get off combusting fossil fuels, and oil specifically, means we would solve massive geopolitical problems, which have been just a plague for the last 100 years,” Adam Scott, executive director at Toronto-based charity advocating for sustainable investing, Shift, told Andre Mayer of Canada’s CBC News.   …If Clean Energy Didn’t Need Key Metals Resources  The war in Ukraine is accelerating the shift to increased investment in renewables as a way to lessen dependence on imports of fossil fuels, a large part of which comes from OPEC and Russia.  However, the big challenge in the energy transition will be supply chains, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said last week.  “Costs for solar and wind turbine components are already experiencing inflation and demand is only going to intensify. There’s also going to be a massive scramble to access the metals to build out electrification – from steel, key base metals including copper, aluminum and nickel, and battery raw materials,” Flowers noted.  Developed economies, including the United States, currently depend on imports for boosting low-carbon energy sources. The U.S. imports more than half of its annual consumption of 31 of the 35 critical minerals, the Department of Energy said at the start of President Biden’s term in office. America does not have domestic production for 14 of those critical minerals and is completely dependent on imports to supply its demand.  President Biden included in March strategic and critical materials necessary for the clean energy transition—such as lithium, nickel, cobalt, graphite, and manganese for large-capacity batteries—in the Defense Production Act of 1950.  This is a step in the right direction for ensuring more domestic supply, considering that geopolitics will play a role in the energy transition, too, although the resource holders may be different.  “There is an underappreciated risk to the energy transition: the supply of clean energy depends on mined natural resources, which are steeped in geological, geopolitical, and governance challenges,” KPMG and Eurasia Group said in a report last year.  The new global energy ecosystem could shift “from OPEC to OMEC”, where OMEC is what KPMG and Eurasia Group describe as a “freshly minted acronym for ‘Organisation of Mineral Exporting Countries’ – this grouping may not yet exist, but the point remains: geopolitical power could shift from oil-dominated countries to critical metal-dominated countries.”   Tyler Durden Sun, 05/08/2022 - 08:10.....»»

Category: blogSource: zerohedgeMay 8th, 2022