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VIS lands increasing orders from China, US, Europe on geopolitical effects

Taiwan's pure-play foundry Vanguard International Manufacturing (VIS) continues to benefit from geopolitical effects, winning more shifted orders from clients in China and the US as well as Europe amid lingering trade conflicts between the world's two major economies, allowing the company to maintain stable business momentum in 2023 and beyond, according to industry sources......»»

Category: topSource: digitimesJan 24th, 2023

VIS lands increasing orders from China, US, Europe on geopolitical effects

Taiwan's pure-play foundry Vanguard International Manufacturing (VIS) continues to benefit from geopolitical effects, winning more shifted orders from clients in China and the US as well as Europe amid lingering trade conflicts between the world's two major economies, allowing the company to maintain stable business momentum in 2023 and beyond, according to industry sources......»»

Category: topSource: digitimesJan 24th, 2023

United Airlines Fourth-Quarter and Full-Year Financial Results: Achieved 9.1% Pre-tax Margin Ahead of Schedule in Q4

Q4 2022 pre-tax margin exceeded 2019 and vaulted United to an industry-leading position The changes United made to increase staffing and resources and invest in technology and infrastructure created strong operations and allowed United to recover quickly after winter storm Elliott Remains confident in hitting its 2023 financial performance targets fueled by United Next progress CHICAGO, Jan. 17, 2023 /PRNewswire/ -- United Airlines (UAL) today reported fourth-quarter and full-year 2022 financial results. The company exceeded adjusted operating margin1 guidance in the fourth quarter reporting a 11.1% operating margin; 11.2% operating margin on an adjusted basis1. Additionally the company reported a 9.1% pre-tax margin on a GAAP basis and 9.0% on an adjusted basis1, achieving its 2023 target ahead of schedule. The company grew operating revenue by 14% and TRASM (total revenue per available seat mile) by 26%, both versus fourth quarter 2019. The company remains confident in the 2023 United Next adjusted pre-tax margin1 target of about 9%. United was able to recover quickly from significant irregular operations in December as a result of winter storm Elliott. During the key holiday travel days between December 21 and 26, nearly 36% of all United flights were exposed to severe weather. Despite that impact, 90% of United customers made it to their destination within 4 hours of their scheduled arrival time. The company credits significant investment in its people, resources, technology and infrastructure over the past few years with its ability to recover from significant weather events.  "Thank you to the United team that, last month, managed through one of the worst weather events in my career to deliver for so many of our customers and get them home for the holidays," said United Airlines CEO Scott Kirby. "Our dedicated team used our state-of-the-art tools to prepare for the bad weather, take care of our customers and quickly recover once the worst of the weather had passed. Over the last three years, United has made critical investments in tools, infrastructure and our people – all of which are essential investments in our future. That's why we've got a big head start, and we're now poised to accelerate in 2023 as our United Next strategy becomes a reality." Fourth-Quarter Financial Results Net income of $843 million, adjusted net income1 of $811 million. Capacity down 9% compared to fourth-quarter 2019. Total operating revenue of $12.4 billion, up 14% compared to fourth-quarter 2019. TRASM of up 26% compared to fourth-quarter 2019. CASM of up 21%, and CASM-ex1 of up 11%, compared to fourth-quarter 2019. Operating margin of 11.1%, adjusted operating margin1 of 11.2%, both up over 2 pts. compared to fourth-quarter 2019. Pre-tax margin of 9.1%, adjusted pre-tax margin1 of 9.0%, both up and around 1 pt. compared to fourth-quarter 2019. Average fuel price per gallon of $3.54. Full-Year Financial Results Net income of $737 million, adjusted net income1 of $831 million. Operating margin of 5.2%, adjusted operating margin1 of 5.5%. Pre-tax margin of 2.2%, adjusted pre-tax margin1 of 2.5%. Ending available liquidity2 of $18.2 billion. Key Highlights Announced the largest widebody order by a U.S. carrier in commercial aviation history: 100 Boeing 787 Dreamliners with options to purchase 100 more. Also added 100 additional Boeing 737 MAX aircraft by exercising 44 options and adding 56 new firm orders. This historic purchase is the next chapter in the ambitious United Next plan and will bolster the airline's leadership role in global travel for years to come. Officially opened the United Aviate Academy, the only major U.S. airline to own a flight training school, with a historic inaugural pilot class of 80% women or people of color. Launched Calibrate, an in-house apprenticeship program that will help grow and diversify its pipeline of Aircraft Maintenance Technicians. Launched a new, national advertising campaign – "Good Leads The Way" – that tells the story of United's leadership in areas like customer service, diversity and sustainability, and captures the optimism fueling the airline's large ambitions at a time of unprecedented demand in air travel. Announced and began the expansion of its Flight Training Center in Denver, already the largest facility of its kind in the world. Announced a historic commercial agreement with Emirates that will enhance each airline's network and give customers easier access to hundreds of destinations around the world. Also announced a new direct flight between Newark/New York and Dubai beginning in March 2023, subject to government approval. Appointed by Department of Homeland Security Secretary Alejandro Mayorkas, United Chief Executive Officer Scott Kirby served as the Co-Chair of the Homeland Security Advisory Council and also served on the Board of Directors of the Business Roundtable as the Chairman of the Education and Workforce Committee. Hosted the first Eco-Skies Alliance Summit, bringing together leaders, corporate customers, and senior U.S. government officials for important discussions on sustainable aviation fuel, best practices of how to reduce carbon emissions from flying and how to collaborate on future sustainability solutions. Operational Performance In the fourth quarter, on-time arrival performance (arrival within 14 minutes of schedule) was at 80%, the best quarterly performance of 2022. United finished first among network carriers for on-time departures and completion at its three largest hubs – Denver, O'Hare and Houston – for the fourth-quarter and full-year 2022. In 2022, over 650,000 passenger connections were saved with ConnectionSaver, resulting in United achieving the lowest misconnect rate ever for the fourth quarter and full year (excluding 2020/2021). In the fourth quarter, Inflight Service, Check-In and Club Satisfaction beat their record from last quarter and ended with their highest quarterly performance since the launch of the NPS (Net Promoter Score) survey in 2020.  Customer Experience In 2022, 80% of domestic departures were operated on a dual-cabin aircraft, up from 67% in 2019. Despite the severe operating conditions during winter storm Elliott, 43% of our customer surveys included a compliment for something a United employee did to help them. Debuted free "bag drop shortcut" – a simple way for customers at United's U.S. hubs to skip the line, check their bag in a minute or less on average, and get to their flight. Began offering eligible T-Mobile customers free in-flight Wi-Fi and streaming where available on select domestic and short-haul international flights. United, with Jaguar North America, launched the first gate-to-gate airport transfer service powered by an all-electric fleet in the U.S. at Chicago O'Hare International Airport. Announced the return of kids' meals on board on select United flights where complimentary meals are served. Announced the opening of United Club FlySM, a new club concept for a U.S. airline at Denver International Airport. Opened the new United ClubSM location at Newark Liberty International Airport, a 30,000-square-foot space offering travelers a modern design, enhanced amenities and culinary offerings. Debuted new custom amenity kits for United Polaris® from Away ahead of summer travel. Debuted new plant-based menu items from Impossible Foods as part of United's goal to add more vegan and vegetarian options to its culinary lineup amidst growing demand for plant-based meat. Network Announced the 2023 summer schedule that includes adding new service to three cities – Malaga, Spain; Stockholm, Sweden; and Dubai, United Arab Emirates – United will be the No. 1 airline to Europe, Africa, India and the Middle East next summer with service to 37 cities, more destinations than all other U.S. airlines combined. Launched a new alliance partnership with Virgin Australia, began year-round, nonstop service between San Francisco and Brisbane, Australia and became the largest carrier between the United States and Australia. Began year-round, nonstop service between Washington, D.C., and Cape Town, South Africa and expanded to year-round nonstop service between New York/Newark and Cape Town, South Africa. Expanded the airline's codeshare agreement with Star Alliance member Singapore Airlines, making it easier for customers to travel to more cities in the United States, Southeast Asia and other destinations in the Asia-Pacific region. Announced a joint business agreement with Air Canada for the Canada-U.S. transborder market, building on the companies' long-standing alliance, that will give more flight options and better flight schedules to customers traveling between the two countries. Environmental, Social and Governance (ESG) In the fourth quarter, over 7,700 volunteer hours were served by more than 1,000 employee volunteers. In the fourth quarter, nearly 13 million miles were donated to 40 participating nonprofit organizations during United's Giving Tuesday 2022 campaign by over 700 donors, including nearly 2 million miles matched by United. In the fourth quarter, more than 4 million miles and over $111,000 were raised for Hurricane Fiona and Hurricane Ian relief efforts. In 2022, through a combination of cargo-only flights and passenger flights, United transported over 1 billion pounds of cargo, including approximately 121 million pounds of medical shipments and approximately 10,500 pounds of military shipments. United Airlines Ventures announced a strategic investment in NEXT Renewable Fuels (NEXT), which is acquiring a permit for a flagship biofuel refinery in Port Westward, Oregon, with expected production beginning in 2026. Announced a $15 million investment in Eve Air Mobility and a conditional purchase agreement for 200 four-seat electric aircraft with options to purchase 200 more, expecting the first deliveries as early as 2026. Launched United for Business Blueprint™, a new platform that will allow corporate customers to fully customize their business travel program contracts with United. United Airlines Ventures and Oxy Low Carbon Ventures announced a collaboration with Cemvita Factory to commercialize the production of sustainable aviation fuel intended to be developed through a revolutionary new process using carbon dioxide and synthetic microbes. Announced a strategic equity investment in Natron Energy, a battery manufacturer whose sodium-ion batteries have the potential to help United electrify its airport ground equipment like pushback tractors and operations at the gate. U.S. President Joe Biden appointed United President Brett Hart to the Board of Advisors on Historically Black Colleges and Universities. Along with the PGA TOUR, announced that it will award 51 golf teams at Historically Black Colleges and Universities with more than half a million dollars in grants to fund travel for golf tournaments and recruiting efforts. Announced a new collaboration with OneTen, a coalition committed to upskill, hire and advance Black talent into family-sustaining careers over the next 10 years. United Airlines Ventures announced an investment in and commercial agreement with Dimensional Energy, another step forward to reaching United's pledge to become 100% green by achieving net-zero greenhouse gas emissions by 2050, without relying on the use of traditional carbon offsets. Became the first U.S. airline to sign an agreement with Neste to purchase sustainable aviation fuel overseas. Over 42 million miles and more than $400,000 donated to World Central Kitchen, Airlink, American Red Cross, and Americares in support of Ukraine relief efforts by United's customers, with an additional 5 million miles and $100,000 matched by United. Earned a top score of 100% on the 2022 Disability Equality Index for the seventh consecutive year and was recognized as a "Best Place to Work" for Disability Inclusion. Hosted more than 100 volunteer events for United's 2nd Annual September of Service with more than 1,600 United employees volunteering 6,500 hours. Became the first airline to donate flights in support of the White House's Operation Fly Formula and transported Kendamil formula free of charge from Heathrow Airport in London to its Washington Dulles hub. Earnings Call UAL will hold a conference call to discuss fourth-quarter and full-year 2022 financial results, as well as its financial and operational outlook for first quarter 2023 and beyond, on Wednesday, January 18, at 9:30 a.m. CT/10:30 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months. Outlook This press release should be read in conjunction with the company's Investor Update issued in connection with this quarterly earnings announcement, which provides additional information on the company's business outlook (including certain financial and operational guidance) and is furnished with this press release with the U.S. Securities and Exchange Commission on a Current Report on Form 8-K. The Investor Update is also available at ir.united.com. Management will also discuss certain business outlook items during the quarterly earnings conference call. The company's business outlook is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release. Please see the section entitled "Cautionary Statement Regarding Forward-Looking Statements." About United United's shared purpose is "Connecting People. Uniting the World." From our U.S. hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C., United operates the most comprehensive global route network among North American carriers. United is bringing back our customers' favorite destinations and adding new ones on its way to becoming the world's best airline. For more about how to join the United team, please visit www.united.com/careers and more information about the company is at www.united.com. United Airlines Holdings, Inc., the parent company of United Airlines, Inc., is traded on the Nasdaq under the symbol "UAL". Website Information We routinely post important news and information regarding United on our corporate website, www.united.com, and our investor relations website, ir.united.com. We use our investor relations website as a primary channel for disclosing key information to our investors, including the timing of future investor conferences and earnings calls, press releases and other information about financial performance, reports filed or furnished with the U.S. Securities and Exchange Commission, information on corporate governance and details related to our annual meeting of shareholders. We may use our investor relations website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. We may also use social media channels to communicate with our investors and the public about our company and other matters, and those communications could be deemed to be material information. The information contained on, or that may be accessed through, our website or social media channels are not incorporated by reference into, and are not a part of, this document. Cautionary Statement Regarding Forward-Looking Statements:  This press release and the related attachments and Investor Update (as well as the oral statements made with respect to information contained in this release and the attachments) contain certain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to, among other things, the potential impacts of the COVID-19 pandemic and other macroeconomic factors and steps the company plans to take in response thereto and goals, plans and projections regarding the company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy. Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about the company's future financial results, goals, plans, commitments, strategies and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the company's control and could cause the company's future financial results, goals, plans, commitments, strategies and objectives to differ materially from those expressed in, or implied by, the statements. Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals," "targets," "pledge," "confident," "optimistic," "dedicated," "positioned" and other words and terms of similar meaning and expression are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. All statements, other than those that relate solely to historical facts, are forward-looking statements. Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law or regulation. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition and liquidity; execution risks associated with our strategic operating plan; changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions; adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business arrangements or other consolidations; our reliance on a limited number of suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; disruptions to our regional network and United Express flights provided by third-party regional carriers; unfavorable economic and political conditions in the United States and globally (including inflationary pressures); reliance on third-party service providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services; extended interruptions or disruptions in service at major airports where we operate and space, facility and infrastructure constrains at our hubs or other airports; geopolitical conflict, terrorist attacks or security events; any damage to our reputation or brand image; our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; increasing privacy and data security obligations or a significant data breach; increased use of social media platforms by us, our employees and others; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations; any failure to attract, train or retain skilled personnel, including our senior management team or other key employees; the monetary and operational costs of compliance with extensive government regulation of the airline industry; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; costs, liabilities and risks associated with environmental regulation and climate change, including our climate goals; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel (including as a result of the Russia-Ukraine military conflict); the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term, and the impacts of insufficient liquidity on our financial condition and business; failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing agreements; the impacts of the proposed phaseout of the London interbank offer rate; limitations on our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes; our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments; fluctuations in the price of our common stock; the impacts of seasonality, weather events, infrastructure and other factors associated with the airline industry; increases in insurance costs or inadequate insurance coverage and other risks and uncertainties set forth in Part I, Item 1A. Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. In addition, certain forward-looking outlook provided in this release relies on assumptions about the duration and severity of the COVID-19 pandemic, the timing of the return to a more stable business environment, the volatility of aircraft fuel prices, customer behavior changes and return in demand for air travel, among other things (together, the "Recovery Process"). The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available staffing and related impacts to the company's flight schedules and reputation), facility closures and related costs and disruptions to the company's and its business partners' operations, reduced travel demand and consumer spending, increased operating costs, supply chain disruptions, logistics constraints, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial markets generally. If the actual Recovery Process differs materially from our assumptions, the impact of the COVID-19 pandemic on our business could be worse than expected, and our actual results may be negatively impacted and may vary materially from our expectations and projections. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. For instance, we regularly monitor future demand and booking trends and adjust capacity, as needed. As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations. Non-GAAP Financial Information:  In discussing financial results and guidance, the company refers to financial measures that are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP and are presented because management believes that they supplement or enhance management's, analysts' and investors' overall understanding of the company's underlying financial performance and trends and facilitate comparisons among current, past and future periods. Non-GAAP financial measures such as adjusted operating margin (which excludes special charges (credits)), CASM-ex (which excludes the impact of fuel expense, profit sharing, special charges and third-party expenses), adjusted pre-tax margin (which is calculated as pre-tax margin excluding operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net) and adjusted net income typically have exclusions or adjustments that include one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of past or future operating results. These items are excluded because the company believes they neither relate to the ordinary course of the company's business nor reflect the company's underlying business performance. Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures presented in the press release and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Please refer to the tables accompanying this release for a description of the non-GAAP adjustments and reconciliations of the historical non-GAAP financial measures used to the most comparable GAAP financial measure and related disclosures. -tables attached-  UNITED AIRLINES HOLDINGS, INC STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)  Three Months Ended December 31, % Increase/ (Decrease) 2022 vs. 2019 Year Ended December 31, % Increase/ (Decrease) 2022 vs. 2019 (In millions, except per share data) 2022 2021 2019 2022 2021 2019 Operating revenue: Passenger revenue $  11,202 $    6,878 $    9,933 12.8 $ 40,032 $ 20,197 $ 39,625 1.0 Cargo 472 727 316 49.4 2,171 2,349 1,179 84.1 Other operating revenue 726 587 639 13.6 2,752 2,088 2,455 12.1 Total operating revenue 12,400 8,192 10,888 13.9 44,955 24,634 43,259 3.9 Operating expense: Aircraft fuel 3,317 1,962 2,249 47.5 13,113 5,755 8,953 46.5 Salaries and related costs 3,000 2,579 3,078 (2.5) 11,466 9,566 12,071 (5.0) Landing fees and other rent 657 681 650 1.1 2,576 2,416 2,543 1.3 Depreciation and amortization 624 619 606 3.0 2,456 2,485 2,288 7.3 Regional capacity purchase 571 601 725 (21.2) 2,299 2,147 2,849 (19.3) Aircraft maintenance materials and outside repairs 600 399 475 26.3 2,153 1,316 1,794 20.0 Distribution expenses 434 235 417 4.1 1,535 677 1,651 (7.0) Aircraft rent 59 63 67 (11.9) 252 228 288 (12.5) Special charges (credits) 16 56 130 NM 140 (3,367) 246 NM Other operating expenses 1,745 1,405 1,630 7.1 6,628 4,433 6,275 5.6 Total operating expense 11,023 8,600 10,027 9.9 42,618 25,656 38,958 9.4 Operating income (loss) 1,377 (408) 861 59.9 2,337 (1,022) 4,301 (45.7) Nonoperating income (expense): Interest expense (479) (429) (161) 197.5 (1,778) (1,657) (731) 143.2 Interest income 156 6 30 420.0 298 36 133 124.1 Interest capitalized 32 23 20 60.0 105 80 85 23.5 Unrealized gains (losses) on investments, net 32 (125) 81 (60.5) 20 (34) 153 (86.9) Miscellaneous, net 12 88 13 (7.7) 8 40 (27) NM Total nonoperating expense, net (247) (437) (17) NM (1,347) (1,535) (387) 248.1 Income (loss) before income taxes 1,130 (845) 844 33.9 990 (2,557) 3,914 (74.7) Income tax expense (benefit) 287 (199) 203 41.4 253 (593) 905 (72.0) Net income (loss) $      843 $     (646) $      641 31.5 $      737 $ (1,964) $   ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaJan 17th, 2023

Semantix Announces 3Q 2022 Financial Results

SÃO PAULO, Brazil, Nov. 29, 2022 (GLOBE NEWSWIRE) -- Semantix, Inc. (NASDAQ:STIX), a leading Latin American end-to-end data platform provider, today announced its financial results for the third quarter ended September 30, 2022. "I am thrilled to see continued momentum in our business and announce record net revenue for the third quarter of 2022. We are strengthening our team, improving our go-to-market motion, and focusing on our customers' core data analytics & AI journeys. Despite challenges in the global macroeconomic environment, we remain ambitious in our ability to capture opportunities in front of us," said Semantix CEO and founder Leonardo Santos. Financial Highlights Net revenue for the third quarter of 2022 was R$81 million, an increase of 7% year-over-year, mainly due to an increase in proprietary SaaS net revenue. Semantix had 12 customers contributing more than US$1 million in revenue in the trailing 12 months as of September 30, 2022. Proprietary SaaS revenue grew 16% year-over-year, with Proprietary SaaS ARR increasing 21% year-over-year in September 2022 with increased focus on core big data & analytics solutions. Gross profit increased 39% year-over-year, with gross margin improving 11 percentage points year-over-year, from 37% in the third quarter of 2021 to 48% in the third quarter of 2022, supported by an increased share of Proprietary SaaS in our revenue mix coupled with better margins from the resale of third-party products. Adjusted EBITDA loss in the third quarter was R$7 million, due primarily to ramping-up investments in talent and sales and marketing efforts. Cash and cash equivalents of R$532 million as of September 30, 2022, reflecting proceeds from the business combination with Alpha Capital. Net cash was R$354 million as of September 30, 2022. Key Business Highlights Set forth below are key highlights in relation to the ongoing execution of our growth strategy, particularly in terms of product development, talent acquisition and other strategic initiatives. Product development: completed redesign of our proprietary data platform (SDP) with focus on user experience; the addition of several ready-to-use AI algorithms to our SDP intended to enhance efficiency for our customers in the execution of certain complex tasks, including, among other new capabilities, tools to extract keywords from text, tag images with visual description, and optimize the distribution of items within online retail stores, among others; enabled customers to use Python programming language as part of scheduled data transformation routines within SDP, improving the performance of such routines and bringing SDP closer to the large community of Python developers; and empowered customers with multiple new types of data source connectors, such as social media platforms and data cloud storage providers. Focus on the core: sharpen focus on portfolio of core AI & data analytics products and discontinue the offering of certain products, such as Smarter Sales and Intelligent Chat. As a result, we are helping our customers to migrate to alternative platforms in the market, as we continue to offer support on AI & data analytics. People and leadership: strategically hired José Pizani as Product Director and Fábio Marcolino as Technology Director. Thought leadership: hosted the Semantix Data Summit on October 4, 2022, bringing together over 500 participants, including some of the most influential tech professionals from Brazil and abroad. Zetta integration: rapid ongoing integration of Zetta, reinforcing a high degree of complementarity and potential for synergy in terms of Zetta product offerings and customers with our existing portfolio and client base. Share buyback: on November 29, 2022, Semantix announced a plan to buy back up to US$5 million of its common shares. 3Q22 Financial Highlights(In BRL million, except for percentages)         3Q 2022 3Q 2021 Y/Y Change Net Revenue R$ 81 R$ 75 7% Gross Profit R$ 39 R$ 28 39% Gross Margin 48% 37% 11 p.p. Adjusted EBITDA (R$ 7) (R$ 12) - Adjusted EBITDA Margin (8%) (16%) 8 p.p.   September 30,2022 December 31,2021 Change Cash and Cash Equivalents R$ 532 R$ 52 921% Net Cash (Debt) R$ 354 (R$ 94) - Financial Outlook Based on current market conditions and management expectations, and subject to a variety of factors described below, Semantix now expects total net revenues for 2022 to be in the range of R$262 million to R$270 million. Historically, Semantix has received a higher volume of orders from new and existing customers during the second half of the year and, in particular, in the fourth quarter of each year, which we believe is due to, among other factors, the procurement, budgeting, and deployment cycles of many of our customers, particularly large enterprise customers. Conference Call and Webcast Information Semantix will host a conference call tomorrow, November 30, 2022, at 8:30 a.m. Eastern Time to discuss its financial results and financial outlook. The conference call will be webcast live on Semantix's Investor Relations website at ir.semantix.ai/news-events/events. Parties interested in participating via telephone may register using this online form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call webcast will be archived on Semantix's Investor Relations website for at least 30 days. Forward-Looking Statements This press release and the earnings call referencing this press release contain forward-looking statements and forward-looking information within the meaning of applicable United States securities legislation that involve substantial risks and uncertainties (collectively herein referred to as "forward-looking statements"). All statements other than statements of historical facts contained in this press release and addressed on our earnings call, including statements regarding our future financial position, results of operations, business strategy and plans and objectives of management for future operations, are forward-looking statements. For example, forward-looking statements include, without limitation, statements concerning the following: the growth of Semantix's business and its ability to realize expected results, including with respect to its net revenue, gross profit, gross margin, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, cash and cash equivalents and net cash (debt); the viability of its growth strategy, including with respect to its ability to grow market share in Brazil and internationally, particularly through the expansion of its proprietary SaaS data solutions, grow revenue from existing customers, and consummate and achieve expected benefits through acquisitions; opportunities, trends and developments in the data industry, including with respect to future financial performance in the industry; the size of Semantix's total addressable market; macroeconomic and geopolitical factors, including the consequences of the 2022 presidential election results in Brazil. In some cases, you can identify forward looking statements by terminology such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "could," "plan," "project," "forecast," "predict," "potential," "seem," "seek," "future," "outlook," "target," "trend" or other similar expressions (or the negative versions of such words or expressions). Such forward-looking statements are based on the current expectations of our management and are inherently subject to uncertainties and changes in circumstance and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements and could adversely affect the outcome and financial effects of the plans and events described herein. In addition, even if the outcome and financial effects of the plans and events described herein are consistent with the forward-looking statements contained in this press release and the earnings call referencing this press release, those results or developments may not be indicative of results or developments in subsequent periods. Although Semantix has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking information contained in this press release and the earnings call referencing this press release are based on current estimates, assumptions, expectations and projections, including with respect to the management's expectations regarding Semantix's growth based on historical financial results and anticipated commercial developments, the anticipated success of current strategies for market penetration in Brazil and globally in light of competition from existing market participants and the emergence of competitors in the future, management's expectations with respect to the development of technology and other proprietary intellectual property by Semantix based on existing technological realities and strategies with respect to intellectual property development, management's expectations regarding the likelihood Semantix will be able to enter into commercial arrangements with relevant third-parties and customers, Semantix's ability to maintain adequate margins based on financial metrics available to management, the ability of Semantix to finance its ongoing capital needs, the continued involvement of Semantix's management in Semantix's operations and the ability of Semantix to attract and retain talent in the future, which are based on the information available as of the date of this press release, and, while considered reasonable by Semantix, are inherently uncertain. Historical statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In this regard, certain financial information contained herein has been extracted from, or based upon, information available in the public domain and/or provided by Semantix. In particular, historical results should not be taken as a representation that such trends will be replicated in the future. No statement in this document is intended to be nor may be construed as a profit forecast. Nothing in this press release and the earnings call referencing this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements in this press release and the earnings call referencing this press release, which speak only as of the date they are made and are qualified in their entirety by reference to the cautionary statements herein. This press release also contains certain financial forecast information of Semantix. Such financial forecast information constitutes forward-looking information and is for illustrative purposes only and should not be relied upon as necessarily being indicative of future results. The assumptions and estimates underlying such financial forecast information are inherently uncertain and are subject to a wide variety of significant business, economic, competitive, and other risks and uncertainties. Actual results may differ materially from the results contemplated by the financial forecast information contained in this press release, and the inclusion of such information in this press release should not be regarded as a representation by any person that the results reflected in such forecasts will be achieved. You must make your own determinations as to the reasonableness of these projections, estimates, goals, trends and other statements and should also note that if one or more estimates change, or one or more assumptions are not met, or one or more unexpected events occur, the performance and results set forth in such projections, estimates, goals, trends and other statements may not be achieved. We can give no assurance as to future operations, performance, results or events. WE DO NOT UNDERTAKE ANY OBLIGATION AND EXPRESSLY DISCLAIM ANY RESPONSIBILITY TO UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, ANY FINANCIAL FORECASTS CONTAINED HEREIN TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FORECASTS. HOWEVER, WE MAY ELECT TO UPDATE OUR BUSINESS OUTLOOK AT ANY TIME FOR ANY REASON. Non-GAAP Financial Measures This press release includes certain non-IFRS financial measures (including on a forward-looking basis) and industry metrics such as EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, annual recurring revenue and net cash (debt). These measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS. Semantix believes that these measures (including on a forward-looking basis) provide useful supplemental information to investors about Semantix, particularly as they exclude the impacts of certain events that we believe are isolated in nature incurred as part of our recent expansion and, therefore, not reflective of our underlying results. Semantix's management does not consider these non-IFRS measures in isolation or as an alternative to financial measures determined in accordance with IFRS. Semantix's management uses forward-looking non-IFRS measures to evaluate Semantix's projected financials and operating performance. However, there are a number of limitations related to the use of these measures, including that they exclude significant expenses that are required by IFRS to be recorded in Semantix's financial statements, including certain research expenses, provisions, expenses related to our stock option plans and other expenses related to our expansion, including our recently-completed business combination and other acquisitions. In addition, other companies may calculate non-IFRS measures or industry metrics differently or may use other measures to calculate their financial performance, and therefore, Semantix's non-IFRS measures and industry metrics may not be directly comparable to similarly titled measures of other companies. Additionally, to the extent that forward-looking non-IFRS financial measures are provided, they are presented on a non-IFRS basis without reconciliations of such forward-looking non-IFRS measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. Other Business Metrics Proprietary SaaS and Resale of Third-party Software: Proprietary SaaS consists of Semantix's data platform software, while Resale of third-party Software consists of the resale of licenses from third-party data platform software providers. Customers with Trailing 12-Month Revenue Greater than US$1 Million: Large customer relationships lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they have larger budgets, and a wider range of potential use cases. As a measure of our ability to scale with our customers and attract large enterprises, we count the number of customers that contributed more than US$1 million in revenues in the trailing 12 months, considering the Brazilian real to US Dollar exchange rate as of September 30, 2022. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. Proprietary SaaS ARR: This metric is intended to measure the value of the contracted recurring revenue components of our proprietary SaaS term subscriptions normalized to a one-year period. We measure Proprietary SaaS ARR as the total gross revenue we expect to receive from our proprietary SaaS customers over the following 12 months based on contractual commitments, assuming no increases or reductions in their subscriptions or usage. Net Cash (Debt): Net cash (debt) reflects Semantix's cash and cash equivalents balance at a given date in time, net of the loans and borrowings balance as of the same date. About Semantix Semantix is Latin America's first fully integrated data software platform. Semantix has more than 300 clients with operations in approximately 15 countries using Semantix's software and services to enhance their businesses. The company was founded in 2010 by CEO Leonardo Santos. For more information, visit www.semantix.ai. Semantix Inc. Unaudited Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income(in BRL thousands)   Three Months Ended, September 30, Nine Months Ended, September 30,   2022 2021 2022 2021 Revenues 80,638 75,189 166,180 170,299 Cost of sales (41,563) (47,062) (99,356) (103,537) Gross profit 39,075 28,127 66,824 66,762 Operating expenses         Sales and marketing expenses (13,466) (6,812) (38,296) (22,532).....»»

Category: earningsSource: benzingaNov 29th, 2022

ELBIT SYSTEMS REPORTS THIRD QUARTER 2022 RESULTS

Backlog of orders at $14.7 billion; Revenues of $1.3 billion; Non-GAAP net income of $63 million; GAAP net income of $56 million; Non-GAAP net EPS of $1.40; GAAP net EPS of $1.26 HAIFA, Israel, Nov. 29, 2022 /PRNewswire/ -- Elbit Systems Ltd. ("Elbit Systems" or the "Company") (NASDAQ:ESLT) (TASE: ESLT), the international high technology company, reported today its consolidated results for the quarter ended September 30, 2022. In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive view of the Company's business results and trends. For a description of the Company's non-GAAP definitions see below, "Non-GAAP financial data". Unless otherwise stated, all financial data presented is US-GAAP financial data. Management Comment: Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: "The current environment presents opportunities and challenges for Elbit Systems. Elevated geopolitical tensions and growing defense budgets have created multiple opportunities and we are increasing investment in business development to realize the potential from these trends. Our people are our most important asset and their contribution is critical to our long term success. This year and as part of our efforts to retain high performing employees, we have awarded stock price linked compensation plans and have incurred related costs. We have also increased inventories in recent quarters as part of our efforts to mitigate the impact of global supply chain disruptions and maintain timely deliveries to our customers. Our working assumption is that supply chain and labor inflation pressures will gradually subside from the second half of 2023. We continue to invest in Elbit Systems' portfolio of advanced technological capabilities including unmanned systems, C4I, EW, maritime solutions and precision munitions. The significant orders received in 2022 have highlighted the relevance of our portfolio to our customers and support future growth prospects". Third quarter 2022 results: Revenues in the third quarter of 2022 were $1,348.9 million, as compared to $1,363.6 million in the third quarter of 2021. Non-GAAP(*) gross profit amounted to $337.9 million (25.0% of revenues) in the third quarter of 2022, as compared to $370.7 million (27.2% of revenues) in the third quarter of 2021. GAAP gross profit in the third quarter of 2022 was $326.0 million (24.2% of revenues), as compared to $363.2 million (26.6% of revenues) in the third quarter of 2021. The GAAP and Non-GAAP gross profit in the third quarter of 2022 includes expenses of approximately $13 million related to the effect of the significant increase in the Company's share price on employees' stock price linked compensation plans. *see Non-GAAP financial data Research and development expenses, net were 113.2 million (8.4% of revenues) in the third quarter of 2022, as compared to 101.5 million (7.4% of revenues) in the third quarter of 2021. Marketing and selling expenses, net were $68.5 million (5.1% of revenues) in the third quarter of 2022, as compared to $84.1 million (6.2% of revenues) in the third quarter of 2021. General and administrative expenses, net were $80.2 million (5.9% of revenues) in the third quarter of 2022, as compared to $67.3 million (4.9% of revenues) in the third quarter of 2021. Other operating income, net were $9.4 million in the third quarter of 2022. Other operating income, net in the third quarter of 2022 was a result of a capital gain from sale of a building in Israel.  Non-GAAP(*) operating income was $84.3 million (6.3% of revenues) in the third quarter of 2022, as compared to $123.0 million (9.0% of revenues) in the third quarter of 2021. GAAP operating income in the third quarter of 2022 was $73.4 million (5.4% of revenues), as compared to $110.3 million (8.1% of revenues) in the third quarter of 2021. GAAP and Non-GAAP(*) operating income in the third quarter of 2022 was reduced by expenses of approximately $22 million related to the Company's stock price linked compensation plans. Financial expenses, net were $16.4 million in the third quarter of 2022, as compared to $13.5 million in the third quarter of 2021. Other income, net were $4.8 million in the third quarter of 2022, as compared to $0.3 million in the third quarter of 2021. Other income, net in the third quarter of 2022 resulted mainly from revaluation of holdings in an affiliated company. Taxes on income were $7.9 million in the third quarter of 2022, as compared to $8.3 million in the third quarter of 2021. Equity in net earnings of affiliated companies and partnerships were $2.3 million in the third quarter of 2022, as compared to $3.0 million in the third quarter of 2021. Non-GAAP(*) net income attributable to the Company's shareholders in the third quarter of 2022 was $62.6 million (4.6% of revenues), as compared to $103.1 million (7.6% of revenues) in the third quarter of 2021. GAAP net income attributable to the Company's shareholders in the third quarter of 2022 was $56.2 million (4.2% of revenues), as compared to $91.9 million (6.7% of revenues) in the third quarter of 2021. Net income in the third quarter of 2022 was reduced by net expenses of approximately $20 million related to the Company's stock price linked compensation plans. Non-GAAP(*) diluted net earnings per share attributable to the Company's shareholders were $1.40 for the third quarter of 2022, as compared to $2.33 for the third quarter of 2021. GAAP diluted earnings per share attributable to the Company's shareholders in the third quarter of 2022 were $1.26, as compared to $2.08 in the third quarter of 2021. Diluted net earnings per share in the third quarter of 2022, were reduced by $0.45 as a result of the expenses related to the Company's stock price linked compensation plans. *see Non-GAAP financial data The Company's backlog of orders as of September 30, 2022 totaled $14.7 billion. Approximately 75% of the current backlog is attributable to orders from outside Israel. Approximately 40% of the backlog is scheduled to be performed during the remainder of 2022 and 2023.  Cash flows provided by operating activities in the nine months ended September 30, 2022 were $44.6 million, as compared to $157.0 million in the nine months ended September 30, 2021. Cash flows in 2022 included an amount of approximately $76 million of a one-time tax payment related to the Company's implementation of the amendment to the law of Encouragement of Capital Investments allowing payment of reduced corporate tax for the release of exempt earnings from "Approved Enterprises" and "Privileged Enterprises" in Israel, as reported in our 2021 annual report. Impact of the Covid-19 Pandemic on the Company: The Coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization in March 2020. COVID-19 has had significant negative impacts on the worldwide economy, resulting in disruptions to supply chains and financial markets, significant travel restrictions, facility closures and shelter-in place orders in various locations. Such disruptions also led to global shortages of electronics and other components, increased costs and extended lead times. Elbit Systems is closely monitoring the evolution of the COVID-19 pandemic and its impacts on the Company's employees, customers and suppliers, as well as on the global economy. As we last reported on August 16, 2022, we have been taking a number of actions to protect the safety of our employees as well as maintain business continuity and secure our supply chain. All of these actions remain ongoing. We have implemented a series of cost control measures to help limit the financial impact of the pandemic on the Company, in parallel to the measures we are taking to maintain business continuity and deliveries to our customers. We also are working on efficiency initiatives with a number of our suppliers. We continue to evaluate our operations on an ongoing basis in order to adapt to the evolving business environment. During 2021 and the first nine months of 2022 our defense activities, which account for most of our business, were not materially impacted by the pandemic, although some of our businesses experienced certain disruptions due to government directed safety measures, travel restrictions and supply chain delays.  We believe that as of September 30, 2022, Elbit Systems had a healthy balance sheet, adequate levels of cash and access to credit facilities that provide liquidity when necessary. We have given high priority to cash management and adequate cash reserves to run the business. The extent of the impact of COVID-19 on the Company's performance depends on future developments including the duration and spread of the pandemic, the measures adopted by governments to limit the spread of the pandemic, including implementation of vaccinations, and resulting actions that may be taken by our customers and our supply chain, all of which contain uncertainties. As noted in our annual report on Form 20-F for the year ended December 31, 2021, the preparation of financial reports requires us to make judgments, assumptions and estimates that affect the amounts reported. For our financial results for the quarter ended September 30, 2022, we considered the economic impact of the COVID-19 pandemic on our critical and significant accounting estimates. The expected impact of the COVID-19 pandemic did not have a material effect on our judgments, assumptions and estimates reflected in the results. However, our future results may differ materially from our estimates. As events continue to evolve in connection with the COVID-19 pandemic, the estimates we use in future periods may change materially. * Non-GAAP financial data: The following non-GAAP financial data is presented to enable investors to have additional information on the Company's business performance as well as a further basis for periodical comparisons and trends relating to the Company's financial results. The Company believes such data provides useful information to investors by facilitating more meaningful comparisons of the Company's financial results over time. Such non-GAAP information is used by the Company's management to make strategic decisions, forecast future results and evaluate the Company's current performance. However, investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies.    The non-GAAP financial data includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, companies generally factor out items such as those that have a non-recurring impact on the income statements, various non-cash items including significant exchange rate differences, significant effects of retroactive tax legislation, changes in accounting guidance, financial transactions and other items not considered to be part of regular ongoing business, which, in management's judgment, are items that are considered to be outside of the review of core operating results. In the Company's non-GAAP presentation, the Company made certain adjustments, as indicated in the table below. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.   Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data: (US Dollars in millions, except for per share amounts) Nine months ended September 30, 2022 Nine months ended September 30, 2021 Three months ended September 30, 2022 Three months ended September 30, 2021 Year ended December 31, 2021 GAAP gross profit $     992.7 $     983.7 $     326.0 $     363.2 $  1,358.0 Adjustments: Amortization of purchased intangible assets 24.5 19.8 11.9 7.5 26.7 Non-GAAP gross profit $  1,017.2 $  1,003.5 $     337.9 $     370.7 $  1,384.7 Percent of revenues 25.4 % 26.5 % 25.0 % 27.2 % 26.2 % GAAP operating income $     247.2 $     311.2 $        73.4 $     110.3 $     418.5 Adjustments: Amortization of purchased intangible assets 37.8 34.3 11.5 12.7 47.0 Capital gain (31.5) (14.7) (0.6) — (14.7) Non-GAAP operating income $     253.5 $     330.8 $        84.3 $     123.0 $     450.8 Percent of revenues 6.3 % 8.7 % 6.3 % 9.0 % 8.5 % GAAP net income attributable to Elbit Systems' shareholders $     190.2 $     266.2 $        56.2 $        91.9 $     274.4 Adjustments: Amortization of purchased intangible assets 37.8 34.3 11.5 12.7 47.0 Capital gain (20.5) (24.9) (0.6) — (24.9) Revaluation of investment measured under fair value method (4.6) (4.8) (4.6) (3.2) (17.3) Non-operating foreign exchange (gains) losses (7.5) 3.4 0.9 3.4 10.6 Tax effect and other tax items, net (1.5) (1.5) (0.8) (1.7) 77.8 Non-GAAP net income attributable to Elbit Systems' shareholders $     193.9 $     272.7 $        62.6 $     103.1 $     367.6 Percent of revenues 4.8 % 7.2 % 4.6 % 7.6 % 7.0 % GAAP diluted net EPS $        4.27 $        6.01 $        1.26 $        2.08 $        6.20 Adjustments, net 0.08 0.15 0.14 0.25 2.10 Non-GAAP diluted net EPS $        4.35 $        6.16 $        1.40 $        2.33 $        8.30   Recent Events: On August 17, 2022, the Company announced that it was awarded two contracts, in an aggregate amount valued at $240 million, to upgrade Main Battle Tanks for an international customer. A $60 million contract will be delivered over a period of two years and a $180 million contract will be delivered over a period of four years.  On September 12, 2022, the Company announced that its U.S. subsidiary, Elbit Systems of America LLC, ("Elbit Systems of America"), was awarded an Indefinite Delivery/Indefinite Quantity (ID/IQ) contract with a maximum potential value of up to approximately $49 million, to provide 120mm mortar systems for the U.S. Army. The contract will be executed in Fort Worth, Texas over a period of five years. An initial delivery order of approximately $10 million has been issued under this ID/IQ contract, to be executed over a two-year period. On September 12, 2022, the Company announced that Elbit Systems of America was awarded a $10 million contract by SOSSEC, Inc. to begin phase II of the development of an ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaNov 29th, 2022

As US-China Relations Worsen, Expect Supply Chain Chaos

As US-China Relations Worsen, Expect Supply Chain Chaos By John Paul Hampstead of FreightWaves The trans-Pacific trade lane connecting the world’s most important countries is a pillar of the global economy. But now it’s becoming an epicenter of supply chain, financial and geopolitical risk.  During the pandemic, ocean container spot rates rocketed upward from approximately $1,000 per 40-foot container to nearly $20,000 last fall before plunging again to $2,720 last week. Meanwhile, U.S. officials staged visits to Taiwan and took action to further separate the Chinese and American semiconductor sectors. This potent combination of economic, political and military issues will make trans-Pacific business complicated for years to come.  China’s zero-COVID policies and recent tensions over Taiwan have accelerated this confrontation, which could lead to further decoupling between the U.S. and China. But the fundamental issues will likely persist beyond present crises.  The American media coverage of President Xi Jinping’s address to the 20th Communist Party Congress in Beijing last week took note of Xi’s pessimistic tone, warning party members to prepare China for confrontation and crisis. Politico’s Phelim Kine called Xi’s view of U.S.-China relations “increasingly bleak.” Bret Stephens played into the rivalry, writing a cynical op-ed in The New York Times sarcastically thanking Xi for running his country so poorly as to make the United States seem good by contrast.  Counter-signaling Xi’s message of a Chinese “national rejuvenation,” U.S. Secretary of State Antony Blinken was at the same time giving speeches at Stanford University in a tour carefully packaged around a national-strength-through-technology theme. Blinken visited the SLAC National Accelerator Laboratory then spoke at a Hoover Institute event with former Secretary of State Condoleeza Rice, who is now the Hoover Institute director. Most strikingly, Blinken said China was “determined to pursue reunification [with Taiwan] on a much faster timeline” — a statement that made headlines. Blinken’s visit to Stanford seems to be part of a general effort from the Biden administration to nationalize technology policy and shape the technology industry into an asset that could be useful in a China conflict. Blinken announced his creation of the State Department’s Bureau of Cyberspace and Digital Policy in April. In August, President Biden signed the CHIPS and Science Act, which will spend $280 billion on U.S. semiconductor infrastructure.  China’s zero-COVID policy fighting losing battle But before we give too much thought to strategic industrial policy, we should recognize the most immediate impact to supply chains and the trans-Pacific trade that the Chinese president’s third term will have: the continuation of Xi’s signature zero-COVID policy for the foreseeable future. China’s draconian surveillance and control regime of tests, quarantines and lockdowns — enabled by a collaboration between the Chinese Communist Party (CCP) and China technology companies — seemed to work well enough for a year. Xi’s policy held down infection rates and kept the economy pointed up and to the right.  But when the Omicron variant’s greater infectiousness overwhelmed mask and vaccine protections, China kept forcefully applying lockdowns, massively disrupting both its own economy and trans-Pacific trade in general. Although the Chinese state adapted its tactics on a case-by-case basis — the 2022 lockdown of Shanghai, for instance, kept critical infrastructure like the container terminals operating in ways that the 2021 lockdown of Yantian did not, for example — the governance mechanism was the same. Centralized algorithms looked for signals in endless oceans of public health, location and social media data. As a result, recommended policy actions were increasingly ineffectual and mismatched to realities on the ground.  Tokyo-based freelance writer Dylan Levi King explored the deep roots of this data-driven, centralized electronic command and control system in a recent article for Palladium Magazine called “The Genealogy of Chinese Cybernetics.” King reconstructs the career of Qian Xuesan, author of “Engineering Cybernetics” (1954), from Pasadena, California, to Beijing and his role in building the computer systems and algorithmic models that justified China’s “Great Leap Forward” and the one-child policy.  As King wrote, the implementation of these policies fell far short of the dream of optimized, electronic, frictionless command and control: “Political attempts at cybernetic planning — both in China and elsewhere — have never overcome the problem of limited sensors and weak effectors.” Though he doesn’t refer specifically to the pandemic, the unintended consequences of a zero-COVID policy, including food shortages, real estate insolvency and bank runs seem to validate it as a further example of this governance style’s inadequacy.  The consensus of the international financial community, as Bloomberg’s John Authers wrote, is that China’s zero-COVID policy under Omicron has been a disaster casting a pall over the global economy. The Hang Sen Index, which measures the health of the Hong Kong stock market and its largest companies, is down 46% since its Feb. 19, 2021, peak. It is threatening to dip below its 30-year support level. Zero-COVID has created downstream supply chain issues with widespread, long-lasting and unpredictable effects on the earnings of U.S. and European companies, from automakers to big-box retailers. US-China relations have weakened for more than decade But whether or not Xi rolls back his zero-COVID policy or not, the future of the trans-Pacific is troubled.  All signs point to escalating confrontation between the United States and China over Taiwan, but the seemingly cheery relationship between the two giants has been shifting — sometimes quickly, sometimes slowly — for years, dating back to the Obama administration. Recall that one of the reasons given for former President Barack Obama’s withdrawal from Iraq and Afghanistan was to enable the “pivot to Asia,” the continent that Obama identified as the future center of gravity of the global economy in terms of population and gross domestic product. These weren’t just words. Obama moved 2,500 Marines into northern Australia and designed the Trans-Pacific Partnership, a trade agreement with smaller regional powers meant to isolate China.  Former President Donald Trump’s tariffs, which eventually escalated into a medium-sized trade war with China and a series of smaller skirmishes with Canada and the European Union, set off panicked behavior by U.S. importers that roiled the trans-Pacific. Companies accelerated the timelines on their purchase orders, “pulling forward” shipments that were originally scheduled to arrive after new tariffs took effect in order to avoid paying the duties. A logjam of volume increased rates, reduced schedule reliability, congested ports and filled warehouses, especially in Southern California.  In summer 2018, when the pull-forward effects were felt, the U.S. truckload market was still on fire, having been catalyzed by Hurricane Harvey the previous year and the ELD mandate’s tightening effect on capacity. The unpredictable volumes coming out of some of the country’s most important freight markets undoubtedly kept truckload rates higher for longer before the market ultimately began rolling over in October. Expect more military activity Although Trump sometimes styled his protectionist tariffs as merely the pragmatic bargaining chips of a consummate dealmaker looking out for the American people, his military moves revealed a deeper, strategic understanding of the trans-Pacific. His administration, for example, emphasized the U.S. Navy’s ability to secure vital trade routes. Navy patrols in heavily trafficked areas and freedom of navigation exercises increased, placing additional pressure on those operations to perform.  When the Navy looked sloppy, heads rolled. In summer 2017, the U.S. Seventh Fleet, a forward-deployed and based in Yokosuka, Japan, and centered on the USS Ronald Reagan’s carrier strike group, suffered two accidents. The Arleigh Burke-class guided missile destroyer USS Fitzgerald collided with a commercial vessel in July off the coast of Yokosuka. The next month, another Arleigh Burke, the USS John McCain, collided with a commercial vessel near the Strait of Malacca off Singapore. Between the two accidents, 17 American sailors were killed. Trump’s chief of naval operations, Adm. John Richardson, responded by effectively purging the Seventh Fleet and the larger U.S. Pacific Fleet. The Navy fired or retired the destroyer commanders and executive officers, as well as commander of the Seventh Fleet, Adm. Joseph Aucoin. Then Richardson told Adm. Scott Swift, commander of the Pacific Fleet (of which the Seventh is a part), that he wouldn’t be considered for promotion to the Indo-Pacific Command, so Swift announced his retirement. The point had been made: U.S. Navy leaders were personally responsible for keeping up with the heavier demands made on security operations in vital trans-Pacific trade lanes.  Beginning in the Obama administration and continuing through the Trump and Biden administrations, the United States has exhibited a growing awareness of the trans-Pacific as not only a trade conduit but also a theater for competition and perhaps conflict. Diplomatic, economic, technological and military steps have been taken that suggest the United States is exploring how it can maintain its interests in the Pacific region without China’s cooperation or consent. The most recent flare-ups are the kind of incidental accelerants that were bound to occur during this more gradual paradigm shift in U.S.-China relations. Supply chain chaos to ensue Apart from overt military encounters, I’ll be watching a few key themes going forward: increased volatility in supply chains, in terms of freight volumes; capacity availability and transportation rates; less visibility into China’s economic activity; and a more diverse, less China-centric trans-Pacific trade. I expect the U.S.-China rivalry to express itself through gamesmanship in a number of spheres, including technology, international law, diplomacy, trade practices and military posture. The uncertainty and chaos of this changing trans-Pacific paradigm — from decades of decreasing friction and lower costs to a new trend of increasing friction and higher costs — will drive unpredictable and disruptive shipper behavior similar to that seen in 2018, 2020 and 2021. Stockouts will be followed by inventory gluts and vice versa, as importers pay too much to move their goods that are stored too long and arrive too late, compressing gross margins.  At the same time, outsider observers will likely see less of China’s real economic activity. Last year, China cut off foreign access to automatic identification system (AIS) data, preventing companies from seeing the real-time location of commercial vessels in Chinese waters. Official reports on economic activity coming out of Shanghai during the last COVID lockdown were anything but transparent, and much Western analysis relied on anecdotes and alternative data sources.  Leland Miller, the CEO of China Beige Book, a firm that tabulates independent Chinese economic data, said last week that the country was undergoing a “paradigm shift” in its governance and economic models that will complicate its further development, including the end of debt-fueled growth. It will be difficult to track this shift accurately, given the unreliability of official data. Finally, if the U.S. and China decide to pursue a policy of mutual divestment, we should expect a more diverse, less China-centric trans-Pacific trade. There are other exciting economies in the region that the United States is connected to, including Vietnam, the Philippines, Taiwan, Korea, Japan and Indonesia. Eastbound freight flows may have more widely distributed origins as China’s share diminishes. Ports like South Korea’s Busan, Malaysia’s Port Klang, Taiwan’s Kaohsiung and Japan’s Yokohama could become relatively more important.  The change in network structure could threaten the stability of the container-ship alliances that control capacity in the trans-Pacific and make the 20,000-plus twenty-foot equivalent unit mega-ships built to serve the largest ports harder to fill and less competitive. Capacity could structurally loosen on what are now the densest lanes, like Shanghai to Los Angeles, while slots could be harder to find on more obscure but growing lanes. The upshot here is that even a prudent trade strategy seeking to de-risk China by sourcing goods in other Asian countries will be exposed to knock-on effects from the challenges the U.S.-China trade is fated to face. Importers and their transportation providers will need to build links between operations teams and strategic planners so that emerging trends in markets can be identified. Tariffs, embargoes and many other forms of economic warfare are potentially on the table.  For 20 years, the trans-Pacific was relatively easy, boring and cheap. Now it’s becoming exciting, difficult and expensive — and will probably stay that way for some time to come. Tyler Durden Fri, 10/28/2022 - 15:06.....»»

Category: smallbizSource: nytOct 28th, 2022

United Airlines Third Quarter Financial Results Solidly Beat Expectations; Expects Q4 Adjusted Operating Margin to Exceed 2019

Company's September TRASM was third best of any month in company history CASM-ex1 for the quarter was 1.5 points better than expected Q4 optimism powered by strong revenue and improving cost trends Best on-time arrival rate and lowest rate of misconnections for any Q3 in history (outside 2020) CHICAGO, Oct. 18, 2022 /PRNewswire/ -- United Airlines (UAL) today reported third quarter 2022 financial results, beating expectations on top-line operating revenue, unit costs and adjusted operating margin¹. As a result, the company achieved operating revenue growth of 13.2% versus third quarter 2019, with a 25.5% TRASM improvement in the quarter versus 2019, while CASM-ex1 (cost per available seat mile) came in better than expected, resulting in 11.3% operating margin; 11.5% operating margin on an adjusted basis1. Looking forward through the end of the year, the airline expects the strong COVID recovery trends to continue to overcome the recessionary pressures in the macroeconomic environment. The airline now expects fourth quarter adjusted operating margin to be above 2019 for the first time. The company also remains confident in the 2023 United Next adjusted pre-tax margin¹ target of ~9%.  The company believes there are three durable trends for air travel demand that are more than fully offsetting any economic headwinds: air travel is still in the COVID recovery phase, hybrid work gives customers the freedom and flexibility to travel for leisure more often, and external supply challenges will limit industry supply for years to come. United delivered one of its best third-quarter operational performances of any third quarter in the company's history, outside of 2020. In addition, the company saved more than 135,000 customer connections with its industry leading tool, ConnectionSaver. "I am grateful to United employees who delivered an incredible performance this quarter taking care of our customers and producing, by most metrics, the best operational quarter in our history," said United Airlines CEO Scott Kirby. "Despite growing concerns about an economic slowdown, the ongoing COVID recovery trends at United continue to prevail and we remain optimistic that we'll continue to deliver strong financial results in the fourth quarter, 2023 and beyond." Third Quarter Financial Results Reported third quarter 2022 net income of $942 million, adjusted net income1 of $927 million. Reported third quarter 2022 capacity down 9.8% compared to third quarter 2019. Reported third quarter 2022 total operating revenue of $12.9 billion, up 13.2% compared to third quarter 2019. Reported third quarter 2022 TRASM of up 25.5% compared to third quarter 2019. Reported third quarter 2022 CASM of up 27.8%, and CASM-ex1 of up 14.5%, compared to third quarter 2019. Reported third quarter 2022 operating margin of 11.3%, adjusted operating margin1 of 11.5%. Reported third quarter 2022 pre-tax margin of 9.0%, adjusted pre-tax margin1 of 8.9%. Reported third quarter 2022 fuel price of $3.81 per gallon. Reported third quarter 2022 payments of long-term debt, finance leases and other financing liabilities of $810 million. Reported third quarter 2022 ending available liquidity2 of $20.4 billion. Key Highlights Achieved best on-time arrival rate for any Q3 in history (outside 2020). Announced a historic commercial agreement with Emirates that will enhance each airline's network and give customers easier access to hundreds of destinations around the world. Also announced a new direct flight between Newark/New York and Dubai beginning in March 2023, subject to government approval. Unveiled a brand-new United ClubSM in Terminal 3 at Phoenix Sky Harbor International Airport. Announced a $15 million investment in Eve Air Mobility and a conditional purchase agreement for 200 four-seat electric aircraft plus 200 options, expecting the first deliveries as early as 2026. Launched United for Business Blueprint™ a new platform that will allow corporate customers to fully customize their business travel program contracts with United. Added more than 120 flights for college football fans to see their team on the road. Began offering eligible T-Mobile customers free in-flight Wi-Fi and streaming where available on select domestic and short-haul international flights.  Customer Experience and Operational Performance Achieved a nearly 5-point improvement in customer satisfaction as measured by Net Promoter Score over the second quarter of 2022. Close to 39 million customers traveled with United in the quarter, 90% of the volume for the same quarter in 2019. Among top carriers, United was the only carrier to outperform the third-quarter of 2019 in on-time departure and on-time arrival performance. Controllable cancellations decreased by 95% in September, compared to January. Controllable cancellations are measured as cancellations that are in control of the airline, such as maintenance. Achieved third-best completion factor for the month of September with a 99% completion rate. This was despite the impacts of Hurricane Ian. Network Announced a joint business agreement with Air Canada for the Canada-U.S. transborder market, building on the companies' long-standing alliance, that will give more flight options and better flight schedules to customers traveling between the two countries. Announced new direct flights between Washington Dulles Airport and Cape Town beginning Nov. 17, 2022, subject to government approval, becoming the first airline to provide nonstop round trip service from the U.S. capital to South Africa. Reintroduced five international routes for the first time since the start of the pandemic: Chicago to Edinburgh, Scotland; San Francisco to Tokyo-Haneda, Japan; and Guam to Fukuoka, Osaka, and Nagoya, Japan. Environmental, Social and Governance (ESG) Hosted 600 girls and young women at 22 events as part of Girls in Aviation Day where attendees got a behind-the-scenes look at careers in aviation. Launched "Game Recognize Game," in partnership with the PGA Tour and hosted by Roger Steele, a video series that features student-athletes and coaches from golf programs at four Historically Black Colleges and Universities (HBCUs) who discuss the positive impact of United's travel grant program. Recognized in the ESG category for Flight Global's annual Airline Strategy Awards. Earned a top score of 100% on the 2022 Disability Equality Index (DEI) for the seventh consecutive year and was recognized as a "Best Place to Work" for Disability Inclusion. Partnered with the Los Angeles Memorial Coliseum and the University of Southern California (USC) to launch the United Airlines - LA Memorial Coliseum Veteran Small Business Grant Program, which will award $100,000 to veteran-owned small businesses in the fourth quarter. Hosted more than 100 volunteer events for United's 2nd Annual September of Service with more than 1,600 United employees volunteering 6,500 hours. Launched a relief campaign for those affected by Hurricanes Fiona and Ian with customers donating over 3 million miles and $36,630 in cash contributions so far for participating organizations. Commemorated 85 years of service in Denver by doing good in the community including hosting students from the Aviation Career Education (ACE) Academy and holding a school supply drive for kids in need. Through a combination of cargo-only flights and passenger flights, United transported nearly 250 million pounds of cargo, including approximately 20 million pounds of medical shipments, 480,000 pounds of COVID-related shipments, and 900 pounds of military shipments. Earnings Call UAL will hold a conference call to discuss third quarter 2022 financial results, as well as its financial and operational outlook for fourth quarter and full year 2022 and beyond, on Wednesday, October 19, at 9:30 a.m. CT/10:30 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months. Outlook This press release should be read in conjunction with the company's Investor Update issued in connection with this quarterly earnings announcement, which provides additional information on the company's business outlook (including certain financial and operational guidance) and is furnished with this press release with the U.S. Securities and Exchange Commission on a Current Report on Form 8-K. The Investor Update is also available at ir.united.com. Management will also discuss certain business outlook items during the quarterly earnings conference call. The company's business outlook is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release. Please see the section entitled "Cautionary Statement Regarding Forward-Looking Statements." About United United's shared purpose is "Connecting People. Uniting the World." From our U.S. hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C., United operates the most comprehensive global route network among North American carriers. United is bringing back our customers' favorite destinations and adding new ones on its way to becoming the world's best airline. For more about how to join the United team, please visit www.united.com/careers and more information about the company is at www.united.com. United Airlines Holdings, Inc., the parent company of United Airlines, Inc., is traded on the Nasdaq under the symbol "UAL". Website Information We routinely post important news and information regarding United on our corporate website, www.united.com, and our investor relations website, ir.united.com. We use our investor relations website as a primary channel for disclosing key information to our investors, including the timing of future investor conferences and earnings calls, press releases and other information about financial performance, reports filed or furnished with the U.S. Securities and Exchange Commission, information on corporate governance and details related to our annual meeting of shareholders. We may use our investor relations website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. We may also use social media channels to communicate with our investors and the public about our company and other matters, and those communications could be deemed to be material information. The information contained on, or that may be accessed through, our website or social media channels are not incorporated by reference into, and are not a part of, this document. Cautionary Statement Regarding Forward-Looking Statements: This press release and the related attachments and Investor Update (as well as the oral statements made with respect to information contained in this release and the attachments) contain certain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to, among other things, the potential impacts of the COVID-19 pandemic and other macroeconomic factors and steps the company plans to take in response thereto and goals, plans and projections regarding the company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy. Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about the company's future financial results, goals, plans, commitments, strategies and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the company's control and could cause the company's future financial results, goals, plans, commitments, strategies and objectives to differ materially from those expressed in, or implied by, the statements. Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals," "targets," "confident," "optimistic," "dedicated" and other words and terms of similar meaning and expression are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. All statements, other than those that relate solely to historical facts, are forward-looking statements. Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law or regulation. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition and liquidity; execution risks associated with our strategic operating plan; changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions; adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business arrangements or other consolidations; our reliance on a limited number of suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; disruptions to our regional network and United Express flights provided by third-party regional carriers; unfavorable economic and political conditions in the United States and globally (including inflationary pressures); reliance on third-party service providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services; extended interruptions or disruptions in service at major airports where we operate and space, facility and infrastructure constrains at our hubs or other airports; geopolitical conflict, terrorist attacks or security events; any damage to our reputation or brand image; our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; increasing privacy and data security obligations or a significant data breach; increased use of social media platforms by us, our employees and others; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations; any failure to attract, train or retain skilled personnel, including our senior management team or other key employees; the monetary and operational costs of compliance with extensive government regulation of the airline industry; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; costs, liabilities and risks associated with environmental regulation and climate change, including our climate goals; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel (including as a result of the Russia-Ukraine military conflict); the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term, and the impacts of insufficient liquidity on our financial condition and business; failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing agreements; the impacts of the proposed phaseout of the London interbank offer rate; limitations on our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes; our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments; fluctuations in the price of our common stock; the impacts of seasonality, weather events, infrastructure and other factors associated with the airline industry; increases in insurance costs or inadequate insurance coverage and other risks and uncertainties set forth in Part I, Item 1A. Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. In addition, certain forward-looking outlook provided in this release relies on assumptions about the duration and severity of the COVID-19 pandemic, the timing of the return to a more stable business environment, the volatility of aircraft fuel prices, customer behavior changes and return in demand for air travel, among other things (together, the "Recovery Process"). The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available staffing and related impacts to the company's flight schedules and reputation), facility closures and related costs and disruptions to the company's and its business partners' operations, reduced travel demand and consumer spending, increased operating costs, supply chain disruptions, logistics constraints, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial markets generally. If the actual Recovery Process differs materially from our assumptions, the impact of the COVID-19 pandemic on our business could be worse than expected, and our actual results may be negatively impacted and may vary materially from our expectations and projections. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. For instance, we regularly monitor future demand and booking trends and adjust capacity, as needed. As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations. Non-GAAP Financial Information: In discussing financial results and guidance, the company refers to financial measures that are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP and are presented because management believes that they supplement or enhance management's, analysts' and investors' overall understanding of the company's underlying financial performance and trends and facilitate comparisons among current, past and future periods. Non-GAAP financial measures such adjusted operating margin (which excludes special charges (credits)), CASM-ex, adjusted pre-tax margin (which is calculated as pre-tax margin excluding operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net) and adjusted net income typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of past or future operating results. These items are excluded because the company believes they neither relate to the ordinary course of the company's business nor reflect the company's underlying business performance. Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures presented in the press release and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Please refer to the tables accompanying this release for a description of the non-GAAP adjustments and reconciliations of the historical non-GAAP financial measures used to the most comparable GAAP financial measure and related disclosures. -tables attached-   UNITED AIRLINES HOLDINGS, INC STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED) Three Months Ended September 30, % Increase/ (Decrease) 2022 vs. 2019 Nine Months Ended September 30, % Increase/ (Decrease) 2022 vs. 2019 (In millions, except per share data) 2022 2021 2019 2022 2021 2019 Operating revenue: Passenger revenue $  11,653 $    6,637 $  10,481 11.2 $ 28,830 $ 13,319 $ 29,692 (2.9) Cargo 498 519 282 76.6 1,699 1,622 863 96.9 Other operating revenue 726 594 617 17.7 2,026 1,501 1,816 11.6 Total operating revenue 12,877 7,750 11,380 13.2 32,555 16,442 32,371 0.6 Operating expense: Aircraft fuel 3,755 1,710 2,296 63.5 9,796 3,793 6,704 46.1 Salaries and related costs 2,843 2,487 3,063 (7.2) 8,466 6,987 8,993 (5.9) Landing fees and other rent 639 652 645 (0.9) 1,919 1,735 1,893 1.4 Aircraft maintenance materials and outside repairs 619 346 490 26.3 1,553 917 1,319 17.7 Depreciation and amortization 610 623 575 6.1 1,832 1,866 1,682 8.9 Regional capacity purchase 596 520 721 (17.3) 1,728 1,546 2,124 (18.6) Distribution expenses 482 218 432 11.6 1,101 442 1,234 (10.8) Aircraft rent 65 58 67 (3.0) 193 165 221 (12.7) Special charges (credits) 20 (1,098) 27 NM 124 (3,423) 116 NM Other operating expenses 1,790 1,197 1,591 12.5 4,883 3,028 4,645 5.1 Total operating expense 11,419 6,713 9,907 15.3 31,595 17,056 28,931 9.2 Operating income (loss) 1,458 1,037 1,473 (1.0) 960 (614) 3,440 (72.1) Nonoperating income (expense): Interest expense (455) (449) (191) 138.2 (1,299) (1,228) (570) 127.9 Interest capitalized 27 18 22 22.7 73 57 65 12.3 Interest income 104 11 36 188.9 142 30 103 37.9 Unrealized gains (losses) on investments, net 28 (34) 21 33.3 (12) 91 72 NM Miscellaneous, net (9) 20 (12) (25.0) (4) (48) (40) NM Total nonoperating expense, net (305) (434) (124) 146.0 (1,100) (1,098) (370) 197.3 Income (loss) before income taxes 1,153 603 1,349 (14.5) (140) (1,712) 3,070 NM Income tax expense (benefit) 211 130 325 (35.1) (34) (394) 702 NM Net income (loss) $      942 $      473 $    1,024 (8.0) $    (106) $ (1,318) $   2,368 NM Diluted earnings (loss) per share $     2.86 $     1.44 $     3.99 (28.3) $   (0.33) $   (4.10) $     9.04 NM Diluted weighted average shares 329.5 329.0 256.4 28.5 326.2 321.3 262.0 24.5.....»»

Category: earningsSource: benzingaOct 18th, 2022

Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed

Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed Two days ago, when stocks were melting up even as oil was storming higher and threatened to rerate inflation expectations sharply higher, we mused that algos were clearly ignoring this potentially ominously convergence. Stock algos still haven't noticed what oil is doing. impressive — zerohedge (@zerohedge) October 4, 2022 And while yesterday we saw the first cracks developing in the meltup narrative as oil extended gains following OPEC's stark slap on the face of the dementia patient in the White House, it was only today that the "oil is about to push inflation sharply higher" discussion entered the broader financial sphere, with JPM writing this morning that "OPEC+ presents inflation risk", Bloomberg echoing JPM that "OPEC+ alliance’s plan to cut oil supply stoked inflation fears and as traders awaited labor-market data to gauge the risk of recession" and Saxo Bank also jumping on the bandwagon, warning that OPEC+ supply cut will worsen global inflation which "raises the risk of inflation staying higher for longer” and “sends the wrong signal to the US Federal Reserve... It could send a signal that they have to keep on their foot on the brake for longer.” And sure enough, with oil rising above its 50DMA for the first time since Aug 30, futures have slumped overnight as oil kept its gains, with S&P and Nasdaq 100 futures both sliding 0.5% as of 730am, while Europe’s Stoxx 600 erased an advance and traded near session lows. US crude futures held on to weekly gains of about 11% after the oil cartel said it would cut daily output by 2 million barrels. Treasuries were steady, the 10Y trading around 3.77%, with the 2Y rate hovering about the 4.15% level. In pre-market trading, Credit Suisse jumped as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15bn as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity. Shares were 2% higher by 13:20pm CET in Zurich, after Bloomberg News reported that the lender is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses, citing people with knowledge of the deliberations. Other banks did not do as well, and slumped in premarket trading Thursday, putting them on track to fall for a second straight day. Twitter shares fell as much as 1.1% to $50.75, trading nearly 7% below Elon Musk’s offer price of $54.20 as investors await progress in the revived deal. Here are the other notable premarket movers: Pinterest (PINS US) shares jump as much as 5.8% in US premarket trading after Goldman Sachs upgraded the social networking site to buy from neutral on improving user growth and better engagement trends, even as the backdrop for digital advertising remains uncertain. Biohaven Ltd. (BHVN US) shares rise 9.7% in US premarket trading, set to extend a 75% gain over the past two days as regular trading in the newly constituted drug developer began following an unusual deal with Pfizer Inc. SurgePays (SURG US) shares soar as much as 11% in premarket trading after the company gave an update on subscriber numbers for its subsidiary SurgePhone Wireless. Flutter (FLTR LN) gained 3.3% in premarket trading as it was initiated at outperform at Exane as the best-placed online gambling name, while Entain also at outperform and DraftKings started at underperform. Richardson Electronics (RELL US) rose 8.2% in extended trading after reporting year-over-year growth in net sales and earnings per share for the fiscal first quarter. While higher energy prices could stoke inflation, some have speculated that this will also divert discretionary income from core items thus pushing core inflation lower and hit company earnings -- potentially encouraging the Federal Reserve to slow monetary tightening. All else equal, as economy slows and oil/gas prices rise due to OPEC/supply constraints, there will be less disposable income for "core" purchases, pushing core PCE lower faster — zerohedge (@zerohedge) October 6, 2022 While such expectations fueled equity gains this week, several money managers are cautioning that the economic path to a less aggressive Fed could be painful: “If you want to preempt the Fed, you are playing a very high-stakes game,” said Kenneth Broux, a strategist at Societe Generale SA. “The Fed do not want financial conditions to loosen; they don’t want equity markets to take off and get too comfortable.” That said, investors are wary of placing large-scale equity bets as they await a report on US initial jobless claims later Thursday and the official nonfarm payrolls data Friday. A Bloomberg survey shows the US economy will have added 260,000 jobs last month; a higher-than-anticipated number may spook markets. In Europe, the Stoxx 50 dropped -0.3% to session lows. Stoxx 600 outperforms peers, adding 0.2%, FTSE MIB lags, dropping 0.5%. Energy and insurance underperform while real estate and travel lead gains. Here are all the notable European movers: Imperial Brands shares rise as much as 4.7% after the tobacco company said it will buy back up to £1b worth of stock. The move was welcomed by analysts, with RBC calling it a “big deal” and Citigroup saying the announcement was earlier than expected. Home24 SE gains as much as 126% to EU7.53 after XXXLutz offered to buy all outstanding shares in the German online furniture retailer for EU7.50 apiece. The bid is generous and the deal is straightforward from a regulatory perspective, according to Tradition. Credit Suisse jumps as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15b as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity. CMC Markets climbs as much as 6.5% after the online trading firm said it sees first- half net operating income up 21% y/y, with market volatility in August and September boosting the results. Numis upgraded the stock to add from hold following the report. Shell drops as much as 5% as analysts say the oil and gas major’s trading update looks “weak” and may mean that FY consensus proves too ambitious. Kloeckner falls as much as 12% as the company faces a “high likelihood” of an imminent profit warning, Bankhaus Metzler says, double-downgrading the stock to sell from buy. Swiss Re is among the weakest members of the Stoxx 600 insurance index on Thursday, declining as much as 4.0%, as Morgan Stanley lowers its price target ahead of third-quarter earnings. Accor drops as much as 2.5% after the hotel chain owner was downgraded to underweight from equal-weight at Barclays, which sees short-term risks as bigger for the company compared with peers and feels investors are looking more at potential negative factors heading into FY23 than 2022 upgrades. Earlier in the session, Asian stocks rose for a third day as hardware technology stocks in South Korea and Japan advanced on views they may have reached a bottom. The MSCI Asia Pacific Index climbed as much as 0.9%, lifted by TSMC, SoftBank and Sony. The benchmark trimmed gains later in the day, but remains on track to advance for the week, following a seven-week losing streak that was the longest since 2015.Korea’s Kospi Index was the region’s best-performing major benchmark, jumping about 1%. The advance was helped by chipmakers extending their gains amid Morgan Stanley’s bullish view on the sector. Hong Kong stocks retreated after Wednesday’s catch-up rally. Trading volume in the region was light as mainland China remains closed for the Golden Week holiday. The MSCI’s Asian benchmark has rebounded this week from its lowest in more than two years. The move tracked a nascent revival in global equities on bets that the Federal Reserve may turn less aggressive in its tightening. In a potential harbinger of shifting market views, Morgan Stanley strategists upgraded emerging-market and Asia ex-Japan stocks to overweight from equal-weight.   Investors are also optimistic that monetary policies in China and Japan, which have bucked the global wave of tightening to remain loose, could provide further support to the nations’ equities.  “While the rest of the world is tightening, Japan and China are still easing, especially China where we are going to see more easing policies going forward,” Chi Lo, senior investment strategist for Asia Pacific at BNP Paribas Asset Management, said in an interview with Bloomberg TV. “That makes us more positive on EM Asia.” Japanese equities gained for a fourth day as investors awaited domestic corporate earnings coming out later this month.  The Topix rose 0.5% to 1,922.47 as of the market close in Tokyo, while the Nikkei 225 advanced 0.7% to 27,311.30. Sony Group contributed the most to the Topix’s gain, increasing 1.7%. Out of 2,168 stocks in the index, 1,564 rose and 490 fell, while 114 were unchanged. “There is relatively little concern about corporate earnings for Japanese stocks with the economy restarting and the yen weakening,” said Shogo Maekawa, a strategist at JPMorgan Asset Management. In FX, the Bloomberg Dollar Spot Index consolidated within the recent day’s ranges, while Britain’s pound slipped 0.4% and gilt yields rose after Fitch Ratings lowered its outlook on the nation to negative. The greenback advanced against most of its G-10 peers. The euro steadied just below $0.99. Euro hedging costs are on the rise again as traders position ahead of Friday’s payrolls print and next week’s US inflation report. Commodity currencies were the worst performers along with the pound. Australian and New Zealand dollars gave up an Asia-session advance. The yen traded in a narrow range. In rates, Treasuries were slightly cheaper across the curve after paring declines led by gilts in London trading after a Bank of England survey found expectations for higher prices. Focal points of US session include several Fed speakers and potential for risk-reduction ahead of Friday’s September jobs report Friday. US yields cheaper by less than 2bp across the curve in bear- flattening move, 10-year by 2bp vs 17bp for UK 10-year, the downside leader in developed market sovereign bonds.  German and Italian bond curves flattened modestly as yields on shorter-dated notes rose, while those further out fell. In commodities, West Texas Intermediate futures traded near $88 a barrel, while Brent crude held near $93.30. The output-cut plan drew a warning from the White House about negative effects on the global economy. Goldman Sachs Group Inc. increased its fourth-quarter price target for Brent to $110 a barrel. To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel. Market Snapshot S&P 500 futures down 0.3% to 3,783.50 STOXX Europe 600 up 0.3% to 400.25 MXAP up 0.4% to 145.05 MXAPJ up 0.3% to 471.37 Nikkei up 0.7% to 27,311.30 Topix up 0.5% to 1,922.47 Hang Seng Index down 0.4% to 18,012.15 Shanghai Composite down 0.6% to 3,024.39 Sensex up 0.6% to 58,403.02 Australia S&P/ASX 200 little changed at 6,817.52 Kospi up 1.0% to 2,237.86 German 10Y yield little changed at 2.05% Euro little changed at $0.9886 Brent Futures up 0.3% to $93.62/bbl Gold spot up 0.0% to $1,716.69 U.S. Dollar Index little changed at 111.24 Top Overnight News from Bloomberg UK bond markets face a potential “cliff edge” when the Bank of England exits the market at the end of next week, leaving traders to navigate a turbulent backdrop without the support of a buyer of last resort Millions more Britons will be dragged into higher rates of income tax over the next three years, costing twice as much as Prime Minister Liz Truss’s personal tax cuts, according to calculations by the Institute for Fiscal Studies Britain’s construction industry turned more pessimistic in September after rising interest rates and the risk of recession held back new orders The European Union plans to examine whether Germany’s massive plan to shelter companies and households from surging energy costs respects the bloc’s rules on public subsidies, EU Commissioner Thierry Breton said German factory orders dropped in August after the previous month was revised to show an increase, hinting at a lack of momentum as the economy stands on the brink of a recession Societe Generale SA cut its exposure to counterparties on trades in China by about $80 million in the past few weeks as global banks seek to guard against any potential fallout from rising geopolitical risks in the world’s second-largest economy A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed as the region partially shrugged off the lacklustre lead from the US where the major indices snapped a firm two-day rally and finished the somewhat choppy session with mild losses amid higher yields and as Fed rhetoric essentially pushed back against a policy pivot. ASX 200 lacked direction amid underperformance in the Real Estate and the Consumer sectors, although the downside was also limited by strength in energy after oil prices were lifted by the OPEC+ output cut. Nikkei 225 was positive with notable gains in exporter names and with Rakuten leading the advances as Mizuho looks to acquire a 20% stake in Rakuten Securities for USD 555mln. Hang Seng was lacklustre and took a breather after the prior day’s more than 5% jump with the mood also not helped after Hong Kong PMI slipped into contraction territory for the first time in 6 months. Top Asian News Haikou city in China's Hainan imposed a COVID lockdown for Thursday, according to Bloomberg. Malaysia PM May Propose Parliament Dissolution, Bernama Reports Why Polio, Once Nearly Eradicated, Is Rebounding: QuickTake Legoland Korea’s Default Flags Risks for Nation’s Developers Paris Club Seeks China Collaboration in Sri Lanka Debt Talks Yen Rout Is Over on Peak US Rate Hike Bets, Says Top Forecaster European bourses are under modest pressure as sentiment broadly takes a slight turn for the worst amid limited newsflow as participants look to Friday's NFP. Currently, European benchmarks are lower by 0.1-0.3% while US futures are posting slightly larger losses of circa 0.7 ahead of Fed speak. Top European News Fitch affirmed the UK at AA-; Outlook revised to Negative from Stable, while it stated that the fiscal package announced as part of the new UK government's growth plan could lead to a significant increase in deficits over the medium-term, according to Reuters. The UK Treasury is set to impose GBP 21bln of additional income taxes despite the "tax-cutting mini-budget", according to a study by the Institute for Fiscal Studies. (Times) BoE Monthly Decision Maker Panel data - September 2022; looking ahead, DMP members expected CPI inflation to be 9.5% one-year ahead, up from 8.4% in the August survey, and 4.8% in three years’ time. BoE's Cunliffe says the FPC will publish its next financial policy statement and record on October 12th, liquidity conditions in the run up to the BoE gilt intervention were "very poor", MPC will make a full assessment of recent developments at its November 3rd meeting. UK government has proposed easing the fee cap for illiquid assets in pensions, according to a rule consultation publication by the government. Swedish Economy Shrinks More Than Estimated on Weak Industry UK Tech M&A Spree Pauses as Buyers Pull Out Amid Chaotic Markets FX USD benefits from the mentioned risk tone, with the DXY extending to a 111.35 peak to the modest detriment of peers. However, EUR is relatively resilient and holding around 0.99 vs the USD as we await the ECB Minutes account for near-term guidance. Cable faded sub-1.1400 and reversed through 1.1300 again amid the USD's move and prior to a letter exchange from the BoE to Treasury re. the Gilt Intervention. Antipodeans under pressure given the USD move and associated action in metals, while the Yuan initially lent a helping hand but this has since dissipated. Given the broader tone, the traditional havens are holding near unchanged levels though yield dynamics are a hinderance. Fixed Income Gilts are once again the standout laggard following rating agency action and the BoE DMP showing inflation pressures were already elevated MM before the fiscal update. As such, the UK yield has extended back above 4.10%; in the US, yields are also bid though to a much lesser extent before Fed speak and Friday's jobs. Back to Europe, Bunds are pressured though only modestly so vs UK counterparts awaiting the ECB's September account Commodities Crude benchmarks are modestly firmer at present, extending marginally above yesterday’s best levels with fresh newsflow limited as participants digest yesterday’s OPEC+ action. WTI and Brent are towards the mid-point of circa. USD 1/bbl ranges, though Brent Dec’22 briefly surpassed the 200-DMA at USD 94.11/bbl before moving back below the figure. Acting Kuwaiti Oil Minister said the OPEC+ decision to cut output will have positive ramifications for oil markets, while they understand consumers' concerns about prices increasing but added that the main motive in OPEC+ is balancing supply and demand, according to Reuters. US National Security official stated the US sanctions policy on Venezuela remains unchanged and there are no plans to change the sanctions policy without constructive steps from Maduro, according to Reuters. Norway's Budget proposes changing the temporary tax rules for the petroleum sector, entails that the uplift is reduced to 12.40% (prev. 17.69%), via Reuters. Saudi sets the November Arab Light OSP to N.W Europe at Ice Brent +USD 0.90/bbl; to the US at ASCI +USD 6.35/bbl, via Reuters citing a document; to Asia at Oman/Dubai +USD 5.85 (Unch.), via Reuters sources. Geopolitics North Korea launched two short-range ballistic missiles which were fired from Pyongyang and landed outside of Japan's exclusive economic zone, according to the South Korean military cited by Yonhap. Furthermore, North Korea said that its missile launches are counteraction measures against the US and South Korean military drills. North Korean jets and bombers have been seen flying in an exercise, according to Yonhap; South Korean jets take off in response, via Reuters. US State Department condemned North Korea's ballistic missile launch and said North Korea's missile launches pose a threat to regional neighbours and the international community, while it added that the US remains committed to a diplomatic approach to North Korea and called on North Korea to engage in dialogue, according to Reuters. The EU has approved the 8th round of Russian sanctions; as expected. US Event Calendar 08:30: Sept. Continuing Claims, est. 1.35m, prior 1.35m 08:30: Oct. Initial Jobless Claims, est. 204,000, prior 193,000 Central bank Speakers 08:50: Fed’s Mester Makes Opening Remarks 09:15: Fed’s Kashkari Takes Part in Moderated Q&A 13:00: Fed’s Evans Takes Part in Moderated Q&A 13:00: Fed’s Cook Speaks on the Economic Outlook 13:00: Fed’s Kashkari Discusses Cyber Risk and Financial Stability 17:00: Fed’s Waller Discusses the Economic Outlook 18:30: Fed’s Mester Discusses the Economic Outlook DB's Henry Allen concludes the overnight wrap After an astonishing rally at the beginning of Q4, markets reversed course yesterday as investors became much more sceptical that we’ll actually get a dovish pivot from central banks after all. The idea of a pivot has been a prominent theme over recent days, particularly after the financial turmoil during the last couple of weeks, thus sparking the biggest 2-day rally in the S&P 500 since April 2020 as the week began. But over the last 24 hours, solid US data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months. And if markets had any further doubt about the Fed’s intentions, San Francisco Fed President Daly explicitly said yesterday that she didn’t expect there to be rate cuts next year, in direct contrast to futures that are still pricing in rate cuts from Q2. Indeed for a sense of just how volatile the reaction has been, 10yr bund yields were up by +16.3bps yesterday, which is their largest daily rise since March 2020 during the initial wave of the pandemic. Looking at the details of those releases, it was evident that markets are still treating good news as bad news at the minute, since they sold off even as data pointed to a more resilient performance from the US economy than had been thought. For example, the ISM services index came in above expectations at 56.7 (vs. 56.0 expected), and the employment component moved up to a 6-month high of 53.0. So that’s a noticeably different picture to the manufacturing print on Monday, when there was a surprise contraction in the employment component. Furthermore, there was another sign of labour market strength from the ADP’s report of private payrolls, which came in at +208k in September (vs. +200k expected), and the previous month’s reading was also revised upwards. We’ll see if that picture is echoed in the US jobs report tomorrow, but there was a clear reaction to the ISM print in markets, as investors moved to upgrade the amount of Fed hikes they were expecting whilst the equity selloff accelerated. Those expectations of a more hawkish Fed were given significant support by comments from Fed officials themselves. The most obvious came from San Francisco Fed President Daly, who was asked about the fact that futures were pricing in rate cuts, and said “I don’t see that happening at all”. In fact when it came to rates, she not only said that they were raising them into restrictive territory, but that they would be “holding it there” until inflation fell. Atlanta Fed President Bostic struck a similar tone, emphasising rate cuts in 2023 were not likely and that “I am not advocating a quick turn toward accommodation. On the contrary.” He said he wanted fed funds rates between 4% and 4.5% by the end of this year, “and then hold at that level and see how the economy and prices react.” That backdrop led to a sizeable cross-asset selloff yesterday on both sides of the Atlantic. The effects on the rates side were particularly prominent, with 10yr US Treasury yields bouncing back +12.0bps to 3.75%. And that move was entirely driven by real yields, which rose +15.1bps as investors moved to price in a more hawkish Fed over the months ahead. You could see that taking place in Fed funds futures too, with the rate priced in for December 2023 up by +8.9bps to 4.19%, thus partially reversing the -22.2bps move lower over the previous two sessions. This morning, 10yr yields are only down -1.0 bps, so far from unwinding those moves. The hawkish tones also proved bad news for equities, with the S&P 500 taking a breather following its blistering start to the week, retreating -0.20% after being as low as -1.80% in the New York morning. European equities did not enjoy the benefits of a New York afternoon rally, leading to a transatlantic divergence, and the STOXX 600 was down -1.02% on a broad-based decline. The energy sector outperformed in both the S&P 500 and STOXX 600 following a rally in crude oil which saw both Brent crude (+2.81%) and WTI (+2.53%) oil prices hit a 3-week high. That followed a decision from the OPEC+ group, who cut output by 2 million barrels per day. Those gains have continued in overnight trading as well, with Brent Crude now at $93.48/bbl. In Europe, the performance of sovereign bonds echoed that for US Treasuries, as yields on 10yr bunds (+16.3bps), OATs (+17.6bps) and BTPs (+29.0bps) all saw their largest daily increases since March 2020. As in the US, that reflected growing scepticism about a dovish pivot from the ECB, but another factor not helping matters was the rebound in energy prices, with natural gas futures up +7.25% on the day to close at €174 per megawatt-hour, alongside the oil rebound mentioned above. That’s been reflected in inflation expectations too, with the 10yr German breakeven up another +8.0bps yesterday to 2.15%, after having closed beneath 2% on Monday for the first time since Russia’s invasion of Ukraine began. Here in the UK, we also saw several key assets lose ground once again following their rally over the last week. For instance, sterling ended a run of 6 consecutive daily gains against the US Dollar to close -1.31% lower, closing back at $1.13. And that wasn’t simply a story of dollar strength, as the pound weakened against every other G10 currency as well. Gilts were another asset to struggle, with real yields in particular seeing significant daily rises of at least +30bps across most of the yield curve, including a +33.0bps rise for the 10yr real yield, and a +36.7bps rise for the 30yr real yield. That came as the Bank of England said they didn’t buy any gilts under their emergency operation for a second day running. In the meantime, there were fresh signs that the turmoil after the fiscal announcement was impacting the mortgage market, with Moneyfacts saying that the average 2yr fixed-rate mortgage had risen to 6.07%, which is the highest since November 2008. Last night that was then followed up by the news that Fitch had downgraded the UK’s outlook from stable to negative. Overnight in Asia there’s been a mixed performance from the major equity indices. Both the Nikkei (+0.94%) and the Kospi (+1.25%) have recorded solid advances, which continues their run of having risen every day this week. In addition, futures in the US and Europe are both pointing higher, with those on the S&P 500 up +0.49%. However, the Hang Seng is down -0.43% and Australia’s S&P/ASX 200 is down -0.05%, whilst markets in mainland China remain closed for a holiday. The dollar index has also lost ground overnight, falling -0.25%, which comes in spite of those hawkish comments from Fed officials pushing back against rate cuts next year. Looking at yesterday’s other data, the final services and composite PMIs mostly echoed the data from the flash readings. The composite PMI for the Euro Area was revised down a tenth to 48.1, and the US composite PMI was revised up two-tenths to 49.5. There was a bigger rise in the UK however, where the composite PMI was revised up seven-tenths to 49.1. To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel. Tyler Durden Thu, 10/06/2022 - 08:02.....»»

Category: blogSource: zerohedgeOct 6th, 2022

Futures Flat As Crushing 37bps Curve Inversion Screams Recession

Futures Flat As Crushing 37bps Curve Inversion Screams Recession US futures are mixed on Thursday, first trading in the red, then turning green before moving unchanged, as investors shrugged off growth warnings from the bond market while Taiwan war fears faded further despite drills launched by China overnight. Oil bounced back from the lowest level in almost six months. Contracts on the S&P 500 were flat while Nasdaq futures were modestly green, suggesting the tech-heavy Nasdaq will extend an advance of 19% from its June 16 low on the back of a massive CTA, buyback and retail-driven buying frenzy. In premarket trading, Alibaba gained 3.4% after reporting revenue for the first quarter that beat the average analyst estimate. Adjusted earnings per American depositary receipt also topped expectations. Altice USA shares jumped 5% after the cable television provider reported second-quarter results and announced it received inquiries for its Suddenlink assets. US-listed Chinese tech stocks including JD.com, Pinduoduo and Baidu rise in premarket trading Thursday as Alibaba shares jump 3.9% after reporting better-than-expected revenue in the first quarter. Here are some other notable premarket movers: AMTD Idea (AMTD) shares slump 11.5% putting the Hong-Kong based financial services firm on track to slump for a second straight day after a wild 237% jump earlier this week. Eli Lilly (LLY) falls 2% after the company cut its adjusted earnings per share forecast for the full year. Equinox Gold Corp. (EQX) slides 2.5% after reporting second quarter results that missed consensus analyst estimates for revenue and posted a loss per share, and announced a CEO change. Fastly Inc. (FSLY) shares are down 7% after the infrastructure software company reported second quarter revenue that beat expectations. Gannett Co. Inc. (GCI) shares plunge 5% after the company lowered its full-year revenue and Ebitda outlook, citing “current economic conditions.”. Kohl’s Corp. (KSS) was downgraded to market perform from outperform at Cowen, with analyst Oliver Chen saying a “weakening and inflationary consumer backdrop” could drive EPS downside. Shares decline 3%. Pacific Biosciences (PACB) 2Q results look broadly in line but guidance has been cut significantly, albeit this is not a major surprise, analysts say. Shares down 4% in US premarket trading. Revolve Group Inc. (RVLV) shares are down 13% after the e-commerce fashion company reported quarterly net sales and earnings per share that fell short of analysts’ expectations. Skillz (SKLZ) shares tumble 11.6% after the mobile games platform operator cut its full-year guidance for revenue, with Citi noting that revenue and user metrics disappointed. Under Armour (UAA) is downgraded to neutral from outperform at Baird, which says its view of the athletic-wear retailer’s near-term prospects has “deteriorated materially” over the past two quarters, and faces further pressure from an uncertain macroeconomic environment. The stock declines 0.5% in premarkettrading. Yellow Corp. (YELL) shares jump 37% after the logistics company reported earnings per share for the second quarter that beat the average analyst estimate. So far US stocks have proven resilient to heightened bond market anxiety and an inverted Treasury yield curve flashing warnings on economic risks, as the S&P 500 climbs back toward the highest level in two months ignoring the screaming recession warning from the 2s10s curve which is now 37bps inverted. But a global wave of monetary tightening risks upending those gains. The Bank of England unleashed its first half-point hike since 1995 in an effort to control inflation, joining some 70 other institutions around the world moving rates up in outsized steps. “There’s an intense tug-of-war happening in the economy and markets,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “On one side, you have a narrative that reasonable growth is going to support continued inflation pressure and keep the Fed hiking. The other narrative is that slowing growth is going to ease inflation and allow the Fed to stop hiking.” Meanwhile, US-China tension remains among the uncertainties clouding the outlook. Taiwan braced for the Chinese military to start firing in exercises being held around the island in response to US House Speaker Nancy Pelosi’s visit. Here are the latest headlines surrounding Taiwan/Pelosi: China's Taiwan Affairs Office said the Taiwan issue is not a regional issue but is a China internal affairs issue, while it added that punishment of pro-Taiwan independence diehards and external forces is reasonable and lawful. Taiwan's Defence Ministry said unidentified aircraft which were likely drones, flew above Kinmen Islands on Wednesday night, while the military fired flares to drive away the aircraft, according to Reuters. Taiwan's Defence Ministry said troops will continue to reinforce alertness level and are carrying out daily training as usual, while the military will react appropriately to an enemy situation and safeguard national security and sovereignty, according to Reuters. ASEAN Foreign Ministers are concerned about international and regional volatility and are concerned volatility could lead to a miscalculation, serious confrontation, open conflicts, and unpredictable consequences among major powers, according to Reuters. US House Speaker Pelosi plans to visit an inter-Korean border area jointly controlled by the American-led UN Command and North Korea, according to a South Korean official cited by Reuters. China's PLA has added an additional zone for its military exercise encircling Taiwan starting Thursday, exercises have been extended until Monday at 10:00, via dwnews' Yang citing Taiwan's port authority. Now seven zones around Taiwan. Gains in the Stoxx Europe 600 Index were led by retailers, leisure and technology firms, alongside an advance in shares of Chinese tech companies.  Among individual stock moves, Glencore Plc shares fell as much as 2% as its capital return plans overshadowed solid first-half results. Ubisoft shares surged as much as 21% after Tencent reached out to Ubisoft’s founding Guillemot family and expressed interest in increasing its stake, according to Reuters. Here are the most notable European movers: Rolls-Royce drops as much as 12% in London. Jefferies highlights that 1H adjusted Ebit came in 24% below consensus, is disappointed Civil margin “once stripped of a number of one-offs, remains well below breakeven.” SES shares drop as much as 10%, the most intraday since April 2020, as some analysts raised doubts about a potential combination with Intelsat after the FT reported deal talks between the two companies. Ambu falls as much as 16%, the most intraday since May 6, after the company slashed its organic revenue forecast for the full year and said it will cut about 200 jobs from its global workforce. Lufthansa gains as much as 7.4% after the airline forecast a “significant increase” in earnings in the third quarter compared to the second and provided a clearer outlook for full-year profit, predicting adjusted Ebit of more than EU500m. Next shares climb as much as 3.2% after the UK apparel retailer reported better-than-expected 2Q sales and raised its profit outlook for the year. Adidas shares gain as much as 4.4% after the German sportswear company reported 2Q results that were largely in line with expectations, following last week’s profit warning. Merck KGaA shares rise as much as 1.7% after the German pharmaceutical group’s 2Q report showed stable growth for its Life Science division despite abating Covid-19 tailwinds, with Jefferies saying it sends a “positive message” for the rest of 2022. Earlier in the session, Asian stocks rebounded as easing tensions over Taiwan and overnight gains on the Nasdaq fueled a rally in Chinese tech shares ahead of key earnings reports. The MSCI Asia Pacific Index climbed 0.5%, set for its first gain in three sessions. Alibaba, which is scheduled to release earnings later Thursday, and e-commerce peers Meituan and JD.com helped boost the Hang Seng Tech Index as much as 3.4%, most in more than a month. Other benchmarks in Hong Kong and South Korea’s tech-heavy Kosdaq were among the region’s outperformers.  “Hong Kong stock markets are getting re-rated after seeing the risk-off mood due to Taiwan tensions, as there were no military conflicts,” said Xuehua Cui, a China equity analyst at Meritz Securities in Seoul.  US House Speaker Nancy Pelosi left Taiwan after reaffirming US support for the democratically elected government in Taipei. China responded with trade curbs and military drills.  Elsewhere in Asia, the main Philippine index reached its highest since June 10 on foreign inflows. Asia’s key stock benchmark has rebounded from its July low, but its recent recovery has been lagging behind US peers amid a property crisis in China and heightened geopolitical risks. Japanese equities erased earlier gains and slipped as Toyota announced first-quarter earnings that missed estimates and as investors continue to evaluate corporate earnings both domestically and abroad.  The Topix Index was virtually unchanged at 1,930.73 with Toyota Motor leading declines as of market close Tokyo time, while the Nikkei advanced 0.7% to 27,932.20. Toyota Motor shares dropped during market hours as the automaker reported disappointing first quarter earnings and kept its conservative outlook for the current year. Out of 2,170 shares in the index, 1,198 rose and 849 fell, while 123 were unchanged. “Toyota Motor’s financial results confirmed that the impact of high raw material and fuel prices was strong enough to offset the effects of the weak yen,” said Shuji Hosoi, an analyst at Daiwa Securities. “The fact that the company didn’t change its full-year operating income forecast negatively impacted the markets, which had been expecting an upward revision.” India’s Sensex index snapped a six-session rally, dragged by Reliance Industries and leading lenders, on risk-aversion ahead of a monetary-policy announcement on Friday.  The S&P BSE Sensex fell 0.1% to 58,298.80, in Mumbai, after paring decline of as much as 1.3% in the session. The NSE Nifty 50 Index was flat. Both gauges posted early gains and appeared headed for their longest winning streaks since October 2021, but reversed course.  “The sudden drop in indexes is most likely led by ‘basket selling’ from foreign portfolio investors ahead of the central bank’s rate decision on Friday,” said Abhay Agarwal, a fund manager at Piper Serica Advisors. “Stocks have gained for six straight sessions and investors may want to reap gains ahead of a major policy event.” Reliance Industries fell 1.3%, while State Bank of India and Axis Bank led declines among lenders.  Economists expect the Reserve Bank of India to raise rates for a third consecutive time on Friday but remain divided on the level of the hike aimed at fighting inflation and supporting a weakening currency.  Of 30 shares in the Sensex index, 17 rose and 13 fell. Both of India’s equity benchmarks had gained least 5.5% in previous six sessions driven by $1.7 billion of net purchases by foreigners since the end of June amid signs that inflationary pressures are cooling.  Eight of the 19 sector sub-indexes compiled by BSE Ltd. declined on Thursday. A measure of telecom stocks was the worst performer among the sectoral measures. In FX,  the dollar consolidated as traders awaited US payrolls data due later in the day for clues on the pace of future Federal Reserve rate hikes. Sterling tumbled after the BOE delivered its biggest rate hike in 27 years, pushing rates up by 50bps, however it also warned of a devastating stagflation, hiking its inflation forecast to 13.3% in October even as it predicted a harrowing 5-quarter long recession. In rates, Treasuries were moderately cheaper across the curve - which continues to invert deeply with the 2s10s now -37bps, the biggest yield curve inversion since 2000 as traders increased wagers on Federal Reserve rate hikes ahead of Friday’s US jobs data - as US stock futures added to Wednesday’s gains.  The US 10-year yield dropping to 2.70% as Federal Reserve officials indicated they were resolute on aggressive hikes to cool inflation, dashing market hopes they were ready to embark on a shallower rate path. Treasuries offered little initial reaction to Bank of England decision to hike rates 50bp in an 8-1 vote while warning of a 5 quarter-long recession. Front-end yields cheaper by ~2bp on the day, flattening 2s10s and 5s30s spreads by ~1.5bp and ~0.5bp; 10-year yields around 2.71% trade cheaper by 5bp vs bunds.  European long-end bonds nudged higher. In the UK, focus is on the Bank of England’s rate decision, with a majority of economists anticipating a 50-basis-point hike. In commodities, oil drifted 0.2% lower to trade at the $90 level as investors weighed weaker US gasoline demand and rising inventories against a token supply increase from OPEC+. Spot gold rises roughly $20 to trade near $1,787/oz. Base metals are mixed; LME lead falls 1.1% while LME zinc gains 1.2%. Bitcoin slips back below the USD 23k mark but remains in relative proximity to the level in a tight range. Looking to the day ahead now and we have US June trade balance and Initial Jobless Claims, Germany June factory orders, July construction PMI, UK July new car registrations, construction PMI, Canada June building permits and international merchandise trade. Earnings will include Alibaba, Eli Lilly, Toyota, ICE, ConocoPhillips, Bayer, Glencore, Cigna, Rolls-Royce, adidas, Cheniere, DBS, Apollo, Lyft, Expedia, Deutsche Lufthansa, Warner Bros Discovery, Vertex Pharmaceuticals, DoorDash, Atlassian, Amgen, Block, EOG, Kellogg and AMC. Market Snapshot S&P 500 futures little changed at 4,153.75 STOXX Europe 600 up 0.2% to 439.32 MXAP up 0.4% to 159.68 MXAPJ up 0.6% to 521.36 Nikkei up 0.7% to 27,932.20 Topix little changed at 1,930.73 Hang Seng Index up 2.1% to 20,174.04 Shanghai Composite up 0.8% to 3,189.04 Sensex down 0.6% to 57,993.23 Australia S&P/ASX 200 little changed at 6,974.93 Kospi up 0.5% to 2,473.11 German 10Y yield little changed at 0.89% Euro up 0.1% to $1.0178 Brent Futures little changed at $96.78/bbl Brent Futures little changed at $96.75/bbl Gold spot up 0.4% to $1,773.19 U.S. Dollar Index down 0.13% to 106.37 Top Overnight News from Bloomberg China’s military fired missiles into the sea on Thursday in live-fire military exercises around the island in response to US House Speaker Nancy Pelosi’s visit, even as Taipei played down the impact on flights and shipping. The Bank of England on Thursday is expected to push through the biggest interest-rate increase in 27 years despite growing risks of a recession. European stocks edged higher on Thursday as investors continued to weigh the path of corporate earnings, while attention turned to the Bank of England’s policy decision later in the day. The dollar is close to a 20-year high, despite talk of its inevitable demise. While reluctant to add another article that ends up in traders’ trash cans, current pricing is extreme. Asia’s emerging economies are drawing on large foreign exchange reserves to help prop up their currencies rather than going all-out with interest-rate hikes. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were firmer as the positive momentum rolled over from global peers. ASX 200 was kept afloat by tech after similar outperformance of the sector stateside. Nikkei 225 briefly reclaimed the 28k level amid recent JPY weakness and as the earnings deluge continued. Hang Seng and Shanghai Comp conformed to the heightened risk appetite with firm gains in tech including Alibaba ahead of its earnings and with Hong Kong set to provide HKD 2k in consumption vouchers from Sunday. Top Asian News   China’s Yiwu city will conduct mass testing and China's Sanya city is on lockdown amid a COVID flare-up, according to state media. China Cancels Japan Meeting Over G-7 Criticism of Taiwan Drills SoftBank Raises $22 Billion Through Alibaba Derivatives: FT China State-Backed Builder’s Dollar Bonds Slump as Worries Mount Tiger Global Fund Halves Stake in India Food Platform Zomato Additional Share Sales Break Asia’s Usual Summer Lull: ECM Watch Li Ka-shing’s CK to Sell AMTD Stake After Unit Soars 14,000% European bourses are firmer across the board, Euro Stoxx 50 +0.9%, with the general tone constructive though the FTSE 100 lags pre-BoE amid GBP strength. Stateside, US futures have lifted from initial rangebound action, ES +0.3%, with specific newsflow limited pre-data/Fed speak Top European News Next Raises Profit Outlook as Hot Spell Spurs Fashion Buying French Tech Startup Back Market Said to Start Early IPO Prep Goldman, Bernstein Strategists Say Stocks Rally Can Fizzle Out European Retailers Outperform, Fueled by Zalando Relief Rally Czech Finance Minister Attending Central Bank’s Rate Meeting Credit Agricole’s Investment Bank Drives Earnings Beat FX DXY remains subdued in early European trade following a relatively contained APAC session; fresh session lows are seen heading into the US entrance. GBP/USD and EUR/USD are currently buoyed, but seemingly more as a function of the Dollar with the former gearing up for the BoE. A mixed session thus far for the non-US Dollars, with the Antipodeans leading the charge whilst the Loonie remained suppressed by crude prices. JPY resides as the current G10 laggard with recent Fed rhetoric fuelling a retracement of last week’s USD/JPY downside. Fixed Income Core consolidation after recent rampant upward move, knife-edge BoE looms; Bund Sep'22 towards mid-point of a +100 tick range. USTs are following suit with the yield curve flattening modestly but generally quite contained ahead of Mester (2022 voter, Hawk) who has provided commentary recently. Pre-BoE Gilts are supported, but in narrower parameters than EGB peers, as participants look for clarity on the 25/50bp debate as pricing implies a 90% chance of 50bp and circa. 150bp total by end-2022. Commodities Crude consolidates and moves with broader sentiment post-OPEC & pre-JCPOA. Currently, benchmarks are firmer by circa. USD 1.00bbl and towards the top-end of relatively/comparably narrow ranges. Saudi Arabia OSPs (Sep) vs Oman/Dubai average: Arab Light to Asia at USD +9.80/bbl (exp. 9.80-11.10/bbl), according to Reuters sources. Spot gold is bid and benefitting from a USD pullback that has sent the yellow-metal above the 50-DMA at best; base metals somewhat mixed. US Event Calendar 07:30: July Challenger Job Cuts YoY, prior 58.8% 08:30: June Trade Balance, est. -$80b, prior -$85.5b 08:30: July Initial Jobless Claims, est. 260,000, prior 256,000; Continuing Claims, est. 1.38m, prior 1.36m DB's Jim Reid concludes the overnight wrap One thing we can say for sure is that August hasn’t been dull so far and we’ve only had three days. This is all before the biggest BoE hike for 27 years (50bps) likely today, and then US payrolls tomorrow. Indeed, there have been some remarkable ranges in treasuries so far in the three days of August. In just over 24 hours from mid-afternoon London time on Tuesday, 2yr US yields moved from 2.83% to 3.18%, 5yrs from 2.58% to 2.96% and 10yrs from 2.52% to 2.83%. These all marked the high points as the three closed at 3.07% (+1.4bps on the day), 2.83% (-2.4bps) and 2.71% (-4.5bps) respectively, 11bps to 13bps off their intra-day highs immediately after a strong US services ISM yesterday. This led to a big curve flattening as 2s10s closed c.6bps lower at -36bps. This morning in Asia, treasury yields are pretty much unchanged. If that wasn’t enough, the Nasdaq 100 (+2.73%) surged to finish the day at a level last seen on May 4th leaving a strong S&P 500 (+1.59%) slightly behind. The narratives at the moment are struggling to be consistent though as equities have recently rallied on weaker growth that has been seen as helping to limit how far the Fed can hike. However yesterday equities rallied on stronger economic data regardless of the potential Fed impact. Discretionary (+2.52%), IT (+2.69%) and communications stocks (+2.48%) were the major drivers of the S&P. The broad rally lifted 79% of benchmark’s members with energy (-2.97%) being the only sector to close in the red as oil plummeted. Speaking of which, although the OPEC+ agreed to increase its September output by 100k bpd, way below the July and August increases north of 600k, crude’s short-lived almost +3% gain unwound fairly quickly, with both WTI (-3.87%) and Brent (-3.60%) weaker on lower US gasoline demand as consumers seem to be driving less. Oil is very slightly higher in Asia. In terms of earnings, Moderna (+16%), PayPal (+9.25%) and CVS (+6.3%) were among top performers in the S&P 500 after a combination of upbeat results and perhaps more importantly buy back announcements. Another interesting snippet from this earnings season came when Bloomberg reported that Meta is looking for a potential debut in bond markets. News of debt sales by Apple and Intel already came through earlier this week as well, supporting narratives of resilience in corporate debt markets. Dissecting the data, just before the ISM services was released, we got a slight upward revision for the US services PMI (47.3 vs 47.0) but the real surprise was the ISM services index itself. The print showed an unexpected expansion from 55.3 in June to 56.7 last month, the highest since April, while the median Bloomberg estimate stood at 53.5. The employment index also improved to 49.1 from 47.4 and business activity and new orders indicators were the highest since January, while prices paid plunged from 80.1 to 72.3. Another strong reading came from June factory orders that increased +2.0% (vs +1.2% expected), up from May’s revised reading of +1.8% (from +1.6% previously). This data dovetailed with comments from a list of Fed speakers over the last 24 hours, including Bullard, Daly, Barkin and Kashkari, all saying that the central bank is not close to finishing its work and markets shouldn’t expect a quick reversal to cuts. This all supports our view that the US isn’t in recession yet. As we’ve said many times before we think it’s almost inevitable it does go into one within say 12 months but that we still might need the lagged impact of an aggressive (but necessary) series of rate hikes first to get us there. The risks to this view in terms of an earlier recession would probably be due to a sudden self fulfilling loss of confidence as everyone talks about imminent recession risk, or if financial conditions dramatically collapse. To be fair the latter was very worrying by mid-June but we’ve seen a tremendous loosening since. Over to Asia and the strong gains in US equities are echoing in Asia with all the key markets trading higher. As I type, the Hang Seng (+1.78%) is leading the way across the region helped by gains in Chinese technology companies with shares of Alibaba climbing around +5.0% ahead of its earnings results later today. Elsewhere, the Nikkei (+0.54%), and the Kospi (+0.36%) are trading higher in early trade. Over in Mainland China, the Shanghai Composite (+0.15%) and the CSI (+0.40%) are both trading in the green. Outside of Asia, stock futures in the US are pausing for breath with contracts on the S&P 500 (-0.10%) and NASDAQ 100 (-0.20%) moving slightly lower. Early morning data showed that Australia’s trade balance swelled to a record high of A$17.67bn in June (v/s A$14.0bn expected) from A$15.97bn in May driven by strong prices of key exports from grains to metals and gold. Elsewhere, although Pelosi left Taiwan yesterday without incident, remember that China will start 4 days of military drills today around the island. So be prepared for headlines to come through. Back to yesterday and European shares rallied but missed the main part of the US climb with the STOXX 600 closing with a +0.51% advance for the day after a steady march higher throughout the session. It was an across-the-board rally led by IT (+2.78%), financials (+1.60%) and discretionary (+1.52%) stocks. The few sectors in the red - utilities (-0.94%), healthcare (-0.92%) and communications (-0.35%) - were left behind by a risk-on mood. Speaking of European utilities, it is a sector that has faced challenges not only amid the Russian gas story but also the extreme heat in Europe. Our European economists cover implications of the drought-driven low water levels for the German economy here. As a reminder, it was an important topic back in 2018 but today’s situation with gas supplies reinforces its effect given coal plants’ reliance on waterways for supplies. Linked in, yesterday’s announcement by Uniper about potentially limiting output at a coal plant in Germany sent gas futures in New York up by almost +10%, with contracts holding on to a +7.71% gain by the close of US markets. Other companies depend on water traffic too and water-intensive industries are likely to get affected as well. Earlier this week EDF has warned about potential further nuclear power cuts as river water, used for plant cooling, becomes too warm. Expect this to be an increasingly pertinent and market-moving issue across industries. Diving back into market movements, the bullish sentiment in European stocks was strong enough to overpower surging yields. In Germany the belly of the curve surged, with 5y yields (+7.6bps) racing ahead of both the front end (+6.9bps) and the 10y (+5.6bps) that was mainly upheld by higher breakevens (+6.1bps). While a similar story was seen in France (OATs +3.4bps), Italy stood out with an across the curve decline in yields. 2s10s still flattened as the 2y yield (-1.5ps) fell by less than the 10y (-4.1bps). We should note that US yields rallied 7-8bps after Europe closed. Central banks and yields will be in focus today as well since today’s BoE’s meeting will likely be top of the list in terms of events for European markets and our UK economists expect the Bank to hike by +50bps (taking the Bank Rate to 1.75%). Their full preview is here. This hike would imply the largest single Bank Rate increase since 1995 and come amid the 9.4% CPI print for June, a 40-year high. They also updated their growth outlook for the country yesterday (link here) and now expect the economy to contract in Q4-22 and Q1-23 in a short and mild technical recession. Gilts behaved similar to other European bond markets yesterday, with the 2y yield (+7.1bps) rising by more than the 10y (+4.4bps) but both lagging the 5y (+9.0bps). Staying with Europe and briefly returning to yesterday’s other data releases, Germany’s exports accelerated to +4.5% in June, way ahead of the +1.0% median estimate on Bloomberg’s and May’s revised +1.3% (from -0.5% previously). Imports came in softer than expected, however, slowing to just +0.2% (+1.3% expected). Elsewhere, Eurozone’s retail sales contracted -3.7% yoy in June, missing estimates of -1.7%. The PPI accelerated to a monthly gain of +1.1% in June relative to the prior +0.5% (revised from +0.7%). To the day ahead now and we have US June trade balance, Germany June factory orders, July construction PMI, UK July new car registrations, construction PMI, Canada June building permits and international merchandise trade. Earnings will include Alibaba, Eli Lilly, Toyota, ICE, ConocoPhillips, Bayer, Glencore, Cigna, Rolls-Royce, adidas, Cheniere, DBS, Apollo, Lyft, Expedia, Deutsche Lufthansa, Warner Bros Discovery, Vertex Pharmaceuticals, DoorDash, Atlassian, Amgen, Block, EOG, Kellogg and AMC. Tyler Durden Thu, 08/04/2022 - 08:25.....»»

Category: smallbizSource: nytAug 4th, 2022

Futures, Oil Fall As Searing Rally Wobbles

Futures, Oil Fall As Searing Rally Wobbles While European and Asian stocks have extended the blistering July rally to start August, US futures remain have traded in the red in the overnight session, if only modestly, which is to be expected after the best month for US markets since November 2020. Contracts on both the Nasdaq 100 and S&P 500 were lower by about 0.1%, alongside a drop in oil, the dollar and crypto, as investors assessed recession risks against the latest remarks from Neel Kashkari over the weekend and Bill Dudley this morning that higher interest rates are needed to bring inflation under control. The Stoxx 600 Index rose 0.2%, led by banks, as HSBC Holdings Plc posted better-than-estimated profits. 10Y yields dipped to 2.64%. Oil declined after poor Chinese economic data added to concerns that a global slowdown may sap demand. West Texas Intermediate dropped below $97 a barrel after sinking almost 7% in July in the first back-to-back monthly loss since late 2020. In thin premarket trading, bank stocks were lower as investors remain on edge over recession risks. In corporate news, Global Payments agreed to buy Evo Payments for $34 per share in cash. Meanwhile, HSBC delivered better-than-estimated profits and pledged to return to paying quarterly dividends next year as it seeks to head off a call by its largest shareholder to split up. Here are some of the biggest U.S. movers today: Siga Technologies (SIGA US) shares are set to rebound on Monday after the stock sank in the previous session following an FDA update on monkeypox. Shares of other companies making vaccines and antiviral products tied to the disease were also higher in premarket trading. Mobile Global Esports (MGAM US) shares surge as much as 76%, set for another day of gains, following the esports platform’s initial public offering on Friday when it jumped 180%. Cryptocurrency-linked stocks fall as Bitcoin slips following its best month since October 2021, with traders assessing the strength of a recovery from the market’s worst levels. Coinbase (COIN US) down 2%, Marathon Digital (MARA US) falls 4.2%. Comcast (CMCSA US) and Charter Communications (CHTR US) both downgraded at Barclays which said it sees the cable companies as “likely past peak growth.” Comcast shares down 0.1%. Bumble (BMBL US) is cut to hold at Jefferies, with the broker citing incremental FX headwinds and a valuation that is not “compelling.” PubMatic (PUBM US) and Taboola (TBLA US) both cut to sector weight at KeyBanc as the broker anticipates “disparate” 2Q results from the adtech sector. Prefers overweight-rated TradeDesk (TTD US). Traders have been speculating the Federal Reserve will tone down its anti-inflation campaign and opt for a slower path of rate hikes after data showed the US economy shrank a second quarter. While that sentiment drove July’s market turnaround after historic first-half losses, over the weekend some Fed officials - such as Kashkari and Dudley - sought to reinforce the message that higher rates are needed to stamp out price pressures and downplayed recession risks. "The fact that a very weak run of data is seen as equity bullish just purely on the basis of lower rates speaks to just how utterly dominant Fed policy has become in driving investor behavior,” said James Athey, investment director at abrdn. "Unless the Fed pulls off a miracle I am afraid the bear market is absolutely not over." Investors are also monitoring US House Speaker Nancy Pelosi’s trip to Asia. A statement from her office skipped any mention of a possible stopover in Taiwan. A visit may stoke US-China tension over the island. Here are a handful of related headlines: US House Speaker Pelosi’s official itinerary for her trip to Asia was released which did not mention Taiwan, while Radio France Internationale’s Chinese website quoted sources that stated Pelosi will fly to Taiwan via Clark Air Base in the Philippines on August 4th, according to Dimsum Daily HK. China held live-fire drills off the coast opposite Taiwan and its air force said it will resolutely safeguard national sovereignty and territorial integrity regarding Taiwan, according to Associated Press and Chinese state media. A senior official in Beijing said the atmosphere of last week’s Biden-Xi telephone conversation was the worst among the five talks between the leaders and President Xi was said to have showed the toughest attitude he has ever shown to any world leader, while the most important topic in the conversation was China-US relations especially the 'Taiwan Question'. Furthermore, the official believes the probability of US House Speaker Pelosi's visit to Taiwan is low, as President Xi’s tough position on Taiwan will push President Biden to put more pressure on Pelosi to bypass Taiwan on this trip and the official warned that an accidental military conflict around the island of Taiwan cannot be ruled out if Pelosi insists on visiting Taiwan, according to SGH Macro Advisors. European stocks climb as earnings continue to buoy risk sentiment, while US futures slide, with S&P 500 and Nasdaq 100 down 0.4%. Euro Stoxx 50 rises 0.3%. FTSE MIB outperforms peers, adding 0.9%, Stoxx 600 lags, adding 0.2%. Banks, telecoms and autos are the strongest-performing sectors. Here are the other notable European movers: HSBC jumps as much as 7%, the most since January 2021, after the lender reported interim results. Analysts were impressed with second-quarter pretax profit coming in ahead of consensus. Pearson shares rise as much as 10% after first-half sales beat analyst estimates, with weakness in the higher education segment more than offset by strong growth in other divisions. EssilorLuxottica shares climb as much as 4.2% after CEO Francesco Milleri told Les Echos he’s bullish about the eyewear giant’s outlook. Analysts also are positive about its prospects. Deutsche Telekom shares rise after Kepler Cheuvreux re-initiated coverage with buy, saying its free cash flow yield is set to rise to over 13% by 2024 from about 8% in 2022. Air- France KLM shares gain as much as 6.1% after being upgraded to buy at HSBC and to outperform at Oddo BHF, with the latter noting that the effects of the airline’s restructuring seem to be underestimated. Quilter shares gain as much as 18% amid a report that NatWest is considering a bid for the wealth management firm. The article said several other private equity firms are also considering an offer. Spectris drops as much as 8.2%, the most since Feb. 28, after the precision instrumentation and controls supplier reported half-year results. Jefferies said the interims were a “touch light.” Heineken shares fall as much as 3.5% after the company reported strong 1H results, with investors focusing on the cautious outlook and tweaked 2023 guidance. Samhallsbyggnadsbolaget i Norden shares plunged after a fresh sell rating by Goldman Sachs, which downgraded the landlord, saying it’s overleveraged as financing costs continue to surge. Varta fell the most since November 2021 after the German battery maker cut its full-year forecast for sales and earnings over headwinds including rising raw materials and energy costs. CEZ shares fell the most in a month as investors in the Czech power utility digested mounting signals that the government was ready to impose a windfall tax on the most profitable companies. Earlier in the session, Asian stocks rose as investors bet corporate earnings will support market valuations and as weak economic data from China spurred hopes for more stimulus.   The MSCI Asia Pacific Index gained as much as 0.8% with Toyota boosting the measure the most ahead of its earnings release later this week. Industrials led gains among the sectoral gauges as Mitsubishi jumped ahead of its quarterly report. Benchmarks in Japan, Singapore, Vietnam and Thailand outperformed.  Hong Kong and mainland China indexes reversed their earlier losses, buoyed by prospects that weak factory data increases the likelihood of fresh policy support from Beijing. China’s factory activity unexpectedly contracted in July while property sales continued to shrink, data over the weekend showed. Some investors said the weak figures have already been priced into last month’s losses in Chinese markets.  “Expecting more stimulus is reasonable, although the market feels the GDP target is no longer a hard target,” said Steven Leung, an executive director at UOB Kay Hian in Hong Kong. “Weak economy means more policies needed to achieve their target, or get closer to their target.” Asian stocks have been on a downtrend despite Monday’s pending gain, with the regional benchmark down almost 30% from its February 2021 high. The gauge has underperformed US peers so far this year as Covid woes continue in China, along with the nation’s property crisis, while ongoing earnings reports in the region are being closely watched.  Japanese equities erased earlier losses to end higher as better-than-expected domestic corporate earnings boosted sentiment. The Topix Index rose 1% to 1,960.11 as of the close in Tokyo, while the Nikkei advanced 0.7% to 27,993.35. Toyota Motor Corp. contributed the most to the Topix Index’s gain, increasing 3.5%. Out of 2,170 shares in the index, 1,706 rose and 395 fell, while 69 were unchanged. Earnings are “fairly good,” said Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management. “The numbers coming out are clearly positive compared to the previous quarter especially in terms of profit growth.” In Australia, the S&P/ASX 200 index rose 0.7% to close at 6,993.00, the highest since June 9, boosted by gains across mining, healthcare and energy shares. A subgauge of miners climbed for a third session, closing the highest since June 29. Investors await the Reserve Bank of Australia’s interest rate decision due Tuesday, with it expected to lift the key interest rate by 50 basis points to 1.85%.  In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,525.87 In FX, the Bloomberg Dollar Spot Index is down about 0.4%; NOK and CAD are the weakest performers in G-10 FX, NZD and JPY outperform. Yen trades at 132.33/USD. The yen climbed as much as 1% against the greenback to 131.89, rising a fourth day in its longest-winning streak since February. While the gains were initially spurred by signs the Federal Reserve will rein back rate hikes, an Asia-based FX trader said Monday that the yen is increasingly seen as a haven play. The euro edged up 0.4%, bolstered by dollar weakness; Goldman Sachs strategists have revised down their three- and six-month forecasts for EUR/USD to 0.99 and 1.02 (from 1.05 and 1.10 previously), citing the shifting European growth outlook. In rates, Treasuries bear-flatten, with the 10-year rate at 2.64%, well down from June’s peak near 3.50%, after hawkish comments from Kashkari and Bostic. Bund 10-year yields rose about 5 bps, after German and Euro Area PMIs were revised higher, while the yield on 10-year gilts climbs about 4 bps to 1.91%. Italian bonds rallied, sending the 10-year yield below 3% for the first time since May, as investors bet that a new government will stick to commitments needed to unlock about 200 billion euros ($205 billion) of European Union funds. In commodities, WTI drifted 2.2% lower to trade at around $96. Base metals are mixed; LME aluminum falls 1.8% while LME nickel gains 4.4%. Spot gold is little changed at $1,766/oz.  Bitcoin declined after reaching the highest levels since mid-June on Saturday amid optimism that the market may have recovered from its worst levels. Looking at today's calendar, we get the July ISM index and June Construction Spending data, Japan July vehicle sales, Eurozone June unemployment rate, Italy July PMI, budget balance, new car registrations, June unemployment rate. We also get earnings from Devon Energy, Activision Blizzard. Market Snapshot S&P 500 futures down 0.3% to 4,123.00 STOXX Europe 600 up 0.2% to 439.12 MXAP up 0.7% to 161.54 MXAPJ up 0.2% to 523.50 Nikkei up 0.7% to 27,993.35 Topix up 1.0% to 1,960.11 Hang Seng Index little changed at 20,165.84 Shanghai Composite up 0.2% to 3,259.96 Sensex up 0.8% to 58,043.18 Australia S&P/ASX 200 up 0.7% to 6,992.97 Kospi little changed at 2,452.25 Gold spot up 0.0% to $1,766.44 U.S. Dollar Index down 0.26% to 105.63 German 10Y yield little changed at 0.87% Euro up 0.2% to $1.0241 Brent Futures down 1.2% to $102.77/bbl Top Overnight News from Bloomberg European stocks climb as earnings continue to buoy risk sentiment, while US futures slide, with S&P 500 and Nasdaq 100 down 0.3%. Stoxx 600 rises 0.1% with banks, telecoms and autos the strongest-performing sectors. In fixed income, Bund 10-year yield rises about 5 bps, after German and Euro Area PMIs were revised higher, while the yield on 10-year gilts climbs about 4 bps to 1.91%. Italian bonds hold gains, with the 10-year yield falling below 3% for the first time since May. European factory activity plunged and Asian manufacturing output continued to weaken in July amid lingering supply-chain complications and a slowing global economy. Natural gas prices in Europe rose, after posting the biggest weekly gain in more than a month, as Russia’s tightening grip over supply rips through the economy and heightens concerns about shortages in the winter. The US Treasury is expected to make its fourth straight reduction in a quarterly sale of longer-term debt this month, with most dealers predicting extra cutbacks for the 20-year bond. China’s massive trade surplus helped to offset capital outflows in the first half of the year, anchoring its balance of payments even as the Federal Reserve’s aggressive interest rate hikes fuel outflows from developed and emerging markets alike. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were choppy as momentum from last week’s earnings-inspired euphoria on Wall St was partially offset by disappointing Chinese PMI data and cautiousness ahead of upcoming risk events including central bank rate decisions, NFP jobs data and US House Speaker Pelosi’s trip to Asia. ASX 200 was kept afloat by strength in energy and utilities after the competition regulator’s interim gas report forecast Australia’s east coast could face a shortfall of 56PJ in 2023, while the latest domestic manufacturing PMI data remained in expansion territory. Nikkei 225 was also positive with the biggest movers driven by recent earnings releases and reports also noted that Japan’s panel is expected to seek a record increase of at least JPY 30 to minimum wages. Hang Seng and Shanghai Comp were initially pressured after Chinese PMI data missed expectations in which the official manufacturing reading printed at a surprise contraction, with sentiment also not helped by US-China tensions as the world second-guesses whether or not US House Speaker Pelosi will defy China’s warnings regarding visiting Taiwan during her Asia trip. However, the mood in Chinese stocks gradually improved and retraced the majority of losses. Top Asian News US House Speaker Pelosi’s official itinerary for her trip to Asia was released which did not mention Taiwan, while Radio France Internationale’s Chinese website quoted sources that stated Pelosi will fly to Taiwan via Clark Air Base in the Philippines on August 4th, according to Dimsum Daily HK. China held live-fire drills off the coast opposite Taiwan and its air force said it will resolutely safeguard national sovereignty and territorial integrity regarding Taiwan, according to Associated Press and Chinese state media. A senior official in Beijing said the atmosphere of last week’s Biden-Xi telephone conversation was the worst among the five talks between the leaders and President Xi was said to have showed the toughest attitude he has ever shown to any world leader, while the most important topic in the conversation was China-US relations especially the 'Taiwan Question'. Furthermore, the official believes the probability of US House Speaker Pelosi's visit to Taiwan is low, as President Xi’s tough position on Taiwan will push President Biden to put more pressure on Pelosi to bypass Taiwan on this trip and the official warned that an accidental military conflict around the island of Taiwan cannot be ruled out if Pelosi insists on visiting Taiwan, according to SGH Macro Advisors. Macau is to permit dine-in services and will reopen gyms, bars and beauty parlours beginning this Tuesday, according to Bloomberg. US, South Korea and Japan will begin joint ballistic missile defence exercises in waters off Hawaii this week, according to Yonhap. "China is willing to boost China-New Zealand comprehensive strategic partnership to yield more results based on the principle of mutual respect and mutual benefit while appropriately handling differences," according to the Chinese Foreign Minister via Global Times. European bourses remain firmer across the board, Euro Stoxx 50 +0.4%, as the region shrugs-off Final Manufacturing PMIs and a mixed APAC handover given Friday's strong Wall St. performance. However, US futures are underpressure in a continuation of downbeat APAC trade amid poor Chinese PMIs and with multiple key risk events looming for the week, ES -0.2%. In Europe, sectors are mixed with the breadth of performance narrow ex-banks given pronounced upside in HSBC, +6.0%, post-earnings; note, HSBC accounts for 18% of the Europe Stoxx 600 Banking sector. Top European News HSBC Shares Jump After Profit Rise and Vow to Restore Dividends Ukraine Latest: First Grain Ship Since Start of War Leaves Odesa Marex Agrees to Buy ED&F Man Brokerage in Global Expansion Italy 10-Year Yield Falls Below 3% for the First Time Since May Quilter Gains; Potential NatWest Deal Has Clear Logic: Investec Vinci Agrees Deal for 30% Stake in Mexico Airport Operator OMA FX DXY down to deeper cycle low sub-105.500 as Yen revival continues and activity currencies climb, USD/JPY retesting underlying bids and support into 132.00 including next layer of Japanese importer buying interest. Aussie up in anticipation of RBA and Kiwi ahead of NZ jobs data, AUD/NZD and NZD/USD firmly back above 0.7000 and 0.6300 respectively. Euro eyes recent peaks and Sterling probes stops around last Friday’s high, EUR/USD touches 1.0270 and Cable tops 1.2250 . Yuan softer in wake of weaker than expected Chinese PMIs, but Rand remains bid irrespective of inflation contractionary SA PMI as Gold underpins, USD/CNH and USD/CNY 6.7600+ and 6.7500+, USD/ZAR under 16.5000. Fixed Income Debt continues to consolidate and retrace from new corrective peaks, but curves remain steeper. Bunds and Gilts sub-par within 157.74-156.74 and 118.22-117.72 respective ranges, T-notes flattish between 121-07+/120-28 parameters. BTPs bid and sharply outperform ahead of Italy's snap elections and into month bereft of issuance. 10 year bond tops 127.50 from 126.40 low just 7 ticks above prior close. Commodities Crude benchmarks are pressured in a resumption of Friday's action after modest overnight consolidation as the complex looks towards OPEC+. Currently, benchmarks are firmer by over USD 1.50/bbl; while Dutch TTF remains around the EUR 200/MWh mark as Russia put the onus on others re. Nord Stream 1. Spot gold is firmer, deriving upside from the pressure seen in the USD though the magnitude of the yellow metal's move perhaps capped by the generally constructive European tone. OPEC Secretary General Al-Ghais said OPEC is not in competition with Russia and that Russia is a big main player in the world energy map with its membership in OPEC+ vital for the success of the agreement. Al-Ghais added OPEC doesn’t control oil prices but practices tuning markets in terms of supply and demand, while he added that the recent rise in prices is not just related to the Ukraine crisis but is also due to lack of spare production capacity. Furthermore, he said the current state of the global oil market is very volatile and that the most important factor to affect oil prices by year-end is the lack of investments in the sector, according to an interview with Al Rai newspaper cited by Reuters. Libya’s Unity government oil minister said oil production is at 1.2mln bpd, according to Reuters. Gazprom said it is halting gas supplies to Latvia and accused it of violating conditions, while Latvia said that it doesn’t expect Gazprom’s decision to have any major impact, according to Reuters. European governments have eased back on efforts to curb trade in Russian oil in which they are delaying a plan to shut Moscow out of the vital Lloyd’s of London maritime insurance market and will permit some international shipments amid fears of rising crude prices and tighter global energy supplies, according to FT. The first ship with grain left the port of Odessa, according to CNN Türk; subsequently, Ukrainian Infrastructure minister says if the grain deal works in full, they will start consultations to open the port of Mykolaiv, via Reuters. Part of the damaged Beirut port silos collapsed following a weeks-long fire, according to Al Jazeera US Event Calendar 10:00: June Construction Spending MoM, est. 0.2%, prior -0.1% 10:00: July ISM Manufacturing, est. 52.0, prior 53.0 Employment, est. 48.2, prior 47.3 New Orders, est. 49.0, prior 49.2 Prices Paid, est. 73.5, prior 78.5 DB's Jim Reid concludes the overnight wrap The 2023 global II survey opens in 11 months' time. If you are likely to value our work in the next year please ...... ah ok, I did promise not to mention it again. Thanks for all the support and we'll see how we do in October or November when the results drop. Talking of results, congratulations to the England women's football team for winning the Euros. After years of watching the men's team lose time and time again in important moments it was strange watching them win, especially against Germany. First second place in the Eurovision Song Contest and now this. The world order is being turned upside down! Anyway, welcome to August and a spectacular start to H2 for markets with the S&P 500 in July (+9.1%) seeing its best month since November 2020 and 10yr US Treasuries (-37bps and +1.7%) seeing their best performance since March 2020. This follows the worst H1 since 1962 and 1788 respectively. A stunning comeback for 60/40, 50/50 or whatever ratio you chose to allocate. See our monthly performance review, out soon after this mail, for all the details. It's a complicated outlook at the moment as we don't think the US is in a typical recession yet but will almost certainly be within a few quarters. That delay is supportive for markets relative to what was priced a few weeks ago but it's hard to say the outlook is positive. However the market has more rallied on lower expected terminal rates and the move to price rate cut probabilities within 6 months. We don't think either will come to pass but my rates colleague Francis Yared always tells me not to fight bullish fixed income markets in the summer. Indeed the CoTD on Friday (link here) showed that August is by far and away the best month of the year for bonds. Interestingly Larry Summers had some harsh words over the weekend suggesting the Fed is engaging in "wishful thinking" in what it will take to tame inflation and that “Jay Powell said things that, to be blunt, were analytically indefensible ...." and that “...there is no conceivable way that a 2.5% interest rate, in an economy inflating like this, is anywhere near neutral.” So this debate will rage on but the winner in August may not be the winner by year end. Markets haven't had a chance to wind down for summer yet and maybe they won't get the chance with US payrolls on Friday, followed by CPI on Wednesday 10th. If nothing out of the ordinary occurs in these two prints though maybe we can have a quiet two or three weeks. However if payrolls are far from consensus and/or CPI is strong then we may have some fun and games in August. It’s a month of low liquidity and if something big happens it can be multiplied in such thin trading. Outside of payrolls, the other most important events this week include the manufacturing PMIs and ISM today, the RBA decision and US JOLTS tomorrow, services PMIs and ISM Wednesday, and the likely biggest hike from the BoE for 27 years alongside the increasingly important US jobless claims data on Thursday. Apart from that, earnings are still coming from all directions, but we are past halfway in the US with over 260 companies having reported. It’s 232 in the Stoxx 600. It might be hard to eclipse the big US tech week last week though. The other thing to look out for is whether US House Speaker Pelosi visits Taiwan this week on her Asian trip. It could set off a major geopolitical incident if she does and domestic accusations of backing down to China if she doesn't given she'd previously said she would visit. The full day by day week ahead is at the end as usual on a Monday but let's preview the main highlights in detail with the big one being payrolls of course. Our US economists expect a 250k reading for nonfarm payrolls (down from 372k in June with consensus also at 250k) and for the unemployment rate to slightly decline to 3.5% from 3.6% (consensus 3.6%). Our economists think the gradual increase in continuing claims since last month is enough to slow the pace of job growth. Remember we did a CoTD on payrolls day last month showing that the first month of a recession on average has a negative payroll print whereas the months leading up to it don't (including R-1). See here for a reminder. This is one of the main reasons we don't think we're there yet in terms of a recession. Our favoured measure of the strength of the labour market has been the JOLTS data which next comes out tomorrow for June. The problem is that it is always one month behind other data. However it gives us a decent if slightly rear-view mirror look at job openings and labour market tightness. Moving on, the BoE's decision on Thursday will be a big event with our UK economists and consensus expecting a +50bps move, which will take the Bank Rate to 1.75% and become the largest single increase since 1995. It will likely also be accompanied by somewhat hawkish economic forecasts from the Bank. The team's full preview, including expectations on forward guidance and QT, can be found here. Before the BoE, our economists expect the RBA to also hike +50bps tomorrow. Regarding policy guidance, they expect the central bank to reiterate the need for higher interest rates, which would implicitly keep another +50bps hike in September among the options. Turning to corporate earnings, this week's line-up will feature a number of important commodities companies, including BP, Occidental Petroleum (tomorrow), ConocoPhillips and Glencore (Thursday). Travel & leisure firms like Marriott, Airbnb (tomorrow) and Booking (Wednesday) will be in the spotlight as well to assess trends in consumer spending on services. Notable carmakers reporting results will include Toyota (Thursday), BMW (Wednesday) and Ferrari (tomorrow). In healthcare, investors will be focused on Regeneron, Moderna (Wednesday), Eli Lilly, Novo Nordisk and Bayer (Thursday). Other notable reporters will include Advanced Micro Devices, PayPal (tomorrow), Maersk (Wednesday) and Alibaba (Thursday). Asian equities are quiet at the start of the week but with China’s disappointing economic data pointing to further weakness in the world’s second biggest economy (more below). As I type, the Nikkei (+0.47%), Shanghai Composite (+0.15%), the CSI and the Kospi (+0.10%) are holding on to their gains helped by a strong US session on Friday. Elsewhere, the Hang Seng (-0.25%) is lower. Outside of Asia, DM stock futures are weaker with contracts on the S&P 500 (-0.50%), NASDAQ 100 (-0.45%) and DAX (-0.25%) edging lower. Oil prices are around -1.5% lower post China data and uncertainty over the OPEC+ meeting this week. Separately, yields on 10yr USTs (-2.0bps) have moved lower, trading at 2.67%, as we go to press. Onto that China data, and factory activity expanded at a slower pace with the Caixin/Markit manufacturing PMI for July easing to 50.4 from 51.7 in June, below analysts’ expectations for a slight dip to 51.5 as growth momentum softened in output, new orders and employment. Over the weekend, China’s factory activity contracted unexpectedly in July with the official reading falling to 49.0 (50.3 expected) from 50.2 in June, underscoring the extent of the uncertainty around growth stemming from fresh virus flare-ups, declining global demand and property market risks. Onto last week now, the FOMC raised rates a super-charged 75bps for the second consecutive meeting, yet financial conditions eased as the market latched onto comments that the hiking cycle would slow at some point and that the Committee was paying heed to slowing activity data. On that news, the splashiest data of the week was the Q2 US GDP which showed the second consecutive quarter of contraction, spurring endless debates as to what constitutes a recession. In Europe, lower Nord Stream capacity continues to ratchet energy pressure higher. The perceived pivot in Fed communications along with slowing activity data drove a shallower pricing of global monetary policy, and thus a rally in global sovereign yields. 10yr Treasuries were -10.2bps lower (-2.7bps Friday), led by a -30.8bp decline in real yields, while 2yr Treasuries were -8.6bps lower on the week (+2.2bps Friday). Not to be outdone, 10yr bunds fell even more, declining -21.4bps (-0.9bp Friday), as the continent looks exposed to even larger potential external shocks. With less aggressive tightening expected, 10yr BTPs tightened -8.1bps versus bunds, -14.3bps of which came on Friday as the main populist far-right party Brothers of Italy, who are polling very strongly, were reported to be likely to adhere to EU budget rules if elected. The easing of expected tightening was a boon to equity markets, which staged big gains across the Atlantic. The S&P 500 was +4.26% higher (+1.42% on Friday) while the NASDAQ picked up +4.70% (+1.88%). Many of the mega cap tech companies reported this week in the US to mixed results. Advertising revenue was sluggish, but supply chain pressures seemed to ease which helped those facing retail customers. Across the board, it seemed like hiring was either slowing or plans were in place to start reducing hiring. European equities also enjoyed some respite from global policy tightening, with the STOXX 600 picking up +2.96% (+1.28% Friday), the DAX +1.74% (+1.52% Friday), and the CAC higher by +3.73% (+1.72% Friday). Despite slowing activity data, oil prices showed no signs of a demand slowdown, with Brent futures climbing +6.60% over the week (+2.68% Friday). On Friday’s data, the US Employment Cost Index increased +1.3%, above 1.2% expectations but a marginal deceleration from 1Q’s 1.4%. The final University of Michigan Sentiment reading was 51.5, versus 51.1 expectations, while year-ahead inflation expectations stayed at 5.2% even if longer term ones edged back up a tenth to 2.9%. Tyler Durden Mon, 08/01/2022 - 07:56.....»»

Category: blogSource: zerohedgeAug 1st, 2022

BE Semiconductor Industries N.V. Announces Q2-22 and H1-22 Results

Q2-22 Revenue of € 214.0 Million and Net Income of € 75.6 Million Up 5.7% and 12.0%, Respectively, vs. Q1-22 H1-22 Revenue and Net Income Up 12.8% and 9.2%, Respectively, vs. H1-21New € 300 Million Share Repurchase Program DUIVEN, The Netherlands, July 21, 2022 (GLOBE NEWSWIRE) -- BE Semiconductor Industries N.V. (the "Company" or "Besi") (Euronext Amsterdam: BESI; OTC markets: BESIY), a leading manufacturer of assembly equipment for the semiconductor industry, today announced its results for the second quarter and first half year ended June 30, 2022. Key Highlights Q2-22 Revenue of € 214.0 million rose 5.7% vs. Q1-22 due primarily to increased shipments for high-end mobile applications. Down 5.4% vs. Q2-21 due to lower demand for high-end smartphones and from Chinese subcontractors partially offset by strength in automotive and computing applications Orders of € 153.1 million down 25.2% vs. Q1-22 principally as a result of lower orders for high-end mobile and high performance computing applications and by Asian subcontractors partially offset by continued strength for automotive end-user markets. Down 23.5% vs. Q2-21 primarily due to lower bookings by Chinese subcontractors and, to a lesser extent, decreased orders for high performance computing applications Gross margin of 61.0% grew 0.9 points vs. Q1-22 due to favorable forex influences and more favorable product mix. Down 1.1 points vs. Q2-21 Net income of € 75.6 million rose 12.0% vs. Q1-22 while net margins increased to 35.4% vs. 33.4% due to higher revenue and gross margins and lower than anticipated expense development. Vs. Q2-21, net income declined 19.1% due to lower revenue and gross margins combined with higher R&D spending Key Highlights H1-22 Revenue of € 416.4 million rose 12.8% vs. H1-21 reflecting strong demand for Besi's computing and automotive end-user markets. Growth partially offset by reduced demand for high-end smartphones as well as lower shipments for mobile handsets and mainstream electronics by Chinese subcontractors Orders of € 357.9 million declined 32.1% vs. H1-21 due to less favorable market conditions, lower orders for high-end smartphones post new introductions in 2021 and decreased demand from Chinese subcontractors Gross margin of 60.5% equal to H1-21 Net income of € 143.2 million increased € 12.1 million, or 9.2%, vs. H1-21 primarily due to higher revenue levels despite 46.8% increase in R&D spending Net cash grew 37.4% vs. Q2-21 to reach € 284.0 million. Total cash of € 601.6 million at end of Q2-22 Current € 185 million share repurchase program to be completed by July 31, 2022. New € 300 million program to begin August 1, 2022, representing approximately 7.5% of shares outstanding Outlook Q3-22 revenue estimated to decrease by approximately 20-30% vs. Q2-22 reflecting weaker market conditions and seasonal trends. Gross margin anticipated to remain between 60-62% (€ millions, except EPS) Q2-2022 Q1-2022 Δ Q2-2021 Δ H1-2022 H1-2021 Δ Revenue 214.0 202.4 +5.7 % 226.1 -5.4 % 416.4 369.3 +12.8 % Orders 153.1 204.8 -25.2 % 200.2 -23.5 % 357.9 527.3 -32.1 % Operating Income 92.5 81.7 +13.2 % 106.7 -13.3 % 174.2 155.0 +12.4 % EBITDA 98.0 87.2 +12.4 % 110.9 -11.6 % 185.2 163.5 +13.3 % Net Income 75.6 67.5 +12.0 % 93.5 -19.1 % 143.2 131.1 +9.2 % EPS (basic) 0.94 0.87 +8.0 % 1.23 -23.6 % 1.81 1.76 +2.8 % EPS (diluted) 0.90 0.81 +11.1 % 1.12 -19.6 % 1.71 1.58 +8.2 % Net Cash and Deposits 284.0* 407.0 -30.2 % 206.7* +37.4 % 284.0 206.7 +37.4 % *Reflects cash dividend payments of € 269.5 million and € 129.4 million in Q2-22 and Q2-21, respectively. Richard W. Blickman, President and Chief Executive Officer of Besi, commented: "Besi reported solid first half year results with revenue and net income of € 416.4 million and € 143.2 million increasing by 12.8% and 9.2%, respectively, versus H1-21. Revenue development this first half year was influenced by a number of important market trends. On the positive side, it reflected ongoing strength for Besi's computing and automotive end-user markets continuing favorable trends from H2-21. Such strength was partially offset by reduced demand for high-end smartphones following a large capacity build in 2021. It also reflected a 31.4% decrease in revenue from Chinese customers primarily associated with reduced shipments to subcontractors for mobile handsets and mainstream electronics applications due to overcapacity and Covid-19 related lockdowns. Net income growth in H1-22 benefitted from higher revenue levels, stable gross margins of 60.5% and cost control efforts which enabled us to keep operating expense margins relatively flat despite funding a 46.8% increase in R&D spending associated with new wafer level product development. Our liquidity position continued to improve at June 30, 2022 with net cash of € 284.0 million and total cash and deposits of € 601.6 million increasing 37.4% and 17.6%, respectively, versus June 30, 2021. Such increases occurred despite the distribution of € 305.7 million to shareholders in H1-22 in the form of dividends and share repurchases. Given continued strong cash flow generation and current market conditions, we intend to complete the current € 185 million share repurchase program by July 31, 2022. Beginning August 1, 2022, we intend to initiate a new € 300 million program representing approximately 7.5% of current shares outstanding with a completion date of October 2023. Repurchases under this new program will help reduce dilution related to Besi's Convertible Notes outstanding and issuances under employee stock plans. For the quarter, Besi's revenue of € 214.0 million and net income of € 75.6 million grew by 5.7% and 12.0%, respectively, versus Q1-22. Sequential revenue and profit growth were primarily due to increased shipments for high-end smartphones, an increase of gross margins to 61.0% due to a more favorable product mix, a stronger dollar and a 5.0% reduction in operating expenses. However, orders of € 153.1 million decreased by 25.2% versus Q1-22 as industry conditions weakened, global GDP growth rates decelerated and customer caution increased. In particular, they reflected lower bookings for high-end mobile and high performance computing applications as well as lower orders by Asian subcontractors partially offset by continued strength in demand for automotive end-user markets. Of note, we received three orders for Besi's new embedded bridge die attach system in H1-22 reflecting progress in the build out of our wafer level assembly portfolio. In addition, Besi's backlog of € 275 million at June 30, 2022 remained at higher than typical levels reflecting ongoing supply chain issues, selective pre ordering by customers and, to a lesser extent, pushouts by some Asian subcontractors given changing market conditions. Whether ​current market​ softness is a temporary pause or more prolonged in duration is difficult to tell ​at present ​given the many conflicting economic, geopolitical and industry cross currents. For Q3-22, we estimate that revenue will decrease by 20-30% versus Q2-22 reflecting current market conditions and seasonal trends. However, Besi's gross margin is expected to remain in the 60-62% range due to the flexibility of our production model and timely operational actions taken. In this regard, we reduced temporary production headcount approximately 16% in the latter half of the quarter to better align production with order trends. Further, operating expenses are anticipated to decrease by 10-15% versus Q2-22 principally related to lower revenue levels. We are accelerating investment in Besi's future, particularly for our hybrid bonding and wafer level assembly portfolio as the long-term drivers of our business remain intact and sub 10 nanometer device innovation continues apace. As such, we are deploying greater resources to meet hybrid bonding goals, introducing new wafer level assembly systems, adding development and support personnel and taking occupancy of a new 125,000 square foot leased facility in Malaysia in Q3-22 which should lessen capacity constraints for our most advanced systems." Second Quarter Results of Operations € millions Q2-2022 Q1-2022 Δ   Q2-2021 Δ   Revenue 214.0 202.4 +5.7%   226.1 -5.4%   Orders 153.1 204.8 -25.2%   200.2 -23.5%   Book to Bill Ratio 0.7x 1.0x -0.3   0.9 -0.2   Q2-22 revenue of € 214.0 million increased 5.7% versus Q1-22 primarily due to increased shipments for high-end mobile applications. Versus Q2-21, revenue decreased by 5.4% as a result of significantly lower demand for high-end smartphones post new product introductions in 2021 as well as lower demand for Chinese handset and mainstream electronics applications due to overcapacity and Covid-19 related lockdowns. This decrease was partially offset by strong revenue growth for both Besi's computing and automotive end-user markets including shipments of hybrid bonding systems to multiple customers. Orders of € 153.1 million decreased 25.2% versus Q1-22 due primarily to lower orders for high-end mobile and high performance computing applications as well as lower orders by Asian subcontractors partially offset by continued strength in demand for automotive end-user markets. Versus Q2-21, orders decreased by 23.5% primarily due to significantly lower demand by Chinese subcontractors and, to a lesser extent, decreased orders for high performance computing applications. Per customer type, IDM orders decreased € 10.3 million, or 10.6%, versus Q1-22 and represented 57% of total orders for the period. Subcontractor orders decreased by € 41.4 million, or 38.4%, versus Q1-22 and represented 43% of total orders. € millions Q2-2022   Q1-2022   Δ   Q2-2021   Δ   Gross Margin 61.0%   60.1%   +0.9   62.1%   -1.1   Operating Expenses 37.9   39.9   -5.0%   33.6   +12.8%   Financial Expense/(Income), net 5.8   3.7   +56.8%   2.8   +107.1%   EBITDA 98.0   87.2   +12.4%   110.9   -11.6%   Besi's gross margin increased to 61.0% in Q2-22, an increase of 0.9 points versus Q1-22 primarily due to forex benefits from an increase in the USD versus the euro and a more favorable product mix. Gross margin decreased by 1.1 points as compared to Q2-21 due to a less favorable product mix. Q2-22 operating expenses declined by € 2.0 million, or 5.0%, versus Q1-22 principally due to a € 5.0 million reduction in share-based compensation expense partially offset by increased variable sales related, travel and R&D personnel costs. Operating expenses increased by € 4.3 million, or 12.8% versus Q2-21 primarily due to increased R&D spending for next generation wafer level assembly systems. As a percentage of revenue, operating expenses were 17.7% in Q2-22 versus 19.7% in Q1-22 and 14.9% in Q2-21. Q2-22 financial expense, net increased by € 2.1 million versus Q1-22 due to increased interest expense from the issuance of € 175 million of 1.875% Convertible Notes due 2029 in March 2022, increased hedging expenses and negative forex effects. € millions Q2-2022   Q1-2022   Δ   Q2-2021   Δ   Net Income 75.6   67.5   +12.0%   93.5   -19.1%   Net Margin 35.4%   33.4%   +2.0   41.3%   -5.9   Tax Rate 12.7%   13.4%   -0.7   10.0%   +2.7   Besi's net income increased 12.0% versus Q1-22 primarily due to increased revenue and gross margins combined with a 5.0% reduction in sequential operating expenses. As a result, Besi's net margin increased to 35.4% versus 33.4%. As compared to Q2-21, Besi's net income decreased by 19.1% principally as a result of decreased revenue and gross margin levels combined with higher development spending in support of wafer level assembly programs and a higher effective tax rate. Half Year Results of Operations € millions H1-2022   H1-2021   Δ   Revenue 416.4   369.3   +12.8%   Orders 357.9   527.3   -32.1%   Gross Margin 60.5%   60.5%   -   Operating Income 174.2   155.0   +12.4%   Net Income 143.2   131.1   +9.2%   Net Margin 34.4%   35.5%   -1.1   Tax Rate 13.1%   11.3%   +1.8   H1-22 revenue of € 416.4 million rose 12.8% reflecting strong demand for Besi's computing and automotive end-user markets including increased shipments of hybrid bonding systems. Growth was partially offset by significantly decreased demand for high-end smartphones, decreased shipments for mobile handsets and mainstream electronics applications to Chinese subcontractors and some pushouts of system deliveries due to softening industry conditions. Of note, revenue from Chinese customers decreased by € 42.1 million, or 31.4%, year-over-year and decreased as a percentage of revenue from 36.3% in H1-21 to 22.1% in H1-22. Orders of € 357.9 million decreased by 32.1% versus H1-21 due to less favorable market conditions post the significant assembly capacity build over the past two years. In particular, the decrease reflected lower orders for high-end smartphones post new product introductions in 2021 and decreased demand from Chinese subcontractors. IDM and subcontractor orders represented 51% and 49%, respectively, of H1-22 orders versus 46% and 54%, respectively, in H1-21. Besi's H1-22 net income of € 143.2 million grew by € 12.1 million, or 9.2%, versus H1-21 due primarily to higher revenue levels. Operating and net margins were roughly equal in each respective period as we successfully controlled overhead growth while increasing development spending by 46.8% in support of wafer level R&D programs. Financial Condition € millions Q22022 Q12022 Δ   Q22021 Δ   H12022 H12021 Δ   Total Cash and Deposits 601.6 696.6 -13.6%   511.4 +17.6%   601.6 511.4 +17.6%   Net Cash and Deposits 284.0 407.0 -30.2%   206.7 +37.4%   284.0 206.7 +37.4%   Cash flow from Ops. 27.6 45.0 -38.7%   51.2 -46.1%   72.5 77.4 -6.3%   At the end of Q2-22, Besi had a strong liquidity position with total cash and deposits aggregating € 601.6 million, an increase of 17.6% versus Q2-21. Versus Q1-22, total cash and deposits decreased by € 95.0 million versus Q1-22 due primarily to (i) the payment of € 269.5 million in cash dividends to shareholders, (ii) € 22.2 million of share repurchases and (iii) € 5.2 million of capitalized development spending which was partially offset by (i) € 172.2 million net proceeds received from the issuance of Besi's 1.875% Convertible Notes due 2029 and (ii) cash flow from operations of € 27.6 million. Net cash of € 284.0 million at quarter end increased by € 77.3 million, or 37.4%, versus June 30, 2021. During Q2-22, € 125.6 million of Besi's 0.50% Convertible Notes due 2024 were converted into shares. As a result, total shares outstanding increased to approximately 80.6 million at quarter end, net of treasury shares held. At June 30, 2022, the total principal amount of Besi's Convertible Notes was € 359.9 million. Share Repurchase Activity During the quarter, Besi repurchased 401,806 of its ordinary shares at an average price of € 55.04 per share for a total of € 22.2 million. Cumulatively, as of June 30, 2022, approximately 4.8 million shares have been purchased under the current € 185 million share repurchase program at an average price of € 35.38 per share for a total of € 171.0 million. As of such date, Besi held approximately 550,000 shares in treasury, equal to 0.7% of its shares outstanding. Besi intends to fully complete the current program by July 31, 2022. New € 300 Million Share Repurchase ProgramA new € 300 million share repurchase program will be initiated effective August 1, 2022. The program is aimed at general capital reduction purposes and to help offset dilution related to Besi's Convertible Notes and shares issued under employee stock plans. It will be funded using Besi's available cash resources, is expected to be completed by October 2023 and will represent approximately 7.5% of Besi's outstanding shares based on Besi's closing share price on July 20, 2022. At present, Besi has authority until October 29, 2023 to purchase up to 10% of its shares issued, or 8.1 million shares. The new share repurchase program will be executed in accordance with industry best practices and in compliance with European buyback rules and regulations and may be suspended or discontinued at any time. The program will be managed by an independent brokerage firm. All purchases will be executed through Euronext Amsterdam and Multilateral Trading Facilities as defined by the Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014 on markets in financial instruments and subject to the rules of the relevant Exchange. Outlook Based on its June 30, 2022 order backlog and feedback from customers, Besi forecasts for Q3-22 that: Revenue will decrease by approximately 20-30% vs. the € 214.0 million reported in Q2-22 reflecting current market conditions and seasonal trends Gross margin will range between 60-62% vs. the 61.0% realized in Q2-22 Operating expenses will decrease by 10-15% vs. the € 37.9 million reported in Q2-22 Investor and media conference callA conference call and webcast for investors and media will be held today at 4:00 pm CET (10:00 am EDT). To register for the conference call and/or to access the audio webcast and webinar slides, please visit www.besi.com. Basis of Presentation The accompanying condensed Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. Reference is made to the Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements as included in our 2021 Annual Report, which is available on www.besi.com. About Besi Besi is a leading supplier of semiconductor assembly equipment for the global semiconductor and electronics industries offering high levels of accuracy, productivity and reliability at a low cost of ownership. The Company develops leading edge assembly processes and equipment for leadframe, substrate and wafer level packaging applications in a wide range of end-user markets including electronics, mobile internet, cloud server, computing, automotive, industrial, LED and solar energy. Customers are primarily leading semiconductor manufacturers, assembly subcontractors and electronics and industrial companies. Besi's ordinary shares are listed on Euronext Amsterdam (symbol: BESI). Its Level 1 ADRs are listed on the OTC markets (symbol: BESIY) and its headquarters are located in Duiven, the Netherlands. For more information, please visit our website at www.besi.com. Contacts:Richard W. Blickman, President & CEOHetwig van Kerkhof, SVP FinanceLeon Verweijen, VP FinanceClaudia Vissers, Executive Secretary/IR coordinatorEdmond Franco, VP Corporate Development/US IR coordinatorTel. (31) 26 319 4500investor.relations@besi.com Caution Concerning Forward Looking Statements This press release contains statements about management's future expectations, plans and prospects of our business that constitute forward-looking statements, which are found in various places throughout the press release, including, but not limited to, statements relating to expectations of orders, net sales, product shipments, expenses, timing of purchases of assembly equipment by customers, gross margins, operating results and capital expenditures. The use of words such as "anticipate", "estimate", "expect", "can", "intend", "believes", "may", "plan", "predict", "project", "forecast", "will", "would", and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words. The financial guidance set forth under the heading "Outlook" contains such forward looking statements. While these forward looking statements represent our judgments and expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from those contained in forward looking statements, including any inability to maintain continued demand for our products; failure of anticipated orders to materialize or postponement or cancellation of orders, generally without charges; the volatility in the demand for semiconductors and our products and services; the extent and duration of the COVID-19 pandemic and measures taken to contain the outbreak, and the associated adverse impacts on the global economy, financial markets, global supply chains and our operations as well as those of our customers and suppliers; failure to develop new and enhanced products and introduce them at competitive price levels; failure to adequately decrease costs and expenses as revenues decline; loss of significant customers, including through industry consolidation or the emergence of industry alliances; lengthening of the sales cycle; acts of terrorism and violence; disruption or failure of our information technology systems; consolidation activity and industry alliances in the semiconductor industry that may result in further increased customer concentration, inability to forecast demand and inventory levels for our products; the integrity of product pricing and protection of our intellectual property in foreign jurisdictions; risks, such as changes in trade regulations, conflict minerals regulations, currency fluctuations, political instability and war, associated with substantial foreign customers, suppliers and foreign manufacturing operations, particularly to the extent occurring in the Asia Pacific region where we have a substantial portion of our production facilities; our ability to mitigate the dislocations caused by the flood at one of our Malaysian production facilities, potential instability in foreign capital markets; the risk of failure to successfully manage our diverse operations; any inability to attract and retain skilled personnel, including as a result of restrictions on immigration, travel or the availability of visas for skilled technology workers as a result of the COVID-19 pandemic; those additional risk factors set forth in Besi's annual report for the year ended December 31, 2021 and other key factors that could adversely affect our businesses and financial performance contained in our filings and reports, including our statutory consolidated statements. We expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events or otherwise. Consolidated Statements of Operations (€ thousands, except share and per share data) Three Months EndedJune 30,(unaudited) Six Months EndedJune 30,(unaudited)   2022 2021 2022 2021           Revenue 213,958 226,056 416,365 369,259 Cost of sales 83,549 85,750 164,307 145,674           Gross profit 130,409 140,306 252,058 223,585           Selling, general and administrative expenses 24,600 24,225 51,913 50,891 Research and development expenses 13,316 9,410 25,938 17,668           Total operating expenses 37,916 33,635 77,851 68,559           Operating income 92,493 106,671 174,207 155,026           Financial expense, net 5,809 2,842 9,525 7,319    .....»»

Category: earningsSource: benzingaJul 21st, 2022

KB Home Q2 Earnings Preview: What Can Be Expected?

Now that the Fed has been cranking borrowing rates in an attempt to bring inflation down, it has landed homebuilders in a unique situation. If anything is certain, it’s that the 2022 Q1 earnings season was one for the books. We witnessed nasty sell-offs following many companies’ quarterly results, undoubtedly not the typical reactions we generally see during earnings season.  Margin compression was widespread as companies struggled to keep pace with rising costs associated with energy, freight, labor, and geopolitical issues. Simply put, we’ve found ourselves in a highly unique economic situation coming out of a once-in-a-lifetime pandemic.Now that the Fed has been cranking borrowing rates in an attempt to bring inflation down, it has landed homebuilders in a unique situation. Earlier this week, we received quarterly results from one of these companies, Lennar LEN.Of course, homebuilder stocks are in the spotlight whenever the Fed becomes more hawkish, raising interest rates as they have done. As borrowing rates increase, so do mortgage rates, affecting mortgage demand.Interestingly, mortgage applications increased just last week, witnessing a spike in demand.Considering that the fixed 30-year mortgage rate has risen from 3.11% at the end of December 2021 to 5.78% in the week ending Thursday, June 16th, the demand spike seems somewhat mysterious on a surface level.  However, one explanation that may be a root cause for the spike in demand is potential homebuyers are forecasting even higher rates in the upcoming months and attempting to lock in rates as soon as possible. After all, mortgage rates have skyrocketed recently and climbed to the highest levels we’ve seen in a decade and a half.  Nonetheless, it’s a fascinating development with extreme, widespread effects on the economy.On deck to release quarterly results after the bell rings today is another homebuilder, KB Home KBH. Let’s closely examine Lennar’s quarterly results to get a feel for what to expect from KBH.Lennar Quarterly ResultsTo a slight surprise, Lennar reported strong quarterly results, beating on the top and bottom lines. The company posted quarterly EPS of $4.69, enough to beat the Zacks Consensus Estimate of $3.95 per share by a substantial 19%.Regarding quarterly revenue, quarterly sales of $8.4 billion was enough to beat estimates of $8.1 billion by a notable 3% and pencil in a 30% increase from the year-ago quarter.  Homebuilding operating earnings increased to $1.9 billion, compared to operating earnings of $1.1 billion. Gross margin on home sales improved 340 basis points to 29.5%.The company’s total deliveries increased 14% to 16,500 homes, and new orders increased 4% to 17,800 homes – both compared to the year-ago quarter.All in all, on a surface level, it was a strong quarter for the company.However, Stuart Miller, Executive Chairman, said, “While our second-quarter results demonstrate strength and excellent performance throughout the quarter, the weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider. We began to see these effects after quarter-end.”Lennar has yet to notice a frightening pullback in demand, potentially because the unemployment rate has fallen significantly, providing consumers the ability to spend. Moving forward, the company gave broad guidance for Q3, citing that the Fed’s actions are still quite “fluid” and “responsive” to inflation data. If anything, it seems that the next few quarters will be where these homebuilders feel the most pain.Let’s move on to projections for KBH.KB HomeYear-to-date, KBH shares have been tossed aroud, declining 42% in value and vastly underperforming the general market.Image Source: Zacks Investment ResearchFor the quarter, the Zacks Consensus EPS Estimate sits at $1.97, marking a substantial 32% growth in earnings from the year-ago quarter. Over the last 60 days, one analyst has lowered their quarterly earnings outlook and has been the only analyst to revise their estimate.Quarterly revenue estimates reside at $1.6 billion, an 11.5% increase in the top-line from year-ago quarterly sales of $1.4 billion.The company missed on the bottom-line by 3.3% in its latest quarterly report but has beat quarterly EPS estimates by 5.6%, on average, over the last four quarters.If Lennar’s quarterly results indicate what’s to come for KBH, it seems that things are shaping up to be a strong quarter. However, pain may be felt in the upcoming quarters.KBH is currently a Zacks Rank #4 (Sell).Bottom LineThe housing market is in a very unique situation as of right now, and it looks as if the pain will start to hit homebuilders later in the year, in Q3 and Q4. Lennar posted strong quarterly results but gave very concerning and vague guidance for the rest of the year.Additionally, Lennar noted that increasing interest rates and rising house costs started to steer away buyers near the end of the quarter, another concerning development.Currently, I believe investors should heed caution in the homebuilding industry – aspects of this industry are starting to show signs of softening. Additionally, homebuilder stocks underwent adverse price action after a few real estate firms announced job cuts last week.  KBH carrying a Zacks Rank #4 (Sell) is another reason investors should heed caution with this stock. 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 KB Home (KBH): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 22nd, 2022

S&P Futures Jump Above 4,000 As Fed Fears Fade

S&P Futures Jump Above 4,000 As Fed Fears Fade After yesterday's post-FOMC ramp which sent stocks higher after the Fed's Minutes were less hawkish than feared and also hinted at a timeline for the Fed's upcoming pause (and easing), US index futures initially swung between gains and losses on Thursday as investors weighed the "good news" from the Fed against downbeat remarks on the Chinese economy from premier Li who warned that China would struggle to post a positive GDP print this quarter coupled with Apple’s conservative outlook. Eventually, however, bullish sentiment prevailed and even with Tech stocks underperforming following yesterday's disappointing earnings from Nvidia, e-mini futures rose to session highs as of 715am, and traded up 0.6% above 4,000 for the first time since May 18, while Nasdaq 100 futures were up 0.2% after earlier dropping as much as 0.8%. The tech-heavy index is down 27% this year. Treasury yields and the dollar slipped. Fed policy makers indicated their aggressive set of moves could leave them with flexibility to shift gears later if needed. Investors took some comfort from the Fed minutes that didn’t show an even more aggressive path being mapped to tackle elevated prices, though central banks remain steadfast in their resolve to douse inflation. Still, volatility has spiked as the risk of a US recession, the impact from China’s lockdowns and the war in Ukraine simmer. While the Fed minutes “provided investors with a temporary relief, today’s mixed price action on stocks mostly shows that major bearish leverages linger,” said Pierre Veyret, a technical analyst at ActivTrades in London. “The war in eastern Europe and concerns about the Chinese economy still add stress to market sentiment,” he wrote in a report. “Investors will want to see evidence of improvements regarding the pressure coming from rising prices.” “We expect key market drivers to continue to be centered around inflation and how central banks react; global growth concerns and how China gets to grip with its zero-Covid policy; and the geopolitical conflict between Russia and Ukraine,” said Fraser Lundie, head of fixed income for public markets at Federated Hermes Limited. “Positive news flow on any of these market drivers could sharply improve risk sentiment; however, there is a broad range of scenarios that could play out in the meantime.” In premarket trading, shares in Apple dropped 1.4% after a report said that the tech giant is planning to keep iPhone production flat in 2022, disappointing expectations for a ~10% increase. The company also said it was raising salaries in the US by 10% or more as it faces a tight labor market and unionization efforts. In other premarket moves, Nvidia dropped 5.3% as the biggest US chipmaker by market value gave a disappointing sales forecast. Software company Snowflake slumped 14%, while meme stock GameStop Corp. fell 2.9%. Among gainers, Twitter Inc. jumped 5.2% after billionaire Elon Musk dropped plans to partially fund his purchase of the company with a margin loan tied to his Tesla stake and increased the size of the deal’s equity component to $33.5 billion. Other notable premarket movers include: Shares of Alibaba and Baidu rise following results, sending other US-listed Chinese stocks higher in US premarket trading. Alibaba shares shot up as much as 4.5% after reporting fourth- quarter revenue and earnings that beat analyst expectations. Lululemon’s (LULU US) stock gains 2.4% in premarket trading as Morgan Stanley raised its recommendation to overweight, suggesting that the business can be more resilient through headwinds than what the market is expecting. Macy’s (M US) shares gain 15% in premarket trading after Co. increases its adjusted earnings per share guidance for the full fiscal year Williams-Sonoma (WSM US) shares jumped as much as 9.6% in premarket trading after 1Q sales beat estimates. The retailer was helped by its exposure to more affluent customers, but analysts cautioned that it may be difficult to maintain the sales momentum amid macroeconomic challenges. Nutanix (NTNX US) shares shed about a third of their value in US premarket trading as analysts slashed their price targets on the cloud platform provider after its forecast disappointed. US airline stocks rise in premarket trading on Thursday, after Southwest and JetBlue provided upbeat outlooks for the second-quarter. LUV up 1.5% premarket, after raising its second-quarter operating revenue growth forecast. JBLU up 2% after saying it expects second-quarter revenue at or above high end of previous guidance. Cryptocurrency-tied stocks fall in premarket trading as Bitcoin snaps two days of gains. Coinbase -2.6%; Marathon Digital -2.3%; Riot Blockchain -1.2%. Bitcoin drops 1.9% at 6:11 am in New York, trading at $29,209.88. It’s time to buy the dip in stocks after a steep global selloff in equity markets, according to Citi strategists. Meanwhile, Fidelity International Chief Executive Officer Anne Richards said the risk of a recession has increased and markets are likely to remain volatile, the latest dire warning on the outlook at the World Economic Forum. “If inflation gets tame enough over summer, there may not be continued raising of rates,” Carol Pepper, Pepper International chief executive officer, said on Bloomberg TV, adding that investors should look to buy tech stocks after the selloff. “Stagflation, I just don’t think that’s going to happen anymore. I think we are going to be in a situation where inflation will start tapering down and then we will start going into a more normalized market.” In Europe, the Stoxx Europe 600 Index rose 0.3%, pare some of their earlier gains but remain in the green, led by gains for retail, consumer and energy stocks. IBEX outperforms, adding 0.6%, FTSE MIB is flat but underperforms peers. Retailers, energy and consumer products are the strongest-performing sectors, with energy shares outperforming for the second day as oil climbed amid data that showed a further decrease in US crude and gasoline stockpiles. Here are the most notable European movers: Auto Trader rises as much as 3.5% after its full-year results beat consensus expectations on both top- and bottom-lines. Galp climbs as much as 4.1% as RBC upgrades to outperform, saying the stock might catch up with the rest of the sector after “materially” underperforming peers in recent years. Rightmove rises as much as 1.5% after Shore upgrades to hold from sell, saying the stock has reached an “appropriate” level following a 27% decline this year. FirstGroup soars as much as 16% after the bus and train operator said it received a takeover approach from I Squared Capital Advisors and is currently evaluating the offer. United Utilities declines as much as 8.9% as company reports a fall in adjusted pretax profit. Jefferies says full-year guidance implies a materially-below consensus adjusted net income view. Johnson Matthey falls as much as 7.5% after the company reported results and said it expects operating performance in the current fiscal year to be in the lower half of the consensus range. BT drops as much as 5.7% after the telecom operator said the UK will review French telecom tycoon Patrick Drahi’s increased stake in the company under the National Security and Investment Act. JD Sports drops as much as 12% as the departure of Peter Cowgill as executive chairman is disappointing, according to Shore Capital. Earlier in the session, Asian stocks were mixed as traders assessed China’s emergency meeting on the economy and Federal Reserve minutes that struck a less hawkish note than markets had expected.  The MSCI Asia Pacific Index was little changed after fluctuating between gains and losses of about 0.6% as technology stocks slid. South Korean stocks dipped after the central bank raised interest rates by 25 basis points as expected. Chinese shares eked out a small advance after a nationwide emergency meeting on Wednesday offered little in terms of additional stimulus. The benchmark CSI 300 Index headed for a weekly drop of more than 2%, despite authorities’ vows to support an economy hit by Covid-19 lockdowns. Investors took some comfort from Fed minutes in which policy makers indicated their aggressive set of moves could leave them with flexibility to shift gears later if needed. Still, Asia’s benchmark headed for a weekly loss amid concerns over China’s lockdowns and the possibility of a US recession. “The coming months are ripe for a re-pricing of assets across the board with a further shake-down in risk assets as term and credit premia start to feature prominently,” Vishnu Varathan, the head of economics and strategy at Mizuho Bank, wrote in a research note.  Japanese stocks closed mixed after minutes from the Federal Reserve’s latest policy meeting reassured investors while Premier Li Keqiang made downbeat comments on China’s economy. The Topix rose 0.1% to close at 1,877.58, while the Nikkei declined 0.3% to 26,604.84. Toyota Motor Corp. contributed the most to the Topix gain, increasing 1.9%. Out of 2,171 shares in the index, 1,171 rose and 898 fell, while 102 were unchanged. In Australia, the S&P/ASX 200 index fell 0.7% to close at 7,105.90 as all sectors tumbled except for technology. Miners contributed the most to the benchmark’s decline. Whitehaven slumped after peer New Hope cut its coal output targets. Appen soared after confirming a takeover approach from Telus and said it’s in talks to improve the terms of the proposal. Appen shares were placed in a trading halt later in the session. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,102.84. India’s key stock indexes snapped three sessions of decline to post their first advance this week on recovery in banking and metals shares. The S&P BSE Sensex rose 0.9% to 54,252.53 in Mumbai, while the NSE Nifty 50 Index advanced by a similar measure. Both benchmarks posted their biggest single-day gain since May 20 as monthly derivative contracts expired today. All but one of the 19 sector sub-indexes compiled by BSE Ltd. gained.  HDFC Bank and ICICI Bank provided the biggest boosts to the two indexes, rising 3% and 2.2%, respectively. Of the 30 shares in the Sensex, 24 rose and 6 fell. As the quarterly earnings season winds up, among the 45 Nifty companies that have so far reported results, 18 have trailed estimates and 27 met or exceeded expectations. Aluminum firm Hindalco Industries is scheduled to post its numbers later today. In FX, the Bloomberg Dollar fell 0.3%, edging back toward the lowest level since April 26 touched Tuesday. The yen jumped to an intraday high after the head of the Bank of Japan said policymakers could manage an exit from their decades-long monetary policy, and that U.S. rate rises would not necessarily keep the yen weak. Commodity currencies including the Australian dollar fell as China’s Premier Li Keqiang offered a bleak outlook on domestic growth. The Chinese economy is in some respects faring worse than in 2020 when the pandemic started, he said. Central banks were busy overnight: Russia’s central bank delivered its third interest-rate reduction in just over a month and said borrowing costs can fall further still, as it looks to stem a rally in the ruble and unwinds the financial defenses in place since the invasion of Ukraine. The Bank of Korea raised its key interest rate on Thursday as newly installed Governor Rhee Chang-yong demonstrated his intention to tackle inflation at his first policy meeting since taking the helm. New Zealand’s central bank has also shown its commitment this week to combat surging prices. In rates, Treasuries bull-steepen amid similar price action in bunds and many other European markets and gains for US equity index futures. Yields richer by ~3bp across front-end of the curve, steepening 2s10 by ~2bp, 5s30s by ~3bp; 10-year yields rose 2bps to 2.76%, keeps pace with bund while outperforming gilts. 2- and 5-year yields reached lowest levels in more than a month, remain below 50-DMAs. US auction cycle concludes with 7-year note sale, while economic data includes 1Q GDP revision. Bund, Treasury and gilt curves all bull-steepen. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 5.1bps to 194.6bps. The US weekly auction calendar ends with a $42BN 7-year auction today which follows 2- and 5-year sales that produced mixed demand metrics, however both have richened from auction levels. WI 7-year yield at ~2.735% is ~17bp richer than April’s, which tailed by 1.7bp. IG dollar issuance slate includes Bank of Nova Scotia 3Y covered SOFR; issuance so far this week remains short of $20b forecast, is expected to remain subdued until after US Memorial Day. In commodities,  WTI trades within Wednesday’s range, adding 0.6% to around $111. Spot gold falls roughly $7 to trade around $1,846/oz. Cryptocurrencies decline, Bitcoin drops 2.5% to below $29,000.  Looking at the day ahead now, and data releases from the US include the second estimate of Q1 GDP, the weekly initial jobless claims, pending home sales for April, and the Kansas City Fed’s manufacturing index for May. Meanwhile in Italy, there’s the consumer confidence index for May. From central banks, we’ll hear from Fed Vice Chair Brainard, the ECB’s Centeno and de Cos, and also get decisions from the Central Bank of Russia and the Central Bank of Turkey. Finally, earnings releases include Costco and Royal Bank of Canada. Market Snapshot S&P 500 futures little changed at 3,974.25 STOXX Europe 600 up 0.2% to 435.16 MXAP little changed at 163.17 MXAPJ down 0.3% to 529.83 Nikkei down 0.3% to 26,604.84 Topix little changed at 1,877.58 Hang Seng Index down 0.3% to 20,116.20 Shanghai Composite up 0.5% to 3,123.11 Sensex up 0.4% to 53,975.57 Australia S&P/ASX 200 down 0.7% to 7,105.88 Kospi down 0.2% to 2,612.45 German 10Y yield little changed at 0.90% Euro little changed at $1.0679 Brent Futures up 0.5% to $114.55/bbl Gold spot down 0.3% to $1,847.94 U.S. Dollar Index little changed at 102.11 Top Overnight News from Bloomberg Federal Reserve officials agreed at their gathering this month that they need to raise interest rates in half-point steps at their next two meetings, continuing an aggressive set of moves that would leave them with flexibility to shift gears later if needed. Russia’s central bank delivered its third interest-rate reduction in just over a month and said borrowing costs can fall further still, halting a rally in the ruble as it unwinds the financial defenses in place since the invasion of Ukraine. China’s trade-weighted yuan fell below 100 for the first time in seven months as Premier Li Keqiang’s bearish comments added to concerns that the economy may miss its growth target by a wide margin this year. Bank of Japan Governor Haruhiko Kuroda said interest rate increases by the Federal Reserve won’t necessarily cause the yen to weaken, saying various factors affect the currency market. A more detailed breakdown of global markets courtesy of Newsquawk Asia-Pac stocks were indecisive as risk appetite waned despite the positive handover from Wall St where the major indices extended on gains post-FOMC minutes after the risk event passed and contained no hawkish surprises. ASX 200 failed to hold on to opening gains as weakness in mining names, consumer stocks and defensives overshadowed the advances in tech and financials, while capex data was mixed with the headline private capital expenditure at a surprise contraction for Q1. Nikkei 225 faded early gains but downside was stemmed with Japan set to reopen to tourists on June 6th. Hang Seng and Shanghai Comp were mixed with early pressure after Premier Li warned the economy was worse in some aspects than in 2020 when the pandemic began, although he stated that China will unveil detailed implementation rules for a pro-growth policy package before the end of the month, while the PBoC issued a notice to promote credit lending to small firms and the MoF announced cash subsidies to Chinese airlines. Top Asian News PBoC issued a notice to promote credit lending to small firms and is to boost financial institutions' confidence to lend to small firms, according to Reuters. BoK raised its base rate by 25bps to 1.75%, as expected, via unanimous decision. BoK raised its 2022 inflation forecast to 4.5% from 3.1% and raised its 2023 forecast to 2.9% from 2.0%, while it sees GDP growth of 2.7% this year and 2.4% next year. BoK said consumer price inflation is to remain high in the 5% range for some time and sees it as warranted to conduct monetary policy with more focus on inflation, according to Reuters. Morgan Stanley has lowered China's 2022 GDP estimate to 3.2% from 4.2%. CSPC Drops After Earnings, Covid Impact to Weigh: Street Wrap China Builder Greenland’s Near-Term Bonds Set for Record Drops Debt Is Top Priority for Diokno as New Philippine Finance Chief European bourses are firmer across the board, Euro Stoxx 50 +0.7%, but remain within initial ranges in what has been a relatively contained session with much of northern-Europe away. Stateside, US futures are relatively contained, ES +0.2%, with newsflow thin and on familiar themes following yesterday's minutes and before PCE on Friday.  Apple (AAPL) is reportedly planning on having a 220mln (exp. ~240mln) iPhone production target for 2022, via Bloomberg. -1.4% in  the pre-market. Baidu Inc (BIDU) Q1 2022 (CNY): non-GAAP EPS 11.22 (exp. 5.39), Revenue 28.4bln (exp. 27.82bln). +4.5% in the pre-market. UK CMA is assessing whether Google's (GOOG) practises in parts of advertisement technology may distort competition. Top European News UK Chancellor Sunak's package today is likely to top GBP 30bln, according to sources via The Times; Chancellor will confirm that the package will be funded in part by windfall tax on oil & gas firms likely to come into effect in the autumn. Subsequently, UK Gov't sources are downplaying the idea that the overall support package is worth GBP 30bln, via Times' Swinford; told it is a very big intervention. UK car production declined 11.3% Y/Y to 60,554 units in April, according to the SMMT. British Bus Firm FirstGroup Gets Takeover Bid from I Squared Citi Strategists Say Buy the Dip in Stocks on ‘Healthy’ Returns The Reasons to Worry Just Keep Piling Up for Davos Executives UK Unveils Plan to Boost Aviation Industry, Passenger Rights Pakistan Mulls Gas Import Deal With Countries Including Russia FX Dollar drifts post FOMC minutes that reaffirm guidance for 50bp hikes in June and July, but nothing more aggressive, DXY slips into lower range around 102.00 vs 102.450 midweek peak. Yen outperforms after BoJ Governor Kuroda outlines exit strategy via a combination of tightening and balance sheet reduction, when the time comes; USD/JPY closer to 126.50 than 127.50 where 1.13bln option expiries start and end at 127.60. Rest of G10, bar Swedish Crown rangebound ahead of US data, with Loonie looking for independent direction via Canadian retail sales, USD/CAD inside 1.2850-00; Cable surpassing 1.2600 following reports that the cost of living package from UK Chancellor Sunak could top GBP 30bln. Lira hits new YTD low before CBRT and Rouble weaker following top end of range 300bp cut from CBR. Yuan halts retreat from recovery peaks ahead of key technical level, 6.7800 for USD/CNH. Fixed Income Debt wanes after early rebound on Ascension Day lifted Bunds beyond technical resistance levels to 154.74 vs 153.57 low. Gilts fall from grace between 119.17-118.19 parameters amidst concerns that a large UK cost of living support package could leave funding shortfall. US Treasuries remain firm, but off peaks for the 10 year T-note at 120-31 ahead of GDP, IJC, Pending Home Sales and 7 year supply. Commodities Crude benchmarks inch higher in relatively quiet newsflow as familiar themes dominate; though reports that EU officials are considering splitting the oil embargo has drawn attention. Currently WTI and Brent lie in proximity to USD 111/bbl and USD 115/bbl respectively; within USD 1.50/bbl ranges. Russian Deputy PM Novak expects 2022 oil output 480-500mln/T (prev. 524mln/T YY), via Ria. Spot gold is similarly contained around the USD 1850/oz mark, though its parameters are modestly more pronounced at circa. USD 13/oz Central Banks CBR (May, Emergency Meeting): Key Rate 11.00% (exp. ~11.00/12.00%, prev. 14.00%); holds open the prospect of further reductions at upcoming meetings. BoJ's Kuroda says, when exiting easy policy, they will likely combine rate hike and balance sheet reduction through specific means, timing to be dependent on developments at that point; FOMC rate hike may not necessarily result in a weaker JPY or outflows of funds from Japan if it affects US stock prices, via Reuters. US Event Calendar 08:30: 1Q PCE Core QoQ, est. 5.2%, prior 5.2% 08:30: 1Q Personal Consumption, est. 2.8%, prior 2.7% 08:30: May Continuing Claims, est. 1.31m, prior 1.32m 08:30: 1Q GDP Price Index, est. 8.0%, prior 8.0% 08:30: May Initial Jobless Claims, est. 215,000, prior 218,000 08:30: 1Q GDP Annualized QoQ, est. -1.3%, prior -1.4% 10:00: April Pending Home Sales YoY, est. -8.0%, prior -8.9% 10:00: April Pending Home Sales (MoM), est. -2.0%, prior -1.2% 11:00: May Kansas City Fed Manf. Activity, est. 18, prior 25 DB's Jim Reid concludes the overnight wrap A reminder that our latest monthly survey is now live, where we try to ask questions that aren’t easy to derive from market pricing. This time we ask if you think the Fed would be willing to push the economy into recession in order to get inflation back to target. We also ask whether you think there are still bubbles in markets and whether equities have bottomed out yet. And there’s another on which is the best asset class to hedge against inflation. The more people that fill it in the more useful so all help from readers is very welcome. The link is here. For markets it’s been a relatively quiet session over the last 24 hours compared to the recent bout of cross-asset volatility. The main event was the release of the May FOMC minutes, which had the potential to upend that calm given the amount of policy parameters currently being debated by the Fed. But in reality they came and went without much fanfare, and failed to inject much life into afternoon markets or the debate around the near-term path of policy. As far as what they did say, they confirmed the line from the meeting itself that the FOMC is ready to move the policy to a neutral position to fight the current inflationary scourge, with agreement that 50bp hikes were appropriate at the next couple of meetings. That rapid move to neutral would leave the Fed well-positioned to judge the outlook and appropriate next steps for policy by the end of the year, and markets were relieved by the lack of further hawkishness, with the S&P 500 extending its modest gains following the release to end the day up +0.95%. As the Chair said at the meeting, and has been echoed by other Fed officials since, the minutes noted that the hawkish shift in Fed communications have already had a noticeable effect on financial conditions, with Fed staff pointing out that “conditions had tightened by historically large amounts since the beginning of the year.” Meanwhile on QT, which the Fed outlined their plans for at the May meeting, the minutes expressed some trepidation about market liquidity and potential “unanticipated effects on financial market conditions” as a result, but did not offer potential remedies. With the minutes not living up to hawkish fears alongside growing concerns about a potential recession, investors continued to dial back the likelihood of more aggressive tightening, with Fed funds futures moving the rate priced in by the December meeting to 2.64%, which is the lowest in nearly a month and down from its peak of 2.88% on May 3. So we’ve taken out nearly a full 25bp hike by now, which is the biggest reversal in monetary policy expectations this year since Russia’s invasion of Ukraine began. That decline came ahead of the minutes and also saw markets pare back the chances of two consecutive +50bp hikes, with the amount of hikes priced over the next two meetings falling under 100bps for only the second time since the May FOMC. Yields on 10yr Treasuries held fairly steady, only coming down -0.5bps to 2.745%. Ahead of the Fed minutes, markets had already been on track to record a steady performance, and the S&P 500 (+0.95%) extended its existing gains in the US afternoon. That now brings the index’s gains for the week as a whole to +1.98%, so leaving it on track to end a run of 7 consecutive weekly declines, assuming it can hold onto that over the next 48 hours, and futures this morning are only down -0.13%. That said, we’ve seen plenty of volatility in recent weeks, and after 3 days so far this is the first week in over two months where the S&P hasn’t seen a fall of more than -1% in a single session, so let’s see what today and tomorrow bring. In terms of the specific moves yesterday, it was a fairly broad advance, but consumer discretionary stocks (+2.78%) and other cyclical industries led the way, with defensives instead seeing a much more muted performance. Tech stocks outperformed, and the NASDAQ (+1.51%) came off its 18-month low, as did the FANG+ index (+1.99%). Over in Europe, equities also recorded a decent advance, with the STOXX 600 gaining +0.63%, whilst bonds continued to rally as well, with yields on 10yr bunds (-1.5bps) OATs (-1.5bps) and BTPs (-2.7bps) all moving lower. These gains for sovereign bonds have come as investors have grown increasingly relaxed about inflation in recent weeks, with the 10yr German breakeven falling a further -4.2bps to 2.23% yesterday, its lowest level since early March and down from a peak of 2.98% at the start of May. Bear in mind that the speed of the decline in the German 10yr breakeven over the last 3-4 weeks has been faster than that seen during the initial wave of the Covid pandemic, so a big shift in inflation expectations for the decade ahead in a short space of time that’s reversed the bulk of the move higher following Russia’s invasion of Ukraine. Nor is that simply concentrated over the next few years, since the 5y5y forward inflation swaps for the Euro Area looking at inflation over the five years starting in five years’ time has come down from aa peak of 2.49% earlier this month to 2.07% by the close last night, so almost back to the ECB’s target. To be fair there’s been a similar move lower in US breakevens too, and this morning the 10yr US breakeven is down to a 3-month low of 2.56%. That decline in inflation expectations has come as investors have ratcheted up their expectations about future ECB tightening. Yesterday, the amount of tightening priced in by the July meeting ticked up a further +0.2bps to 32.7bps, its highest to date, and implying some chance that they’ll move by more than just 25bps. We heard from a number of additional speakers too over the last 24 hours, including Vice President de Guindos who said in a Bloomberg interview that the schedule for rate hikes outlined by President Lagarde was “very sensible”, and that the question of larger hikes would “depend on the outlook”. Overnight in Asia, equities are fluctuating this morning after China’s Premier Li Keqiang struck a downbeat note on the economy yesterday. Indeed, he said that the difficulties facing the Chinese economy “to a certain extent are greater than when the epidemic hit us severely in 2020”. As a reminder, our own economist’s forecasts for GDP growth this year are at +3.3%, which if realised would be the slowest in 46 years apart from 2020 when Covid first took off. Against that backdrop, there’s been a fairly muted performance, and whilst the Shanghai Composite (+0.65%) and the CSI 300 (+0.60%) have pared back initial losses to move higher on the day, the Hang Seng (-0.13%) has lost ground and the Nikkei (+0.07%) is only just in positive territory. We’ve also seen the Kospi (-0.08%) give up its initial gains overnight after the Bank of Korea moved to hike interest rates once again, with a 25bp rise in their policy rate to 1.75%, in line with expectations. That came as they raised their inflation forecasts, now expecting CPI this year at 4.5%, up from 3.1% previously. At the same time they also slashed their growth forecast to 2.7%, down from 3.0% previously. There wasn’t much in the way of data yesterday, though we did get the preliminary reading for US durable goods orders in April. They grew by +0.4% (vs. +0.6% expected), although the previous month was revised down to +0.6% (vs. +1.1% previously). Core capital goods orders were also up +0.3% (vs. +0.5% expected). To the day ahead now, and data releases from the US include the second estimate of Q1 GDP, the weekly initial jobless claims, pending home sales for April, and the Kansas City Fed’s manufacturing index for May. Meanwhile in Italy, there’s the consumer confidence index for May. From central banks, we’ll hear from Fed Vice Chair Brainard, the ECB’s Centeno and de Cos, and also get decisions from the Central Bank of Russia and the Central Bank of Turkey. Finally, earnings releases include Costco and Royal Bank of Canada. Tyler Durden Thu, 05/26/2022 - 07:50.....»»

Category: dealsSource: nytMay 26th, 2022

Futures Slide Before Fed Minutes, Dollar Jumps As China Lockdown Fears Return

Futures Slide Before Fed Minutes, Dollar Jumps As China Lockdown Fears Return Another day, another failure by markets to hold on to even the smallest overnight gains: US futures erased earlier profits and dipped as traders prepared for potential volatility surrounding the release of the Federal Reserve’s minutes which may provide insight into the central bank’s tightening path, while fears over Chinese lockdowns returned as Beijing recorded more Covid cases and the nearby port city of Tianjin locked down a city-center district. Contracts on the Nasdaq 100 and the S&P 500 were each down 0.5% at 7:30 a.m. in New York after gaining as much as 1% earlier, signaling an extension to Tuesday’s slide that followed a profit warning from Snap. In premarket trading, Nordstrom jumped 10% after raising its forecast for earnings and revenue for the coming year suggesting that the luxury consumer is doing quite fine even as most of the middle class has tapped out; analysts highlighted the department store’s exposure to higher-end customers.Meanwhile, Wendy’s surged 12% after shareholder Trian Fund Management, billionaire Nelson Peltz' investment vehicle, said it will explore a transaction that could give it control of the fast-food chain. Here are the most notable premarket movers in the US: Urban Outfitters (URBN US) shares rose as much as 5.7% in premarket trading after Nordstrom’s annual forecasts provided some relief for the beaten down retail sector. Shares rallied even as Urban Outfitters reported lower-than-expected profit and sales for the 1Q. Best Buy (BBY US) shares could be in focus as Citi cuts its price target on electronics retailer to a new Street-low of $65 from $80, saying that there continues to be “significant risk” to 2H estimates. Dick’s Sporting Goods (DKS US) sinks as much as 20% premarket after the retailer cut its year adjusted earnings per share and comparable sales guidance for the full year. Peers including Big 5 Sporting Goods, Hibbett and Foot Locker also fell after the DKS earnings release 2U Inc. (TWOU US) shares drop as much as 4.3% in US premarket trading after Piper Sandler downgraded the online educational services provider to underweight from neutral, with broker flagging growing regulatory risk. Verrica Pharma (VRCA US) shares slump as much as 61% in US premarket trading after the drug developer received an FDA Complete Response Letter for its VP-102 molluscum treatment. Shopify’s (SHOP US) U.S.-listed shares fell 0.7% in premarket trading after a second prominent shareholder advisory firm ISS joined its peer Glass Lewis to oppose the Canadian company’s plan to give CEO Tobi Lutke a special “founder share” that will preserve his voting power. Cazoo (CZOO US) shares declined 3.3% in premarket trading as Goldman Sachs initiated coverage of the stock with a neutral recommendation, saying the company is well positioned to capture the significant growth in online used car sales. CME Group (CME US Equity) may be in focus as its stock was upgraded to outperform from market perform at Oppenheimer on attractive valuation and an “appealing” dividend policy. US stocks have slumped this year, with the S&P 500 flirting with a bear market on Friday, as investors fear that the Fed’s active monetary tightening will plunge the economy into a recession: as Bloomberg notes, amid surging inflation, lackluster earnings and bleak company guidance have added to market concerns. The tech sector has been particularly in focus amid higher rates, which mean a bigger discount for the present value of future profits. The Nasdaq 100 index has tumbled to the lowest since November 2020 and its 12-month forward price-to-earnings ratio of 19.7 is the lowest since the start of the pandemic and below its 10-year average. “The consumer in the US is still showing really good signs of strength,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets. “Even if there is a slowdown it’s going to be quite mild,” he said in an interview with Bloomberg Television. Meanwhile, Barclays Plc strategists including Emmanuel Cau see scope for stocks to fall further if outflows from mutual funds pick up, unless recession fears are alleviated. Retail investors have also not yet fully capitulated and “still look to be buying dips in old favorites in tech/growth,” the strategists said. "Our central scenario remains that a recession can be avoided and that geopolitical risks will moderate over the course of the year, allowing equities to move higher,” said Mark Haefele,  chief investment officer at UBS Global Wealth Management. “But recent market falls have underlined the importance of being selective and considering strategies that mitigate volatility." The Fed raised interest rates by 50 basis points earlier this month -- to a target range of 0.75% to 1% -- and Chair Jerome Powell has signaled it was on track to make similar-sized moves at its meetings in June and July. Investors are now awaiting the release of the May 3-4 meeting minutes later on Wednesday to evaluate the future path of rate hikes. However, in recent days, traders have dialed back the expected pace of Fed interest-rate increases over worse-than-expected economic data and the selloff in equities. Sales of new US homes fell more in April than economists forecast, and the Richmond Fed’s measure of business activity dropped to a two-year low. The yield on the 10-year Treasury slipped for a second day to 2.73%. “Given the risks to growth and our view that positive real rates will be unmanageable for any significant length of time, we expect the Fed to deliver less tightening in 2022 overall than it and markets currently expect,” Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, wrote in a note. In Europe, stocks pared an earlier advance but hold in the green while the dollar rallies. The Stoxx 600 gave back most of the morning’s gains with autos, financial services and travel weighing while miners and utilities outperformed. The euro slid as comments by European Central Bank officials indicated policy normalization will be gradual. The ECB is in the midst of a debate over how aggressive it should act to rein in inflation. Here are some of the most notable European movers today: SSE shares rise as much as 6.3% after strong guidance and amid reports that electricity generators are likely to escape windfall taxes being considered by the U.K. government. Air France-KLM jumps as much as 13% in Paris after falling 21% on Tuesday as the airline kicked off a EU2.26 billion rights offering. Mining and energy stocks outperform the broader market in Europe as iron ore rebounded, while oil rose after a report that showed a decline in US gasoline stockpiles. Rio Tinto gains as much as 2.3%, Anglo American +2.6%, TotalEnergies +2.8%, Equinor +3.7% Elekta rises as much as 9.3% after releasing a 4Q earnings report that beat analysts’ expectations. Torm climbs as much as 12% after Pareto initiates coverage at buy and says the company may pay out dividends equal to 40% of its market value over the next 3 years. Mercell rises as much as 104% to NOK6.13/share after recommending a NOK6.3/share offer from Spring Cayman Bidco. Luxury stocks traded lower amid rekindled Covid-19 worries in China as Beijing continued to report new infections while nearby Tianjin locked down its city center. LVMH declines as much as 1.4%, Burberry -2.6% and Hermes -1.7% Sodexo falls as much as 5.7% after the French caterer decided not to open up the capital of its benefits & rewards unit to a partner following a review of the business. Ocado slumps as much as 8% after its grocery joint venture with Marks & Spencer slashed its forecast for FY22 sales growth to low single digits, rather than around 10% guided previously. Earlier in the session, Asian stocks were steady as traders continued to gauge growth concerns and fears of a US recession. The MSCI Asia Pacific Index rose 0.1%, paring an earlier increase of as much as 0.5%, as gains in the financial sector were offset by losses in consumer names. New Zealand equities dipped on Wednesday after the central bank delivered an expected half-point interest rate hike to combat inflation. Chinese shares stabilized after the central bank and banking regulator urged lenders to boost loans as the nation grapples with ongoing Covid outbreaks. The benchmark CSI 300 Index snapped a two-day losing streak to close 0.6% higher. Asian equities have been trading sideways as the prospect of slower growth amid tighter monetary conditions, as well as China’s strict Covid policy and supply-chain disruptions, remain key overhangs for the market. In China, the country’s strict Covid policy is outweighing broad measures to support growth and keeping investors wary. Its commitment to Covid Zero means it’s all but certain to miss its economic growth target by a large margin for the first time ever. The nation’s central bank and banking regulator urged lenders to boost loans in the latest effort to shore up the battered economy. “The valuation is still nowhere near attractive and you have a number of leading indicators, whether its credit, liquidity or growth, which are not yet indicating that we want to take more risks on the market,” Frank Benzimra, head of Asia equity strategy at Societe Generale, said in a Bloomberg TV interview. He added that the preferred strategy in equities will focus on defensive plays like resources and income. Investors will get further clues on the Federal Reserve’s interest-rate policies with the release in Washington of minutes from the latest meeting on Wednesday. Concerns that the Fed’s tightening will plunge the nation into recession had spurred a sharp selloff in US shares recently. Japanese stocks ended a bumpy day lower as investors awaited minutes from the latest Federal Reserve meeting and continued to gauge the impact of China’s rising Covid cases. The Topix fell 0.1% to close at 1,876.58, while the Nikkei declined 0.3% to 26,677.80. Nintendo Co. contributed the most to the Topix Index decline, decreasing 4.3%. Out of 2,171 shares in the index, 793 rose and 1,257 fell, while 121 were unchanged. Meanwhile, Australian stocks bounced with the S&P/ASX 200 index rising 0.4% to close at 7,155.20, with banks and miners contributing the most to its move. Costa Group was the top performer after reaffirming its operating capex guidance. Chalice Mining dropped after an equity raising. In New Zealand, the S&P/NZX 50 index fell 0.7% to 11,173.37 after the RBNZ’s policy decision. The central bank raised interest rates by half a percentage point for a second straight meeting and forecast further aggressive hikes to come to tame inflation. India’s key equity indexes fell for the third consecutive session, dragged by losses in software makers as worries grow over companies’ spending on technology amid a clouded growth outlook. The S&P BSE Sensex slipped 0.6% to 53,749.26 in Mumbai, while the NSE Nifty 50 Index dropped 0.6%. The benchmark has retreated for all but four sessions this month, slipping 5.8%, dragged by Infosys, Tata Consultancy and Reliance Industries. All but two of the 19 sector sub-indexes compiled by BSE Ltd. fell on Wednesday, led by information technology stocks. Out of 30 shares in the Sensex index, 12 rose and 18 fell. The S&P BSE IT Index has lost nearly 26% this year and is trading at its lowest level since June.  In FX, the Bloomberg dollar spot index resumed rising, up 0.3% with all G-10 FX in the red against the dollar. The euro slipped and Italian bonds extended gains after comments from ECB officials. Executive board member Fabio Panetta said the ECB shouldn’t seek to raise its interest rates too far as long as the euro-area economy displays continuing signs of fragility. Board Member Olli Rehn said the ECB should raise rates to zero in autumn. The pound was steady against the dollar and gained versus the euro, paring some of its losses from Tuesday. Focus is on the long-awaited report into lockdown parties at No. 10. The BOE needs to tighten policy further to fight rising inflation, but it’s also wary of acting too quickly and risking pushing the UK into recession, according to Chief Economist Huw Pill. Sweden’s krona slumped on the back of a stronger dollar and amid data showing that consumer confidence fell to the lowest level since the global financial crisis. Yen eased as Treasury yields steadied in Asia from an overnight plunge.  China’s offshore yuan weakened for the first time in five days as Beijing recorded more Covid cases and the nearby port city of Tianjin locked down a city-center district. New Zealand dollar and sovereign yields rose after the RBNZ hiked rates by 50 basis points for a second straight meeting and forecast more aggressive tightening, with the cash rate seen peaking at 3.95% in 2023. Most emerging-market currencies also weakened against a stronger dollar as investors await minutes from the Federal Reserve’s last meeting for clues on the pace of US rate hikes.  The ruble extended its recent rally in Moscow even as Russia’s central bank moved up the date of its next interest-rate meeting by more than two weeks to stem gains in the currency with more monetary easing. Russia has been pushed closer to a potential default. US banks and individuals are barred from accepting bond payments from Russia’s government since 12:01 a.m. New York time on Wednesday, when a license that had allowed the cash to flow ended. The lira lagged most of its peers, weakening for a fourth day amid expectations that Turkey’s central bank will keep rates unchanged on Thursday even after consumer prices rose an annual 70% in April. In rates, Treasuries were steady with yields slightly richer across long-end of the curve as S&P 500 futures edge lower, holding small losses. US 10-year yields around 2.745% are slightly richer vs Tuesday’s close; long-end outperformance tightens 5s30s spread by 1.4bp on the day with 30-year yields lower by ~1bp. Bunds outperform by 2bp in 10-year sector while gilts lag slightly with no major catalyst. Focal points of US session include durable goods orders data, 5-year note auction and minutes of May 3-4 FOMC meeting. The US auction cycle resumes at 1pm ET with $48b 5-year note sale, concludes Thursday with $42b 7-year notes; Tuesday’s 2-year auction stopped through despite strong rally into bidding deadline. The WI 5-year yield at ~2.740% is ~4.5bp richer than April auction, which tailed by 0.9bp. In commodities, WTI pushed higher, heading back toward best levels of the week near $111.60. Most base metals trade in the red; LME aluminum falls 2.3%, underperforming peers. Spot gold falls roughly $10 to trade around $1,856/oz. Spot silver loses 1.1% to around. Bitcoin trades on either side of USD 30k with no real direction. Looking to the day ahead now, and central bank publications include the FOMC minutes from their May meeting and the ECB’s Financial Stability Review. Separately, we’ll hear from ECB President Lagarde, the ECB’s Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair Brainard and the BoE’s Tenreyro. Otherwise, data releases from the US include preliminary April data on durable goods orders and core capital goods orders. Market Snapshot S&P 500 futures little changed at 3,942.75 STOXX Europe 600 up 0.4% to 433.41 MXAP little changed at 163.41 MXAPJ up 0.3% to 531.42 Nikkei down 0.3% to 26,677.80 Topix little changed at 1,876.58 Hang Seng Index up 0.3% to 20,171.27 Shanghai Composite up 1.2% to 3,107.46 Sensex down 0.5% to 53,763.20 Australia S&P/ASX 200 up 0.4% to 7,155.24 Kospi up 0.4% to 2,617.22 German 10Y yield little changed at 0.94% Euro down 0.5% to $1.0677 Brent Futures up 1.0% to $114.69/bbl Gold spot down 0.5% to $1,856.22 U.S. Dollar Index up 0.30% to 102.16 Top Overnight News from Bloomberg New Zealand dollar and sovereign yields rose after the RBNZ hiked rates by 50 basis points and forecast more aggressive tightening, with the cash rate seen peaking at 3.95% in 2023 The euro slipped and Italian bonds extended gains after comments from ECB officials. Executive board member Fabio Panetta said the ECB shouldn’t seek to raise its interest rates too far as long as the euro-area economy displays continuing signs of fragility. Board Member Olli Rehn said the ECB should raise rates to zero in autumn The pound was steady against the dollar and gained versus the euro, paring some of its losses from Tuesday. Focus is on the long-awaited report into lockdown parties at No. 10 The BOE needs to tighten policy further to fight rising inflation, but it’s also wary of acting too quickly and risking pushing the UK into recession, according to Chief Economist Huw Pill Sweden’s krona slumped on the back of a stronger dollar and amid data showing that consumer confidence fell to the lowest level since the global financial crisis Yen eased as Treasury yields steadied in Asia from an overnight plunge A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly positive but with gains capped and price action choppy after a lacklustre lead from global counterparts as poor data from the US and Europe stoked growth concerns, while the region also reflected on the latest provocations by North Korea and the RBNZ’s rate increase. ASX 200 was led higher by commodity-related stocks despite the surprise contraction in Construction Work. Nikkei 225 remained subdued after recent currency inflows and with sentiment clouded by geopolitical tensions. Hang Seng and Shanghai Comp were marginally higher following further support efforts by the PBoC and CBIRC which have explored increasing loans with major institutions and with the central bank to boost credit support, although the upside is contained amid the ongoing COVID concerns and with Beijing said to tighten restrictions among essential workers. Top Asian News US SEC official said significant issues remain in reaching a deal with China over audit inspections and even if US and China reach a deal on proceeding with inspections, they would still have a long way to go, according to Bloomberg. China will be seeing a Pacific Island Agreement when Senior Diplomat Wang Yi visits the region next week, according to documents cited by Reuters. North Korea Fires Suspected ICBM as Biden Wraps Up Asia Tour Luxury Stocks Slip Again as China Covid-19 Worries Persist Asia Firms Keep SPAC Dream Alive Despite Poor Returns: ECM Watch Powerlong 2022 Dollar Bonds Fall Further, Poised for Worst Week In Europe the early optimism across the equity complex faded in early trading. Major European indices post mild broad-based gains with no real standouts. Sectors initially opened with an anti-defensive bias but have since reconfigured to a more pro-defensive one. Stateside, US equity futures have trimmed earlier gains, with relatively broad-based gains seen across the contracts; ES (+0.1%). Top European News Aiming ECB Rate at Neutral Risks Hurting Economy, Panetta Says M&S Says Russia Exit, Inflation to Prevent Profit Growth Prudential Names Citi Veteran Wadhwani as Insurer’s Next CEO EU’s Gentiloni Eyes Deal on Russian Oil Embargo: Davos Update UK’s Poorest to See Inflation Hit Near Double Pace of the Rich FX Buck builds a base before Fed speak, FOMC minutes and US data - DXY tops 102.250 compared to low of 101.640 on Tuesday. Kiwi holds up well after RBNZ hike, higher OCR outlook and Governor Orr outlining the need to tighten well beyond neutral - Nzd/Usd hovers above 0.6450 and Aud/Nzd around 1.0950. Euro pulls back sharply as ECB’s Panetta counters aggressive rate guidance with gradualism to avoid a normalisation tantrum - Eur/Usd sub-1.0700 and Eur/Gbp under 0.8550. Aussie undermined by flagging risk sentiment and contraction in Q1 construction work completed - Aud/Usd retreats through 0.7100. Loonie and Nokkie glean some underlying traction from oil returning to boiling point - Usd/Cad capped into 1.2850, Eur/Nok pivots 10.2500. Franc, Yen and Sterling all make way for Greenback revival - Usd/Chf bounces through 0.9600, Usd/Jpy over 127.00 and Cable close to 1.2500. Fixed Income Choppy trade in bonds amidst fluid risk backdrop and ongoing flood of global Central Bank rhetoric, Bunds and Gilts fade just above 154.00 and 119.00. Eurozone periphery outperforming as ECB's Panetta urges gradualism to avoid a normalisation tantrum and Knot backs President Lagarde on ZIRP by end Q3 rather than going 50 bp in one hit. US Treasuries flat-line before US data, Fed's Brainard, FOMC minutes and 5-year supply - 10 year T-note midway between 120-21/09+ parameters. Commodities WTI and Brent July futures are firmer intraday with little newsflow throughout the European morning. US Energy Inventory Data (bbls): Crude +0.6mln (exp. -0.7mln), Gasoline -4.2mln (exp. -0.6mln), Distillates -0.9mln (exp. +0.9mln), Cushing -0.7mln. Spot gold is pressured by the recovery in the Dollar but found some support at its 21 DMA. Base metals are pressured by the turn in the risk tone this morning. US Event Calendar 07:00: May MBA Mortgage Applications -1.2%, prior -11.0% 08:30: April Durable Goods Orders, est. 0.6%, prior 1.1% -Less Transportation, est. 0.5%, prior 1.4% 08:30: April Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.4% 08:30: April Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 1.3% Central Banks 12:15: Fed’s Brainard Delivers Commencement Address 14:00: May FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap This morning we’ve launched our latest monthly survey. In it we try to ask questions that aren’t easy to derive from market pricing. For example we ask whether you think a recession is a price worth paying to tame inflation back to target. We also ask whether you think the Fed will think the same. We ask whether you think bubbles are still in markets and whether the bottom is in for equities. We also ask you the best hedge against inflation from a small list of mainstream assets. Hopefully it will be of use and the more people that fill it in the more useful it might be so all help welcome. The link is here. Talking of inflation I had a huge shock yesterday. The first quote of three came back from builders for what I hope will be our last ever renovation project as we upgrade a dilapidated old outbuilding. Given the job I do I'd like to think I'm fully aware of commodity price effects and labour shortages pushing up costs but nothing could have prepared me for a quote 250% higher than what I expected. We have two quotes to come but if they don't come in nearer to my expectations then we're either going to shelve/postpone the project after a couple of years of planning or my work output might reduce as I learn how to lay bricks, plumb, tile, make and install windows and plaster amongst other things. Maybe I could sell the rights of my journey from banker to builder to Netflix to make up for lost earnings. Rather like my building quote expectations, markets came back down to earth yesterday, only avoiding a fresh closing one-year low in the S&P 500 via a late-day rally that sent the market from intra-day lows of -2.48% earlier in the session to -0.81% at the close and giving back just under half the gains from the best Monday since January. Having said that S&P futures are up +0.6% this morning so we've had a big swing from the lows yesterday afternoon. The blame for the weak market yesterday was put on weak economic data alongside negative corporate news. US tech stocks saw the biggest losses as the NASDAQ (-2.35%) hit its lowest level in over 18 months following Snap’s move to cut its profit forecasts that we mentioned in yesterday’s edition. The stock itself fell -43.08%. Indeed, the NASDAQ just barely avoided closing more than -30% (-29.85%) from its all-time high reached back in November. The S&P 500's closing loss leaves it +1.03% week to date as it tries to avoid an 8th consecutive weekly decline for just the third time since our data starts in 1928. Typical defensive sectors Utilities (+2.01%), staples (+1.66%), and real estate (+1.21%) drove the intraday recovery, so even with the broad index off the day’s lows, the decomposition points to continued growth fears. Investors had already been braced for a more difficult day following the Monday night news from Snap, but further fuel was then added to the fire after US data releases significantly underwhelmed shortly after the open. First, the flash composite PMI for May fell to 53.8 (vs. 55.7 expected), marking a second consecutive decline in that measure. And then the new home sales data for April massively underperformed with the number falling to an annualised 591k (vs. 749k expected), whilst the March reading was also revised down to an annualised 709k (vs. 763k previously). That 591k reading left new home sales at their lowest since April 2020 during the Covid shutdowns, and comes against the backdrop of a sharp rise in mortgage rates as the Fed have tightened policy, with the 30-year fixed rate reported by Freddie Mac rising from 3.11% at the end of 2021 to 5.25% in the latest reading last week. The strong defensive rotation in the S&P 500 and continued fears of a recession saw investors pour into Treasuries, which have been supported by speculation that the Fed might not be able to get far above neutral if those growth risks do materialise. Yields on 10yr Treasuries ended the day down -10.1bps at 2.75%, and the latest decline in the 10yr inflation breakeven to 2.58% leaves it at its lowest closing level since late-February, just after Russia began its invasion of Ukraine that led to a spike in global commodity prices. And with investors growing more worried about growth and less worried about inflation, Fed funds futures took out -11.5bps of expected tightening by the December meeting, and saw terminal fed funds futures pricing next year close below 3.00% for the first time in two weeks. 10 year US yields are back up a basis point this morning. Over in Europe there was much the same pattern of equity losses and advances for sovereign bonds. However, the decline in yields was more muted after there was further chatter about a potential 50bp hike from the ECB. Austrian central bank governor Holzmann said that “A bigger step at the start of our rate-hike cycle would make sense”, and Latvian central bank governor Kazaks also said that a 50bp hike was “certainly one thing that we could discuss”. Along with Dutch central bank governor Knot, that’s now 3 members of the Governing Council who’ve openly discussed the potential they could move by 50bps as the Fed has done, and markets seem to be increasingly pricing in a chance of that, with the amount of hikes priced in by the July meeting closing at a fresh high of 32.5bps yesterday. In spite of the growing talk about a 50bp move at a single meeting, the broader risk-off tone yesterday led to a decline in sovereign bond yields across the continent, with those on 10yr bunds (-4.9bps), OATs (-4.3bps) and BTPs (-5.9bps) all falling back. Equities struggled alongside their US counterparts, and the STOXX 600 (-1.14%) ended the day lower, as did the DAX (-1.80%) and the CAC 40 (-1.66%). The flash PMIs were also somewhat underwhelming at the margins, with the Euro Area composite PMI falling a bit more than expected to 54.9 (vs. 55.1 expected). Over in the UK there were even larger moves after the country’s flash PMIs significantly underperformed expectations. The composite PMI fell to 51.8 (vs. 56.5 expected), which is the lowest reading since February 2021 when the country was still in lockdown. In turn, that saw sterling weaken against the other major currencies as investors dialled back the amount of expected tightening from the Bank of England, with a fall of -0.44% against the US dollar. That also led to a relative outperformance in gilts, with 10yr yields down -8.3bps. And on top of that, there were signs of further issues on the cost of living down the tracks, with the CEO of the UK’s energy regulator Ofgem saying that the energy price cap was set to increase to a record £2,800 in October, an increase of more than 40% from its current level. Asian equity markets are mostly trading higher this morning with the Hang Seng (+0.64%), Shanghai Composite (+0.58%), CSI (+0.17%) and Kospi (+0.80%) trading in positive territory with the Nikkei (-0.03%) trading fractionally lower. Earlier today, the Reserve Bank of New Zealand (RBNZ), in a widely anticipated move, hiked the official cash rate (OCR) by 50bps to 2.0%, its fifth-rate hike in a row in a bid to get on top of inflation which is currently running at a 31-year high. The central bank has significantly increased its forecast of how high the OCR might rise in the coming years with the cash rate jumping to about 3.4% by the end of this year and peaking at 3.95% in the third quarter of 2023. Additionally, it forecasts the OCR to start falling towards the end of 2024. Following the release of the statement, the New Zealand dollar hit a three-week high of 0.65 against the US dollar. Elsewhere, as we mentioned last week, today marks the expiration of the US Treasury Department’s temporary waiver that allowed Russia to make sovereign debt payments to US creditors. US investors will no longer be able to receive such payments, pushing Russia closer to default on its outstanding sovereign debt. To the day ahead now, and central bank publications include the FOMC minutes from their May meeting and the ECB’s Financial Stability Review. Separately, we’ll hear from ECB President Lagarde, the ECB’s Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair Brainard and the BoE’s Tenreyro. Otherwise, data releases from the US include preliminary April data on durable goods orders and core capital goods orders. Tyler Durden Wed, 05/25/2022 - 08:00.....»»

Category: blogSource: zerohedgeMay 25th, 2022

Futures Slide As Snap Forecast Steamrolls Rebound Optimism

Futures Slide As Snap Forecast Steamrolls Rebound Optimism It's not every day that a relatively small social media company (whose market cap is now less than Twitter) slashing guidance can send shockwaves across global markets and wipe out over a trillion in market cap, yet SNAP's shocking crash after it cut its own guidance released one month ago which hammered risk assets around the globe, and here we are. Add to this the delayed realization that Biden was just spouting his usual senile nonsense yesterday when he said Chinese trade tariffs would be discussed and, well, wave goodbye to the latest dead cat bounce as futures unwind much of Monday's rally. SNAP just crushed any hope of a sustained dead cat bounce — zerohedge (@zerohedge) May 23, 2022 US futures declined as technology shares were set to come under pressure after Snap warned it would miss second-quarter profit and revenue forecasts amid deteriorating macroeconomic trends. Nasdaq 100 futures slid 1.5% at 7:30 a.m. ET and S&P 500 futures retreated 1.0% just as the benchmark was starting to pull back from the brink of a bear market amid fears the Federal Reserve’s tightening could hurt growth. Meanwhile in other markets, Chinese tech stocks fell by more than 4%, while Europe’s Stoxx 600 Index dropped 1%, led by losses in shares of utilities and retail companies. The dollar was little changed, while Treasuries advanced. Snapchat plunged more 31% in premarket trading, while Facebook Meta and other companies that rely on digital advertising also tumbled amid fears that the sudden collapse in ad spending is systemic. Technology shares have been hammered this year amid rising interest rates and soaring inflation, with the Nasdaq 100 trading near November 2020 lows and at the cheapest valuations since the early days of the pandemic. Social media stocks are on course to erase more than $100 billion in market value Tuesday after Snap’s warning: Meta Platforms (FB US) declined 6.3%, Twitter (TWTR US) -4.1%, Alphabet (GOOGL US) -3.8% and Pinterest (PINS US) -12%. “It highlights how fleeting swings in sentiment are now and also that investors are running at the first sign of trouble,” Jeffrey Haley, a senior market analyst at Oanda Asia Pacific, wrote in a note. “The market continues to turn itself inside out and back to front as it tries to decide if it has priced all of the impending rate hikes, soft landing or recession, inflation or stagflation, China, Ukraine, US summer driving season, supply chains, the list goes on.” Among other notable moves in US premarket trading, Zoom Video’s shares rallied as much as 6.3% after better-than-expected guidance. Deutsche Bank said the video-software maker’s continued post-pandemic growth in its Enterprise business is encouraging, though analysts remain cautious on the company’s comments around free cash flow. Tesla shares fell 2.6% in premarket trading on Tuesday, amid news that it may take the electric-vehicle maker at least until later this week to resume full production at its China factory. Also, Daiwa analyst Jairam Nathan lowered his price target on TSLA to $800 from $1150, the latest in a string of target cuts by Wall Street analysts. Nathan cited the lockdowns in Shanghai and supply chain concerns impacting ramp-up of Austin and Berlin plants, and lowered the EPS estimates for 2022 and 2023. Elsewhere, Frontline shares rallied 3.1% after the crude oil shipping company reported net income for the first quarter that beat the average analyst estimate. Here are some other notable premarket movers: Social media and other digital advertisers fell in US premarket trading after Snap cut its forecasts. Albemarle (ALB US) shares may be in focus as analysts raise their price targets on the specialty chemicals maker amid a boost from higher lithium prices. BitNile (NILE US) swings between gains and losses in US premarket trading, after the crypto miner reported 1Q results amid a broader slump across high-growth stocks. Nautilus (NLS US) got a new Street-low price target after exercise equipment maker’s “lackluster” guidance, with the company’s shares slumping as much as 24% in US extended trading on Monday. INmune Bio (INMB US) shares dropped 23% in postmarket trading on Monday after the FDA placed the company’s investigational new drug application to start a Phase 2 trial of XPro in patients with Alzheimer’s disease on clinical hold. Abercrombie & Fitch (ANF IS)  falls as much as 21% premarket after the clothing retailer reported an unexpected loss for its first quarter Equities have been volatile as investors assess the outlook for monetary policy, inflation and the impact of China’s strict Covid policies on the global economy. Minutes on Wednesday of the most recent Federal Reserve rate-setting meeting will give markets insight into the US central bank’s tightening path. “With the era of cheap money hurtling to an end the focus will be on a speech from Jerome Powell, the chair of the Federal Reserve later, with investors keen to glean any new titbit of information about just how far and fast the US central bank will go in raising rates and offloading its mass bond holdings,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, wrote in a note. In Europe, the Stoxx 50 slumped 1.4%. FTSE 100 outperformed, dropping 0.6%, while CAC 40 lags. Utilities, retailers and consumer products are the worst performing sectors. Utilities were the biggest decliners in Europe, as Drax Group Plc, Centrica Plc and SSE Plc all sank on Tuesday following a report about UK plans for a possible windfall tax. Air France-KLM fell after plans to sell about 2.26 billion euros ($2.4 billion) of new shares to shore up its balance sheet. Oil and gas stocks underperformed the European equity benchmark in morning trading as crude declines amid investors’ concerns about Chinese demand, while mining shares also fall alongside metal prices.  Here are some of the biggest European movers: Big Yellow shares gain as much as 4% after what Citi described as a “strong set” of results, supported by structural tailwinds. SSP rises as much as 13% after the U.K. catering and concession-services company reported 1H results that Citi says were above expectations. Adevinta climbs as much as 7.8% after reporting 1Q results that were broadly as expected, with revenue slightly below expectations and Ebitda ahead, according to Citi. Frontline gains as much as 6.4% in Oslo after the crude oil shipping company reported 1Q net income that beat the average analyst estimate. Moonpig gains as much as 8.2%, extending a rise of 11% on Monday when the company announced the acquisition of Smartbox Group UK U.K. utility firms sink after the Financial Times reported that Chancellor of the Exchequer Rishi Sunak has ordered officials to prepare plans for a possible windfall tax on power generators as well as oil and gas firms. SSE declines as much as 11%, Drax Group -19% and Centrica -12% European technology and advertising stocks slump with Nasdaq futures after Snap cut its revenue and profit forecasts below the low end of its previous guidance. Just Eat falls as much as 4.8%, Deliveroo -4.9%, Delivery Hero -4.4%, STMicro -3%, Infineon -2.8%, AMS -3% Prosus drops as much as 6.7% in Amsterdam and Naspers declines as much as 6.1% in Johannesburg as Barclays cuts ratings on both stocks after downgrading Tencent in the prior session. The latest flash PMI data showed that Europe’s two largest economies kept growing in May as they benefited from a sustained rebound in services that offset fallout from Russia’s invasion of Ukraine. Meanwhile, the pound fell after a report showed the UK economy faces an increasing risk of falling into a recession as firms and households buckle under the fastest inflation rate in four decades. At the same time, the euro climbed above $1.07 for the first time in four weeks as ECB President Christine Lagarde said the currency bloc has reached a “turning point” in monetary policy and rejected the idea that the region is heading for a recession, but said the ECB won’t be rushed into withdrawing monetary stimulus. Earlier in the session, Asian stocks dipped as traders remained cautious on global growth concerns while assessing the impact of China’s fresh fiscal stimulus.  The MSCI Asia Pacific Index fell as much as 1.2%, with tech names the biggest drags. Lower revenue and profit forecasts from Snap Inc. weighed on the broader sector. Chinese stocks led declines in the region as the government’s new support package including more than 140 billion yuan ($21 billion) in additional tax relief failed to impress investors. Covid-19 lockdowns remain a key overhang, while market participants are looking to major China tech earnings this week, including Alibaba and Baidu, for direction. Hong Kong equities also dropped after the city’s outgoing leader said border controls will remain in place for now.  Hong Kong’s Hang Seng Tech Index tumbles as much as 4.2% in afternoon trading on Tuesday, on track for a second day of declines.  “Markets have caught a glimpse of the impact of regulatory risks and Covid-19 lockdowns from Tencent’s recent lackluster earnings,” and a potential mirroring of the weakness by big tech earnings ahead “may be driving some caution,” Jun Rong Yeap, a market strategist at IG Asia Pte., wrote in a note Japanese equities dropped as investors mulled China’s new stimulus measures and amid growing concerns over global economic health.  The Topix Index fell 0.9% to close at 1,878.26 on Tuesday, while the Nikkei declined 0.9% to 26,748.14. Recruit Holdings Co. contributed the most to the Topix’s decline, as the staffing-services firm tumbled 6.6%. Among the 2,171 shares in the index, 1,846 fell, 249 rose and 76 were unchanged. “The markets will continue to be in an unstable situation for a while as the US is still in the process of raising its interest rates and we are entering a phase where the effects of interest rate tightening on the economy will start to be felt in the real economy,” said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management. Indian stocks also declined, dragged by a selloff in information technology firms, as investors remained cautious over global economic growth.  The S&P BSE Sensex fell 0.4% to 54,052.61 in Mumbai while the NSE Nifty 50 Index eased 0.6%. The gauges have now dropped for four of five sessions and eased 5.3% and 5.7% this month, respectively. All but two of the 19 sector sub-indexes compiled by BSE Ltd. declined on Tuesday, led by information technology stocks. Foreign funds have been net sellers of Indian stocks since end of September and have taken out $21.3 billion this year through May 20. The benchmark Sensex is now 12.5% off its peak in Oct. Corporate earnings for the March quarter have been mixed as 26 out of 41 Nifty companies have reported profit above or in line with consensus expectations. “There is a lot of skepticism among investors over interest rate hikes in the near term and its impact on growth going ahead,” according to Kotak Securities analyst Shrikant Chouhan. In FX, the dollar dipped while the euro jumped to a one-month high versus the US dollar after the European Central Bank reiterated its plans to end negative rates quickly, bolstering market expectations that rates will rise as early as July. It pared some gains after ECB Governing Council’s Francois Villeroy de Galhau argued against a 50 bps increase. “The single currency is dancing to the tune of ECB policymakers this week as the Governing Council attempts to talk up the euro to insure against imported inflation,” said Simon Harvey, forex analyst at Monex Europe. “The euro’s rally highlights how dip buyers are happy to buy into the ECB’s messaging in the near-term.” Elsewhere, the pound slid and gilts rallied after a weak UK PMI reading ramped up speculation that the country is heading toward recession. The Australian and New Zealand dollars led declines among commodity currencies after Snapchat owner Snap Inc. slashed its revenue forecast, spurring doubts about the strength of the US economy. Japan’s yen snapped a two-day drop as Treasury yields resumed their decline. Japanese government bond yields eased across maturities, following their US peers. In rates, Treasuries were richer by up to 4bp across belly of the curve as S&P futures gapped lower from the reopen and extended losses over Asia, early European session. Treasury 10-year yields around 2.815%, richer by 3.5bp vs. Monday close US session focus to include Fed Chair Powell remarks and 2-year note auction. Gilts outperformed following soft UK data. Gilts outperform by additional 1.5bp in the sector after May’s preliminary PMI prints missed expectations. Belly-led gains steepened the US 5s30s by 1.8bp on the day while wider bull steepening move in gilts steepens UK 5s30s by 5bp on the day.  The US auction cycle begins at 1pm ET with $47b 2- year note sale, followed by $48b 5- and $42b 7-year notes Wednesday and Thursday. In commodities, oil and gas stocks underperformed as crude declined amid concerns about Chinese demand, while mining shares also fall alongside metal prices. WTI is in the red but recovers off worst levels to trade back on a $109-handle. Most base metals trade poorly; LME nickel falls 4.5%, underperforming peers. Spot gold rises roughly $5 to trade above $1,858/oz. Looking at the day ahead, we’ll get the rest of the May flash PMIs from Europe and the US, along with US new home sales for April and the Richmond Fed’s manufacturing index for May. Otherwise, central bank speakers include Fed Chair Powell, the ECB’s Villeroy and the BoE’s Tenreyro. Market Snapshot S&P 500 futures down 1.3% to 3,920.75 STOXX Europe 600 down 0.9% to 432.44 MXAP down 1.1% to 163.24 MXAPJ down 1.3% to 531.58 Nikkei down 0.9% to 26,748.14 Topix down 0.9% to 1,878.26 Hang Seng Index down 1.7% to 20,112.10 Shanghai Composite down 2.4% to 3,070.93 Sensex down 0.3% to 54,148.93 Australia S&P/ASX 200 down 0.3% to 7,128.83 Kospi down 1.6% to 2,605.87 Gold spot up 0.3% to $1,859.38 US Dollar Index down 0.11% to 101.96 Brent Futures down 0.2% to $113.15/bbl German 10Y yield little changed at 0.99% Euro up 0.2% to $1.0713 Top Overnight News from Bloomberg Social media stocks are on course to shed more than $100 billion in market value after Snap Inc.’s profit warning, adding to woes for the sector which is already reeling amid stalling user growth and rate-hike fears. The US must be “strategic” when it comes to a decision on whether to remove China tariffs, Trade Representative Katherine Tai said a day after President Joe Biden mentioned he would review Trump-era levies as consumer prices surge. China rolled out a broad package of measures to support businesses and stimulate demand as it seeks to offset the damage from Covid lockdowns on the world’s second-largest economy. China’s central bank and banking regulator urged lenders to boost loans as the economy is battered by Covid outbreaks that have threatened growth this year. President Joe Biden is seeking to show US resolve against China, yet an ill-timed gaffe on Taiwan risks undermining his bid to curb Beijing’s growing influence over the region. Europe’s two largest economies kept growing in May as they benefited from a sustained rebound in services that offset fallout from Russia’s invasion of Ukraine. Russia’s currency extended a rally that’s taken it to the strongest level versus the dollar in four years, prompting a warning from one of President Vladimir Putin’s staunchest allies that the gains may be overdone. A more detailed look at global markets courtesy of Newqsuawk Asia-Pac stocks mostly declined after Snap's profit warning soured risk sentiment and weighed on US tech names. ASX 200 was rangebound but kept afloat for most of the session by resilience in tech and mining stocks, while PMIs remained in expansion territory. Nikkei 225 fell below 27,000 although losses are stemmed by anticipation of incoming relief with Finance Minister Suzuki set to present an additional budget to parliament tomorrow. Hang Seng and Shanghai Comp were pressured after further bank downgrades to Chinese economic growth forecasts, while the recent announcement of targeted support measures by China and reports of the US mulling reducing China tariffs, did little to spur risk appetite. Top Asian News Shanghai will allow supermarkets, convenience stores and drugstores to resume operations with a maximum occupancy of 50% before May 31st and 75% after June 1st, according to Global Times. Hong Kong Chief Executive Carrie Lam said they are unlikely to lift the quarantine in her term, according to Bloomberg. US President Biden said there is no change to the policy of strategic ambiguity regarding Taiwan, while Defense Secretary Austin earlier commented that he thinks US President Biden was clear that US policy has not changed on Taiwan, according to Reuters. USTR Tai said the US is engaging with China on Phase 1 commitments of trade, while she added they must be strategic on tariffs and that President Biden's team believes trade needs new ideas, according to Reuters. China's push to loosen USD dominance is said to take on new urgency amid Western sanctions on Russia and some Chinese advisers are urging the government to overhaul the exchange rate regime to turn the Yuan into an anchor currency, according to SCMP. European bourses are subdued following the Snap-headwind, further hawkish ECB rhetoric and disappointing Flash PMIs; particularly for the UK, Euro Stoxx 50 -0.7%. US futures are similarly subdued and the Nasdaq, -1.7%, is taking the brunt of the pressure as tech names are hit across the board, ES -1.1%. Snap (SNAP) said the macroeconomic environment has deteriorated further and faster than anticipated since its last guidance issuance and it now believes it will report revenue and adjusted EBITDA below the low end of its Q2 guidance range, according to the filing cited by Reuters. Samsung (005935 KS) is to reportedly invest USD 360bln on chips and biotech over a period of five years, according to Bloomberg. Tesla (TSLA) could take until later this week to restore full production in China after quarantining thousands of workers. Uber (UBER) has initiated a broad hiring freeze across the Co. as it faces increased pressure to become profitable, according to Business Insider sources Top European News UK Chancellor Sunak ordered officials to draw up a plan for a windfall tax on electricity generators' profits, according to FT. ECB's Nagel said it seems clear that the wage moderation seen for 10 years in Germany is over and they think they will see high numbers from German wage negotiations. Germany's Chambers of Commerce DIHK cuts 2022 GDP growth forecast to 1.5% (vs prev. view of 3% made in Feb). FX Yen outperforms on risk off and softer yield dynamics, USD/JPY at low end of wide range stretching from just above 128.00 to just over 127.00 and multiple chart supports under the latter. Franc and Euro underpinned as SNB and ECB pivot towards removal of rate accommodation, USD/CHF sub-0.9650, EUR/USD 1.0700-plus. Dollar suffers as a result of the above, but DXY contains losses under 102.000 as Pound plunges following disappointing UK preliminary PMIs; Cable recoils from the cusp of 1.2600 to touch 1.2475. Aussie, Loonie and Kiwi all suffer from aversion and latter also cautious ahead of RBNZ on Wednesday; AUD/USD loses grip of 0.7100 handle, NZD/USD under 0.6450 having got close to 0.6500 yesterday and USD/CAD probing 1.2800 vs virtual double bottom around 1.2765. Lira loses flight to stay above 16.0000 vs Buck as Turkish President Erdogan refuses to acknowledge Greek leader and sets out plans to strengthen nation’s southern border defences. Fixed Income Gilts fly after UK PMIs miss consensus and only trim some gains in response to much better than expected CBI distributive trades 10 year bond holds near the top of a 118.86-117.92 range Bunds bounce from sub-153.00 lows after more hawkish guidance from ECB President Lagarde, but Italian BTPs lag under 128.00 as books build for 15 year issuance US Treasuries bull-flatten ahead of 2 year note supply and Fed's Powell, T-note just shy of 120-00 within 120-02+/119-18 band Italy has commenced marketing a new syndicated 15yr BTP, guidance +11bp vs outstanding March 2037 bond, according to the lead manager via Reuters; subsequently, set at +8bp. Commodities WTI and Brent are subdued amid the broader risk environment with familiar factors still in play; however, the benchmarks are off lows amid USD downside. Meandering around USD 110/bbl (vs low 108.61/bbl) and USD 113/bbl (vs low USD 111.70/bbl) respectively. White House is considering environmental waivers for all blends of US gasoline to lower pump prices, according to Reuters sources. Spot gold is modestly firmer though it has failed to extend after briefly surpassing the 21-DMA at USD 1856/oz. Central Banks ECB's Lagarde believes the blog post on Monday was at a good time, adding we are clearly at a turning point, via Bloomberg TV; adds, we are not in a panic mode. Rates are likely to be positive at end-Q3; when out of negative rates, you can be at or slightly above zero. Does not comment on FX levels, when questioned about EUR/USD parity. Click here for more detail, analysis & reaction. ECB's Villeroy says he believes the ECB will be at a neutral rate at some point next year, via Bloomberg TV; 50bps hike does not belong to the Governing Council's consensus, does not yet know the terminal rate. NBH Virag says continuing to increase rates in 50bp increments is an options, increasing into double-digits is not justified. US Event Calendar 09:45: May S&P Global US Manufacturing PM, est. 57.6, prior 59.2 May S&P Global US Services PMI, est. 55.2, prior 55.6 May S&P Global US Composite PMI, est. 55.6, prior 56.0 10:00: May Richmond Fed Index, est. 10, prior 14 10:00: April New Home Sales MoM, est. -1.7%, prior -8.6%; New Home Sales, est. 750,000, prior 763,000 Central Banks 12:20pm: Powell Makes Welcoming Remarks at an Economic Summit DB's Jim Reid concludes the overnight wrap These are pretty binary markets at the moment. If the US doesn’t fall into recession over the next 3-6 months then it’s easy to see markets rallying over this period. However if it does, the correction will likely have further to run and go beyond the average recession sell-off (that we were close to at the lows last week) given the rich starting valuations. For choice I don’t think the US will go into recession over this period but as you know I do think it will next year. As such a rally should be followed by bigger falls next year. Two problems with this view. Timing the recession call and timing the market’s second guessing of it. Apart from that it's all very easy!! This week started on a completely different basis to most over the past few months. So much so that there's hope that the successive weekly losing S&P streak of seven might be ended. 4 days to go is a long time in these markets but after day one we're at +1.86% and the strongest start to a week since January. And that comes on top of its intraday recovery of more than +2% late on Friday’s session, after the index had briefly entered bear market territory, which brings the index’s gains to more than 4% since its Friday lows at around the European close. However just when you thought it was safe to emerge from behind the sofa, S&P 500 futures are -0.84% this morning with Nasdaq futures -1.42% due to Snapchat slashing profit and revenue forecasts overnight. Their shares were as much as -31% lower in after hours, taking other social media stocks with it. Asia is also weaker this morning as we'll see below. Before we get there, yesterday's rally was built on a few bits of positive news that are worth highlighting. Investors were buoyed from the get-go by remarks from President Biden that he’d be considering whether to review Trump-era tariffs on China. It had been reported previously that such a move was under consideration, but there are also geopolitical as well as economic factors to contend with, and a Reuters report last week cited sources who said that US Trade Representative Katherine Tai favoured keeping the tariffs in place. Biden said that he’d be discussing the issue with Treasury Secretary Yellen following his return to the United States, so one to watch in the coming days with the administration under pressure to deal with inflation. This comes as the Biden administration unveiled the Indo-Pacific Economic Framework yesterday, which covers 13 countries and approximately 40% of the world’s GDP. Conspicuously, China was not one of the included parties, but US officials said there was a path for them to join. The framework reportedly does not contain any new tariff reductions, but instead seems focused on new labour, environmental, and anti-money laundering standards while seeking to build resilience. The 13 involved countries said in a joint statement, “This framework is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies.” It is not clear what is binding, or what Congress will think about the framework, but regardless, this is battle to halt or slow the anti-globalisation sentiment so prominent in recent years. It was not just Biden who helped encourage the rally. We then had a further dose of optimism in the European morning after the Ifo Institute’s indicators from Germany surprised on the upside. Their business climate indicator unexpectedly rose to 93.0 in May (vs. 91.4 expected), thus marking a second successive increase from the March low after Russia’s invasion of Ukraine. This morning we’ll get the May flash PMIs for Germany and elsewhere in Europe, so let’s see if they paint a similar picture. Ahead of that, equity indices moved higher across the world, with the S&P 500 up +1.86% as mentioned, joining other indices higher including the NASDAQ (+1.59%), the Dow Jones (+1.98%), and the small-cap Russell 2000 (+1.10%). It was a very broad-based advance, with every big sector group moving higher on the day, and banks (+5.12%) saw the largest advance in the S&P 500. Meanwhile, consumer discretionary (+0.64%) continues to lag the broader index. Over in Europe there were also some major advances, with the STOXX 600 (+1.26%), the DAX (+1.38%) and the CAC 40 (+1.17%) all rising. They have lagged the US move since Friday's Euro close mostly because they have out-performed on the downside. Staying on Europe, we had some significant developments on the policy outlook as ECB President Lagarde published a blog post that basically endorsed near-term market pricing for future hikes. In turn, that helped the euro to strengthen against other major currencies and led to a rise in sovereign bond yields. In the post, Lagarde said that she expected net purchases under the APP “to end very early in the third quarter”, which would enable rates to begin liftoff at the July meeting in just over 8 weeks from now. Furthermore, the post said that “on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter”, so implying that we’ll see more than one hike in Q3, assuming they move by 25bp increments. Interestingly, Bloomberg subsequently reported that others at the ECB wanted to keep open the possibility of moving even faster. Indeed, it said that Lagarde’s plan had “irked colleagues” seeking to keep that option open, and was “a position that leaves some more hawkish officials uncomfortable.” So according to this, some officials want to keep the option of moving in 50bp increments like the Fed did earlier this month, although so far only Dutch central bank Governor Knot has openly referred to this as a possibility. That move from Lagarde to endorse an exit from negative rates in Q3 sent sovereign bonds noticeably higher after the blog post was released, with 10yr bund yields giving up their initial decline to rise +7.5bps by the close, aided by the broader risk-on move. Those on 10yr OATs (+7.1bps) and BTPs (+3.3bps) also moved higher, with a rise in real yields driving the moves in all cases. Nevertheless, when it came to what the market was pricing for future rate hikes, Lagarde’s comments seemed to just solidify where they’d already reached, with the amount priced in for the ECB by year-end rising just +5.5bps to remain above 100bps. Given the ECB’s more hawkish rhetoric of late as well as the upside Ifo reading, the Euro gained further ground against the US dollar over the last 24 hours, strengthening by +1.20% in yesterday’s session. In fact, the dollar was the second-worst performer amongst all the G10 currencies yesterday, narrowly edging out the yen, and the dollar index has now shed -2.64% since its peak less than two weeks ago. That’s in line with what our FX colleagues argued in their Blueprint at the end of last week (link here), where they see the reversal of the dollar risk premium alongside ECB tightening sending EURUSD back above 1.10 over the summer. But even though the dollar was losing ground, US Treasury yields still moved higher alongside their European counterparts, with 10yr yields up +7.0bps to 2.85%. They given back around a basis point this morning. Over to Asia and as discussed earlier markets are weaker. The Hang Seng (-1.50%) is extending its previous session losses with stocks in mainland China also lagging. The Shanghai Composite (-1.09%) and CSI (-0.80%) are both trading lower even as the government is offering more than 140 billion yuan ($21 billion) in extra tax relief to companies and consumers as it seeks to offset the impact of Covid-induced lockdowns on the world’s second biggest economy. Among the agreed new steps, China will also reduce some passenger car purchase taxes by 60 billion yuan. Meanwhile, the Nikkei (-0.51%) and Kospi (-0.90%) are also trading in the red. Early morning data showed that Japan’s manufacturing activity expanded at the slowest pace in three months in May after the au Jibun Bank flash manufacturing PMI slipped to +53.2 from a final reading of +53.5 in April amid supply bottlenecks with new orders growth slowing. Meanwhile, the nation’s services PMI improved to +51.7 in May from +50.7. Elsewhere, manufacturing sector activity in Australia expanded at the slowest pace in four months as the S&P Global flash manufacturing PMI fell to +55.3 in May from April’s +58.8 level while the services PMI dropped to +53.0 in May. While markets try to judge whether or not a near-term recession is imminent and how severe it may be, another external shock to contend with is the growing Covid case count in mainland China and how stiff the lockdown measures authorities will impose to contain outbreaks. As we reported yesterday, Beijing registered record case growth over the weekend. The Chinese mainland on Monday reported 141 locally-transmitted confirmed COVID-19 cases, of which 58 were in Shanghai and 41 in Beijing. So these numbers will be closely watched over the next few days. To the day ahead now, and we’ll get the rest of the May flash PMIs from Europe and the US, along with US new home sales for April and the Richmond Fed’s manufacturing index for May. Otherwise, central bank speakers include Fed Chair Powell, the ECB’s Villeroy and the BoE’s Tenreyro. Tyler Durden Tue, 05/24/2022 - 08:08.....»»

Category: blogSource: zerohedgeMay 24th, 2022

Goldman Warns "Dollar Dominance On A Downtrend"

Goldman Warns 'Dollar Dominance On A Downtrend' As we have noted numerous times in the past (since 2014), nothing lasts forever... And while he falls short of the apocalyptic views of The World Bank's former chief economist: "The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency." ...and Zoltan Poszar's recent warnings of the backlash against US weaponization of the dollar against Russia, noting that "...wars tend to turn into major junctures for global currencies, and with Russia losing access to its foreign currency reserves, a message has been sent to all countries that they can’t count on these money stashes to actually be theirs in the event of tension... it may make less and less sense for global reserve managers to hold dollars for safety, as they could be taken away right when they’re most needed." ...and Dylan Grice's fears over the end of dollar hegemony... never seen weaponization of money on this scale before…you only get to play the card once. china will make it a priority to need no USD before going for Taiwan. it’s a turning point in monetary history: the end of USD hegemony & the acceleration towards a bipolar monetary order — Dylan Grice (@dylangrice) February 27, 2022 Goldman Sachs' Zach Pandl argues that the Dollar’s role as the dominant international currency will likely continue to decline over the coming years, reinforcing his view that the Dollar will weaken over the medium term. Within a country’s borders, the typical money medium used by households and firms is largely dictated by government rules and regulations. At an international level, by contrast, currency users have a choice. For over six decades, the US Dollar has been the world’s dominant international currency, reflecting both the convenience of using the US currency and a lack of suitable alternatives. But the Dollar’s international role is now under pressure on both fronts. US foreign policy choices may discourage heavy reliance on the Dollar in some cases, while policy changes by other governments, as well as technological innovation, may help facilitate diversification away from it. The Dollar’s share of global foreign exchange reserves peaked at around 85% in the 1970s and fell to below 60% last year, a downward trend we expect to continue over the coming years as other nations pivot toward other fiat currencies and, potentially, alternative money mediums. US foreign policy doing the Dollar no favors Pressures on the Dollar’s dominant international role partly stem from US foreign policy choices, in particular, the US’ aggressive use of extraterritorial financial sanctions. Given that all transactions in Dollars eventually pass through the US financial system, preventing US banks and their subsidiaries from transacting with a sanctioned entity effectively shuts that entity out of the global financial system. For example, an EU business could be prevented from trading with Iran, even if it’s legal under domestic EU law, because its bank could run afoul of US sanctions. For this reason, the EU Commission has said that US sanctions and trade disputes with other countries represent a threat to the EU’s economic and monetary sovereignty. Overuse of sanctions by the US could discourage other countries from transacting in the Dollar in the first place, a risk that US officials are well aware of. Former Treasury Secretary Jacob Lew said in 2016 that the US “must be conscious of the risk that overuse of sanctions could undermine our leadership position within the global economy, and the effectiveness of our sanctions themselves… if they excessively interfere with the flow of funds worldwide, financial transactions may begin to move outside of the United States entirely—which could threaten the central role of the US financial system globally.” Similarly, former US Secretary of State Henry Kissinger said in 2014: “I do have a number of problems with the sanctions [on Russia for its annexation of Crimea]. When we talk about a global economy and then use sanctions within the global economy, then the temptation will be that big countries thinking of their future will try to protect themselves against potential dangers, and as they do, they will create a mercantilist global economy." Will the recent imposition of sanctions on Russia’s central bank over the war in Ukraine be the straw that breaks the camel’s back? Countries hold foreign exchange reserves as a store of value to use in times of crisis. But when the Russian government recently needed its reserves to stabilize the country’s financial system, they were immobilized by Western sanctions. As a result, other nations may worry that the value of their Dollar-denominated financial assets is only as solid as their relationship with the US at the time, which may motivate sovereign investors to search for alternative assets, including a more diversified mix of foreign currency holdings. Dollar facing stiffer competition Competition for the Dollar has also gotten stiffer, especially from China, which has taken significant steps to modernize and open up its financial system, leading to a wave of fixed income portfolio inflows in recent years. Since 2016, mutual fund and ETF holdings of Chinese bonds have increased sixfold and official reserve allocations to the Yuan have increased almost fourfold. We expect both of these trends to continue over the coming years, due to likely increases in China’s weight in major benchmark indices, as well as the Yuan’s relatively high nominal and real yields, its relatively cheap valuation, and China’s increasing strategic importance. The Bank of Israel, for instance, cited related considerations when explaining the ramp-up of its Yuan-denominated reserve assets this year. And China’s efforts to develop the first major central bank digital currency (CBDC) may also help facilitate international use of the Yuan, perhaps first by Chinese tourists abroad and partner countries in the Belt and Road Initiative. Separately, recent institutional upgrades to the EU—as well as the prospect of positive cash yields—could help the Euro compete with the Dollar in international currency choice over time. While the Euro functions as an international currency today, primarily in trade with its regional neighbors, it has fallen well short of the project’s initial aspirations, and is generally thought to be “punching below its weight”, for several reasons. First, the Euro area has lower macroeconomic stability than other highly-developed economies, due in large part to an incomplete fiscal union and therefore more persistent internal imbalances. Second, the Euro area lacks a large supply of the type of high-quality government bonds sought by sovereign investors. And third, Europe lacks the geopolitical reach of the US, in part because foreign affairs and defense policy are still conducted at the member state level. While the European Union has a coordinator for regional foreign policy, and arguably some aspects of “soft power”, it lacks the type of global military arrangements that help underpin Dollar dominance. However, Europe tends to take steps forward in times of crisis, and the policy responses to recent disruptions are likely building a better foundation for the single currency for the future. While not billed as an effort to speed up Euro internationalization, the EU Recovery Fund/NGEU project— Europe’s response to the Covid pandemic—helps address the Euro’s structural weaknesses, and may therefore have positive implications for the currency’s global use over time. The program addresses macroeconomic instability through intraregional transfers—in effect, a step toward fiscal federalism— and also creates a new supply of highly-rated government bonds, which should be attractive to sovereigns and other international investors. Russia’s invasion of Ukraine presents new challenges for the EU and Euro area, and may damage economic growth over the short term, but could be positive for the Euro over the long term if it results in an increase in defense spending and more “hard power” for the region. Lastly, while cryptocurrencies are still in their infancy today, the technology could eventually be applied to certain types of international payments, possibly displacing the Dollar. The Western conflict with Russia, for example, demonstrates the key challenge that cryptocurrency networks like Bitcoin aim to solve: the need for parties who may not know or trust each other to transact value. Gold often served this role as an alternative international money medium to fiat currency in the past. Before Bitcoin, there was no digital equivalent to gold, because digital payments required a centralized intermediary. While there is no guarantee that Bitcoin will serve this purpose in the future, its foundational blockchain technology demonstrates that a scarce digital medium can be created through cryptographic algorithms and the careful use of economic incentives, and some market participants may prefer this type of digital medium to traditional fiat currencies for certain types of international payments. Declining dominance, eventually a declining Dollar In recent days and weeks, the Dollar has continued to appreciate as markets have discounted even more monetary tightening by the Fed, and, over the near term, the outlook for rate hikes in the US relative to other economies will likely remain the primary driver of Dollar exchange rates. But over a medium-term horizon, the balance of risk around the Dollar is skewed significantly to the downside, in our view, due to the currency’s high valuation (more than 10% overvalued on our standard models) and three potential structural changes in global capital flows: (i) fixed income flows back to the Euro area as the ECB exits negative rates, (ii) outflows from US equities on any sustained underperformance, and (iii) de-Dollarization efforts by official institutions designed to reduce exposure to Dollar-centric payment networks. The Dollar maintains its role as the world’s leading international currency for many reasons - with reinforcing complementarities or “network effects” a key factor - so this structure will not change overnight. But the shifting tactical and structural trends reinforce our conviction in a weaker Dollar over the medium term. Tyler Durden Tue, 05/03/2022 - 21:25.....»»

Category: blogSource: zerohedgeMay 3rd, 2022

Populism Averted For Now, But "Chaos Is Infectious"

Populism Averted For Now, But 'Chaos Is Infectious' Authored by Bill Blain via MorningPorridge.com, “Something wicked this way comes…..” Macron’s victory has been hailed as a market plus, a win for Europe and common purpose, but it’s likely just a crisis averted, perhaps, for a few more years. Around the globe populism will likely be fanned by inflation, food and energy insecurity and become an increasingly destabilising force on markets. Another Monday, and it’s another glorious sunrise here in Happy Hamble. I spent Saturday on a long walk down the River Itchen with the young dog, while Sunday opened with an early open water swim against the tide followed by an uncompromising gardening assault on the weeds and cutting back our olive trees, before a long dinner with friends. The spring blossom this year looks incredible! It all felt wonderful last night…. Maybe it’s a metaphor for what’s to come – but this morning I feel old, bruised, achy, dusty and not a little broken. I suspect something similar is in prospect for the global economy. Rising political tension and stress around the globe could amplify the current threats of conflict, recession and stagnation, making them look even worse..… As we worry more and more about fertiliser costs, food prices and supply chain breakdowns getting wheat out of Ukraine, it might be wise to recall the old adage the gap between civilisation and chaos is 7 meals. Chaos is infectious. The perception of chaos does strange things to the behaviours and peculiar madness of crowds. Few things go wrong overnight. Most market crises are years in the making – for instance; the unnoticed disconnects between prices, risks, and expectations not being spotted till they triggered the liquidity crisis of 2007. Or in politics – where the mistakes of one generation influence the next. Politics around the globe looks fraxious.. and in fraxious times, politicians do silly things. It’s no surprise there is a lot of hysterical positive stuff this morning about how France, Europe, the Global Economy (take yer pick) just dodged a bullet in the election of Centrist Emmanuel Macron over populist right-winger Marine Le Pen. Its apparently great news for European unity and for French markets. Phew… Alternatively, it’s a flashing danger signal: 42% of Frenchmen made a conscious call to support the Far Right, and were outvoted by a majority willing to vote for anyone by Le Pen. Macron has a mandate, but a thin one off which the veneer could quickly be stripped. France, like the rest of Europe, will face mounting pressures from inflation, food and energy security, and a potential fracture with Germany over its continued pandering to Russian energy. The gillet jaunes’ trademark jackets are still hanging by the door. The next French election could be even more testing: Macron successfully retained power for a second term (the first president to do in 20 years) by being the only acceptable alternative to Le Pen. He has done so by destroying the traditional parties of the soft left and right in France. They all but vanished in this year’s election – begging the question: what credible parties will arise to replace Macron? And how will they develop in a time of increasing social tension – which the savvy Le Pen will milk to her advantage? Social Tension is an excellent breeding ground for populism – reinforcing messages of inequality, unfairness… and resentment. Any politicians trying to reinstate traditional French politics will face a test as rivals try to position themselves for the crowds. Let’s not forget – democracy is the very worst form of government (except for any other alternative). The voting machine of a mass plebiscite can give us terrible populist surprises – like Boris, Trump and Brexit. In Germany, there are clear signs of dither and conflict within the new coalition. With inflation at a post war high – the ancestral fears of Weimar instability have reawakened. (To be fair we’re a long-way from runaway hyperinflation – but..) Otmar Issing, the aging high priest of the militant wing of the inflation hawks, has accused Madame Inflation (ECB head Christine Legarde as names by Bild) of living in a fantasy. Oh dear. It was all going rather well. Europe had been responding magnificently to the Ukraine crisis – coming together with common purpose… for a while. Now Germany is dithering over the difficult choices. Do they shut down the economic powerhouse of Europe by accepting the ban on Russian Energy? Or do they compromise to continue energy imports and thereby risk a breach with the rest of Europe. That would be a massive test for any top-shelf politician. Olaf Scholz? Go figure… In the UK – don’t go there…. There are rumours Boris Johnson could be gone as early as this Wednesday. The Tory “establishment” managed to delay the publication of Sue Gray’s review into “Party-Gate” – a series of Downing Street lockdown parties apparently presided over by our mop-top blusterer of a prime-minister – by compelling the police to mount a half-hearted, slow and obfuscated investigation into the matter. “Oh, we can’t possibly release the report until Plod has completed their investigation” – the plan being for said investigation to take a couple of decades. The report, which is now leaking round the colander that is Westminster, is “excoriating” according to officials. It’s apparently so damning Johnson will be forced to resign… his name is on the VIP guest list of at least 12 separate illegal events… The notoriously broke Boris can probably raise the fines by flogging a few knighthoods to dodgy oligarchs… He may still wriggle. We’ve heard all the worst of a bumbling blimp of a PM before. Boris will apologise and act like nothing happened. Like the time he stole the crown jewels and was caught red-handed trying to fence them through a pawnbrokers… only getting off after he convinced a doddery judge he was simply seeking advice on how to clean the diamonds as a surprise for the Queen… Boris is a shady as a barrel full of shadows on a very sunny day. Who will replace him? Given the dearth of talent, honesty or electability on the front benches, that’s a bit of a Five Famous Belgians question – impossible to answer (unless you use fictional characters). There are few Conservatives with the brains and honour to deserve the appointment. The bulk of the party I voted for in 2019 is now so sullied with Boris’ honking bluff, bluster and money-grabbing entitlement we should get shot of them with alacrity. And as the Labour party – evening a recovering Marxist like myself is struggling to be positive. We will find out just how bad its going for the Selfservatives in the local elections in 10 days time.… (The one Tory I might trust would be Sajid Javid – short-lived chancellor who had the decency to resign when Boris and Dominic Cummings tried to undermine him by stripping him of his advisors – but he’s spent his political career working hard rather than addressing his popularity.) And if you think I’m overdoing my political fears – well just look across the pond. The election not won by Trump was 2 years ago and now we’re dominated by who will win in November. The US has become essentially unmanageable – impossible to agree on critical policies and spending.. But a thought did strike me over the weekend – maybe there is a way to economic recovery, while achieving geopolitical goals? I’d been chatting to a retired senior British Army officer. He was full of praise for the resilience of the Ukrainian troops, saying they’d clearly been trained by Brits. I asked what he meant… “The British Army’s special power is to make do with less. Decades of cuts in manpower and lousy equipment, and we still field the best Army in the world because we are experts in making do. The Ukrainian’s have learnt that lesson well.” In contrast, the one budget that is sacrosanct in the US is the Military – and no matter how bitter the political wrangling, it is always divided 30% to the Army, Navy and Airforce, with 10% to the Marines. The US military has become an implement of economic policy, feeding the “Military Industrial Complex” that Eisenhower warned about, with orders while creating massive multiplier effects across the economy.  It works. It does raise the issue – what’s the efficiency frontier of such an approach, and when does it result in policy errors.. The West won the last cold war by outspending the enemy. Can we do it again… or have the risks changed? I shall leave readers with that contentious thought… Tyler Durden Mon, 04/25/2022 - 09:45.....»»

Category: dealsSource: nytApr 25th, 2022

Key Events This Busy, Holiday-Shortened Week: ECB Hawkish Surpise, Scorching CPI And Earnings Season Starts

Key Events This Busy, Holiday-Shortened Week: ECB Hawkish Surpise, Scorching CPI And Earnings Season Starts After a rather quiet start to the month of April, DB's Henry Rallen notes that it is an eventful calendar for markets this week ahead of Easter, with Thursday’s ECB meeting set to be one of the main highlights. At their last meeting in March, the ECB adopted a more hawkish position than had been expected by confirming a faster reduction in their asset purchases. That’s set to see APP purchases fall from €40bn in April to €30bn in May and then €20bn in June, with the possibility of ending purchases altogether in Q3. Since then however, inflation has accelerated by even more than the consensus expected, with the flash CPI estimate for the Euro Area at +7.5% in March, which is the highest since the formation of the single currency, and up from +5.9% in February. In terms of what to look for this time round, Deutsche Bank economists write in their preview that they’re not expecting much change to the ECB’s message. Instead, they think that when the new staff forecasts are available in June, they’ll announce that APP purchases will end in July, ahead of a liftoff in the policy rate in September, so an underlying direction of travel that’s becoming clear. Their view is that the risks are tiled towards a more hawkish, rather than a less hawkish tone though; furthermore, the bank's economists changed their call last week to expect a more aggressive ECB exit given the deteriorating inflation outlook, and now see the terminal rate reaching 2% by end-2023, which is 250bps higher than at present. Staying on that central bank theme, another big highlight this week will be the release of the US CPI data for March on Tuesday, which is the last one the Fed will get ahead of their meeting in early April. That comes amidst heightened speculation that the Fed could move by 50bps at the next meeting, and futures are pricing in an 88% chance of a 50bps move. Speaking of the actual print, DB's economists are expecting that the monthly gain in headline CPI of +1.3% will push the year-on-year rate up to +8.6%, which hasn’t been seen since 1981. That said, they think that March is likely to be the peak in the year-on-year rates for both headline and core, since the base effects from last year’s surge in used car prices will begin rolling off in the April data. Finally, and also this week, we’ll start to see the Q1 earnings season get going, with releases from a number of US financials, among others. They include JPMorgan Chase and BlackRock (both on Wednesday), ahead of reports from Citigroup, Morgan Stanley, Goldman Sachs and Wells Fargo (on Thursday). But overall, it’s still a fairly quiet on the earnings front with just 15 companies in the S&P 500 reporting, and it’ll only really ramp up the following week with 68 of the index reporting, and then 181 in the week after that. While some strategists point to continued solid sequential earnings growth in Q1, and look for slightly above average beats, skeptics have emerged who warn that Q1 may be as good as it gets for growth (more in our preview to follow shortly). Here is a day-by-day calendar of events Monday April 11 Data: China March CPI and PPI, Japan March machine tool orders, UK February monthly GDP, industrial, manufacturing production, index of services, trade balance, construction output Central banks: Fed's Bostic, Waller, Bowman and Evans speak, BoJ's Governor Kuroda speaks Other: EU foreign ministers meet Tuesday April 12 Data: US March CPI, monthly budget statement, NFIB small business optimism, Japan March PPI, bank lending, UK March jobless claims change, February unemployment rate, weekly earnings, France February trade balance, Germany and Eurozone April ZEW survey Central banks: Fed's Brainard and Barkin speak Earnings: Saudi Aramco, Asos Wednesday April 13 Data: US March PPI, China March trade balance, Japan March money stock, February core machine orders, UK March CPI, RPI, February house price index, Italy February industrial production Central banks: BoC rate decision Earnings: JPMorgan, BlackRock, Delta Air Lines, Tesco Thursday April 14 Data: US April University of Michigan sentiment, March retail sales, import and export price indices, February business inventories, initial jobless claims, Canada February manufacturing sales, wholesale trade sales Central banks: ECB rate decision, Fed's Mester and Harker speak Earnings: TSMC, Wells Fargo, Morgan Stanley, Goldman Sachs, Citi, UnitedHealth, Coinbase, Ericsson Friday April 15 Data: US April Empire manufacturing index, March industrial production, capacity utilisation, China March new home prices Central banks: ECB Survey of Professional Forecasters * * * Looking at just the US, Goldman writes that the key economic data releases this week are the CPI report on Tuesday and the retail sales report on Thursday. There are several speaking engagements from Fed officials this week, including remarks by Governor Brainard on Tuesday at an event hosted by the Wall Street Journal. Monday, April 11 There are no major economic data releases scheduled. 09:30 AM Atlanta Fed President Bostic (FOMC non-voter) and Fed Governors Bowman (FOMC voter) and Waller (FOMC voter) speak: Atlanta Fed President Raphael Bostic and Fed Governors Michelle Bowman and Christopher Waller will deliver remarks at a Fed Listens event in Nashville. On Thursday, President Bostic noted that the Fed should “move [its] policy closer to a neutral position,” but cautioned that “we need to do it in a measured way.” Last week, President Bostic said that his submission to the FOMC’s March Summary of Economic Projections included “six rate hikes for 2022 and two more for 2023.” He noted that “the elevated levels of uncertainty are front forward in my mind and have tempered my confidence that an extremely aggressive path is appropriate today.” Earlier this week, the March FOMC minutes noted that while “many” participants would have favored a 50bp hike in March, “a number” of those participants judged a 25bp hike to be more appropriate given the uncertainty related to the Russian invasion of Ukraine. We expect the FOMC to hike by 50bp at its May and June meetings. In her last public appearance, on February 21st, Governor Bowman noted that she favored taking “forceful action to help reduce inflation, bringing it back toward our 2% goal, while keeping the economy on track.” On March 18th, Governor Waller said that “the data is basically screaming at us to go [with] 50 [basis-point hikes] but the geopolitical events were telling you to go forward with caution.” Later, on March 24th, Governor Waller noted that “at a later date, certainly not anytime soon, the FOMC may start to consider sales of [mortgage-backed securities].” The March minutes have since revealed that FOMC participants will likely support peak runoff caps of $60bn per month for Treasury securities and $35bn for mortgage-backed securities—for a total of $95bn per month and roughly double the pace of last cycle’s runoff. Participants also “generally agreed” that “the caps could be phased in over a period of three months or modestly longer” and that it would be appropriate to consider sales of MBS “after balance sheet runoff was well under way.” We continue to expect the FOMC to announce the start of balance-sheet normalization at its May meeting. 12:40 PM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Fed President Charles Evans will discuss the economy and monetary policy at the Detroit Economic Club. Audience and media Q&A are expected. On Friday, President Evans noted that he was “optimistic that we can get to neutral, look around, and find that we’re not necessarily that far from where we need to go.” On March 24th, President Evans noted that he “would be comfortable with … each meeting increasing [the federal funds rate] by a quarter-point,” but that “maybe a 50 [basis-point hike] helps.” Tuesday, April 12 06:00 AM NFIB small business optimism, March (consensus 95.0, last 95.7) 08:30 AM CPI (mom), March (GS +1.32%, consensus +1.2%, last +0.8%); Core CPI (mom), March (GS +0.47%, consensus +0.5%, last +0.5%) CPI (yoy), March (GS +8.60%, consensus +8.4%, last +7.9%); Core CPI (yoy), March (GS +6.59%, consensus +6.6%, last +6.4%): We estimate a 0.47% increase in March core CPI (mom sa), which would boost the year-on-year rate by 0.2pp to 6.6%. Our forecast reflects a decline in used car prices from elevated levels, but Ukraine-related increases for new cars and auto parts. We also expect a post-Omicron increase in hotel lodging and airline prices, as well as additional wage-price pass-through in services categories like recreation and household operations. We estimate rent increased by 0.58% and OER increased by 0.43%, reflecting a boost to the former from rebounding downtown rents and a drag on the latter from imputed utilities. We also assume another month of strength for health and car insurance rates, with the latter boosted by a rebound in accidents and higher vehicle replacement costs. We estimate a 1.32% monthly increase in headline CPI, reflecting a sharp rise in energy prices as well as higher grocery and restaurant prices. 12:10 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will discuss the economic outlook during an event hosted by the Wall Street Journal. Moderated Q&A is expected. On Tuesday, Governor Brainard stressed that “currently, inflation is much too high and is subject to upside risks,” and noted that the Fed is “prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.” 06:45 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will speak at an event hosted by the Money Marketeers of New York University. Text and audience and media Q&A are expected. On Wednesday, President Barkin noted that the Fed has “moved at a 50 basis-point clip in the past, [and] could [do so] again.” Last week, President Barkin said that “there is a real chance” that the Fed would need to take the federal funds rate above its estimated neutral level in order to bring down inflation. Wednesday, April 13 PPI ex-food and energy, March (GS +0.6%, consensus +0.5%, last +0.2%); PPI ex-food, energy, and trade, March (GS +0.6%, consensus +0.5%, last +0.2%): We estimate a 0.6% increase for PPI ex-food and energy and PPI ex-food and energy, and trade, reflecting a continued boost from supply chain bottlenecks, labor shortages, and commodity prices. We estimate that headline PPI increased by 1.2% in March. Thursday, April 14 08:30 AM Retail sales, March (GS flat, consensus +0.6%, last +0.3%); Retail sales ex-auto, March (GS +1.0%, consensus +0.8%, last +0.2%); Retail sales ex-auto & gas, March (GS flat, consensus +0.2%, last -0.4%); Core retail sales, March (GS -0.3%, consensus flat, last -1.2%): We estimate a 0.3% decline in March core retail sales (ex-autos, gasoline, and building materials; mom sa). The elevated level of retail sales suggest a high seasonal hurdle for additional gains during the busy spring shopping season, and we believe higher gasoline prices and the phasing-out of the child tax credit are weighing on discretionary spending among lower-income consumers. On the positive side, we expect a further rise in restaurant spending as public health normalized, and we expect a boost in the general merchandise category from higher nominal fuel sales. We estimate a flat reading for headline retail sales, reflecting lower auto sales but a spike in gasoline prices. 08:30 AM Import price index, March (consensus +2.3%, last +1.4%): Export price index, March (consensus +2.2%, last +3.0%) 08:30 AM Initial jobless claims, week ended April 9 (GS 166k, consensus 175k, last 166k); Continuing jobless claims, week ended April 2 (consensus 1,500k, last 1,523k): We estimate initial jobless claims were unchanged at 166k in the week ended April 9. 10:00 AM University of Michigan consumer sentiment, April preliminary (GS 60.0, consensus 59.0, last 59.4): We expect the University of Michigan consumer sentiment index increased by 0.6pt to 60.0 in the preliminary April reading, reflecting somewhat strong signals from other consumer confidence measures. 03:00 PM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will speak at the Ohio Economic Forum, hosted by the University of Akron. Text and audience Q&A are expected. In her latest public appearance, on March 23rd, President Mester noted that the Fed is “going to need to do some 50 basis-point moves,” and argued that the Fed should “be more aggressive earlier rather than later.” 06:00 PM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will give a speech on the economy and the labor market at Rider University in New Jersey. Text and audience Q&A are expected. On Wednesday, President Harker cautioned that the Fed should act “in a way that isn’t so aggressive that we risk putting the economy in recession,” while noting that “the good news is that … [the economy is] very healthy.” Friday, April 15 US equity and bond markets will be closed in observance of Good Friday. 08:30 AM Empire State manufacturing survey, April (consensus +1.0, last -11.8) 09:15 AM Industrial production, March (GS +0.7%, consensus +0.4%, last +0.5%); Manufacturing production, March (GS +0.6%, consensus +0.5%, last +1.2%); Capacity utilization, March (GS 78.0%, consensus 77.8%, last 77.6%): We estimate industrial production rose by 0.8% in March, with strong auto production offsetting weaker natural gas. We estimate capacity utilization increased by 0.4pp to 78.0%. Source: DB, BofA, Goldman Tyler Durden Mon, 04/11/2022 - 09:52.....»»

Category: smallbizSource: nytApr 11th, 2022

Key Events This Busy, Holiday-Shortened Week: ECB Hawkish Surpise, Schorching CPI And Earnings Season Starts

Key Events This Busy, Holiday-Shortened Week: ECB Hawkish Surpise, Schorching CPI And Earnings Season Starts After a rather quiet start to the month of April, DB's Henry Rallen notes that it is an eventful calendar for markets this week ahead of Easter, with Thursday’s ECB meeting set to be one of the main highlights. At their last meeting in March, the ECB adopted a more hawkish position than had been expected by confirming a faster reduction in their asset purchases. That’s set to see APP purchases fall from €40bn in April to €30bn in May and then €20bn in June, with the possibility of ending purchases altogether in Q3. Since then however, inflation has accelerated by even more than the consensus expected, with the flash CPI estimate for the Euro Area at +7.5% in March, which is the highest since the formation of the single currency, and up from +5.9% in February. In terms of what to look for this time round, Deutsche Bank economists write in their preview that they’re not expecting much change to the ECB’s message. Instead, they think that when the new staff forecasts are available in June, they’ll announce that APP purchases will end in July, ahead of a liftoff in the policy rate in September, so an underlying direction of travel that’s becoming clear. Their view is that the risks are tiled towards a more hawkish, rather than a less hawkish tone though; furthermore, the bank's economists changed their call last week to expect a more aggressive ECB exit given the deteriorating inflation outlook, and now see the terminal rate reaching 2% by end-2023, which is 250bps higher than at present. Staying on that central bank theme, another big highlight this week will be the release of the US CPI data for March on Tuesday, which is the last one the Fed will get ahead of their meeting in early April. That comes amidst heightened speculation that the Fed could move by 50bps at the next meeting, and futures are pricing in an 88% chance of a 50bps move. Speaking of the actual print, DB's economists are expecting that the monthly gain in headline CPI of +1.3% will push the year-on-year rate up to +8.6%, which hasn’t been seen since 1981. That said, they think that March is likely to be the peak in the year-on-year rates for both headline and core, since the base effects from last year’s surge in used car prices will begin rolling off in the April data. Finally, and also this week, we’ll start to see the Q1 earnings season get going, with releases from a number of US financials, among others. They include JPMorgan Chase and BlackRock (both on Wednesday), ahead of reports from Citigroup, Morgan Stanley, Goldman Sachs and Wells Fargo (on Thursday). But overall, it’s still a fairly quiet on the earnings front with just 15 companies in the S&P 500 reporting, and it’ll only really ramp up the following week with 68 of the index reporting, and then 181 in the week after that. While some strategists point to continued solid sequential earnings growth in Q1, and look for slightly above average beats, skeptics have emerged who warn that Q1 may be as good as it gets for growth (more in our preview to follow shortly). Here is a day-by-day calendar of events Monday April 11 Data: China March CPI and PPI, Japan March machine tool orders, UK February monthly GDP, industrial, manufacturing production, index of services, trade balance, construction output Central banks: Fed's Bostic, Waller, Bowman and Evans speak, BoJ's Governor Kuroda speaks Other: EU foreign ministers meet Tuesday April 12 Data: US March CPI, monthly budget statement, NFIB small business optimism, Japan March PPI, bank lending, UK March jobless claims change, February unemployment rate, weekly earnings, France February trade balance, Germany and Eurozone April ZEW survey Central banks: Fed's Brainard and Barkin speak Earnings: Saudi Aramco, Asos Wednesday April 13 Data: US March PPI, China March trade balance, Japan March money stock, February core machine orders, UK March CPI, RPI, February house price index, Italy February industrial production Central banks: BoC rate decision Earnings: JPMorgan, BlackRock, Delta Air Lines, Tesco Thursday April 14 Data: US April University of Michigan sentiment, March retail sales, import and export price indices, February business inventories, initial jobless claims, Canada February manufacturing sales, wholesale trade sales Central banks: ECB rate decision, Fed's Mester and Harker speak Earnings: TSMC, Wells Fargo, Morgan Stanley, Goldman Sachs, Citi, UnitedHealth, Coinbase, Ericsson Friday April 15 Data: US April Empire manufacturing index, March industrial production, capacity utilisation, China March new home prices Central banks: ECB Survey of Professional Forecasters * * * Looking at just the US, Goldman writes that the key economic data releases this week are the CPI report on Tuesday and the retail sales report on Thursday. There are several speaking engagements from Fed officials this week, including remarks by Governor Brainard on Tuesday at an event hosted by the Wall Street Journal. Monday, April 11 There are no major economic data releases scheduled. 09:30 AM Atlanta Fed President Bostic (FOMC non-voter) and Fed Governors Bowman (FOMC voter) and Waller (FOMC voter) speak: Atlanta Fed President Raphael Bostic and Fed Governors Michelle Bowman and Christopher Waller will deliver remarks at a Fed Listens event in Nashville. On Thursday, President Bostic noted that the Fed should “move [its] policy closer to a neutral position,” but cautioned that “we need to do it in a measured way.” Last week, President Bostic said that his submission to the FOMC’s March Summary of Economic Projections included “six rate hikes for 2022 and two more for 2023.” He noted that “the elevated levels of uncertainty are front forward in my mind and have tempered my confidence that an extremely aggressive path is appropriate today.” Earlier this week, the March FOMC minutes noted that while “many” participants would have favored a 50bp hike in March, “a number” of those participants judged a 25bp hike to be more appropriate given the uncertainty related to the Russian invasion of Ukraine. We expect the FOMC to hike by 50bp at its May and June meetings. In her last public appearance, on February 21st, Governor Bowman noted that she favored taking “forceful action to help reduce inflation, bringing it back toward our 2% goal, while keeping the economy on track.” On March 18th, Governor Waller said that “the data is basically screaming at us to go [with] 50 [basis-point hikes] but the geopolitical events were telling you to go forward with caution.” Later, on March 24th, Governor Waller noted that “at a later date, certainly not anytime soon, the FOMC may start to consider sales of [mortgage-backed securities].” The March minutes have since revealed that FOMC participants will likely support peak runoff caps of $60bn per month for Treasury securities and $35bn for mortgage-backed securities—for a total of $95bn per month and roughly double the pace of last cycle’s runoff. Participants also “generally agreed” that “the caps could be phased in over a period of three months or modestly longer” and that it would be appropriate to consider sales of MBS “after balance sheet runoff was well under way.” We continue to expect the FOMC to announce the start of balance-sheet normalization at its May meeting. 12:40 PM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Fed President Charles Evans will discuss the economy and monetary policy at the Detroit Economic Club. Audience and media Q&A are expected. On Friday, President Evans noted that he was “optimistic that we can get to neutral, look around, and find that we’re not necessarily that far from where we need to go.” On March 24th, President Evans noted that he “would be comfortable with … each meeting increasing [the federal funds rate] by a quarter-point,” but that “maybe a 50 [basis-point hike] helps.” Tuesday, April 12 06:00 AM NFIB small business optimism, March (consensus 95.0, last 95.7) 08:30 AM CPI (mom), March (GS +1.32%, consensus +1.2%, last +0.8%); Core CPI (mom), March (GS +0.47%, consensus +0.5%, last +0.5%) CPI (yoy), March (GS +8.60%, consensus +8.4%, last +7.9%); Core CPI (yoy), March (GS +6.59%, consensus +6.6%, last +6.4%): We estimate a 0.47% increase in March core CPI (mom sa), which would boost the year-on-year rate by 0.2pp to 6.6%. Our forecast reflects a decline in used car prices from elevated levels, but Ukraine-related increases for new cars and auto parts. We also expect a post-Omicron increase in hotel lodging and airline prices, as well as additional wage-price pass-through in services categories like recreation and household operations. We estimate rent increased by 0.58% and OER increased by 0.43%, reflecting a boost to the former from rebounding downtown rents and a drag on the latter from imputed utilities. We also assume another month of strength for health and car insurance rates, with the latter boosted by a rebound in accidents and higher vehicle replacement costs. We estimate a 1.32% monthly increase in headline CPI, reflecting a sharp rise in energy prices as well as higher grocery and restaurant prices. 12:10 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will discuss the economic outlook during an event hosted by the Wall Street Journal. Moderated Q&A is expected. On Tuesday, Governor Brainard stressed that “currently, inflation is much too high and is subject to upside risks,” and noted that the Fed is “prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.” 06:45 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will speak at an event hosted by the Money Marketeers of New York University. Text and audience and media Q&A are expected. On Wednesday, President Barkin noted that the Fed has “moved at a 50 basis-point clip in the past, [and] could [do so] again.” Last week, President Barkin said that “there is a real chance” that the Fed would need to take the federal funds rate above its estimated neutral level in order to bring down inflation. Wednesday, April 13 PPI ex-food and energy, March (GS +0.6%, consensus +0.5%, last +0.2%); PPI ex-food, energy, and trade, March (GS +0.6%, consensus +0.5%, last +0.2%): We estimate a 0.6% increase for PPI ex-food and energy and PPI ex-food and energy, and trade, reflecting a continued boost from supply chain bottlenecks, labor shortages, and commodity prices. We estimate that headline PPI increased by 1.2% in March. Thursday, April 14 08:30 AM Retail sales, March (GS flat, consensus +0.6%, last +0.3%); Retail sales ex-auto, March (GS +1.0%, consensus +0.8%, last +0.2%); Retail sales ex-auto & gas, March (GS flat, consensus +0.2%, last -0.4%); Core retail sales, March (GS -0.3%, consensus flat, last -1.2%): We estimate a 0.3% decline in March core retail sales (ex-autos, gasoline, and building materials; mom sa). The elevated level of retail sales suggest a high seasonal hurdle for additional gains during the busy spring shopping season, and we believe higher gasoline prices and the phasing-out of the child tax credit are weighing on discretionary spending among lower-income consumers. On the positive side, we expect a further rise in restaurant spending as public health normalized, and we expect a boost in the general merchandise category from higher nominal fuel sales. We estimate a flat reading for headline retail sales, reflecting lower auto sales but a spike in gasoline prices. 08:30 AM Import price index, March (consensus +2.3%, last +1.4%): Export price index, March (consensus +2.2%, last +3.0%) 08:30 AM Initial jobless claims, week ended April 9 (GS 166k, consensus 175k, last 166k); Continuing jobless claims, week ended April 2 (consensus 1,500k, last 1,523k): We estimate initial jobless claims were unchanged at 166k in the week ended April 9. 10:00 AM University of Michigan consumer sentiment, April preliminary (GS 60.0, consensus 59.0, last 59.4): We expect the University of Michigan consumer sentiment index increased by 0.6pt to 60.0 in the preliminary April reading, reflecting somewhat strong signals from other consumer confidence measures. 03:00 PM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will speak at the Ohio Economic Forum, hosted by the University of Akron. Text and audience Q&A are expected. In her latest public appearance, on March 23rd, President Mester noted that the Fed is “going to need to do some 50 basis-point moves,” and argued that the Fed should “be more aggressive earlier rather than later.” 06:00 PM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will give a speech on the economy and the labor market at Rider University in New Jersey. Text and audience Q&A are expected. On Wednesday, President Harker cautioned that the Fed should act “in a way that isn’t so aggressive that we risk putting the economy in recession,” while noting that “the good news is that … [the economy is] very healthy.” Friday, April 15 US equity and bond markets will be closed in observance of Good Friday. 08:30 AM Empire State manufacturing survey, April (consensus +1.0, last -11.8) 09:15 AM Industrial production, March (GS +0.7%, consensus +0.4%, last +0.5%); Manufacturing production, March (GS +0.6%, consensus +0.5%, last +1.2%); Capacity utilization, March (GS 78.0%, consensus 77.8%, last 77.6%): We estimate industrial production rose by 0.8% in March, with strong auto production offsetting weaker natural gas. We estimate capacity utilization increased by 0.4pp to 78.0%. Source: DB, BofA, Goldman Tyler Durden Mon, 04/11/2022 - 09:52.....»»

Category: worldSource: nytApr 11th, 2022

The Necro-Neologism Of Lethal Legal Experts

The Necro-Neologism Of Lethal Legal Experts Authored by Laurie Calhoun via The Libertarian Institute, The power of language is magical to behold. Through the mere pronouncement of words, people can be persuaded to do what they would never have thought to do, left to their own devices. The playbook with the most success in this regard is that of war. When people are “informed” that they and their families are in mortal danger, they can and often will acquiesce to any and all policies which government authorities claim to be necessary in order to protect them. Young people can be coaxed into killing complete strangers who never did anything personally to them. Citizens can be brainwashed to believe that suitably labeled persons can and indeed must be denied any and all human rights. When the stakes are claimed to be life and death, even apparently intelligent people can be goaded to accept that the mere possession of a divergent opinion is evil, and the expression of dissent a crime. The use of military weapons to execute obviously innocent, entirely innocuous civilians, including children, suddenly becomes permissible, so long as the victims have been labeled collateral damage. All any of this takes is to identify “the enemy” as evil. In centuries past, “the laws of war” were said to require the humane treatment of enemy soldiers. They were diagnosed as suffering from “invincible ignorance,” misled and mistaken about the dispute said to necessitate recourse to war, but still acknowledged as persons capable of being courageous combatants who found themselves through historical fortuity on the wrong side. An enemy soldier was to be provided with the opportunity to lay down his weapon and surrender in order to save his own life. Disarmed or incapacitated soldiers were not to be executed by their captors, for they had already been neutralized and posed no more danger than unarmed civilians. Prisoners of war were to be treated as human beings, and when they were tortured or summarily executed, this constituted a war crime. Such “laws of war,” which form the basis of international agreements, including the Geneva Conventions, have needless to say often been flouted, but, in theory, they were to be upheld by civilized people. After the terrorist attacks of September 11, 2001, political leaders and government officials proclaimed that “everything changed.” The Bush administration legal team deployed linguistic innovation to issue in an entirely new era of warfare, wherein the “laws of war” would still be said to obtain, but they would be inapplicable to entire classes of human beings. Jihadist soldiers for radical Islamist causes were labeled unlawful enemy combatants, whose “unlawful” status was said to imply that they were protected by neither international norms such as the Geneva Conventions nor the laws of civil society. Under this pretext, terrorist suspects were tortured while held captive at prisons in Guantánamo Bay, Abu Ghraib and Baghram, in addition to many black sites around the world. Ever keen to cover their tracks, the CIA (Central Intelligence Agency) also flatly denied that they ever tortured anyone, by redefining as enhanced interrogation techniques the abusive practices inflicted on hundreds, if not thousands, of men in an effort to extract from them actionable intelligence. And just in case any of this “logic” was called into question by pesky human rights advocates, Bush administration officials also derided the Geneva Conventions as “quaint.” Imminent vs. Immediate in the Global War on Terror The “peace candidate” Barack Obama was elected in 2008 on the promise to rein in the excesses of the Bush administration, including what Obama characterized as the “dumb” war on Iraq. The new president publicly denounced “enhanced interrogation techniques” as torture but then proceeded to take linguistic neologism to an entirely new level by not only redefining assassination as targeted killing but also labeling any suspect eliminated through the use of lethal drones as an Enemy Killed in Action (EKIA). The slaughtered “soldiers” were assumed to be guilty of possible complicity in future possible crimes, a preposterous position never fully grasped by Obama’s devotees, who somehow failed to recognize that the specific implement used to kill does not distinguish various types of homicide from one another, morally speaking. The extrajudicial execution of individual human beings in civil society is illegal, but the Obama administration effectively maintained that the targeting of suspicious persons and their associates in lands far away was perfectly permissible, so long as the victims were killed by missiles launched from drones, thereby rendering them “acts of war.” The entire drone program, whether within or far from areas of active hostilities (i.e., war zones), was portrayed by Obama and his administration as just another facet of “just war.” Blinded to the moral atrocity of this new lethal-centric approach to dealing with suspected enemies, whereby they would be executed rather than taken prisoner, Obama’s loyal supporters blithely embraced the propaganda according to which he was a smart warrior. After demonstrating his death creds to the satisfaction of hawks, by killing not only Osama bin Laden, but also U.S. citizen Anwar al-Awlaki, suspected of complicity in factional terrorism, Obama was reelected for a second term in 2012, despite having summarily executed thousands of men—mostly brown-skinned, unnamed, and unarmed—located in their own civil societies, far from any U.S. citizen, and in clear violation of the Geneva Conventions. The deft deployment of two simple words, immediate and imminent, played a key role in allowing Obama to get away with murder, even of U.S. citizens such as Anwar al-Awlaki and his sixteen-year-old son, Abdulrahman al-Awlaki. Guided by drone-killing czar John Brennan, Obama’s lawyers calmly explained in public addresses and official documents that suspects who posed imminent threats to the United States could be targeted by lethal drones because an imminent threat did not imply immediacy. In other words, they could be killed even when they were currently unarmed and living in their own civil society, surrounded by family members and friends, and even when the future crime of which they were vaguely suspected was merely hypothetical and therefore had no specific date. When targets were “nominated” for execution, the administration operated under the assumption that they were guilty unless specific information was brought forth to demonstrate their innocence. The victims themselves obviously could not do this, initially, because they were not informed that they were being targeted and, later, because they were dead. Meanwhile, local residents and journalists on the ground who knew these people’s names and dared to assert that the victims were not terrorists were either denounced as propagandists or cast as misguided persons hoodwinked by the rhetoric of jihadists. As the death toll mounted, outspoken critics in the vicinity of the missile strikes became progressively more terrified of being themselves eliminated for seeming to support terrorist groups. Their concerns were not unfounded, for they risked being affixed with the lethal label associate and added to hit lists for execution if they dared to question the drone warriors’ narrative. This oppressive climate needless to say served actively to suppress dissent from the U.S. government’s official story of what they had done, even among locals who witnessed the grisly scenes where entirely innocent community members were incinerated by missiles launched from drones. Imminent vs. Immediate in the Opioid Crisis Improbably enough, the very same two words, imminent and immediate, used by the Obama legal team to invert the presumption of innocence to a presumption of guilt in the case of terrorist suspects located abroad, proved to be deadly in an entirely different context during the twenty-first century as well. The causes of the sudden and shocking increase in the number of narcotics addicts and overdose deaths all over the United States are manifold, but a tidal wave of diversion was made possible by drug-dealer doctors and the notorious “pain clinics” where they plied their trade. Manufacturers produced and pharmacies dispensed billions of pills as demand multiplied in tandem with the creation of more and more new addicts, who could no longer function without narcotics. Purdue Pharma and the Sackler family are widely regarded as the prime movers of the opioid crisis, having undertaken a highly successful campaign to coax doctors into believing that their patented time-release prescription narcotic Oxycontin was nonaddictive and could be safely provided to patients even for moderate pain. This marketing feat was achieved by influencing key players at the FDA (Food and Drug Administration), who not only approved the medication but permitted it to be sold along with a package insert falsely suggesting that it was less prone to abuse than other narcotics. In its quest to sell as many pills as possible, the pharmaceutical industry repeatedly pivoted to neologize in lethal ways over the two decades following the launch of Oxycontin in 1996. When it emerged that the pills sometimes wore off before the twelve-hour time release period, marketers and sales representatives claimed that those patients were suffering from breakthrough pain, the remedy for which was (surprise!) to double their dose. The narcotics marketers indulged in flat-out sophistry when they insisted that patients who appeared to be addicted to their painkillers were in fact suffering from pseudoaddiction, the remedy for which was (surprise!) even higher doses of their drugs. As farcical as these arguments may seem in retrospect, with the benefit of hindsight and in the light of the overdose epidemic now running rampant, many doctors appear to have been persuaded to believe that their patients’ miserable condition was not indicative of addiction but a manifestation of their ongoing and unbearable pain, the solution to which was to ply them with yet more powerful narcotics. Pharma-coopted lawmakers were notified of the proliferating addiction problem early on but refused to stop the runaway train by demanding that the FDA cease playing along with Purdue’s insane pro-narcotics marketing campaign. Other companies needless to say contributed as well, through promulgating the “pain epidemic” propaganda so as to expand the market niche of such products, which had previously been reserved for terminally ill patients. Johnson & Johnson played a causal role in what became the opioid crisis by growing tons of poppies (in Tasmania) to meet the enormous increased industry need for raw opium, without which the billions of pills prescribed could not and would never have been produced. As the opioid crisis began to become recognized for what it was, the Drug Enforcement Administration (DEA) sought to issue “Immediate Suspension Orders” (ISOs) against the three major drug wholesale distributors to pharmacies, Cardinal Health, McKesson, and Amerisource Bergen. Through issuing such orders, Joe Rannazzisi, the deputy director of the Office of Diversion Control, hoped to halt the ongoing mass shipments of opioids to retailers such as CVS in cases where the sheer volume of prescriptions could not be explained by ordinary medical practice and so was a clear indication that widespread diversion of narcotics was underway. Rannazzisi ended up being hobbled by a team of corporate lawyers and lobbyists who managed to cobble together a new law in 2014 which, despite its beneficent-sounding name, “The Ensuring Patient Access and Effective Drug Enforcement Act” (HR4709), served to protect, above all, drug manufacturers and distributors. The Act rewrote the law already on the books through redefining the imminent danger required to issue an ISO to mean “a substantial likelihood of an immediate threat.” One of the new Act’s enthusiastic promoters, Linden Barber (a former DEA officer and lawyer who had left his government position to represent the drug distributors), persuasively explained on the floor of Congress that “having a clear legal standard is always better.” The measure passed unanimously, without a roll call vote, for the simple reason that it sounded like a policy to which no decent person could object. But rather than stemming the tide of the opioid crisis, the Act severely hampered the DEA’s ability to issue ISOs, for it was prohibitively difficult for officials to meet the newly stipulated legal standard of imminence as requiring immediacy. President Obama signed the Ensuring Patient Access and Effective Drug Enforcement Act of 2014 into law, and the marketing campaign used to promote the use of highly addictive time-release narcotics barreled ahead. The DEA’s sudden inability to call a halt to the shipment of tons of narcotics to retailers effectively guaranteed that the number of dependent persons would multiply, as potent prescription pills continued to be diverted for recreational uses and thereby create more addicts. But more addicts meant more overdoses, not only from the potent pills themselves, but also because the street supplies of heroin to which many users eventually turned were often cut with extremely dangerous fentanyl. Unfazed by the death tolls, which had already soared to many thousands by 2014, the pharmaceutical giants insisted that the sorry situation of addicts was no argument against helping patients genuinely in pain, who would in fact be wronged if their access to narcotics were curbed. The addicts dropping like flies were painted as solely responsible for their plight, despite ample evidence that many of the overdose victims began as legitimate pain patients, who became aware of their dependency only upon reaching the bottom of their amber vials. The Role of Obamacare in Propelling and Augmenting the Opioid Crisis “Everything changed” in the twenty-first century, not only with the war on terror, the rebranding of torture, and the normalization of assassination, but also in the pharma-friendly approach to healthcare ushered in by President Barack Obama. By pushing through his signature legislation, the Affordable Care Act (ACA) of 2010, which leftists were led to believe would create a system of socialized medicine (referred to by many as Obamacare), the president notoriously bowed to drug makers and the insurance industry, extending to those sectors the very form of crony corporate welfare already enjoyed by companies in the military industry. Obama’s collaboration with pharmaceutical and insurance company executives in crafting the ACA allowed them to secure advantageous pricing arrangements to ensure the maximization of their profits, while at the same time massively increasing the sheer volume of sales. The pharmaceutical industry was greatly enriched through the provision of virtually limitless free psychiatric medications to low-income patients through government programs such as Medicaid and Medicare, and to veterans through the VA (Veterans Administration). Mental health-based disability claims soared, and the sales of SSRIs (selective serotonin reuptake inhibitors), anti-anxiety, atypical anti-psychotic medications and other psychotropes, including narcotics, increased accordingly. The millions of new prescription medications dispensed to formerly uninsured Americans ended up being paid for by the middle class, who were mandated by law to sign up for Obamacare or else face a hefty tax penalty, should they decline to comply. Despite what may have been Obama’s initial good intention, to make healthcare available to uninsured persons, Obamacare ultimately made medical treatment in the United States prohibitively expensive for many middle class families, whose copays, premiums and deductibles increased dramatically. The new mandatory healthcare program skyrocketed the salaries of health industry executives while pricing drugs and procedures out of reach for many persons who had previously been able to afford them. Millions of people in the United States have filed medical bankruptcy in recent years. In cases where prescription narcotics addicts became uninsured because they lost their jobs, they turned to the streets for their needed drugs, given the impossibility of paying out of pocket for extraordinarily expensive prescription pills. Given the story of Obamacare, perhaps no one should be surprised that when the Obama administration finally took action to address the opioid epidemic, most of the allocated $1.1 billion was for the alternative medication of already existing addicts. The pharma-friendly approach prevailed once again, encouraging the sale of more and more drugs (such as Suboxone) to help addicts to wean themselves off their narcotics. Obama’s dilatory and pro-pill approach to the opioid crisis ultimately generated even more people who, in order to kick their narcotics habit, would need to avail themselves of further pharmaceutical means, effectively trading one drug for another. In other words, both the problem of opioid overprescription, facilitated through Obamacare by providing easy access to narcotics to formerly uninsured persons, and the measures implemented by the Obama administration in response to the overdose epidemic, served to increase pharmaceutical industry profits. The Death Connection Whether or not one wishes to connect any further dots in the cases of drone assassination and the opioid epidemic, it does seem worth pointing out that Obama’s own attorney general, Eric Holder (2009-2015), was a former legal counselor to Purdue Pharma, who in fact defended the company in a 2004 lawsuit alleging deceptive marketing of Oxycontin. This is noteworthy because it was none other than Eric Holder who, in an infamous White Paper and various public addresses, so adamantly defended the creative interpretation of imminence as not implying immediacy, the crucial linguistic maneuver used to defend and promote Obama’s drone killing spree. The normalization of assassination achieved by the Obama administration expanded the domain of what was said to be legitimate state killing by inverting the burden of proof on suspects while simultaneously claiming (illogically enough) that “areas outside active hostilities” were in fact war zones. Together, all of these linguistic tricks generated a veritable killing machine, opening up vast new market niches and dramatically increasing the profit potential for companies in the shockingly lucrative business of state-inflicted homicide. Not only weapons manufacturers but also logistics and analytics companies were able to reap hefty profits through eliminating as many people pegged as “terrorist suspects” as possible. The imminent vs. immediate dichotomy was inverted and redeployed, but in the opposite direction, by pharmaceutical company legal teams and collaborating lawmakers in 2014 to permit the promiscuous sale of narcotics to continue on despite the opioid overdose epidemic on display throughout the United States. The Ensuring Patient Access and Effective Drug Enforcement Act of 2014 ironically “ensured” only profits for drug companies, as millions of new addicts would be created during the second decade of the twenty-first century, accelerating and multiplying the domino effect of diversion and overdoses already ravaging communities all across the United States. It matters not that pharmaceutical company executives sought not to kill people but to sell pills. They aggressively pushed narcotics without regard for the likely future consequences of their drive for profit. Indeed, they persisted in pushing narcotics even as drug overdose deaths reached record levels. Under Obama, more than two thousand suspects outside areas of active hostilities were premeditatedly and intentionally incinerated by missiles launched from drones. The tally of overdose deaths in the United States exceeded 100K for the single year ending in April 2021. The long-range effects of the normalization of assassination, however, are likely to be more deadly than the opioid crisis, given that many other governments have followed suit in acquiring lethal drones for their own use, having been persuaded by the precedent set by the U.S. government that this form of state-inflicted homicide is perfectly permissible. In contrast, the promiscuous opioid prescription practices of doctors in the United States has been curtailed and was not emulated in the UK or in Europe, although the pharmaceutical giants do appear to have continued their morally dubious marketing practices in other countries abroad, especially in less-developed lands. As both the drone program and the opioid prescription debacle illustrate, when government agencies such as the Pentagon and the FDA have been captured by industry forces focused above all on maximizing profits, they will simply look the other way as the corpses pile up, denying responsibility for any and all “collateral damage.” This tendency of bureaucrats and corporate leaders to shirk responsibility for the negative consequences of their policies helps to explain the ease with which lawmakers are coopted by lobbyists from not only the military but also the pharmaceutical industry. The recent deployment of imminent and immediate by lethal legal “experts” serves to underscore why the censorship of language by government officials themselves is inherently dangerous, given that their policies in recent years have multiplied, not prevented, the deaths of human beings. In a representative democracy, the lawmakers promote the interests of the voters who elected them. What kind of government sacrifices the lives of human beings in order to maximize the profits of corporate leaders? Tyler Durden Fri, 04/01/2022 - 23:40.....»»

Category: blogSource: zerohedgeApr 2nd, 2022

Biden"s Massive SPR Release "Does Not Resolve" Upside Risks, Goldman Warns As It Hikes 2023 Oil Price Target To $115

Biden's Massive SPR Release "Does Not Resolve" Upside Risks, Goldman Warns As It Hikes 2023 Oil Price Target To $115 Update (16:00ET): The Biden administration confirmed a record large Strategic Petroleum Reserve release of 180 mb over the next six months to fight the "Putin price hike at the pump", with the potential for other countries to release 30 to 50 mb. As noted earlier,  while such a release will help trim prices in the short-term, increasing supply and commensurately reducing the amount of necessary price-induced demand destruction - the sole oil rebalancing mechanism currently available in a world devoid of inventory buffers and supply elasticity - it will lead to higher prices over the longer-term as the government's panicked, political intervention in the energy market which is obviously meant to avoid a Democrat wipeout in the midterms will discourage any rational investing in supply by US majors. Furthermore, a release of inventories is, only a temporary source of supply and in fact, as Goldman notes, lower prices in 2022 support oil demand while slowing the acceleration in shale production, leaving for now a deficit in 2023 with an eventual need to refill the SPR. As a result, in a note published late on Thursday, Goldman updates its oil supply, demand and price forecasts accordingly, in which the bank is increasing its already expected SPR release to match today’s announcement of 1.2 mb/d over six months, while delaying an expected ramp-up in Iran exports to 3Q22 given delays coming to an agreement and the lag in the required certification for exports to resume. Separately, Goldman's expectations of a 1 mb/d hit to Chinese demand due to lockdowns in 2Q remains unchanged, with OPEC+ expected to stick to its scheduled quota increases through 3Q22 consistent with today’s decision. Finally, the bank is also increasing the probability of a Moderate Russian export disruption scenario (to 50%), implying a slightly larger loss of supply in our weighted mean outcome. This leads Goldman to cut its 2H22 Brent price forecast from $135 to $125/bbl while also raising the 2023 Brent forecast from $110 to $115/bbl. In particular, the bank says it doesn't see "today’s decision as resolving oil’s structural deficit, now years in the making." This is consistent with the resilience in long-dated prices today, with Dec-23 Brent remaining the bank's preferred long-term bullish oil trade (with EU Gasoil cracks the preferred short-term oil trade). Worse, according to Goldman's commodity team, "upsides risks have not been resolved with today’s release" because: Potential logistical bottlenecks to such an unprecedentedly large and long US SPR discharge could reduce its flow rate, with potential congestion on the Gulf Coast in getting to refiners or export terminals. We see risks of a slower shale growth than the 1.1 mb/d we are expecting in 2023, due to the combined effects of rising cost inflation and binding service bottlenecks. The US policy use of an SPR release, a potential deal with Iran, extreme price volatility and the growing risk of a recession next year, are all exacerbating the uncertainty faced by producers, reducing their incentive to invest more. The bank concludes that since fundamental uncertainty is set to remain extremely high in coming weeks and months despite Biden's action, Goldman reiterates "our conviction for higher oil prices." (full note available to pro subs in the usual place) * * * Watch the President deliver remarks on "responding to Putin's Price Hike" at 1330ET: *  *  * Update (1100ET): The White House has released its fact sheet on how the Biden administration will respond to what they are calling "Putin's Price Hike" by releasing 1 million barrels/day from the Strategic Petroleum Reserve... After consultation with allies and partners, the President will announce the largest release of oil reserves in history, putting one million additional barrels on the market per day on average – every day – for the next six months. The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time. This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up. Which just happens to be when the midterms are held. This move will reduce the SPR to its lowest absolute level; in 40 years and its lowest level all-time in terms of days-supply... The goal of Biden’s plan is to create a bridge for U.S. supply until the fall, when domestic production is anticipated to increase, the people said. But OPEC+’s refusal to increase its own production may dampen any effect of the U.S. release. “It is hard to overstate the scale of this intervention if it bears out,” Kevin Book, managing director of ClearView Energy Partners, said in a research note. “It would be the largest draw-down volume announced in the 45-year history of the SPR by a factor of 3.6x.” But, as Goldman warned below, such a release would therefore not resolve the structural supply deficit, years in the making... and the need for restocking will be a big demand pressure on prices A large release from America “would reduce the amount of necessary price-induced demand destruction,” Goldman Sachs Group Inc. analyst Damien Courvalin wrote in a note to clients. “This would remain, however, a release of oil inventories, not a persistent source of supply for coming years.” Additionally, Saad Rahim, Trafigura Group's Chief Economist told Bloomberg TV, that the potential SPR release will actually discourage future oil output and could drive forward prices higher, and added that the US is only capable of delivering 400,000 to 500,000 barrels a day of oil from the strategic reserve. And the modest drop in WTI prices tells you all you need to know about the market's expectations of the success of this intervention... “Energy traders see any proposal of tapping strategic reserves as a short-term fix,” said Ed Moya, senior market analyst at Oanda.  Which will barely impact gas prices for the average American... The WTI crude curve has dropped at the short-end on the immediate supply (but as Goldman warns, longer-dated crude prices are actually rising)... And just to throw some more interventionary gas on the fire, Biden urges Congress to make companies pay fees on wells from their leases that they haven’t used in years and on acres of public lands that they are hoarding without producing.  Which will also fail to achieve anything substantive because if the wells were economic, they would be running them and so companies will uncap wells only to keep them flowing at a trickle to avoid fines. Never one to miss a greening opportunity - and desperate to keep the progressive left happy, Biden threw a bone to AOC and her climate crazed crowd as he ramps up fossil fuel supply by issuing a directive, authorizing the use of the Defense Production Act to secure American production of critical materials to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future. *  *  * Full statement below (link): FACT SHEET: President Biden’s Plan to Respond to Putin’s Price Hike at the Pump Americans face rising prices at the pump because of Putin’s Price Hike.  Since Putin accelerated his military build-up around Ukraine, gas prices have increased by nearly a dollar per gallon.  Because of Putin’s war of choice, less oil is getting to market, and the reduction in supply is raising prices at the pump for Americans.  President Biden is committed to doing everything in his power to help American families who are paying more out of pocket as a result.  That is why today, President Biden will announce a two-part plan to ease the pain that families are feeling by increasing the supply of oil starting immediately and achieving lasting American energy independence that reduces demand for oil and bolsters our clean energy economy.  Immediately Increasing Supply At the start of this year, gas was about $3.30 a gallon.  Today, it’s over $4.20, an increase of nearly $1.  And now, a significant amount of Russian oil is not making it to market.  The President banned the import of Russian oil – which Republicans and Democrats in Congress called for and supported.  It was the right thing to do.  But, as the President said, Russian oil coming off the global market would come with a cost, and Americans are seeing that at the pump. The first part of the President’s plan is to immediately increase supply by doing everything we can to encourage domestic production now and through a historic release from the Strategic Petroleum Reserve to serve as a bridge to greater supply in the months ahead. Increasing Domestic Production The fact is that there is nothing standing in the way of domestic oil production. The United States is already approaching record levels of oil and natural gas production. There are oil companies that are doing the right thing and committing to ramp up production now.  Right now, domestic production is expected to increase by 1 million barrels per day this year and nearly 700,000 barrels per day next year. Still, too many companies aren’t doing their part and are choosing to make extraordinary profits and without making additional investment to help with supply.  One CEO even acknowledged that, even if the price goes to $200 a barrel, they’re not going to step up production.  Right now, the oil and gas industry is sitting on more than 12 million acres of non-producing Federal land with 9,000 unused but already-approved permits for production. Today, President Biden is calling on Congress to make companies pay fees on wells from their leases that they haven’t used in years and on acres of public lands that they are hoarding without producing. Companies that are producing from their leased acres and existing wells will not face higher fees. But companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a fee for each idled well and unused acre. Historic Release from the Strategic Petroleum Reserve as a Bridge Through the Crisis After consultation with allies and partners, the President will announce the largest release of oil reserves in history, putting one million additional barrels on the market per day on average – every day – for the next six months.  The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time. This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.  The Department of Energy will use the revenue from the release to restock the Strategic Petroleum Reserve in future years. This will provide a signal of future demand and help encourage domestic production today, and will ensure the continued readiness of the Strategic Petroleum Reserve to respond to future emergencies.   President Biden is coordinating this action with allies and partners around the world, and other countries are expected to join in this action, bringing the total release to well over an average 1 million barrels per day. Achieving Real American Energy Independence The United States is the largest oil producer in the world and is a net energy exporter.  Despite that, the actions of a dictator half a world away can still impact American families’ pocketbooks. The President will announce his commitment to achieving real energy independence – which centers on reducing our dependence on oil altogether. The President will call on Congress to pass his plan to speed the transition to clean energy that is made in America.  His plan will help ensure that America creates millions of good-paying union jobs in clean, cutting-edge industries for generations to come. And it will save American families money in theimmediate future – including more than $950 a year in gas savings from taking advantage of electric vehicles, and an additional $500 a year from using clean electricity like solar and heat pumps to power their homes.    And, the President will issue a directive, authorizing the use of the Defense Production Act to secure American production of critical materials to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future.  Specifically, the DPA will be authorized to support the production and processing of minerals and materials used for large capacity batteries–such as lithium, nickel, cobalt, graphite, and manganese—and the Department of Defense will implement this authority using strong environmental, labor, community, and tribal consultation standards. The sectors supported by these large capacity batteries—transportation and the power sector—account for more than half of our nation’s carbon emissions.  The President is also reviewing potential further uses of DPA – in addition to minerals and materials – to secure safer, cleaner, and more resilient energy for America. This week alone, President Biden announced historic efforts to increase energy efficiency and lower costs for consumers.  The Department of Energy opened applications for more than $3 billion in new Bipartisan Infrastructure Law funding—ten times the historical funding levels of the Weatherization Assistance Program—for energy efficiency and electrification upgrades in thousands of homes that will save families hundreds of dollars on utility bills.  The Administration also advanced smart standards that will lower consumer costs, including a roadmap of 100 actions this year that will save families $100 annually through more efficient home appliances and equipment, as well as new fuel economy standards for cars and trucks to save drivers money at the pump.  And the Administration is seeking additional opportunities to ramp up the deployment of heat pumps to displace fuel burned in buildings, as well as programs to drive efficiency, electrification, and use of clean fuels in the industrial sector. *  *  * Update (0800ET): Oil prices have stabilized, down around 5% after last night's leaked rumors of the Biden admin's latest plan to save the world - and his approval rating - from soaring gas prices by releasing a gargantuan amount of reserv7es from the SPR. However, as we noted overnight, this is not a solution that provides anything other than a short-term fillip, and as Goldman's Damien Courvalin confirms, this SPR release would remain, however, a release of oil inventories, not a persistent source of supply for coming years. Such a release would therefore not resolve the structural supply deficit, years in the making. Worse still, Courvalin warns that in fact, lower prices in 2022 would support oil demand while slowing the acceleration in shale production, leaving for now a deficit in 2023 as well as the likely requirement to refill the SPR. The net supply increase would be more modest, since we had already assumed a 0.3/0.6/0.9 mb/d SPR release under our Mild/Moderate/Severe Russian export scenarios. In fact, the bank sees three potential bullish (higher oil price) risks: (1) potential logistical bottlenecks to such an unprecedentedly large and long US SPR discharge, reducing its flow. In particular, congestion on the Gulf Coast could crowd out shale's expected production growth this year. (2) We assume that OPEC+ would still accelerate its planned quota increase if Russian and Kazakhstan exports fall by 2 mb/d, which may not occur in the face of an SPR release. (3) We now see increasingly symmetrical probabilities to our Mild and Moderate disruption scenarios (of 1 and 2 mb/d respectively), implying a larger loss of supply in our weighted mean outcome than previously. Adjusting for these probabilities would, for example, bring our 2H22 forecast back to $125/bbl. And looking forward to 2023, the bank says on balance would point to prices $5/bbl above our current $110/bbl forecast, reflecting higher demand and lower shale supply exiting 2022, as well as the likely requirement to restock the SPR (we assume this is done proportionally over 2023-2025, similar to last year's release). Goldman has refrained  from adjusting any of oits crude price forecasts until details of the SPR release are reportedly revealed this afternoon at 1330ET, but the bank notes that additional measures could be announced, with a potential increase to the amount of ethanol blended into gasoline, a measure that in turn would exacerbate the already very tight outlook for grain markets. There will also be an IEA organized emergency meeting on Friday at 8:00am ET, for a potential global coordination of such a large reserve release. Additionally, OPEC+ has agreed on a 432k b/d output hike in May - as expected. Official Communiqué: Following the conclusion of the 27th OPEC and non-OPEC Ministerial Meeting, held via videoconference on March 31, it was noted that continuing oil market fundamentals and the consensus on the outlook pointed to a well-balanced market, and that current volatility is not caused by fundamentals, but by ongoing geopolitical developments. The OPEC and participating non-OPEC oil-producing countries decided to: Reaffirm the decision of the 10th OPEC and non-OPEC Ministerial meeting on 12th April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial meeting on the 18th July 2021. Reconfirm the baseline adjustment, the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC Ministerial Meeting and the decision to adjust upward the monthly overall production by 0.432 mb/d for the month of May 2022, as per the attached schedule. Reiterate the critical importance of adhering to full conformity and to the compensation mechanism taking advantage of the extension of the compensation period until the end of June 2022. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting. Hold the 28th OPEC and non-OPEC Ministerial Meeting on 5 May 2022. Delegates say the meeting wrapped up in 12 minutes, beating last month’s record for brevity. The opec plus meeting just ended it lasted 12 mins. No change in policy. #OOTT — Amena Bakr (@Amena__Bakr) March 31, 2022 That won't please Biden at all. *  *  * As we detailed last night, for those keeping score, we believe this is the third time in the last month that the Biden administration has tried to jawbone crude oil prices lower with an ever-increasing 'threat' of releases from the Strategic Petroleum Reserve. This time is different though as Bloomberg reports that, according to people familiar with the matter, the Biden administration is weighing a plan to release roughly one million barrels of oil a day for several months. The total release may be as much as 180 million barrels, the people said, which is quite a step up from the 30mm barrel release 'mulled' on March 25th (yes 5 days ago). The instant reaction from the algos was to sell, knocking WTI down around 4%... However... as much as we want lower gas prices, these actions by the administration are bordering on the insane. Of course, just like last year's SPR release, which actually sent oil prices higher as the strategy backfired spectacularly, another shot of supplies from the reserve would probably be futile. To further illustrate this point, the chart below shows that a release of 180M barrels from the reserve (which is supposed to be reserved for emergencies) would take the Strategic Petroleum Reserve to its lowest since 1984...and so far has done absolutely nothing to slow the surge in prices... In fact, this time around, it's possible - even likely - that the backlash could be even more punishing, since, when adjusted for the present level of implied demand, SPR levels are already at their lowest levels since 2002, with just 33 days of supply. But like the old saying goes: if at first you don't succeed, then try, try again. In all likelihood, President Biden and his team probably aren't all that concerned with the short-term market impact, since political decisions like these are all about optics anyway. Of course, Einstein seems to have been right: "insanity is doing the same thing over and over again and expecting different results." And when this SPR release (should it ever actually happen) fails to do much of anything to drive prices lower, how much longer until the administration resorts to the next logical steps, being 1) gas stimmies (like our European allies) before 2) price controls? Bear in mind that OPEC+ is still shunning any demands from Biden to increase production 'for the sake of global democracy....or his approval ratings or some such...' and the cartel is widely expected to ratify a production increase of 432,000 barrels a day for May. Simply put, as old saying goes, the cure for high oil (gas) prices, is high oil (gas prices), and notably, there is some evidence of demand destruction starting to happen as gas prices soar to record highs. And as we noted earlier today, the decline in implied gasoline demand is fairly concrete proof that record high prices are dampening consumption across the country. On a four-week moving average basis, demand appeared to have stalled out around 8.8 million barrels a day as levels fell behind seasonal trends. Now, it appears to have fully turned around, falling 61,000 barrels a day week on week. However, of course there is government intervention to consider, consumer subsidies may actually worsen the situation by limiting demand destruction, with California, France, Brazil and Mexico being the latest to enact policies to cut prices at the pump. We give the last words to @RufusXavierSar2 who succinctly summed up the real farce of all this desperation... That's great until the SPR is empty and we have a real oil shock — RufusXavierSarsaparilla (@RufusXavierSar2) March 31, 2022 And don't expect any short-term help from this modest drop in oil... Sadly for Biden's approval rating (and drivers across the country), the recent resurgence in crude prices suggest pump prices will soon be on the rise again. Tyler Durden Thu, 03/31/2022 - 13:30.....»»

Category: blogSource: zerohedgeMar 31st, 2022