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Wisconsin Center convention bookings continue to rebound heading into 2022

The year before Covid-19 was the best-ever booking year for the Wisconsin Center. The city's convention center hosted 56 events in 2019 and was preparing for another strong year in 2020......»»

Category: topSource: bizjournalsNov 25th, 2021

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases As expected over the weekend, and as we first noted shortly after electronic markets reopened for trading on Sunday, S&P futures have maintained their overnight gains and have rebounded 0.7% while Nasdaq contracts jumped as much as 1.3% after risk sentiment stabilized following Friday’s carnage and as investors settled in for a few weeks of uncertainty on whether the Omicron variant would derail economic recoveries and the tightening plans of some central banks. Japan led declines in the Asian equity session (which was catching down to Friday's US losses) after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.  Oil prices bounced $3 a barrel to recoup some of Friday's rout, while the safe haven yen, Swiss franc and 10Y Treasury took a breather after its run higher. Moderna shares jumped as much as 12% in pre-market trading after Chief Medical Officer Paul Burton said he suspects the new omicron coronavirus variant may elude current vaccines, and if so, a reformulated shot could be available early in the new year. Which he would obviously say as his company makes money from making vaccines, even if they are not very efficient. Here are some of the other notable premarket movers today: BioNTech (BNTX US) advanced 5% after it said it’s starting with the first steps of developing a new adapted vaccine, according to statement sent by text. Merck & Co. (MRK US) declined 1.6% after it was downgraded to neutral from buy at Citi, which also opens a negative catalyst watch, with “high probability” the drugmaker will abandon development of its HIV treatment. A selection of small biotechs rise again in U.S. premarket trading amid discussion of the companies in StockTwits and after these names outperformed during Friday’s market rout. Palatin Tech (PTN US) +37%, Biofrontera (BFRI US) +22%, 180 Life Sciences (ATNF US) +19%. Bonds gave back some of their gains, with Treasury futures were down 11 ticks. Like other safe havens, the market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks. Needless to say, Omicron is all anyone can talk about: on one hand, authorities have already orchestrated a lot of global panic: Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, even though the South African doctor who discovered the strain and treated cases said symptoms of Omicron were so far mild. The new variant of concern was found as far afield as Canada and Australia as more countries such as Japan imposed travel restriction to try to seal themselves off. Summarizing the fearmongering dynamic observed, overnight South African health experts - including those who discovered the Omicron variant, said it appears to cause mild symptoms, while the Chinese lapdog organization, WHO, said the variant’s risk is “extremely high”. Investors are trying to work out if the omicron flareup will a relatively brief scare that markets rebound from, or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: South African scientists suggested it’s presenting with mild symptoms so far, though it appears to be more transmissible, but the World Health Organization warned it could fuel future surges of Covid-19 with severe consequences. "There is a lot we don't know about Omicron, but markets have been forced to reassess the global growth outlook until we know more," said Rodrigo Catril, a market strategist at NAB. "Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery." "Despite the irresistible pull of buying-the-dip on tenuous early information on omicron, we are just one negative omicron headline away from going back to where we started,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “Expect plenty of headline-driven whipsaw price action this week.” The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday. “We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market.” European stocks rallied their worst drop in more than a year on Friday, with travel and energy stocks leading the advance. The Stoxx 600 rose 0.9% while FTSE 100 futures gain more than 1%, aided by a report that Reliance may bid for BT Group which jumped as much as 9.5% following a report that India’s Reliance Industries may offer to buy U.K. phone company, though it pared the gain after Reliance denied it’s considering a bid. European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant Japanese shares lead Asian indexes lower after Premier Kishida announces entry ban of all new foreign visitors. Hong Kong’s benchmark Hang Seng Index closed down 0.9% at the lowest level since October 2020, led by Galaxy Entertainment and Meituan. The index followed regional peers lower amid worries about the new Covid variant Omicron. Amid the big movers, Galaxy Entertainment was down 5.4% after police arrested Macau’s junket king, while Meituan falls 7.1% after reporting earnings. In FX, currency markets are stabilizing as the week kicks off yet investors are betting on the possibility of further volatility. The South African rand climbed against the greenback though most emerging-market peers declined along with developing-nation stocks. Turkey’s lira slumped more than 2% after a report at the weekend that President Recep Tayyip Erdogan ordered a probe into foreign currency trades. The Swiss franc, euro and yen retreat while loonie and Aussie top G-10 leaderboard after WTI crude futures rally more than 4%. The Bloomberg Dollar Spot Index hovered after Friday’s drop, and the greenback traded mixed against its Group-of-10 peers; commodity currencies led gains. The euro slipped back below $1.13 and Bunds sold off, yet outperformed Treasuries. The pound was steady against the dollar and rallied against the euro. Australian sovereign bonds pared an opening jump as Treasuries trimmed Friday’s spike amid continuing uncertainty over the fallout from the omicron variant. The Aussie rallied with oil and iron ore. The yen erased an earlier decline as a government announcement on planned border closures starting Tuesday spurred a drop in local equities. The rand strengthens as South African health experts call omicron variant “mild.” In rates, Treasuries were cheaper by 4bp-7bp across the curve in belly-led losses, reversing a portion of Friday’s sharp safe-haven rally as potential economic impact of omicron coronavirus strain continues to be assessed. The Treasury curve bear- steepened and the benchmark 10-year Treasury yield jumped as much as 7 basis points to 1.54%; that unwound some of Friday’s 16 basis-point plunge -- the steepest since March 2020.  Focal points include month-end on Tuesday, November jobs report Friday, and Fed Chair Powell is scheduled to speak Monday afternoon. Treasuries broadly steady since yields gapped higher when Asia session began, leaving 10-year around 1.54%, cheaper by almost 7bp on the day; front-end outperformance steepens 2s10s by ~3bp. Long-end may draw support from potential for month-end buying; Bloomberg Treasury index rebalancing was projected to extend duration by 0.11yr as of Nov. 22 In commodities, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday. "The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December," wrote analyst at ANZ in a note. "Such headwinds are the reason it's been only gradually raising output in recent months, despite demand rebounding strongly." Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24. Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce . SGX iron ore rises almost 8% to recoup Friday’s losses. Bitcoin rallied after falling below $54,000 on Friday. Looking at today's calendar, we get October pending home sales, and November Dallas Fed manufacturing activity. We also get a bunch of Fed speakers including Williams, Powell making remarks at the New York Fed innovation event, Fed’s Hassan moderating a panel and Fed’s Bowman discussing central bank and indigenous economies. Market Snapshot S&P 500 futures up 0.6% to 4,625.00 MXAP down 0.9% to 191.79 MXAPJ down 0.4% to 625.06 Nikkei down 1.6% to 28,283.92 Topix down 1.8% to 1,948.48 Hang Seng Index down 0.9% to 23,852.24 Shanghai Composite little changed at 3,562.70 Sensex up 0.4% to 57,307.46 Australia S&P/ASX 200 down 0.5% to 7,239.82 Kospi down 0.9% to 2,909.32 STOXX Europe 600 up 0.7% to 467.47 German 10Y yield little changed at -0.31% Euro down 0.3% to $1.1283 Brent Futures up 3.8% to $75.49/bbl Gold spot up 0.3% to $1,797.11 U.S. Dollar Index up 0.13% to 96.22 Top Overnight News from Bloomberg The omicron variant of Covid-19, first identified in South Africa, has been detected in locations from Australia to the U.K. and Canada, showing the difficulties of curtailing new strains While health experts in South Africa, where omicron was first detected, said it appeared to cause only mild symptoms, the Geneva-based WHO assessed the variant’s risk as “extremely high” and called on member states to test widely. Understanding the new strain will take several days or weeks, the agency said All travelers arriving in the U.K. starting at 4 a.m. on Nov. 30 must take a PCR coronavirus test on or before the second day of their stay and isolate until they receive a negative result. Face coverings will again be mandatory in shops and other indoor settings and on public transport. Booster shots may also be approved for more age groups within days, according to Health Secretary Sajid Javid The economic effects of the successive waves of the Covid pandemic have been less and less damaging, Bank of France Governor Francois Villeroy de Galhau says Italian bonds advance for a third day, as investors shrug off new coronavirus developments over the weekend and stock futures advance, while bunds are little changed ahead of German inflation numbers and a raft of ECB speakers including President Christine Lagarde A European Commission sentiment index fell to 117.5 in November from 118.6 the previous month, data released Monday showed Spanish inflation accelerated to the fastest in nearly three decades in November on rising food prices, underscoring the lingering consequences of supply-chain bottlenecks across Europe. Consumer prices jumped 5.6% Energy prices in Europe surged on Monday after weather forecasts showed colder temperatures for the next two weeks that will lift demand for heating ECB Executive Board member Isabel Schnabel took to the airwaves to reassure her fellow Germans that inflation will slow again, hours before data set to show the fastest pace of price increases since the early 1990s Russia’s ambassador to Washington said more than 50 diplomats and their family members will have to leave the U.S. by mid-2022, in the latest sign of tensions between the former Cold War enemies China sent the biggest sortie of warplanes toward Taiwan in more than seven weeks after a U.S. lawmaker defied a Chinese demand that she abandon a trip to the island A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling (S&P 500 -2.3%) as all focus remained on the Omicron variant after several countries announced restrictions and their first cases of the new variant, although markets took solace from reports that all cases so far from South Africa have been mild. Furthermore, NIH Director Collins was optimistic that current vaccines are likely to protect against the Omicron variant but also noted it was too early to know the answers, while Goldman Sachs doesn’t think the new variant is a sufficient reason to adjust its portfolio citing comments from South Africa’s NICD that the mutation is unlikely to be more malicious and existing vaccines will most likely remain effective at preventing hospitalizations and deaths. ASX 200 (-0.5%) is subdued after Australia registered its first cases of the Omicron variant which involved two people that arrived in Sydney from southern Africa and with the government reviewing its border reopening plans. Nikkei 225 (-1.6%) whipsawed whereby it initially slumped at the open due to the virus fears and currency-related headwinds but then recouped its losses and briefly returned flat as the mood gradually improved, before succumbing to a bout of late selling, and with mixed Retail Sales data adding to the indecision. Hang Seng (-1.0%) and Shanghai Comp. (Unch) weakened with Meituan the worst performer in Hong Kong after posting a quarterly loss and with casino names pressured by a crackdown in which police detained Suncity Group CEO and others after admitting to accusations including illegal cross border gambling. However, the losses in the mainland were cushioned after firm Industrial Profits data over the weekend and with local press noting expectations for China to adopt a more proactive macro policy next year. Finally, 10yr JGBs shrugged off the pullback seen in T-note and Bund futures, with price action kept afloat amid the cautious mood in stocks and the BoJ’s presence in the market for over JPY 900bln of JGBs mostly concentrated in 3yr-10yr maturities. Top Asian News Hong Kong Stocks Slide to 13-Month Low on Fresh Virus Woes Li Auto Loss Narrows as EV Maker Rides Out Supply-Chain Snarls Singapore Adds to Its Gold Pile for the First Time in Decades China Growth Stocks Look Like Havens as Markets Confront Omicron Bourses in Europe are experiencing a mild broad-based rebound (Euro Stoxx 50 +1.0%; Stoxx 600 +0.9%) following Friday's hefty COVID-induced losses. Desks over the weekend have been framing Friday's losses as somewhat overstretched in holiday-thinned liquidity, given how little is known about the Omicron variant itself. The strain will likely remain the market theme as scientists and policymakers factor in this new variant, whilst data from this point forth – including Friday's US labour market report - will likely be passed off as somewhat stale, and headline risk will likely be abundant. Thus far, symptoms from Omicron are seemingly milder than some of its predecessors, although governments and central banks will likely continue to express caution in this period of uncertainty. Back to price action, the momentum of the rebound has lost steam; US equity futures have also been drifting lower since the European cash open – with the RTY (+0.9%) was the laggard in early European trade vs the ES (+0.8%), NQ (+1.0%) and YM (+0.7%). European cash bourses have also been waning off best levels but remain in positive territory. Sectors are mostly in the green, but the breadth of the market has narrowed since the cash open. Travel & Leisure retains the top spot in what seems to be more a reversal of Friday's exaggerated underperformance as opposed to a fundamentally driven rebound – with more nations announcing travel restrictions to stem the spread of the variant. Oil & Gas has also trimmed some of Friday's losses as oil prices see a modest rebound relative to Friday's slump. On the other end of the spectrum, Healthcare sees mild losses as COVID-related names take a mild breather, although Moderna (+9.1% pre-market) gains ahead of the US open after its Chief Medical Officer suggested a new vaccine for the variant could be ready early next year. Meanwhile, Autos & Parts reside as the current laggard amid several bearish updates, including a Y/Y drop in German car exports - due to the chip shortage and supply bottlenecks – factors which the Daimler Truck CEO suggested will lead to billions of Euros in losses. Furthermore, auto supbt.aplier provider Faurecia (-5.9%) trades at the foot of the Stoxx 600 after slashing guidance – again a function of the chip shortage. In terms of Monday M&A, BT (+4.7%) shares opened higher by almost 10% following source reports in Indian press suggesting Reliance Industries is gearing up for a takeover approach of BT – reports that were subsequently rebuffed. Top European News U.K. Mortgage Approvals Fall to 67,199 in Oct. Vs. Est. 70,000 Johnson Matthey Rises on Report of Battery Talks With Tata Gazprom Reports Record Third-Quarter Profit Amid Gas Surge Omicron’s Spread Fuels Search for Answers as WHO Sounds Warning In FX, the Buck has bounced from Friday’s pullback lows on a mixture of short covering, consolidation and a somewhat more hopeful prognosis of SA’s new coronavirus strand compared to very early perceptions prompted by reports that the latest mutation would be even worse than the Delta variant. In DXY terms, a base above 96.000 is forming within a 93.366-144 band amidst a rebound in US Treasury yields and re-steepening along the curve following comments from Fed’s Bostic indicating a willingness to back faster QE tapering. Ahead, pending home sales and Dallas Fed business manufacturing along with more Fed rhetoric from Williams and chair Powell on the eve of month end. AUD/CAD/NZD - No surprise to see the high beta and risk sensitive currencies take advantage of the somewhat calmer conditions plus a recovery in crude and other commodities that were decimated by the prospect of depressed demand due to the aforementioned Omicron outbreak. The Aussie is back over 0.7150 vs its US counterpart, the Loonie has pared back losses from sub-1.2750 with assistance from WTI’s recovery to top Usd 72/brl vs a Usd 67.40 trough on November 26 and the Kiwi is hovering above 0.6800 even though RBNZ chief economist Ha has warned that a pause in OCR tightening could occur if the fresh COVID-19 wave proves to be a ‘game-changer’. JPY/EUR - The major laggards as sentiment stabilses, with the Yen midway between 112.99-113.88 parameters and hardly helped by mixed Japanese retail sales data, while the Euro has retreated below 1.1300 where 1.7 bn option expiry interest resides and a key Fib level just under the round number irrespective of strong German state inflation reports and encouraging pan Eurozone sentiment indicators, as more nations batten down the hatches to stem the spread of SA’s virus that has shown up in parts of the bloc. GBP/CHF - Both narrowly divergent vs the Dollar, as Cable retains 1.3300+ status against the backdrop of retreating Gilt and Short Sterling futures even though UK consumer credit, mortgage lending and approvals are rather conflicting, while the Franc pivots 0.9250 and meanders from 1.0426 to 1.0453 against the Euro after the latest weekly update on Swiss bank sight deposits showing no sign of official intervention. However, Usd/Chf may veer towards 1.1 bn option expiries at the 0.9275 strike if risk appetite continues to improve ahead of KoF on Tuesday and monthly reserves data. SCANDI/EM - Although Brent has bounced to the benefit of the Nok, Sek outperformance has ensued in wake of an upgrade to final Swedish Q3 GDP, while the Cnh and Cny are deriving support via a rise in Chinese industrial profits on a y/y basis and the Zar is breathing a sigh of relief on the aforementioned ‘better’ virus updates/assessments from SA on balance. Conversely, the Try is back under pressure post-a deterioration in Turkish economic sentiment vs smaller trade deficit as investors look forward to CPI at the end of the week. Meanwhile, Turkish President Erdogan provides no reprieve for the Lira as he once again defending his unorthodox view that higher interest rates lead to higher inflation. In commodities, WTI and Brent front-month futures consolidate following an overnight rebound – with WTI Jan back on a USD 71/bbl handle and Brent Feb just under USD 75/bbl – albeit still some way off from Friday's best levels which saw the former's high above USD 78/bbl and the latter's best north of USD 81/bbl. The week is packed with risks to the oil complex, including the resumption of Iranian nuclear talks (slated at 13:00GMT/08:00EST today) and the OPEC+ monthly confab. In terms of the former, little is expected in terms of progress unless the US agrees to adhere to Tehran's demand – which at this point seems unlikely. Tehran continues to seek the removal of US sanctions alongside assurances that the US will not withdraw from the deal. "The assertion that the US must 'change its approach if it wants progress' sets a challenging tone", Citi's analysts said, and the bank also expects parties to demand full access to Iranian nuclear facilities for verification of compliance. Further, the IAEA Chief met with Iranian officials last week; although concrete progress was sparse, the overall tone of the meeting was one of progress. "We remain of the opinion that additional Iranian supplies are unlikely to reach the market before the second half of 2022 at the earliest," Citi said. Meanwhile, reports suggested the US and allies have been debating a "Plan B" if talks were to collapse. NBC News – citing European diplomats, former US officials and experts – suggested that options included: 1) a skinny nuclear deal, 2) ramp up sanctions, 3) Launching operations to sabotage Iranian nuclear advances, 4) Military strikes, 5) persuading China to halt Iranian oil imports, albeit Iran and China recently signed a 25yr deal. Over to OPEC+, a rescheduling (in light of the Omicron variant) sees the OPEC and JTC meeting now on the 1st December, followed by the JMMC and OPEC+ on the 2nd. Sources on Friday suggested that members are leaning towards a pause in the planned monthly output, although Russian Deputy PM Novak hit the wires today and suggested there is no need for urgent measures in the oil market. Markets will likely be tested, and expectations massaged with several sources heading into the meeting later this week. Elsewhere, spot gold trades sideways just under the USD 1,800/oz and above a cluster of DMAs, including the 50 (1,790.60/oz), 200 (1,791.30/oz) and 100 (1,792.80/oz) awaiting the next catalyst. Over to base metals, LME copper recoups some of Friday's lost ground, with traders also citing the underlying demand emanating from the EV revolution. US Event Calendar 10am: Oct. Pending Home Sales YoY, prior -7.2% 10am: Oct. Pending Home Sales (MoM), est. 0.8%, prior -2.3% 10:30am: Nov. Dallas Fed Manf. Activity, est. 17.0, prior 14.6 Central Bank speakers: 3pm: Fed’s Williams gives opening remarks at NY Innovation Center 3:05pm: Powell Makes Opening Remarks at New York Fed Innovation Event 3:15pm: Fed’s Hassan moderates panel introducing NY Innovation Center 5:05pm: Fed’s Bowman Discusses Central bank and Indigenous Economies DB's Jim Reid concludes the overnight wrap Last night Henry in my team put out a Q&A looking at what we know about Omicron (link here) as many risk assets put in their worst performance of the year on Friday after it exploded into view. The main reason for the widespread concern is the incredibly high number of mutations, with 32 on the spike protein specifically, which is the part of the virus that allows it to enter human cells. That’s much more than we’ve seen for previous variants, and raises the prospect it could be a more transmissible version of the virus, although scientists are still assessing this. South Africa is clearly where it has been discovered (not necessarily originated from) and where it has been spreading most. The fact that’s it’s become the dominant strain there in just two weeks hints at its higher level of contagiousness. However the read through to elsewhere is tough as the country has only fully vaccinated 24% of its population, relative to at least 68% in most of the larger developed countries bar the US which languishes at 58%. It could still prove less deadly (as virus variants over time mostly are) but if it is more contagious that could offset this and it could still cause similar healthcare issues, especially if vaccines are less protective. On the other hand the South African doctor who first alerted authorities to the unusual symptoms that have now been found to have been caused by Omicron, was on numerous media platforms over the weekend suggesting that the patients she has seen with it were exhausted but generally had mild symptoms. However she also said her patients were from a healthy cohort so we can’t relax too much on this. However as South African cases rise we will get a lot of clues from hospitalisation data even if only 6% of the country is over 65s. My personal view is that we’ll get a lot of information quite quickly around how bad this variant is. The reports over the weekend that numerous cases of Omicron have already been discovered around the world, suggests it’s probably more widespread than people think already. So we will likely soon learn whether these patients present with more severe illness and we’ll also learn of their vaccination status before any official study is out. The only caveat would be that until elderly patients have been exposed in enough scale we won’t be able to rule out the more negative scenarios. Before all that the level of restrictions have been significantly ramped up over the weekend in many countries. Henry discusses this in his note but one very significant one is that ALL travellers coming into (or back to) the UK will have to self isolate until they get a negative PCR test. This sort of thing will dramatically reduce travel, especially short business trips. Overnight Japan have effectively banned ALL foreign visitors. I appreciate its dangerous to be positive on covid at the moment but you only have to look at the UK for signs that boosters are doing a great job. Cases in the elderly population continue to collapse as the roll out progresses well and overall deaths have dropped nearly 20% over the last week to 121 (7-day average) - a tenth of where they were at the peak even though cases have recently been 80-90% of their peak levels. If Europe are just lagging the UK on boosters rather than anything more structural, most countries should be able to control the current wave all things being equal. However Omicron could make things less equal but it would be a huge surprise if vaccines made no impact. Stocks in Asia are trading cautiously but remember that the US and Europe sold off more aggressively after Asia closed on Friday. So the lack of major damage is insightful. The Nikkei (-0.02%), Shanghai Composite (-0.14%), CSI (-0.22%), KOSPI (-0.47%) and Hang Seng (-0.68%) are only slightly lower. Treasury yields, oil, and equity futures are all rising in Asia. US treasury yields are up 4-6bps across the curve, Oil is c.+4.5% higher, while the ZAR is +1.31%. Equity futures are trading higher with the S&P 500 (+0.71%) and DAX (+0.84%) futures in the green. In terms of looking ahead, we may be heading into December this week but there’s still an incredibly eventful period ahead on the market calendar even outside of Omicron. We have payrolls on Friday which could still have a big impact on what the Fed do at their important December 15 FOMC and especially on whether they accelerate the taper. Wednesday (Manufacturing) and Friday (Services) see the latest global PMIs which will as ever be closely watched even if people will suggest that the latest virus surge and now Omicron variant may make it backward looking. Elsewhere in the Euro Area, we’ll get the flash CPI estimate for November tomorrow (France and Italy on the same day with Germany today), and we’ll hear from Fed Chair Powell as he testifies (with Mrs Yellen) before congressional committees tomorrow and Wednesday. There’s lots of other Fed speakers this week (ahead of their blackout from this coming weekend) and last week there was a definite shift towards a faster taper bias, even amongst the doves on the committee with Daly being the most important potential convert. Fed speakers this week might though have to balance the emergence of the new variant with the obvious point that without it the Fed is a fair bit behind the curve. Importantly but lurking in the background, Friday is also the US funding deadline before another government shutdown. History would suggest a tense last minute deal but it’s tough to predict. Recapping last week now and the emergence of the new variant reshaped the whole week even if ahead of this, continued case growth across Europe prompted renewed lockdown measures and travel bans across the continent. Risk sentiment clearly plummeted on Friday. The S&P 500 fell -2.27%, the biggest drop since October 2020, while the Stoxx 600 fell -3.67%, the biggest one-day decline since the original Covid-induced risk off in March 2020. The S&P 500 was -2.20% lower last week, while the Stoxx 600 was down -4.53% on the week. 10yr treasury, bund, and gilt yields declined -16.1bps, -8.7bps, and -14.5bps, undoing the inflation and policy response-driven selloff from earlier in the week. The drop in 10yr treasury and gilt yields were the biggest one-day declines since the original Covid-driven rally in March 2020, while the drop in bund yields was the largest since April 2020. 10yr treasury, bund, and gilt yields ended the week -7.3bps lower, +0.7bps higher, and -5.4bps lower, respectively. Measures of inflation compensation declined due to the anticipated hit to global demand, with 10yr breakevens in the US and Germany -6.8bps and -8.8bps lower Friday, along with Brent and WTI futures declining -11.55% and -13.06%, respectively. Investors pushed back the anticipated timing of rate hikes. As it stands, the first full Fed hike is just about priced for July, and 2 hikes are priced for 2022. This follows a hawkish tone from even the most dovish FOMC members and the November FOMC minutes last week. The prevailing sentiment was the FOMC was preparing to accelerate their asset purchase taper at the December meeting to enable inflation-fighting rate hikes earlier in 2022. Understanding the impact of the new variant will be crucial for interpreting the Fed’s reaction function, though. The impact may not be so obvious; while a new variant would certainly hurt global demand and portend more policy accommodation, it will also likely prompt more virus-avoiding behaviour in the labour market, preventing workers from returning to pre-Covid levels. Whether the Fed decides to accommodate these sidelined workers for longer, or to re-think what constitutes full employment in a Covid world should inform your view on whether they accelerate tapering in December. It feels like a lifetime ago but last week also saw President Biden nominate Chair Powell to head the Fed for another term, and for Governor Brainard to serve as Vice Chair. The announcement led to a selloff in rates as the more dovish Brainard did not land the head job. In Germany, the center-left SPD, Greens, and liberal FDP agreed to a full coalition deal. The traffic-light coalition agreed to restore the debt break in 2023, after being suspended during the pandemic, and to raise the minimum wage to €12 per hour. The SPD’s Olaf Scholz will assume the Chancellorship. The US, China, India, Japan, South Korea, and UK announced releases of strategic petroleum reserves. Oil prices were higher following the announcement, in part because releases were smaller than anticipated but, as mentioned, prices dropped precipitously on Friday on the global demand impact of the new Covid variant. The ECB released the minutes of the October Governing Council meeting, where officials stressed the need to maintain optionality in their policy setting. They acknowledged growing upside risks to inflation but stressed the importance of not overreacting in setting policy as they see how inflation scenarios might unfold. Tyler Durden Mon, 11/29/2021 - 08:01.....»»

Category: dealsSource: nytNov 29th, 2021

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns US equity futures and European markets started the Thanksgiving week on an upbeat note as investors set aside fear of surging inflation and focused on a pickup in M&A activity while China signaled possible easing measures. The euphoria which lifted S&P futures up some 0.5% overnight and just shy of all time highs ended abruptly and futures reversed after German Chancellor Angela Merkel said the Covid situation in the country is worse than anything so far and tighter curbs are needed. At 730 a.m. ET, Dow e-minis were up 95 points, or 0.26%. S&P 500 e-minis were up 12.25 points, or 0.26% and Nasdaq 100 e-minis were up 58.75 points, or 0.357%. U.S. stocks trade near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally. In other words, as Bloomberg puts it "bears are winning the argument, bulls are winning in the market" while Nasdaq futures hit another record high as demand for technology stocks remained strong. “Based on historical data, the Thanksgiving week is a strong week for U.S. equities,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “Black Friday sales will be closely watched. The good news is, people still have money to spend, even though they get less goods and services in exchange of what’s spent.” In premarket moves, heavyweights, including most FAANG majors, rose in premarket trade. Vonage Holdings Corp. jumped 26% in premarket trading after Ericsson agreed to buy it. Telecom Italia SpA jumped as much as 30% in Europe after KKR offered to buy it for $12 billion. Energy stocks recovered slightly from last week's losses, although anticipation of several economic readings this week kept gains in check. Bank stocks rose in premarket trading as the U.S. 10-year Treasury yield climbed for the first time in three sessions to about 1.58%. S&P 500 futures gain as much as 0.5% on Monday morning. Tesla gained 2.8% after Chief Executive Elon Musk tweeted that Model S Plaid will "probably" be coming to China around March. Activision Blizzard (ATVI.O) slipped 1.1% after a media report that the video game publisher's top boss, Bobby Kotick, would consider leaving if he cannot quickly fix culture problems. Travel and energy stocks, which were among the worst performers last week, also marked small gains before the open. Here is a list of the other notable premarket movers: Astra Space (ASTR US) shares surge 33% in premarket trading after the company said its rocket reached orbit. Aurora Innovation (AUR US) falls 8% in premarket, after soaring 71% last week amid a surge in popularity for self-driving technology companies among retail traders. Chinese electric-carmaker Xpeng (XPEV US) rises as much as 2.8% premarket after co. unveils a large sports-utility vehicle pitted more directly against Tesla’s Model Y and Nio’s ES series. Stocks of other EV makers are mixed. Monster Beverage (MNST US)., the maker of energy drinks, is exploring a combination with Corona brewer Constellation Brands (STZ US), according to people familiar with the matter. CASI Pharma (CASI US) jumped 17% in postmarket trading after CEO Wei-Wu He disclosed the purchase of 400,000 shares in a regulatory filing. Along with an eye on the Fed's plans for tightening policy, investors are also watching for an announcement from Joe Biden on his pick for the next Fed chair. Powell was supposed to make his decision by the weekend but has since delayed it repeatedly. Investors expect current chair Jerome Powell to stay on for another term, although Fed Governor Lael Brainard is also seen as a candidate for the position. “Bringing the most dovish of the doves wouldn’t guarantee a longer period of zero rates,” Ozkardeskaya wrote. “If the decisions are based on economic fundamentals, the economy is calling for a rate hike. And it’s calling for it quite soon.” The Stoxx 600 trimmed gains after German Chancellor Angela Merkel called for tighter Covid-19 restrictions. European telecom shares surged after KKR’s offer to buy Telecom Italia for about $12 billion, which boosted sentiment about M&A in the sector. The Stoxx 600 Telecommunications Index gained as much as 1.6%, the best-performing sector gauge for the region: Telefonica +4.8%, Infrastrutture Wireless Italiane +4%, KPN +2.7%. Meanwhile, telecom equipment stock Ericsson underperforms the rest of the SXKP index, falling as much as 4.9% after a deal to buy U.S. cloud communication provider Vonage; Danske Bank says the price is “quite steep”. Earlier in the session, Asian stocks fell as Covid-19 resurgences in Europe triggered risk-off sentiment across markets amid weaker oil prices, a strong U.S. dollar and higher bond yields. The MSCI Asia Pacific Index declined 0.3%, with India’s Sensex measure slumping the most since April as Paytm’s IPO weighed on sentiment. The country’s oil giant Reliance dragged down the Asian index after scrapping a deal with Saudi Aramco, and energy and financials were the biggest sector losers in the region. Asian markets have turned softer after capping their first weekly retreat this month, following lackluster moves from economically sensitive sectors in the U.S., while investors continue to monitor earnings reports of big Chinese technology firms this week. “Some impact from the regulatory risks and dull macroeconomic conditions have shown up in several Chinese big-tech earnings and that may put investors on the sidelines as earnings season continues,” Jun Rong Yeap, a market strategist at IG Asia Pte., wrote in a note. China’s equity gauge posted a second straight day of gains after the central bank’s quarterly report indicated a shift toward easing measures to bolster the economic recovery. South Korea led gains in the region, with the Kospi adding more than 1%, helped by chipmakers Samsung Electronics and SK Hynix. Asia’s chip-related shares rose after comments from Micron Technology CEO Sanjay Mehrotra added to optimism the global shortage of semiconductors is easing. Reports of Japan earmarking $6.8 billion to bolster domestic chipmaking and Samsung planning to announce the location of its new chip plant in the U.S. also aided sentiment. Japanese stocks fluctuated after U.S. shares retreated on Friday following hawkish remarks from Federal Reserve officials. The Topix index was virtually unchanged at 2,044.16 as of 2:21 p.m. Tokyo time, while the Nikkei 225 advanced 0.1% to 29,783.92. Out of 2,180 shares in the index, 1,107 rose and 948 fell, while 125 were unchanged. “There are uncertainties surrounding the direction of U.S. monetary policy,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. “The latest comments from FRB members are spurring talk that steps to taper could accelerate.” Australian stocks sunk as banks tumbled to almost a 4-month low. The S&P/ASX 200 index fell 0.6% to close at 7,353.10, weighed down by banks and technology stocks as the measure for financial shares finished at the lowest level since July 30.  Nickel Mines was the top performer after agreeing to expand its strategic partnership with Shanghai Decent. Flight Centre fell for a second session, ending at its lowest close since Sept. 20, as the Covid-19 situation worsens in Europe. In New Zealand, the S&P/NZX 50 index fell 1% to 12,607.64. In FX, the Bloomberg dollar index holds Asia’s narrow range, trading little changed on the day. AUD outperforms G-10 peers, extending Asia’s modest gains. SEK and JPY are the weakest. RUB lags in EMFX, dropping as much as 1% versus the dollar with USD/RUB on a 74-handle. According to Bloomberg, hedge funds’ bullishness toward the dollar is starting to evaporate amid speculation the U.S. currency has risen too much given the Federal Reserve remains adamant it’s in no rush to raise interest rates. Meanwhile, the euro pared modest Asia session losses to trade below $1.13, while European bond yields edged higher, led by bunds and gilts. The pound dipped after comments from Bank of England policy makers raised questions about the certainty of an interest-rate increase in December. Governor Andrew Bailey said that the risks to the U.K. economy are “two-sided” in a weekend interview. Australian dollar advanced against the kiwi on position tweaking ahead of Wednesday’s RBNZ’s rate decision, and after China’s central bank removed sticking with “normal monetary policy” from its policy outlook. Yen declines as speculation China will steer toward more accommodative policy damps the currency’s haven appeal. Hungary’s forint tumbled to a record low against the euro as back-to-back interest rate increases failed to shield it during a rapidly deteriorating pandemic and a flight to safer assets. In commodities, crude futures drifted higher. WTI rises 0.3% near $76.20, Brent regains at $79-handle. Spot gold has a quiet session trading near $1,844/oz. Base metal are mixed: LME copper, tin and zinc post small losses; lead and nickel are in the green Looking at today's calendar, we get the October Chicago Fed national activity index, existing home sales data, and the Euro Area advance November consumer confidence. Zoom is among the companies reporting earnings. Market Snapshot S&P 500 futures up 0.3% to 4,710.75 STOXX Europe 600 up 0.3% to 487.45 German 10Y yield little changed at -0.34% Euro little changed at $1.1283 MXAP down 0.2% to 198.88 MXAPJ down 0.2% to 647.20 Nikkei little changed at 29,774.11 Topix little changed at 2,042.82 Hang Seng Index down 0.4% to 24,951.34 Shanghai Composite up 0.6% to 3,582.08 Sensex down 2.0% to 58,450.84 Australia S&P/ASX 200 down 0.6% to 7,353.08 Kospi up 1.4% to 3,013.25 Brent Futures up 0.4% to $79.22/bbl Gold spot little changed at $1,846.10 U.S. Dollar Index also little changed at 96.08 Top Overnight News from Bloomberg Negotiators hammering out details of a transformative new global corporate tax regime are shaping the deal to maximize its chance of winning acceptance in the U.S., whose companies face the biggest impact from the overhaul The U.S. has shared intelligence including maps with European allies that shows a buildup of Russian troops and artillery to prepare for a rapid, large-scale push into Ukraine from multiple locations if President Vladimir Putin decided to invade, according to people familiar with the conversations. The ruble slid to the weakest since August and the hryvnia fell With investors ramping up expectations for the Federal Reserve and other developed-market central banks to tighten policy, the likes of the Brazilian real and Hungarian forint have been weighed down by inflation and political concerns even as local officials pushed up borrowing costs. The Chinese yuan, Taiwanese dollar and Russian ruble have been among the few to stand their ground An organization formed by key participants in China’s currency market urged banks to limit speculative foreign-exchange trading after the yuan climbed to a six-year high versus peers The Avalanche cryptocurrency has surged in the past several days, taking it briefly into the top 10 by market value and surpassing Dogecoin and Shiba Inu, after a deal related to improvement of U.S. disaster-relief funding A more detailed breakdown of overnight news courtesy of Newsquawk Asia-Pac stocks traded mixed following last Friday's mostly negative performance stateside, where risk appetite was dampened by concerns of a fourth COVID wave in Europe and recent hawkish Fed rhetoric. Weekend newsflow was light and the mood was tentative heading into this week's risk events including FOMC minutes and US GDP data before the Thanksgiving holiday. The ASX 200 (-0.6%) was subdued with declines led by weakness in gold miners and the energy sector. The Nikkei 225 (+0.1%) was lacklustre after last week’s inflows into the JPY but with downside eventually reversed as the currency faded some of the gains and following the recent cabinet approval of the stimulus spending. The KOSPI (+1.4%) outperformed and reclaimed the 3k level with shares in index heavyweight Samsung Electronics rallying as its de facto leader tours the US which spurred hopes the Co. could deploy its USD 100bln cash pile. The Hang Seng (-0.4%) and Shanghai Comp. (+0.6%) diverged with the mainland kept afloat after the PBoC conducted a mild liquidity injection and maintained its Loan Prime Rate for a 19th consecutive month as expected, although Hong Kong was pressured by losses in energy and cautiousness among developers, as well as the recent announcement of increased constituents in the local benchmark. Finally, 10yr JGBs eked marginal gains amid the cautious risk tone in Asia and following firmer demand at the enhanced liquidity auction for 2yr-20yr JGBs, but with upside capped as T-note futures continued to fade Friday’s early gains that were fuelled by the COVID-19 concerns in Europe before the advances were later halted by hawkish Fed rhetoric calling for a discussion on speeding up the tapering at next month’s meeting. Top Asian News China Blocks Peng Shuai News as It Seeks to Reassure World China FX Panel Urges Banks to Cap Speculation as Yuan Surges Paytm Founder Compares Himself to Musk After Historic IPO Flop China Tech Stocks Are Nearing Inflection Point, UBS GWM Says European cash bourses kicked off the new trading week with mild gains (Euro Stoxx 50 +0.3%; Stoxx 600 +0.3%) following a mixed APAC handover. Some have been attributing the mild gains across Europe in the context of the different approaches of the Fed and ECB, with the latter expected to remain dovish as the former moves tighter, while COVID lockdowns will restrict economic activity. News flow in the European morning has however been sparse, as participants look ahead to FOMC Minutes, Flash PMIs and US GDP ahead of the Thanksgiving holiday (full Newsquawk Desk Schedule on the headline feed) alongside the Fed Chair update from President Biden and a speech from him on the economy. US equity futures see modestly more pronounced gains, with the more cyclically-exposed RTY (+0.6%) performing better than then NQ (+0.4%), ES (+0.4%) and YM (+0.4%). Since the European cash open, the initial mildly positive momentum has somewhat waned across European cash and futures, with the region now conforming to a more mixed picture. Spain's IBEX (+0.7%) is the clear regional outperforming, aided by index heavyweight Telefonica (+5.0%), which benefits from the sectorial boost received by a couple of major M&A updates. Firstly, Telecom Italia (+22%) gapped higher at the open after KKR presented a EUR 0.505/shr offer for Telecom Italia. The offer presents a ~45% premium on Friday's close. Second, Ericsson (-3.5%) made a bid to acquire American publicly held business cloud communications provider Vonage in a deal worth USD 6.2bln. As things stand, the Telecom sector is the clear outperformer, closely followed by banks amid a revival in yields. The other end of the spectrum sees Travel & Leisure back at the foot of the bunch as COVID fears in Europe mount. In terms of individual movers, Vestas Wind Systems (-2.0%) was hit as a cyber incident that impacted parts of its internal IT structure and data has been compromised. Looking ahead, it’s worth noting that volume will likely be more muted towards the latter half of the week on account of the Thanksgiving holiday. Top European News Scholz Closer to German Chancellery as Cabinet Takes Shape Austria Back in Lockdown Ahead of Mandatory Vaccine Policy Energy Crunch Drives Carbon to Record as Europe Burns More Coal BP Goes on Hydrogen Hiring Spree in Bid for 10% Market Share In FX, the Antipodean Dollars are outperforming at the start of the new week on specific supportive factors, like a bounce in the price of iron ore and a further re-opening from pandemic restrictions in both Australia and New Zealand, while the REINZ shadow board is ‘overwhelmingly’ behind another RBNZ rate hike this week. Aud/Usd is holding around 0.7250 and Nzd/Usd is hovering circa 0.7000 as the Aud/Nzd cross pivots 1.0350 in the run up to flash Aussie PMIs and NZ retail sales. DXY - Aussie and Kiwi strength aside, the Greenback retains a solid underlying bid on safe haven and increasingly hawkish Fed grounds after a run of recent much better than expected US data. In index terms, a base just above 96.000 provides a platform to retest last week’s peaks at 96.245 and 96.266 vs 96.223 so far, but Monday’s agenda may not give bulls much in the way of encouragement via data with only existing home sales scheduled. Instead, the Buck could derive more impetus from Treasuries given front-loaded supply ahead of Thanksgiving in the form of Usd 58 bn 2 year and Usd 59 bn 5 year notes. CHF/CAD/EUR/GBP/JPY - All narrowly mixed against their US rival, as the Franc keeps its head above 0.9300 and meanders between 1.0485-61 vs the Euro amidst some signs of official intervention from a rise in weekly Swiss sight deposits at domestic banks. Meanwhile, the Loonie has some leverage from a mild rebound in crude prices to pare declines from sub-1.2650 and should glean support into 1.2700 from 1 bn option expiries at 1.2685 on any further risk aversion or fallout in WTI. Conversely, 1 bn option expiry interest from 1.1300-05 could scupper Euro recoveries from Friday’s new y-t-d low around 1.1250 against the backdrop of ongoing COVID-19 contagion and pre-ECB speakers plus preliminary Eurozone consumer confidence. Elsewhere, the Pound is weighing up BoE tightening prospects and the impact of no breakthrough between the UK and EU on NI Protocol as Cable and Eur/Gbp straddle the 1.3435-40 zone and 0.8400 respectively, while the Yen has unwound more of its safe haven premium within a 114.27-113.91 range eyeing UST yields in relation to JGBs alongside overall risk sentiment. SCANDI/EM - The Nok is deriving some traction from Brent back over Usd 79/brl, but geopolitical concerns are preventing the Rub from benefiting and the Mxn is also on a weaker footing along with most EM currencies. However, the Try is striving to draw a line in the sand irrespective of a marked deterioration in Turkish consumer sentiment and the Cnh/Cny are holding up well regardless of a softer PBoC fix for the onshore unit as LPRs were unchanged yet again and China’s FX regulator told banks to limit Yuan spec trades. In CEE, the Pln has plunged on diplomatic strains between Poland and the EU, the Huf has depreciated to all time lows on virus fears and the Czk has been hampered by CNB’s Holub downplaying the chances of more big tightening surprises such as the aggressive hike last time. In commodities, WTI and Brent front month futures see some consolidation following Friday’s slide in prices. In terms of the fundamentals, the demand side of the equations continues to be threatened by the fourth wave of COVID, namely in the European nations that have not had a successful vaccine rollout. As a reminder, Austria is in a 20-day nationwide lockdown as of today, whilst Germany, Belgium and the Netherlands see tighter restrictions, with the latter two also experiencing COVID-related social unrest over the weekend. The European Commission will on Wednesday issue a set of new recommendations to its member states on non-essential travel, a senior EU diplomat said, which will be watched for activity and jet fuel demand. Over to the supply side, There were weekend reports that Japan and the US are planning a joint announcement regarding the SPR release, although a key Japanese official later noted there was no fixed plan yet on releasing reserves. Japanese PM Kishida confirmed that they are considering releasing oil reserves to curb prices. Meanwhile, Iranian nuclear talks are regaining focus as negotiations are poised to resume on the 29th of November – it is likely we’ll see officials telegraph their stances heading into the meeting. Eyes will be on whether the US offers an olive branch as Tehran stands firm. Elsewhere, the next OPEC+ meeting is also looming, but against the backdrop of lower prices, COVID risk and SPR releases, it is difficult to see a scenario where OPEC+ will be more hawkish than dovish. WTI and Brent Jan trade on either side of USD 76/bbl and USD 79/bbl respectively and within relatively narrow bands. Spot gold and silver meanwhile see a mild divergence, with the yellow metal constrained by resistance in the USD 1,850/oz area, whilst spot silver rebounded off support at USD 24.50/oz. Finally, base metals are relatively mixed with no standout performers to point out. LME copper is flat but holds onto USD 9,500+/t status. US Event Calendar 8:30am: Oct. Chicago Fed Nat Activity Index, est. 0.10, prior -0.13 10am: Oct. Existing Home Sales MoM, est. -1.8%, prior 7.0% 10am: Oct. Home Resales with Condos, est. 6.18m, prior 6.29m DB's Jim Reid concludes the overnight wrap This morning we’ve just published our 2022 credit strategy outlook. 2021 has been one of the lowest vol years for credit on record but we think this is unlikely to last and spreads will sell-off at some point in H1 when markets reappraise how far behind the curve the Fed is. Even with covid restrictions mounting again in Europe as we go to print, we think it’s more likely that we’ll be in a “growthflationary” environment for 2022 and think overheating risks are more acute than the stagflation risk, especially in the US. Strong growth and high liquidity should mean that full year 2022 is a reasonable year for credit overall but if we’re correct there’ll be regular pockets of inflationary/interest rate concerns in the market, which we think is more likely to happen in H1. At the H1 wides, we could see spreads widen as much as 30-40bps in IG and 120-160bps in HY which is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. However, with the potential for a shift in the narrative to potential late-cycle dynamics, we think spreads will close 2022 slightly wider than they are today. We will be watching the yield curve closely through the year for clues as to how the cycle will evolve into 2023. This has the ability to move our YE 22 forecasts in both directions as the year progresses. This week will be heavily compressed given Thanksgiving on Thursday. The highlight though will be a likely choice of Fed governor before this, assuming the timetable doesn’t slip again. Overnight it’s been announced that Biden will give a speech to the American people tomorrow on the economy and prices. It’s possible the Fed Chair gets announced here and perhaps plans to release oil from the strategic reserve. We will see. Following that, Wednesday is especially busy as a pre-holiday US data dump descends upon us. We’ll see the minutes of the November 3rd FOMC meeting and earlier that day the core PCE deflator (the Fed's preferred inflation metric), Durable Goods, the UoM sentiment index (including latest inflation expectations), new home sales and jobless claims amongst a few other releases. More internationally, covid will be focus, especially in Europe as Austria enters lockdown today after the shock announcement on Friday. Germany is probably the swing factor here for sentiment in Europe so case numbers will be watched closely. Staying with Germany, there’s anticipation that a coalition agreement could be reached in Germany between the SPD, Greens and the FDP, almost two months after their federal election. Otherwise, the flash PMIs for November will be in focus, with the ECB following the Fed and releasing the minutes from their recent meeting on Thursday. As discussed at the top the most important market event this week is likely to be on the future leadership of the Federal Reserve, as it’s been widely reported that President Biden is expected to announce his choice on who’ll be the next Fed Chair by Thanksgiving on Thursday. Previous deadlines have slipped on this announcement, but time is becoming increasingly limited given the need for Senate confirmation ahead of Chair Powell’s current four-year term expiring in early February. The two names that are quite obviously in the frame are incumbent Chair Powell and Governor Brainard, but there are also a number of other positions to fill at the Fed in the coming months, with Vice Chair Clarida’s term as an FOMC governor expiring in January, Randal Quarles set to leave the Board by the end of this year, and another vacant post still unfilled. So a significant opportunity for the Biden administration to reshape the top positions at the Fed. In spite of all the speculation over the position of the Fed Chair, our US economists write in their latest Fed update (link here), that the decision is unlikely to have a material impact on the broad policy trajectory. Inflation in 2022 is likely to remain at levels that make most Fed officials uncomfortable, whilst the regional Fed presidents rotating as voters lean more hawkish next year, so there’ll be constraints to how policy could shift in a dovish direction, even if an incoming chair wanted to move things that way. Another unconfirmed but much anticipated announcement this week could come from Germany, where there’s hope that the centre-left SPD, the Greens and the liberal FDP will finally reach a coalition agreement. The general secretaries of all three parties have recently said that they hope next week will be when a deal is reached, and a deal would pave the way for the SPD’s Olaf Scholz to become chancellor at the head of a 3-party coalition. Nevertheless, there are still some hurdles to clear before then, since an agreement would mark the start of internal party approval processes. The FDP and the SPD are set to hold a party convention, whilst the Greens have announced that their members will vote on the agreement. On the virus, there is no doubt things are getting worse in Europe but it’s worth putting some of the vaccine numbers in some context. Austria (64% of total population) has a double vaccination rate that is somewhat lower than the likes of Spain (79%), Italy (74%), France (69%), the UK (69%) and Germany (68%). The UK for all its pandemic fighting faults is probably as well placed as any due to it being more advanced on the booster campaign due to an earlier vaccine start date and also due to higher natural infections. It was also a conscious decision back in the summer in the UK to flatten the peak to take load off the winter wave. So this is an area where scientists and the government may have made a calculated decision that pays off. Europe is a bit behind on boosters versus the UK but perhaps these will accelerate as more people get 6 months from their second jab, albeit a bit too late to stop some kind of winter wave. There may also be notable divergence within Europe. Countries like Italy and Spain (and to a slightly lesser extent France) that were hit hard in the initial waves have a high vaccination rate so it seems less likely they will suffer the dramatic escalation that Austria has seen. Germany is in the balance as they have had lower infection rates which unfortunately may have encouraged slightly lower vaccination rates. The irony here is that there is some correlation between early success/lower infections and lower subsequent vaccination rates. The opposite is also true - i.e. early bad outcomes but high vaccination rates. The US is another contradiction as it’s vaccination rate of 58% is very low in the developed world but it has had high levels of natural infections and has a higher intolerance for lockdowns. So tough to model all the above. Overall given that last winter we had no vaccines and this year we have very high levels of protection it seems unfathomable that we’ll have an outcome anywhere near as bad. Yes there will be selected countries where the virus will have a more severe impact but most developed countries will likely get by without lockdowns in my opinion even if the headlines aren’t always going to be pleasant. Famous last words but those are my thoughts. In light of the rising caseloads, the November flash PMIs should provide some context for how the global economy has performed into the month. We’ve already seen a deceleration in the composite PMIs for the Euro Area since the summer, so it’ll be interesting to see if that’s maintained. If anything the US data has reaccelerated in Q4 with the Atlanta Fed GDPNow series at 8.2% for the quarter after what will likely be a revised 2.2% print on Wednesday for Q3. Time will tell if Covid temporarily dampens this again. Elsewhere datawise, we’ll also get the Ifo’s latest business climate indicator for Germany on Wednesday, which has experienced a similar deceleration to other European data since the summer. The rest of the week ahead appears as usual in the day-by-day calendar at the end. Overnight in Asia stocks are mixed with the KOSPI (+1.31%) leading the pack followed by the Shanghai Composite (+0.65%) and CSI (+0.53%), while the Nikkei (-0.18%) and Hang Seng (-0.35%) are lower. Stocks in China are being boosted by optimism that the PBOC would be easing its policy stance after its quarterly monetary policy report on Friday dropped a few hints to that effect. Futures are pointing towards a positive start in the US and Europe with S&P 500 futures (+0.31%) and DAX futures (+0.14%) both in the green. Turning to last week now, rising Covid cases prompted renewed lockdown measures to varying degrees and hit risk sentiment. Countries across Europe implemented new lockdown measures and vaccine requirements to combat the latest rise in Covid cases. The standouts included Austria and Germany. Austria will start a nationwide lockdown starting today and will implement a compulsory Covid vaccine mandate from February. Germany will restrict leisure activities and access to public transportation for unvaccinated citizens and announced a plan to improve vaccination efforts. DM ten-year yields decreased following the headline. Treasury, bund, and gilt yields declined -3.8bps, -6.7bps, and -4.6bps on Friday, respectively, bringing the weekly totals to -1.3bps, -8.3bps, and -3.5bps, respectively. The broad dollar appreciated +0.54% Friday, and +0.98% over the week. Brent and WTI futures declined -2.89% and -3.68% on Friday following global demand fears, after drifting -4.27% and -5.79% lower throughout the week as headlines circulated that the US and allies were weighing whether to release strategic reserves. European equity indices declined late in the week as the renewed lockdown measures were publicized. The Stoxx 600, DAX, and CAC 40 declined -0.33%, -0.38%, and -0.42%, respectively on Friday, bringing their weekly totals to -0.14%, +0.41%, and +0.29%. The S&P 500 index was also hit ending the week +0.32% higher after declining -0.14% Friday, though weekly gains were concentrated in big technology and consumer discretionary stocks. U.S. risk markets were likely supported by the U.S. House of Representatives passing the Biden Administration’s climate and social spending bill. The bill will proceed to the Senate, where its fate lays with a few key moderate Democrats. This follows President Biden signing a physical infrastructure bill into law on Monday. On the Fed, communications from officials took a decidedly more hawkish turn on inflation dynamics, especially from dovish members. Whether the Fed decides to accelerate its asset purchase taper at the December FOMC will likely be the key focus in markets heading into the meeting. Ending the weekly wrap up with some positive Covid news: the U.S. Food and Drug Administration cleared Pfizer and Moderna booster shots for all adults. Additionally, the US will order 10 million doses of Pfizer’s Covid pill. Tyler Durden Mon, 11/22/2021 - 07:49.....»»

Category: blogSource: zerohedgeNov 22nd, 2021

Futures Flat As Yields, Dollar Slide On Speculation Demo-Dove Brainard Will Replace Powell

Futures Flat As Yields, Dollar Slide On Speculation Demo-Dove Brainard Will Replace Powell For the second session in a row, S&P 500 futures reversed earlier losses and traded flat after falling as much as 0.3% earlier in the run-up to today's PPI report - the first of a couple of readings on inflation this week - as investors weighed the Federal Reserve’s warning that stock prices are "vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall." US Treasury yields fell and the dollar index slipped for a third consecutive day following a late Monday report that Joe Biden interviewed uber-dove and Hillary Clinton fan Lael Brainard for the central bank’s top job, although prediction markets were not impressed. European stocks advanced for a ninth day, the longest streak since June while Asian shares drifted. Some more stats from DB's Jim Reid There wasn’t an awful lot of newsflow for investors yesterday as they looked forward to tomorrow’s US CPI release, but the astonishing equity advance showed no signs of relenting just yet, with the S&P 500 (+0.09%) up for an 8th consecutive session to another record high. For reference, that’s the longest winning streak since April 2019, and if we get a 9th day in the green today, that would mark the longest run of consecutive gains since November 2004, back when George W. Bush had just beaten John Kerry to win a second term. It's also 17 out of 19 days up, which hasn’t happened since December 1971. At 715am S&P futures were up 1 point or 0.02% to 4,965. If, or rather when, the S&P closes green today, it will be up 9 consecutive sessions, the longest such streak since Nov 2004. Nasdaq futures rose another 33.25 points; If the nasdaq index is up today, it will be 12 days in a row, a feat it last achieved in 2009 and which hasn't been topped since 1992. “U.S. indexes continue flirting with all-time high levels following a surprise NFP read, the approval of Biden’s $550 billion spending bill and the discovery of an oral Covid treatment from Pfizer,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “But inflation worries come to overshadow the Monday optimism.” Sysco and DoorDash are among companies reporting earnings. Rivian Automotive is scheduled to price its initial public offering, seeking to raise as much as $10 billion in a listing that could give the producer of electric trucks a fully diluted valuation of more than $70 billion. “The company is seen as the most serious competitor to Tesla in the EV race,” Ozkardeskaya said. “The company will be worth more than Honda and Ferrari." Paypal Holdings fell 4.5% in U.S. premarket trading with analysts saying the payments firm’s full-year guidance was a disappointment and that the shares are likely to remain under pressure near-term despite announcing a new Venmo deal with Amazon, while General Electric surged 11.6% in premarket after the U.S. conglomerate said it would split itself into three companies focused on aviation, healthcare and power. Tesla Inc shares rose 1.4%, rebounding from a nearly 5% fall on Monday after Chief Executive Elon Musk’s Twitter poll proposing to sell a tenth of his holdings garnered 57.9% vote in favor of the sale. The proposal also raised questions about whether Musk may have violated his settlement with the U.S. securities regulator again. Zynga Inc jumped 6.6% after the “FarmVille” creator beat quarterly net bookings estimates, while Tripadvisor Inc fell 7.4% after reporting downbeat quarterly earnings and announcing the departure of Chief Executive Stephen Kaufer. Here are some of the other notable premarket movers today: TripAdvisor (TRIP US) shares fall as much as 7% in U.S. premarket trading with analysts saying the company’s 3Q results and outlook are a disappointment given the travel recovery being seen across the board. Cryptocurrency-exposed stocks rise in U.S. premarket trading on Tuesday, set to extend Monday’s gains after the global crypto market hit the $3 trillion milestone Roblox (RBLX US) shares jump as much as 27% in U.S. premarket trading after the video-game platform firm’s quarterly bookings topped estimates even after the easing of Covid restrictions Naked Brand (NAKD US) shares rise as much as 45% in U.S. premarket trading, after the company said it will acquire commercial EV technology company Cenntro Automotive in a stock-for-stock deal Robinhood Markets (HOOD US) slides 3% in premarket trading after it said personal information of millions of customers was compromised in a data breach last week and that the culprit demanded a payment. Arrival (ARVL US) plunged 19% in extended trading after the electric-vehicle maker says previous long-term forecasts from the merger with the CIIG special purpose acquisition company should no longer be relied upon SmileDirectClub (SDC US) slumps 21% in U.S. premarket trading after its 3Q revenue and 4Q forecast missed the lowest analyst estimates Aterian (ATER US) shares jumped 24% in postmarket trading on Monday, after third-quarter revenue and gross margin topped analysts’ estimates Five9 (FIVN US) shares rose 8.8% in extended trading on Monday, after the software company reported third-quarter results that beat expectations RealReal (REAL US) shares jumped 5.5% in Monday extended trading, after the online marketplace reported third- quarter revenue that beat expectations Invitae (NVTA US) shares tumbled 14% postmarket after the genetics company cut its full- year revenue forecast 3D Systems (DDD US) fell 8.5% postmarket after reporting third-quarter results. The 3D printing firm narrowed its 2021 adjusted gross margin guidance to 41% to 43% from an earlier range of 40% to 44% Data from the Labor Department due at 8:30 a.m. ET is expected to show that its producer price index for final demand rose 0.6% in October, with accelerating inflation and tighter monetary policy becoming a bigger concern for investors than the COVID-19 pandemic. Global equities hovered near all-time highs as investors weigh strong earnings, easing travel curbs and U.S. infrastructure spending against the risk of persistent inflation that may lead to tighter monetary policy.  A better-than-expected earnings season, positive developments around COVID-19 antiviral pills and the loosening of travel curbs have recently helped the market continue its record run. European equities faded small opening losses in otherwise quiet trade, with Euro Stoxx 50 little changed and other major indexes adding ~0.2%. Retailers traded well, insurance and financial services are under pressure but ranges are relatively narrow. Bayer jumped 3% after the German producer of healthcare and agricultural products raised its earnings forecast. In the latest positive development in uranium, Rolls-Royce surged 4.9% after the British engineering company raised an equivalent $617 million to fund the development of small modular nuclear reactors. Investor sentiment in Germany rose unexpectedly in November on expectations that price pressures will ease at the start of next year and growth will pick up in Europe’s largest economy, a survey showed on Tuesday. The ZEW economic research institute said its economic sentiment index increased to 31.7 from 22.3 points in October. A Reuters poll had forecast a fall to 20.0. “Financial market experts are more optimistic about the coming six months,” ZEW President Achim Wambach said in a statement. “For the first quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the euro zone,” Wambach added. A fall in a current conditions index to 12.5 from 21.6 - compared with a consensus forecast for 18.0 - showed investors expected that supply bottlenecks and inflationary pressures would hold back the economy in the current quarter, he said. Supply bottlenecks for raw and preliminary materials have weighed down industrial production here in Germany. Exports fell here for a second consecutive month in September. Asian equities were mixed, struggling to follow a positive lead from Wall Street as traders weighed economic optimism and Covid treatments against virus outbreaks across China. The MSCI Asia Pacific Index was up 0.1% on Tuesday, trimming an earlier 0.4% gain. SoftBank surged 11% after the company said it would buy back as much as 1 trillion yen ($8.8 billion) of its own stock. Wuxi Biologics rebounded from the previous day’s tumble, after the U.K. government said it will add some of China’s shots to approved vaccines for visitors.  Taiwan and the Philippines had the region’s top-performing benchmarks, with those in Japan and Malaysia slipping. While Asian markets attempted to follow increases seen on Wall Street overnight, “paring back of initial gains suggest that several factors including China’s Covid-19 situation and its property sector remain of concern,” said Jun Rong Yeap, market strategist with IG Asia Pte. in Singapore.  Investors are also awaiting news from China on the Communist Party’s meeting this week, its first major convention in more than a year. “The sixth plenum will quite possibly be a manifesto from Xi Jinping as he adopts the mantle of effective leader for life,” said Kyle Rodda, an analyst at IG Markets Ltd. “His agenda and rhetoric will be important, with investors nervous about what comes out about China’s strategic and economic direction.”  Over in Japan, a morning rally in Japanese stocks gave way to profit-taking for a second day, even as SoftBank Group surged on its latest buyback announcement. Electronics and chemical makers were the biggest drags on the Topix, which fell 0.8%, reversing an early 0.7% gain. Fast Retailing was the biggest contributor to a 0.8% decline in the Nikkei 225. The yen was up 0.4% against the dollar, in its forth day of advance. SoftBank jumped more than 10% after it said it will repurchase as much as 1 trillion yen ($8.8 billion) of its stock. Its climb helped drive Japanesestocks higher in early trading, after the S&P 500 rose to a new record high. “Futures were sold after the open as investors moved to book profits with the Nikkei 225 approaching 30,000,” said Hideyuki Ishiguro, a strategist at Nomura Asset Management in Tokyo. “There is a lack of catalysts for further gains, and the stronger yen is also limiting the upside.” Australian stocks edged lower, weighed down by bank. The S&P/ASX 200 index fell 0.2% to close at 7,434.20, with banks contributing the most to its drop. Eight of the benchmark’s 11 subgauges declined, while miners rallied. Inghams tumbled to its lowest price since May 27. Chalice Mining surgend after reporting its maiden Mineral Resource Estimate for the Gonneville Deposit at Julimar. In New Zealand, the S&P/NZX 50 index rose 0.4% to 13,090.58. In rates, USTs bull steepened, returning to Asia’s richest levels after speculation about a dovish change in leadership at the Fed. Treasuries advance across the curve, following wider gains across bunds; a bull-flattening move during Europe session was extended after Netherlands 2038 auction. Gilts long-end also well bid, adding support for Treasuries. Focal points for U.S. session include Fed’s Powell speaking at 9am ET, 10-year note auction at 1pm. Treasury yields were richer by 2bp-3bp across the curve, with curve spreads broadly within 1bp of Monday’s close; bunds outperform by ~1bp in the 10-year sector while long-end gilt yields are ~5bp lower on the day. Long-end Germany outperforms gilts and USTs, richening ~4bps. Peripheral spreads tighten with 10y Bund/BTP near 112bps. In FX, the Bloomberg Dollar Spot Index fell to its lowest level this month and Treasuries rallied following the report that Federal Reserve Governor Lael Brainard was interviewed for the top job at the central bank, with speculation that a Brainard-led Fed would be more dovish than that of current Chair Jerome Powell. The dollar was weaker against most of its Group-of-10 peers while the yen was among the top performers as traders wound back bets on higher global central- bank interest rates; the euro briefly rose above the $1.16 level before erasing gains. JPY tops the leaderboard with USD/JPY remaining sub-113. Cable briefly regains a 1.36-handle. In commodities, Crude futures push higher after a subdued Asia session. WTI adds 0.9% to trade near $82.60, Brent regains a $84-handle. Spot gold is range bound near $1,825/oz. Base metals hold modest gains with LME zinc the marginal outperformer Looking at the day ahead now, and data releases includethe US PPI reading for October, along with that month’s NFIB small business optimism index. Over in Germany, there’s also the ZEW survey for November and the trade balance for September. Central bank speakers include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and PBoC Governor Yi Gang, along with the ECB’s Panetta, Rehn, Knot and Schnabel, the Fed’s Bullard, Daly and Kashkari, and BoE Deputy Governor Broadbent. Market Snapshot S&P 500 futures little changed at 4,693.50 STOXX Europe 600 up 0.1% to 484.28 MXAP little changed at 198.97 MXAPJ up 0.3% to 649.50 Nikkei down 0.8% to 29,285.46 Topix down 0.8% to 2,018.77 Hang Seng Index up 0.2% to 24,813.13 Shanghai Composite up 0.2% to 3,507.00 Sensex down 0.3% to 60,381.61 Australia S&P/ASX 200 down 0.2% to 7,434.20 Kospi little changed at 2,962.46 German 10Y yield little changed at -0.26% Euro little changed at $1.1588 Brent Futures up 0.7% to $83.99/bbl Gold spot up 0.0% to $1,824.68 U.S. Dollar Index little changed at 93.96 Top Overnight News from Bloomberg Just weeks ago, Wall Street analysts and central bankers were quick to assure investors that a collapse by China Evergrande Group wouldn’t be a Lehman moment. Regulators in Beijing said that the crisis would be “contained.” Now that a bond selloff has spread to China’s entire real estate sector and beyond, concern is growing about the potential risk to the global financial system The Federal Reserve warned that fragility in China’s commercial real-estate sector could spread to the U.S. if it deteriorates dramatically, as investor focus turns to China Evergrande Group’s next bond payment deadlines Japan ruling Liberal Democratic Party and coalition partner Komeito agree to give 50,000 yen in cash and 50,000 yen in coupons for every child 18 or younger, Kyodo reports, without attribution Boris Johnson is struggling to repress the U.K. backlash over his defense of a ruling party lawmaker who broke lobbying rules, as his government was openly accused of corruption in Parliament and even typically friendly newspapers took aim at his ruling Conservative Party Bitcoin jumped past $68,000 for the first time to a new all-time high, part of a wider recent rally in the cryptocurrency sector. The climb in cryptocurrencies overall has taken their combined value above $3 trillion. Bitcoin hit its October record following the launch of the first Bitcoin-linked exchange-traded fund for U.S. investors A more detailed look at global markets from Newsquawk Asia-Pac stocks traded indecisively as focus centred on earnings and despite the positive handover from Wall St where the S&P 500 notched an 8th consecutive record close amid a lack of catalysts to derail the momentum in stocks. ASX 200 (-0.2%) began marginally higher amid strength in the tech and mining sectors but with upside eventually reversed by losses in the top-weighted financial industry as NAB shares declined despite posting a 77% jump in FY cash earnings and its FY net more than doubled to AUD 6.4bln, although this was still short of some analysts’ forecasts and the Co. also noted that competitive pressures are expected to continue in FY22. Nikkei 225 (-0.7%) was choppy amid a slew of earnings releases with outperformance in SoftBank following its H1 results in which net income declined by more than 80%, but revenue increased and it confirmed a JPY 1tln share buyback. It was also reported that PM Kishida instructed COVID measures to be compiled this week and economic measures by next Friday, while a government panel recommended tax breaks for companies that increase wages, although Tokyo stocks have failed to benefit with early momentum offset by recent flows into the JPY. Hang Seng (-0.1%) and Shanghai Comp. (+0.2%) lacked firm direction amid mixed developer related headlines with Kaisa Group said to be taking several measures to solve liquidity issues and have pleaded for more time and patience from investors, while China Evergrande reportedly scraped together more cash by offloading a 5.7% stake in HengTen Networks for USD 145mln. Furthermore, the PBoC continued with its liquidity efforts but recent source reports noted that chances of a PBoC rate cut looks slim and that the PBoC is expected to be cautious in easing monetary policy amid stagflation concerns. Finally, 10yr JGBs were flat amid the indecisive mood in stocks and was only briefly supported from the improvement across most metrics at the latest 30yr JGB auction. Top Asian News Gold Rally Pauses as Focus Turns to Upcoming Inflation Data Indonesia Bonds Risk Losing Key Support as Outflows Surge Nissan Raises Profit Outlook Despite Supply Disruptions Fed Warns of Woes Spreading as Deadline Looms: Evergrande Update After a soft open, European equities trade in close proximity to the unchanged mark (Eurostoxx 50 +0.1%) with incremental newsflow relatively light thus far with a mixed German ZEW report unable to shift the dial. The handover from the Asia-Pac session was a mixed one with the region unable to benefit from the positive tailwinds on Wall St. Stateside, futures are near-enough unchanged with participants tentative ahead of tomorrow’s US CPI release which is expected to see Y/Y CPI rise to 5.8% from 5.4%. For the Stoxx 600, UBS’ announced today that its end-2022 target is at 520 which would mark around 8% of upside from current levels. In terms of a regional breakdown, UBS upgraded Italy to overweight from underweight whilst holding Germany and the UK as overweight. Sectors in Europe are a mixed bag with Autos outperforming peers as Renault (+4.6%) sits at the top of the CAC in the wake of Nissan earnings, which the Co. says will have a positive impact on its Q3 earnings. Basic Resources, Retail and Media names are also faring well. To the downside, Insurance names are on a softer footing following earnings from Munich Re (-3.4%) with the Co. warning of further COVID-related losses, whilst results have also hampered the performance of Direct Line (-2.6%). Bayer (+2.6%) is one of the better performers in Germany after beating revenue and EBITDA expectations and guiding FY EPS higher. Associated British Foods (+6.5%) is the best performer in the Stoxx 600 after announcing a special dividend alongside results. Finally, other strong stocks in the UK include Rolls Royce (+5.4%) after confirming it has received funding for small modular nuclear reactors, whilst BT (+2.9%) is seen higher after being upgraded to buy from hold at Berenberg. Top European News UniCredit to Take $1.9 Billion Charge From Yapi Kredi Sale Russia’s Gazprom Says Gas Will Flow Into EU Storage This Month European Gas Prices Slide on Some Signs of Higher Russian Flows Polish Key Rate Hikes Past 1.5% May Be Needed, MPC’s Sura Says In FX, the Yen and Dollar are locked around the 113.00 mark after the former extended its mainly technical rally to around 112.73 before running out of steam, and this has given the Greenback in general some breathing space as the index claws back declines from a slightly deeper 93.872 post-NFP low to retest resistance at the psychological 94.000 level. However, Usd/Jpy and Yen crosses are still trending lower following clear breaches of several key chart supports that will now form upside barriers, such as Fibs in the headline pair spanning 113.20-30, while the Buck and DXY retain a bearish tone following their sharp retracement from a new y-t-d high in the case of the former last Friday. Ahead, US PPI data provides a timely inflation gauge for CPI on Wednesday, while there is another array of Fed speakers and more supply to absorb as Usd 39 bn 10 year notes are up for auction. GBP - Sterling continues to regroup in wake of the BoE shock, with Cable cresting 1.3600 and even Eur/Gbp unwinding gains towards 0.8520 amidst ongoing Brexit angst that could reach another critical stage by the end of this week given reports that the EU is formulating a package of short/medium-term retaliatory measures which might be presented by Sefcovic to Frost on Friday, to dissuade the UK from triggering Article 16, according to Eurasia Group's Rahman. Note, however, the cross may be underpinned by decent option expiry interest at the 0.8500 strike (1 bn), if not mere sentimentality. AUD/NZD - Some reasons for the Aussie to reverse recent underperformance vs the Kiwi down under, as NAB business confidence and conditions both improved markedly in October, while consumer sentiment ticked up as a counterweight to an acceleration in NZ electronic card consumption, with Aud/Usd firmly back on the 0.7400 handle, Aud/Nzd rebounding from sub-1.0350 and Nzd/Usd hovering midway between 0.7148-74 parameters. CAD/EUR/CHF - All narrowly divergent vs their US counterpart, as the Loonie gleans traction from a Usd 1/brl rebound in WTI to bounce through 1.2450 and away from 1.1 bn option expiries at 1.2460 in advance of another speech from BoC Governor Macklem, while the Euro is weighing up a mixed ZEW survey against expectations in close proximity to 1.1600 and also ‘comfortably’ above 1.8 bn expiry interest down at 1.1550. Elsewhere, the Franc is keeping its head afloat of 0.9150 and 1.0600 vs the Euro awaiting remarks from the SNB via Maechler and Moser about the changing FX market and implications for the Swiss Central Bank on Thursday. In commodities, WTI and Brent are firmer this morning though the benchmarks have drifted off earlier highs as we approach the entrance of US participants. At best, Brent has surpassed the USD 84.00/bbl mark, a figure which eluded it yesterday, and WTI has been within reach of the USD 83.00/bbl mark. Fresh newsflow explicitly for the complex has been slim but we are, more so than usual, looking to the EIA STEO due at 17:00GMT/12:00EST today. Heightened attention on this stems from US Energy Secretary Granholm commenting earlier in the week that President Biden may make an announcement in relation to crude and the SPR this week; as such, administration officials will be scrutinising the STEO report. For reference, the OPEC+ MOMR and IEA OMR are due on November 11th and 16th respectively. October’s STEO upgraded world 2021 oil demand growth forecasts by 90k but cut the 2022 view by 150k while highlighting that US crude output is to fall 260k vs prev. 200k fall in 2021. As usual, we do have the Private Inventory report due today as well with expectations set for a headline build of 1.9mln. Moving to metals, spot gold and silver are once again lacklustre and remain comfortably within overnight ranges and the upside seen in the metals at the tail-end of last week means we are circa, for spot gold, USD 30/oz from a cluster of DMAs. Elsewhere, base metals are firmer given the support for industrial names on the US infrastructure bill, but the likes of LME copper remain within familiar ranges. US Event Calendar 8:30am: Oct. PPI Ex Food, Energy, Trade MoM, est. 0.3%, prior 0.1% 8:30am: Oct. PPI Ex Food, Energy, Trade YoY, est. 6.2%, prior 5.9% 8:30am: Oct. PPI Ex Food and Energy YoY, est. 6.8%, prior 6.8% 8:30am: Oct. PPI Final Demand YoY, est. 8.6%, prior 8.6% 8:30am: Oct. PPI Ex Food and Energy MoM, est. 0.5%, prior 0.2% 8:30am: Oct. PPI Final Demand MoM, est. 0.6%, prior 0.5% Central Banks 7:50am: Fed’s Bullard Takes Part in Virtual Event 9am: Powell to Speak at Joint Fed, ECB and BoC Diversity Conference 9am: ECB’s Knot, Fed’s Bullard on UBS Panel 11:35am: Fed’s Daly Speaks at NABE Conference 1:30pm: Fed’s Kashkari Takes Part in Moderated Discussion DB's Jim Reid concludes the overnight wrap Thanks for all your well wishes yesterday. It was very kind to have a few hundred take the time to email. If you missed it, see yesterday’s EMR to understand why my responsibilities have mounted this week. The latest is that I’ve now got two perfect night’s sleep while my wife who is sleeping by my daughter’s side at hospital on a camp bed all week got hardly any the first night. Nurses coming in every hour, lots of machines beeping, it being too hot and no privacy. A look at my WhatsApp this morning shows she was last seen at 3.58am, so I’m worried I’m going to hear about a repeat. Although I will want to know who she’s whatsApping at that time of the night! There wasn’t an awful lot of newsflow for investors yesterday as they looked forward to tomorrow’s US CPI release, but the astonishing equity advance showed no signs of relenting just yet, with the S&P 500 (+0.09%) up for an 8th consecutive session to another record high. For reference, that’s the longest winning streak since April 2019, and if we get a 9th day in the green today, that would mark the longest run of consecutive gains since November 2004, back when George W. Bush had just beaten John Kerry to win a second term. It's also 17 out of 19 days up, which hasn’t happened since December 1971. All these records for various equity indices might seem jarring when you consider that there are still strong inflationary pressures in the pipeline, and with them the prospect of a renewed hawkish shift by central banks. However, the prevalent view among economists (which continues to influence investors) remains that those pressures will prove transitory and we’ll see price pressures diminish as we move through next year, hence enabling a steady lift-off in rates from central banks. Obviously it remains to be seen if that proves correct, but that’s still the prevailing view. And even though Covid-19 cases have begun to rise again in many countries, not least in Europe, the positive news from both Merck and Pfizer about a new pill that reduces hospitalisations and deaths offers societies another tool alongside vaccines to help prevent the overwhelming of healthcare systems going forward. And on top of all that, we’ve had a further dose of optimism from the latest payrolls data on Friday, which saw an above-consensus print along with positive revisions to previous months. With that in mind, it was another day of records across the board yesterday, with the NASDAQ (+0.07%), the Dow Jones (+0.29%), and Europe’s STOXX 600 (+0.04%) all ascending to fresh highs of their own. Cyclicals tended to outperform, and the small-cap Russell 2000 (+0.23%) was yet another index that hit an all-time high. Not even Tesla declining -4.84% after Elon Musk’s weekend Twitter poll over whether he should sell 10% of his stake was enough to derail things. Materials led the pack (+1.23%) with energy (+0.88%) close behind thanks to a fresh boost in commodity prices. By the close of trade, Brent Crude was up another +0.83% to $83.43/bbl, so still beneath its peak from a couple of weeks ago, but very much remaining in the range above $80/bbl that we’ve seen since the start of October. For sovereign bonds, however, the rally from late last week reversed, 5yr US Treasuries increased +6.1bps, bringing them back above last Thursday’s close, while yields on 10yr US Treasuries were up +3.8bps to 1.49%. Both were entirely driven by higher inflation breakevens, as 5yr and 10yr breakevens both increased +7.1bps. 10yr real yields sank -3.4bps to -1.13%, putting them less than 10bps away from their intraday low back in August of -1.220%. Over in Europe, it was much the same story of higher nominal yields thanks to rising inflation expectations, with yields on 10yr bunds (+3.7bps), OATs (+3.6bps) and BTPs (+1.7bps) all ending the session higher. Overnight in Asia stocks are trading in the red with the Shanghai Composite (-0.02%), Hang Seng (-0.07%), CSI (-0.30%), KOSPI (-0.29%) and the Nikkei (-0.66%) all down. In Japan, wages grew at +0.2% year-on-year in September (vs +0.6% consensus) and real wages actually fell -0.6% as prices rose faster. The new Prime Minister Kishida is expected to announce a stimulus package to boost Japan's recovery in an effort to shore up wages. Staying in Asia, strains on global supply chains continue with Bangladeshi truckers continuing their strike from Friday over a 23% hike in diesel prices. Protests are intensifying as diesel shortages have already sent prices upwards of 64% this year. Futures are indicating that the winning streak in the US and Europe might be under threat with S&P 500 futures (-0.25%) and DAX futures (-0.28%) both down. With all eyes on when we might get some news about the various Fed positions, another place opened up on the Board yesterday after Randal Quarles said that he would be resigning his position as a Governor at the end of December. Quarles had also been Vice Chair for Supervision, though his four-year term for that post came to an end last month. Quarles’ departure from the Fed Board means that there’s now another position at the Fed for President Biden to fill, with Jay Powell’s term as chair concluding in February, Vice Chair Clarida’s position on the board concluding at the end of January, and an additional vacant post on the Board on top of those. Staying on the Fed, yesterday we had the latest Survey of Consumer Expectations from the new York Fed, which showed that one-year inflation expectations hit a series high of 5.7%, while the 3-year inflation expectations remained at a joint-series high of 4.2%. Separately, we also heard from Vice Chair Clarida, who reiterated his belief that the necessary conditions “for raising the target range for the federal funds rate will have been met by year-end 2022.” The Fed also released its bi-annual Financial Stability Report after the closing bell last night. Timely, considering the record run equities have been on, the report noted that “asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall.” Other key risks the report mentions include stablecoins, retail-fuelled volatility, and structural vulnerabilities in money market funds. While on structural vulnerabilities, the Inter-Agency Working Group, five key US regulators, also released a progress report on potential Treasury market reforms. There are a number of reforms being considered; what is ultimately adopted will have a sizable impact on the shape of the Treasury market and demand for Treasury securities. To the day ahead now, and data releases includethe US PPI reading for October, along with that month’s NFIB small business optimism index. Over in Germany, there’s also the ZEW survey for November and the trade balance for September. Central bank speakers include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and PBoC Governor Yi Gang, along with the ECB’s Panetta, Rehn, Knot and Schnabel, the Fed’s Bullard, Daly and Kashkari, and BoE Deputy Governor Broadbent. Tyler Durden Tue, 11/09/2021 - 08:08.....»»

Category: personnelSource: nytNov 9th, 2021

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

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

Category: blogSource: zerohedgeNov 4th, 2021

Futures At All Time High On Evergrande Reprieve Despite Intel, Snapchat Collapse

Futures At All Time High On Evergrande Reprieve Despite Intel, Snapchat Collapse S&P 500 futures traded to within 2 points of their September all time high, rising 0.12% to 4547, just shy of their 4549.5 record after China's Evergrande unexpectedly made a last minute coupon payment, averting an imminent weekend default and boosting risk sentiment. But while spoos were up, Nasdaq futures edged -0.18% lower after Intel warned of lower profit margins, while Snap crashed 22%, leading declines among social media firms after flagging a hit to digital advertising from privacy changes by Apple. Intel plunged 10% in premarket trading as it missed third-quarter sales expectations, while its Chief Executive pointed to shortage of other chips holding back sales of the company's flagship processors. 10Y yields dropped 2bps, the dollar slumped and bitcoin traded above $63,000. Fed Chair Powell is scheduled to speak at 11am ET.  The Chinese property giant’s bond-coupon payment has boosted sentiment because it reduces risks to the broader financial system, according to Pierre Veyret, technical analyst at ActivTrades. “However, this optimistic trading mood may be short-lived as investors’ biggest concern remains inflation,” he said. “Traders will listen intently to Jerome Powell today as the Fed chairman is expected to give more clues about monetary policy.” Not everything was roses, however, and Facebook fell 3.7%, while Twitter lost 4.1% after Snap said privacy changes by Apple on iOS devices hurt the company's ability to target and measure its digital advertising Snap plunged 20.9% on the news and cast doubts over quarterly reports next week from Facebook and Twitter, social media firms that rely heavily on advertising revenue. Meanwhile supply chain worries, inflationary pressures and labor shortages have been at the center of third-quarter earnings season, with analysts expecting S&P 500 earnings to rise 33.7% year-on-year, according to Refinitiv data. Some analysts, however, said such worries will only have a temporary impact on earnings from mega-cap technology and communications companies this reporting season. "Intel also produced less than stellar results. Shorting big-tech has been a good way to lose money in the past two years, and I expect only a temporary aberration," wrote Jeffrey Halley, senior market analyst, Asia Pacific at OANDA in a client note. Elsewhere, Apple rose 0.2%. Other giga tech stocks including Tesla, Microsoft and Netflix also rose, limiting declines on Nasdaq 100 e-minis. Here are some more premarket movers: Mattel (MAT US) rose 6.7% after the firm known for its Barbie and Fisher-Price toys lifted its full-year guidance amid a sales rebound, even as it grapples with a global logistics crunch ahead of Christmas. Digital World Acquisition (DWAC US) jumped 67% after more than quadrupling on Thursday after news that the blank-check company would merge with former President Donald Trump’s media firm. Phunware (PHUN US) soared 288% as the company, which runs a mobile enterprise cloud platform, is plugged by retail traders on Reddit. Whirlpool (WHR US) fell 2% as the maker of refrigerators reported sales that fell short of Wall Street’s estimates, citing supply chain woes. Investors were more upbeat about Europe, where consumer and tech companies led a 0.6% gain for the Stoxx 600 Index which headed for a third week of gains with cosmetics maker L’Oreal SA jumping more than 6% after reporting sales that were significantly higher than analysts expected. Euro Stoxx 50 and CAC gain over 1%, FTSE 100 and IBEX lag but hold in the green. Tech, household & personal goods and auto names are the strongest sectors. On the downside, French carmaker Renault SA and London Stock Exchange Group Plc were the latest companies to report supply-chain challenges. Here are some of the biggest European movers today: L’Oreal shares rise as much as 6.8% after its 3Q sales beat impresses analysts, with Citi praising the French beauty-product maker’s capacity to re-balance growth between different geographies at a time of worry over China. The stock posted its biggest gain in almost a year. Essity shares are the biggest gainers in the OMX Stockholm 30 large cap index after 3Q EPS beat consensus by 10%, with Jefferies citing lower financing costs as among reasons for the improved earnings. Thule shares rise as much as 6.7%, most since July 21, after the company reported earnings for the third quarter. Klepierre shares gain as much as 4.8%, hitting the highest since Sept. 30, after the French mall owner boosted its net current cash flow per share view amid an ongoing recovery in its markets and stronger-than- expected rent collection. Wise shares fell as much as 5.4% after co-founder Taavet Hinrikus sold a stake worth GBP81.5m in the digital-payments provider to invest in early-stage businesses. Boliden shares declined as much as 6.1%, most since May 2020, after 3Q earnings missed estimates. London Stock Exchange declines as much as 4.2% following third-quarter earnings, with Citi (neutral) describing the revenue mix as “marginally disappointing” amid underperformance in the data and analytics division. Shares in holding company Lifco fell as much as 8% after reporting disappointing sales numbers in its dental business, missing Kepler Cheuvreux’s revenue estimates by 18%. European stocks ignored the latest warning print from the continent's PMIs, where the composite flash PMI declined by 1.9pt to 54.3 in October—well below consensus expectations—continuing the moderation from its July high. The area-wide softening was primarily led by Germany, although sequential momentum slowed elsewhere too. In the UK, on the heels of a succession of downside surprises, the composite PMI surprised significantly to the upside for the first time since May. Supply-side constraints continue to exert upward price pressures, with both input and output prices rising further and reaching new all-time highs across most of Europe. Euro Area Composite PMI (October, Flash): 54.3, GS 54.9, consensus 55.2, last 56.2. Euro Area Manufacturing PMI (October, Flash): 58.5, GS 57.1, consensus 57.1, last 58.6. Euro Area Services PMI (October, Flash): 54.7, GS 54.8, consensus 55.4, last 56.4. Germany Composite PMI (October, Flash): 52.0, GS 54.5, consensus 54.3, last 55.5. France Composite PMI (October, Flash): 54.7, GS 54.3, consensus 54.7, last 55.3. UK Composite PMI (October, Flash): 56.8, GS 53.6, consensus 54.0, last 54.9. Earlier in the session, Asian equities climbed, led by China, as signs that Beijing may be easing its property policies and a bond interest payment by Evergrande boosted sentiment. The MSCI Asia Pacific Index rose 0.2%, on track to take its weekly advance to almost 1%. Chinese real estate stocks, including Seazen Group and Sunac China, were among the top gainers Friday, after Beijing called for support for first-home purchases, adding to recent official rhetoric on property market stability. China Evergrande Group pulled back from the brink of default by paying a bond coupon before this weekend’s deadline. The payment “brings some near-term reprieve ahead of its official default deadline and presents a more positive scenario than what many will have expect,” said Jun Rong Yeap, a market strategist at IG Asia Pte. The Asian measure was also bolstered by tech shares, including Japan’s Tokyo Electron and Tencent, while the Hang Seng Tech Index capped a 6.9% rise for the week in its biggest climb since August. The gains in the sector offset declines for mining shares as coal futures in China extended a price collapse to more than 20% in three days. Unlike in the U.S., where stocks are trading at a record high, Asian shares have been mixed in recent weeks as traders try to assess the impact on earnings of inflation, supply chain constraints and China’s growth slowdown. Falling earnings growth forecasts, combined with rising inflation expectations, are continuing to cast “a stagnation shadow over markets,” Kerry Craig, a global markets strategist at JPMorgan Asset Management, said in a note. In rates, Treasuries resumed flattening with long-end yields richer by more than 2bp on the day, while 2-year yield breached 0.46% for the first time since March 2020, extending its third straight weekly increase. 2-year yields topped at 0.464% while 10-year retreated from Thursday’s five-month high 1.70% to ~1.685%, remaining higher on the week; 2s10s is flatter by 2.5bp, 5s30s by ~1bp. In 10-year sector bunds cheapen by 3.5bp vs Treasuries as German yield climbs to highest since May; EUR 5y5y inflation swap exceeds 2% for the first time since 2014. In Europe, yield curves were mixed: Germany bear-flattened with 10-year yields ~2bps cheaper near -0.07%. Meanwhile, measures of inflation expectations continue to print new highs with EUR 5y5y inflation swaps hitting 2%, the highest since 2014, and U.K. 10y breakevens printing at a 25-year high. In FX, AUD and NZD top the G-10 scoreboard. The Bloomberg dollar index Index fell and the greenback traded weaker against all its Group-of-10 peers apart from the pound; risk-sensitive Scandinavian and Antipodean currencies led gains. The pound inched lower after U.K retail sales fell unexpectedly for a fifth month as consumer confidence plunged, adding to evidence that the economic recovery is losing momentum. The cost of hedging against inflation in the U.K. over the next decade rose to the highest level in 25 years amid mounting concern over price pressures building in the economy. The Aussie dollar climbed as positive sentiment was boosted by the news about Evergrande Group’s bond payment; it had earlier fallen to a session low after the central bank announced an unscheduled bond-purchase operation to defend its yield target. The yen held steady following two days of gains as a rally in Treasuries narrows yield differentials between Japan and the U.S. In commodities, crude futures recover off Asia’s worst levels, settling around the middle of this week’s trading range. WTI is 0.5% higher near $82.90, Brent regains a $85-handle. Spot gold adds ~$10 to trade near $1,792/oz. Most base metals trade well with LME nickel and zinc outperforming. Looking at the day ahead, the main data highlight will be the aforementioned flash PMIs from around the world, on top of UK retail sales for September. From central banks, Fed Chair Powell will be speaking, in addition to the Fed’s Daly and the ECB’s Villeroy. Earnings releases will include Honeywell and American Express. Market Snapshot S&P 500 futures little changed at 4,538.75 STOXX Europe 600 up 0.4% to 471.82 MXAP up 0.2% to 200.16 MXAPJ up 0.2% to 661.40 Nikkei up 0.3% to 28,804.85 Topix little changed at 2,002.23 Hang Seng Index up 0.4% to 26,126.93 Shanghai Composite down 0.3% to 3,582.60 Sensex down 0.2% to 60,775.00 Australia S&P/ASX 200 little changed at 7,415.48 Kospi little changed at 3,006.16 Brent Futures up 0.2% to $84.81/bbl Gold spot up 0.5% to $1,792.58 U.S. Dollar Index down 0.18% to 93.60 Euro up 0.2% to $1.1645 Top Overnight News from Bloomberg The Bank of England will likely defy investors’ expectations of a sudden interest-rate increase next month because it rarely shifts policy in such dramatic fashion, according to three former senior officials. The ECB will supercharge its regular bond-buying program before pandemic purchases run out in March, according to economists surveyed by Bloomberg. Euro-area businesses are reporting a sharp slowdown in activity caused by an aggravating global supply squeeze that’s also producing record inflation. French manufacturing output declined at the steepest pace since coronavirus lockdowns were in place last year, while growth momentum deteriorated sharply in Germany, purchasing managers report. Private-sector activity in the euro area slowed to the weakest since April, though it remained above a pre-pandemic average. China continued to pull back on government spending in the third quarter even as the economy slowed, with the cautious fiscal policy reflecting the desire to deleverage and improve public finances. President Joe Biden said the U.S. was committed to defending Taiwan from a Chinese attack, in some of his strongest comments yet as the administration faces calls to clarify its stance on the democratically ruled island. A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded with a positive bias but with gains capped following the temperamental mood on Wall St amid mixed earnings results and although a late tailwind heading into the close lifted the S&P 500 to a record high and contributed to the outperformance of the NDX, futures were then pressured after hours as shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook and Twitter. ASX 200 (Unch.) was subdued amid weakness in mining names and financials but with downside cushioned after the recent reopening in Melbourne and with the RBA also conducting unscheduled purchases to defend the yield target for the first time since February. Nikkei 225 (+0.3%) recovered from opening losses with risk appetite at the whim of a choppy currency and with some encouragement heading into the easing of restrictions in Tokyo and Osaka from Monday. News headlines also provided a catalyst for individual stocks including Nissan which was subdued after it cut planned output by 30% through to November and with Toshiba pressured as merger talks between affiliate Kioxia and Western Digital stalled, while SoftBank enjoyed mild gains after a 13.5% increase in WeWork shares on its debut following a SPAC merger. Hang Seng (+0.4%) and Shanghai Comp. (-0.3%) traded, initially, with tentative gains after another respectable liquidity injection by the PBoC and news of Evergrande making the USD-bond interest payment to avert a default ahead of tomorrow’s grace period deadline. This lifted shares in Evergrande with attention now turning to another grace period deadline for next Friday, although regulatory concerns lingered after the PBoC stated that China will continue separating operations of banking, securities and insurance businesses, as well as signed an MOU with the HKMA on fintech supervision and cooperation in the Greater Bay area. Finally, 10yr JGBs were lower on spillover selling following a resumption a resumption of the curve flattening stateside where T-note futures tested the 130.00 level to the downside amid inflationary concerns and large supply from AerCap which launched the second largest IG dollar bond issuance so far this year. In addition, the gains in Japanese stocks and absence of BoJ purchases in the market today added to the lacklustre demand for JGBs, while today also saw the RBA announce unscheduled purchases valued at AUD 1bln to defend the yield target for the first time since February, although the impact on yields was only brief. Top Asian News Tencent Blames WeChat Access for Search Engines on Loophole JPM’s Yang Joins Primas Asset Management’s Credit Trading Team Gold Rises on Weaker Dollar to Head for Second Weekly Gain Interest Payment Made; Junk Bonds Rally: Evergrande Update A choppy start to the session has seen European equities extend on opening gains (Stoxx 600 +0.8%) with the Stoxx 600 on course to see the week out relatively unchanged. After a marginally positive lead from Asia, European stocks picked up after the cash open with little in the way of clear catalysts for the surge. Macro focus for the region has fallen on flash PMI readings for October which painted a mixed picture for the Eurozone economy as the EZ-wide services metric fell short of expectations whilst manufacturing exceeded forecasts. Despite printing north of the 50-mark, commentary from IHS Markit was relatively downbeat, noting that "After strong second and third quarter expansions, GDP growth is looking much weaker by comparison in the fourth quarter.” Stateside, futures are mixed with the ES relatively flat whilst the NQ (-0.3%) lags after shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook (-4% pre-market) and Twitter (-4.5% pre-market). Elsewhere in the US, traders are awaiting further updates in Capitol Hill, however, moderate Democrat Senator Manchin has already tempered expectations for a deal being reached by today’s goal set by Senate Majority Leader Schumer. Back to Europe, sectors are mostly firmer with outperformance in Personal & Household Goods following earnings from L’Oreal (+6.2%) who sit at the stop of the Stoxx 600 after Q3 earnings saw revenues exceed expectations. To the downside, Telecom names are lagging amid losses in Ericsson (-3.1%) after the DoJ stated that the Co. breached obligations under a Deferred Prosecution Agreement. Elsewhere, Vivendi (+3.1%) is another notable gainer in the region as Q3 earnings exceeded analyst estimates. LSE (-3.3%) sits at the foot of the FTSE 100 post-Q3 results, whilst IHG (-3.5%) is another laggard in the index post-earnings as the Co.’s fragile recovery continues. Top European News U.K.-France Power Cable Has Unplanned Halt: National Grid Banks Prepare to Fight Basel Over Carbon Derivatives Rule Wise Slumps After Founder Hinrikus Offloads $112 Million Stake London Stock Exchange Says Supply Chains to Delay Tech Spend In FX, the Greenback has topped out yet again, and partly in tandem with US Treasury yields following their latest ramp up, but also against the backdrop of improved risk appetite that emerged during APAC hours when reports that China’s Evergrande made an overdue interest payment helped to lift sentiment after a late tech-led downturn on Wall Street. The index may also have lost momentum on technical grounds following a minor extension to 93.792, but still not enough impetus to reach 94.000 or test a couple of resistance levels standing in the way of the nearest round number (Fib resistance at 93.884 and 21 DMA that comes in at 93.948 today compared to 93.917 on Thursday), and a fade just shy of yesterday’s best before the aforementioned drift back down to meander between a narrow 93.789-598 corridor. Ahead, Markit’s flash PMIs and a trio of Fed speakers including Williams, Daly and chair Powell feature on Friday’s agenda alongside today’s batch of earnings. AUD/NZD/CAD - Honours remain pretty even down under as the Aussie and Kiwi both take advantage of the constructive market tone that is weighing on their US counterpart, while assessing specifics such as RBA Governor Lowe reiterating no target rate for Aud/Usd, but the Bank having to intervene in defence of the 0.1% 3 year yield target for the first time in 8 months overnight in wake of upbeat preliminary PMIs. Meanwhile, NZ suffered another record number of new COVID-19 cases to justify PM Adern’s resolve to keep restrictions tight until 90% of the population have been vaccinated and keep Nzd/Usd capped under 0.7200 in mild contrast to Aud/Usd hovering just above 0.7500. Elsewhere, some traction for the Loonie in the run up to Canadian retail sales from a rebound in WTI to retest Usd 83/brl from recent sub-Usd 81 lows, as Usd/Cad retreats towards the bottom of a 1.2375-30 range. EUR/CHF/GBP/JPY - All marginally firmer or flat against the Dollar, but the Euro easing back into a lower band beneath 1.1650 and not really helped by conflicting flash PMIs or decent option expiry interest from 1.1610-00 (1.4 bn) that could exert a gravitational pull into the NY cut. The Franc is keeping afloat of 0.9300, but under 0.9250, the Pound has bounced to probe 1.3800 on the back of considerably stronger than expected UK prelim PMIs that have offset poor retail sales data and could persuade more of the BoE’s MPC to tilt hawkishly in November, especially after the new chief economist said the upcoming meeting is live and policy verdict finely balanced. Conversely, the BoJ is widely tipped to maintain accommodation next week and as forecast Japanese inflation readings will do little to change perceptions, putting greater emphasis on the Outlook Report for updated growth and core CPI projections and leaving the Yen tethered around 114.00 in the meantime. SCANDI/EM - The Sek and Nok are on a firm footing circa 9.9800 and 9.7000 against the Eur respectively, and the former may be acknowledging an upbeat Riksbank business survey, while the latter piggy-backs Brent’s recovery that is also underpinning the Rub in the run up to the CBR and anticipated 25 bp hike. The Cnh and Cny are back in the ascendency with extra PBoC liquidity and Evergrande evading a grace period deadline by one day to compensate for ongoing default risk at its main Hengda unit, but the Try is still trying in vain to stop the rot following Thursday’s shock 200 bp CBRT blanket rate cuts and has been down to almost 9.6600 vs the Usd. In commodities, WTI and Brent are marginally firmer this morning though reside within overnight ranges and have been grinding higher for the duration of the European session in-spite of the lack of newsflow generally and for the complex. Currently, the benchmarks are firmer by circa USD 0.40/bbl respectively and reside just off best levels which saw a brief recapture of the USD 83/bbl and USD 85/bbl handles. Given the lack of updates, the complex remains attentive to COVID-19 concerns where officials out of China reiterated language issues yesterday about curbing unnecessary travel around Beijing following cases being reported in the region. Elsewhere, yesterday’s remarks from Putin continue to draw focus around OPEC+ increasing output more than agreed and once again reiterating that Russia can lift gas supplies to Europe; but, as of yet, there is no update on the situation. Finally, the morning’s European earnings were devoid of energy names, but updated Renault guidance is noteworthy on the fuel-demand front as the Co. cut its market forecast to Europe and anticipates a FY21 global vehicle loss of circa 500k units due to component shortages. Moving to metals, spot gold and silver are firmer but have been fairly steady throughout the session perhaps aided by the softer dollar while elevated yields are perhaps capping any upside. Base metals remain buoyed though LME copper continues to wane off the closely watched 10k mark. US Event Calendar 9:45am: Oct. Markit US Composite PMI, prior 55.0 9:45am: Oct. Markit US Services PMI, est. 55.2, prior 54.9 9:45am: Oct. Markit US Manufacturing PMI, est. 60.5, prior 60.7 10am: Fed’s Daly Discusses the Fed and Climate Change Risk 11am: Powell Takes Part in a Policy Panel Discussion DB's Jim Reid concludes the overnight wrap Hopefully today is my last Friday ever on crutches but with two likely knee replacements to come in the next few years I suspect not! 6 days to go until the 6 weeks of no weight bearing is over. I’m counting down the hours. Tomorrow I’ll be hobbling to London to see “Frozen: The Musical”. I’ve almost had to remortgage the house for 5 tickets. There is no discount for children which is a great business model if you can get away with it. Actually given the target audience there should be a discount for adults as I can think of better ways of spending a Saturday afternoon. The weekends have recently been the place where the Bank of England shocks the market into pricing in imminent rate hikes. Well to give us all a break they’ve gone a couple of days early this week with new chief economist Huw Pill last night telling the FT that the November meeting was “live” and that with inflation was likely to rise “close to or even slightly above 5 per cent” early next year, which for a central bank with a 2% inflation target, is “a very uncomfortable place to be”. Having said that, he did add that "maybe there’s a bit too much excitement in the focus on rates right now" and also talked about how the transitory nature of inflation meant there was no need to go into a restrictive stance. So the market will probably firm up November hike probabilities today but may think 1-2 year pricing is a little aggressive for the moment. However, it’s been a volatile ride in short sterling contracts of late so we will see. Ultimately the BoE will be a hostage to events. If inflation remains stubbornly high they may have to become more hawkish as 2022 progresses. This interview capped the end of a day with another selloff in sovereign bond markets as investors continued to ratchet up their expectations of future price growth. In fact by the close of trade, the 5yr US inflation breakeven had risen +10.0bps to 2.91%, and this morning they’re up another +3.5bps to 2.95%, which takes them to their highest level in the 20 years that TIPS have traded. 10y breakevens closed up +4.7bps at 2.65%, their highest level since 2011. Bear in mind that at the depths of the initial Covid crisis back in 2020, the 5yr measure fell to an intraday low of just 0.11%, so in the space of just over 18 months investors have gone from expecting borderline deflation over the next 5 years to a rate some way above the Fed’s target. Those moves weren’t just confined to the US however, as longer-term inflation expectations moved higher in Europe too. The 10yr German breakeven rose +5.4bps to a post-2013 high of 1.87%, and its Italian counterpart hit a post-2011 high of 1.78%. And what’s noticeable as well is that these higher inflation expectations aren’t simply concentrated for the next few years of the time horizon, since the 5y5y inflation swaps that look at expectations for the five year period starting in five years’ time have also seen substantial increases. Most strikingly of all, the Euro Area 5y5y inflation swap is now at 1.95%, which puts it almost at the ECB’s 2% inflation target for the first time since 2014. The global increase in inflation compensation drove nominal yields higher, with the yield on 10yr US Treasuries up +4.4bps yesterday to a 6-month high of 1.70%, as investors are now pricing in an initial hike from the Fed by the time of their July 2022 meeting. And in Europe there was a similar selloff, with yields on 10yr bunds (+2.4bps), OATs (+2.1bps) and BTPs (+2.7bps) all moving higher too. Interestingly though, the slide in sovereign bonds thanks to higher inflation compensation came in spite of the fact that commodity prices slid across the board, with energy, metal and agricultural prices all shifting lower, albeit in many cases from multi-year highs. Both Brent Crude (-1.41%) and WTI (-1.63%) oil prices fell by more than -1% for the first time in over two weeks, whilst the industrial bellwether of copper (-3.72%) had its worst daily performance since June. Even with high inflation remaining on the agenda, US equities proved resilient with the S&P 500 (+0.30%) posting a 7th consecutive advance to hit an all-time high for the first time in 7 weeks. Consumer discretionary and retail stocks were the clear outperformer, in line with the broader reflationary sentiment. Other indices forged ahead too, with the NASDAQ (+0.62%) moving to just -1.04% beneath its own all-time record, whilst the FANG+ index (+1.11%) of megacap tech stocks climbed to a fresh record as well. In Europe the major indices were weaker with the STOXX 600 retreating ever so slightly, by -0.08%, but it still remains only -1.29% beneath its August record. Looking ahead, the main theme today will be the release of the flash PMIs from around the world, which will give us an initial indication of how various economies have fared through the start of Q4. Obviously one of the biggest themes has been supply-chain disruptions throughout the world, so it’ll be interesting to see how these surface, but the composite PMIs over recent months had already been indicating slowing growth momentum across the major economies. Our European economists are expecting there’ll be a further decline in the Euro Area composite PMI to 55.1. Overnight we've already had some of those numbers out of Asia, which have showed a recovery from their September levels. Indeed, the Japanese service PMI rose to 50.7 (vs. 47.8 in Sep), which is the first 50+ reading since January 2020 before the pandemic began, whilst the composite PMI also moved back into expansionary territory at 50.7 for the first time since April. In Australia there was also a move back into expansion, with their composite PMI rising to 52.2 (vs. 46.0 in Sep), the first 50+ reading since June. Elsewhere in Asia, equity markets have followed the US higher, with the Hang Seng (+0.92%), CSI (+0.87%), Hang Seng (+0.42%), KOSPI (+0.27%) and Shanghai Composite (+0.09%) all in the green. That also comes as Japan’s nationwide CPI reading moved up to +0.2% on a year-on-year basis, in line with expectations, which is the first time so far this year that annual price growth has been positive. In other news, we learnt from the state-backed Securities Times newspaper that Evergrande has avoided a default by making an $83.5m interest payment on a bond whose 30-day grace period was going to end this weekend. Separately, the state TV network CCTV said that 4 Covid cases had been reported in Beijing and an official said that they would be testing 34,700 people in a neighbourhood linked to those cases. Looking forward, equity futures are pointing to a somewhat slower start in the US, with those on the S&P 500 down -0.08%. Turning to the pandemic, global cases have continued to shift higher in recent days, and here in the UK we had over 50k new cases reported yesterday for the first time since mid-July. New areas are moving to toughen up restrictions, with Moscow moving beyond the nationwide measures in Russia to close most shops and businesses from October 28 to November 7. In better news however, we got confirmation from Pfizer and BioNTech that their booster shot was 95.6% effective against symptomatic Covid in a trial of over 10,000 people. Finally, there was some decent economic data on the US labour market, with the number of initial jobless claims in the week through October 16 coming in at 290k (vs. 297k expected). That’s the lowest they’ve been since the pandemic began and also sends the 4-week average down to a post-pandemic low of 319.75k. Alongside that, the continuing claims for the week through October 9 came down to 2.481m (vs. 2.548m expected). Otherwise, September’s existing home sales rose to an annualised rate of 6.29m (vs. 6.10m expected), and the Philadelphia Fed’s business outlook survey fell to 23.8 (vs. 25.0 expected). To the day ahead now, and the main data highlight will be the aforementioned flash PMIs from around the world, on top of UK retail sales for September. From central banks, Fed Chair Powell will be speaking, in addition to the Fed’s Daly and the ECB’s Villeroy. Earnings releases will include Honeywell and American Express. Tyler Durden Fri, 10/22/2021 - 08:07.....»»

Category: dealsSource: nytOct 22nd, 2021

Futures Rebound From Overnight Slide As Oil Keeps Rising

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

Category: personnelSource: nytOct 12th, 2021

Futures Slide On Growing Stagflation Fears As Treasury Yields Surge

Futures Slide On Growing Stagflation Fears As Treasury Yields Surge US index futures, European markets and Asian stocks all turned negative during the overnight session, surrendering earlier gains as investors turned increasingly concerned about China's looming slowdown - and outright contraction - amid a global stagflationary energy crunch, which sent 10Y TSY yields just shy of 1.50% this morning following a Goldman upgrade in its Brent price target to $90 late on Sunday. At 745 a.m. ET, S&P 500 e-minis were down 4.75 points, or 0.1% after rising as much as 0.6%, Nasdaq 100 e-minis were down 83 points, or 0.54% and Dow e-minis were up 80 points, or 0.23%. The euro slipped as Germany looked set for months of complex coalition talks. While the market appears to have moved beyond the Evergrande default, the debt crisis at China's largest developer festers (with Goldman saying it has no idea how it will end), and data due this week will show a manufacturing recovery in the world’s second-largest economy is faltering faster. A developing energy crisis threatens to crimp global growth further at a time markets are preparing for a tapering of Fed stimulus. The week could see volatile moves as traders scrutinize central bankers’ speeches, including Chair Jerome Powell’s meetings with Congressional panels. “Most bad news comes from China these days,” Ipek Ozkardeskaya, a senior analyst at Swissquote Group Holdings, wrote in a note. “The Evergrande debt crisis, the Chinese energy crackdown on missed targets and the ban on cryptocurrencies have been shaking the markets, along with the Fed’s more hawkish policy stance last week.” Oil majors Exxon Mobil and Chevron Corp rose 1.5% and 1.2% in premarket trade, respectively, tracking crude prices, while big lenders including JPMorgan, Citigroup, Morgan Stanley and Bank of America Corp gained about 0.8%.Giga-cap FAAMG growth names such as Alphabet, Microsoft, Amazon.com, Facebook and Apple all fell between 0.3% and 0.4%, as 10Y yield surged, continuing their selloff from last week, which saw the 10Y rise as high as 1.4958% and just shy of breaching the psychological 1.50% level. While growth names were hit, value names rebounded as another market rotation appears to be in place: industrials 3M Co and Caterpillar Inc, which tend to benefit the most from an economic rebound, also inched higher (although one should obviously be shorting CAT here for its China exposure). Market participants have moved into value and cyclical stocks from tech-heavy growth names after the Federal Reserve last week indicated it could begin unwinding its bond-buying program by as soon as November, and may raise interest rates in 2022. Here are some other notable premarket movers: Gores Guggenheim (GGPI US) shares rise 7.2% in U.S. premarket trading as Polestar agreed to go public with the special purpose acquisition company, in a deal valued at about $20 billion. Naked Brand (NAKD US), one of the stocks caught up in the first retail trading frenzy earlier this year, rises 11% in U.S. premarket trading, extending Friday’s gains. Among other so-called meme stocks in premarket trading: ReWalk Robotics (RWLK) +6.5%, Vinco Ventures (BBIG) +18%, Camber Energy (CEI) +2.9% Pfizer (PFE US) and Opko Health (OPK US) in focus after they said on Friday that the FDA extended the review period for the biologics license application for somatrogon. Opko fell 3.5% in post-market trading. Aspen Group (ASPU) climbed 10% in Friday postmarket trading after board member Douglas Kass buys $172,415 of shares, according to a filing with the U.S. Securities & Exchange Commission. Seaspine (SPNE US) said spine surgery procedure volumes were curtailed in many areas of the U.S. in 3Q and particularly in August. Tesla (TSLA US) and other electric- vehicle related stocks globally may be active on Monday after Germany’s election, in which the Greens had their best-ever showing and are likely to be part of any governing coalition. Europe likewise drifted lower, with the Stoxx Europe 600 Index erasing earlier gains and turning negative as investors weighed the risk to global growth from the China slowdown and the energy crunch. The benchmark was down 0.1% at last check. Subindexes for technology (-0.9%) and consumer (-0.8%) provide the main drags while value outperformed, with energy +2.4%, banks +2% and insurance +1.3%.  The DAX outperformed up 0.5%, after German election results avoided the worst-case left-wing favorable outcome.  U.S. futures. Rolls-Royce jumped 12% to the highest since March 2020 after the company was selected to provide the powerplant for the B-52 Stratofortress under the Commercial Engine Replacement Program. Here are some of the other biggest European movers today IWG rises as much as 7.5% after a report CEO Mark Dixon is exploring a multibillion-pound breakup of the flexible office-space provider AUTO1 gains as much as 6.1% after JPMorgan analyst Marcus Diebel raised the recommendation to overweight from neutral Cellnex falls as much as 4.3% to a two-month low after the tower firm is cut to sell from neutral at Citi, which says the stock is “priced for perfection in an imperfect industry” European uranium stocks fall with Yellow Cake shares losing as much as 6% and Nac Kazatomprom shares declining as much as 4.7%. Both follow their U.S. peers down following weeks of strong gains as the price of uranium ballooned For those who missed it, Sunday's closely-watched German elections concluded with the race much closer than initially expected: SPD at 25.7%, CDU/CSU at 24.1%, Greens at 14.8%, FDP at 11.5%, AfD at 10.3% Left at 4.9%, the German Federal Returning Officer announced the seat distribution from the preliminary results which were SPD at 206 seats, CDU/CSU at 196. Greens at 118, FDP at 92, AfD at 83, Left at 39 and SSW at 1. As it stands, three potential coalitions are an option, 1) SPD, Greens and FDP (traffic light), 2) CDU/CSU, Greens and FDP (Jamaica), 3) SPD and CDU/CSU (Grand Coalition but led by the SPD). Note, option 3 is seen as the least likely outcome given that the CDU/CSU would be unlikely willing to play the role of a junior partner to the SPD. Therefore, given the importance of the FDP and Greens in forming a coalition for either the SPD or CDU/CSU, leaders of the FDP and Greens have suggested that they might hold their own discussions with each other first before holding talks with either of the two larger parties. Given the political calculus involved in trying to form a coalition, the process is expected to play out over several months. From a markets perspective, the tail risk of the Left party being involved in government has now been removed due to their poor performance and as such, Bunds trade on a firmer footing. Elsewhere, EUR is relatively unfazed due to the inconclusive nature of the result. We will have more on this in a subsequent blog post. Asian stocks fell, reversing an earlier gain, as a drop in the Shanghai Composite spooked investors in the region by stoking concerns about the pace of growth in China’s economy.  The MSCI Asia Pacific Index wiped out an advance of as much as 0.7%, on pace to halt a two-day climb. Consumer discretionary names and materials firms were the biggest contributors to the late afternoon drag. Financials outperformed, helping mitigate drops in other sectors.  “Seeing Shanghai shares extending declines, investors’ sentiment has turned weak, leading to profit-taking on individual stocks or sectors that have been gaining recently,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities. “The drop in Chinese equities is reminding investors about a potential slowdown in their economy.”  The Shanghai Composite was among the region’s worst performers along with Vietnam’s VN Index. Shares of China’s electricity-intensive businesses tumbled after Beijing curbed power supplies in the country’s manufacturing hubs to cut emissions. The CSI 300 still rose, thanks to gains in heavily weighted Kweichow Moutai and other liquor makers. Asian equities started the day on a positive note as financials jumped, tracking gains in U.S. peers and following a rise in Treasury yields. Resona Holdings was among the top performers after Morgan Stanley raised its view on the stock and Japanese banks. The regional market has been calmer over the past few trading sessions after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. While anxiety lingers, many investors expect China will resolve the distressed property developer’s problems rather than let them spill over into an echo of 2008’s Lehman crisis. Japanese equities closed lower, erasing an earlier gain, as concerns grew over valuations following recent strength in the local market and turmoil in China. Machinery and electronics makers were the biggest drags on the Topix, which fell 0.1%. Daikin and Bandai Namco were the largest contributors to a dip of less than 0.1% in the Nikkei 225. Both gauges had climbed more 0.5% in morning trading. Meanwhile, the Shanghai Composite Index fell as much as 1.5% as industrials tumbled amid a power crunch. “Seeing Shanghai shares extending declines, investors’ sentiment has turned weak, leading to profit-taking on individual stocks or sectors that have been gaining recently,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities Co. “The drop in Chinese equities is reminding investors about a potential slowdown in their economy. That’s why marine transportation stocks, which are representative of cyclical sectors, fell sharply.” Shares of shippers, which have outperformed this year, fell as investors turned their attention to reopening plays. Travel and retail stocks gained after reports that the government is making final arrangements to lift all the coronavirus state of emergency order in the nation as scheduled at the end of this month. Australia's commodity-heavy stocks advanced as energy, banking shares climb. The S&P/ASX 200 index rose 0.6% to close at 7,384.20, led by energy stocks. Banks also posted their biggest one-day gain since Aug. 2. Travel stocks were among the top performers after the prime minister said state premiers must not keep borders closed once agreed Covid-19 vaccination targets are reached. NextDC was the worst performer after the company’s CEO sold 1.6 million shares. In New Zealand, the S&P/NZX 50 index. In FX, the U.S. dollar was up 0.1%, while the British pound, Australian dollar, and Canadian dollar lead G-10 majors, with the Swedish krona and Swiss franc lagging. •    The Bloomberg Dollar Spot Index was little changed and the greenback traded mixed versus its Group-of-10 peers o    Volatility curves in the major currencies were inverted last week due to a plethora of central bank meetings and risk-off concerns. They have since normalized as stocks stabilize and traders assess the latest forward guidance on monetary policy •    The yield on two-year U.S. Treasuries touched the highest level since April 2020, as tightening expectations continued to put pressure on front-end rates and ahead of debt sales later Monday •    The pound advanced, with analyst focus on supply chain problems as Prime Minister Boris Johnson considers bringing in army drivers to help. Bank of England Governor Andrew Bailey’s speech later will be watched after last week’s hawkish meeting •    Antipodean currencies, as well as the Norwegian krone and the Canadian dollar were among the best Group-of-10 performers amid a rise in commodity prices •    The yen pared losses after falling to its lowest level in six weeks and Japanese stocks paused their rally and amid rising Treasury yields   In rates, treasuries extended their recent drop, led by belly of the curve ahead of this week’s front-loaded auctions, which kick off Monday with 2- and 5-year note sales.  Yields were higher by up to 4bp across belly of the curve, cheapening 2s5s30s spread by 3.2bp on the day; 10-year yields sit around 1.49%, cheaper by 3.5bp and underperforming bunds, gilts by 1.5bp and 0.5bp while the front-end of the curve continues to sell off as rate-hike premium builds -- 2-year yields subsequently hit 0.284%, the highest level since April 2020. 5-year yields top at 0.988%, highest since Feb. 2020 while 2-year yields reach as high as 0.288%; in long- end, 30-year yields breach 2% for the first time since Aug. 13. Auctions conclude Tuesday with 7-year supply. Host of Fed speakers due this week, including three scheduled for Monday. In commodities, Brent futures climbed 1.4% to $79 a barrel, while WTI futures hit $75 a barrel for the first time since July, amid an escalating energy crunch across Europe and now China. Base metals are mixed: LME copper rises 0.4%, LME tin and nickel drop over 2%. Spot gold gives back Asia’s gains to trade flat near $1,750/oz In equities, Stoxx 600 is up 0.6%, led by energy and banks, and FTSE 100 rises 0.4%. Germany’s DAX climbs 1% after German elections showed a narrow victory for social democrats, with the Christian Democrats coming in a close second, according to provisional results. S&P 500 futures climb 0.3%, Dow and Nasdaq contracts hold in the green. In FX, the U.S. dollar is up 0.1%, while the British pound, Australian dollar, and Canadian dollar lead G-10 majors, with the Swedish krona and Swiss franc lagging. Base metals are mixed: LME copper rises 0.4%, LME tin and nickel drop over 2%. Spot gold gives back Asia’s gains to trade flat near $1,750/oz Investors will now watch for a raft of economic indicators, including durable goods orders and the ISM manufacturing index this week to gauge the pace of the recovery, as well as bipartisan talks over raising the $28.4 trillion debt ceiling. The U.S. Congress faces a Sept. 30 deadline to prevent the second partial government shutdown in three years, while a vote on the $1 trillion bipartisan infrastructure bill is scheduled for Thursday. On today's calendar we get the latest Euro Area M3 money supply, US preliminary August durable goods orders, core capital goods orders, September Dallas Fed manufacturing activity. We also have a bunch of Fed speakers including Williams, Brainard and Evans. Market Snapshot S&P 500 futures down 0.1% to 4,442.50 STOXX Europe 600 up 0.3% to 464.54 MXAP little changed at 200.75 MXAPJ little changed at 642.52 Nikkei little changed at 30,240.06 Topix down 0.1% to 2,087.74 Hang Seng Index little changed at 24,208.78 Shanghai Composite down 0.8% to 3,582.83 Sensex up 0.2% to 60,164.70 Australia S&P/ASX 200 up 0.6% to 7,384.17 Kospi up 0.3% to 3,133.64 German 10Y yield fell 3.1 bps to -0.221% Euro down 0.3% to $1.1689 Brent Futures up 1.2% to $79.04/bbl Gold spot little changed at $1,750.88 U.S. Dollar Index up 0.15% to 93.47 Top Overnight News from Bloomberg House Speaker Nancy Pelosi put the infrastructure bill on the schedule for Monday under pressure from moderates eager to get the bipartisan bill, which has already passed the Senate, enacted. But progressives -- whose votes are likely vital -- are insisting on progress first on the bigger social-spending bill Olaf Scholz of the center-left Social Democrats defeated Chancellor Angela Merkel’s conservatives in an extremely tight German election, setting in motion what could be months of complex coalition talks to decide who will lead Europe’s biggest economy China’s central bank pumped liquidity into the financial system after borrowing costs rose, as lingering risks posed by China Evergrande Group’s debt crisis hurt market sentiment toward its peers as well Global banks are about to get a comprehensive blueprint for how derivatives worth several hundred trillion dollars may be finally disentangled from the London Interbank Offered Rate Economists warned of lower economic growth in China as electricity shortages worsen in the country, forcing businesses to cut back on production Governor Haruhiko Kuroda says it’s necessary for the Bank of Japan to continue with large-scale monetary easing to achieve the bank’s 2% inflation target The quant revolution in fixed income is here at long last, if the latest Invesco Ltd. poll is anything to go by. With the work-from-home era fueling a boom in electronic trading, the majority of investors in a $31 trillion community say they now deploy factor strategies in bond portfolios A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded somewhat mixed with the region finding encouragement from reopening headlines but with gains capped heading towards month-end, while German election results remained tight and Evergrande uncertainty continued to linger. ASX 200 (+0.6%) was led higher by outperformance in the mining related sectors including energy as oil prices continued to rally amid supply disruptions and views for a stronger recovery in demand with Goldman Sachs lifting its year-end Brent crude forecast from USD 80/bbl to USD 90/bbl. Furthermore, respectable gains in the largest weighted financial sector and details of the reopening roadmap for New South Wales, which state Premier Berijiklian sees beginning on October 11th, further added to the encouragement. Nikkei 225 (Unch) was kept afloat for most of the session after last week’s beneficial currency flows and amid reports that Japan is planning to lift emergency measures in all areas at month-end, although upside was limited ahead of the upcoming LDP leadership race which reports noted are likely to go to a run-off as neither of the two main candidates are likely to achieve a majority although a recent Kyodo poll has Kono nearly there at 47.4% of support vs. nearest contender Kishida at 22.4%. Hang Seng (+0.1%) and Shanghai Comp. (-0.8%) were varied with the mainland choppy amid several moving parts including back-to-back daily liquidity efforts by the PBoC since Sunday and with the recent release of Huawei’s CFO following a deal with US prosecutors. Conversely, Evergrande concerns persisted as Chinese cities reportedly seized its presales to block the potential misuse of funds and its EV unit suffered another double-digit percentage loss after scrapping plans for its STAR Market listing. There were also notable losses to casino names after Macau tightened COVID-19 restrictions ahead of the Golden Week holidays and crypto stocks were hit after China declared crypto activities illegal which resulted in losses to cryptoexchange Huobi which dropped more than 40% in early trade before nursing some of the losses, while there are also concerns of the impact from an ongoing energy crisis in China which prompted the Guangdong to ask people to turn off lights they don't require and use air conditioning less. Finally, 10yr JGBs were flat but have clawed back some of the after-hour losses on Friday with demand sapped overnight amid the mild gains in stocks and lack of BoJ purchases in the market. Elsewhere, T-note futures mildly rebounded off support at 132.00, while Bund futures outperformed the Treasury space amid mild reprieve from this month’s losses and with uncertainty of the composition for the next German coalition. Top Asian News Moody’s Says China to Safeguard Stability Amid Evergrande Issues China’s Tech Tycoons Pledge Allegiance to Xi’s Vision China Power Crunch Hits iPhone, Tesla Production, Nikkei Reports Top Netflix Hit ‘Squid Game’ Sparks Korean Media Stock Surge Bourses in Europe have trimmed the gains seen at the open, albeit the region remains mostly in positive territory (Euro Stoxx 50 +0.4%; Stoxx 600 +0.2%) in the aftermath of the German election and amid the looming month-end. The week also sees several risk events, including the ECB's Sintra Forum, EZ CPI, US PCE and US ISM Manufacturing – not to mention the vote on the bipartisan US infrastructure bill. The mood in Europe contrasts the mixed handover from APAC, whilst US equity futures have also seen more divergence during European trade – with the yield-sensitive NQ (-0.3%) underperforming the cyclically-influenced RTY (+0.4%). There has been no clear catalyst behind the pullback since the Cash open. Delving deeper into Europe, the DAX 40 (+0.6%) outperforms after the tail risk of the Left party being involved in government has now been removed. The SMI (-0.6%) has dipped into the red as defensive sectors remain weak, with the Healthcare sector towards to bottom of the bunch alongside Personal & Household Goods. On the flip side, the strength in the price-driven Oil & Gas and yield-induced Banks have kept the FTSE 100 (+0.2%) in green, although the upside is capped by losses in AstraZeneca (-0.4%) and heavy-weight miners, with the latter a function of declining base metal prices. The continued retreat in global bonds has also hit the Tech sector – which resides as the laggard at the time of writing. In terms of individual movers, Rolls-Royce (+8.5%) trades at the top of the FTSE 100 after winning a USD 1.9bln deal from the US Air Force. IWG (+6.5%) also extended on earlier gains following reports that founder and CEO Dixon is said to be mulling a multibillion-pound break-up of the Co. that would involve splitting it into several distinct companies. Elsewhere, it is worth being cognizant of the current power situation in China as the energy crisis spreads, with Global Times also noting that multiple semiconductor suppliers for Tesla (Unch), Apple (-0.4% pre-market) and Intel (Unch), which have manufacturing plants in the Chinese mainland, recently announced they would suspend their factories' operations to follow local electricity use policies. Top European News U.K. Relaxes Antitrust Rules, May Bring in Army as Pumps Run Dry Magnitude 5.8 Earthquake Hits Greek Island of Crete German Stocks Rally as Chances Wane for Left-Wing Coalition German Landlords Rise as Left’s Weakness Trumps Berlin Poll In FX, the Aussie is holding up relatively well on a couple of supportive factors, including a recovery in commodity prices overnight and the Premier of NSW setting out a timetable to start lifting COVID lockdown and restrictions from October 11 with an end date to completely re-open on December 1. However, Aud/Usd is off best levels against a generally firm Greenback on weakness and underperformance elsewhere having stalled around 0.7290, while the Loonie has also run out of momentum 10 pips or so from 1.2600 alongside WTI above Usd 75/brl. DXY/EUR/CHF - Although the risk backdrop is broadly buoyant and not especially supportive, the Buck is gleaning traction and making gains at the expense of others, like the Euro that is gradually weakening in wake of Sunday’s German election that culminated in narrow victory for the SPD Party over the CDU/CSU alliance, but reliant on the Greens and FDP to form a Government. Eur/Usd has lost 1.1700+ status and is holding a fraction above recent lows in the form of a double bottom at 1.1684, but the Eur/Gbp cross is looking even weaker having breached several technical levels like the 100, 21 and 50 DMAs on the way down through 0.8530. Conversely, Eur/Chf remains firm around 1.0850, and largely due to extended declines in the Franc following last week’s dovish SNB policy review rather than clear signs of intervention via the latest weekly Swiss sight deposit balances. Indeed, Usd/Chf is now approaching 0.9300 again and helping to lift the Dollar index back up towards post-FOMC peaks within a 93.494-206 range in advance of US durable goods data, several Fed speakers, the Dallas Fed manufacturing business index and a double dose of T-note supply (Usd 60 bn 2 year and Usd 61 bn 5 year offerings). GBP/NZD/JPY - As noted above, the Pound is benefiting from Eur/Gbp tailwinds, but also strength in Brent to offset potential upset due to the UK’s energy supply issues, so Cable is also bucking the broad trend and probing 1.3700. However, the Kiwi is clinging to 0.7000 in the face of Aud/Nzd headwinds that are building on a break of 1.0350, while the Yen is striving keep its head afloat of another round number at 111.00 as bond yields rebound and curves resteepen. SCANDI/EM - The Nok is also knocking on a new big figure, but to the upside vs the Eur at 10.0000 following the hawkish Norges Bank hike, while the Cnh and Cny are holding up well compared to fellow EM currencies with loads of liquidity from the PBoC and some underlying support amidst the ongoing mission to crackdown on speculators in the crypto and commodity space. In commodities, WTI and Brent front-month futures kicked the week off on a firmer footing, which saw Brent Nov eclipse the USD 79.50/bbl level (vs low 78.21/bbl) whilst its WTI counterpart hovers north of USD 75/bbl (vs low 74.16/bbl). The complex could be feeling some tailwinds from the supply crunch in Britain – which has lead petrol stations to run dry as demand outpaces the supply. Aside from that, the landscape is little changed in the run-up to the OPEC+ meeting next Monday, whereby ministers are expected to continue the planned output hikes of 400k BPD/m. On that note, there have been reports that some African nations are struggling to pump more oil amid delayed maintenance and low investments, with Angola and Nigeria said to average almost 300k BPD below their quota. On the Iranian front, IAEA said Iran permitted it to service monitoring equipment during September 20th-22nd with the exception of the centrifuge component manufacturing workshop at the Tesa Karaj facility, with no real updates present regarding the nuclear deal talks. In terms of bank commentary, Goldman Sachs raised its year-end Brent crude forecast by USD 10 to USD 90/bbl and stated that Hurricane Ida has more than offset the ramp-up in OPEC+ output since July with non-OPEC+, non-shale output continuing to disappoint, while it added that global oil demand-deficit is greater than expected with a faster than anticipated demand recovery from the Delta variant. Conversely, Citi said in the immediate aftermath of skyrocketing prices, it is logical to be bearish on crude oil and nat gas today and forward curves for later in 2022, while it added that near-term global oil inventories are low and expected to continue declining maybe through Q1 next year. Over to metals, spot gold and silver have fallen victim to the firmer Dollar, with spot gold giving up its overnight gains and meandering around USD 1,750/oz (vs high 1760/oz) while spot silver briefly dipped under USD 22.50/oz (vs high 22.73/oz). Turning to base metals, China announced another round of copper, zinc and aluminium sales from state reserves – with amounts matching the prior sales. LME copper remains within a tight range, but LME tin is the outlier as it gave up the USD 35k mark earlier in the session. Finally, the electricity crunch in China has seen thermal coal prices gain impetus amid tight domestic supply, reduced imports and increased demand. US Event Calendar 8:30am: Aug. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.9% 8:30am: Aug. Cap Goods Orders Nondef Ex Air, est. 0.4%, prior 0.1% 8:30am: Aug. -Less Transportation, est. 0.5%, prior 0.8% 8:30am: Aug. Durable Goods Orders, est. 0.6%, prior -0.1% 10:30am: Sept. Dallas Fed Manf. Activity, est. 11.0, prior 9.0 Central Banks 8am: Fed’s Evans Speaks at Annual NABE Conference 9am: Fed’s Williams Makes Opening Remarks at Conference on... 12pm: Fed’s Williams Discusses the Economic Outlook 12:50pm: Fed’s Brainard Discusses Economic Outlook at NABE Conference DB's Jim Reid concludes the overnight wrap Straight to the German elections this morning where unlike the Ryder Cup the race was tight. The centre-left SPD have secured a narrow lead according to provisional results, which give them 25.7% of the vote, ahead of Chancellor Merkel’s CDU/CSU bloc, which are on 24.1%. That’s a bit narrower than the final polls had suggested (Politico’s average put the SPD ahead by 25-22%), but fits with the slight narrowing we’d seen over the final week of the campaign. Behind them, the Greens are in third place, with a record score of 14.8%, which puts them in a key position when it comes to forming a majority in the new Bundestag, and the FDP are in fourth place currently on 11.5%. Although the SPD appear to be in first place the different parties will now enter coalition negotiations to try to form a governing majority. Both Olaf Scholz and the CDU’s Armin Laschet have said that they will seek to form a government, and to do that they’ll be looking to the Greens and the FDP as potential coalition partners, since those are the most realistic options given mutual policy aims. So the critical question will be whether it’s the SPD or the CDU/CSU that can convince these two to join them in coalition. On the one hand, the Greens have a stronger policy overlap with the SPD, and governed with them under Chancellor Schröder from 1998-2005, but the FDP seems more in line with the Conservatives, and were Chancellor Merkel’s junior coalition partner from 2009-13.  So it’s likely that the FDP and the Greens will talk to each other before talking to either of the two biggest parties. For those wanting more information, our research colleagues in Frankfurt have released a post-election update (link here) on the results and what they mean. An important implication of last night’s result is that (at time of writing) it looks as though a more left-wing coalition featuring the SPD, the Greens and Die Linke would not be able for form a majority in the next Bundestag. So the main options left are for the FDP and the Greens to either join the SPD in a “traffic light” coalition or instead join the CDU/CSU in a “Jamaica” coalition. The existing grand coalition of the SPD and the CDU/CSU would actually have a majority as well, but both parties have signalled that they don't intend to continue this. That said, last time in 2017, a grand coalition wasn’t expected after that result, and there were initially attempts to form a Jamaica coalition. But once those talks proved unsuccessful, discussions on another grand coalition began once again. In terms of interesting snippets, this election marks the first time the SPD have won the popular vote since 2002, which is a big turnaround given that the party were consistently polling in third place over the first half of this year. However, it’s also the worst ever result for the CDU/CSU, and also marks the lowest combined share of the vote for the two big parties in post-war Germany, which mirrors the erosion of the traditional big parties we’ve seen elsewhere in continental Europe. Interestingly, the more radical Die Linke and AfD parties on the left and the right respectively actually did worse than in 2017, so German voters have remained anchored in the centre, and there’s been no sign of a populist resurgence. This also marks a record result for the Greens, who’ve gained almost 6 percentage points relative to four years ago, but that’s still some way down on where they were polling earlier in the spring (in the mid-20s), having lost ground in the polls throughout the final weeks of the campaign. Markets in Asia have mostly started the week on a positive note, with the Hang Seng (+0.28%), Nikkei (+0.04%), and the Kospi (+0.25%) all moving higher. That said, the Shanghai Comp is down -1.30%, as materials (-5.91%) and industrials (-4.24%) in the index have significantly underperformed, which comes amidst power curbs in the country. In the US and Europe however, futures are pointing higher, with those on the S&P 500 up +0.37%, and those on the DAX up +0.51%. Moving onto another big current theme, all the talk at the moment is about supply shocks and it’s not inconceivable that things could get very messy on this front over the weeks and months ahead. However, I think the discussion on supply in isolation misses an important component and that is demand. In short we had a pandemic that effectively closed the global economy and interrupted numerous complicated supply chains. The global authorities massively stimulated demand relative to where it would have been in this environment and in some areas have created more demand than there would have been at this stage without Covid. However the supply side has not come back as rapidly. As such you’re left with demand outstripping supply. So I think it’s wrong to talk about a global supply shock in isolation. It’s not as catchy but this is a “demand is much higher than it should be in a pandemic with lockdowns, but supply hasn't been able to fully respond” world. If the authorities hadn’t responded as aggressively we would have plenty of supply for the demand and a lot of deflation. Remember negative oil prices in the early stages of the pandemic. So for me every time you hear the phrase “supply shock” remember the phenomenal demand there is relative to what the steady state might have been. This current “demand > supply” at lower levels of activity than we would have had without covid is going to cause central banks a huge headache over the coming months. Should they tighten due to what is likely to be a prolonged period of higher prices than people thought even a couple of months ago or should they look to the potential demand destruction of higher prices? The risk of a policy error is high and the problem with forward guidance is that markets demand to know now what they might do over the next few months and quarters so it leaves them exposed a little in uncertain times. This problem has crept up fast on markets with an epic shift in sentiment in the rates market after the BoE meeting Thursday lunchtime. I would say they were no more hawkish than the Fed the night before but the difference is that the Fed are still seemingly at least a year from raising rates and a lot can happen in that period whereas the BoE could now raise this year (more likely February). That has focused the minds of global investors, especially as Norway became the first central bank among the G-10 currencies to raise rates on the same day. Towards the end of this note we’ll recap the moves in markets last week including a +15bps climb in US 10yr yields in the last 48 hours of last week. One factor that will greatly influence yields over the week ahead is the ongoing US debt ceiling / government shutdown / infrastructure bill saga that is coming to a head as we hit October on Friday - the day that there could be a partial government shutdown without action by the close on Thursday. It’s a fluid situation. So far the the House of Representatives has passed a measure that would keep the government funded through December 3, but it also includes a debt ceiling suspension, so Republicans are expected to block this in the Senate if it still includes that. The coming week could also see the House of Representatives vote on the bipartisan infrastructure bill (c.$550bn) that’s already gone through the Senate, since Speaker Pelosi had previously committed to moderate House Democrats that there’d be a vote on the measure by today. She reaffirmed that yesterday although the timing may slip. However, there remain divisions among House Democrats, with some progressives not willing to support it unless the reconciliation bill also passes. In short we’ve no idea how this get resolved but most think some compromise will be reached before Friday. Pelosi yesterday said it “seems self-evident” that the reconciliation bill won’t reach the $3.5 trillion hoped for by the administration which hints at some compromise. Overall the sentiment has seemingly shifted a little more positively on there being some progress over the weekend. From politics to central banks and following a busy week of policy meetings, there are an array of speakers over the week ahead. One of the biggest highlights will be the ECB’s Forum on Central Banking, which is taking place as an online event on Tuesday and Wednesday, and the final policy panel on Wednesday will include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda. Otherwise, Fed Chair Powell will also be testifying before the Senate Banking Committee on Tuesday, alongside Treasury Secretary Yellen, and on Monday, ECB President Lagarde will be appearing before the European Parliament’s Committee on Economic and Monetary Affairs as part of the regular Monetary Dialogue. There are lots of other Fed speakers this week and they can add nuances to the taper and dot plot debates. Finally on the data front, there’ll be further clues about the state of inflation across the key economies, as the Euro Area flash CPI estimate for September is coming out on Friday. Last month's reading showed that Euro Area inflation rose to +3.0% in August, which was its highest level in nearly a decade. Otherwise, there’s also the manufacturing PMIs from around the world on Friday given it’s the start of the month, along with the ISM reading from the US, and Tuesday will see the release of the Conference Board’s consumer confidence reading for the US as well. For the rest of the week ahead see the day-by-day calendar of events at the end. Back to last week now and the highlight was the big rise in global yields which quickly overshadowed the ongoing Evergrande story. Bonds more than reversed an early week rally as yields rose for a fifth consecutive week. US 10yr Treasury yields ended the week up +8.9bps to finish at 1.451% - its highest level since the start of July and +15bps off the Asian morning lows on Thursday. The move saw the 2y10y yield curve steepen +4.5bps, with the spread reaching its widest point since July as well. However, at the longer end of the curve the 5y30y spread ended the week largely unchanged after a volatile week. It was much flatter shortly following the FOMC and steeper following the BoE. Bond yields in Europe moved higher as well with the central bank moves again being the major impetus especially in the UK. 10yr gilt yields rose +7.9bps to +0.93% and the short end moved even more with the 2yr yield rising +9.4bps to 0.38% as the BoE’s inflation forecast and rhetoric caused investors to pull forward rate hike expectations. Yields on 10yr bunds rose +5.2bps, whilst those on the OATs (+6.3bps) and BTPs (+5.7bps) increased substantially as well, but not to the same extent as their US and UK counterparts. While sovereign debt sold off, global equity markets recovered following two consecutive weeks of declines. Although markets entered the week on the back foot following the Evergrande headlines from last weekend, risk sentiment improved at the end of the week, especially toward cyclical industries. The S&P 500 gained +0.51% last week (+0.15% Friday), nearly recouping the prior week’s loss. The equity move was primarily led by cyclicals as higher bond yields helped US banks (+3.43%) outperform, while higher commodity prices saw the energy (+4.46%) sector gain sharply. Those higher bond yields led to a slight rerating of growth stocks as the tech megacap NYFANG index fell back -0.46% on the week and the NASDAQ underperformed, finishing just better than unchanged (+0.02). Nonetheless, with four trading days left in September the S&P 500 is on track for its third losing month this year, following January and June. European equities rose moderately last week, as the STOXX 600 ended the week +0.31% higher despite Friday’s -0.90% loss. Bourses across the continent outperformed led by particularly strong performances by the IBEX (+1.28%) and CAC 40 (+1.04%). There was limited data from Friday. The Ifo's business climate indicator in Germany fell slightly from the previous month to 98.8 (99.0 expected) from 99.4 on the back a lower current assessment even though business expectations was higher than expected. In Italy, consumer confidence rose to 119.6 (115.8 expected), up just over 3pts from August and at its highest level on record (since 1995). Tyler Durden Mon, 09/27/2021 - 08:09.....»»

Category: personnelSource: nytSep 27th, 2021

Here Comes Santa Claus - 3 Strong Buy Stocks to Boost Your Portfolio

3 Zacks #1 Strong Buys to Take Advantage of the Santa Claus Rally After a tumultuous last two weeks, the bulls have made a stand this week as the major indexes are back in the green for December. This month normally gives investors a few reasons to feel cheerful. Historically one of the strongest months, December is up 1.5% on average going back to 1950 and finishes in the green nearly 75% of the time.Another stat to keep the bulls feeling jolly – when the S&P 500 is up greater than 20% on the year heading into December (as is the case in 2021), December posts stronger than normal returns at an average of 1.7%. With this week’s gap up to striking distance of all-time highs, it certainly appears that history will rhyme and we may end the year with a solid finish.The Invesco Nasdaq 100 ETF QQQM has withstood the recent volatility and is within 2% of its all-time highs. QQQM seeks to track the investment results of the Nasdaq 100 Index and contains many of the top technology companies in the world. The Invesco Nasdaq 100 ETF also holds all three of the Zacks #1 Ranked Strong Buys we will discuss today and is up about 27% on the year. As shown below, while many stocks plunged in weeks prior, QQQM appears to have found support in the midst of its continued uptrend.Image Source: Zacks Investment ResearchLet’s peel back the curtain on three of the QQQM holdings that have seen positive earnings estimate revision activity in recent weeks, each garnering our top stock ranking.Alphabet Inc. (GOOGL)Alphabet is best known for its web-based search engine and provides advertisements, software applications, mobile operating systems, mapping technologies, and consumer content. Headquartered in Mountain View, CA, GOOGL also offers enterprise solutions, in addition to commerce and hardware products through its subsidiaries.Between GOOGL’s strong cloud division, its expanding data centers, and enhanced mobile search segment, Alphabet’s substantial revenue growth continues to impress investors. The company dominates the online search market with a 94% share. There’s also that video entertainment application…what’s it called again? Oh that’s right. YouTube. Last year, YouTube alone generated $20 billion in advertising revenues.The Zacks Consensus Estimate for current year revenues stands at $209.34 billion, a 39.8% growth rate over 2020. This is a staggering growth rate for a company of its size, and the sales trend looks to continue for GOOGL into 2022.Image Source: Zacks Investment ResearchAlphabet has also made its way into other profitable markets such as autonomous driving and healthcare. Clearly, GOOGL is one of the most innovative companies in the world, and its stock has followed suit this year with a gain of over 68% YTD.Alphabet (GOOGL) Price, Consensus and EPS SurpriseImage Source: Zacks Investment ResearchGOOGL last reported EPS back in October of $27.99, a 21% positive surprise over estimates. The company has produced an average earnings surprise of +41.53% over the past four quarters. Analysts have increased their full-year earnings outlook by 6.31% to $108.29 over the past 60 days. If GOOGL simply meets this expectation, it would represent a roughly 85% increase in earnings compared to 2020. Whether you’re a short-term trader or long-term investor, having exposure to Alphabet is a good idea.JD.com, Inc. (JD)JD.com operates as an online direct sales company based in China. Through its website and mobile applications, JD provides a host of products including mobile handsets, computers, home appliances, automobile accessories, luxury goods, jewelry, and many more consumer goods.Much has been said and written about China’s technology crackdown this year, and Chinese equities have responded negatively with many tech companies down significant double-digit percentages on the year. The Chinese Internet ETF (KWEB) is down nearly 44% this year. Despite the severe underperformance, JD has held up relatively well and is currently making a series of intermediate higher highs, looking to end the year on a high note.Revenues are set to grow nearly 36% this year compared to 2020. JD last reported earnings in November of $0.49, a +44.12% surprise over consensus. The company has posted a positive average earnings surprise 18.4% over the past four quarters.JD.com (JD) Price, Consensus and EPS SurpriseImage Source: Zacks Investment ResearchIn the last 30 days, analysts covering JD have upped their annual earnings estimates by 18.57% to $1.66. Looking out at next year, the Zacks Consensus Estimate for 2022 EPS sits at $2.18, which would translate to a 31.63% growth rate over this year. JD.com is next scheduled to announce quarterly earnings on 3/10/22.Marvell Technology, Inc. (MRVL)Marvell Technology is a designer, developer and marketer of analog, mixed-signal and digital signal processing integrated circuits. MRVL is headquartered in Santa Clara, CA, and provides data infrastructure semiconductor solutions.MRVL has benefitted from robust demand for its storage and networking chips pertaining to the 5G and data-center end markets. The company last reported quarterly EPS of $0.43, a 13.16% surprise over consensus. MRVL has posted an average positive earnings surprise of 7.56% over the past four quarters, aiding the stock’s 92% return this year.Marvell Technology (MRVL) Price, Consensus and EPS SurpriseImage Source: Zacks Investment ResearchRevenues for the current year are estimated at $4.44 billion, translating to a nearly 50% growth rate over last year. Analysts have upped their earnings estimates by 6.9% within the past week, and the Zacks Consensus Estimate for 2021 EPS is now $1.55. If MRVL is able to achieve this, the company’s earnings will have increased by over 68% compared to last year.Looking at out next year, analysts covering MRVL have recently revised EPS estimates to $2.21, an increase of 15.7% from just seven days ago. Even with the stellar year Marvell Technology has had, those estimates would represent a 42.62% increase in EPS. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marvell Technology, Inc. (MRVL): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report JD.com, Inc. (JD): Free Stock Analysis Report Invesco NASDAQ 100 ETF (QQQM): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacks3 hr. 32 min. ago

Bull of the Day: Salesforce (CRM)

Shares are on sale given this data dominator's steady growth -- and Benioff isn't going anywhere Salesforce CRM reported a solid Q3 on November 30 but investors took the stock down nearly 12% the next day. In this report, we'll look at the numbers and analyst reactions to determine whether the shares are a better value now.Salesforce’s non-GAAP earnings of $1.27 per share beat the Zacks Consensus Estimate of 92 cents. Quarterly earnings included a benefit of 28 cents per share from the mark-to-mark accounting of CRM’s strategic investments on a non-GAAP tax rate of 21.5%. However, non-GAAP earnings declined 27% from the year-ago quarter’s earnings of $1.74 per share.Salesforce’s quarterly revenues of $6.86 billion climbed 27% year over year surpassing the Zacks Consensus Estimate of $6.79 billion. The enterprise cloud computing solutions provider has been benefiting from the robust demand environment as customers are undergoing a major digital transformation that requires fast, data-driven business intelligence and communications with customers.Also, the recently acquired Slack business boosted revenues and  contributed $280 million in total sales during the third quarter.Quarter DetailsSubscription and Support (93% of total revenues) increased 25% from the year-earlier period to $6.38 billion. Professional Services and Other (7% of total sales) revenues climbed 45% to $484 million.Under the Subscription and Support segment, Sales Cloud revenues grew 17% year over year to $1.5 billion. Revenues from Service Cloud, one of the company’s largest and the fastest-growing businesses, also improved 20% to $1.7 billion. Marketing & Commerce Cloud revenues jumped 25% to $1 billion. Salesforce Platform and Other revenues were up 51% to $1.3 billion. Also, revenues from Data increased 20% year over year to $900 million.Geographically, Salesforce registered constant-currency revenues of 23% in America (68% of total revenues), 29% in the Asia Pacific (9%) and 35% in the EMEA (23%) on a year-over-year basis.Salesforce’s gross profit came in at $5.02 billion, up 25% from the prior-year period. However, gross margin contracted 120 basis points (bps) to 73.1%.Steady-to-Mixed GuidanceAfter the 35-cent EPS beat, Salesforce naturally raised their FY22 (ends January) adjusted EPS view to $4.68-$4.69, vs the consensus of $4.42. The company's prior view was for $4.36-$4.38. And management raised their FY22 revenue view to $26.39B-$26.4B from $26.25B-$26.3B, vs. the consensus of $26.33B.Salesforce also offered revised FY23 revenue guidance of $31.7B-$31.8B, vs. the consensus of $31.8B, representing upside of 20% annual growth. Another closely-watched metric about future revenues is the remaining performance obligation (RPO), which "represents all future revenue under contract that has not yet been recognized as revenue," according to the company.The headline RPO came in at $36.3 billion , for +20% year-over-year advance. Within that figure, the current RPO (cRPO), which "represents future revenue under contract that is expected to be recognized as revenue in the next 12 months" came in at $18.8 billion (+23% YoY), edging out the $18.7 billion consensus.The Build Up of Bullish ExpectationsPart of the set-up for any disappointment in the CRM report was that analysts were so busy upgrading their view a week prior. Here were two good examples...BofA analyst Brad Sills raised his price target on Salesforce to $360 from $330 citing feedback from the company's partners that suggested deal activity tracked in line or above expectations in the quarter, often accelerating from "steady" Q2 growth, largely driven by continued momentum across the broader Salesforce stack.As Sills projected Q3 upside and increased margin discipline as likely catalysts for the shares, he reiterated the stock as a top pick a week before the Q3 print.Jefferies analyst Brent Thill raised his price target on Salesforce to $360 from $325 on November 23 following a survey of over 40 partners that he called "the most positive survey in the past eight quarters." In his survey, 83% of respondents noted that their pipelines had improved, while 55% said that their pipelines had improved by more than 5%.Sentiment on Salesforce had improved since the Investor Day in late September and Thill observed that the set up heading into the company's Q3 report was attractive due to easy comparisons for billings and CRPO combined with his robust demand checks.Analysts Remain Bullish on the DominatorOkay, so that was a sample of the optimism headed into the report. Now let's look as some analyst reactions afterwards as the stock gapped down over 10%. We'll start with the glass half-full view...UBS analyst Karl Keirstead lowered his price target on Salesforce to $315 from $330 but kept a Buy rating on the shares. The company's Q3 results "lacked the pizzaz" of the prior three quarters which had delivered material revenue guidance raises and improved margin narrative.Keirstead cited the company's "skinny" cRPO beat, weaker than expected Q4 ex-Slack cRPO guide, and weaker than expected Q4 revenue view. Following the post-earnings decline however, he stated that the stock looks "attractively priced" at 8.5-times revenue and 40-times free cash flow expected for 2022.Morgan Stanley analyst Keith Weiss said Salesforce's Q3 report "likely fell short for investors expecting a more robust growth rebound" given a narrower cRPO beat and smaller FY22 raise. However, he sees his core thesis around accelerating FY23 free cash flow growth as intact given organic constant currency bookings growth near 20% and margin expansion potential, leading him to keep an Overweight rating and $360 price target on Salesforce shares.Deutsche Bank analyst Brad Zelnick recommended using last Wednesday's post-earnings selloff in CRM as a buying opportunity. The company reported solid Q3 results that were "ahead of consensus on all metrics," with particularly strong operating margin nearing 20%. Zelnick noted that while investors were disappointed in the magnitude of the beat, the stock "thesis remains firmly intact."He kept a Buy rating on Salesforce with a $360 price target.Mizuho analyst Gregg Moskowitz lowered his price target on Salesforce to $350 from $360 and kept a Buy rating as he noted "mixed" fiscal Q3 results ran into "investors generally hoping for a bit more." Salesforce's revenue and operating margins "showed healthy upside," but the Q4 guidance was more subdued than expected. Moskowitz believes the shares "will likely be sluggish near-term."While many analysts who were very bullish prior to the quarterly report kept their lofty price targets north of $350, here was one of the few who actually found justification in the numbers to raise his PT...Truist analyst Terry Tillman raised his price target on Salesforce to $330 from $315 citing the company's solid Q3 results with cRPO upside and "relatively strong" performance in its core products. Tillman added that CRM's operating margins and free cash flow were even ahead of his above-consensus estimates. Tillman further states that with the stock down 6% post-earnings, investors should buy shares "on any weakness".Benioff With One Foot Out the Door?Another bit of news that may have spooked investors was the announcement that Bret Taylor, who has served as President and Chief Operating Officer since 2019 (and Chief Product Officer before that), has been promoted to company Vice Chair and Co-CEO, effective immediately.Jefferies analyst Brent Thill, one of those who upgraded the stock before the report, saw the promotion of Bret Taylor to co-CEO, as a positive given that Taylor has been at the company for five years and "has a strong product focus." Despite the Q4 CRPO growth guide of 19%, which would be a 400 basis point sequential deceleration and below the Street at 20% due to foreign exchange and MuleSoft headwinds, Thill was encouraged by the strength in the core business and maintained his Buy rating and $360 price target on CRM.And the other new "co-CEO" Marc Benioff made an appearance on CNBC's Mad Money to tell Jim Cramer and viewers "I love Salesforce and I'm never leaving. It's my life's pursuit."As he described the core of the business growing very quickly, and faster than expected to their FY26 target of $50 billion revenue, he noted "We're very excited about the future."Co-CEO Bret Taylor said the core of Salesforce's business has "never been stronger."Bottom line: CRM is a buy near $250 and may already be putting in a bottom there given last week's price action. Investor Alert: Legal Marijuana Looking for big gains? Now is the time to get in on a young industry primed to skyrocket from $13.5 billion in 2021 to an expected $70.6 billion by 2028. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could kick start an even greater bonanza for investors. Zacks Investment Research has recently closed pot stocks that have shot up as high as +147.0%. You’re invited to immediately check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers FREE >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report salesforce.com, inc. (CRM): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 6th, 2021

Futures Flat Ahead Of Taper Accelerating Payrolls

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

Category: blogSource: zerohedgeDec 3rd, 2021

Black Friday Turns Red On "Terrible News" - Global Markets Crater On "Nu Variant" Panic

Black Friday Turns Red On "Terrible News" - Global Markets Crater On "Nu Variant" Panic The Friday after thanksgiving is called black Friday because that's when retailers finally turn profitable for the year. Not so much for market, however, because this morning it's red as far as the eye can see. The culprit: the same one we discussed late last night - the emergence of a new coronavirus strain detected in South Africa, known as B.1.1.529, which reportedly carries an "extremely high number" of mutations and is “clearly very different” from previous incarnations, which may drive further waves of disease by evading the body’s defenses according to South African scientists, and soon, Anthony Fauci. British authorities think it is the most significant variant to date and have hurried to impose travel restrictions on southern Africa, as did Japan, the Czech Republic and Italy on Friday. The European Union also said it aimed to halt air travel from the region. "Markets have been quite complacent about the pandemic for a while, partly because economies have been able to withstand the impact of selective lockdown measures. But we can see from the new emergency brakes on air travel that there will be ramifications for the price of oil," said Chris Scicluna, head of economic research at Daiwa. As a result, what was initially just a 1% drop in US index futures, has since escalated to a plunge of as much as 2% with eminis dropping the most since September, at one point dropping below 4,600 after closing on Wednesday above 4,700 as a post-Thanksgiving selloff spread across global markets amid mounting concerns the new B.1.1.529 coronavirus variant - which today will be officially called by the Greek lettter Nu - could derail the global economic recovery.  Russell 2000 contracts sank as much as 5.4%. Technology shares may be caught in the net too as Nasdaq 100 futures slid. The VIX increased as much as 9.4 vols to 28, it's biggest jump since January. It was last seen up 7.4 points, or the biggest increase since February. Adding to the pain, there is nothing on today's macro calendar and the US market closes early which will reduce already dismal liquidity even more, exacerbating some of the moves throughout the session. Headlines are likely to center on various nations preventing travel from South Africa whilst potentially imposing more stringent COVID measures domestically, as well as which countries "find" the Nu variant. Amid the panicked flight to safety, 10Y TSY yields tumbled as traders slashed bets on monetary tightening by the Federal Reserve (just hours after Goldman predicted that the Fed would double the pace of its taper and hike 3 times in 2022, oops) ... ... as did oil amid fears new covid lockdowns will lead to a collapse in crude demand (they will also certainly force OPEC+ to put on pause their plans to keep hiking output by 400K every month). Paradoxically, even cryptos are tumbling, which is surprising since even the dumbest algos should realize by now that a new covid outbreak means more dovish central banks, no tightening, and if nothing else, more QE and more liquidity which is precisely what cryptos need to break out to new all time highs. Cruise ship operator Carnival slumped 9.1% in premarket trading and Boeing slid 5.8% as travel companies tumbled worldwide. Stay-at-home stocks such as Zoom Video rallied.  Didi Global shares fell after Chinese regulators reportedly asked the ride-hailing giant to delist from U.S. bourses. Here are some of the other big premarket movers: Airlines and other travel stocks slumped in premarket trading on growing concern about a new Covid-19 variant identified in southern Africa. The European Union is proposing to halt air travel from several countries in the area and the U.K. will temporarily ban flights from the region. United Airlines (UAL US) fell 8.9%, Delta Air (DAL US) -7.9%, American Airlines (AAL US) -6.7%; cruiseline-operator Carnival (CCL US) -12%; hotelier Marriott (MAR US) -6.1%; lodging company Airbnb (ABNB US) -6.9%. Stay-at-home stocks that benefit from higher demand in lockdowns rose in premarket, with Zoom Video (ZM US) gaining 8.5% and fitness equipment group Peloton (PTON US) +4.7%. Vaccine stocks surged in premarket, while Pfizer and BioNTech got an added boost after their coronavirus shot won European Union backing for expanded use in children. Moderna (MRNA US) rose 8.8%, Novavax (NVAX US) +6.2%, Pfizer (PFE US) +5.1%, BioNTech (BNTX US) +6.4%. Small biotech stocks gained in premarket as investors sought havens. Ocugen (OCGN US) added 22%, Vir Biotechnology (VIR US) +7.8%, Sorrento Therapeutics (SRNE US) +5%. Cryptocurrency-exposed stocks fell as Bitcoin dropped as investors dumped risk assets. Marathon Digital (MARA US) declined 9%, Riot Blockchain (RIOT US) -8.8%, Coinbase (COIN US) -4.6%. Didi Global (DIDI US) declined 6% in premarket after Chinese regulators were said to have asked the ride-hailing giant to delist from U.S. bourses. Selecta Biosciences (SELB US) dropped 13% in Wednesday’s postmarket ahead of Thursday’s Thanksgiving closure, after saying the U.S. FDA placed a clinical hold on a trial. Quotient Technology (QUOT US) gained 3.9% in Wednesday’s postmarket on news that a board member bought $150,000 of shares. What happens next will matter and so, all eyes are on the opening bell for the U.S. markets, set to return from the holiday for a shortened trading session. Tumbling futures and a soaring VIX signaled that the rout in Asia and Europe won’t spare New York equities, while lack of liquidity will only make the pain worse. The Japanese yen emerged as the main haven currency of the day, with the dollar languishing. “Every trader in New York will be rushing to the office now,” said Salm-Salm & Partner portfolio manager Frederik Hildner, adding that news of the new variant could mean the end of the inflation and tapering debate. The worsening pandemic poses a dilemma for central banks that are preparing to tighten monetary policy to curb elevated price pressures, according to Ipek Ozkardeskaya, senior analyst at Swissquote. “It’s terrible news,” Ipek Ozkardeskaya, a senior analyst at Swissquote, said in emailed comments. “The new Covid variant could hit the economic recovery, but this time, the central banks won’t have enough margin to act. They can’t fight inflation and boost growth at the same time. They have to choose.” “We now have a new Covid variant that’s ‘very’ different from the ones we knew so far, a rising inflation, and a market bubble,” she said.  “The only encouraging news is the easing oil prices, which could tame the inflationary pressures and give more time to the central banks before pulling back support.” In the meantime, the World Health Organization and scientists in South Africa were said to be working “at lightning speed” to ascertain how quickly the B.1.1.529 variant can spread and whether it’s resistant to vaccines. The new threat adds to the wall of worry investors are already contending with in the form of elevated inflation, monetary tightening and slowing growth. In Europe, the Stoxx 600 index headed for the biggest drop in 13 months plunging 2.7%; travel and banking industries led the Stoxx Europe 600 Index down as much as 3.7%, the biggest intraday drop since June 2020. Airbus slumped 8.6% in Paris and British Airways owner IAG tumbled 12% in London, while food-delivery stocks gained.  Here are some of the biggest European movers today: Stay-at-home stocks and Covid testing firms such as TeamViewer and DiaSorin are among the biggest gainers as worries over a new Covid variant send the Stoxx 600 tumbling on lockdown fears TeamViewer and DiaSorin rise as much as 6% and 7%, respectively On the down side, travel and leisure stocks plunge, with the likes of IAG, Lufthansa and Carnival posting double- digit falls IAG drops as much as 21% Software AG shares rise as much as 9.5% after Bloomberg reported that the firm is exploring strategic options, including a potential sale, with Morgan Stanley saying the company’s biggest headwinds are behind it. Evolution gains as much as 4.6%, recouping part of Thursday’s 16% plunge, with Bank of America saying the share price’s “crazy time” amounts to a good buying opportunity. Skistar rises as much as 3.7%, bucking steep declines for travel and leisure stocks, after Handelsbanken upgraded the stock, saying bookings for the Scandinavian ski resort operator are “set to surge.” Telecom Italia climbs as much as 2.8% following a Bloomberg report that private equity firms KKR and CVC are considering teaming up on a bid for the company. ING Groep falls as much as 11% after Goldman Sachs analyst Jean-Francois Neuez cut his recommendation to neutral from buy. Getlink drops as much as 6% as French fishermen start protests aimed at stepping up pressure on the U.K. in a post-Brexit fishing dispute. Earlier in the session, MSCI's index of Asian shares outside Japan fell 2.2%, its sharpest drop since August. Casino and beverage shares were hammered in Hong Kong, while travel stocks dropped in Sydney and Tokyo. Japan's Nikkei skidded 2.5% and S&P 500 futures were last down 1.8%. Giles Coghlan, chief currency analyst at HYCM, a brokerage, said the closure of the U.S. market for the Thanksgiving holiday on Thursday had exacerbated moves. "We need to see how transmissible this variant is, is it able to evade the vaccines - this is crucial," Coghlan said. "I expect this story to drag on for a few days until scientists have a better understanding of it." Indian stocks plunged as the detection of a new coronavirus strain rattled investor sentiment globally, raising concerns over a likely setback to the nascent economic recovery.  The S&P BSE Sensex lost 2.9%, the most since mid-April, to 57,107.15 in Mumbai, taking its loss this week to 4.2%, the biggest weekly drop since January. The NSE Nifty 50 Index declined by a similar magnitude on Friday. Reliance Industries was the biggest drag on both measures and declined 3.2%.  “There is fear of this new variant spreading to other countries which might again derail the global economy,” said Hemang Jani, head of equity strategy at Motilal Oswal Financial Services Ltd.   Of the 30 shares in the Sensex index, 26 fell and 4 gained. All but one of 19 sub-indexes compiled by BSE Ltd. retreated, led by a index of realty companies. The S&P BSE Healthcare index was the only sub-index to gain, surging 1.2%. While researchers are yet to determine whether the new virus variant is more transmissible or lethal than previous ones, authorities around the world have been quick to act. The European Union, U.K., Israel, and Singapore placed emergency curbs on passengers from South Africa and the surrounding region. Travel stocks were among the hardest hit. InterGlobe Aviation Ltd. fell 8.9%, Spicejet Ltd. slipped 6.7% and Indian Hotels Co. Ltd. plunged 11.2%, the most since March 2020.  “Nervousness on the new variant of coronavirus and expectations of the U.S. Fed increasing the pace of tapering have led to recent market weakness,” Amit Gupta, fund manager for portfolio management services at ICICI Securities Ltd. said. “This trend may take some time to recover as the WHO meeting on the new mutant variant impact and hospitalization rates in US and Europe will be watched by the market very closely.” Crude oil to emerging markets completed this picture of mayhem. In rates, fixed income was firmly bid as Treasuries extended their advance led by the belly of the curve, outperforming bunds, while money markets pared rate-hike bets amid fears that a new coronavirus strain may spread globally, slowing economic growth. Cash Treasuries outperformed, richening 12-14bps across the short end, with Thursday’s closure exacerbating the optics. As shown above, 10Y Treasury yields shed as much as 10 basis points while the Japanese yen jumped the most since investors’ March 2020 rush for safety. Yields across the curve are lower by more than 8bp at long end, 13bp-15bp out to the 7-year point, moves that if sustained would be the largest since at least March 2020 and in some cases since 2009. Short-term interest rate futures downgraded the odds of Fed rate increases. Gilts richened 10-11bps across the curve, outperforming bunds by 4-5bps. Peripheral and semi-core spreads widen. In FX, JPY and CHF top the G-10 scoreboard with havens typically bid. In FX, the Bloomberg Dollar Spot Index was little changed after earlier touching a fresh cycle high, and the greenback was mixed versus its Group-of-10 peers as the yen and the Swiss franc led gains while the Canadian dollar and Norwegian krone were the worst performers as commodity prices plunged. Traders pushed back the timing of a 25-basis-point rate increase by the Federal Reserve to July from June, with only one further hike expected for the remainder of 2022. It’s a similar story in the U.K. where the Bank of England is now expected to tighten policy in February instead of next month. Wagers that the ECB will raise its deposit rate by the end of next year have also been slashed, with only a six basis-point increase priced in, half of that seen earlier this week. The European Union is proposing to follow the U.K. in halting air travel from southern Africa after the new Covid-19 variant was identified there. The yen is at the epicenter of skyrocketing currency volatility as the new virus variant shakes markets. The cost of hedging against swings in the Japanese currency over the next week, which captures the release of the next U.S. payrolls report, is the most expensive in more than a year. In commodities, crude futures are hit hard. WTI drops over 7% before finding support near $73, Brent drops over 5% before recovering near $78. Spot gold grinds higher, adding $21 to trade near $1,809/oz. Base metals are sharply offered with much of the complex off as much as 3%. Looking at the otherwise quiet day ahead, data releases include French and Italian consumer confidence for November, as well as the Euro Area M3 money supply for October. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Visco, Schnabel, Centeno, Panetta and Lane, and BoE chief economist Pill. Market Snapshot S&P 500 futures down 1.9% to 4,607.50 STOXX Europe 600 down 2.8% to 468.04 MXAP down 1.8% to 193.33 MXAPJ down 2.2% to 628.97 Nikkei down 2.5% to 28,751.62 Topix down 2.0% to 1,984.98 Hang Seng Index down 2.7% to 24,080.52 Shanghai Composite down 0.6% to 3,564.09 Sensex down 2.7% to 57,234.83 Australia S&P/ASX 200 down 1.7% to 7,279.35 Kospi down 1.5% to 2,936.44 Brent Futures down 5.8% to $77.46/bbl Gold spot up 0.9% to $1,805.13 U.S. Dollar Index down 0.33% to 96.46 German 10Y yield little changed at -0.31% Euro up 0.4% to $1.1259 Top Overnight News from Bloomberg The European Union is proposing to halt air travel from southern Africa over growing concern about a new Covid-19 variant that’s spreading there, as the U.K. said it will also temporarily ban flights from the region Those close to the Kremlin say the Russian president doesn’t want to start another war in Ukraine. Still, he must show he’s ready to fight if necessary in order to stop what he sees as an existential security threat: the creeping expansion of the North Atlantic Treaty Organization in a country that for centuries had been part of Russia Bitcoin tumbled 20% from record highs notched earlier this month as a new variant of the coronavirus spurred traders to dump risk assets across the globe Germany’s Greens tapped their two co- leaders to run the foreign ministry and take charge of an influential portfolio overseeing economy and climate protection in the country’s next government under Social Democrat Olaf Scholz A more detailed breakdown of global markets courtesy of Newsquawk Asian equity markets declined and US equity futures were also on the backfoot on reopen from the prior day’s Thanksgiving lull with markets spooked by new COVID variant concerns related to the B.1.1.529 variant in South Africa that was first detected in Botswana. The new variant showed a high number of mutations and was said to be the most evolved strain ever which spurred fears it could be worse than Delta and is prompting both the UK and Israel to halt flights from several African nations. ASX 200 (-1.7%) was negative with heavy losses in energy and broad underperformance in cyclicals leading the downturn across all sectors, while the much better than expected Australian Retail Sales data was largely ignored. Nikkei 225 (-2.5%) underperformed and gave up the 29k status as selling was exacerbated by detrimental currency inflows and with SoftBank shares among the worst hit on reports that China is said to have asked Didi to delist from US exchanges on security fears, which doesn't bode well for SoftBank given that its Vision Fund is the top shareholder in the Chinese ride hailing group with a stake of more than 20%. Hang Seng (-2.5%) and Shanghai Comp. (-0.7%) conformed to the risk aversion with the mood not helped by ongoing geopolitical concerns after a Chinese Defense Ministry spokesperson noted they are ready to crush Taiwan independence bid "at any time”, while China also said it opposes US sanctions on its companies and will take all necessary measures to firmly defend the rights of Chinese companies. Beijing interference further contributed to the headwinds amid the request by China for Didi to delist from US which reports stated regulators could backtrack on and with Tencent subdued after some Chinese state-run companies restricted the use of Tencent's messaging app. Top Asian News Stocks in Asia Set for Worst Day Since March on Virus Woes Mizuho CEO Steps Down After Regulator Hit on System Issues Meituan 3Q Revenue Meets Estimates Japan’s Kishida Delivers $316 billion Extra Budget for Recovery European equities are trading markedly lower (Stoxx 600 -2.9%) with losses in the Stoxx 600 extending to 3.8% WTD. Sentiment throughout the week has been hampered by various lockdown measures imposed across the region with the latest leg lower accelerated by new COVID variant concerns related to the B.1.1.529 variant in South Africa. The new variant has shown a high number of mutations and is said to be the most evolved strain so far. This has spurred fears it could be worse than Delta and has prompted multiple nations to halt flights from several African nations.The handover from the overnight session was an equally downbeat one with the Nikkei 225 (-2.5%) dealt a hammer blow by the risk environment and unfavourable currency flows. Stateside, futures are lower across the board with the RTY the clear laggard with losses of 4.2% compared to the ES -1.8%, whilst the tech-heavy NQ is faring better than peers but ultimately still lower on the session to the tune of 1.6%. Note, early closures in the US and subsequent liquidity conditions could exacerbate some of the moves throughout the session. With the macro calendar light, focus for the session is likely to centre on various nations preventing travel from South Africa whilst potentially imposing more stringent COVID measures domestically. Any further clarity on the spread of the variant and its potential to evade vaccines will be of great interest to the market and likely be the main driving force of price action today. Sectors in Europe are lower across the board with the Stoxx 600 Banking (-5.1%) sector bottom of the pile amid the declines seen in global bond yields as markets scale back expectations of central bank tightening (e.g. pricing now assigns a 63% chance of a 15bps hike by the BoE next month vs. 93% a week ago). Oil & Gas names (-4.8%) are suffering on account of the declines in the crude space with WTI crude in freefall with losses of 6.7% given the potential impact of travel restrictions on demand. Travel restrictions on South Africa (from UK, Israel, EU et al) and the potential for further announcements has crushed the Travel & Leisure sector (-5.7%) with airline names dealt a hammer blow; IAG (-13.5%), easyJet (-11%), Deutsche Lufthansa (-12%), Air France (-9.5%). Elsewhere, there are a whole raft of other laggards which are very much in-fitting with the March 2020 playbook but there are simply too many to list for the purpose of this report. Defensives and Tech are faring better than peers but ultimately still lower on the session to the tune of 1% and 1.9% respectively. Finally, for anyone wanting some positivity from today’s session, the potential for further lockdowns has proved to be beneficial for the likes of HelloFresh (+3.2%), Ocado (+2.1%) and Delivery Hero (+1.9%). Top European News Airlines Skid on South Africa Travel Bans Tied to Variant German Coalition Proposes a Combustion-Car Ban Without Saying So Putin Pushes Confrontation With NATO as Hardliners Prevail Siemens Is Said to Kick Off Sale of Postal Logistics Business In FX, the index has been under pressure in the risk-averse environment amid a slump in yields and gains in its basket components – namely the JPY, CHF, EUR (see below) – and with liquidity also thinned by Thanksgiving. From a technical perspective, the index has declined from its 96.787 overnight high, through the 96.500 mark, to a low of 96.332 – with the weekly trough at 96.035. Ahead, the US calendar is once again light, with the US also poised for an early Thanksgiving closure; thus, impulses will likely be derived from the macro environment. JPY, CHF, EUR - Haven FX JPY and CHF are the clear outperformers as a function of risk-related inflows. USD/JPY has retreated from a 115.37 peak and fell through its 21 DMA (114.15) to a base around 113.66 - with the current weekly low around 113.64. USD/CHF retreated from 0.9360 to 0.9260 – with the 50 and 100 DMAs seen at 0.9234 and 0.9219, respectively, ahead of 0.9200. EUR/USD meanwhile gains on what is seemingly an unwind of the carry trade amid a spike in volatility. EUR/USD found support near 1.1200 before rebounding to a current 1.1288 peak. AUD, NZD, CAD, GBP - The non-US Dollar risk currencies bear the brunt of the latest market downturn, with losses across industrial commodities not helping. The Loonie has taken the spot as the biggest G10 loser as hefty COVID-induced losses in the oil complex keep the currency suppressed. USD/CAD trades towards the top of a current 1.2647-2774 range. AUD is also weighed on by softer base metal prices – AUD/USD fell from a 0.7200 overnight high to a current low at 0.7110. On that note, Westpac sees AUD/USD pushed down to 0.7000 by Jun 2022 (prev. 0.7700) amid rate differentials with the US; Westpac made significant changes to its FOMC policy forecast and now expect consecutive increases in the fed funds rate in Jun, Sept, and Dec 2022. NZD/USD is slightly more cushioned amid smaller exposure to commodities, and as the AUD/NZD cross takes aim at 1.0450 to the downside. GBP, meanwhile, was initially among the losers amid its high-beta status but thereafter nursed losses in a move that coincided with EUR/GBP rejecting an upside breach of its 21 DMA at 0.8475. EM - The ZAR is the standout laggard given the new South African COVID variant - B.1.1.529 COVID-19 variant (expected to be named Nu) – which is said to be the most evolved strain so far and thus prompted several countries to halt travel to the country of origin. USD/ZAR currently trades within a 15.9375-16.3630 intraday band. Meanwhile, the downturn oil sees USD/RUB north of 75.00 and closer to 76.00 from a 74.2690 base. The Lira also feels some contagion despite the lower oil prices (Turkey being a large net oil importer) – USD/TRY is back on a 12.00 handle and within 11.92-1226 parameters at the time of writing. In commodities, the crude complex has been hit by compounding COVID fears which in turn triggered various travel restrictions and subsequently took its toll on global crude demand prospects. The new and more evolved South African variant prompted the UK, Singapore, and Israel to expand their travel red lists to include some African nations (Israel reported its first case of the new COVID-19 variant known as B.1.1.529). Japan also imposed tighter border restrictions. China’s Shanghai city see flights impacted by its own outbreak. Europe also tackles its surge in daily cases - German Green Party's Baerbock (incoming Foreign Minister) does not rule out a German lockdown, according to Spiegel. EU Commission President von der Leyen is also to propose activation of the emergency air brake, to halt travel from southern Africa due to the B.1.1.529 COVID-19 variant. Losses in oil have exacerbated - with WTI Jan and Brent Feb now under USD 74/bbl (vs high 78.65/bbl) and USD 77/bbl (vs high 80.42/bbl), -6.0% and -5.0% respectively. This comes ahead of the OPEC+ confab next week, whereby OPEC watchers have suggested that oil prices will be a large contributor to the final decision. It is difficult to see how OPEC+ will increase output to the levels the US et al. will be content with, with the latest COVID downturn building the case for a pause in planned output hikes. Elsewhere, haven demand sees spot gold extend on gains above USD 1,800/oz after topping the 100 DMA (1,792.95/oz), 200 DMA (1,791.38/oz), 50 DMA (1,790.13/oz) overnight. Base metals are softer across the board amid the risk aversion. LME copper posts losses of around 3% at the time of writing, as prices threaten a more convincing downside breach of USD 9,500/t. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap Things have escalated on the covid front quite rapidly over the last 12 hours. Yesterday new covid variant B.1.1.529 was slowly starting to gather increasing attention but overnight it has begun to dominate markets and has caused a notable flight to quality with 10 year USTs -8bps lower. It was originally identified in Botswana and is starting to spread rapidly in Africa. The South African Health Minister has said it is "of serious concern". Almost 100 cases have already been identified in South Africa and the UK moved to put the country back (along with 5 other African nations) on a reinstated red travel list last night with others following this morning. The variant is said to be the most heavily mutated version yet and the WHO will meet today to decide if it is a variant of interest or a variant of concern. So a lot of eyes will be on how severe it is and whether it completely evades vaccines. At this stage very little is known. Mutations are often less severe so we shouldn’t jump to conclusions but there is clearly a lot of concern about this one. Also South Africa is one of the world leaders in sequencing so we are more likely to see this sort of news originate from there than many countries. Suffice to say at this stage no one in markets will have any idea which way this will go. Overnight in Asia all benchmarks are trading lower on the news with the Shanghai Composite (-0.50%), CSI (-0.64%), KOSPI (-1.27%), Hang Seng (-2.13%) and the Nikkei (-2.90%) all lower. Airlines and other travel stocks have obviously fallen heavily. Hong Kong has detected two confirmed cases of the new variant just as Hong Kong and China were considering quarantine-free travel. S&P 500 (-0.93%) and DAX (-1.82%) futures are also much weaker. Elsewhere, in Japan, CPI rose +0.5% year-on-year (+0.4% consensus and +0.1% previously), on the back of 16-month high fuel prices. With the US out on holiday for Thanksgiving, there wasn’t much going on yesterday after a very quiet day in markets. The variant news was only slowly creeping into the news flow so it hardly impacted trading. But in keeping with the theme of recent days, both inflation and the latest covid wave in Europe remained very much in the picture as jitters continue to increase that we could see further lockdowns as we move towards Christmas. Starting with the headline moves, European equities did actually show signs of stabilising yesterday, with the STOXX 600 up +0.42% thanks to a broad-based advance across the continent. In fact that’s actually the index’s best daily performance in over three weeks, although that’s not reflecting any particular strength, but instead the fact the index inched steadily but persistently towards a record high before selling off again a week ago. Other indices moved higher across the continent too, with the FTSE 100 (+0.33%), the CAC 40 (+0.48%) and the DAX (+0.25%) all posting similar advances. These will all likely reverse this morning. One piece of news we did get came from the ECB, who released the account of their monetary policy meeting for October. Something the minutes stressed was the importance that the Governing Council maintain optionality in their policy settings, with one part acknowledging the growing upside risks to inflation, but also saying “it was deemed important for the Governing Council to avoid an overreaction as well as unwarranted inaction, and to keep sufficient optionality in calibrating its monetary policy measures to address all inflation scenarios that might unfold.” Against this backdrop, 10yr bond yields moved lower across multiple countries, with those on bunds (-2.3ps), OATs (-2.3bps) and BTPs (-1.9bps) all declining. There was also a flattening in all 3 yield curves as well, with the 2s10s slope in Germany (-3.0bps), France (-3.7bps) and Italy (-2.8bps) shifting lower. And the moves also coincided with a continued widening in peripheral spreads, with both the Spanish and the Greek spreads over 10yr bund yields widening to their biggest levels in over a year. Of course, one of the biggest concerns in Europe right now remains the pandemic, and yesterday saw a number of fresh measures announced as policymakers seek to get a grip on the latest wave. In France, health minister Veran announced various measures, including the expansion of the booster rollout to all adults, and a reduction in the length of time between the initial vaccination and the booster shot to 5 months from 6. Meanwhile in the Czech Republic, the government declared a state of emergency and approved tighter social distancing measures, including the closure of restaurants and bars at 10pm. And in Finland, the government have said that bars and restaurants not using Covid certificates will not be able to serve alcohol after 5pm. All this came as the European Medicines Agency recommended that the Pfizer vaccine be approved for children aged 5-11, which follows the decision to approve the vaccine in the US. Their recommendation will now go to the European Commission for a final decision. There wasn’t much in the way of data at all yesterday, though German GDP growth in Q3 was revised down to show a +1.7% expansion (vs. +1.8% previous estimate). Looking at the details, private consumption was the only driver of growth (+6.2%), with government consumption (-2.2%), machinery and equipment (-3.7%) and construction (-2.3%) all declining over the quarter. To the day ahead now, and data releases include French and Italian consumer confidence for November, as well as the Euro Area M3 money supply for October. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Visco, Schnabel, Centeno, Panetta and Lane, and BoE chief economist Pill. Tyler Durden Fri, 11/26/2021 - 08:12.....»»

Category: blogSource: zerohedgeNov 26th, 2021

Microsoft (MSFT) Up 4.6% Since Last Earnings Report: Can It Continue?

Microsoft (MSFT) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. A month has gone by since the last earnings report for Microsoft (MSFT). Shares have added about 4.6% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Microsoft due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Microsoft Q1 Earnings Beat, Azure Drives Top LineMicrosoft reported first-quarter fiscal 2022 earnings of $2.27 per share, which beat the Zacks Consensus Estimate by 10.2%. The bottom line also surged 25% on a year-over-year basis (up 23% at constant currency or cc).Revenues of $45.3 billion increased 22% from the year-ago quarter’s levels (up 20% at cc). The top line surpassed the Zacks Consensus Estimate by 3.3%.Robust adoption of Azure cloud offerings drove the top line. Continued momentum in Teams app and strong performances from Power Platform, LinkedIn business and the gaming segment were other tailwinds.Commercial bookings climbed 11% year over year (up 14% at cc), courtesy of consistent execution across new, add-on and renewal sales motions, noted the company.Commercial remaining performance obligation amounted to $137 billion, up 28% year over year (up 29% at cc). Commercial revenue annuity mix was 95%, up 2% year over year owing to the ongoing shift to cloud infrastructure.Microsoft cloud revenues were $20.7 billion, up 36% (up 34% at cc) year over year.Segmental DetailsThe Productivity & Business Processes segment, which includes the Office and Dynamics CRM businesses, contributed 33.2% to total revenues. Revenues increased 22% (up 20% at cc) on a year-over-year basis to $15.039 billion.Office Commercial products and cloud services revenues rose 18% (up 16% at cc) on a year-over-year basis. Office 365 commercial revenues rallied 23% (up 21% at cc). The upside can be attributed to strong installed base growth and average revenues per user (ARPU) expansion.E5 revenue growth was driven by strength in the advanced security, compliance, and voice components.Paid Office 365 Commercial seats increased 17% year over year, driven by growth across small- and medium-sized businesses as well as front-line worker offerings.Office Consumer products and cloud services revenues rose 10% (up 8% at cc), driven by growth in Microsoft 365 subscription revenues.  Microsoft 365 Consumer subscribers totaled 54.1 million at the end of the fiscal first quarter.Dynamics products and cloud services business increased 31% (up 29% at cc) year on year. Dynamics 365 revenues surged 48% (45% at cc) and the same from Power Apps was up 202% (up 197% at cc), noted Microsoft.LinkedIn revenues advanced 42% from the year-ago quarter’s levels (up 39% at cc). The better-than-expected performance was driven by strength in the Marketing solutions and Talent Solutions along with an improvement in the job market scenario.Microsoft is gaining from expanding user base of different applications including Microsoft 365 and Teams. Both solutions continue to witness record adoption. The uptick can be attributed to the continuation of work-from-home trend and mainstream adoption of hybrid work policies. The company noted that Microsoft Teams has 138 customers with more than 100,000 users of Teams and more than 3,000 clients with over 10,000 users.Microsoft’s Power Platform reported a monthly active user base of 20 million, up 76% year over year in the quarter under review.In October 2021, Microsoft rolled out the latest iteration of its Windows operating system — Windows 11.  The system features a Start Button at the center along with Teams Integration and a overhauled Microsoft Store among others.The Intelligent Cloud segment, including server and enterprise products and services, contributed 37.4% to total revenues. The segment reported revenues of $16.964 billion, up 31% (up 29% at cc) year over year.Server product and cloud services revenues rallied 35% year over year (up 33% at cc). The high point was Azure and other cloud services’ revenues, which surged 50% year over year (up 48% at cc). The upside was driven by robust growth in consumption-based business.On-premises server products revenues increased 14% (up 13% at cc) year over year, on strong demand for hybrid offerings.Enterprise mobility and security installed base revenues rallied 30% to more than 196 million seats.Enterprise service revenues increased 9% (up 8% at cc) in the reported quarter, owing to growth in Microsoft Consulting Services and Enterprise Support Services.More Personal Computing segment, which primarily comprises Windows, Gaming, Devices and Search businesses, contributed 29.4% to total revenues. Revenues were up 12% (up 11% at cc) year over year to $13.314 billion, driven by strength in gaming and Windows OEM.Windows commercial products and cloud services revenues increased 12% year over year (up 10% at cc), on the back of higher customer adoption of Microsoft 365 offerings.Windows OEM revenues was up 10% on a year-over-year basis owing to strength in the PC market.Search advertising revenues, excluding traffic acquisition costs (TAC), increased 40% (up 39% at cc) on recovering advertising market.Surface revenues fell 17% (down 19% at cc) from the year-ago quarter’s levels due to tougher year-over-year comparisons.Gaming revenues increased 16% (up 14% at cc) driven by increased engagement levels. Revenues from Xbox hardware soared 166% (up 162% at cc), driven by the new consoles.Xbox content and services revenues was up 2% year over year (relatively unchanged at cc), owing to higher Game Pass subscriptions and demand for first party titles. The uptick was partly offset by tougher year-over-year comparisons and a decline in third party titles.Operating ResultsGross margin increased 21% (up 19% in cc) to $31.7 billion. This can be attributed to revenue growth across the Productivity & Business Processes, Intelligent Cloud and More Personal Computing segments.Non-GAAP gross margin (in percentage terms) of 70% declined slightly on a year-over-year basis, due to change in accounting estimate, noted the company. Microsoft cloud gross margin was 71%, also slightly down year over year.Operating margin expanded 200 bps on a year-over-year basis to 45%.Productivity & Business Process operating income rose 33% (up 29% at cc) to $7.58 billion. Intelligent Cloud operating income surged 39% (up 37% at cc) to $7.56 billion.More Personal Computing operating income rallied 7% (up 5% at cc) to $5.1 billion. Gross margin (as a percentage of segment income) declined on a year-over-year basis, as sales mix moved to Gaming.Balance Sheet & Free Cash FlowAs of Sep 30, 2021, Microsoft had total cash, cash equivalents and short-term investments balance of $130.6 billion compared with $130.3 billion as of Jun 30, 2021. As of Sep 30, 2021, long-term debt (including current portion) was $53.29 billion compared with $58.15 billion as of Jun 30, 2021.Operating cash flow during the reported quarter was $24.5 billion compared with $22.7 billion in the previous quarter. Free cash flow during the quarter was $18.7 billion compared with $16.3 billion in the prior quarter.In the reported quarter, the company returned $10.9 billion to shareholders in the form of share repurchases ($6.2 billion) and dividends payouts ($4.7 billion).GuidanceFor second-quarter fiscal 2022, Productivity and Business Processes revenues are anticipated between $15.7 billion and $15.95 billion. Strong upsell opportunity for Microsoft E5 and momentum in Office 365 is expected to drive growth in Office commercial.On-premises business is anticipated to decline in high-teens due to customers’ shift to cloud.LinkedIn revenue growth is anticipated to be in mid-30% range driven by improving ad and jobs market and increasing engagement levels. Revenue growth for Dynamics is expected to be similar as in the fiscal first quarter driven by continued Dynamics 365 momentum and Power Apps.Office consumer revenues are expected to witness growth in mid teens’ range driven by increases in Microsoft 365 subscription revenues.Intelligent Cloud revenues are anticipated between $18.1 billion and $18.35 billion. Azure's revenue growth is likely to reflect continued strength in the consumption-based services.Gains from Microsoft 365 suite adoption is expected to boost growth in per-user business. However, the company noted that it was expecting some moderation in growth given the large size of the installed base.For Enterprise Services business, management expects revenues to be up in high-single digits. On-premises server business is projected to grow in the mid-single digits range driven by demand for hybrid offerings.More Personal Computing revenues are expected between $16.35 billion and $16.75 billion. The company expects overall Windows OEM revenues to increase in the low to mid-teens’ range.Windows commercial products and cloud services are expected to grow in low double-digit range driven by demand for Microsoft 365 and advanced security solutions.Search advertising revenues, excluding TAC, are anticipated to grow in the low to mid-20% range on improving advertising market. The company noted that persistent supply chain disruptions likely to affect ad budgets and might put a dent on the performance.Surface revenues are anticipated to decline in the single digits on a year-over-year basis, due to supply chain disruption.Gaming revenues are anticipated to be up in high-single digits marred by tougher year over year comparisons. Xbox content and services revenues are projected to increase in the mid-teens range owing to higher engagement levels on the Xbox platform and the launch of new AAA titles. Demand for Xbox Series X and S will continue to be negatively impacted by supply issues.Management expects COGS between $17 billion and $17.2 billion. Operating expenses are anticipated in the range of $12.7-$12.8 billion.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in fresh estimates.VGM ScoresCurrently, Microsoft has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Microsoft has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksNov 25th, 2021

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes where the central banks hiked rates but not as much as some had expected. Traders also braced for an epic data dump in the US, which includes is an epic data dump which includes an update to Q3 GDP, advance trade balance, initial jobless claims, wholesale and retail inventories, durable goods, personal income and spending, UMich consumer sentiment, new home sales, and the FOMC Minutes The two-year U.S. yield shed two basis points. The dollar extended its rising streak against a basket of peers to a fourth day. At 730am, S&P 500 e-mini futures dropped 0.3%, just off session lows, while Nasdaq futures dropping 0.34%. In premarket trading, Nordstrom sank 27% after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. The company reported higher labor and fulfillment costs in the third quarter while sales remained stubbornly below pre-pandemic levels and profit missed analyst estimates. Telecom Italia SpA surged in Europe on enhanced takeover interest. Oil prices fluctuated as producers and major consuming nations headed for a confrontation. Other notable premarket movers: Gap (GPS US) sank 20% premarket after the clothing retailer reported quarterly results that missed estimates and cut its net sales forecast for the full year. Analysts lowered their price targets. Nordstrom (JWN US) tumbles 27% in premarket after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. Jefferies, meanwhile, downgrades the stock to hold from buy as transformation costs are rising. Guess (GES US) posted quarterly results which analysts say included impressive sales and margins, and showed the company navigating supply-chain issues successfully. The shares closed 9.2% higher in U.S. postmarket trading. HP (HPQ US) shares are up 8.4% in premarket after quarterly results. Analysts note strong demand and pricing in the personal computer market. Meme stocks were mixed in premarket after tumbling the most since June on Tuesday as investors bailed out of riskier assets. Anaplan (PLAN US) slides 18% in premarket as a narrower-than-expected quarterly loss wasn’t enough to stem a downward trend. Analysts slashed price targets. Autodesk (ADSK US) shares slump 14% in premarket after the building software maker narrowed its full-year outlook. Analysts are concerned that issues with supply chains and the pandemic could impact its targets for 2023. GoHealth (GOCO US) gained 8.4% in postmarket trading after the insurer’s CEO and chief strategy officer added to their holdings. As Bloomberg notes, investors are on the edge as they face a wall of worry from a resurgence of Covid-19 in Europe to signs of persistent consumer-price growth. Damping inflation is now center-stage for policy makers, with ultra-loose, pandemic-era stimulus set to be wound down. The slew of U.S. data as well as Federal Reserve minutes due today may provide the next catalysts for market moves. In Europe, the Stoxx 600 Index erased earlier gains of up to 0.4% to trade down -0.1%, with tech and travel and leisure leading declines. Miners gained 0.8%, tracking higher copper prices on easing concerns over Chinese demand, while travel stocks slid over 1% on prospects of harsher travel curbs: Italy and France are debating new measures to cope with Covid’s resurgence while Germany isn’t ruling out fresh curbs. Oil stocks rose 1.2%, set for their biggest jump in over a month, with crude prices inching higher as investors remained sceptical about the effectiveness of a U.S.-led release of oil from strategic reserves. Here are some of the most notable European equity movers: Mulberry shares surge as much as 24%, the most since March 12, after the U.K. luxury company swung to a 1H profit from a year earlier and reported an increase in sales. Telecom Italia shares rise as much as 10% following a Bloomberg report that KKR is considering to raise its offer for the company after top investor Vivendi said the bid was too low. However, the stock is still trading below the initial non-binding offer from KKR. Golden Ocean gains as much as 9.6%, most since Feb., after earnings. DNB says “Golden Ocean delivered solid Q3 results” and adds “Furthermore, guidance for Q4 should lift consensus estimates and solidify further dividend potential in our view.” Intertek shares gain as much as 6.7%, the most since May 2020, after the company issued a trading update. UBS says the company’s accelerating momentum and reiterated targets are “reassuring.” Aegon shares rise as much as 5.5% after Credit Suisse upgraded its recommendation to outperform from neutral and raised the PT to EU5.30 from EU4.00. IQE shares slump as much as 21% for the biggest intraday drop since March 2020, falling to their lowest level since June 2020 after the semiconductor company said it sees softening demand in 4Q. Genus shares fall as much 15% after the animal genetics firm lowered its FY22 earnings guidance, leading Peel Hunt and Liberum to cut estimates. European stocks are on course for weekly losses, as the return of COVID-19 curbs, rate hike and inflation concerns sparked fears of a weaker economic growth outlook. "There's a two-way pull between macro concerns and what's happening bottoms-up in terms of corporate profits," said Nick Nelson, head of European equity strategy at UBS, adding that while the third quarter has been one of the decade's best reporting seasons for Europe, macro concerns such as a rise in U.S. bond yields and COVID-19 cases have been holding stocks back. Earlier in the session, Asian equities declined, on track for a third-straight session of losses, as higher U.S. Treasury yields continued to weigh on technology stocks in the region. The MSCI Asia Pacific Index slid as much as 0.6%, with Japan stocks leading losses as traders returned from a holiday to access the prospect of tighter U.S. monetary policy to curb inflation. TSMC and Tencent were among the biggest drags on the regional gauge. READ: Samsung Plans $17 Billion Texas Chip Plant, Creating 2,000 Jobs The renomination of Jerome Powell as Federal Reserve chair earlier this week has sent U.S. 10-year Treasury yields to about levels near 1.65%, implying higher borrowing costs. That’s adding to concerns about weak earnings growth in Asia as well as ongoing supply-chain constraints. Investors will now turn their attention to U.S. gross domestic product data and FOMC minutes due out after Asian markets close Wednesday.  “A cautious tone may still seem to prevail for now,” Jun Rong Yeap, a market strategist at IG Asia, said in a note. “Markets continue to shift their expectations towards a tighter Fed monetary policy.” New Zealand’s stock gauge added 0.6% after the central bank raised interest rates by 25 basis points, less than the 50 points that some economists had predicted. Singapore authorities, meanwhile, expect gross domestic product to expand 3% to 5% next year, a slower pace than this year as the country rebounds from the pandemic. Indian stocks fell ahead of the November monthly expiry on Thursday, led by technology companies. The S&P BSE Sensex slipped 0.6% to 58,340.99 in Mumbai to close at its lowest level in two months. The gauge gained 0.3% on Tuesday, snapping four sessions of selloff.   The NSE Nifty 50 Index declined 0.5% on Wednesday, reversing intraday gains of as much as 0.6%. Software exporter Infosys Ltd. was the biggest drag on both gauges and slipped more than 2%. Of the 30 shares in the Sensex, 21 dropped and nine rose.  Investors roll over positions ahead of the expiry of derivatives contracts on the last Thursday of every month. Fourteen of 19 sub-indexes compiled by BSE Ltd. fell, led by a measure of IT companies. “The scheduled monthly expiry would keep the traders busy on Thursday,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. “We suggest continuing with negative bias on the index while keeping a check on leveraged positions.” In Fx, the most notable movers was the drop in the kiwi: New Zealand’s currency ironically slid to the weakest in nearly two months and the nation’s bond rallied as the central bank’s 25 basis-point rate hike disappointed traders betting on a bigger increase. The central bank projected 2% benchmark borrowing costs by the end of 2022. The Bloomberg Dollar Spot Index advanced a fourth consecutive day as the greenback gained versus all Group-of-10 peers apart from the yen, which reversed its losses after falling to the lowest since March 2017. The euro underperformed, nearing the $1.12 handle amid broad dollar strength even before data showing German business confidence took another hit in November and amid renewed fears that Germany may be considering a full lockdown and mandatory vaccines. RBNZ Governor Adrian Orr said policy makers considered a 50bps move before deciding on 25bps, and he sees the OCR climbing to around 2.5% by end-2023.  Elsewhere, Turkey’s lira stabilized after Tuesday’s plunge. MSCI’s gauge of emerging-market stocks edged lower for a sixth session.   In rates, Treasuries were richer by 1bp to 2bp across the curve, paced by European bonds ahead of a raft of U.S. data preceding Thursday’s market close. 10-year Treasury yields were richer by ~1bp on the day at around 1.655%, slightly trailing bunds; most curve spreads are within a basis point of Tuesday’s close with comparable shifts across tenors. During Asia session, Treasuries were supported by wider gains across Kiwi bonds after RBNZ hiked policy rates, but still erred on the dovish side. Bunds remain supported during European morning as haven demand stems from prospect of a nationwide German lockdown. Italian bonds snapped a two-day decline. In commodities, oil futures in New York swung between gains and losses following an announcement by the U.S. and other nations of a coordinated release of strategic reserves. Focus now turns to OPEC+ on how the group will respond to the moves. The alliance has already said that such releases were unjustified by market conditions and it may reconsider plans to add more supply at a meeting next week. Base metals are well bid with LME nickel adding over 2% to outperform peers. LME copper rises over 1% to best levels for the week. Crude futures fade a modest push higher fading after a brief push through Tuesday’s best levels. WTI trades flat, having briefly printed above $79; Brent prints highs of $83 before fading. Spot gold holds a narrow range close to $1,790/oz To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Market Snapshot S&P 500 futures down 0.1% to 4,683.50 STOXX Europe 600 up 0.3% to 480.66 MXAP down 0.5% to 196.76 MXAPJ down 0.1% to 643.18 Nikkei down 1.6% to 29,302.66 Topix down 1.2% to 2,019.12 Hang Seng Index up 0.1% to 24,685.50 Shanghai Composite up 0.1% to 3,592.70 Sensex down 0.3% to 58,499.84 Australia S&P/ASX 200 down 0.2% to 7,399.44 Kospi down 0.1% to 2,994.29 Brent Futures up 0.4% to $82.63/bbl Gold spot up 0.1% to $1,791.37 U.S. Dollar Index little changed at 96.57 German 10Y yield little changed at -0.22% Euro down 0.2% to $1.1231 Top Overnight News from Bloomberg Olaf Scholz is set to succeed Angela Merkel as German chancellor after forging an unprecedented alliance that aims to revamp Europe’s largest economy by tackling climate change and promoting digital technologies The European Commission is set to announce the recommendations for the entire EU as soon as Thursday, Politico’s Playbook newsletter reported, citing three unidentified officials and diplomats Italy’s government is debating tough new measures to stem an increase in coronavirus cases, which could include restrictions on unvaccinated people and be approved as soon as Wednesday The ECB’s pandemic purchasing program may enter a “waiting room” rather than be abolished completely once net purchases are set to end in March, Governing Council member Robert Holzmann said at briefing in Vienna The U.K.’s biggest business lobby group has urged Prime Minister Boris Johnson to back down in its dispute with the European Union over Northern Ireland and not follow through with threats to suspend parts of the Brexit divorce deal Polish central bank Governor Adam Glapinski said further weakening of the zloty wouldn’t be consistent with the country’s economic fundamentals, helping lift the embattled currency from 12-year lows The supply crunch that’s helped drive inflation to multi- decade highs shows some signs of easing in the U.S. -- but it’s still getting worse in Europe. That’s the takeaway from the latest readings on Bloomberg Economics’ new set of supply indicators The unraveling of the Turkish lira threatens to erode Recep Tayyip Erdogan’s grasp on the economy and is already emboldening his political opponents. Small protests erupted in Istanbul and Ankara overnight, calling for an end to economic mismanagement that’s unleashed rapid inflation and triggered the currency’s longest losing streak in two decades A more detailed breakdown of global news courtesy of newsquawk Asia-Pac equity indices were mixed following the choppy performance of their US counterparts where energy rallied despite the SPR announcement and tech lagged as yields continued to gain, with the latest RBNZ rate hike, as well as looming FOMC Minutes and US data releases adding to the tentative mood. ASX 200 (-0.2%) was rangebound with the index subdued by losses in tech and gold miners which suffered from the rising yield environment, but with downside cushioned by strength in the largest weighted financials sector and with outperformance in energy after oil prices rallied in the aftermath of the widely anticipated SPR announcement. The strength in oil was attributed to several reasons including a “sell the rumour/buy the news” play and expectations of a response from OPEC+, while an administration official kept the prospect of an oil export ban on the table which is seen as bullish as it would remove US supply from the global market. Nikkei 225 (-1.6%) was the laggard on return from holiday amid flows into the local currency and with reports also suggesting the BoJ is considering tweaking its pandemic relief program. Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) swung between gains and losses with early indecision due to the broad tech weakness tech which was not helped by reports that Chinese cyberspace regulators and police summoned Alibaba (9988 HK) and Baidu’s (9888 HK) cloud unit for telecoms network fraud, although the losses for Chinese bourses were eventually reversed amid gains in the energy heavyweights and after a mild PBoC liquidity injection. Finally, 10yr JGBs opened lower on spillover selling from global peers but gradually pared some of the losses after rebounding from support at 151.50 and with the BoJ in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Shinsei Drops Poison Pill Against SBI in Japan Takeover Saga Morgan Stanley to Repay Hong Kong Staff $5,100 for Quarantine KKR, Equinix Among Suitors for $11 Billion Global Switch Japan to Issue $192 Billion in Debt for Stimulus: Nikkei European equities attempted to claw back some of the week’s losses (Euro Stoxx 50 -0.2%; Stoxx 600 -0.2%) at the open with Monday and Tuesday’s session dominated by ongoing COVID angst in the region. Lockdown measures were enough to see investors shrug off yesterday’s better-than-expected PMI metrics for the Eurozone with today’s slightly softer than hoped for German Ifo report having little sway on price action. Despite the upside seen at the open, optimism has faded throughout the session as speculation mounts over whether the announcement of the German coalition deal (set to be unveiled at 14:00GMT) could prompt further lockdown measures for the nation. Furthermore, reports note that the Italian government is debating potential restrictions on the unvaccinated; measures could be approved as soon as today. On a more positive footing French Finance Minister Le Maire says at the moment he does not see any need for further COVID-related restrictions in France. However, it remains to be seen how long this viewpoint can be sustained. Stateside, futures are a touch softer with losses across the majors of a relatively equal magnitude (ES -0.1%) in the final full session of the week ahead of the Thanksgiving Holiday. Given the shortened week, today sees a deluge of data from the US with releases including key personal income, spending and PCE data for October, a second look at Q3 GDP, final Michigan consumer sentiment data, as well as weekly jobless claims and energy inventory data. All of which is followed by the FOMC minutes from the November meeting. In a recent note, BNP Paribas stated it is of the view that equities will go on to provide the highest returns across asset classes in 2022 with the French bank targeting 5100 (currently 4690) for the S&P 500 by the end of next year. From a European perspective, BNP expects the Euro Stoxx 50 to close 2022 out at 4500 (currently 4300) with the market “too pessimistic” on margins; albeit the Bank concedes that the resurgence of COVID presents a risk to its view. Sectors in Europe are mostly constructive with Oil & Gas and Basic Resources underpinned by gains in the underlying commodities with the former continuing to garner support post-yesterday’s SPR announcement. The Travel & Leisure sector lags peers with the Travel element of the group hampered by reports that the European Commission is preparing new COVID travel recommendations for the whole of the EU. For Leisure names, Entain (-5.0%) and Flutter Entertainment (-3.0%) have been hit by news that over 160 UK MPs and peers are said to be demanding that online gambling limits are lowered. Finally, Telecom Italia (+9.7%) is the best performer in the Stoxx 600 after source reports suggesting that KKR is considering a higher bid for the Co. in an attempt to win over support from Vivendi.   Top European News Scholz Seals Coalition Deal to Become Next German Chancellor Italy Readies Curbs on the Unvaccinated as Covid Cases Rise Booking Agrees to Buy CVC’s Etraveli for About EU1.63b Orange CEO Convicted in $453 Million Arbitration Fraud Case In FX, the Dollar index has gained traction and continued its gains above 96.500+ status in early European hours before eclipsing resistance at 96.700 to a fresh YTD peak at 96.758, with US players also preparing to wind down for the long weekend. Before that, the Buck will be facing a plethora of Tier 1 US data, including Prelim GDP (Q3), weekly Jobless Claims, and monthly PCE in the run-up to the FOMC Minutes – which will be eyed for clues on what could warrant an adjustment of the pace of tapering (Full preview available in the Newsquawk Research Suite). On the downside, immediate support will likely be at yesterday’s 96.308 low before this week’s current 96.035 trough. In terms of early month-end FX flows (on account of the holiday-shortened week), Morgan Stanley’s model points towards USD weakness against most G10 peers. EUR, GBP - The single currency dipped a 16-month low just before the release of the German Ifo survey, which unsurprisingly voiced cautiousness against the backdrop of COVID and supply chain issues – with Ifo forecasting a growth stagnation this current quarter, whilst ING believe that today’s Ifo signals that “The risk of stagnation or even recession in the German economy at the turn of the year has clearly increased.” The currency came under further pressure in what coincided with reports that Germany is mulling a full COVID lockdown and mandatory vaccinations, although the piece failed to cite any sources nor officials and seemed to be more an extrapolation of recent remarks from the German Health Minister. EUR/USD fell through pivotal support at 1.1210 to a current low at 1.1206 ahead of 1.1200. Traders should also be cognizant of several chunky OpEx clips including EUR 1.3bln between 1.1195-1.1200. Ahead, the SPD, Greens and FDP set to unveil their coalition deal at 14:00GMT. ECB speak today include from the likes Schnabel after Panetta and Holzmann failed to spur action across EU assets. Elsewhere, the GBP/USD is flat intraday and saw little reaction to BoE Governor Bailey yesterday, suggesting he does not think the MPC will go back to a hard form of guidance and stated that it is not off the table that they give no guidance at all on rates. Bailey also stated that decisions are made meeting by meeting and that they have a very tight labour market. From a political standpoint, European Commission VP Sefcovic said EU-UK talks on Northern Ireland trade rules will probably drag into 2022. Cable remains within a 1.3353-89 range whilst EUR/GBP trades on either side of 0.8400. Looking ahead, BoE’s Tenreyro speaking at the Oxford Economics Society – with early-Nov commentary from the MPC member suggesting that monetary policy will have to bite if there are signs of second-round inflation effects, but policy cannot fix energy price spikes. NZD, AUD - The Kiwi stands as the G10 laggard following a dovish 25bps hike by the RBNZ, with the board citing optionality. Desks suggest that FX was clearly gearing for a hawkish surprise from the central bank, with markets pricing some 35% of a 50bps hike heading into the meeting given the inflation survey earlier this month. Money markets were also disappointed, with participants flagging that the 2yr swap fell over 15bps despite the RBNZ upping its 2023 OCR forecast to 2.3% (prev. 1.7%). NZD/USD fell further beneath the 0.7000 mark to a current 0.6957 low. AUD meanwhile sees its losses cushioned from another day of firm gains in iron ore, whilst cross-currency flows help the AUD/NZD test 1.0450 to the upside. Nonetheless, the cautious market mood keeps AUD/USD around the flat mark after the pair found support at 0.7200. JPY - The traditional haven outperforms as risk aversion creeps into the market. USD/JPY pivots the 115.00 market after hitting an overnight high of 115.23. Some desks suggest that offers are seen from 115.30 on Wednesday, with more around the 115.50 area, according to IFR citing Tokyo sources. In terms of notable OpEx, USD/JPY sees USD 1.7bln between 115.00-10. In commodities, WTI and Brent Jan futures consolidate following yesterday’s gains post-SPR announcement. The release disappointed the oil bears given the widely telegraphed nature of the announcement coupled with relatively small contributions from members. Desks have also highlighted that the reserves will need to be replenished at some time in the future, and thus, analysts have passed the effects from the SPR release as temporary; although, cautioning that if the desired impact is not achieved, then further action can be taken – with a temporary export ban still on the table. Meanwhile, on the demand side, futures dipped after CNBC reported that Germany could head into a full lockdown, but the piece did not make a mention of officials nor sources but seemed to be more an extrapolation of recent comments from the Germany Health Minister, with an announcement on this matter potentially to come today. Further, tomorrow could see revised travel guidance for the whole of the EU, according to Politico sources, although "The biggest overall change will be a move away from a country-based approach and to a person-based one, which takes into account a citizen’s individual COVID status." Despite this month’s European COVID developments, JPMorgan sees global oil demand growing by another 3.5mln BPD next year to reach 99.8mln BPD (280k BPD above 2019 level); 2023 demand is expected to average around 101.5mln BPD (1.9mln BPD above pre-COVID levels) and suggested that global oil demand is on track to exceed 2019 levels by March 2022 and strengthen further. As a reminder, next week also sees the OPEC+ meeting whereby the group is expected to continue with plans of monthly output increases of 400k BPD, with a risk of a more dovish decision and/or commentary. WTI Jan trades around USD 78.50/bbl (vs high 79.23/bbl) and Brent Jan around USD 82.25/bbl (vs high 83.00/bbl). Elsewhere, spot gold is interestingly unfazed by the rampant Dollar as prices remain caged within a cluster of DMAs (100 around 1,793, 200 around 1,791 and 50 around 1,788). Copper prices are again on the grind higher with LME around USD 9,800/t at the time of writing – with participants citing underlying demand, particularly from China. US Event Calendar 8:30am: 3Q GDP Annualized QoQ, est. 2.2%, prior 2.0% 8:30am: 3Q GDP Price Index, est. 5.7%, prior 5.7% 8:30am: 3Q PCE Core QoQ, est. 4.5%, prior 4.5% 8:30am: 3Q Personal Consumption, est. 1.6%, prior 1.6% 8:30am: Oct. Durable Goods Orders, est. 0.2%, prior -0.3% 8:30am: Oct. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.8%; - Less Transportation, est. 0.5%, prior 0.5% 8:30am: Oct. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 1.4% 8:30am: Oct. Retail Inventories MoM, est. 0.3%, prior -0.2%; Wholesale Inventories MoM, est. 1.0%, prior 1.4% 8:30am: Oct. Advance Goods Trade Balance, est. - $95b, prior -$96.3b 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 268,000; Continuing Claims, est. 2.03m, prior 2.08m 9:45am: Nov. Langer Consumer Comfort, prior 50.7 10am: Oct. Personal Income, est. 0.2%, prior -1.0%; 10am: Oct. Personal Spending, est. 1.0%, prior 0.6% 10am: Oct. Real Personal Spending, est. 0.6%, prior 0.3% 10am: Oct. New Home Sales, est. 800,000, prior 800,000 10am: Oct. New Home Sales MoM, est. 0%, prior 14.0% 10am: Oct. PCE Deflator MoM, est. 0.7%, prior 0.3% 10am: Oct. PCE Core Deflator MoM, est. 0.4%, prior 0.2% 10am: Oct. PCE Deflator YoY, est. 5.1%, prior 4.4% 10am: Oct. PCE Core Deflator YoY, est. 4.1%, prior 3.6% 10am: Nov. U. of Mich. Sentiment, est. 67.0, prior 66.8 10am: Nov. U. of Mich. 5-10 Yr Inflation, prior 2.9% 10am: Nov. U. of Mich. 1 Yr Inflation, prior 4.9% 10am: Nov. U. of Mich. Current Conditions, prior 73.2 10am: Nov. U. of Mich. Expectations, prior 62.8 2pm: Nov. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap We’ve had a number of requests to bring back our Covid tables in the EMR. At the moment I’m resisting as they take a considerable amount of time. While we work out an efficient form of articulating the current wave on a daily basis, in today’s EMR we show graphs of the daily rolling 7-day cases and fatalities per million in the population for the G7. We’ve also included Austria, given how topical that is, and also The Netherlands, given mounting problems there. These act as a useful reference point for some of the more stressed countries. The cases chart should be in the text below and the fatalities one visible when you click “view report”. Germany is probably the main one to watch in the G7 at the moment and overnight reported 66,884 new cases (a record) compared with 45,362 the day before. A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detailed IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here. As we hit Thanksgiving Eve and a US data dump of a day given the holiday tomorrow, the big story over the last 2-3 business days has been real rates in the US. As recently as Friday, after the Austria lockdown news, 10yr real rates hit -1.2%. Yesterday they traded above -0.95% before closing at -0.97%, +4.0bps higher than the previous close. Our view in the 2022 credit strategy document is that credit is more tied to real rates than nominal rates and if the market attacks the Fed as we expect, then they should go up. However, note that I’ve also said I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression. Anyway, rising real yields, a fresh covid wave and belief over a less dovish Fed post the Powell reappointment saw a tough day for equities, especially in Europe, before the US managed to eke out a gain into the close. The S&P 500 (+0.17%) was up for the first time in 3 days, whilst Europe’s STOXX 600 (-1.28%) posted its worst daily performance in nearly 2 months. On a sector level, it was the same story in the US, where energy (+3.04%) shares benefitted from climbing oil prices and financials (+1.55%) gained on steeper and higher yields. Larger tech firms retreated on the higher discount rates, with the Nasdaq declining -0.50%. Meanwhile the VIX index of volatility was back above the 20-mark for the first time in over a month, coinciding with a broader tightening of financial conditions. However, we dipped back below 20 into the stronger close. Honing in on bonds now and there was a major selloff yesterday that hit a number of European countries in particular. By the close of trade, yields on 10yr bunds were up +8.1bps, which is their single-biggest daily increase in over a year, actually since the day we found out that the Pfizer/BioNTech vaccine had proven successful in trials and was set to be rolled out. The move came about entirely due to higher real rates, with Germany 10yr inflation breakevens actually down -2.0bps on the day. Similar moves were seen elsewhere on the continent, with yields on 10yr OATs (+8.6bps) and BTPs (+10.5bps) seeing sharp rises of their own, which occurred in part on the back of stronger than expected flash PMI data raising the prospect of a quicker drawdown in monetary stimulus, not least with inflation still running some way ahead of the ECB’s target. For US Treasuries, yields were a touch more subdued, and the yield curve twist steepened. 2yr yields declined -1.8bp whilst every other maturity increased, and all tenors out to 7 years are at post-pandemic highs. The 5yr nominal yield increased +2.2bps to 1.34%. The 10yr was up +4.1bps to 1.67% due, as we discussed above, to real yields. 10yr breakevens were flat (+0.2bp) at 2.63%. The 10 year is 7.5bps off of 2021 closing highs and in the 430 plus business days since the pandemic started there have only been 14 days with a higher close than last nights. Elsewhere yesterday, we had an important piece of news on the energy front, as the US announced that it would be releasing 50m barrels of oil from the Strategic Petroleum Reserve, with the move occurring alongside similar decisions in China, India, Japan, South Korea and the UK. 32m of those 50m will be an exchange, whereby oil is released over the next few months that is then returned over the coming years, while another 18m are coming from an acceleration of an oil sale that Congress had already authorised. Oil prices rose following the release however, with Brent crude (+3.27%) and WTI (+2.28%) both seeing decent advances, in part because the contribution from other nations was smaller than many had anticipated, but also because the potential release from the SPR had been widely reported in advance, thus sending prices lower from their peak around a month ago. Even with the news, there’s no sign that inflationary pressures will be going away just yet, since much of what happens next will depend on the reaction of the OPEC+ group. If they move to cancel plans to increase production, then that could put upward pressure on prices again and help counter the impact of the move from the various energy consumers. And as we’ve been discussing, inflationary pressures have been widening for some time now, stretching beyond specific categories like energy and used cars to an array of other areas. Overnight in Asia stocks are trading mostly in the red with the CSI (-0.03%), Hang Seng (-0.06%), Shanghai Composite (-0.10%), KOSPI (-0.48%) and the Nikkei (-1.35%) all lower. The Reserve Bank of New Zealand has raised interest rates for the second consecutive month and lifted the official cash rate 25bps to 0.75%. There was some who expected 50bps so bonds are rallying with 2yr and 10yrs -5.5bps and -7.5bps lower, respectively. The central bank were pretty hawkish in their comments though. US Treasuries are 2-4bps lower across the curve overnight as well. Staying on New Zealand, the country eased its travel restrictions by allowing fully vaccinated travellers (and other eligible travellers) from Australia without any isolation from Jan 17 and those from the rest of the world from February 14. Elsewhere, South Korea reported its highest ever daily new cases of 4,115 with 586 critical cases with the PM announcing the situation is "more serious than expected". Futures are indicating a slightly weaker start in the US and Europe with the S&P 500 (-0.24%) and DAX (-0.09%) lower. Over in Europe, there’s no sign of the pandemic letting up just yet, with French health minister Veran saying in parliament that “we are sadly well and truly in a fifth wave of the epidemic” as France announced 30,454 new cases yesterday. Austria has been the main country in the headlines recently as it moved into a nationwide lockdown, but the reality is that the trend lines have been moving higher across the continent, raising the prospect of fresh restrictions. In terms of yesterday’s developments, the Netherlands announced that social distancing would be reintroduced on a mandatory basis, and that people should stay 1.5m apart, and Poland saw the biggest daily increase in hospitalisations since April. Elsewhere, Slovakia’s PM said that he was considering following the steps adopted in Austria, and the outgoing Czech PM said that mandatory vaccines for the over-60s were being considered. In spite of the growing Covid wave across Europe, the flash PMIs released yesterday actually proved better than the consensus was expecting, and even saw something of an uptick from the October readings. The Euro Area composite PMI ended a run of 3 successive declines as it rose to 55.8 (vs. 53.0 expected), with both manufacturing (58.6) and services (56.6) rising relative to a month ago. And both the German (52.8) and the French (56.3) composite PMIs were also better than expected. On the other hand, the US had somewhat underwhelming readings, with the flash services PMI down to 57.0 (vs. 59.0 expected), as the composite PMI fell to 56.5. To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Tyler Durden Wed, 11/24/2021 - 08:07.....»»

Category: blogSource: zerohedgeNov 24th, 2021

Here"s Why Investor Should Hold on to Caesars (CZR) Stock

Caesars (CZR) benefits from solid performance of regional properties, robust occupancy and sports betting expansion. Caesars Entertainment, Inc. CZR continues to benefit from solid performance of regional properties, robust occupancy and sports betting expansion. Consequently, the company’s shares have surged 27% so far this year, compared with the industry’s rally of 13.2%. However, coronavirus induced uncertainties remain a concern.Growth DriversThe company continues to witness encouraging trends for its regional destination properties. In the third quarter, the company reported encouraging revenues, adjusted EBITDA and margin performance. During the quarter, net revenues in the segment were $1,492 million compared with $1,055 million in the year-ago quarter. The segment’s adjusted EBITDA was $554 million compared with $350 million reported in the prior-year quarter.The company continues to benefit from robust occupancy. During third-quarter 2021, occupancy in Las Vegas reached 89%, with weekend occupancy attaining 86%. The upside can primarily be attributed to pent-up demand and solid booking trends. Going forward, the company remains optimistic with respect to booking trends as it is witnessing increased bookings for group and convention room nights. Caesars Entertainment expects an uptrend in booking to sustain in 2022 and beyond. The company announced that while attrition remains higher than normal, it began witnessing return of conventions to Las Vegas in the third quarter, and the segment represented roughly 10% of occupied room nights. The momentum is likely to continue in 2022.The Zacks Rank #3 (Hold) company continues to focus on partnerships to drive growth. The company has expanded its partnership with the Arizona Diamondbacks and Caesars Superdome. Meanwhile, the company emphasizes sports betting expansion. To this end, the company formed a new Caesars Digital segment comprising sports betting, iGaming and poker. Caesars Entertainment integrated its digital offerings with Caesars Rewards, at both online and physical casinos. As of Sep 30, 2021, the company operates sports betting in 20 jurisdictions, 14 of which are mobile. The company expects to complete the migration of its legacy up to Washington, D.C., Nevada, Pennsylvania, and Illinois to the Liberty platform in 2022.Image Source: Zacks Investment ResearchConcernsThe coronavirus pandemic negatively impacted the company’s business, financial condition and results of operations in the three months ended Sep 30, 2021. The impact of COVID-19 on its business remains uncertain.Caesars Entertainment is subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where its facilities are located. If additional gaming regulations are adopted in its operating jurisdiction, such as imposition of restrictions or costs, it might adversely affect the company.Key PicksSome better-ranked stocks in the Consumer Discretionary sector include, Hilton Grand Vacations Inc. HGV, Bluegreen Vacations Holding Corporation BVH and Camping World Holdings, Inc. CWH.Hilton Grand Vacations sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have jumped 38% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial year sales and earnings per share suggests growth of 41.2% and 161.4%, respectively, from the year-ago period.Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have surged 58.5% in the past three months.The Zacks Consensus Estimate for Bluegreen Vacations current financial year sales and earnings per share indicates growth of 25.6% and 191.5%, respectively, from the year-ago period.Camping World carries a Zacks Rank #2 (Buy). The company has been benefiting from the launch of a fresh peer-to-peer RV rental marketplace and a mobile service marketplace. It has been investing heavily in product development.Camping World has a trailing four-quarter earnings surprise of 70.9%, on average. Shares of the company have appreciated 20.4% in the past three months. The Zacks Consensus Estimate for CWH’s current financial year sales and earnings per share suggests growth of 25.9% and 77.1%, respectively, from the year-ago period. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Camping World (CWH): Free Stock Analysis Report Caesars Entertainment, Inc. (CZR): Free Stock Analysis Report Hilton Grand Vacations Inc. (HGV): Free Stock Analysis Report Bluegreen Vacations Holding Corporation (BVH): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 23rd, 2021

The Fitness Industry"s Roundtrip

Cut the Cost of Your Fitness Membership By Investing in These 3 Stocks What a difference a single year can make. Now that most of the pandemic-related restrictions have been lifted across the country, investors have been aiming to take advantage of stocks that stand to benefit from the economic reopening. Whereas last year witnessed a surge in many of the ‘stay-at-home’ names, the beginnings of a return to normalcy have coincided with a surge in industries that were decimated last year.Gyms were certainly one of the hardest hit businesses in 2020, and it’s easy to understand why that was the case. Their monthly revenues disappeared overnight as gyms were forced to freeze memberships at no cost to the consumer.Social distancing and other restrictions that were imposed upon the public left zero chance of getting a workout in at the gym for a solid four months in most states. And even when gyms were permitted to reopen, many members were extremely hesitant to return. A survey conducted by Statista Global Consumer showed 46% of respondents were very uncomfortable going back to the gym in the latter half of 2020.As such, people turned to exercise at home, which led to well-known names like Peloton PTON and Nautilus NLS skyrocketing in 2020. Last year, it seemed like everyone was buying a spin bike to use in the comfort of their home (I know one ended up in mine). While both Peloton and Nautilus had a stellar 2020, we can see in the chart below that these ‘stay-at-home’ names have reversed course this year, while the more traditional Planet Fitness has held up well.Image Source: Zacks Investment ResearchEvery fitness advertisement last year claimed that the industry had been changed forever. Yet just like many major cities have seen numbers come roaring back after an initial scare, gyms are also seeing members return. This is an industry that has truly completed the roundtrip.People are going back to the gym. And while it’s certainly convenient to workout in your own residence, there is simply no getting around the fact that gyms have a much wider array of machines and equipment to help keep people in shape - not to mention extra amenities such as pools, spas and other luxuries.Let’s take a look at three stocks that stand to benefit from the continued economic reopening.Lululemon Athletica (LULU)One could argue that Lululemon has created its own specific niche within the fitness industry. Last year, LULU acquired Mirror, the smart at-home workout machine founded by Brynn Putnam. And while it has been touting Mirror in much of its marketing, the company has built a devout following over the years for its athletic apparel and yoga-related products.Currently sporting a Zacks #2 Buy rating, a return to the gym has undoubtedly provided a boost to LULU’s core business. The company has seen a rebound in brick-and-mortar sales driven by an increase in store traffic as consumers have become more comfortable shopping in store. In the second quarter, traffic trends increased by over 150% compared to last year. LULU most recently reported an EPS beat of $1.65 back in September, delivering a 36% surprise over consensus and 123% growth over the same quarter in 2020.lululemon athletica inc. Price, Consensus and EPS Surprise lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. QuoteThe company is part of the Textile – Apparel industry within the Consumer Discretionary sector. This industry currently boasts a Zacks Industry rank of 66, which puts it in the top 26% of all 253 industries.LULU’s next earnings report is slated for December 9th. Management remains upbeat and earlier this year raised its outlook for fiscal 2021. LULU’s current full-year Zacks Consensus Estimates are anticipating earnings of $7.51 per share, which would represent a nearly +60% change year-over-year.The company’s solid financial footing and strong business momentum should serve it well heading into next year. Dicks Sporting Goods (DKS)Currently holding a Zacks #3 ranking, DKS stock has been on a tear this year. It has advanced over 160% and is showing no signs of slowing down. The company is on a hot streak in terms of EPS surprises. In each of the last three quarters, DKS has handily beat estimates with an average EPS surprise of over 118%. It most recently reported earnings back in August of $5.08 per share, up 58% from the prior year quarter and a surprise of over 81% compared to the $2.80 consensus.DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise DICK'S Sporting Goods, Inc. price-consensus-eps-surprise-chart | DICK'S Sporting Goods, Inc. QuoteThe sporting goods retailer is witnessing increased demand from the economic reopening, which has translated into more consumer purchases for its athletic shoes, apparel and other accessories. Solid Q2 results were driven by an increase in net sales of 21% year-over-year and double-digit sales growth in its core categories – hardlines, apparel and footwear.DKS management revised its fiscal 2021 guidance earlier this year. Same-store sales are likely to grow 18-20%, up substantially from the prior 8-11%. Adjusted earnings are expected to be in the range of $12.45-$12.95, reflecting a drastic improvement from the $8-$8.70 previously expected.The company is part of the Retail – Miscellaneous industry group, which ranks 106 out of all 253 industries, putting it in the top 42%.Zacks full-year current consensus estimates are sitting at $12.91, which would represent an increase of nearly 111% year-over-year. DKS is due to report quarterly earnings next Tuesday, November 23rd. The consensus estimate has been revised upward by 3.3% in the past 30 days.What the Zacks Model RevealsThe Zacks Model predicts an earnings beat for DKS for the upcoming earnings announcement. The combination of a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) increases the chances of an earnings beat. The Earnings ESP looks to find companies that have recently seen positive earnings estimate revision activity. DKS currently has an Earnings ESP of +27.97%.Life Time Group Holdings (LTH)Life Time, currently a Zacks #3 Hold, is a leading lifestyle brand offering premium fitness, wellness and health experiences to over 1.4 million individual members. The company was founded nearly 30 years ago and is headquartered in Chanhassen, Minnesota. Life Time operates over 150 fitness centers across 29 states as well as a Canadian location.Prior to the pandemic, the company generated $1.9 billion in revenue in 2019, with $438 million in Adjusted EBITDA and $30 million in net income. While a COVID-related downturn was expected for the company in 2020, LTH has seen a strong rebound in 2021. The company has also invested in multiple lucrative partnerships, including an agreement with Apple to provide Apple Fitness+ to their members.LTH recently enjoyed its IPO back in early October. The company has since reported that Q3 revenue was up 66.7% to $385 million and comparable center sales were up 58.7%. These results were achieved with nearly 20% of LTH’s centers still experiencing pandemic-related restrictions during the quarter. The stock is currently about 10% from its initial $18 IPO price.Life Time Group Holdings, Inc. Price, Consensus and EPS Surprise Life Time Group Holdings, Inc. price-consensus-eps-surprise-chart | Life Time Group Holdings, Inc. QuoteOn a personal note, I’ve been a Life Time member for many years and have been continuously impressed with their services. Having frequented several well-known gyms, I can definitively say that LTH’s luxurious fitness centers are some of the best in the business. The company’s handling of the pandemic and the procedures it implemented with regards to social distancing, cleanliness and safety were second to none.The staff does an incredible job and I can tell that this is a well-run company. It will be interesting to see how the stock performs moving forward. LTH is scheduled to report earnings on January 27th, 2022. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DICK'S Sporting Goods, Inc. (DKS): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report Nautilus Group, Inc. The (NLS): Free Stock Analysis Report Peloton Interactive, Inc. (PTON): Free Stock Analysis Report Life Time Group Holdings, Inc. (LTH): Get Free Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 19th, 2021

Workday Announces Fiscal 2022 Third Quarter Financial Results

Fiscal Third Quarter Total Revenues of $1.33 Billion, Up 20.0% Year Over YearSubscription Revenue of $1.17 Billion, Up 21.0% Year Over Year24-Month Subscription Revenue Backlog of $7.12 Billion, Up 19.7% Year Over YearTotal Subscription Revenue Backlog of $10.97 Billion, Up 23.7% Year Over Year PLEASANTON, Calif., Nov. 18, 2021 (GLOBE NEWSWIRE) -- Workday, Inc. (NASDAQ:WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2022 third quarter ended October 31, 2021. Fiscal 2022 Third Quarter Results Total revenues were $1.33 billion, an increase of 20.0% from the third quarter of fiscal 2021. Subscription revenue was $1.17 billion, an increase of 21.0% from the same period last year. Operating income was $23.9 million, or 1.8% of revenues, compared to an operating loss of $14.1 million, or negative 1.3% of revenues, in the same period last year. Non-GAAP operating income for the third quarter was $332.2 million, or 25.0% of revenues, compared to a non-GAAP operating income of $268.1 million, or 24.2% of revenues, in the same period last year.1 Basic and diluted net income per share was $0.17, compared to a basic and diluted net loss per share of $0.10 in the third quarter of fiscal 2021. Non-GAAP basic and diluted net income per share was $1.15 and $1.10, respectively, compared to a non-GAAP basic and diluted net income per share of $0.92 and $0.86, respectively, in the same period last year.2 Operating cash flows were $384.7 million compared to $293.8 million in the prior year. Cash, cash equivalents, and marketable securities were $3.55 billion as of October 31, 2021. Comments on the News "We delivered another strong quarter as we continue to expand our addressable market through our diverse product portfolio and multiple go-to-market levers, helping to support our sustained growth," said Aneel Bhusri, co-founder, co-CEO, and chairman, Workday. "I continue to remain optimistic about the great opportunity in front of us, supported by our employees' incredible efforts, our relentless focus on innovation, and our growing customer community – which consists of some of the world's largest organizations that are making long-term investments in their future with Workday." "In the third quarter, we continued to see increased demand exceed our expectations, with more global organizations selecting our products to manage their people and finances and existing customers expanding their Workday footprint," said Chano Fernandez, co-CEO, Workday. "As we look to the future, we will continue to accelerate our investments in our go-to-market efforts and our people, who are so critical to our success. We are well positioned with a strong foundation heading into fiscal 2023.""We reported a strong third quarter, once again accelerating subscription revenue growth, as organizations across the globe look to Workday as their strategic partner in driving their Finance and HR digital transformations," said Robynne Sisco, co-president and chief financial officer, Workday. "As a result, we are raising our fiscal 2022 guidance for subscription revenue to a range of $4.533 billion to $4.535 billion, growth of 20%. We expect fourth-quarter subscription revenue of $1.216 billion to $1.218 billion, growth of 21%. We are also raising our fiscal 2022 non-GAAP operating margin guidance to 22%." Recent Highlights As part of its continued investment in proven leaders, Workday announced the promotion of Doug Robinson to co-president – effective immediately, and Barbara Larson to chief financial officer – effective Feb. 1, 2022. With these changes, Robynne Sisco will continue as co-president alongside Doug. In addition, Workday appointed Pete Schlampp to chief strategy officer and Sayan Chakraborty to executive vice president of Product and Technology. Workday announced its intent to acquire VNDLY, an industry leader in cloud-based external workforce and vendor management technology. With VNDLY, Workday will provide organizations with a unified workforce optimization solution that will help organizations manage all types of workers and support a holistic talent strategy. Workday acquired Zimit, one of the only configure price quote (CPQ) solutions built specifically for services industries, further expanding the Workday product portfolio that is enabling the office of the CFO to digitally transform. Workday announced Workday Scheduling and Labor Optimization, an intelligent, worker-first scheduling solution that matches labor demands with worker preferences so that organizations can better optimize shift schedules and empower frontline workers with flexibility and control for when and how they work. Workday announced that nearly 1,000 organizations are using Skills Cloud to effectively hire, engage, and retain their workforce amid the changing world of work. The company also announced a new packaged solution – skills foundation – to help customers accelerate and evolve their skills-based people strategies. Workday announced Workday Everywhere, packaged connectors that deliver a simple, connected, and more engaging employee experience by bringing Workday tasks and insights directly into digital workspaces. Workday was named a Leader in the 2021 Gartner® Magic Quadrant™ for Cloud HCM Suites for 1,000+ Employee Enterprises for the sixth consecutive year and positioned the highest for overall Ability to Execute.3 Workday Financial Management received the Gartner Peer Insight Customers' Choice 2021 Distinction for products in Cloud Core Financial Management Suites for Midsize, Large, and Global Enterprises based on feedback and ratings from end-user professionals.  Workday announced that following its acquisition of Peakon ApS earlier this year, the leading employee engagement solution is now called Workday Peakon Employee Voice, marking a significant milestone in the integration of Peakon with Workday. Earnings Call Details Workday plans to host a conference call today to review its fiscal 2022 third quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days. Workday uses the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Non-GAAP operating income excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization expense for acquisition-related intangible assets. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details. Non-GAAP net income per share excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, non-cash interest expense related to our convertible senior notes, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details. Gartner "Magic Quadrant for Cloud HCM Suites for 1,000+ Employee Enterprises," by Sam Grinter, Chris Pang, Jeff Freyermuth, Ron Hanscome, Helen Poitevin, Ranadip Chandra, John Kostoulas, October 19, 2021. Required Disclaimer GARTNER and MAGIC QUADRANT are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Gartner Peer Insights Customers' Choice constitute the subjective opinions of individual end-user reviews, ratings, and data applied against a documented methodology; they neither represent the views of, nor constitute an endorsement by, Gartner or its affiliates. About Workday Workday is a leading provider of enterprise cloud applications for finance and human resources, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics have been adopted by thousands of organizations around the world and across industries – from medium-sized businesses to more than 50% of the Fortune 500. For more information about Workday, visit workday.com. © 2021 Workday, Inc. All rights reserved. Workday, Peakon, Zimit, and the Workday logo are registered trademarks of Workday, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders. Use of Non-GAAP Financial Measures Reconciliations of non-GAAP financial measures to Workday's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures." A reconciliation of our forward outlook for non-GAAP operating margin with our forward-looking GAAP operating margin is not available without unreasonable efforts as the quantification of share-based compensation expense, which is excluded from our non-GAAP operating margin, requires additional inputs such as the number of shares granted and market prices that are not ascertainable. Forward-Looking Statements This press release contains forward-looking statements including, among other things, statements regarding Workday's full-year fiscal 2022 subscription revenue and non-GAAP operating margin, fourth-quarter subscription revenue, growth, innovation, opportunities, customer demand and momentum, acceleration potential, and investments. These forward-looking statements are based only on currently available information and our current beliefs, expectations, and assumptions. Because forward-looking statements relate to the future, they are subject to risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control. If the risks materialize, assumptions prove incorrect, or we experience unexpected changes in circumstances, actual results could differ materially from the results implied by these forward-looking statements, and therefore you should not rely on any forward-looking statements. Risks include, but are not limited to: (i) the risk that the pending acquisition of VNDLY may not be completed in a timely manner or at all, that we may not be able to achieve the expected benefits of the transaction, or that we may incur unanticipated costs or other negative effects in connection with the transaction; (ii) our ability to implement our plans, objectives, and other expectations with respect to VNDLY or any other of our acquired companies; (iii) the impact of the ongoing COVID-19 pandemic on our business, as well as our customers, prospects, partners, and service providers; (iv) breaches in our security measures or those of our third-party providers, unauthorized access to our customers' or other users' personal data, or disruptions in our data center or computing infrastructure operations; (v) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (vi) our ability to manage our growth effectively; (vii) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (viii) the development of the market for enterprise cloud applications and services; (ix) acceptance of our applications and services by customers and individuals, including any new features, enhancements, and modifications, as well as the acceptance of any underlying technology such as machine learning, artificial intelligence, and blockchain; (x) adverse changes in general economic or market conditions; (xi) the regulatory, economic, and political risks associated with our domestic and international operations; (xii) the regulatory risks related to new and evolving technologies such as machine learning, artificial intelligence, and blockchain; (xiii) delays or reductions in information technology spending; and (xiv) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on these and additional risks that could affect Workday's results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Form 10-Q for the fiscal quarter ended October 31, 2021, and our future reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. Workday assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release. Any unreleased services, features, or functions referenced in this document, our website, or other press releases or public statements that are not currently available are subject to change at Workday's discretion and may not be delivered as planned or at all. Customers who purchase Workday services should make their purchase decisions based upon services, features, and functions that are currently available. Workday, Inc.Condensed Consolidated Balance Sheets(in thousands)(unaudited)   October 31, 2021   January 31, 2021 Assets       Current assets:       Cash and cash equivalents $ 1,297,259     $ 1,384,181   Marketable securities 2,257,722     2,151,472   Trade and other receivables, net 865,040     1,032,484   Deferred costs 135,829     122,764   Prepaid expenses and other current assets 137,858     111,160   Total current assets 4,693,708     4,802,061   Property and equipment, net 1,120,196     972,403   Operating lease right-of-use assets 269,687     414,143   Deferred costs, noncurrent 287,645     271,796   Acquisition-related intangible assets, net 371,658     248,626   Goodwill 2,428,481     1,819,625   Other assets 269,508     189,757   Total assets $ 9,440,883     $ 8,718,411   Liabilities and stockholders' equity       Current liabilities:       Accounts payable $ 47,928     $ 75,596   Accrued expenses and other current liabilities 196,331     169,266   Accrued compensation 311,819     285,061   Unearned revenue 2,423,305     2,556,624   Operating lease liabilities 83,452     93,000   Debt, current 1,212,215     1,103,101   Total current liabilities 4,275,050     4,282,648   Debt, noncurrent 635,994     691,913   Unearned revenue, noncurrent 70,606     80,111   Operating lease liabilities, noncurrent 202,969     350,051   Other liabilities 40,448     35,854   Total liabilities 5,225,067     5,440,577   Stockholders' equity:       Common stock 249     242   Additional paid-in capital 6,919,963     6,254,936   Treasury stock (12,437 )   (12,384 ) Accumulated other comprehensive income (loss) (20,627 )   (54,970 ) Accumulated deficit (2,671,332 )   (2,909,990 ) Total stockholders' equity 4,215,816     3,277,834   Total liabilities and stockholders' equity $ 9,440,883     $ 8,718,411   Workday, Inc.Condensed Consolidated Statements of Operations(in thousands, except per share data)(unaudited)   Three Months Ended October 31,   Nine Months Ended October 31,   2021   2020   2021   2020 Revenues:               Subscription services $ 1,171,517     $ 968,547     $ 3,317,140     $ 2,782,201   Professional services 155,746     137,413     445,517     404,111   Total revenues 1,327,263     1,105,960     3,762,657     3,186,312   Costs and expenses (1):               Costs of subscription services 200,700     152,396     575,646     442,666   Costs of professional services 159,024     142,785     462,652     442,422   Product development 455,615     419,962     1,341,482     1,282,127   Sales and marketing 366,323     302,870     1,050,974     897,924   General and administrative 121,656     102,024     347,391     296,461   Total costs and expenses 1,303,318     1,120,037     3,778,145     3,361,600   Operating income (loss) 23,945     (14,077 )   (15,488 )   (175,288 ) Other income (expense), net 21,557     (8,846 )   115,491     (31,272 ) Income (loss) before provision for (benefit from) income taxes 45,502     (22,923 )   100,003     (206,560 ) Provision for (benefit from) income taxes 2,090     1,417     (2,623 )   4,164   Net income (loss) $ 43,412     $ (24,340 )   $ 102,626     $ (210,724 ) Net income (loss) per share, basic $ 0.17     $ (0.10 )   $ 0.42     $ (0.89 ) Net income (loss) per share, diluted $ 0.17     $ (0.10 )   $ 0.40     $ (0.89 ) Weighted-average shares used to compute net income (loss) per share, basic 248,468     238,059     246,348     235,685   Weighted-average shares used to compute net income (loss) per share, diluted 254,760     238,059     253,917     235,685   (1) Costs and expenses include share-based compensation expenses as follows:           Three Months Ended October 31,   Nine Months Ended October 31,   2021   2020   2021   2020 Costs of subscription services $ 21,340     $ 16,767     $ 62,478     $.....»»

Category: earningsSource: benzingaNov 18th, 2021

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates U.S. index futures rose again, trading on top of the massive 4700 "max gamma" level despite downbeat data out of Chinese tech names, as investors awaited the latest batch of unemployment data and taking comfort from signals that central banks will stay far behind the curve and keep pledges to overlook faster inflation rather than rush into rate hikes. European stocks were steady and Asian equities fell as Chinese tech stocks tumbled after poor results from Baidu and Bilibili. Treasury yields edged higher, the dollar was little changed and gold declined. Bitcoin retreated for a fifth straight day. Oil prices skidded to a six-week low on concern about a supply overhang and the prospect of China, Japan and the United States dipping in to their fuel reserves, with Brent futures last at $79.77, more than 8% off last month's three-year high. Nasdaq futures rose 86.25 points or 0.53% outperforming S&P 500 futs which were up 11.50 points or 0.25% to 4697.75, after chip giant Nvidia jumped 7% after a sales forecast by the world’s largest chipmaker. Elsewhere in premarket trading, Cisco dropped 6.6% after the computer networking equipment group’s growth and earnings forecast fell short of expectations while Alibaba slid after reporting sales that missed analyst estimates for a second straight quarter. Some other notable premarket movers: EV makers are mixed in U.S. premarket trading, with Rivian Automotive (RIVN US), Lucid (LCID US) and Canoo (GOEV US) all declining and newly-listed Sono (SEV US) extending its bounce Nvidia (NVDA US) shares gain 7% in U.S. premarket trading, with analysts saying the chipmaker delivered a strong enough quarter to justify its punchy valuation Amtech (ASYS US) fell 22% in post-market trading after reporting fourth quarter revenue that missed estimates from two analysts. The semiconductor stock has risen 139% this year through Wednesday’s trading. Kraft Heinz (KHC US) fell 1.6% in postmarket trading on Wednesday after announcing one of its top holders was selling a portion of its stake. Victoria’s Secret (VSCO US) shares gain 13% in U.S. premarket trading as analysts highlight “better-than- feared” 3Q results for the lingerie retailer. JD.com (JD US) shares advanced 2.2% premarket after it reported net revenue for the third quarter that beat the average analyst estimate. “While companies are managing to report solid third-quarter numbers, the ability to do so is being tempered by concerns about slimmer margins,” said Michael Hewson, chief market analyst at CMC Markets in London. “One positive thing, aside from the concern over rising inflation, has been the resilience of labor markets, on both sides of the Atlantic.” The Stoxx Europe 600 Index was little changed with most cash indexes giving back early gains or losses to trade flat as travel and consumer companies gained while the energy and minings industries retreated. FTSE 100 underperformed slightly. Oil & gas was the weakest sector followed by mining stocks. European metals and mining stocks fall 0.8%, the second worst performing sub-index on the benchmark Stoxx 600, amid sinking iron ore futures and copper prices. Iron ore retreated as investors weighed a top producer’s forecasts of a balanced market next year and the impact on miners amid a price collapse in recent months. Diversified miners drop, Glencore -0.8%, Anglo American -1%, BHP -0.7%, Rio Tinto -1.1%; the four stocks account for more than 60% of the SXPP. Earlier in the session, Asian stocks fell, on track for a second day of losses, as Baidu helped lead a slump in Chinese technology giants.  The MSCI Asia Pacific Index dropped as much as 0.4%, extending its two-day slide to about 0.9%. The Hang Seng Tech Index lost about 3%, as search engine giant Baidu tumbled on worries over the advertising outlook and video-streaming firm Bilibili dropped after posting a larger-than-expected loss. Hong Kong’s Hang Seng Index and China’s CSI 300 benchmark were the worst performing national benchmarks Thursday, while Taiwan’s Taiex managed a small gain. Alibaba also fell, ahead of its highly awaited earnings report later today that may show the impact of Beijing’s regulatory curbs. Japan's Nikkei was down 0.6% in early trade. "We do seem to have stalled somewhat as we head into the year end," said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners in Sydney. "Investors perhaps are just taking a bit of pause," she said, in the wake of a strong U.S. results season, but as inflation and China's slowdown loom as macroeconomic headwinds. “With a bout of earnings having been released and put behind the market, we’re in an environment where investors are inclined to take profits,” said Takashi Ito, an equity market strategist at Nomura Securities in Tokyo. “Investors are likely to cherry pick stocks that have high earnings and ROE and have strong momentum for growth.”  The region’s equities are now poised for a weekly drop after wiping out gains from earlier this week. Anxiety over global inflation has weighed on sentiment as investors search for clues on when central banks will start raising interest rates. Indonesia and the Philippines kept borrowing costs unchanged, as expected, to aid two economies that bore the brunt of Covid-19 outbreaks in Southeast Asia this year. In rates, treasuries were slightly cheaper across long-end of the curve after S&P 500 and Nasdaq 100 futures breached Wednesday’s highs. Yields are higher by ~1bp in 30-year sector, with 2s10s steeper by ~1bp, 5s30s by ~0.5bp; 10-year is ~1.60%, trailing bunds by ~2bp as traders push back on ECB rate-hike pricing. Focal points Thursday include several Fed speakers and a potentially historic 10-year TIPS auction at 1pm ET - at $14BN, the 10Y TIPS reopening is poised to draw a record low yield near -1.14%; breakeven inflation rate at ~2.71% is within 7bp of Monday’s YTD high. Elsewhere, Gilts outperformed richening ~2.5bps across the curve. Peripheral spreads tighten, semi-core widens marginally. In FX, the U.S. dollar erased an earlier modest loss and was flat, with majors mostly range-bound. Treasury yields stabilized from overnight declines; the greenback traded mixed versus its Group-of-10 peers, though most were confined to tight ranges, New Zealand’s dollar led G-10 gains after two-year ahead inflation expectations rose to 2.96% in the fourth quarter from 2.27% in the third, according to survey of businesses published by the Reserve Bank of New Zealand. Support in euro- Swiss franc at 1.0500 holds for now and consolidation for risk reversals this week suggests that a breach of the key level may not see a big follow through. The pound inched up and is on its longest winning streak in nearly seven months after this week’s jobs and inflation data fueled confidence that the Bank of England will hike rates. The Turkish lira plunged to a new all time low, with the USDTRY rising to 10.93 after the central bank cut rates by 100bps. Currency traders are also assessing a sharp downdraft in the Aussie/yen cross, often a barometer of market sentiment. It fell through its 200-day moving average on Tuesday and has lost almost 4% in a dozen sessions . "You've got the perfect storm there for bears," said Matt Simpson, senior analyst at brokerage City Index. "Fundamentally and technically Aussie/yen looks pretty good with lower oil prices." In commodities, crude futures remained in the red but bounce off worst levels as the potential for SPR releases remains center stage. WTI finds support near $77, recovering toward $78; Brent regains a $80-handle. Spot gold gives back Asia’s small gains, dropping ~$7 to trade near $1,860/oz. Base metals trade poorly, LME zinc and lead underperform. Looking at the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Market Snapshot S&P 500 futures up 0.4% to 4,703.25 STOXX Europe 600 up 0.1% to 490.50 MXAP down 0.3% to 199.31 MXAPJ down 0.6% to 650.79 Nikkei down 0.3% to 29,598.66 Topix down 0.1% to 2,035.52 Hang Seng Index down 1.3% to 25,319.72 Shanghai Composite down 0.5% to 3,520.71 Sensex down 0.4% to 59,755.91 Australia S&P/ASX 200 up 0.1% to 7,379.20 Kospi down 0.5% to 2,947.38 Brent Futures down 0.1% to $80.18/bbl Gold spot down 0.2% to $1,863.45 U.S. Dollar Index little changed at 95.75 German 10Y yield little changed at -0.26% Euro little changed at $1.1327 Top Overnight News from Bloomberg More Wall Street banks are wagering that the Federal Reserve will hike rates at a faster-than-expected pace, with Citigroup Inc. joining Morgan Stanley in backing trades that will profit if the central bank does just that China is releasing some oil from its strategic reserves days after the U.S. invited it to participate in a joint sale, suggesting the world’s two biggest oil consumers are willing to work together to keep a lid on energy costs European countries are increasingly forcing reluctant companies to let employees work from home in an effort to break the rapidly spreading fourth wave of the coronavirus pandemic A more in depth look at global markets courtesy of Newsqauwk Asia-Pac stocks traded mostly negative with sentiment in the region subdued amid a lack of significant macro drivers and following the uninspired lead from the US - where the major indices finished a choppy session in the red and the DJIA gave up the 36k status. Nonetheless, the ASX 200 (+0.1%) remained afloat with notable strength in gold miners, as well as some consumer stocks, although advances in the index were limited by losses in the financial and energy sectors after similar underperformance stateside amid a decline in yields and oil prices. The Nikkei 225 (-0.3%) was initially dragged lower by unfavourable currency inflows which overshadowed reports that Japan wants to enhance tax breaks for corporations that raise wages, while shares in Eisai were hit after EU regulators placed doubts regarding the approval of Co. and Biogen’s co-developed Alzheimer’s drug and SoftBank also declined after the US regulator raised concerns regarding Nvidia’s acquisition of Arm. However, the index then briefly returned flat in late trade on reports that the Japanese stimulus package is to require JPY 55.7tln of fiscal spending which is higher than the previously speculated of around JPY 40tln. The Hang Seng (-1.3%) and Shanghai Comp. (-0.5%) weakened after another liquidity drain by the PBoC and with the declines in Hong Kong exacerbated by tech selling, while the losses in the mainland were to a lesser extent with China said to be mulling additional industrial policies aimed to support growth and SGH Macro sources suggested the US and China agreed there would be some substantial progress on trade such as the removal of some punitive tariffs by the US and increased purchases of US products by China, although the report highlighted that it was unclear if this would be from a high-profile announcement or a discrete relaxing of tariffs. Finally, 10yr JGBs were initially flat as prices failed to benefit from the subdued risk appetite in Japan and rebound in global peers, while firmer metrics at the 20yr JGB bond auction provided a mild tailwind in late trade although the support was only brief and prices were then pressured on news of the potentially larger than anticipated fiscal spending in PM Kishida's stimulus package. Top Asian News China Property Stocks Sink, $4.2 Billion Rush: Evergrande Update Japan’s Kishida Eyes Record Fiscal Firepower to Boost Recovery China Property Firm Shinsun’s Shares and Bonds Slump JD.com Sales Beat Estimates as Investments Start to Pay Off Major bourses in Europe are choppy, although sentiment picked up following a subdued APAC session but despite a distinct lack of fresh catalysts. US equity futures have also been grinding higher in early European hours, with the NQ (+0.6%) outpacing the ES (+0.3%), RTY (+0.2%) and YM (+0.2%). Back to European cash – broad-based gains are seen across the Euro bourses – which lifted the CAC, DAX and SMI to notch record intraday highs, whilst upside in the UK's FTSE 100 (-0.2%) has been hampered by hefty losses in today's lagging sectors– the Energy and Basic Resources - amid price action in the respective markets. Tech names also see a strong performance thus far as chip names cheer NVIDIA (+6% pre-market) earnings yesterday. Overall, sectors have maintained a similarly mixed picture vs the cash open, with no overarching theme. In terms of individual movers, Swatch (+2.8%) and Richemont (+0.6) piggyback on the increase in Swiss Watch Exports vs 2020 and 2019. Metro Bank (-20%) plumbed the depths after terminating takeover talks with Carlyle. Top European News Royal Mail Hands Investors $540 Million Amid Parcel Surge German Coalition Plans Stricter Rent Increase Regulation: Bild HSBC Sees ECB Sticking With Easy Stance Despite Record Inflation Astra Covid Antibody Data Shows Long-Lasting Protection In FX, the Kiwi has extended its recovery on heightened RBNZ tightening expectations prompted by significant increases in Q4 inflation projections, with some pundits now assigning a greater probability to the OCR rising 50 bp compared to the 25 bp more generally forecast and factored in. Nzd/Usd is eyeing 0.7050 and the 50 DMA just above (at 0.7054 today) having breached the 100 DMA (0.7026), while the Aud/Nzd cross is probing further below 1.0350 even though the Aussie has found some support into 0.7250 against its US rival and will be encouraged by news that COVID-19 restrictions in the state of Victoria are on the verge of being completely lifted. GBP/EUR/DXY - Notwithstanding Kiwi outperformance, the Dollar has lost a bit more of its bullish momentum to the benefit of most rivals, and several of those that compose the basket. Indeed, Cable has popped above 1.3500, while the Euro is looking more comfortable on the 1.1300 handle as the index retreats further from Wednesday’s new y-t-d peak and away from the psychological 96.000 level into a 95.840-642 range. Ahead, IJC and Philly Fed are due amidst another decent slate of Fed speakers, while Eur/Usd will also be eyeing the latest ECB orators for some direction and Eur/Gbp is back around 0.8400 where decent option expiry interest resides (1.1 bn), but perhaps more focused on latest talks between the UK and EU on the NI dispute. CHF/CAD/JPY - The Franc has pared more declines vs the Buck from sub-0.9300 and remains firm against the Euro near 1.0500 in wake of Swiss trade data showing a wider surplus and pick-up in key watch exports, but the Loonie looks a bit hampered by a more pronounced fall in the price of oil as the US calls on other countries for a concerted SPR tap and China is said to be working on the release of some crude stocks. Usd/Cad is tethered to 1.2600 and highly unlikely to threaten 1.1 bn option expiries at the 1.2500 strike in contrast to the Yen that stalled above 114.00 and could be restrained by 1.4 bn between 113.90 and the round number or 1.3 bn from 114.20-25, if not reports that Japan’s stimulus package may require Jpy 55.7 tn of fiscal spending compared to Jpy 40 tn previously speculated. In commodities, WTI and Brent front-month futures are off worst levels but still under pressure amid the prospect of looming crude reserves releases, with reports suggesting China is gearing up for its own release. There were also prior source reports that the US was said to have asked other countries to coordinate a release of strategic oil reserves and raised the oil reserve release request with Japan and China. Furthermore, the US tapping of the SPR could be either in the form of a sale and/or loan from the reserve, and the release from the reserve needs to be more than 20mln-30mln bbls to get the message to OPEC, while a source added that the US asked India, South Korea and large oil-consuming countries, but not European countries, to consider oil reserve releases after pleas to OPEC failed. This concoction of headlines guided Brent and WTI futures under USD 80/bbl and USD 78/bbl respectively with early selling also experienced as European players entered the fray. On the geopolitical front, US National security adviser Jake Sullivan raised with his Israeli counterpart the idea of an interim agreement with Iran to buy more time for nuclear negotiations, according to sources. However, two American sources familiar with the call said the officials were just "brainstorming" and that Sullivan passed along an idea put forward by a European ally. Next, participants should continue to expect jawboning from the larger economies that advocated OPEC+ to release more oil. OPEC+ is unlikely to react to prices ahead of next month's meeting (barring any shocks). Elsewhere, spot gold and silver have been choppy within a tight range. Spot gold trades under USD 1,875/oz - with technicians flagging a Fib around USD 1,876/oz. Spot silver trades on either side of USD 25/oz. Base metals are on a softer footing amid the broader performance across industrial commodities – LME copper remains subdued under the USD 9,500/t level, whilst some reports suggest companies are attempting to arbitrage the copper spread between Shanghai and London. US Event Calendar 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 267,000; Continuing Claims, est. 2.12m, prior 2.16m 8:30am: Nov. Philadelphia Fed Business Outl, est. 24.0, prior 23.8 9:45am: Nov. Langer Consumer Comfort, prior 50.3, revised 50.3 10am: Oct. Leading Index, est. 0.8%, prior 0.2% 11am: Nov. Kansas City Fed Manf. Activity, est. 28, prior 31 Central banks 8am: Fed’s Bostic Discusses Regional Outlook 9:30am: Fed’s Williams speaks on Transatlantic responses to pandemic 2pm: Fed’s Evans Takes Part in Moderated Q&A 3:30pm: Fed’s Daly takes part in Fed Listens event DB's Jim Reid concludes the overnight wrap After 9 weeks since surgery, yesterday I got the green light to play golf again from my consultant. Yippee. However he said that he’ll likely see me in 3-5 years to do a procedure called distal femoral osteotomy where he’ll break my femur and realign the leg over the good part of the knee. Basically I have a knee that is very good on the inside half and very bad on the outer lateral side. He’s patched the bad side up but it’s unlikely to last more than a few years before the arthritis becomes too painful. This operation would be aimed at delaying knee replacement for as long as possible! Sounds painful and a bit crazy! Meanwhile I also have a painful slipped disc in my back at the moment that I’m going to have an injection for to hopefully avoid surgery after years of managing it. As you might imagine from reading my posts last week I don’t get much sympathy at home at the moment for my various ailments. In terms of operations and golf I’m turning into a very very poor man’s Tiger Woods! Markets have been limping a bit over the last 24 hours too as the inflation realities seemed to be a bit more in focus. Those worries were given additional fuel from the UK CPI release for October, which followed the US and the Euro Area in delivering another upside surprise, just as a number of key agricultural prices continued to show significant strength. Oil was down notably though as we’ll discuss below. To add to the mix, the latest global Covid-19 wave has shown no sign of abating yet, even if some countries are better equipped for it than others. Starting with inflation, one of the main pieces of news arrived yesterday morning, when the UK reported that CPI came in at +4.2% year-on-year in October. That was above every economist’s estimate on Bloomberg, surpassing the +3.9% consensus expectation that was also the BoE’s staff projection in their November Monetary Policy Report. That’s the fastest UK inflation since 2011, and core inflation also surprised on the upside with a +3.4% reading (vs. +3.1% expected). In response to this, our UK economist (link here) is now expecting that CPI will peak at +5.4% in April, with the 2022 annual average CPI still at +4.2%, which is more than double the BoE’s 2% target. The release was also seen as strengthening the case for a December rate hike by the BoE, and sterling was the second best performing G10 currency after being top the day before in response, strengthening +0.45% against the US dollar. Even as inflation risks mounted however, the major equity indices demonstrated an impressive resilience, with the STOXX 600 (+0.14%) rising for the 17th time in the last 19 sessions. This is the best such streak since June this year, when the index managed to increase 18 of 20 days. We’ll see if that mark is matched today That was a better performance than the S&P 500 (-0.26%). 342 stocks were in the red today, the most in three weeks. Energy (-1.74%) and financials (-1.11%) each declined more than a percent, on lower oil prices and yields, respectively. Real estate (+0.65%) and consumer discretionary (+0.59%) led the way, driven by a +3.25% increase in Tesla. In line with the broad-based retreat, small-caps continued to put in a much weaker performance, with the Russell 2000 shedding -1.16% as it underperformed the S&P for a 4th consecutive session. Sovereign bonds also managed to advance yesterday, with yields on 10yr Treasuries (-4.5bps) posting their biggest decline in over a week, taking them to 1.59%. Declining inflation expectations drove that move, with the 10yr breakeven down -3.2bps to 2.71%, which was its biggest decline in over two weeks. For Europe it was a different story however, with yields on 10yr bunds only down -0.3bps, just as those on 10yr OATs (+0.1bps) and BTPs (+0.5bps) both moved higher. Most of the Treasury rally was after Europe closed though. Those moves came against the backdrop of a fairly divergent performance among commodities. On the one hand oil prices fell back, with WTI (-2.97%) closing beneath $80/bbl for only the second time in the last month as speculation continued that the US would tap its strategic reserves. On the other hand, there was no sign of any relenting in European natural gas prices, which rose a further +0.79% yesterday to bring their gains over the last 7 days to +31.57%. That follows the German regulator’s decision to temporarily suspend certification for Nord Stream 2, which has added to fears that Europe will face major supply issues over the winter. And while we’re discussing the factors fuelling inflation, there were some fresh moves higher in agricultural prices as well yesterday, with wheat futures (+1.48%) hitting an 8-year high, and coffee futures (+4.75%) climbing to their highest level in almost a decade. Central banks will be watching these trends closely. There’s still no word on who’s going to lead the Fed over the next 4 years, but yesterday’s news was that President Biden will make his pick by Thanksgiving. For those keeping track at home, on Tuesday the guidance was within the next four days. So, while it appears momentum toward an announcement is growing, take signaling of any particular day with a grain of salt. On the topic of the Fed, our US economists released their updated Fed outlook yesterday (link here) in which they brought forward their view of the expected liftoff to July 2022, with another rate increase following in Q4 2022. And although it’s not their base case, they acknowledge that incoming data could even push the Fed to speed up their taper and raise rates before June. They don’t see the choice of the next Fed Chair as having much impact on the broad policy trajectory, since inflation next year is likely to still be at high levels that makes most officials uncomfortable, plus the annual rotation of regional Fed presidents with an FOMC vote leans more hawkish next year. So that will constrain the extent to which a new chair could shift matters in a dovish direction, even if they wanted to. Overnight in Asia stocks are trading mostly in the red outside of a flat KOSPI (+0.01%). The Shanghai Composite (-0.13%), CSI (-0.64%), Nikkei (-0.77%) and Hang Seng (-1.35%) are being dragged down by tech after a bout of Chinese IT companies missed earnings continuing a theme of this earnings season. Elsewhere in Japan, the Nikkei reported that the new economic stimulus package could be around YEN 78.9 tn ($691 bn). Prime Minister Fumio Kishida will announce the package on Friday. Elsewhere S&P 500 (+0.08%) and DAX futures (+0.01%) both fairly flat. The House of Representatives is slated to begin debate on the Biden social and climate spending ‘build back better’ bill. Word from Congress suggested it could be tabled for a vote as soon as today, though the House has been as profligate missing self-imposed deadlines to vote on the bill as President Biden has been with the announcement of Fed Chair. In addition to the Build Back Better package, there’ll still be plenty of action in Congress over the next month, with another government shutdown looming on December 3, and then a debt ceiling deadline estimated on December 15. The House Budget Chair echoed Treasury Secretary Yellen’s exhortation, and urged Congress to raise the debt ceiling to avoid a government default. Treasury bills are pricing increasing debt ceiling uncertainty during December; yields on bills maturing from mid- to late-December are around double the yields of bills maturing in November and January. Turning to the pandemic, cases have continued to rise at the global level over recent days, as alarm grows in a number of countries about the potential extent of the winter wave. In Germany, Chancellor Merkel and Vice Chancellor Scholz are taking part in a video conference with state leaders today on the pandemic amidst a major surge in cases. And Sweden’s government said that they planned to bring in a requirement for vaccine passports at indoor events with more than 100 people. In better news however, the UK’s 7-day average of reported cases moved lower for the first time in a week yesterday. Moderna also joined Pfizer in seeking emergency use authorization from the FDA for booster jabs of its Covid vaccines for all adults. Looking at yesterday’s other data, US housing starts fell in October to an annualised rate of 1.520m (vs. 1.579m expected), whilst the previous months’ reading was also revised lower. Building permits rose by more than expected however, up to an annualised rate of 1.650m (vs. 1.630m expected). Finally, Canada’s CPI inflation reading rose to +4.7% in October as expected, marking the largest annual rise since February 2003. To the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Tyler Durden Thu, 11/18/2021 - 08:05.....»»

Category: blogSource: zerohedgeNov 18th, 2021

Why US Shale Won"t Go To War With OPEC+

Why US Shale Won't Go To War With OPEC+ By David Messler of OilPrice.com OPEC+ will be very happy with where oil prices currently are and is unlikely to change its course anytime soon The U.S. does have the ability to increase production, but U.S. shale does not have support from either the government or shareholders to boost production significantly The two bearish variables that could drag prices down in the near term are a strong dollar and the continuation of inventory builds For years, the Kingdom of Saudi Arabia’s economy has suffered from low oil prices. Since 2014 when it increased supplies to try and break American shale producers, Saudi Arabia has had to struggle with a flooded market. Its cash reserves have been drawn down by hundreds of billions and it had to sell a small percentage of its prize asset, Saudi Aramco. At the same time, Saudi Arabia’s Vision 2030 plan fell behind in its lofty goals of diversifying its economy. I discussed this at some length in a prior Oilprice article. Now with the price of Brent - the benchmark against which Saudi Arabia prices its production - finally back above the $80 mark, the Kingdom is beginning to refill its coffers. So it was no great surprise when the Saudis and the Russians, the two principal members of the OPEC+ cartel, roundly rejected a demand from President Biden to increase production to ease the world’s energy crisis. Up to this point, there had been some lingering concern on the part of OPEC+ that too high a price would reinvigorate the shale industry that had finally come to heel in early 2020. Restraint on the part of shale drillers since then has encouraged them that a new “war” for market share won’t be the result. As the linked Reuters article notes, while some American shale drillers are bumping up their budgets, many are standing pat. Kaes Van't Hof, the CFO of Diamondback Energy (NYSE:FANG) was quoted as saying, "The industry has tried a market share war with OPEC before and it didn't work out."  In this article, we will discuss what we see as being the major variables to the oil supply equation and where oil prices might go in the next few months. We think the world is in a new era of higher-priced commodities including oil, and several factors will sustain this condition for a number of years. The new energy Triumvirate There are three countries with the significant excess capacity to substantially increase oil supplies in a short period of time, KSA, Russia, and the USA. The IEA projects that KSA has about 12.25 mm BOPD of capacity or about 2.25 mm BOPD above present levels.  S&P Global Platts estimates that Russia, currently producing 9.7 mm BOPD under the OPEC+ agreement, has an upper capacity of about 11.5 mm BOPD. Between the two they could quickly add 4-mm BOPD and knock prices down considerably if it was remotely in their best interests. KSA and Russia depend upon oil sales to fund their economies as they produce little else of value for the global market.  The USA on the other hand is a giant of international commerce but still depends on its internal production to fund its approximate 21.3 mm BOPD habit. Russia and KSA have the clear objective of wanting to derive the maximum benefit from their production by optimizing the supply/price ratio. The U.S. has for years sent mixed messages to its domestic producers, a trend that’s only increased with the new administration. With its climate goals front and center the U.S. has tied the hands, figuratively speaking, of its domestic energy producers. Whether it’s the canceling of lease sales, denying permits on federal lands, opposing midstream takeaway, or implementing carbon taxes the American government has sent U.S. producers a very clear message. What should we expect from OPEC+? Consistency has not been a hallmark associated with the OPEC cartel in terms of sticking to output cuts, but since allowing the Russians to first participate in their meetings in 2016 has shown a much more deliberate approach to setting output goals. This new resilience came with some false starts, but finally, in 2018 the cartel (with the Russians) began withholding crude from the market and apportioning the cuts among its members. By 2021 they were able to declare victory. Oil in the $80s means that each country can fund their internal and external demands as they look to maintain their economic growth and expand their geopolitical ambitions. We shouldn’t expect them to alter a course that took so long to craft and finally deploy successfully. What should we expect from American shale producers? Bank debt-laden and near bankruptcy, the pandemic of 2020 found many shale drillers already in the early stages of changing their corporate strategies. In the years that followed the oil crash of 2014 they had pursued a bank-fueled growth at any cost approach to development. This drove shale production ever higher year over year to the point, where even as the rig count had begun to decline from persistently low prices, it peaked in the first quarter of 2020 at 9.3 mm BOEPD. Post the depths of the pandemic, as the global economy began to recover, shale drillers moved from a posture of bank-financing their drilling programs to one of self-funding their activity with cash flow. This posture was driven not only by financial necessity but by government fiat as the new administration began to issue edicts intended to hamper growth in the industry as it pushed its “climate-friendly” agenda. Two principle things have actually occurred in the face of this governmental opposition. The first is the consolidation trend that began in 2020 with several mid-sized companies being bought out by larger companies, has continued into 2021. Prime examples from 2020 would be, ConocoPhillips, (NYSE:COP), taking out Concho Resources, Devon Energy, (NYSE:DVN), taking out WPX Energy, and then Pioneer Natural Resources, (NYSE:PXD) taking out Parsley Energy. Most of these deals were pure stock swap transactions that created no new debt for the surviving company. These mergers have had the goal of “bolting-on” to existing prime acreage positions to enhance well planning, logistics, and to lower unit costs. The second thing that’s occurred as shale drillers have seen the stunning run-up in oil prices this year triple and quadruple operating cash flows is the use of this cash flow to fund capex in amounts sized to keep production essentially flat through 2022, repair their balance sheets by paying down debt, and reward shareholders with increased dividends and stock buybacks. Rick Muncrief, CEO of Devon Energy made the following comment in their Q-3 conference call- “As we have stated many times in the past, we have no intention of adding incremental barrels into the market until demand side fundamentals sustainably recover and it becomes evident that OPEC+ spare oil capacity is effectively absorbed by the world market. With this disciplined approach and to sustain our production profile in 2022, we are directionally planning on an upstream capital program in the range of $1.9 to $2.2 billion.” Flat or slightly increasing production is a refrain we have heard from many companies like DVN whose share prices collapsed to single digits at the bottom of the pandemic. In the case of DVN a share price of $8.10 on Oct, 28th of last year, has rebounded to $44.52 in Monday, Nov-8th trading. The expectation is that shale drillers will maintain their posture of capital restraint and shareholder reward despite recent pleas from the administration to increase drilling to ease perceived or anticipated shortages in supply for the coming year. Things driving the direction for oil prices going into 2022 Every day it becomes clearer that the global economy is on the rebound. Just today the government reopened the skies between the U.S. and 35 foreign countries. Airline stocks are soaring as a result. Demand for jet fuel will quickly return to and surpass 2019 levels. The question then becomes: what is the supply situation? Two key indicators are shown in the charts below. The Energy Information Agency-EIA, Short Term Energy Outlook report is instructive here. Updated monthly, the report shows a very tight balance between output and demand as we go into 2022. The second indicator for crude is shown in the EIA report below. Crude stocks, despite 6-weeks of steady builds, are still on the very low end of 5-year averages for this time of year. These factors are primarily bullish for oil (WTI and Brent) maintaining current levels and then perhaps exceeding them as natural gas prices cause electricity generators to substitute oil for increasingly expensive gas. This puts another unanticipated demand on already tight supplies of crude. Forecasts of $100 Brent are becoming increasingly common as we head into the winter of 21/22. There are some factors that may tend to blunt the effects of this tightness in the market. Chief among them is likely the dollar strength compared to the market basket of other currencies. The USD is trading at a one-year high as the Fed announces a tapering of asset purchases beginning as early as November. Crude, which is priced in dollars, may see some softness as a result. Inventory builds are also increasingly problematic for market sentiment and had been the primary drag on oil prices over the last six weeks of builds until OPEC+ announced their intention to maintain its course with increased supplies. If this continues, that $100 forecast will look increasingly dated. Your takeaway Inflation has reared its head in the global marketplace after nearly a three-decade absence of any significance. Prices for everything are surging as the demand side of the equation empties shelves of goods. The term “Commodity Super-Cycle” is increasing in news reports for the first time in a number of years. I discussed this possibility in an Oilprice article early this year. Inflation and surging growth in commodities prices may put a drag on the prices of stocks in some sectors of the economy. Stocks that participate in the energy economy still trade at a significant discount to the major indexes and may provide a haven for investors looking to shield their portfolios from the full effects of higher energy and commodities prices. It is likely in my view that the current oil price rally still has legs, all things considered, and the stocks of companies that participate in this rally will continue to do well in the coming year. Tyler Durden Wed, 11/10/2021 - 08:49.....»»

Category: blogSource: zerohedgeNov 10th, 2021

Iron Mountain (IRM) Q3 FFO Beats Estimates, Revenues Up Y/Y

Iron Mountain's (IRM) Q3 results reflect improved performance of the storage and service segments as well as continued momentum in the data-center business. Iron Mountain Incorporated IRM reported third-quarter 2021 adjusted funds from operations (AFFO) per share of 72 cents, which surpassed the Zacks Consensus Estimate of 70 cents. The reported figure is also 14.3% higher than the year-ago quarter’s 63 cents.Both service and storage segments put up solid performance during the third quarter, while the data-center business saw a continued momentum. Moreover, the company executed 22 megawatts of new and expansion leasing at its global data-center portfolio through Sep 30, 2021.Revenues of $1.13 billion increased 9%, year over year. However, the top line missed the Zacks Consensus Estimate by 0.13%.According to William L. Meaney, president and CEO of Iron Mountain, "Our Mountaineers have been executing well despite what continues to be a challenging environment, and we are pleased to continue to drive accelerated growth with continued strong uptake in our digital and SITAD offerings resulting in 19% year over year growth, strong storage growth of 3.2% with positive organic volume, and continued momentum in our Data Center business, which is well on track to deliver bookings in excess of 30 megawatts for the year."Quarter in DetailStorage rental revenues were $719 million in the third quarter, highlighting a 3% year-over-year increase.Service revenues amounted to $412 million in the reported quarter, reflecting a year-over-year rise of 21%.Global Data Center business revenues climbed 21.7% in the third quarter, or marked a 21.2% increase from the prior-year quarter, excluding the impact of foreign-currency exchange.The adjusted EBITDA improved 11% year over year to $418 million in third-quarter 2021, backed by strong increase in service revenues, benefits from Project Summit and the flow through from revenue management.The adjusted EBITDA margin expanded 70 basis points (bps) to 37.0% on a year-over-year basis.LiquidityThe company exited the third quarter with $161.4 million of cash and cash equivalents, down from $205.1 million at the end of 2020.Dividend UpdateOn Nov 4, Iron Mountain announced its fourth-quarter common stock cash dividend of 61.85 cents per share. The dividend will be paid out on Jan 6, 2022, to its shareholders of record on Dec 15, 2021.OutlookIron Mountain confirmed the guidance for 2021 and projects current-year adjusted FFO per share at $3.33-$3.45.The Zacks Consensus Estimate for the same is pegged at $2.76.Revenues are estimated to be $4,415-$4,515 million, while the adjusted EBITDA is predicted to be $1,600-$1,635 million.Iron Mountain currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Iron Mountain Incorporated Price, Consensus and EPS Surprise Iron Mountain Incorporated price-consensus-eps-surprise-chart | Iron Mountain Incorporated QuoteWe now look forward to the earnings releases of other REITs, including Outfront Media Inc. OUT, Welltower Inc. WELL and Federal Realty Investment Trust FRT, scheduled to be out today.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Iron Mountain Incorporated (IRM): Free Stock Analysis Report Federal Realty Investment Trust (FRT): Free Stock Analysis Report OUTFRONT Media Inc. (OUT): Free Stock Analysis Report Welltower Inc. (WELL): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksNov 4th, 2021

5 reasons Democrats should be worried about 2022 after their devastating losses in Virginia

Democrats are no longer dominating the suburban areas that swung their way under Donald Trump and can't make every race a referendum on him. Gov.-elect Glenn Youngkin of Virginia tossing a signed basketball to supporters at an election-night party in Chantilly, Virginia, early Wednesday. AP Photo/Andrew Harnik Democrats suffered a trio of devastating losses Tuesday in Virginia's elections. Republicans also prevailed in other under-the-radar elections in blue and swing states. Here are five reasons for Democratic concern heading into the 2022 midterms. Virginia Democrats took a shellacking Tuesday as Republicans flipped control of the top three statewide offices and are on track to take away Democrats' majority in the House of Delegates.With President Joe Biden in the White House and the party controlling both chambers of Congress, Democrats faced an uphill battle. Voters tend to feel dissatisfied with their current leadership or their own personal fortunes and have historically turned on the party in power.But the results in Virginia and in New Jersey, where Democratic Gov. Phil Murphy and the Republican Jack Ciattarelli were neck and neck as of Wednesday evening, are indicative of even more structural warning signs for Democrats.1. Democrats don't have the suburbs on lockRepublican Gov.-elect Glenn Youngkin, Lt. Gov.-elect Winsome Sears, and Attorney General-elect Jason Miyares' paths to victory in Virginia relied on winning back white and suburban voters who recently turned away from the GOP.In his race against the Democrat Terry McAuliffe, Youngkin flipped at least eight counties and cities that Biden carried in the 2020 presidential election, including the affluent Richmond-area suburbs in Chesterfield County and the fast-growing Caroline County. Voters in Midlothian, Virginia, on Tuesday. Midlothian is located in Chesterfield County, a key Richmond suburb that supported Youngkin over Terry McAuliffe. AP Photo/Steve Helber Republicans also handily won parts of the Virginia Beach and Norfolk areas, including Virginia Beach, James City, and Chesapeake City, the second-largest city in the state, that have all trended blue in recent elections.Youngkin also put a dent in Democrats' margins in more reliably blue suburban areas like Loudoun County, which gained national attention as the center of high-profile battles over education policy and how racism is taught in schools. McAuliffe carried the northern Virginia county by just under 10 points, 55% to 45%, over Youngkin. This marked a major shift from Biden's 25-point win over Donald Trump in the county in 2020.2. Democrats continue to lose among rural and blue-collar votersRural areas getting redder while suburbs got bluer was a major storyline of Trump-era elections. And the continued erosion of Democratic support in rural areas while non-Trump Republican candidates forge new paths in suburbs presents a worrying math problem for Democrats entering 2022.Beyond gaining ground in the suburbs, a question that lingered into Election Day was whether Youngkin would succeed in winning over enough reliably Republican voters in rural parts of the state to outpace McAuliffe's dominance in blue counties and cities.Compared with the 2017 governor's race between the Democrat Ralph Northam and the Republican Ed Gillespie, the southwestern corner of the state saw both higher turnout and larger margins for Youngkin and other Republicans, with McAuliffe too getting lower margins than Northam. And while Democrats aren't likely to mount a big rural revival anytime soon, those margins have an impact in competitive elections.In New Jersey too, Ciattarelli appears to have flipped three South Jersey counties that Biden carried in 2020 and is substantially outperforming Trump's 2020 margins in Republican-leaning areas of the state.-Dave Wasserman (@Redistrict) November 3, 20213. Democrats can't bank on making every race a referendum on TrumpBoth McAuliffe and Murphy went all in on painting their opponents as better-polished versions of Trump, hoping that voters' disdain for Trump would translate down the ballot.But Youngkin and Ciattarelli overperformed expectations by deploying the well-worn playbook of a Republican businessman turned politician running as a check on Democratic dominance in blue states.Youngkin put enough distance between himself and Trump both stylistically and in his policy positions so as not to alienate diehard Trump supporters, Biden voters, or independents - all of whom he needed to win statewide. Youngkin and former President Donald Trump. Getty Images And more important, he, unlike McAuliffe, successfully controlled the narrative of the race by making education and schools, particularly how much control parents have over their kids' schools curriculum and policies, a key mobilizing issue for voters.By the end of the campaign, surveyed voters said education was the most important issue to them while COVID-19 and abortion, issues where McAuliffe dominated, fell to the wayside.Ciattarelli, meanwhile, branded himself as a "Main Street businessman," adopting a moderate stance on hot-button issues like abortion and immigration while also hammering Murphy's handling of the COVID-19 pandemic and highlighting New Jersey-specific issues like lowering property taxes.4. Republicans now have a clear road map to do well in blue and swing statesWhile Biden's big win over Trump in the presidential race got most of the attention in 2020, downballot Republicans proved themselves able to shed Trump's baggage, picking up about a dozen seats in the US House and flipping more than 80 seats in state legislatures.And elsewhere in the Northeast on Tuesday night, Republicans furthered that trend and secured more under-the-radar but notable downballot wins.Republicans flipped back control of four seats in the Virginia House of Delegates and could flip as many as four more, which would give them back control of the chamber after two years of Democratic dominance.GOP candidates also won a competitive election for district attorney in New York's Nassau County and two big judicial elections, including a key state Supreme Court race, in Pennsylvania on Tuesday.Those races were, of course, influenced by all kinds of state and local factors as well as the quality of the candidates. But they show how Democrats can't rely on a divisive figure at the top of the ticket to obscure structural headwinds they face. President Joe Biden spoke at a campaign event for McAuliffe at Lubber Run Park in Arlington, Virginia, on July 23. AP Photo/Andrew Harnik 5. Negative polarization means Biden's poor approval is more of a drag on downballot DemocratsOver the past decade or so, the phenomenon of negative polarization, in which voters are more motivated by disdain toward the opposing party than affinity toward their own, has increasingly shaped American voter behavior and the outcome of elections.This is manifested in Americans holding increasingly negative views of the other party and its voters and record-low levels of voters splitting their tickets between one party at the presidential level and downballot races.Negative polarization gave Democrats a huge downballot boost in the Trump years, as dissatisfaction with Trump particularly among white and college-educated voters delivered Democrats big wins in the 2018 midterms.But now the shoe is on the other foot and Democrats find themselves stumbling over Biden's dismal approvals and the large percentage of Americans who see the country as going in the wrong direction.To the extent that national politics did impact the results of the Virginia and New Jersey races, Biden's historically paltry approval ratings were more of a drag on Democrats than Trump's unpopularity was on Republicans.In Virginia, Youngkin won 51% of the vote, improving on Trump's 2020 vote share in the commonwealth by over 6 percentage points, while McAuliffe received 49% of the vote, underperforming Biden's 2020 vote share also by 6 points.And while more votes remain to be counted in the New Jersey governor's race, the same pattern is playing out in the Garden State, with Murphy so far underperforming Biden's 2020 vote share and Ciattarelli outperforming Trump.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 4th, 2021