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How The Inflation Reduction Act Will Spur a New Climate Tech Ecosystem

The new climate policy could lead to the creation of 1,000 new companies, estimates the head of investment at Bill Gates’ climate fund On the surface, the Inflation Reduction Act that President Biden signed into law on Tuesday may sound like a massive government spending program. Indeed, it promises to put nearly $370 billion in federal funding behind the energy transition. But, if you dig deeper, the IRA is less about the power of government spending and more about the power of the private sector. The tax incentives, loans, and grants at its center are all intended to nudge the private sector to go faster in deploying existing technologies like wind and solar while also advancing future technologies. “The path they went down is 100% the ‘sweeten the deal path,’” says Karen Karniol-Tambour, chief investment officer for sustainability at Bridgewater. “Let’s just give lots of incentives to make the green stuff really competitive.” [time-brightcove not-tgx=”true”] It’s early days, but it’s safe to say that this landmark investment will create a new ecosystem as companies—from large multinationals to feisty startups—chase the opportunities embedded in the IRA. A version of this story first appeared in the Climate is Everything newsletter. To sign up, click here. To understand the revolution underway, let’s start with the biggest line items: green tax incentives. The law includes tens of billions in tax credits for a range of clean technologies, from electricity production to more efficient consumer appliances. Beyond boosting popular wind and solar, it will also advance technologies that have struggled to win mainstream acceptance. Think: nuclear, hydrogen, and fossil fuels where carbon dioxide emissions are captured. These credits will change corporate behavior. Most obviously, power companies will be encouraged to produce clean energy over more polluting options. But the implications for industry go much further as firms—particularly carbon intensive ones—consider new, financially-rewarding ways to cut emissions. As tax consultancy PWC advised in the wake of the IRA, companies should “consider potential changes to their manufacturing or operating models” to take advantage of the benefits of the new law. In total, $3.5 trillion is expected to be invested in new, primarily clean energy infrastructure in the U.S. between 2023 and 2035, according to an analysis of the IRA’s impacts by Princeton University’s REPEAT Project. Read more: The Inflation Reduction Act Will Soon Make it Cheaper to Buy EVs—If They Have North American Batteries Tax credits for people to retrofit their homes and purchase new energy efficient appliances creates another market incentive for companies to expand their product offerings. And new companies will spring up to do the same thing. The IRA also has a few ways to more directly help the private sector beyond tax credits. An analysis from the Environmental Defense Fund shows that $11.7 billion in new federal funding will allow the Department of Energy to loan more than $312 billion to private companies. These loans will help companies get groundbreaking technology, programs, and infrastructure off the ground. (This same program helped Tesla expand its manufacturing more than a decade ago). All of this is likely to lead to a new ecosystem in the private sector as big companies evolve and a new generation of climate tech companies alike chase newfound opportunities. The head of investment at Bill Gates’ climate fund estimated this week that the IRA would lead to the creation of 1,000 new companies. But while investors are generally good at allocating capital to make better technology (and turn a profit) they are less good at addressing the social ramifications. To address this, the IRA includes guardrails to promote domestic manufacturing, union labor, and environmental justice concerns. But many activists remain unconvinced. Shaping the new climate ecosystem may be the topic for the next big climate legislation......»»

Category: topSource: timeAug 19th, 2022

Futures Fall, Yields Rise Ahead Of Econ Data Onslaught

Futures Fall, Yields Rise Ahead Of Econ Data Onslaught Extremely illiquid US equity futures (top of book depth is between $1-2MM) dropped after trading flat for much of the overnight session, ahead of a packed data slate today including retail sales, industrial production and capacity utilisation for August, the Empire State manufacturing survey and the Philadelphia Fed business outlook for September, and the weekly initial jobless claims, as Treasury and Bund yield rose after Russian energy supplier Gazprom warned that nearly full EU gas inventories can’t guarantee a safe winter with money markets raise tightening wagers, pricing as much as 193bps of ECB hikes by July versus 186bps on Wednesday (and as much as 210bps of Fed hikes by March). As of 7:15am ET, S&P 500 futures slipped 0.1% after a tumultuous few days of trading following the consumer price index reading; Nasdaq 100 futures fell 0.4%. Both underlying indexes had slumped on Tuesday after the report, nearly erasing a four-day rally, before slightly rebounding on Wednesday. European stocks were flat, while the MSCI Asia Pacific Index reversed earlier gains to trade down. The dollar resumed its rise while the yuan dropped below the critically important 7.00 level against the greenback. Ethereum completed the merge and traded around $1600 without any big moves in either direction. In US premarket trading, Netflix advanced 2.2% after Evercore ISI raised the stock to outperform from in-line, saying that Netflix’s launch of an ad-supported plan is one of the biggest catalysts in the internet sector over the next 12 months. Meanwhile, railway operators Union Pacific Corp and CSX Corp gained after the US government said railroad companies and unions representing more than 100,000 workers reached a tentative agreement in a breakthrough that looks to avert a labor disruption that risked adding supply-chain strains to the world’s largest economy. Here are some other notable premarket movers Danaher (DHR US) shares rise 4.2% in premarket trading after the company says it will spin off environmental and applied solutions unit. Analysts responded positively to the news, saying a more streamlined Danaher has potential to unlock value. Union Pacific (UNP US) shares rise 4.7% in premarket trading as US railroad companies and unions representing more than 100,000 workers reached a tentative agreement, the government said, a breakthrough that looks to avert a labor disruption. Yum China Holdings (YUMC US) shares advance 3.2% in US premarket trading after the Chinese megacity of Chengdu said it had controlled the spread of Covid-19 and would start easing the lockdown. Devon Energy (DVN US) declines 1% in premarket trading as the stock was cut to neutral at JPMorgan in note titled ‘E&P Fall Playbook,’ while EOG Resources (EOG US), Permian Resources (PR US) and Vermilion Energy (VET CN) shares were upgraded. Watch US cryptocurrency-exposed stocks as digital tokens traded in tight ranges Thursday while Ethereum completed the crypto world’s biggest and most ambitious software upgrade to date. Keep an eye on shares including Coinbase (COIN US), Marathon Digital (MARA US), Riot Blockchain (RIOT US), Ebang (EBON US). Watch department store shares as Jefferies says there are still selective opportunities within the sector, upgrading Nordstrom (JWN US) to buy and downgrading Kohl’s (KSS US) to hold. Keep an eye on hotel operators as Berenberg upgraded Marriott (MAR US), Hyatt (H US) and Hilton Worldwide (HLT US) shares to buy, saying the accelerating recovery in lodging performance hasn’t yet been reflected in share prices of these companies. Watch Phillips 66 (PSX US) stock as it was cut to peer perform at Wolfe, which said that competitors are better positioned to deliver catalysts for shareholder returns. Traders have been extremely focused on US economic data, with a decline in producer prices providing some relief after Tuesday’s consumer inflation jolt saw wagers for rate increases ratchet higher and stocks slump the most in two years. Investors are now bracing for the Fed’s meeting next week, with some concerned that the central bank can hike rates by as much as 100 basis points. Meanwhile, all eyes will be on fresh jobs, manufacturing and retail numbers later Thursday for further clues on the path of monetary policy. “It still seems unlikely the Fed will go by more than 75 basis points at this point despite the collective freakout of the past couple of days,” said Michael Hewson, chief market analyst at CMC Markets UK. Retail sales figures “could reinforce this hawkish narrative if we get another strong number.” Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with odd for a full-point move dropping to 20% from almost 50% two days ago, after JPM said that it is unlikely that the Fed will rise a full percent. The continued rise in rate-sensitive Treasuries deepened the curve inversion to a level unseen this century. Meanwhile, Bridgewater's Ray Dalio came out with a gloomy prediction for stocks and the economy. A mere increase in rates to about 4.5% would lead to a nearly 20% plunge in equity prices, he wrote in a LinkedIn article dated Tuesday, which is odd since the market is already pricing in rates rising to well over 4%. But then again "cash is trash" or something... “Markets seem torn between a bearish sentiment on one hand, supported by lingering macro threats in a tighter liquidity environment, and dip buyers on the other who continue to bet on the inflation peak,” said Pierre Veyret, an analyst at ActivTrades. “Most benchmarks aren’t registering strong and significant bullish corrections following Tuesday’s sell-off, but continue to trade sideways in a volatile manner, which highlights the ‘wait and see’ situation ahead of today’s new batch of US data, tomorrow’s EU CPI report and next week’s Fed decision on rates.” In Europe, the Stoxx 50 index rose 0.2%. FTSE 100 outperforms peers, adding 0.5%, CAC 40 underperforms. Banks, miners and health care are the strongest-performing sectors. European banks rose to a three-month high on Thursday, with Spanish banks among the best performers after a local website said the government is open to modifying the tax it plans to impose on windfall profits. Also boosting sentiment on the sector, Morgan Stanley upgraded its view on European banks to attractive Earlier in the session, Asian stocks extended their recent weakness as investors remained cautious over tighter Federal Reserve policy, with losses in China weighing on the regional benchmark. The MSCI Asia Pacific Index erased earlier gains to fall as much as 0.4%, on track to fall for a third day. Financials and energy shares advanced the most, while technology stocks were the biggest drag.  Chinese stocks led declines in the region as a meeting between President Xi Jinping and Vladimir Putin nears, an event that traders say raises geopolitical risks. Meanwhile, the People’s Bank of China’s kept its key rate unchanged while draining liquidity from the banking system. An easing of lockdown in the Chinese megacity of Chengdu was insufficient to provide reassurance. Asian markets were jittery ahead of the Fed’s policy decision next week, though a month-on-month decline in US producer prices offered some relief. Traders are expecting an outsized interest rate increase by the Fed to curb persistent inflation. “Overall risk sentiments will continue to carry a cautious tone,” Jun Rong Yeap, a market strategist at IG Asia Pte, wrote in a note. “The absence of any clear resolution in China’s Covid-19 policy and uncertainty on further moderation in economic conditions ahead remain a weighing block for risk sentiments.”  Markets in Japan, Australia and Hong Kong were among those in the green. Japanese equities edged higher as investors assess the Fed’s hawkish stance and await further data that would provide clearer signals on the direction of the global economy.  The Topix Index rose 0.2% to close at 1,950.43, while the Nikkei advanced 0.2% to 27,875.91. Sony Group Corp. contributed the most to the Topix Index gain, increasing 0.9%. Out of 2,169 stocks in the index, 1,100 rose and 926 fell, while 143 were unchanged. “US stocks have calmed down and there is a sense of relief buying,” said Masayuki Otani, a chief market strategist at Securities Japan. “But there is still a wait-and-see mood ahead of next week’s FOMC meeting and US retail sales to be announced tonight, Japan time.” Australia's S&P/ASX 200 index rose 0.2% to close at 6,842.90, boosted by gains in energy shares and banks.  Australian unemployment unexpectedly rose in August, the first increase in 10 months, a result that supports the Reserve Bank’s signal of a potential shift to smaller interest-rate increases. In New Zealand, the S&P/NZX 50 index was little changed at 11,658.94. Shares of Wellington-listed Pushpay fell 11%, after a report that a pending buyout of the digital payments firm may be nearing collapse. In Fx, the Bloomberg dollar spot index is flat. NOK and JPY are the weakest performers in G-10 FX, as CHF and EUR outperform. Asian currencies remained at risk from a strong greenback. The offshore yuan weakened above 7 per dollar for the first time since July 2020. The yen declined to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention. Ominously, despite the plunge in the yen, Japan’s trade hit a record deficit in August. The euro traded little changed, slightly below parity against the dollar. The pound led G-10 losses, with focus turning to next week’s Bank of England decision. Demand for one- week sterling-dollar downside protection covering the BOE meeting is around the least since before the Feb. decision, perhaps reflecting the drop in spot. Cable one-week implied volatility touches 14.5%, a level unseen since Sept. 9, when the meeting was delayed The yen fell as wariness over potential FX intervention from Japan receded, undermined by Japan’s trade deficits and expectations the US Fed will retain its hawkish stance. The government bond yield curve steepened after a weak 20-year auction Japan’s unadjusted trade deficit expanded to 2.82 trillion yen ($19.7 billion) last month, the finance ministry reported Thursday. The gap was far larger than economists’ estimates and extends the sequence of red ink to 13 months, the longest stretch since 2015 Australia’s sovereign bonds extended opening declines after a government report showed employers added workers last month, even as the jobless rate rose. The Aussie traded in a tight range In rates, Treasury futures traded near session lows after grinding lower during Asia session and European morning, leaving yields cheaper by about 5bp across long-end of the curve. US 10-year yields trade around 3.45%, cheaper by nearly 5bp vs Wednesday’s close; front-end outperforms slightly; 2-year German yields cheaper by 8bp on the day following hawkish remarks by ECB policy makers Holzmann and Kazaks late Wednesday. US session features packed economic data slate headed by retail sales. Corporate bond sales may go forward after some issuers stood down over past two days. European bonds slipped: Bunds, Italian bonds fell as money markets wagered on a faster ECB tightening pace following hawkish remarks from policy makers Holzmann and Kazaks late Wednesday. Bund yields rise between 4-2bps across the curve. Gilts outperform bunds and USTs. Treasury 10-year yield up 3.8bps to 3.44%. In commodities, oil fluctuated as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves. WTI trades within Wednesday’s range, falling 0.2% to near $88.33. Natural gas increased as traders assessed Europe’s steps to contain the energy crisis, with governments making plans to shut down power in some places to avoid a total collapse of the system this winter. Spot gold falls roughly $10 to trade near $1,687/oz. Spot silver loses 1.1% to around $19. Bitcoin meanders around USD 20k and Ethereum fell under USD 1.6k after completing the Ethereum Merge. To the day ahead now, and data releases from the US include retail sales, industrial production and capacity utilisation for August, the Empire State manufacturing survey and the Philadelphia Fed business outlook for September, and the weekly initial jobless claims. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Centeno. Lastly, earnings releases include Adobe. Market Snapshot S&P 500 futures little changed at 3,949.25 STOXX Europe 600 up 0.2% to 418.54 MXAP down 0.3% to 152.10 MXAPJ down 0.2% to 499.22 Nikkei up 0.2% to 27,875.91 Topix up 0.2% to 1,950.43 Hang Seng Index up 0.4% to 18,930.38 Shanghai Composite down 1.2% to 3,199.92 Sensex down 0.5% to 60,020.39 Australia S&P/ASX 200 up 0.2% to 6,842.89 Kospi down 0.4% to 2,401.83 German 10Y yield little changed at 1.75% Euro little changed at $0.9980 Gold spot down 0.5% to $1,688.07 U.S. Dollar Index little changed at 109.73 Top Overnight News from Bloomberg Shortly before invading Ukraine in February, Vladimir Putin and Xi Jinping declared a “no limits” friendship. Yet even as Russian forces suffer humiliating losses on the battlefield, Putin shouldn’t expect much help from Xi at their first meeting since the invasion China is considering allowing its oil refiners to export more fuel in an attempt to revive its economy, in what would be a reversal from a focus on minimizing emissions Investors in high-risk emerging-market debt are finally seeing positive returns as fears of an economic meltdown ease. In a reversal of fortunes from the first half of the year, junk- rated emerging corporate and sovereign bonds in dollars have returned 7.2% in the past two months, according to Bloomberg indices. That follows a brutal 18% slide until June, marking the worst year since the 2008 credit crisis Germany will likely face “waves” of gas shortages this winter, Klaus Mueller, president of the country’s energy regulator, told Handelsblatt in an interview published on Thursday Swedish long-term inflation expectations staying put in July offered a rare piece of good news for the country’s central bank, which looks set to step up interest-rate hikes after a string of higher-than-expected inflation outcomes Swedish right-wing opposition parties are intensifying negotiations on forming a new government, after Prime Minister Magdalena Andersson announced her resignation on Wednesday A more detailed look at global markets courtesy of Newsquawk Asia stocks mostly traded with mild gains after the slight reprieve on Wall Street where inline PPI data provided some solace from inflationary woes, although mixed data and hawkish central bank expectations scuppered a broad recovery. ASX 200 was led higher by outperformance in energy and financials but with upside capped after the miss on jobs data. Nikkei 225 eked mild gains as expectations of looming stimulus and looser border controls offset the mixed trade data. Hang Seng and Shanghai Comp were mixed despite the latest policy support pledges by China including an extension of tax reliefs for small firms and a CNY 200bln relending facility by the PBoC, while the easing of lockdown restrictions in some cities also failed to spur risk appetite as participants digest the PBoC MLF announcement in which it partially rolled over maturing loans and maintained the rate at 2.75%, as expected. Top Asian News PBoC injected CNY 400bln vs CNY 600bln maturing via 1-year MLF with the rate kept at 2.75%. PBoC set USD/CNY mid-point at 6.9101 vs exp. 6.9153 (prev. 6.9116). Singapore to Create Up to 20,000 Finance Jobs in Five Years Iron Ore Steadies as Easing of Chengdu Curbs Spurs Optimism China Holds Key Rate, Withdraws Liquidity Amid Yuan Defense Aluminum Leads Metals Up With China Energy Woes Hitting Supplies Korea’s Housing Market Falls Most Since Global Financial Crisis South Korea FX authorities were reportedly seen selling USD to curb the KRW's fall, according to multiple dealers cited by Reuters. China Securities Journal said the domestic economy is poised for a rebound in Q3. Japan will drop a ban on individual tourist visits and remove a cap on daily arrivals with PM Kishida expected to announce changes in the coming days, according to Nikkei. European bourses modestly extended on the gains seen at the open despite a lack of fresh fundamental catalysts, but ahead of Q3 quad-witching tomorrow. European sectors are mostly firmer but with no defensive/cyclical bias. Stateside, US equity futures trade sideways with a mild upside bias and a relatively broad-based performance seen across the major contracts. Top European News Europe Gas Surges as Traders Weigh Efficacy of EU’s Intervention Stellantis May Make Own Energy as Europe Braces for ‘Chaos’ Eni CEO Says Italy Can Make It Through Winter Without Russia Gas Ericsson Drops on Credit Suisse Double Downgrade; Nokia Raised Iron Ore Steadies as Easing of Chengdu Curbs Spurs Optimism FX DXY has been waning off its 109.92 best towards 109.50, but the Buck extended gains against some EM currencies. Divergence is seen between the traditional havens, with CHF gaining and JPY among the laggards. The rest of the G10s are trading relatively flat against the USD. Fixed Income Choppy and erratic price action is seen in the complex. The short end of the UK rate curve stages a more emphatic and impressive recovery to the extent that the ripples are reaching Gilts Bunds sit midway between 143.63-142.83 parameters, OATs and Bonos have recouped some pre-French and Spanish auction downside T-note is lagging within a 114-20+/115-01 range ahead of a very busy US agenda. Commodities WTI and Brent are choppy after settling higher yesterday, Spot gold meanders just above its YTD low (USD 1,680.25/oz) and the 2021 trough at 1,676.10. Base metals are flat/mixed in directionless trade, with 3M LME Copper in a tight range under USD 8,000/t. Russia's Gazprom says demand rises for long-term Russian gas export contracts including from Europe, via Al Jazeera US Event Calendar 08:30: Sept. Initial Jobless Claims, est. 227,000, prior 222,000 Continuing Claims, est. 1.48m, prior 1.47m 08:30: Aug. Import Price Index MoM, est. -1.3%, prior -1.4%; YoY, est. 7.7%, prior 8.8% Export Price Index MoM, est. -1.1%, prior -3.3%; YoY, est. 12.4%, prior 13.1% 08:30: Aug. Retail Sales Advance MoM, est. -0.1%, prior 0% Retail Sales Ex Auto MoM, est. 0%, prior 0.4% Retail Sales Ex Auto and Gas, est. 0.5%, prior 0.7% Retail Sales Control Group, est. 0.5%, prior 0.8% 08:30: Sept. Philadelphia Fed Business Outl, est. 2.2, prior 6.2 08:30: Sept. Empire Manufacturing, est. -12.9, prior -31.3 09:15: Aug. Industrial Production MoM, est. 0%, prior 0.6% Capacity Utilization, est. 80.2%, prior 80.3% Manufacturing (SIC) Production, est. -0.1%, prior 0.7% 10:00: July Business Inventories, est. 0.6%, prior 1.4% DB's Jim Reid concludes the overnight wrap Following Tuesday’s dramatic slump after the US CPI release, global markets have shown signs of stabilising over the last 24 hours. It was hardly a great performance and was more driven by the absence of bad news rather than any actively good news, but the S&P 500 did manage to recover +0.34% on the day after its worst session in over two years. Treasuries also steadied to an extent, with some support from the fact that the PPI release yesterday wasn’t as bad as some had feared. Nevertheless, there are still a number of headwinds as markets turn their attention towards next week’s all-important FOMC meeting, and investors are continuing to price in an increasingly hawkish response from central banks across the world. When it comes to that FOMC meeting next week, futures are still fully pricing in a third consecutive 75bps hike, but equities were supported by the fact that a bumper 100bps move is now perceived as less likely than it was shortly after the CPI release. In fact, looking at Fed funds futures, the peak pricing for next week’s meeting has come down from an intraday high of 87.0bps on Tuesday to 81.3bps by yesterday’s close. But while a 100bps hike next week is being seen as less likely, if you look beyond next week, it’s clear that markets are still expecting the Fed to remain hawkish, with the peak rate priced in for March 2023 actually rising by +7.3bps on the day to 4.39%, which implies more than 200bps of further tightening on top of where we already are. Those diminishing expectations of a 100bps move were in part thanks to a somewhat weaker-than-expected PPI print from the US. Unlike the CPI, the headline monthly reading was in line with expectations and showed a -0.1% decline in prices, with the year-on-year measure falling back to +8.7% (vs. +8.8% expected). Against that backdrop, yields on 10yr Treasuries fell by -0.4bps to 3.41%, moving off from their intraday peak of 3.47% at one point, and yields have only seen a modest rise of +1.7bps again this morning. The decline was driven by lower real yields, with the 10yr yield down -3.4bps on the day to 0.93%, coming off its post-2019 closing peak from the previous session. That decline in Treasury yields echoed what we saw in Europe yesterday, where those on 10yr bunds (-1.4bps) and OATs (-1.0bps) both moved lower. We did have some ECB speakers yesterday, including France’s Villeroy, who said that for the Euro Area “R* can be estimated as being as below or close to 2% in nominal terms, and we could be there by the end of the year”. Meanwhile, ECB chief economist Lane said that “it was appropriate to take a major step that frontloads the transition from the prevailing highly-accommodative level of policy rates towards levels that will support a timely return of inflation to our target.” As with the Fed, markets were pricing an increasingly hawkish profile of rate hikes, and by yesterday’s close a further 135bps rate hikes were expected at the two remaining meetings this year. Staying on Europe, we heard more on the EU’s energy plans for the winter ahead in Commission President Von der Leyen’s State of the Union address yesterday. The measures proposed included a temporary revenue cap on “inframarginal” electricity producers, which would be set at €180 per megawatt-hour, with surplus revenues above the cap used to support energy consumers. In addition, there was a windfall tax proposal on other activities in the oil, gas, coal and refinery sectors which would be applied on 2022 profits that are more than 20% above the average profits over the most recent 3 years. In the meantime, we heard that France would be capping the increase in energy prices for households to 15% from January, and the country’s power-grid operator said that they may have to issue alerts to encourage a reduction in energy consumption over the next six months. European natural gas futures continued to rebound from their one-month low on Monday, gaining +9.70% to €218 per megawatt-hour. With oil and gas prices putting in a strong performance yesterday, that meant that the energy sector outperformed other equities on both sides of the Atlantic, supporting the S&P 500 to make its +0.34% gain on the day. Otherwise, tech stocks were another outperformer as they recovered some of their Tuesday losses, with the NASDAQ advancing +0.74%. Over in Europe, equities caught up with the late US losses from the previous session, and the STOXX 600 (-0.87%) and the DAX (-1.23%) lost ground for a second day running. Here in the UK, gilts outperformed after the latest CPI release for August came in slightly below expectations. That marked a contrast with the upside surprise from the US the previous day, since year-on-year CPI fell to +9.9% (vs. +10.0% expected). However, there were similarities to the US in that some of the details were much less positive, with core CPI rising to +6.3% (vs. +6.2% expected). However, that didn’t stop gilts outperforming their counterparts elsewhere, with 10yr yields down -3.8bps on the day. Overnight in Asia, the major equity indices have also stabilised for the most part, with the Hang Seng (+0.46%) and the Nikkei (+0.17%) advancing after their sharp losses during the previous session, although the Kospi (-0.25%) has moved lower once again. The biggest underperformer are equities in mainland China this morning, where the Shanghai Composite (-1.01%) and the CSI 300 (-0.71%) have built on the previous day’s losses after the People’s Bank of China kept its one-year medium-term lending facility rate unchanged at 2.75% after being lowered by 10bps in August. Furthermore, they withdrew a net 200bn yuan via the MLF from the banking system as expected.The PBOC’s announcement to squeeze liquidity indicates their concern over capital outflows as the central bank is trying to reduce pressure on the yuan emanating from a divergent monetary policy with the Fed. Otherwise in overnight trading, US stock futures are slightly higher with those on the S&P 500 (+0.06%) and NASDAQ 100 (+0.05%) both advancing ahead of numerous economic indicators coming out today, including retail sales and industrial production for August. Speaking of data, Japan recorded a record trade deficit of 2.82tn yen in August (vs. 2.39tn yen expected) after higher energy prices and the weaker yen pushed up import costs. Elsewhere, our colleagues in the European Leveraged Finance Research team have just published their quarterly top trade ideas. You can find the report here. To the day ahead now, and data releases from the US include retail sales, industrial production and capacity utilisation for August, the Empire State manufacturing survey and the Philadelphia Fed business outlook for September, and the weekly initial jobless claims. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Centeno. Lastly, earnings releases include Adobe. Tyler Durden Thu, 09/15/2022 - 07:54.....»»

Category: dealsSource: nytSep 15th, 2022

AMD Joins PyTorch Foundation to Accelerate AI Adoption

Advanced Micro Devices (AMD) joins the newly-launched PyTorch foundation to create a sustainable ecosystem of open-source projects with PyTorch and drive the growing adoption of AI. Advanced Micro Devices AMD recently announced that it is joining the newly-launched PyTorch foundation as a founding member. The organization is part of the non-profit Linux establishment, created to drive the adoption of artificial Intelligence (AI) by building a sustainable ecosystem of open-source projects with PyTorch, the machine learning (ML) software framework originally developed by Meta Platforms META.Other founding members of the PyTorch foundation are Amazon, Alphabet’s Google cloud, Microsoft Azure and Nvidia NVDA.AMD is supporting the PyTorch foundation by working on democratizing state-of-the-art tools, libraries and other components to make its ML innovations accessible to everyone with an array of software and products. These are the AMD ROCm open software platform, Instinct accelerators, Adaptive SoCs and CPUs.Advanced Micro Devices is constantly developing its ROCm open software platform to meet the growing needs of AI, ML and high-performance computing (HPC) and the recent collaboration with other tech giants to form the PyTorch foundation. This reflects AMD’s growing proliferation to benefit from the rising AI and MI megatrends.Advanced Micro Devices, Inc. Price and Consensus Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. QuoteAMD Ventures Into AI Space to Drive Top LineShares of AMD have slumped 41.2% compared with the Zacks Computer and Technology sector's decline of 27.1% in the year-to-date period.The stock is suffering from the rising geo-political tensions between the United States and China, the global supply-chain challenges that adversely impacted the semiconductor industry, the ongoing Russia-Ukraine war, rising inflation and interest rate hikes by the U.S. Federal Reserve.As AMD ventures into the AI and ML space, it is facing increasing pressure from its PyTorch peer Nvidia.NVDA has been benefiting from the rapid proliferation of AI so far. It has been expanding its base in the untapped markets like climate science, energy research, space exploration and digital biology for a while.However, AMD is leading its peers in HPC as it is enabling customers across various fields like manufacturing, life sciences, financial services, climate research and more to utilize supercomputers for research purposes.It is worth mentioning that AMD powers five of the top 10 most powerful and eight of the top 10 most energy-efficient supercomputers, globally.Recently, Advanced Micro Devices partnered with Hewlett Packard HPE and the U.S. Department of Energy’s Oak Ridge National Laboratory to build the world’s fastest and the most energy-efficient supercomputer, Frontier.AMD ventured into the AR space via its recent collaboration with META.Advanced Micro Devices’ alliance with Meta will aid the former in concentrating on the semi-custom chip business. This, in turn, will help AMD expand in the high-growth markets like the Metaverse, which is anticipated to reach a market value of $426.9 billion by 2027, according to Bloomberg.AMD became Meta's ecosystem partner, while its radio chip Xilinx Zynq UltraScale RFSoC will be utilized to develop a Metaverse-ready radio access unit.Advanced Micro Devices is constantly enhancing the performance of its Ryzen processors to help address rising demand for its Ryzen processors, courtesy of the increasing proliferation of AI and Machine Learning (ML) in industries like cloud, gaming and data centers.AMD which currently carries Zacks Rank #3 (Hold) anticipates revenues to improve as it forays into the AI market. AMD expects third-quarter 2022 revenues to be $6.7 billion (+/-$200 million), which indicates growth of 55% from the year-ago reported figure. The Zacks Consensus Estimate for third-quarter sales is pegged at $6.71 billion. You can see see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 13th, 2022

4 Ways The "Inflation Reduction Act" Could Impact Supply Chains

4 Ways The "Inflation Reduction Act" Could Impact Supply Chains By Alyssa Sporrer, by American Shipper As its name suggests, the Inflation Reduction Act of 2022 (IRA) signed into law by President Joe Biden earlier this month is designed to reduce inflation, but it also includes $300 billion worth of grants and incentives for clean energy and initiatives to combat climate change.  The goal of the incentives is to accelerate electric vehicle adoption, green ports, increase renewable energy capacity and support products made in the U.S. There are also tax reforms and provisions for health care. The climate legislation is supposed to help the U.S. lower greenhouse gas emissions by 40% by 2030 compared to 2005 levels. 1. Incentives for electric trucks The tax credit for purchasing an EV covers the price difference between a diesel truck and an electric truck, or 30% of the truck’s purchase price, whichever is lower. But it’s capped at $40,000 per vehicle purchase. New heavy-duty electric trucks can cost over $300,000, so it’s unclear how much this tax credit would incentivize fleet owners to invest in EVs. The tax credit may be “geared more toward incentivizing the purchase of smaller vehicles, such as cargo vans or box trucks used for short-haul package delivery in urban areas,” Beia Spiller, director of the transportation program at the nonprofit research group Resources for the Future, which studies the implications of vehicle electrification, told FreightWaves in a previous interview. The IRA also includes a credit for building EV charging infrastructure of up to $100,000 per charger. 2. Renewable energy incentives The IRA includes production and investment tax credits for battery storage and renewable wind and solar energy. This should make it greener and cheaper for supply chain companies to power their warehouses, distribution centers and stores. Independent environmental and energy research nonprofit Resources for the Future projects the act will reduce electricity costs for the retail industry by 5.2% to 6.7% over the next decade, saving electricity consumers $209 billion to $278 billion.  These estimations were based on expected natural gas prices. One of the benefits of more clean energy is it insulates electricity consumers from volatile natural gas prices. The nonprofit predicted the GHG emissions from the electricity sector would drop between 70% and 75% by 2030 below 2005 levels. Without the IRA, those emissions were estimated to decrease by about 49% in the same time frame. “As the nation looks to increase production of renewable energy and the sustainability of the supply chain, these new public investments will help support more solar, more electric trucks and new clean-energy technologies and infrastructure,” Susan Uthayakumar, chief energy and sustainability officer at Prologis, said in a statement. 3. Supporting domestic supply chains The IRA is expected to drastically increase the demand for components needed in solar panels, wind turbines and EVs. This could create more jobs in the clean energy and manufacturing sectors.  But there’s a catch. Some of the incentives hinge on a certain amount of raw materials being sourced in the U.S., the final product being constructed in the U.S. or meeting worker training and competitive wage standards. While these conditions support domestic supply chains and labor rights, some experts think it may slow the adoption rate of EVs and renewable energy. Domestic supply chains for EV and solar panel production are not mature right now.  It’s unclear whether these incentives will spur the expansion of these domestic supply chains or how fast that may occur. The National Association of Manufacturers “remains staunchly opposed to the IRA. It increases taxes on manufacturers in America, undermining our competitiveness while we are facing harsh economic headwinds such as supply chain disruptions and the highest rate of inflation in decades.” 4. Greening ports The IRA includes $3 billion in grants and rebates for port authorities and marine terminals to purchase zero-emission cargo-handling equipment until September 2027. The goal is to address air pollution in and around ports. But it defines zero-emission port equipment and technology as being “human-operated equipment or human-maintained technology” and therefore excludes automated technology from being grant eligible. Zero-emission cargo handling equipment or technology must emit no air pollutants or GHGs, or it must capture 100% of those emissions produced by vessels at berth to qualify for the grants. “This would go a long way to help seaports meet their emission reduction goals,” said Elaine Nessle, executive director of the Coalition for America’s Gateway and Trade Corridors. “Freight projects often have economic benefits for the entire country, but they can also negatively impact local communities, so it’s good to have resources at the federal level to offset those negative impacts.” Tyler Durden Sat, 08/27/2022 - 15:30.....»»

Category: blogSource: zerohedgeAug 27th, 2022

Joe Biden"s Inflation Reduction Act "Secretly" Brought To You By Bill Gates

Joe Biden's Inflation Reduction Act "Secretly" Brought To You By Bill Gates The Democrats' "Inflation Reduction Act" - which according to the Congressional Budget Office will raise taxes on the middle class to the tune of $20 billion - not to mention unleash an army of IRS agents on working class Americans over the next decade, was made possible by Bill Gates and (in smaller part) Larry Summers, who have been known to hang out together. Pals hanging out The bill, of course, was signed yesterday. This is what dementia looks like: pic.twitter.com/e9fof5l4RS — End Wokeness (@EndWokeness) August 16, 2022 In a Tuesday Bloomberg article that reads more like a newsletter for the Gates fan club, the billionaire Microsoft co-founder recalls how earlier this year, as moderate Democratic Senators Joe Manchin and Kyrsten Sinema continued to block the tax-and-spend legislation over concerns that it would raise taxes on the middle class (it will), Gates says he tapped into a relationship with Manchin that he'd been cultivating since at least 2019. Gates was banking on more than just his trademark optimism about addressing climate change and other seemingly intractable problems that have been his focus since stepping down as Microsoft’s chief executive two decades ago. As he revealed to Bloomberg Green, he has quietly lobbied Manchin and other senators, starting before President Joe Biden had won the White House, in anticipation of a rare moment in which heavy federal spending might be secured for the clean-energy transition. Those discussions gave him reason to believe the senator from West Virginia would come through for the climate — and he was willing to continue pressing the case himself until the very end. “The last month people felt like, OK, we tried, we're done, it failed,” Gates said. “I believed it was a unique opportunity.” So he tapped into a relationship with Manchin that he’d cultivated for at least three years. “We were able to talk even at a time when he felt people weren’t listening.” -Bloomberg We know, gag us with a spoon. Apparently Gates and Manchin's bromance began when the billionaire wooed the West Virgina Senator at a 2019 meal in Seattle, in an effort to garner support for clean-energy policy. Manchin at the time was the senior-most Democrat on the energy committee. "My dialogue with Joe has been going on for quite a while," said Gates. After Manchin walked (again) on the bill last December over concerns that it would exacerbate the national debt, inflation, the pandemic, and amid geopolitical uncertainty with Russia, Gates jumped into action. A few weeks later, he met with Manchin and his wife, Gayle Conelly Manchin, at a DC restaurant, where they talked about what West Virginia needed. Manchin understandably wanted to preserve jobs at the center of the US coal industry, while Gates suggested that coal plant workers could simply swap over to nuclear plants - such as those from Gates' TerraPower. Manchin apparently wasn't convinced, announcing on Feb. 1 that "Build Back Better" (the Inflation Reduction Act's previous iteration) was "dead." In an effort to convince him otherwise, Democrats pulled together a cadre of economists and other Manchin influencers - including former Treasury Secretary Lawrence Summers, who convinced Manchin that the bill wouldn't raise taxes on the middle class, or add to the deficit. Collin O’Mara, chief executive officer of the National Wildlife Federation, recruited economists to assuage Manchin’s concerns — including representatives from the University of Chicago and the Wharton School of the University of Pennsylvania. Senator Chris Coons of Delaware brought in a heavyweight: former Treasury Secretary Lawrence Summers, who has spent decades advising Democrats.  The economists were able to “send this signal that [the bill’s] going to help with the deficit,” O’Mara said. “It’s going to be slightly deflationary and it’s going to spur growth and investment in all these areas.” Through this subtle alchemy, clean-energy investments could be reframed for Manchin as a hedge against future spikes in oil and gas prices and a way to potentially export more energy to Europe. -Bloomberg Gates also sprang into action again on July 7, when Manchin was spotted at the Sun Valley media conference in Idaho - which Gates also attended. "We had a talk about what was missing, what needed to be done," Gates said. "And then after that it was a lot of phone calls." Gates looks back at the new law with satisfaction. He achieved what he set out to do. “I will say that it's one of the happier moments of my climate work,” Gates said. “I have two things that excite me about climate work. One is when policy gets done well, and this is by far the biggest moment like that.” His other pleasure comes from interviewing people at climate and clean-tech startups: “I hear about this amazing new way to make steel, cement and chemicals.” -Bloomberg "I don’t want to take credit for what went on," says Gates - in the article about how he gets credit for what went on. Tyler Durden Wed, 08/17/2022 - 10:11.....»»

Category: blogSource: zerohedgeAug 17th, 2022

Illumina Helped the World Fight COVID-19. Now, CEO Francis deSouza Has Monkeypox in His Sights

The genetic sequencing company's CEO Francis deSouza spoke to TIME about the company’s role in the battles against COVID-19 and monkeypox As chief executive of San Diego-based genomic sequencing company Illumina, Francis deSouza feels well-placed to witness the world’s next great scientific transformation. “I really believe that just like the 20th century was the era of the bit and the digital revolution, the 21st century is likely to be remembered as the era of the genome,” he says. “We’re seeing that play out in terms of genomic-based screening and diagnostics emerging, like Illumina’s offerings, but we’re also seeing the emergence of genomic-based medicine.” DeSouza’s excitement is understandable. Well over a billion doses of mRNA vaccines—developed in record-time with the help of gene sequencing—have been safely deployed around the world to help fight the COVID-19 pandemic. mRNA treatments are also under development for other infectious diseases like malaria, Ebola and HIV, as well as for cancer. “We’re really seeing a huge expansion in the number of personalized therapies, gene therapies, and those are likely to have a huge impact in the coming years,” deSouza says. [time-brightcove not-tgx=”true”] DeSouza, 51, is a veteran of the digital revolution, having spent the bulk of his career in the tech sector. At the age of 16, he entered MIT, where he studied computer science and electrical engineering. Later, he co-founded two companies that made collaborative software for large corporate clients. Symantec acquired one of the startups, and Microsoft bought the other. He did stints in executive positions at each of the acquiring companies and joined Illumina in 2013 as president. He became CEO in 2016. In that time, Illumina’s products have been central to many of the field’s advancements. “Already, any academic, commercial or pharmaceutical lab focused on doing genomics work likely owns one if not several Illumina sequencers,” wrote TIME’s Alice Park in 2021, when the company was chosen among the “TIME100 Most Influential Companies”. The business has also faced steep challenges, including a costly patent lawsuit and an E.U. antitrust probe into its acquisition of biotechnology company Grail. On Aug. 11, Illumina surprised Wall Street analysts, posting worse-than-expected second quarter earnings that showed it had swung to a loss—something deSouza attributed to a “complex macroeconomic environment” in a statement accompanying the results. At the same time, the company drastically lowered its full-year outlook. DeSouza spoke to TIME recently about motivating scientists, finding ways to make COVID-19 “our last pandemic,” and the company’s role in the fight against monkeypox. This interview has been condensed and edited for clarity. (For coverage of the future of work, visit TIME.com/charter and sign up for the free Charter newsletter.) Illumina has sequenced monkeypox, but there’s still work to be done. What’s been keeping you busy lately? Over the last few months, we have been engaged with health systems around the world to understand the spread of monkeypox and the evolution of the monkeypox virus. Fortunately, now many countries over the last two to three years have been standing up a genomics-based pathogen surveillance program to help fight COVID. And so, they had a bit of a head start and were able to start to repurpose some of the infrastructure that was focused on COVID to look at monkeypox. We still have big blind spots when it comes to monkeypox. So for example, over 50% of the countries that have reported a monkeypox outbreak have yet to share any data on the genomics of the monkeypox outbreak they have. And so they may not be doing the surveillance yet or they may not be in the position yet to upload that data, so we still don’t know how it’s evolving in at least 50% of the countries that already have reported it. So, we still have work to do to truly have this global pan-pathogen, genomic surveillance network. It must be an interesting time for a company like yours. The world is trying to emerge from the COVID-19 pandemic, and suddenly monkeypox emerges. You’re right. We’re not only still dealing with the pandemic and seeing the emergence of monkeypox, but if you look around the world, there are countries that are grappling with [tuberculosis] outbreaks, for example. We’re seeing polio reemerge in some communities where we haven’t seen it. And it really does emphasize the need for a sort of early identification of disease outbreaks and the value that a genomics infrastructure would play. The other thing that’s becoming clear is that identifying and fighting outbreaks early is not just a public health priority, but it’s also a national defense priority for countries because the same infrastructure that can help you identify a monkeypox outbreak can also help you identify a bioterrorist attack. And so, there’s a growing awareness that this is both a public health priority, as well as a defense priority. As if that wasn’t enough, most CEOs see a recession coming, according to recent surveys. How does the business landscape look from where you sit? At a very top level, there are certainly some challenges that businesses and consumers are facing right now that are likely going to continue to play out in the coming quarters. The rising interest rates and the threat of inflation, the challenges to the supply chain, the impact of the war in Ukraine, are all going to continue to be headwinds to business as a whole. So, Illumina is doing battle with COVID, monkeypox, and cancer. What’s the latest on those fronts? We launched a viral surveillance panel that can do sequencing of 66 of the most critical viruses that are of public health concern, including monkeypox. One of the important takeaways from the pandemic is that it’s important for us to do pathogen surveillance routinely so that we can identify outbreaks when they first emerge, but also how they spread and how the viruses mutate. We have now, for example, more than 700 customers around the world that are doing COVID surveillance using our sequencing. We’re enabling those customers to use the existing infrastructure by adding to it our viral surveillance panel so that they can look for outbreaks across any one of those 66 viruses. As far as monkeypox, we want to track how it’s spreading and how it’s evolving, and this will allow our customers to do that. And so, we’re making that viral surveillance panel available for early access, and then commercializing it as quickly as possible after that. What was the sequence of events that went into developing Illumina’s monkeypox test? The way the company responded to monkeypox was similar to the way we responded to the COVID outbreak. When we were in the early stages of the [COVID] outbreak, our teams got to work immediately on coming up with a panel to sequence the virus. The teams worked seven days a week, often around the clock, to go from the idea of what that product would look like to having a product that received emergency use authorization from the FDA in under 60 days. That’s unprecedented and it just took a huge amount of work from hundreds of people across Illumina to make that happen. We did that back in 2020. When we saw monkeypox emerge, we activated that same approach. We had a team come together, create the content so that the panel would be able to identify monkeypox, as well as 65 other pathogens now, and the team worked really quickly to make this panel available. We benefited from the experience of having done it before for COVID so we knew what it took, and we also now benefit from the fact that we have infrastructure in place that we can leverage to make this panel accessible more broadly. Monkeypox comes at a time when Illumina is introducing a lot of other products, right? Can you talk about that and how you insert something very quickly into the product chain, when these new viruses come along? Yeah, I think all of us have learned from the pandemic that there is a need for a global genomic pathogen surveillance infrastructure—that we need to have the capability to identify when an outbreak is happening, as quickly as possible. We need to look for the evolution and spread of COVID-19, SARS-CoV-2, but also for the next coronavirus, for emerging antimicrobial resistance, for a bio-terrorist attack, the next zoonotic transmission. So, for example, we are starting to see the emergence of wastewater surveillance, where counties and cities are starting to sample their wastewater regularly and sequence it to get an understanding of the viral load and the emerging strains in a community. What we are able to do is provide additional technology. So, it’s not just SARS-CoV-2 now, but we’ve given them signatures around these 66 viruses to say any one of these, if you see it, report it back, report the load associated with it. So, we get this advanced warning system about how pathogen outbreaks are emerging and evolving. I think that positions us as a global community much better to address the next outbreak. While we may not ever be able to prevent an outbreak, we should commit to making this our last pandemic. I wonder how a company like Illumina balances helping the world fight viruses and other medical concerns, while also showing investors that you’re growing revenue and increasing profitability, et cetera. How do you weigh those dual concerns? Our mission from the beginning has always been to improve human health by unlocking the power of the genome. One of the important roles we play is to drive innovation aggressively to make genomic sequencing more accessible to everyone—to make it accessible to more researchers, initially, to enable them to do larger experiments so they could uncover the discoveries around how a human genome or a plant genome or an animal genome translates into health disease characteristics. Our focus has been to drive innovation that makes sequencing cheaper, faster, easier to use. About a decade ago we started to see some of the first discoveries translated to clinical applications. We saw, for example, clinical applications like noninvasive prenatal testing emerge, also, therapy selection for cancer patients. We want to accelerate the adoption of those technologies because it improves health outcomes for people, and it is good for our business as well and it takes costs out of the healthcare system. To do that, we realized that we need to make sure that we are creating and supporting an ecosystem of partners that will create the applications that the clinicians want across a variety of different healthcare conditions—in noninvasive prenatal testing, in genetic disease testing for kids in the NICU, in helping cancer patients select the right therapies. We create our own tests as well to help catalyze the market. We also created a group that focuses on getting reimbursement for patients for genomic testing. By creating, nurturing, and supporting an ecosystem of partners that leverage our platform—as well as catalyzing support from other stakeholders, like regulatory bodies, like reimbursement authorities—that expands the market for genomics and is good for patients, is good for our customers, and is good for Illumina. That’s a lot. What are your biggest challenges to accomplishing it all? One of the challenges that we have to address is making genomics accessible to everyone. We need to increase awareness of the benefits of genomic testing and the availability of testing by patients and physicians. A lot of physicians, for example, went to medical school before the first human genome was sequenced and so there’s a need for education and awareness. There’s also a need for expanded reimbursement. Our teams at Illumina have helped deliver reimbursement for one billion people around the world for genomic testing. That’s a huge amount of progress in the last few years and we have reimbursement now in some regions for things like genetic disease testing, especially for children, for cancer therapy selection, for noninvasive prenatal testing. But there’s still a long way to go to make reimbursement broadly available around the world. It’s surprising to hear that some doctors find it difficult to change their ways and accept some of these new technologies. You’re essentially saying “Hey, we have this test that can look for 50 types of cancers.” Where’s the barrier for a doctor? There is a shortage of educational material and training available for physicians, patients, and even in academic environments. There’s still a need to expand genomics education in medical schools, in undergrad, and a lot of that is just because the field is emerging so quickly. We’re all sort of helping catch up in terms of education and awareness of genomic testing. Over the last year, Illumina’s stock has fallen by almost half. Is there something investors aren’t quite understanding about the company and its vision? I think investors appreciate the long-term opportunity for genomics to really transform healthcare and that’s a big opportunity in terms of improving patient outcomes The need is to accelerate the adoption of genomics technology in a healthcare system and continue to make sure that the benefits of genomics are understood and are absorbed at a pace that investors would like to see investors are continuing to look at how quickly genomics is being adopted in cancer, for example, whether it’s for cancer therapy selection or identification of minimal residual disease, or for screening. The GRAIL Galleri test that was launched last June is a huge breakthrough in terms of cancer screening. It is a single blood test that can identify if a patient has one of 50 types of cancer, across stages. Forty-five out of the 50 cancers that GRAIL can identify have no other screen. We know that if you identify a cancer early, your five-year survival odds are much higher than if you discover a cancer late. The challenge is that the majority of cancers don’t have any screen. Over 70% of the people who die from cancer, die of cancer that has no screen. The GRAIL test promises to be quite transformative. I have always wondered how someone in your position motivates scientists who are trained to plod slowly through research over many years and not operate on corporate timetables. How do you handle that, inspiring scientists, lighting a fire under them? The kind of people that work at Illumina are typically drawn by the mission, the idea that the work we do improves human health by unlocking the power of the genome. When you talk to our employees, they will tell you personal stories about why they’re here, whether it’s a person in their family that was impacted by cancer, or somebody in their family that has a genetic disease. What that means is there is a huge amount of self-motivation among our employees to do the work right. We take the right amount of diligence. We recognize that delivering a diagnostic is a sacred responsibility, that people make important decisions with the output of our products. And then there’s also a visceral acknowledgement of the fierce urgency of what we do. We know that in the U.S., somewhere between 1,500 to 2,000 people a day die of cancer. If we can get our products to the market faster while doing them right, that makes a difference. Similarly, we have customers working on improving food security or helping develop synthetic fuels that will help combat climate change. These are not only some of the biggest challenges humanity faces, but they’re also some of the most urgent challenges humanity faces, and everybody at Illumina gets that viscerally......»»

Category: topSource: timeAug 15th, 2022

Furious Rally Pauses As Sentiment Turns Metaworse Amid Record Earnings Barrage

Furious Rally Pauses As Sentiment Turns Metaworse Amid Record Earnings Barrage One day after the Nasdaq 100 posted its biggest jump since November 2020 when the market exploded higher after it interpreted Powell's forward guidance purge and comment that it is "likely appropriate to slow rate increases at some point" as more dovish than expected, US stocks were set to pull back as downbeat earnings and a dire outlook from bad to Metaworse weighed on demand. Futures contracts on the technology-heavy Nasdaq 100 dropped 0.5% by 7:15 a.m. in New York, after the underlying gauge rallied 4.3% in the previous session. S&P 500 futures were down 0.2% after the benchmark index jumped to its highest level in seven weeks. Treasury yields were little changed and the dollar and bitcoin edged up. In premarket trading, Facebook parent Meta tumbled after it reported its first-ever quarterly sales decline as ad spend by businesses cooled, leading to a far worse than expected forecast. Qualcomm also slipped as it issued a lackluster forecast.  Renewable energy companies soared in Europe and premarket trading following a deal by Democrats and Senator Manchin to advance a bill that will spend hundreds of billions of dollars on energy security and climate change. Vestas Wind Systems A/S surged more than 14% as oil also rose.  Spirit Airlines Inc. rose in premarket on a deal with JetBlue Airways Corp. Among other individual movers, Best Buy dropped in premarket trading as analysts slashed their price targets on the retailer after it cut its profit and sales outlook. Ford Motor on the other hand, jumped after reporting better-than-expected adjusted earnings per share for the second quarter. Here are some other notable premarket movers: Qualcomm (QCOM US) shares fall 4.5% in premarket trading after the chipmaker issued a lackluster forecast for the current quarter as it expects weakening economy to weigh on consumer spending on mobile devices. Watch shares of US chipmakers and semiconductor capital equipment stocks, including Lam Research (LRCX US), Applied Materials (AMAT US), Nvidia (NVDA US), Advanced Micro Devices (AMD US), Intel (INTC US), after Samsung’s quarterly profit missed estimates and Qualcomm’s forecast. Meta Platforms (META US) shares are down 5.9% in premarket trading, after the Facebook parent reported its first- ever quarterly sales decline as ad spend by businesses cooled. Ford (F US) shares jumped as much as 7.7% in US premarket trading after the carmaker’s adjusted earnings per share for the second quarter beat the average analyst estimate. Solar energy and renewables stocks gain in US premarket trading after Senator Joe Manchin and Senate Majority Leader Chuck Schumer struck a deal on a tax and energy policy bill. First Solar (FSLR US) +10%, SunRun (RUN US) +12%, Enphase Energy (ENPH US) +3.6%, SolarEdge (SEDG US) +4.0% Etsy (ETSY US) rises 6.1% in premarket trading on Thursday after the company posted stronger-than-expected second- quarter results, with most analysts seeing the online retailer retaining its market-share gains made during the pandemic ServiceNow (NOW US) shares fall 7.5% in US premarket trading, after the software company cut its full-year revenue forecast due to a stronger dollar and a potential pull back in demand. Spirit Airlines (SAVE US) shares climb 4.5% in premarket trading as JetBlue Airways is said to be close to an agreement to buy the carrier. Best Buy (BBY US) shares drop 4.4% in US premarket trading as analysts slashed their price targets on the retailer after it cut its profit and sales outlook, with brokers blaming the macroeconomic backdrop. Teladoc Health (TDOC US) shares fall about 25% in premarket trading after the virtual- care company’s 3Q Ebitda guidance came in below expectations, with analysts saying the outlook for Teladoc is likely to be revised downward. Community Health Systems Inc. (CYH US) shares plummet 52% in premarket trading after the hospital company reported a surprise loss per share for the second quarter. US stocks have rallied in July, putting the S&P 500 Index on course for its biggest monthly gain since October 2021, as the market finally grasps what we have been saying since January, namely that the weaker macroeconomic will prompt the central bank to "pivot" to easier policy, coupled with bets that much of the bad news was now priced in. It could get even worse, er better, today when the US reports Q2 GDP which may confirm that the world's largest economy is in a technical recession further shortening the Fed tightening phase. To be sure, the knee-jerk relief in markets on possible crumbs of comfort from the Fed outlook echoes a pattern seen after earlier hikes. Those bouts of optimism stumbled on recession risks from a global wave of monetary tightening, Europe’s energy woes and China’s property sector and Covid challenges. “We do feel the hikes are going to slow from these levels,” Laura Fitzsimmons, JPMorgan Australia’s executive director of macro sales, said on Bloomberg Television. But financial-industry participants are skeptical about the pricing indicating Fed rate cuts in 2023, she added. “As the tug-of-war between inflation and recession fears plays out in the second half of the year, we expect to see highly volatile markets,” Richard Flynn, UK Managing Director at Charles Schwab, wrote in a note. All eyes have also been on corporate earnings for signs of resilience in profit margins to surging inflation and weaker sentiment. A record number of US and European firms worth more than $9.4 trillion will report their results on Thursday. Of these $6.8 trillion are 55 S&P500 companies if constituents of the Nasdaq 100 are included. That comes on the heels of the Fed raising rates by 75 basis points for a second month, saying such a move is possible but that the pace of hikes will slow at some point. Chair Jerome Powell said policy will be set meeting-by-meeting as he tries to control rising prices amid signs of an economic slowdown. Big Tech will be a particular focus again with results from Amazon, Apple and Intel. “We see the earning season as a mixed bag and it’s not necessarily very good news looking forward because we have an economic momentum that is this decelerating very fast and we also have central banks all around the world hiking interest rates,” Geraldine Sundstrom, portfolio manager for asset allocation strategies at Pimco, said on Bloomberg TV. “For financial markets, the risk of the Fed taking an overly aggressive stance has eased over the past week due to mixed growth and inflation data,” said Gurpreet Gill, macro strategist of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Growing evidence of slowing demand has curbed the need for speed –- hence the Fed did not provide forward guidance on its policy path.” The dovish Fed euphoria also helped lift European stocks, which initially faded a strong opening bounce only to recover all gains. Euro Stoxx 600 rose 0.5%, with the FTSE MIB outperforming, adding 0.8%, IBEX lags, dropping 1.3%. Telecoms, food & beverages and utilities are the worst-performing sectors. The Stoxx 600 Basic Resources index rose as much as 3.6%, the top-performing sub-index in the benchmark, following well-received results and with metals prices gaining. ArcelorMittal jumped following a cash flow beat and new buyback in its results, while Anglo American gains as its earnings and dividend both topped expectations. Other steel stocks SSAB, Voestalpine higher after ArcelorMittal and after beat from Acerinox. Copper miners KGHM and Antofagasta the biggest gainers with copper price up for fifth day. Here are some of the most notable market movers: Shell rises as much as 2.2% after the company reported what RBC Capital Markets described as strong results and announced that it will repurchase a further $6 billion of shares in the third quarter. Renewable energy companies’ shares soared following a deal by US senators to advance a bill that will spend hundreds of billions of dollars on energy security and climate change. Vestas Wind Systems stock gained as much as 15%, Nordex +12%, Orsted +6.5%, SMA Solar +7.6%, Meyer Burger +9.3% Schneider Electric shares were up as much as 5.2% after it reported a strong set of results; analysts welcome the increased FY growth targets and the company’s ability to pass on inflation. Diageo rises as much as 2.7% after the British distiller’s FY22 organic sales beat estimates. The group reiterated its medium-term guidance even as it expects a challenging environment for FY23. Stellantis shares gain as much as 4.3%, after the carmaker reported 1H results that Jefferies called “impressive and clean.” TotalEnergies declines as much as 3.8%, after its plan to maintain the pace of buybacks disappointed some analysts amid expectations for accelerated share repurchases in the industry. Airbus shares fall as much as 6.6% in Paris after the aircraft maker cut its full-year delivery projections and pushed back ramping up the A320 build rate to 65 a month from summer 2023 until early 2024. Nestle shares drop as much as 2.2% after the company cut its margin outlook for the year. The results are “mixed,” given the sales beat and increased FY organic revenue forecast, but there are questions around margin, according to analysts. Fresenius Medical Care shares slide as much as 15% after the dialysis services firm issued a guidance downgrade that showed significant cost pressures on many fronts, Truist says in a note. Ironically, as Europe edges toward a full-blown energy crisis and recession, its manufacturing giants are raking in the cash. Luxury-car leader Mercedes-Benz joined Europe’s biggest chemicals maker BASF, Swiss building-materials producer Holcim, shipping company Hapag-Lloydand others to report a jump in profit and raise earnings forecasts for the year. The results offered a stark contrast to the wave of grim economic news sweeping across Europe. Confidence in the euro-area fell to the weakest in almost 1 1/2 years as fears of energy shortages haunt consumers and businesses, and the European Central Bank’s first interest-rate increase in a more than decade feeds concerns that a recession is nearing. Earlier in the session, Asian stocks also advanced after the Federal Reserve said it will slow the pace of interest-rate increases at some point. The MSCI Asia Pacific Index climbed as much as 1.1%, driven by gains in material and energy stocks. Equity benchmarks in the Philippines and New Zealand led gains in the region as a weakening dollar boosted risk appetite. “The stock markets may reverse their recent falls” following the Fed’s decision, said Heo Pil-Seok, chief executive officer at Midas International Asset Management in Seoul. “Starting today, we should see if there’s any changes in foreign fund flows, as outflows have somewhat eased recently,” he said, adding however that the stock rally may be short-lived as investors remain cautious on earnings. Gains in Asia were small relative to the rally in US stocks overnight, as investors monitored the latest local earnings along with China’s property crisis and the Covid situation. Asian tech bellwether Samsung Electronics provided a weak demand forecast Thursday, citing uncertainties following a rare earnings miss. Chinese benchmarks were flat amid the Politburo meeting and a possible call between Xi Jinping and Joe Biden. Elsewhere, traders are awaiting a phone call between President Joe Biden and China’s Xi Jinping, which could touch on US tariffs and other points of tension. Japanese equities climbed, following US peers higher on relief after the Federal Reserve raised interest rates by 75 basis points and indicated that monetary policy tightening will eventually slow down. The Topix rose 0.2% to 1,948.85 as of the market close in Tokyo, while the Nikkei 225 advanced 0.4% to 27,815.48 as the yen gained against the dollar, weighing on exporters such as Toyota. Recruit Holdings Co. contributed the most to the Topix’s gain, increasing 4.4%. Out of 2,169 shares in the index, 1,406 rose and 652 fell, while 111 were unchanged. “It does seem as if the market bottomed out at the end of June,” said Hitoshi Asaoka, a strategist at Asset Management One. “There is a sense that a rise in interest rates is receding worldwide and stocks are also calming down along with that.” Fed Hikes by 75 Basis Points as Powell Sees No US Recession Now In FX, the Bloomberg dollar spot index revered a drop of 0.6% to trade higher. SEK and DKK are the weakest performers in G-10 FX, JPY maintains outperformance, trading at 135.33/USD.  The yen was around 135.40 per dollar, after strengthening more than 1% to 135.11 in Asia, extending an overnight rise to hit a three-week high. It jumped by a similar amount against the euro and the Australian dollar. In rates, Treasury yields were little changed to 3bps lower in European trading after dropping on Wednesday. The Treasury curve extended Wednesday’s post-FOMC steepening move as short end leads recovery from losses during European morning. Declines followed a large downside options trade, while gilts and bunds have underperformed over the London session. Focal points of US session include first estimate of 2Q GDP and 7-year note auction.US long-end yields remain cheaper by ~2bp while front-end and belly yields are richer on the day, steepening 2s10s by ~2bp, 5s30s by ~3bp; 10-year yields around 2.79% are little changed with bunds cheaper by ~2bp, gilts by ~4bp. Bunds lag following German regional CPI data, with national gauge due at 8am ET. German curve steepens with two-year yields lower after some state inflation gauges slow, while rates at the longer end rise. US 10-year yields are steady at 2.79%. In commodities, WTI drifts 1.7% higher to trade below $99. Spot gold rises roughly $10 to trade near $1,745/oz. Most base metals trade in the green; LME zinc rises 3%, outperforming peers. Looking the day ahead, in addition to the US GDP we get core PCE, consumption, and jobless claims in the US. In Europe, German CPI and France PPI are due with the first German regional numbers out just after we press send this morning. Our economists expect MoM CPI at +0.8% in Germany, and +0.5% on the EU harmonized MoM measure. Market Snapshot S&P 500 futures down 0.3% to 4,011.25 STOXX Europe 600 up 0.2% to 428.98 MXAP up 1.0% to 160.34 MXAPJ up 0.8% to 524.61 Nikkei up 0.4% to 27,815.48 Topix up 0.2% to 1,948.85 Hang Seng Index down 0.2% to 20,622.68 Shanghai Composite up 0.2% to 3,282.58 Sensex up 1.7% to 56,792.04 Australia S&P/ASX 200 up 1.0% to 6,889.75 Kospi up 0.8% to 2,435.27 German 10Y yield little changed at 0.98% Euro little changed at $1.0206 Gold spot up 0.7% to $1,746.23 U.S. Dollar Index down 0.18% to 106.26 Top Overnight News from Bloomberg Chair Jerome Powell said the Federal Reserve will press on with the steepest tightening of monetary policy in a generation to curb surging inflation, while handing officials more flexibility on coming moves amid signs of a broadening economic slowdown. The yen catapulted higher against major peers on Thursday as lowered expectations for rate hikes caused hedge funds to cover short bets from one of the biggest global macro trades of the year. US Stocks Set to Dip After Biggest Tech Gain Since November 2020 Meta Disappoints With Forecast Miss, First-Ever Revenue Drop China Leaders Call for ‘Best’ Growth Outcome at Key Meeting US Offers Russia to Swap Jailed Basketball Star for Arms Deale US Aircraft Carrier Enters South China Sea Amid Taiwan Tensions US Offers Russia to Swap Griner and Whelan for Arms Dealer Bout Barclays Latest Bank to Make Provision for US WhatsApp Fine Yen Roars Back as Hedge Funds Cut and Run From Big Macro Short China-US Deal Needed Soon to Avoid Delistings, Gensler Says Alibaba’s Gains From Primary Listing Plan Wiped out in Two Days Samsung’s Profit Is Latest Tech Casualty to Recession Fears Senate Deal Includes EV Tax Credits Sought by Tesla, Toyota Manchin Backs $369 Billion Energy-Climate Plan, Rejects SALT A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded higher across the board following the firm lead from Wall Street. ASX 200 saw firm gains across its Tech, Gold, and Mining sectors. Nikkei 225 gained in early trade and briefly topped the 28k mark before recoiling as the JPY saw a sudden bout of strength. KOSPI benefited from Samsung Electronics' rise post-earnings, although the firm echoed recent remarks from SK Hynix regarding weaker H2 memory demand. Hang Seng moved on either side of breakeven but later saw an upside bias as Hong Kong Finance Secretary said Hong Kong's H2 economic performance will be better than H1. Shanghai Comp eventually gained despite the recent cautious commentary from Chinese President Xi. Top Asian News Chinese Politburo says it will keep economic operations in a reasonable range. Australian Treasurer Chalmers said the final budget outcome for 2021/22 likely to show a dramatically better-than-expected outcome. Samsung Electronics (005930 KS) - Q2 2022 (KRW): Revenue 772tln (Co. exp. 77tln); operating profit 14.1tln (exp. 14tln). Net profit 11.1tln (exp. 10.3tln); Chip operating profit 9.98tln (exp. 11.08tln); expects weaker H2 phone/PC memory chip demand. South Korean President Yoon has ordered to take steps against illegal activities regarding stock short selling, via Yonhap. Hong Kong Finance Secretary said Hong Kong's H2 economic performance will be better than H1; property market fundamentals remain sound. Hong Kong Monetary Chief expects overnight and one-month interbank rate to continue to rise at a much faster pace; says HKD has been stable and has been operating in an orderly manner; public should be prepared for interbank rate to climb further, via Reuters. PBoC injected CNY 2bln via 7-day reverse repos with the maintained rate of 2.10% for a net drain of CNY 1bln. PBoC set USD/CNY mid-point at 6.7411 vs exp. 6.7425 (prev. 6.7731). Japanese government spokesperson says there is currently no plan to impose restrictions on people's movements following increasing COVID cases; Tokyo COVID cases reach 40,406 vs. previous record of 34,995. European bourses are modestly softer, Euro Stoxx 50 -0.10%, but relatively contained now after fading initial gains from the FOMC-inspired upside. Amid numerous earnings updates from Europe & in the US aftermarket. US futures are relatively stable but continue to post modest losses with the NQ -0.8% lagging amid pre-market downside in Meta post-earnings, -6.0%. Meta Platforms Inc (META) Q2 2022 (USD): EPS 2.46 (exp. 2.59), Revenue 28.82bln (exp. 28.95bln), Advertising revenue 28.15bln (exp. 28.53bln). Outlook reflects continuation of weak advertising demand environment it experienced throughout Q2. Guidance assumes FX will be about a 6% headwind to Y/Y total revenue growth in Q3. Co. said the economic downturn will have a broad impact on digital advertising business, says the situation seems worse than it did a quarter ago. -6.0% in the pre-market. Jack Ma intends to relinquish control of Ant Group, via WSJ sources; to transfer some voting power to executives, could push-back IPO timing by over a year. Top European News German consumer energy bill to increase by EUR 1k/year, following a cost shift, via Bloomberg; Effective from October 1st, via Reuters sources; levy will cover 90% of costs. Subsequently, German Economy Minister says the gas level would cost several hundred EURs per household. India to Restart Ukraine Sunflower Oil Imports as Trade Eases Wind, Solar Stocks Surge After US Energy Bill Agreement Vanguard Europe MD Says Climate Is Now ‘the Most Material Risk’ Schroders Up; Jefferies Says Results Show Resilience of Platform EDF Posts $1.3 Billion Loss as State Readies Nationalization Turkey Raises 2022 Inflation Forecast to 60.4% on Imports, Lira Central Banks BoJ Deputy Governor Amamiya said we must not loosen our grip in keeping monetary policy easy as there is no prospect yet of sustainably meeting the 2% inflation target. He added that consumer sentiment has been worsening due to rising energy and food prices. BoJ must be vigilant to financial and forex moves and their impact on economy and prices. ECB's Visco refrains from saying whether markets should expect a 25bps or 50bps hike in September; not prepared to say the ECB would go for 50bps in September in order to reach its target quicker. Adds, the ECB doesn't really know where its target is. BoK to strengthen monitoring of FX and capital flows following the FOMC hike, according to Bloomberg. HKMA raised its base rate by 75bps to 2.75%, as expected, following the earlier Fed rate hike. NBH hikes the one-week deposit rate to 10.75% (prev. 9.75%) at tender. CBRT Governor says the bank has enough FX reserves to meet high energy costs and reserves continue to increase. FX Fed leaves Dollar in limbo with no firm forward guidance and reliant on unfolding macro fundamentals, DXY depressed within 106.580-050 range vs pre-FOMC high of 107.430. Yen outperforms on prospect of less BoJ vs Fed policy divergence, USD/JPY sub-135.50 and key Fib level. Kiwi outpaces Aussie as NZ business outlook and activity turn less downbeat, while Australian retail sales miss consensus and slow to softest pace in 2022 so far; AUD/NZD retreats through 1.1150 as AUD/USD and NZD/USD hover just under 0.7000 and 0.6300 respectively. Pound extends gains against Euro through 0.8400 and chart trend line, but both fade from post-FOMC peaks vs Buck, Cable unable to reach 1.2200 and EUR/USD fails to hold above 1.0200. Lira and Forint flounder irrespective of supportive CBRT rhetoric and NBH raising 1-week deposit rate by 100bp, USD/TRY touches 17.9300 in wake of jump in year end Turkish CPI forecast and EUR/HUF approaches 408.00. Fixed Income Bonds remain volatile post-Fed, but curve steepening the clear trend as markets reset rate expectations to data rather than forward guidance. Bunds choppy within wide 154.75-155.87 extremes, Gilts between 116.70-117.19 parameters and T-note from 119-23+ to 120-08+. US Treasuries also conscious of looming 7 year supply after potentially pivotal Q2 GDP and jobless claims. Commodities WTI and Brent are firmer by over 1.5% on the session after spending much of the European morning relatively contained. European gas prices are significantly more contained when compared to price action earlier in the week but remain at elevated levels comfortably above EUR 200/MWh for TTF. Gazprom continues shipping gas to Europe via Ukraine, Thursday's volume is 42.1MCM (vs Monday's 42.2MCM). Shell (SHEL LN) has cut gas use at the Rotterdam Pernis (404k BPD) facility by 40% and at German sites by ~70%, due to the ongoing gas situation. India's gold demand in H2 is seen falling Y/Y due to lower disposable income; H1 gold demand rose 42% Y/Y, according to World Gold Council. Magnitude 6.3 earthquake hits Tocopilla in Chile, according to the EMS; 5.5 magnitude earthquake occurs near Nicaragua coast, via EMSC. Nornickel Q2 production: Nickel 48k tonnes, Palladium 709/koz, via Reuters. Spot gold is bid by just over USD 10/oz but, again, remains subject to USD action as while the index is bid it has dipped markedly. Amidst the USD’s relative weakness, base metals are similarly supported. US Event Calendar 08:30: 2Q GDP Annualized QoQ, est. 0.5%, prior -1.6% Personal Consumption, est. 1.2%, prior 1.8% PCE Core QoQ, est. 4.4%, prior 5.2% GDP Price Index, est. 8.0%, prior 8.2% 08:30: July Initial Jobless Claims, est. 250,000, prior 251,000 Continuing Claims, est. 1.39m, prior 1.38m 11:00: July Kansas City Fed Manf. Activity, est. 4, prior 12 DB's Jim Reid concludes the overnight wrap Just before the June FOMC, the surprise last minute leak that the Fed were about to hike rates by 75bps shocked yields much higher and equities much lower. However last night's routine 75bps July FOMC hike was cheered to the rafters by the equity market with yields also falling, especially at the front end. So how times change! Today we could see confirmation of the start of a technical recession in US with Q2 GDP out, and also German CPI which might show some signs of falling before we think it hits new highs again in the autumn. So a busy day. Back to the Fed and the expected 75bps hike brings the rate into territory that some Committee members may deem ‘neutral’ (Our full US econ review, here). The statement maintained guidance that the Committee sees further rate hikes, and thus moves into restrictive territory, as appropriate, even as the statement opened by acknowledging that some activity data had softened. Nothing in the statement came as a particular surprise, leaving equities and rates little changed upon release with the bulk of the rally after the press conference started. At the press conference, the Chair left open the possibility of another super-charged 75bp hike (or larger) in September, but demurred on providing forward guidance, saying that the Committee would be making policy decisions on a meeting-per-meeting basis. A tacit acceptance of what they have already been doing, to an extent. Nevertheless, the Chair did note that the SEP from June, that shows policy getting to between 3% and 3.5% by the end of year, and a terminal rate of 3.8% was probably still the best guide for the path of policy. Despite the continued insistence on more hikes being necessary, and inflation being much too high, markets instead latched onto the fact that the Committee was cognisant of the signs of slowing growth in the economy, and that the Fed would logically slow the path of tightening at some point. Upon this, markets priced in a shallower policy path, which saw 2yr Treasuries -5.5bps lower on the day, with 10yr yields down -2.2bps, and no more rate hikes in 2023 after hitting a terminal rate of 3.3%. What was left unsaid is that slowing growth has to translate to slowing inflation for the FOMC to pivot policy. That cuts are being priced in within six months when inflation is still climbing from lofty levels seems too optimistic. However this very much fits it with the current market narrative so this doesn't feel the time to fight it. That optimistic pricing path drove US equities through the roof after the FOMC, with the NASDAQ ending the day +4.06% higher, climbing around +1.58% after the FOMC events, it’s best daily return since April 2020, while the FANG+ was up +5.30%, its best day in two months. Tech stocks outperformed given the sensitivity of their valuations to rate policy, but the broad S&P 500 climbed +2.62% as well, with every sector in the green. After the FOMC, Meta missed analyst estimates, posting its first ever decline in sales over a quarter, and traded around -4.5% lower in after-hours trading. In the release the company also noted hiring has slowed this year much like its other mega cap brethren. This morning, S&P 500 futures are trading -0.14% lower, with Meta having taken some shine out of the post-FOMC glow. Elsewhere overnight, Senator Joe Manchin reportedly reached a deal with Senate Majority Leader Chuck Schumer on a tax and spending plan focused on climate spending, capping health care costs, while raising additional tax revenue. This will be a huge story out of Washington heading into the fall midterms, and the overall impact of the bill – which is being structured to pass through the reconciliation process and thus with a simple majority – will be assessed over coming days as more people get eyes on it. An announcement that came out of the blue after Senator Manchin shot down reconciliation efforts in light of growing inflation time and again. One we will surely be talking about more over the near-term. Ahead of the FOMC, equities were higher on both sides of the Atlantic on buoyant sentiment following optimistic forecasts from tech giants Microsoft and Alphabet the night before. European equities closed modestly higher across the board, with the STOXX 600 closing up +0.47%, the DAX +0.53% higher, and the CAC up +0.75%. The big focus in Europe remained on the gas situation. A German government spokesperson acknowledged there had been a reduction of gas supplies from Russia and noted there was no technical reason for Russia to cut supplies. European natural gas futures climbed another +2.54% on the day to €205. Core European and Treasury yield curves were flatter heading into the Fed, with 2yr bund yields climbing +8.7bps and 10yr bunds +2.0bps higher to 0.94%. The spread widening in BTPs continued, with 10yr BTPs +5.5bps wider to bunds at 236bps, just under 5bps from their widest levels reached in mid-June. Meanwhile, Treasury yields were lower across the curve, with the curve even more inverted. The data out before the Fed was never going to be the main driver of rates on the day, and they painted a mixed picture. Housing continued its torrid run, with pending home sales down -8.6% MoM versus expectations of -1.0%. Meanwhile, Durable Goods Orders expanded 1.9% versus -0.4% expectations, while inventories increased 1.9% as well versus 1.5% expectations. Those data helped some GDP trackers, with the Atlanta Fed’s nowcast for 2Q GDP increasing to -1.2% from -1.6% following the data. We get the first advance reading of US 2Q GDP today, but know today’s reading will be subject to many revisions before we have the final figure. 10yr TSY yields are little changed at 2.78% as we go to press this morning. Brent crude futures climbed +2.13% to $107/bbl, following EIA data that showed inventories fell by 4.52mln barrels, while demand for gasoline in the US looks more robust than some recent survey measures have suggested, putting more upward pressure on energy. Finally, a Biden aide said the Iran deal was not likely to return in the near future, effectively keeping potential additional supply from hitting the market for longer. Asian equity markets are trading higher this morning following the Fed. Stocks in mainland China are gaining with the Shanghai Composite (+0.89%) and the CSI (+0.95%) both up whilst the Nikkei (+0.32%), the Hang Seng (+0.20%) and the Kospi (+0.97%) all edging higher. Early morning data showed that retail sales in Australia rose +0.2% m/m in June, its slowest pace this year and down from May’s downwardly revised +0.7% pace of growth and falling short of markets expectations of a +0.5% increase. The soft data represents that soaring inflation and rising interest rates may be finally hampering consumer demand. To the day ahead, in addition to the US GDP we get core PCE, consumption, and jobless claims in the US. In Europe, German CPI and France PPI are due with the first German regional numbers out just after we press send this morning. Our economists expect MoM CPI at +0.8% in Germany, and +0.5% on the EU harmonized MoM measure. Tyler Durden Thu, 07/28/2022 - 08:04.....»»

Category: blogSource: zerohedgeJul 28th, 2022

Futures Bounce On Tech Optimism As Fed Looms

Futures Bounce On Tech Optimism As Fed Looms Global markets and US equity futures got a strong boost on Tuesday from reassuring big tech reports including Microsoft, Texas Instruments and Google, which delivered double-digit revenue growth reversing the doom and gloom from other reporters. Microsoft assuaged fears that the strong dollar and a weakening economy would hurt sales while Alphabet posted advertising revenue that surpassed analysts’ expectations amid an industry slowdown. Credit Suisse CEO Thomas Gottstein will to be replaced by asset-management head Ulrich Koerner next week after the Swiss bank posted its third straight quarterly loss and its worst trading first half in decades. All of that, of course, pales ahead of the day's main event Later today, the Federal Reserve is expected to increase its benchmark interest rate by three quarters of a percentage point. Nasdaq 100 contracts led gains rising 1.3% and reversing much of Tuesday's plunge. S&P futures rose 0.8% alongside European stocks which also rose, with the banking sector up even as Credit Suisse Group AG posted a larger-than-expected loss, Deutsche Bank AG warned on costs, and the outlook on Italy’s sovereign debt ranking was lowered by S&P. The dollar and Treasury yields slipped, while oil and European natural gas prices extended gains. In premarket trading, major technology and internet stocks were higher after both Microsoft and Google-parent Alphabet reported double- digit quarterly revenue growth amid tough macro conditions. Microsoft shares rose 4.3% after the software company said it expects double- digit sales growth for the fiscal year 2023. While quarterly revenue was weaker than expected, Barclays analysts say the report shows resilience despite a number of headwinds. Fellow tech giant Alphabet shares also rise 4% in premarket trading after the Google parent reported its 2Q revenue in line with Wall Street expectations. Analysts said the results were better than feared, but noted that “macro uncertainty remains high.” Here are some other notable premarket movers: Alphabet Inc (GOOGL) Q2 2022 (USD): EPS 1.21 (exp. 1.29), Revenue 69.70bln (exp. 70.04bln).Google advertising 56.29bln, (exp. 55.91bln). CFO said FX impact to be even greater in the current Q, according to CNBC. (Newswires/CNBC) +3.5% in the pre-market Microsoft Corp (MSFT) Q4 2022 (USD): EPS 2.23 (exp. 2.29/2.29 GAAP), Revenue 51.9bln (exp. 52.45bln). Intelligent Cloud revenue 20.91bln (exp. 21.07bln). Guides FY23 revenue double digits sales growth, FY23 FX impact of 4-points decrease in revenue growth, via its conference call. (Newswires) +3.8% in the pre-market Visa Inc (V) Q3 2022 (USD): Adj. EPS 1.98 (exp. 1.74/1.73 GAAP), Revenue 7.3bln (exp. 7.06bln). (Newswires) Co. seeing no evidence of a pullback in consumer spending. Unch. in the pre-market Twitter (TWTR) said it significantly slowed hiring in Q2 2022; in 2021 and H1 2022, macro factors had a negative impact on, and may negative impact in future periods, such as advertising revenue. Twitter is to hold shareholder vote on Musk deal on September 13th at 18:00BEST/13:00EDT, according to CNBC. (Newswires/CNBC) PayPal (PYPL US) shares jump as much as 6.5% premarket, following a report that activist investor Elliott is building a stake in the payments firm. Results from peer Visa also boost sentiment. Cryptocurrency-exposed stocks are higher in premarket trading as Bitcoin rebounds along with US stock futures after Alphabet, Microsoft and Texas Instruments results spur hopes that the technology sector can manage a slow economy. Coinbase (COIN US) +4.9%, Marathon Digital (MARA US) +7.6%, Riot Blockchain (RIOT US) +5.5%, Ebang (EBON US) +12% ObsEva (OBSV US) shares slump 75% in premarket trading after the biopharmaceutical company said it plans to initiate a corporate restructuring given the commercial landscape and potential additional capital is needed to fund the completion of the linzagolix clinical development program. Enphase Energy (ENPH US) shares surged as much as 12% in premarket trading as analysts hiked their price targets on the solar energy equipment maker, with brokers saying its results and guidance for the 3Q were robust and exceeded expectations thanks to strong demand. Texas Instruments (TXN US) shares rose 2.8% in postmarket trading on Tuesday after issuing a bullish forecast for the current quarter. Analysts note that the company exceeded its “overly conservative” estimates as lockdowns eased in China. Teva Pharmaceuticals shares jump as much as 16% in Tel Aviv, the most since May 2020, after the Israeli company said it had struck a deal with US state and local governments to pay more than $4 billion to settle thousands of lawsuits. US-listed ADRs also gain 16% in premarket trading. The mood remains edgy ahead of a much-anticipated Fed interest-rate increase - part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown. Investors are also bracing for the busiest reporting day of the season, where Meta may sour the mood after the bell with a slowdown in ad spending. Qualcomm will give investors a view into a smartphone market that's losing steam. Boeing, Ford and Kraft are also due. That said, US company earnings are providing a sliver of hope -- more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges. Top-tier firms including Apple, Amazon and Mastercard will report tomorrow, on what will be a $9.4 trillion day in the US and Europe. Last but not least tomorrow the US will report the first estimate of Q2 GDP which is expected to print negative confirming a US technical recession.  “Inflation is hurting companies and the question is whether these policy rate hikes are going to do anything to alleviate the pain,” Quadratic Capital Management founder Nancy Davis said on Bloomberg Television. Elsewhere, President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation. And speaking of the Fed, the swaps market currently prices in around 77bp of rate hikes for today’s Fed decision and combined additional 183bp by the December FOMC meeting. The projected 75 basis-point Fed move to tackle price pressures would cement the steepest two-month rise in rates since the 1980s. The key question is whether Chair Jerome Powell’s policy signals validate or refute scaled-back bets projecting a 3.4% peak fed funds rate around year-end and cuts in 2023 to shore up an economy at risk of recession. “The Fed hasn’t even gotten to neutral yet,” Jason England, global bonds portfolio manager at Janus Henderson Investors, said on Bloomberg Television. “For them to start easing already or for them to start seeing eases priced in is, I think, a little premature.” In any case, Powell is expected to acknowledge that downside risks to growth have increased and reiterate the Fed’s commitment to controlling inflation. A full FOMC preview can be found here. “The risk is that Powell starts to set markets up for a move back to a default position of 50bp moves, though we can see little reason for the Fed to lose the optionality of going 75bp when there is significant news that they may have to react to between this and the next meeting,” according to RBC Capital Markets strategist Adam Cole. Meanwhile, the ECB will deliver only 50 basis points of additional interest rate increases this year as the euro zone succumbs to a recession in the fourth quarter, according to JPMorgan. In Europe, the Stoxx 50 rose 0.6% with travel, personal care and tech are the strongest performing sectors. Credit Suisse shares gained as the bank replaced its embattled chief executive officer and said it would embark on a new turnaround plan just nine months after the last one, while Deutsche Bank fell after it scrapped an efficiency target for the year and warned a key profitability goal was getting harder to reach. Here are the most notable European movers: UniCredit shares jumped as much as 7.4% after what Jefferies said was a “bumper” quarter, with new 2022 profit guidance about 10% above consensus. The lender reported net income for 2Q that doubled analyst expectations. Reckitt shares jump as much as 6.7%, after the consumer-goods company reported 2Q sales that beat estimates and raised its outlook for the year. Worldline shares jump as much as 15% after the payment firm’s 2Q revenue and margin beat expectations, with strength driven by the in- focus merchant services arm, according to analysts. Holcim shares climb as much as 5.9% after it reported 2Q sales that beat the average estimate, with analysts highlighting the building materials company’s success in raising prices. Mercedes-Benz shares rise as much as 4.5% after the company reported 2Q results that beat estimates and raised its guidance. Oddo BHF calls the increased guidance “supportive.” Smurfit Kappa shares rose as much as 6.7% after reporting 2Q results which reassured analysts amid a challenging macro environment. Davy described the release as a “blow-out quarter” and further proof of the group’s business transformation. Rio Tinto shares decline as much as 4.6%, lagging peers in Europe’s Stoxx 600 Basic Resources subindex, after the miner reported 1H results that missed analyst estimates and cut its dividend in half. Adidas shares fall as much as 6.1%. The magnitude of the group’s outlook cut was bigger than anticipated by analysts and could signal challenges ahead for the rest of the sportswear sector. Eurofins Scientific shares fall as much as 11% after the French laboratory company presented its latest earnings. Analysts note that while the company boosted its guidance, organic growth disappointed. The stock trimmed some losses later. Aena drops as much as 7.7% after it reported results that missed the average estimates. Analysts’ worries focus around operating expenses’ inflation for 2H, the winter outlook and any impact from further impairment. Italian bonds fell after S&P lowered the nation’s outlook to stable from positive after recent political turmoil led to the resignation of the nation’s prime minister and the calling of fresh elections. The rating itself remains at BBB, two levels above junk. The news spread the spread between Italy and German 10Y yields to a new one-month highs. Earlier in the session, most Asian stocks were higher while gauges in China and Hong Kong fell, with trading volume thin as traders awaited the Federal Reserve’s monetary policy decision. The MSCI Asia Pacific Index fell 0.1%, dragged down by Chinese tech giants. Trading volume in Asia was among the lowest this year as investors took to the sidelines ahead of the Fed’s anticipated 75 basis point rate hike due later Wednesday.  Hong Kong’s equity benchmark fell more than 1%, with Alibaba’s retreat contributing the most to the loss as the focus shifted to next week’s earnings results. India’s gauges jumped, while those in South Korea, Japan and Australia advanced modestly.   The market is particularly keen to hear about the Fed’s post-July path, which will impact the dollar and flows to the global markets. “July looks like a very weak season for the market,” with sentiment damped by macroeconomic concerns, Covid and China’s property crisis, Jun Li, chief investment officer at Power Pacific Investment Management, said in an interview on Bloomberg TV. “We do have confidence in the second half of 2022,” she said.  A measure of Asian chip stocks reversed its earlier loss to rise for the first time in four sessions, as SK Hynix said it would significantly adjust its 2023 capital spending, which could limit declines in chip prices. In stocks, US futures rally after strong earnings. S&P futures rise 1%. Nasdaq contracts rally 1.7%. Euro Stoxx 50 rises 0.6%. Travel, personal care and tech are the strongest performing sectors. Bloomberg dollar spot index falls 0.2%. NZD and AUD are the weakest performers in G-10 FX. In FX, the Bloomberg dollar spot index fell 0.2%, giving up some of its 0.4% gain from Tuesday. The Fed is forecast to raise its key rate by 75 basis points for a second meeting. EUR/USD gained 0.3% to $1.0144; the pair had tumbled 1% Tuesday as traders focused on spiking natural gas prices on the prospect of reduced Russian supply. Sterling inched up, supported by early gains in UK and European share markets. The Aussie weakened as much as 0.4% after a government report showed inflation was slower in the second quarter than economists forecast, before rallying back to $0.6950. NZD and AUD are the weakest performers in G-10 FX. In rates, Treasuries were slightly richer across the curve with gains led by belly, outperforming core European rates market and steepening 5s30s spread. US 10-year yields around 2.795%, richer by 1.5bp on the day; belly outperformance re-steepens 5s30s spread back to around 14bp, near middle of Tuesday’s range. The 5-year yield across the Treasury curve continues to slightly outperform, while 2s5s10s butterflies are about 3 bps tighter. In European fixed income, bunds edge lower and gilts slightly bear steepen. The US IG issuance slate empty so far, expected to remain light with FOMC event risk; July volumes have already met expectations, helped by last week’s bumper $45b slate. In commodities, WTI trades within Tuesday’s range, adding 1.2% to trade near $96.12. Spot gold rises roughly $6 to trade near $1,724/oz. Most base metals trade in the green; LME copper rises 1.2%, outperforming peers.  Looking at the day ahead, the FOMC looms large in the day ahead, but US pending home sales, inventories, and goods trade balance data will also be released, along with consumer confidence figures in Germany, France, and Italy, and Chinese industrial profits. The day is chock full with earnings as well, including: Meta, T-Mobile, Qualcomm, Bristol-Myers Squibb, Boeing, Airbus, Rio Tinto, Kering, Iberdrola, Lam Research, Mercedes-Benz, Boston Scientific, Shopify, Ford, Kraft Heinz, BASF, Universal Music Group, Danone, Hilton, Vici, Spotify, Credit Suisse Market Snapshot S&P 500 futures up 1.0% to 3,963.50 STOXX Europe 600 up 0.4% to 427.68 MXAP down 0.2% to 158.84 MXAPJ down 0.3% to 520.24 Nikkei up 0.2% to 27,715.75 Topix up 0.1% to 1,945.75 Hang Seng Index down 1.1% to 20,670.04 Shanghai Composite little changed at 3,275.76 Sensex up 0.7% to 55,657.82 Australia S&P/ASX 200 up 0.2% to 6,823.23 Kospi up 0.1% to 2,415.53 German 10Y yield little changed at 0.94% Euro up 0.3% to $1.0144 Gold spot up 0.4% to $1,723.92 U.S. Dollar Index down 0.19% to 106.98 Top Overnight News from Bloomberg Oil Climbs as US Crude Stockpiles Shrink Ahead of Fed Decision Biden Will Speak to Xi on Thursday as US-China Ties Worsen A $9.4 Trillion Results Day Looms in a Test for Stock Market Deutsche Bank Warns of Costs as Inflation Headwinds Build Elliott Is Said to Amass PayPal Stake Seeking to Speed Cuts Europe Energy Prices Keep Soaring as Russia Turns the Screw Europe Gas Extends Scorching Rally as Russia Supply Set to Slump Cathie Wood Dumps Coinbase Shares for First Time This Year Apple Supplier SK Hynix’s Outlook Sours as Tech Demand Wanes Trump Efforts to Create Fake Electors Probed by US Prosecutors Teva Pharmaceutical to Pay Over $4 Billion in Opioid Accord Visa to Dole Out Annual Raises Earlier Amid Inflation Pressures Microsoft Shares Rise on Upbeat 2023 Sales Growth Forecast Trump Returns to D.C., Hinting on 2024 and Jabbing Jan. 6 Panel Google Reassures Investors With Ad Sales Showing Resilience Microsoft Shares Rise on Upbeat Forecast for Fiscal 2023 Growth Texas Instruments’ Rosy Forecast Counters Fears of Slowdown Carson Block Sued Over $14 Million SEC Whistle-Blower Award A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded mixed following a mostly subdued session, but within narrow intraday ranges. ASX 200 moved between gains and losses with the Healthcare sector leading the gains whilst Metals & Mining lagged. Nikkei 225 was similarly contained whilst Canon shares fell as much as 3% post-earnings. KOSPI declined with Apple-supplier SK Hynix warning of a slowing in memory chip demand in H2. Hang Seng underperformed with Alibaba retracing yesterday's gains whilst the property sector was also hit. Shanghai Comp was caged following another modest net liquidity drain by the PBoC, whilst multiple sources suggested the Biden-Xi call is to take place on Thursday. Top Asian News Hong Kong will have no choice but to raise interest rates, although the pace or scale need not follow US hikes and it is unlikely to trigger the kind of property market crisis seen in 1998, according to SCMP citing the Hong Kong Financial Secretary. Magnitude 7.2 earthquake hits Philippines region of Luzon, according to ESMC; no tsunami warnings issue, according to Reuters. China overnight rate fell below 1% for the first time since last year, according to Bloomberg. PBoC injected CNY 2bln via 7-day reverse repos with the maintained rate of 2.10% for a net drain of CNY 1bln. PBoC set USD/CNY mid-point at 6.6.7731 vs exp. 6.7680 (prev. 6. 7483); weakest fix since May 17th. European bourses are firmer across the board continuing the MSFT & GOOG driven early APAC action amidst numerous European earnings; Euro Stoxx 50 +0.6%. US futures are firmer across the board though the NQ +1.4% outperforms amid those after-market developments though participants are looking to the FOMC. Top European News     Central Banks Deutsche Bank and Goldman Sachs have revised their August RBA calls to a 50bps hike (prev. 75bps hike) following the Australian Q2 CPI metrics. FX Buck backs off before the Fed and US data in the lead up, DXY slips into range around 107.000 and just shy of yesterday's 107.290 recovery high. Sterling secures firmer foothold above 1.2000 vs Dollar and maintains momentum through key technical level against Euro, EUR/GBP cross probes 0.8400 after breach of 200 DMA. EUR/USD retains 1.0100+ status as Greenback wanes and hefty option expiry interest supplements underlying bids, 1.84bln rolls off at the strike. Aussie sags as mixed inflation data sparks round of revised RBA hike forecasts from 75bp to half point, AUD/USD around 0.6950 following test of Fib resistance just under 0.7000 on Tuesday. Loonie pares losses as crude prices settle down and Nokkie makes clean break of 10.0000 vs Euro, USD/CAD closer to 1.2850 than 1.2900. Fixed Income Whip-saw trade in debt ahead of the Fed as Bunds veer from 156.07 to 155.36, Gilts between 117.67-12 parameters and T-note within a 113-31/119-19+ range 2032 German tap and 2051 UK linker sale sluggish Italian BTPs underperform amidst the political void and S&P revising the sovereign's outlook to stable from positive after interim ratings review Commodities Dutch TTF Aug’22 is the standout commodity mover, amid a reduction in physical flows through Nord Stream 1; thus far, TTF has printed a high of EUR 228/mWh. Crude benchmarks modestly firmer, but significantly more contained. NEC Director Deese said there are no plans to continue SPR releases beyond the originally set out 6mth period, according to Reuters. US Private Inventory Data (bbls): Crude -4.0mln (exp. -1mln), Distillates -0.6mln (exp. +0.5mln), Gasoline -1.1mln (exp. -0.9mln), Cushing +1.1mln. US Deputy Treasury Secretary Adeyemo met with European counterparts to discuss a price cap on Russian oil. Chinese National Energy Administration expects energy consumptions growth to increase in H2, via Reuters. Spot gold has staged a recovery on the session from earlier lows of USD 1713/oz; however, the yellow metal remains well within recent ranges and continues to move predominantly as a function of USD action. US Event Calendar 07:00: July MBA Mortgage Applications -1.8%,  prior -6.3% 08:30: June Durable Goods Orders, est. -0.4%, prior 0.8%; - Less Transportation, est. 0.2%, prior 0.7% 08:30: June Cap Goods Orders Nondef Ex Air, est. 0.2%, prior 0.6% Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 0.8% 08:30: June Advance Goods Trade Balance, est. -$103b, prior -$104.3b 08:30: June Retail Inventories MoM, est. 1.0%, prior 1.1% Wholesale Inventories MoM, est. 1.5%, prior 1.8% 10:00: June Pending Home Sales YoY, est. -13.5%, prior -12.0% 10:00: June Pending Home Sales (MoM), est. -1.0%, prior 0.7% 14:00: July FOMC Rate Decision (Lower Boun, est. 2.25%, prior 1.50% DB's Jim Reid concludes the overnight wrap Burgeoning energy and political crises in Europe, and the specter of the Fed pouring cold water on the recent dovish repricing of its policy weighed on risk yesterday. Diving in. It was a bad day for the gas crisis in Europe, ultimately seeing European natural gas futures climb +21.2% to €214, their highest since the aftermath of the invasion, bringing them +33.9% higher on the week. As intimated in yesterday’s EMR, Russia was halting another Nord Stream 1 turbine to cut capacity down to 20%. At those levels, the continent would need to countenance rationing unless exports were cut (see our gas monitor here for more details), voluntary curbs which would be politically difficult. Yesterday gave a sense how difficult. While EU countries reached a deal on emergency gas cuts for this winter, the deal lacks the teeth of the original plan, as member states have more flexibility to determine demand curbs, which was a necessary concession to reach a bloc-wide deal. In particular, states can reduce their cuts if they commit to export more gas to neighbors and also exempt certain industries from demand reductions. Member states are due to prepare emergency plans by the end of September to show how they will curb demand. That drove demand for most sovereign bonds, with 10yr bund yields falling -9.3bps. The STOXX 600 marched to a staccato rhythm all day, fluctuating around unchanged and ultimately closing a hair lower at -0.03%, while continental bourses closed on the downbeat, with the DAX -0.86% lower and the CAC down -0.42%. Along with the lackluster risk environment, S&P lowered Italy’s credit outlook from positive to stable, amid political uncertainty. 10yr BTP spreads widened +5.1bps to 232bps against bunds, their widest since mid-June. Rising prices will of course be front and center at today’s key macro event, the July FOMC. The market is pricing +78bps of hikes today. That’s in line with our US economics call of another +75bp hike (see preview here). The team expects the Committee to downshift to a +50bp hike in September, reaching 3.6% by the end of the year and 4.1% early in the next one. They see risks to both sides of that modal path; continued hot inflation prints would enable another +75bp hike in September, while material labor market deterioration could flatten the path of hikes. While the Fed will probably offer guidance about how they are currently thinking about policy actions at the September meeting, the amount of data between now and then means investors shouldn’t assign too strong a prior to any forward guidance. For most investors, however, the key question will be how restrictive the Fed ultimately needs to get policy. That is, how high is the terminal rate? The Chair will certainly be quizzed on the path to terminal during the press conference, but his elucidation about how restrictive policy needs to get will be more informative. DB research has spilled a fair bit of ink on that question in recent days, including US econ on what would trigger cuts next year (here), Alan Ruskin on terminal rate scenarios (here), and yours truly on the predictive power of forward looking rates during FOMC hiking cycles and periods of elevated inflation (here). Today’s Fed decision kept Treasury markets calm, with 2yrs rising +3.7bps and 10yrs just +1.1bps higher at 2.81%. The market has assumed slowing growth numbers will factor into the Fed’s reaction function since the June FOMC, driving 2yr Treasuries -13.8bps lower, 10yr Treasuries -47.7bps lower, the S&P 500 +3.5% higher, and the NASDAQ +4.18% higher over that time, with around one fewer 25bp hike priced into terminal rates. How the Committee and Chair view that assessment will be a crucial element of today’s meeting. While US risk has enjoyed an optimistic intermeeting period, more jitters creeped in today, with the S&P 500 closing -1.15% lower. A panoply of less-than-inspiring data weighed on the tone set by geopolitical risk and the Fed; with FHFA house prices (+1.4% vs. +1.5% expectations), New Home Sales (590k v 655k) Richmond Fed Manufacturing (0 vs. -14), and Conference Board Consumer Confidence (95.7 vs. 97.0) all pointing toward a looming (or present) growth slowdown. Consumer expectations continue to be weakest since 2013, while present situation figures are the lowest since April 2021. Earnings added to the malaise. Shopify reported plans to cut staff, continuing last week’s theme from major tech earnings. However, after the close, Microsoft missed estimates but shares climb more than +4% in after-hours trading on the back of an optimistic forecast, while Alphabet’s shares were around +5% higher after hours as their ad revenues look to be more resilient than some of their tech peers. That has pointed to a more optimistic open today, with S&P 500 futures +0.72% higher and NASDAQ futures +1.33% higher. Elsewhere, the Presidents Biden and Xi will speak Thursday. The reportedly ‘robust’ agenda does not include tariffs, as of yet. One to keep an eye on once we’re through the Fed. Heading into the open, the moves in the US and European equities reverberated across Asia overnight with all the equity markets trading in negative territory. The Hang Seng (-1.25%) is the largest underperformer across the region with the Kospi (-0.58%), the CSI (-0.57%), the Shanghai Composite (-0.32%) and the Nikkei (-0.13%) all lagging. Australia’s inflation rose +6.1% y/y in the June quarter (v/s +6.3% expected), the fastest annual pace in more than 30 years as food and energy costs increased, accelerating from last quarter’s +5.1% rate. Elsewhere, China’s industrial profits rebounded +0.8% y/y in June, recovering from a -6.5% decline in May as factory activity resumed in major manufacturing hubs. The FOMC looms large in the day ahead, but US pending home sales, inventories, and goods trade balance data will also be released, along with consumer confidence figures in Germany, France, and Italy, and Chinese industrial profits. The day is chock full with earnings as well, including: Meta, T-Mobile, Qualcomm, Bristol-Myers Squibb, Boeing, Airbus, Rio Tinto, Kering, Iberdrola, Lam Research, Mercedes-Benz, Boston Scientific, Shopify, Ford, Kraft Heinz, BASF, Universal Music Group, Danone, Hilton, Vici, Spotify, Credit Suisse Tyler Durden Wed, 07/27/2022 - 08:00.....»»

Category: blogSource: zerohedgeJul 27th, 2022

AMD Launches New Ryzen Series to Address Trending Markets

Advanced Micro Devices (AMD) is launching its latest Ryzen processors to expand its product portfolio to address new and trending markets. Advanced Micro Devices AMD has announced the launch of its latest Ryzen Embedded R-Series system-on-chips processors to expand its product portfolio to address new and trending markets.The new Ryzen processor is specifically designed to address solutions for industrial and robotics systems, machine vision, IoT and thin-client equipment. Ryzen Embedded R2000 series doubles the core count and uplifts performance compared to prior models, with upto 81 percent higher CPU and graphics performance.The company is constantly improving the performance of its Ryzen processors to help address the rising demand for the same, courtesy of the increasing proliferation of AI and Machine Learning (ML) in industries like cloud, gaming and data center.This has impacted AMD's first-quarter 2022 revenues positively and is expected to aid its 2022 top-line growth.Advanced Micro Devices, Inc. Price and Consensus Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. QuoteAMD Product Portfolio to Help Boost Stock PricesShares of AMD have lost 41.8% compared with the Zacks Electronics - Semiconductors industry’s and the Zacks Computer and Technology sector’s declines of 31.1% and 32.3%, respectively, in the year-to-date period.The recent fall in share prices can be attributed to global supply chain challenges in the semiconductor industry, the Russia-Ukraine war and rising inflation that skyrocketed AMD’s operating expenses by 62% in the first quarter of 2022.Negative sentiments among investors about the overall tech industry amidst macro-economic turmoil are reflected by the downfall of the tech-heavy NASDAQ index, which pulled down AMD prices.Further, as AMD ventures into new markets, the company is facing rising competition from the likes of NVIDIA NVDA.NVIDIA is giving AMD tough competition in the high-performance computing (“HPC”) market. NVIDIA’s superchips have been benefiting from the rapid proliferation of AI while the company is expanding its base in untapped markets like climate science, energy research, space exploration and digital biology.However, in order to address the rising inflation, the Federal Reserve has announced the biggest interest rate hike in the last 28 years. The Fed expects this move to curtail spending and rekindle traders’ interest to go long, specifically in cyclical sectors like technology.AMD is expected to benefit from this due to its plans to address new markets, accelerate data center growth, and enter the AI and AR spaces with its launch of various new products.AMD’s strategic acquisitions of Xilinx and Pensando will help the company address its expansion in uncharted AR space and data center business with its collaborated products.The recent acquisition of Xilinx has helped AMD collaborate with Meta Platforms META to enter the metaverse.AMD has become Meta’s ecosystem partner and AMD’s radio chip, Xilinx Zynq UltraScale RFSoC, will be utilized to develop a metaverse-ready radio access unit.Also, the company is looking to capture a significant share of the $300-billion market of high-performance and adaptive products.AMD is leading its peers in HPC by forming strategic partnerships to build products that set the bar quite high.It is worth mentioning that AMD powers five of the top ten most powerful and eight of the top ten most energy-efficient supercomputers globally.Recently, AMD partnered with Hewlett Packard HPE and the U.S. Department of Energy’s Oak Ridge National Laboratory to build the world’s fastest and most energy-efficient supercomputer — Frontier.The company’s strong product portfolio and the strategy to enter new and emerging markets like HPC and the metaverse will aid its revenue growth. Its strategy will impact the stock prices positively and generate positive returns in the long run.AMD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 22nd, 2022

How Do Shareholders View Shell"s (SHEL) Climate Goals?

Shell (SHEL), like its peers, is under increasing pressure from activists and investors surrounding climate change and the commitment to reduce emissions. At its Annual General Meeting in London, Shell plc SHEL shareholders voted in favor of the company’s energy transition strategy but in lower numbers. The supermajor, which has set itself a target of becoming a net-zero greenhouse gas emissions business by 2050, received 80% support for its climate policy, down from 89% in 2021 when the plan was first unveiled.At the same time, a resolution filed by activist group Follow This, which demands the company's targets to be more stringent and in line with the Paris Agreement, got 20% votes — a sharp decrease from last year, when a similar motion won 30% support. As per the investor advocacy group, Shell’s intermediate targets are linked to emissions’ intensity that might actually allow the firm to advance its fossil fuel output.   Shell, like its peers, is under increasing pressure from activists and investors surrounding climate change and the commitment to reduce emissions. Holding management publicly accountable for their lack of progress on meeting targets to cut emissions, this year’s annual meeting was disrupted by climate activists for almost three hours, with campaigners chanting and shouting against the company’s continued exploration for oil and natural gas.Even last week, investment fund and Shell stakeholder Odey Asset Management called on Europe’s largest oil company to retract its appeal against a landmark 2021 Dutch court ruling to cut its emissions quicker and lower its absolute emissions by 45% by 2030. Meanwhile, Shell is sticking to its mid-century net-zero target.According to the London-based multinational, it has lowered emissions from operations by 18% between 2016 and 2021, with a pledge to extend it to 50% by 2030. Shell also claims to have reduced the net carbon intensity of its marketable product portfolio by 2.5% by the end of 2021 compared with 2016, ultimately targeting a 9-12% reduction by 2024.Shell is one of the primary oil supermajors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. The company is fully integrated, meaning it participates in every aspect related to energy – from oil production to refining and marketing.Zacks Rank & Key PicksShell currently carries a Zacks Rank #3 (Hold).Some better-ranked players in the energy space include Equinor ASA EQNR, Canadian Natural Resources CNQ and Marathon Oil MRO. each carrying a Zacks Rank #1 (Strong Buy), currently.You can see the complete list of today’s Zacks #1 Rank stocks here.Equinor: Equinor is valued at some $120 billion. The Zacks Consensus Estimate for EQNR’s 2022 earnings has been revised 51.9% upward over the past 60 days.Equinor, headquartered in Stavanger, Norway, delivered a 1.9% beat in Q1. EQNR shares have surged around 74.5% in a year.Canadian Natural Resources: CNQ beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 17.6%, on average.Canadian Natural is valued at around $75.1 billion. CNQ has seen its shares gain around 95.2% in a year.Marathon Oil: Marathon Oil is valued at some $20.5 billion. The Zacks Consensus Estimate for MRO’s 2022 earnings has been revised 52.9% upward over the past 60 days.Marathon Oil, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 23%, on average. MRO shares have gained around 151.3% in a year. Just Released: The Biggest Tech IPOs of 2022 For a limited time, Zacks is revealing the most anticipated tech IPOs expected to launch this year. Concerns about Federal interest rates and inflation caused many private companies to stay on the bench- leading to companies with better brand recognition and higher growth rates getting into the game. With the strength of our economy and record amounts of cash flooding into IPOs, you don’t want to miss this opportunity. See the complete list today.>>See Zacks Hottest IPOs NowWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marathon Oil Corporation (MRO): Free Stock Analysis Report Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report Equinor ASA (EQNR): Free Stock Analysis Report Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 27th, 2022

Futures Slide As Snap Forecast Steamrolls Rebound Optimism

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

Category: blogSource: zerohedgeMay 24th, 2022

Key Events This Week: Global PMIs, US Durables and PCE

Key Events This Week: Global PMIs, US Durables and PCE It is a relatively quiet week, and the biggest highlight for investors following the growth concerns that have roiled markets of late will be the global preliminary PMIs for May tomorrow. Central banks will also remain in focus as we will get the latest FOMC meeting minutes (Wednesday) and the US April PCE, the Fed's preferred inflation proxy, on Friday. An array of global industrial activity data will be another theme to watch. Consumer sentiment will be in focus too, with a number of confidence measures from Europe and personal income and spending data from the US (Friday). Corporates reporting results will include spending bellwethers Macy's and Costco. After last week’s retail earnings bloodbath (e.g. Walmart and Target) these will get added attention. On the Fed, the minutes may be a bit stale now but it’ll still be interesting to see the insight around the biases of 50bps vs 25/75bps hikes after the next couple of meetings. Thoughts on QT will also be devoured. Staying with the US, for the personal income and spending numbers on Friday, our US economists expect the two indicators to slow to +0.2% and +0.6% in April, respectively. The Fed’s preferred inflation gauge, the PCE, will be another important metric released the same day and DB’s economics team expects the April core reading to stay at +0.3%. Other US data will include April new home sales tomorrow and April durable goods orders on Wednesday. A number of manufacturing and business activity indicators are in store, too. Regional Fed indicators throughout the week will include an April gauge of national activity from the Chicago Fed (today) and May manufacturing indices from the Richmond Fed (tomorrow) and the Kansas City Fed (Thursday). In Europe, the May IFO business climate indicator for Germany will be out today, followed by a manufacturing confidence gauge for France (tomorrow) and Italy (Thursday). China's industrial profits are due on Friday. This week will also feature a number of important summits. Among them will be the World Economic Forum’s annual meeting in Davos that has now started and will run until next Thursday. It'll be the first in-person meeting since the pandemic began and geopolitics will likely be in focus. Meanwhile, President Biden will travel to Asia for the first time as US president and attend a Quad summit in Tokyo tomorrow. Details on the Indo-Pacific Economic Framework are expected. Finally, NATO Parliamentary Assembly’s 2022 Spring Session will be held in Vilnius from next Friday to May 30th. In corporate earnings, investors will be closely watching Macy's, Costco and Dollar General after this week's slump in Walmart and Target. Amid the carnage in tech, several companies that were propelled by the pandemic will be in focus too, with reporters including NVIDIA, Snowflake (Wednesday) and Zoom (today). Other notable corporates releasing earnings will be Lenovo, Alibaba, Baidu (Thursday) and XPeng (Monday). Source: Earnings Whispers Courtesy of DB, here is a day-by-day calendar of events Monday May 23 Data: US April Chicago Fed national activity index, Germany May IFO business climate Central banks: Fed's Bostic speaks, ECB's Holzmann, Nagel and Villeroy speak, BoE's Bailey speaks Earnings: XPeng, Zoom Tuesday May 24 Data: May PMIs for the US, Japan, UK, France, Germany and the Eurozone, US May Richmond Fed manufacturing index, April new home sales, Japan April nationwide, Tokyo department sales, UK April public finances, France May manufacturing confidence Central banks: Fed's George speaks, ECB's Villeroy speaks Earnings: Best Buy, Intuit Other: Quad summit in Tokyo Wednesday May 25 Data: US April durable, capital goods orders, Germany June GfK consumer confidence, Q1 private consumption, government spending, capital investment, France May consumer confidence Central banks: Fed FOMC meeting minutes, ECB's Lagarde, Rehn, Panetta and Holzmann speak, BoJ's Kuroda speaks, ECB's Finance Stability Review Earnings: NVIDIA, Snowflake Thursday May 26 Data: US May Kansas City Fed manufacturing activity index, April pending home sales, initial jobless claims, Japan April services PPI, Italy May consumer, manufacturing, economic confidence, March industrial sales, Canada May CFIB business barometer, March payroll employment change, retail sales Earnings: Royal Bank of Canada, Dollar General, Lenovo, Alibaba, Baidu, Macy's, Dollar Tree, Costco, Marvell, Autodesk Friday May 27 Data: US April advance goods trade balance, April wholesale inventories, personal income, personal spending, PCE deflator, China April industrial profits, Japan May Tokyo CPI, Eurozone April M3 Central banks: ECB's Lane speaks Earnings: Pinduoduo Other: NATO Parliamentary Assembly begins, until May 30th * * * Finally, looking at just the US, Goldman writes that the key economic data releases this week are the durable goods report on Wednesday, the Q1 GDP release on Thursday, and the core PCE inflation report on Friday. The minutes from the May FOMC meeting will be released on Wednesday. There are several scheduled speaking engagements by Fed officials this week, including remarks by Chair Powell on Tuesday and a speech by Vice Chair Brainard on Wednesday. Monday, May 23 There are no major economic data releases scheduled. 12:00 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will discuss the economic outlook at an event in Atlanta. Audience and media Q&A are expected. On May 10th, President Bostic argued that a 50bp pace of hiking is “the pace we need to stay at—getting 50bp increases, maybe for the next two or perhaps three meetings, and let’s just keep this moving to make sure that we’re doing all we can to get inflation under control,” while also stressing that he does not think “we need to be moving even more aggressively” than a 50bp pace. 07:30 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Fed President Esther George will give a speech at an agricultural symposium hosted by the Kansas City Fed. Audience Q&A is expected. On May 19th, President George noted that she was “very comfortable right now with 50 basis points,” and argued that “what’s more important [than estimates of the neutral rate] is at what point will we see inflation level out and begin to decelerate. That, I think, will tell us something about where we need to go with monetary policy.” Tuesday, May 24 09:45 AM S&P Global US manufacturing PMI, May preliminary (consensus 57.8, last 59.2); S&P Global US services PMI, May preliminary (consensus 55.3, last 55.6) 10:00 AM Richmond Fed manufacturing index, May (consensus 10, last 16) 10:00 AM New home sales, April (GS -2.0%, consensus -1.7%, last -8.6%): We estimate that new home sales declined 2.0% in April, following an 8.6% decline in March. 12:20 PM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will deliver welcoming remarks to the National Center for American Indian Enterprise Development 2022 Reservation Economic Summit. Text is expected. On May 17th, Chair Powell noted that “during the course of the [May FOMC] meeting it became clear that there was broad support in the committee for having on the table the idea of doing additional [50bp] rate increases … at each of the next two meetings.” Chair Powell noted that the Fed is looking to “have financial conditions tighten to the point where growth will moderate and still be positive, but moderate to the point where supply and demand can get back into alignment and where we can get inflation back down to 2%,” and stressed that “what we need to see is inflation coming down in a clear and convincing way and we're going to keep pushing until we see that.” Chair Powell argued that “there are a number of plausible paths to having a softish landing,” although he warned that “there could be some pain” as the Fed tightens monetary policy. Wednesday, May 25 08:30 AM Durable goods orders, April preliminary (GS -0.4%, consensus +0.6%, last +1.1%); Durable goods orders ex-transportation, April preliminary (GS +0.4%, consensus +0.6%, last +1.4%); Core capital goods orders, April preliminary (GS +0.3%, consensus +0.5%, last +1.3%); Core capital goods shipments, April preliminary (GS +0.5%, consensus +0.5%, last +0.4%): We estimate that durable goods orders declined 0.4% in the preliminary April report, following a 1.1% increase in March. Our forecast reflects lower commercial aircraft orders and a possible slowdown in new orders of core capex equipment. 12:15 PM Fed Vice Chair Brainard (FOMC voter) speaks: Fed Vice Chair Lael Brainard will deliver remarks at the Johns Hopkins University School of Advance International Studies 2022 commencement ceremony in Washington. Text is expected. On April 12th, Vice Chair Brainard said that she expects “the combined effect of moving the policy rate to a more neutral level and commencing balance sheet reduction to have the effect of bringing inflation down, seeing some moderation in demand while the supply side catches up.” Vice Chair Brainard also noted that “core goods, which has been the source of an outsized amount of core inflationary pressure, moderated more than I had anticipated. It’s very welcome to see the moderation in this category. And I will be looking to see whether we continue to see moderation in the months ahead.” 02:00 PM FOMC meeting minutes, May 3-4 meeting: The FOMC increased the federal funds rate by 50bp at its May meeting. Chair Powell said that further 50bp increases in the funds rate should be on the table at the next couple of meetings, but that a “75bp increase is not something the committee is actively considering.” We expect the FOMC to deliver two additional 50bp hikes in June and July, and to hike by 25bp at its remaining meetings this year. The FOMC also announced the start of balance sheet runoff at the May meeting, with peak caps of $60bn for Treasury securities and $35bn for mortgage-backed securities. We expect that UST runoff will always hit its cap until the balance sheet reaches its terminal size, but MBS runoff will never hit its cap, especially following the very sharp recent rise in mortgage rates. Thursday, May 26 08:30 AM GDP, Q1 second (GS -1.7%, consensus -1.3%, last -1.4%); Personal consumption, Q1 second (GS +2.0%, consensus +2.9%, last +2.7%): We estimate a three-tenths downward revision to Q1 GDP growth to -1.7% (qoq ar) following Friday’s weaker-than-expected Quarterly Services Survey (QSS). Our forecast assumes downward revisions to consumption related to Omicron, partially offset by upward revisions to intellectual property investment and inventories. 08:30 AM Initial jobless claims, week ended May 21 (GS 218k, consensus 210k, last 218k); Continuing jobless claims, week ended May 14 (consensus 1,310k, last 1,317k): We estimate initial jobless claims were unchanged at 218k in the week ended May 21. 10:00 AM Pending home sales, April (GS -2.3%, consensus -2.0%, last -1.2%): We estimate that pending home sales declined 2.3% in April, following a 1.2% decline in March. 11:00 AM Kansas City Fed manufacturing index, May (consensus 18, last 25) Friday, May 27 08:30 AM Personal income, April (GS +0.6%, consensus +0.5%, last +0.5%); Personal spending, April (GS +1.1%, consensus +0.7%, last +1.1%); PCE price index, April (GS +0.14%, consensus +0.2%, last +0.87%); PCE price index (yoy), April (GS +6.13%, consensus +6.2%, last +6.59%); Core PCE price index, April (GS +0.21%, consensus +0.3%, last +0.29%); Core PCE price index (yoy), April (GS +4.75%, consensus +4.9%, last +5.18%): Based on details in the PPI, CPI, and import prices reports, we estimate that the core PCE price index rose by 0.20% month-over-month in April, corresponding to a 4.75% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.14% in April, corresponding to a +6.13% increase from a year earlier. We expect that personal income increased by 0.6% and personal spending increased by 1.1% in April. 08:30 AM Advance goods trade balance, April (GS -$114.0, consensus -$114.7bn, last -$127.1bn): We estimate that the goods trade deficit decreased by $13.1 to $114.0 in April compared to the final March report, reflecting a decrease in imports. 08:30 AM Wholesale inventories, April preliminary (consensus +1.9%, last +2.3%): Retail inventories, April (consensus +2.0%, last +2.0%) 10:00 AM University of Michigan consumer sentiment, April final (GS 58.1, consensus 59.1, last 59.1): We expect the University of Michigan consumer sentiment index decreased by 1.0pt to 58.1 in the final May reading. d   Tyler Durden Mon, 05/23/2022 - 10:25.....»»

Category: worldSource: nytMay 23rd, 2022

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

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

Category: blogSource: zerohedgeMay 23rd, 2022

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday The relentless rout that erased $3.4 trillion from the Nasdaq 100 in the past month paused on Turnaround Tuesday as battered tech valuations attracted scattered dip buyers, but nothing like the full-throttled BTFD buying parade observed in months gone by. Futures on the tech-heavy gauge advanced as much 1.4% as bargain hunters returned after the Nasdaq 100 slumped to the lowest since November 2020 on Monday, capping three days of major losses. S&P 500 futures were 0.7% higher to 4,016 after rising as much as 1.2% earlier but also after plunging to as low as 3,961. After rising as high as 3.20% on Monday, 10-year Treasury yields dropped for a second day, sliding below 3.0% and providing further relief to technology shares. The dollar erased a loss and Treasuries edged higher, signaling the return of some haven demand amid nervousness over the path of Federal Reserve policy. European bonds rallied. The Nasdaq’s 14-day relative-strength index (RSI) closed at 33 on Monday, getting closer to the level of 30, which to some analysts indicates a security is oversold and is poised to rise. Another sharp selloff “seems unlikely without an external trigger,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “Nevertheless, as long as the problems persist, we do not expect a big recovery and have used the relief rally to move our equity exposure to neutral.” Indeed, traders have been caught between stubbornly high inflation that erodes asset values and central-bank tightening that threatens to slow economic growth, or even push some nations into recession. Recent U.S. data suggesting the Federal Reserve will stay on an aggressive rate-hike path have sparked the latest bout of risk-off trades. Fresh outbreaks of Covid in China, and the nation’s stringent measures to control them, have worsened sentiment. “For now, investors need to be prepared for continued volatility,” Solita Marcelli, Americas chief investment officer at UBS Global Wealth Management, wrote in a note. She added “sentiment is bearish” but not capitulating. In premarket trading, electric vehicle makers are up, with Tesla, Rivian and Lucid set to rebound after losing $188 billion in three days. AMC Entertainment is 6.4% higher after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Bank stocks edge higher in premarket trading amid a broader rebound for equity markets after Monday’s rout. S&P 500 futures are up about 0.8% this morning, while the U.S. 10-year yield retreats for a second day to sit at roughly 3%. In corporate news, BlackRock said it won’t support efforts by shareholders who try to micromanage companies on climate change. Meanwhile, Bitcoin rebounded back above $30,000 after briefly sinking below the closely watched level. Here are some of the biggest U.S. movers today: Most large cap U.S. technology and internet stocks rose in premarket trading, on course to recoup some of the heavy losses they suffered in a steep selloff over the last three sessions. Apple (AAPL US) is up 1.2%, Microsoft (MSFT US) +1.2% and Meta (FB US) +2.8%. AMC Entertainment (AMC US) is up 3.8% in premarket trading after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Electric vehicle makers Tesla (TSLA US), Rivian (RIVN US) and Lucid (LCID US) are rebounding after losing $188 billion in three days of heavy selling in technology and growth stocks. Shockwave Medical (SWAV US) may move after it raised its revenue guidance for the full year, with analysts saying that the company’s performance was boosted by its coronary business. Shares rose 11% in extended trading on Monday. Upstart Holdings (UPST US) shares plunge 48% in premarket trading after the cloud-based artificial intelligence lending platform cut full- year revenue guidance on macro uncertainties. Piper Sandler cut the stock to neutral. Novavax (NVAX US) is down 21% premarket, with analysts saying that the biotech firm’s revenue for the first quarter missed expectations. Plug Power (PLUG US) shares are 5.6% lower premarket after the fuel cell company reported net revenue for the first quarter that missed the average analyst estimate, with KeyBanc noting pressure on margins and higher costs. Video game stocks may move after Sony’s earnings fell short of estimates amid supply constraints and component shortages. Watch shares in Activision Blizzard (ATVI US), Electronic Arts (EA US) and Take-Two Interactive (TTWO US). U.S. stocks and particularly the Nasdaq 100 have been crushed this year (amid a tireless tirade from JPM's Marko Kolanovic to buy each and every dip) as investors fret over recession risks from the Federal Reserve embarking on aggressive monetary tightening amid surging inflation. Higher interest rates mean a bigger discount for the present value of future profits, hurting growth and in particular tech stocks with the highest valuations.  European stocks trade well, with most cash indexes gaining over 1% to recover roughly half of Monday’s losses when the index slumped to its lowest level in two months. Euro Stoxx 50 rose as much as 1.75%, FTSE MIB outperforms slightly, FTSE 100 lags but still adds 1%. Construction, banks and autos lead broad-based Stoxx 600 sectoral gains. The Stoxx 600 energy sub-index edges lower, being one of the worst-performing sectors in a rising broader market for European stocks, as oil keeps falling. Shell declines as much as 1.5%, TotalEnergies SE -1.6%, Equinor -4.5%. Here are some of the biggest European movers today: Luxury stocks such as Kering (+0.5%) and Watches of Switzerland (+4.2%) rebounded after the declines of the previous sessions, with investors hopeful that the Covid-19 situation in the key market of China may be slightly improving. Hermes rises as much as +1.6%, LVMH +2.4% Airbus gains as much as 3.7% in Paris trading after being raised to buy from hold at Societe Generale, with the broker highlighting the planned production ramp-up of the “highly profitable” A320 family. Swedish Match rises as much as 28% after Philip Morris International said it’s in talks to buy the company. While a deal would make strategic sense, a counter-bid can’t be ruled out, analysts said. Centrica climbs as much as 6.5%, the most since Feb. 25, after the company guided adjusted earnings per share to be at the top end of the consensus range. Euroapi soars as much as 9.5% after the Sanofi spinoff is initiated with a buy recommendation and EU20 price target at Deutsche Bank, which sees “good value” and an attractive business. E-commerce stocks rise in Europe, with many outperforming the benchmark Stoxx 600 Index, buoyed by dip buyers returning to growth and technology shares that have been battered this year. Zalando up as much as 4.9%, Home24 +12%, Moonpig +3.6% Earlier in the session, Asian stocks extended their decline to a seventh day as the specter of rapid credit tightening in the U.S. and protracted lockdowns in Chinese cities prompted some investors around the region to reduce holdings of riskier assets.  The MSCI Asia Pacific Index fell as much as 2.1% to its lowest level since July 2020, weighed down tech shares after a three-day selloff in the Nasdaq 100. Hong Kong’s Hang Seng Index ended 1.8% lower as the market reopened after a holiday, though benchmarks in mainland China rebounded from early-trading lows on hopes for easier monetary conditions. MSCI Asia Pacific Index down 0.7% Japan’s Topix index down 0.9%; Nikkei 225 down 0.6% Hong Kong’s Hang Seng Index down 1.8%; Hang Seng China Enterprises down 2.2%; Shanghai Composite up 1.1%; CSI 300 up 1.1% Taiwan’s Taiex index up 0.1% South Korea’s Kospi index down 0.5%; Kospi 200 down 0.5% Australia’s S&P/ASX 200 down 1%; New Zealand’s S&P/NZX 50 down 1.3% India’s S&P BSE Sensex Index down 0.2%; NSE Nifty 50 down 0.4% “There’s nowhere to escape so it’s pretty tough,” said Yuya Fukue, a trader at Rheos Capital Works. “Economic data appears to be deteriorating of late, though that has seemed to have gone little noticed while the markets were so focused on the Fed’s policy. It feels as if the game is changing.” Among Chinese tech giants, Alibaba tumbled 4.8% in Hong Kong, while Tencent dropped 2.3%. Regional declines were broad, with investors dumping even this year’s star energy shares as oil prices eased.  Singapore’s Straits Times Index and Australia’s S&P/ASX 200 both dropped about 1%. The Philippine benchmark ended 0.6% lower, recovering after skidding more than 3%, after Ferdinand Marcos Jr. won a landslide victory in the country’s presidential election. Mainland Chinese shares closed higher after the People’s Bank of China repeated a pledge to proactively address mounting economic pressure and highlighted a drop in deposit rates, which could spur banks to lower the cost of borrowing for the first time in months. “The market was a bit oversold. In addition, PBOC is also mentioning a drop in deposit rates, raising expectations of more room for banks to increase lending,” said Aw Hsi Lien, a strategist at Tokai Tokyo Research. India’s benchmark equity index slipped to a two-month low amid a weaker trend in Asia as surging oil prices and inflationary pressures weighed on investor sentiment. The S&P BSE Sensex fell 0.2% to 54,364.85 in Mumbai, after swinging between gains and losses several times during the session. The NSE Nifty 50 Index slipped 0.4% to 16,240.05. This is the third consecutive session of declines for the key indexes.  Sixteen of the 19 sector sub-indexes compiled by BSE Ltd. dropped, led by metal stocks. Reliance Industries Ltd. slipped 1.7% to a seven-week low and was the biggest drag on the Sensex, which saw 18 out of its 30 member-stocks trading lower.   In earnings, among the 27 Nifty 50 companies that have announced results so far, 10 have missed estimates while 17 either exceeded or met forecasts.  In FX, the Bloomberg Dollar Spot Index fell 0.1% after climbing to a two-year high on Monday, and the greenback was steady or weaker against all of its Group-of-10 peers. The euro consolidated and the region’s yields fell as Italian bonds led an advance. The pound was steady against both the dollar and euro while gilts outperformed peers. Domestic focus is on the Queen’s speech laying out the government’s agenda for the next parliamentary session and Brexit risks after reports the U.K. is preparing to scrap parts of the Northern Ireland protocol. U.K. retail sales are falling on an annual basis for the first time since the start of last year as the cost of living crisis crushes consumer confidence and puts the brakes on spending. Scandinavian currencies led gains among G-10 pairs after both currencies fell to the weakest level in around two years versus the dollar on Monday. The Australian and New Zealand dollars also bounced off two-year lows as stock indexes trimmed an intraday decline. Aussie’s gains were tempered as iron ore fell for a third day to bring the three-day slide to about 15%. The yen edged lower as Treasury yields recovered from a sharp overnight drop. Bonds pared earlier gain after the 10-year debt sale. Bank of Japan Executive Director Shinichi Uchida says that widening the central bank’s yield target band would be equivalent to a rate hike and wouldn’t be favorable for Japan’s economy In rates, Treasuries rose in early U.S. trading with belly leading gains and the curve flattening modestly after Monday’s bull-steepening. Yields are richer by ~4bp across in belly of the curve, steepening 5s30s spread by ~3bp as long-end yields lag; 10-year trading just around 3%, richer by ~3bp on the day, trailing gilts by ~7bp in the sector. Core European rates outperform led by gilts while stocks and U.S. futures recover a portion of Monday’s steep losses. Bunds bull-flatten, while peripheral spreads tightened to Germany with short-dated BTPs outperforming. Treasury auction cycle begins with 3-year note sale, and several Fed speakers are slated. U.S. new-issue auction cycle consists of $45b 3-year note, followed by 10- and 30-year sales Wednesday and Thursday. WI 3-year yield ~2.800% is higher than auction stops since 2018 and ~6bp cheaper than last month’s, which stopped through by 0.1bp. Three-month dollar Libor +0.13bp at 1.39986% In commodities, crude futures are choppy, WTI dips back into the red having stalled near $104. Spot gold rises ~$9 near $1,863/oz. Much of the base metals complex trades poorly. LME copper outperforms, holding in the green but off best levels after a test of $9,400/MT. Bitcoin reclaimed the $31K handle, but is yet to make a concerted move higher. Looking ahead, we get the April NFIB Small Business Optimism print (93.2, Exp. 92.9), Chinese M2, Speeches from Fed's Williams, Waller, Bostic, Barkin, Kashkari, Mester, ECB's de Guindos & BoE's Saunders, Supply from the US. Earnings from Norwegian Cruise Line & Warner Music. Biden speaks on soaring inflation at 11am EDT. Biden will also meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Of course, the big event is tomorrow morning when the US CPI print comes. Market Snapshot S&P 500 futures up 1.1% to 4,031.75 STOXX Europe 600 up 1.2% to 422.32 MXAP down 0.8% to 159.98 MXAPJ down 0.8% to 523.71 Nikkei down 0.6% to 26,167.10 Topix down 0.9% to 1,862.38 Hang Seng Index down 1.8% to 19,633.69 Shanghai Composite up 1.1% to 3,035.84 Sensex up 0.4% to 54,674.30 Australia S&P/ASX 200 down 1.0% to 7,051.16 Kospi down 0.5% to 2,596.56 German 10Y yield little changed at 1.07% Euro little changed at $1.0564 Brent Futures up 0.8% to $106.83/bbl Gold spot up 0.5% to $1,862.69 U.S. Dollar Index little changed at 103.65 Top Overnight News from Bloomberg The EU is considering the issuance of joint debt to finance Ukraine’s long-term reconstruction, which may end up costing hundreds of billions of euros, according to an EU official familiar with the plan China’s provinces are set to sell a historic amount of new special bonds by the end of June as part of an infrastructure investment push intended to rescue an economy stymied by Covid outbreaks and lockdowns Hungarian Prime Minister Viktor Orban’s talks with the head of the EU about proposed sanctions on Russian oil imports made progress, but failed to reach a breakthrough, according to both sides Investor confidence in Germany’s pandemic rebound improved, but remained deeply negative as the war in Ukraine darkens the outlook for Europe’s largest economy. The ZEW institute’s gauge of expectations rose to -34.3 in May from -41 the previous month, defying expectations for a third straight deterioration. An index of current conditions worsened Saudi Arabia’s oil minister warned that spare capacity is decreasing in all sectors of the energy market, as prices of products from crude to diesel and natural gas trade at or near multi-year highs in the wake of Russia’s invasion of Ukraine A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly negative after the resumed sell-off on Wall St where the S&P 500 slipped beneath the 4,000 level for the first time since March 2021. ASX 200 briefly gave up the 7,000 status with notable underperformance in the energy and mining-related sectors. Nikkei 225 slumped from the open although moved off its lows as participants digested stronger than expected Household Spending data and after BoJ's Uchida dismissed the prospects of a tweak to the BoJ’s 50bps yield target band. Hang Seng and Shanghai Comp both initially joined in on the selling with heavy losses in the tech sector contributing to the underperformance in Hong Kong on return from the extended weekend, although the downside in the mainland was later reversed after the recent policy support efforts by China’s MIIT and CBIRC. Top Asian News China Tech Stocks Slide as Growth Woes, Global Rout Grip Traders Investor’s Guide to the 2022 Philippine Presidential Election ArcelorMittal Evaluating Bidding for ACC, Ambuja: ET Now Philippine Stocks Fall as Traders Weigh Marcos Win, Global Rout European equities feel some reprieve following the prior session’s selloff; Euro Stoxx 50 +1.2%. Relatively broad-based gains are seen across the majors with some mild underperformance in the FTSE 100. Sectors show some of the more defensive sectors at the bottom of the bunch – alongside energy – whilst Construction, Autos, Banks, and Industrial Goods reside as the current winners. US equity futures are firmer across the board, ES +1.0%, with the NQ narrowly outpacing peers after underperforming yesterday. Top European News Russian Gas Flows to Europe Remain Steady on Key Links Highest Inflation in Three Decades Boosts Czech Rate Hike Case BPER Banca Soars After Earnings Beat, With Fees as Highlight Russia’s Economy Facing Worst Contraction Since 1994 FX The Dollar retains a firm underlying bid ahead of another slew of Fed speakers; risk sentiment remains fluid and fragile. The Swiss Franc has hit a fresh 2022 peak vs the Greenback; USD/JPY is consolidating around 130.00. EUR/USD was unfazed by mixed German ZEW data but later lost ground under 1.0550. Cable rotates either side of 1.2350 awaiting Brexit/N. Ireland news, further political fallout and more comments from BoE hawk Saunders. Crude and commodity FX have gleaned a degree of traction from partial recoveries or stabilisation in underlying prices. CBRT and regulator have asked banks to undertake FX transactions with corporate clients between 10:00-16:00, when the market is liquid, via Reuters citing bankers. Fixed Income Core benchmarks bounce further after a brief breather early on, with little in way of fresh fundamentals behind the upside. Initial highs were faded pre-UK/German issuance; once this cleared, Bunds and Gilts lifted to 152.50+ and 119.00+ peaks. Stateside, USTs are bolstered but far from best, with the curve re-flattening into today's 3yr sale and yet more Fed speak. Commodities Crude futures have come under renewed pressure in recent trade after seeing some gains in the European morning.   The initial downside coincided with the mixed Germany ZEW reports alongside the downbeat commentary from Hungary regarding an imminent oil ban; albeit, benchmarks are off overnight USD 100.44/bbl and USD 103.19/bbl respective lows. Saudi Energy Minister says it is "mind-boggling" why focus is on high oil prices and not on gasoline, diesel or others. World needs to wake up to an existing reality that it is running out of energy capacity at all levels, via Reuters. UAE Energy Minister says oil prices could double or triple in "chaotic" market. US officials reportedly asked Brazil's Petrobras in March to boost output, but it the oil Co. said it could not, according to Reuters sources. China's Shenghong Petrochemical has started a trial operation at its (320k BPD) greenfield refining complex in east China, according to Reuters sources. Germany is said to be shifting away from plans for a strategic national coal reserve, according sources cited by Reuters. Spot gold holds onto mild gains as DXY pulled back from the fresh YTD highs set yesterday. LME futures post mild gains following yesterday’s downside with the market still looking somewhat fragile. DB's Jim Reid concludes the overnight wrap It's school photo day today. After discussing it with my kids last night I said to them that I'd dig out my old school photos so they could see me at school. Without hesitation and with a straight face Maisie said, "Are they in black and white Daddy?". I was half amused and half depressed. Markets are pretty black at the moment with little white on show. Actually the only bright colour is a sea of red. Indeed after a rocky few weeks in markets, there’s been a further rout over the last 24 hours as investor jitters about the global growth outlook have continued to escalate. There has been some respite in Asia but markets remain very shaky. There wasn’t really a single catalyst to yesterday’s steep declines, but ultimately there’s been a growing scepticism in markets as to whether the Fed and other central banks will actually be able to achieve a soft landing without a recession as they seek to bring down inflation. One interesting development though was that rates rallied as the equity slump intensified, rather than both selling off as has been the norm in recent weeks. Although the day lacked a single catalyst, the bond market moves seem to turn around the same time as Atlanta Fed President Bostic spoke. He picked up where Chair Powell left things after last week’s press conference. Bostic signaled that +50bp hikes were part of his core view, placing low odds on anything larger, stating +50bp hikes were “already a pretty aggressive move.” Like other Fed speakers, he signaled a desire to get policy to neutral and then assess. While he isn’t a voter this year, his voice does carry weight at the hawkish end of the committee so the price action likely reflected the market believing that a consensus continues to build for 50bps, and not 75bps, even among the hawks. Sovereign bonds were actually seeing a strong sell-off before his comments but rallied fairly fiercely from around the same time. 10yr Treasury yields hit an intraday high of 3.20% during the European morning (+7.5bps on the day) but ended up closing -9.3bps lower at 3.03%, showing that wide intraday ranges and volatility continue to grip the market. With the Fed continuing to put a perceived ceiling on the near-term pace of hikes, 2yr yields rallied -13.7bps on the day with the curve steepening another +5.3bps. The amount of Fed hikes priced in by the December meeting down by -15.5bps. As I type, 10yr US yields are fairly flat in Asia. The move echoed in Europe, where 10yr bunds rallied -3.5bps to 1.09%. The broader risk-off move meant that there was a further widening in spreads yesterday, with the gap between Italian 10yr BTPs over bunds widening by +4.9bps to 205bps, which is the widest they’ve been since May 2020. And that widening was seen on the credit side as well, where iTraxx Main moved above 100bps for the first time since April 2020 in trading, before falling back somewhat to settle at 98bps (+1.4bps). Against this backdrop, the S&P 500 fell by a sizeable -3.20% that takes the index to its lowest level in over a year. That comes on the backs of 5 consecutive weekly losses, which is already the longest run in over a decade, and given the performance yesterday it would take a strong comeback over the remaining four days this week to avoid that run extending to 6 weeks. See my Chart of the Day yesterday (link here) for more on how rare it has been to see an 11 year run without a 5 successive weekly decline. Energy was the worst performing US sector, falling an astonishing -8.30%, in its worst one-day performance since June 2020, after the fall in oil (more below). The sector is still by far the best performing S&P sector YTD, up +36.79%, with every other sector in the red. Despite the rate rally, it was a bad day for mega-cap and other growth tech stocks. Indeed, the NASDAQ fell a further -4.29% to its lowest level since November 2020, whilst the FANG+ index of 10 megacap tech stocks fell an even larger -5.48%. For reference, that now takes the FANG+ index’s decline since its all-time high in November to a massive -38.22%. Even a high quality component like Amazon is now down -35.75% since March 29th and is pretty much back to pre-covid levels. Over the other side of the pond, Europe saw some sizeable declines as well, with the STOXX 600 down -2.90% to leave the index not far away from its recent lows in early March. With the Fed set to continue their hiking cycle, just as the ECB are still pondering on when to even start hikes and China’s growth prospects are fading, the US dollar has continued to benefit. Yesterday, the Japanese Yen (+0.21% vs USD) was the top-performing G10 currency, in line with its traditional status as a safe haven, but Bitcoin continued to lose ground, falling to its lowest level since July last year, after falling to $31,562. It briefly fell below 30k this morning. It's been interesting that Bitcoin is not getting much mention with all the inflationary issues seen in recent months. It seems to be suffering from a higher dollar, higher real yields and a tech related sell-off. Markets continue to fall in Asia but US futures are up. Hang Seng (-3.06%) is the largest underperformer, but is paring its losses after falling more than -4% as the market returned after a holiday with the Chinese listed tech firms among the worst hit. Elsewhere, the Nikkei (-0.93%) and Kospi (-0.95%) are down. Meanwhile, mainland Chinese stocks are trading in positive territory with the Shanghai Composite (+0.17%) and CSI (+0.15%) somewhat recovering from opening losses. Looking ahead, S&P 500 (+0.56%), NASDAQ 100 (+0.92%) and DAX (+0.25%) futures are moving higher. Early morning data showed that Japan’s household spending declined -2.3% y/y in March, its first drop in three months albeit the fall was less than -3.3% estimated by Bloomberg and followed +1.1% growth in February. Back to inflation and one potentially problematic indicator came from the New York Fed’s latest consumer survey, which found that median inflation expectations for 3 years ahead rose to +3.9%, which is the highest since December, and up from +3.5% back in January. It’s still not as high as the +4.2% readings back in September and October, but will obviously be unwelcome news to the Fed whose path to a soft landing is in part reliant on inflation expectations remaining well anchored around target. Turning to the situation in Ukraine, a key risk event yesterday had been Russia’s Victory Day parade, where it was speculated that President Putin would move towards a general mobilisation. However, in reality it finished with surprisingly little news, and whilst not showing a path towards de-escalation, didn’t move to escalate things further. Separately, it was reported by Bloomberg that the EU would soften its proposed sanctions package on Russian oil exports, with an article saying that they would drop the proposal to ban EU-owned vessels transporting Russian oil to third countries. The sanctions package has already come under criticism from some member states, and the article said that Hungary and Slovakia had been offered a longer time period lasting until end-2024 to comply with the proposals to ban Russian oil imports, with Hungary in particular saying more talks were needed to support oil-related sanctions. So with no further escalation and a softening in sanctions, oil prices fell back significantly amidst weak risk appetite more generally. Brent crude was down -5.74%, whilst WTI fell -6.09%, which follows 2 consecutive weekly gains for both. This morning oil prices are again lower with Brent and WTI futures -1.74% and -1.68% lower respectively. To the day ahead now, and central bank speakers include the Fed’s Williams, Barkin, Waller, Kashkari and Mester, along with ECB Vice President de Guindos and Bundesbank President Nagel. Data releases include Italy’s industrial production for March and Germany’s ZEW survey for May. Finally on the political side, President Biden will meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Tyler Durden Tue, 05/10/2022 - 07:57.....»»

Category: smallbizSource: nytMay 10th, 2022

Futures Slide Ahead Of Tech Earnings Deluge

Futures Slide Ahead Of Tech Earnings Deluge One day after stocks staged a remarkable rebound and closing well in the green after sliding as much as 1.5% (ostensibly after getting a boost from the latest bout of bearishness from Dennis Gartman), index futures are trading lower again despite another attempt by China's central bank to reassure investors overnight that China's sliding risk assets will rebound, with investors once again preoccupied by risks from aggressive monetary tightening. S&P500 futures contracts were 0.4% not too far off the worst levels ahead of a busy session of earnings releases including Google, Microsoft and Google; Nasdaq 100 futures declined 0.3%. Treasuries were steady and the dollar gained. “Markets in general are preoccupied by the prospect of tighter monetary policy conditions from global central banks to stem rising prices,” said Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management. “Indeed, while the Federal Reserve and the ECB both stepped up their inflation-fighting rhetoric, they failed to prevent market-based inflation expectations from moving higher.” Twitter extended gains in premarket trading after Elon Musk agreed to buy the social media company for $44 billion. Its shares are still trading below the offer price of $54.20 per share. Analysts say Musk’s vision to reduce moderation to promote free speech could put the social media company’s advertising dollars at risk. Here are some of the other big U.S. movers today: Meme stock Cenntro Electric (CENN) drops as much as 15% in U.S. premarket trading, after the maker of commercial electric vehicles reported a net loss of $16.4 million for 2021. Redbox Entertainment (RDBX) shares rise 2.8% in U.S. premarket trading after the company disclosed after Monday’s close that CFO Kavita Sutha had resigned. O-I Glass (OI) “crushes” its first-quarter, according to Truist Securities, with the broker noting the glass bottle maker’s operating profit beat and a guidance hike. O-I shares were up 12% in postmarket trading. Venator Materials (VNTR) jumps as much as 27% in premarket trading Tuesday after the company reached an $85 million cash settlement with Tronox Holdings over a break fee from a failed chemical plant deal dating back to 2018. Nkarta (NKTX) shares slump 8% in U.S. premarket after launching a stock offering via Cowen, SVB, Evercore at a price of $15/share that represents 19.9% discount to last close. Universal Health’s (UHS) weaker-than-expected results and potential guidance downgrade were driven by labor headwinds, analysts say. Shares fell 12% in after-hours trading. Protagonist Therapeutics’ (PTGX) PN-943 drug candidate “still has legs to make it across the finish line,” despite the Phase 2 data showing that a 450 mg BID dose did not meet its primary endpoint. Shares fell 31% in postmarket trading. Barclays sees positive fundamentals for medical office building property category, expanding coverage with initiations on Healthcare Realty Trust (HR US) and Physicians Realty Trust (DOC) at overweight. Companies reporting earnings on Tuesday include Microsoft, Google parent Alphabet and Visa. European stocks traded well, the Stoxx 600 Index 0.8% higher with energy and mining shares gaining as commodity prices rebounded. Euro Stoxx rises as much as 1.25%, roughly halving Monday’s decline. Miners and real estate lead broad sectoral gains. A third of Stoxx 600 companies will be updating on earnings and sales this week.  Asian stocks pared most of their early Tuesday advance as Chinese shares gave up gains spurred by a renewed central bank pledge to support the region’s biggest economy. The MSCI Asia Pacific Index was up 0.3% as of 5:38 p.m. in Hong Kong, versus an earlier rally of as much as 0.8%. China’s CSI 300 Index ended 0.8% lower as worries about a potential city-wide lockdown in Beijing weighed on sentiment. Still, a gauge of the nation’s tech stocks jumped almost 3% in Hong Kong on fresh policy promises to end a regulatory crackdown in the sector. Continued losses in Chinese equities have weighed on the Asian stock benchmark, which is headed for a fourth straight month of losses. China’s government expanded Covid-19 testing to most of Beijing, sparking fears about an unprecedented lockdown. Traders have said a change in the nation’s Covid-Zero strategy is the key to turning around sentiment.  “It would be difficult to see a quick improvement in sentiment” amid weak market fundamentals and fund flows, said Kim Kyung Hwan, a Chinese equity strategist at Hana Financial Investment in Seoul. “Market players are waiting for stronger measures, such as an interest-rate cut.” Elsewhere in Asia, stocks rose in India and South Korea while those in Australia slipped. Traders are also monitoring results releases in what is set to be the busiest week of the current earnings cycle in Asia. Japanese equities rose for the first time in three sessions, boosted by gains in telecoms. Service providers also lifted the Topix, which rose 0.1%. SoftBank Group and M3 Inc. were the largest contributors to a 0.4% rise in the Nikkei 225 Australian stocks fell the most in two months on the continued Materials selloff. The S&P/ASX 200 index fell 2.1%, the most since Feb. 24, to close at 7,318.00, as trading resumed after a three-day break. The materials and energy groups led declines following drops in commodities prices. EML Payments tumbled to the lowest level in two years after lowering its revenue and earnings forecasts for the full year. Nufarm was among the biggest gainers, rising to its highest level since September 2018 after issuing 1H guidance.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 11,813.18. Fixed income grinds higher with 10y bund and UST futures erasing Asia’s losses; the 10-year TSY is around 2.795% outperforming bunds by ~2.5bp, gilts by ~3.5bp. Treasuries are moderately richer across the curve, sharply outperforming bunds and gilts over the London session, although 10-year note futures remain inside Monday’s range. US yields are richer by 1bp-3bp across most of the curve with long-end lagging slightly, steepening 5s30s and 10s30s by ~2bp. Peripheral spreads widen to cover with long-end Portugal underperforming. Japan’s bond futures gained after the central bank said it will extend its unlimited debt buying operation by two more days. In FX, the Bloomberg Dollar Spot Index rose a fourth day, as the greenback advanced against most of its Group-of-10 peers. Treasury yields dropped 2-3 bps across the curve. The euro fell to touch $1.0673, the lowest level since March 2020. European bonds were little changed, underperforming U.S. Treasuries.  China’s yuan rose for the first time in six days after the nation’s central bank pledged to support the economy through targeted financing for small businesses, and a quick resolution of the ongoing crackdown on technology firms, in a bid to reassure investors nervous about growth and Covid lockdowns. Australian dollar climbed on leveraged buying as China’s policy-support pledge spurred a turnaround in the nation’s stock indexes and added to a bounce in oil and iron ore. The yen was set for its longest winning streak in almost a month.  The pound ticked lower against the dollar amid broad-based greenback strength and Gilts inched up, led by the short end. Prime Minister Boris Johnson will urge ministers to explore “innovative ways” to ease pressures on household finances on Tuesday In commodities, crude futures decline with WTI eventually finding support near $97. Spot gold posts small gains, Bitcoin holds a narrow range near $40,500. Binance has launched Binance Refugee Crypto Card for all current and new Binance users from Ukraine moving to EEA countries Looking at the day ahead, data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Market Snapshot S&P 500 futures down 0.3% to 4,281.50 STOXX Europe 600 up 0.8% to 448.67 MXAP up 0.2% to 166.28 MXAPJ up 0.3% to 546.79 Nikkei up 0.4% to 26,700.11 Topix up 0.1% to 1,878.51 Hang Seng Index up 0.3% to 19,934.71 Shanghai Composite down 1.4% to 2,886.43 Sensex up 1.0% to 57,161.33 Australia S&P/ASX 200 down 2.1% to 7,317.98 Kospi up 0.4% to 2,668.31 German 10Y yield little changed at 0.84% Euro down 0.2% to $1.0687 Brent Futures down 0.3% to $101.97/bbl Brent Futures down 0.3% to $101.97/bbl Gold spot up 0.3% to $1,902.86 U.S. Dollar Index up 0.13% to 101.89 Top overnight News from Bloomberg ECB Governing Council member Martins Kazaks says the central bank should raise interest rates soon and has room for as many as three hikes this year, Reuters reports The renewed pledge by Chinese authorities to boost the economy is being met with skepticism by stock traders worried about a potential city-wide lockdown in Beijing China’s central bank pledged to increase support for the economy, seeking to reassure investors as financial markets take a hammering from a worsening growth outlook and threats of widespread Covid lockdowns. China’s economy slowed rapidly in April as the costs of both a worsening Covid outbreak and the nation’s stringent approach to eliminating the virus took their toll. Oil held its decline below $100 a barrel as investors assessed the impact of China’s Covid-19 resurgence on the outlook for global demand. Base metals in London plunged on Monday, following sinking iron ore markets in Asia as investors fret over deteriorating demand outlook in China and higher interest rates in western economies. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly higher with bourses in the region encouraged after the rebound on Wall Street. ASX 200 bucked the trend as the prior day’s rout caught up with markets in Australia and New Zealand on return from the extended weekend, with miners pressured by tepid output from South32 and Woodside Petroleum. Nikkei 225 gained after a surprise decline in Unemployment and amid preparations for a relief package. Hang Seng and Shanghai Comp were lifted as strength in tech helped the former reclaim the 20k level and after further PBoC policy support pledges gradually offset the initial Beijing COVID-19 jitters in the mainland. Top Asian news BOJ Extends Unlimited Bond Buying Into Policy Meeting This Week China Tech Stocks Rebound as Beijing Renews Policy Support China Is Running Out of Ways to Stem Self-Made Market Meltdown Tencent-Backed Fintech Startup Airwallex Said to Seek New Funds European bourses feel some reprieve following the bout of selling seen in recent sessions and following Wall Street's afternoon bounce yesterday. Sectors are all in the green but to varying degrees – with Basic Resources rebounding with a vengeance after yesterday’s slide, albeit Energy has failed to hold onto early gains as the underlying commodity price wanes. Stateside, US equity futures trade relatively flat with a mild downside bias (ES -0.1%, NQ -0.1%, RYT -0.1%, YM -0.1%), trimming earlier losses. United Parcel Service Inc (UPS) Q1 2022 (USD): EPS 3.03 (exp. 2.88), Revenue 24.4bln (exp. 23.79bln), reaffirms guidance; doubles buy-back target to USD 2bln Top European News Germany to Send Anti-Aircraft Tanks to Ukraine in Policy Shift European Gas Prices Swing With Focus on LNG Imports, Russia Flow Gupta’s GFG Alliance Offices in Paris Raided by French Police Sunak Warns Future Generations at Risk From U.K. Debt Burden FX Dollar mixed as broad risk appetite returns after Monday’s flight to safety; USD down vs high betas, but up against most index components. Aussie and Kiwi refreshed following long holiday weekend and further rebound in Yuan on the back of China’s RRR reduction effective May 15 Euro and Pound flounder as DXY eyes 102.000 and conflict contagion weighs heavier in Europe relative to the US Yen continues to consolidate off multi year lows after a dip in Japan’s unemployment rate and Government rolls out fiscal relief measures Japanese PM Kishida said rapid FX moves are undesirable; no comment on specific JPY levels. Fixed Income Debt futures resume recovery rally or retracement from recent cycle lows with curves a tad flatter ahead of 2 year US auction    Bunds are just shy of Monday's 155.26 peak, Gilts back above 119.00 and 10 year T-note eyeing 120-00 BTPs hold firm following Italian issuance, irrespective marginally softer cover ratios UK debt lags after larger than forecast PSNB deficit and upwardly revised 2022/32 DMO remit UK DMO raises its 2022/23 Gilt issuance remit to GBP 131.5bln from GBP 124.7bln and sees GBP 7bln additional T-bill sales Commodities WTI and Brent June futures continue drifting lower as the crude complex continues to be dampened by China's COVID situation. Spot gold was pressured by the firmer Buck and fell to a current intraday low of USD 1,894/oz in early trade before finding a base and reclaiming a USD 1,900/oz handle   Base metals, meanwhile, are mostly firmer in what is seemingly a rebound following yesterday's downside. Shanghai Futures Exchange raises trading limits and margin requirements for steel rebar, wire rod, and hot rolled coils futures from settlement on April 28. US Event Calendar 08:30: March Durable Goods Orders, est. 1.0%, prior -2.1%; -Less Transportation, est. 0.6%, prior -0.6% 08:30: March Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.3%; Cap Goods Orders Nondef Ex Air, est. 0.5%, prior -0.2% 09:00: Feb. S&P CS Composite-20 YoY, est. 19.20%, prior 19.10% Feb. S&P/CS 20 City MoM SA, est. 1.50%, prior 1.79% 10:00: April Conf. Board Consumer Confidenc, est. 108.2, prior 107.2 Present Situation, prior 153.0; Expectations, prior 76.6 10:00: April Richmond Fed Index, est. 9, prior 13 10:00: March New Home Sales, est. 768,000, prior 772,000 March New Home Sales MoM, est. -0.6%, prior -2.0% DB's Jim Reid concludes the overnight wrap I'll admit to being a bit tired this morning as at 2am I got woken by loud constant shouts of "Daddy, Daddy". On bleary eyed investigation one of the twins wanted to know when we are next going to a water park. As we haven't discussed this or been to one since last summer this was a bit random. I said it was inappropriate to shout the house down at 2am to ask this. He then said "what's inappropriate mean". I angrily shut the conversation down which didn't help him or I get back to sleep very quickly. The market felt tired and worn down by the building risks yesterday and by the time Europe closed things were looking pretty bleak. However a late rally turned the S&P 500 from being -1.67% to closing +0.57%. The Nasdaq closed +1.29% and was rallying back even before Twitter agreed to sell the company to Elon Musk. Outside of that late story it was hard to find a narrative for the strong rebound. Tech stocks will stay front-and-center though as earnings progress this week, with Microsoft and Alphabet both set to report after the close tonight. It was much easier to find a narrative for the earlier sell-off as investors grappled with the continued Covid outbreak in China, further signs of inflationary pressures, and the prospect that the Fed and other central banks’ hiking cycles might push their economies into recession. As Europe closed the S&P was over -7% lower in April and on track to see the worst month since the pandemic rout of March 2020. Even with the rebound, the index is still more than -5% lower over April and still at risk of taking the ignominious title of worst monthly return since Covid if it dips below this January’s -5.26% return. Bonds also sold off with the US equity bounce back but unlike equities held on a large proportion of the days gains. 10yr Treasuries closed down -7.9bps to 2.82%, after being as much as -14bps lower intraday. That decline was driven by declining inflation expectations, as growth fears dominated. Given the global growth fear flavour of yesterday’s risk off, the 2s10s curve flattened -3.7bps to 18.8bps, as 2yr yields lagged the longer-maturity rally. The curve has maintained its level this morning but the yield reversal has continued with 2 and 10yr yields both back up around +3.5bps as we type. The dollar was another significant beneficiary yesterday, strengthening +0.53% to levels not seen since March 2020, and leaving it on track for its best monthly performance since January 2015. It's given up -0.18% of the gains so far this morning. As discussed, the biggest concern yesterday came from China, where the potential that there could be a lockdown in Beijing (in addition to the one already in Shanghai) saw the CSI 300 (-4.94%) fall to a 2-year low in yesterday’s session, marking the index’s worst daily performance since the original Covid-19 outbreak there in February 2020. This morning the index is +0.90% higher with the Shanghai Composite (+0.67%) also trading in positive territory after the PBOC reassured markets of their policy support for the economy. That comes as Beijing expanded its Covid testing to 11 further districts from today until April 30, with growing questions as to how the economy will perform against the backdrop of further lockdowns, particularly if the country continues its Zero Covid strategy. Other Chinese assets are also struggling, with the offshore Yuan weakening to its lowest levels against the US Dollar since 2020, though yesterday the People’s Bank of China said in a statement that they will lower banks’ FX reserve ratio from 9% to 8% beginning May 15. Overnight, the Yuan has witnessed a rebound, climbing +0.4% to 6.533 against the US dollar, snapping five days of losses. Elsewhere in Asia, equity markets are mostly trading higher with the Hang Seng (+1.81%) leading gains across the region in early trading amid a gain in tech stocks. Elsewhere, the Nikkei (+0.51%) is up following the release of upbeat jobs data. Data showed that Japan’s jobless rate unexpectedly dropped 0.1 percentage points to 2.6% in March while the Job-To-Applicant Ratio improved to +1.22 in March from +1.21, climbing for the third consecutive month. Meanwhile, the Kospi (+0.60%) is climbing after South Korea’s Q1 GDP data surprised on the upside. The nation’s GDP expanded +0.7% q/q, slowing from +1.2% a quarter earlier, but slightly faster than the +0.6% expected. Looking ahead, stock futures in the US are pointing to a positive start with contracts on the S&P 500 (+0.23%) and Nasdaq (+0.25%) trading up with European future soaring (Stoxx 50 +1.66%) after the poor close yesterday. European sovereign bonds are likely to sell off at the open after a strong close yesterday before the risk relief rally. Yesterday, yields on 10yr German bunds (-13.5bps) saw the biggest declines as havens outperformed. The French 10yr spread over bunds did widen by +2.6bps, but that was part of a broader widening in European spreads rather than because of the election result that was mostly priced in already, and we also saw the Italian (+4.1bps) and Greek (+11.0bps) spreads move by even larger margins. That left the Italian spread at 173.6bps, its widest level since June 2020. Back to equities and earlier the STOXX 600 (-1.81%) slumped along with other bourses on the continent, closing during the nadir in US equities. On a sectoral basis, the biggest global underperformer for equities were energy stocks, but that was no surprise considering the decline in oil prices given concerns over Chinese demand going forward. By the close, Brent Crude fell by -4.06% to $102.32/bbl, but rallied along with equities after trading as much as -6.30% lower intraday and below $100/bbl for the first time in a couple of weeks. WTI was also down -3.46% at $98.54/bbl. And other energy prices lost ground too, with European natural gas futures (-2.15%) falling to their lowest levels since Russia’s invasion of Ukraine began, at €92.84/MWh. Oil is back up around 1% this morning after the renewed global risk appetite. In spite of the more negative growth tone in markets, the Ifo’s business climate indicator from Germany yesterday came in above expectations in April, with the reading at 91.8 (vs. 89.0 expected), marking an unexpected improvement from the March reading that had been the worst since August 2020. Otherwise on the data side, the Dallas Fed’s manufacturing activity index for April fell to 1.1 (vs. 5.0 expected), the lowest since July 2020. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Tyler Durden Tue, 04/26/2022 - 07:45.....»»

Category: blogSource: zerohedgeApr 26th, 2022

Top 5 Chip Makers at Lucrative Valuation for a Solid Portfolio

We have narrowed our search to five U.S. semiconductor giants that are currently trading on the dip. These are: GFS, NVDA, MU, ADI and AVGO. The technology sector, of which semiconductor is a major part, suffered a bloody blow as soon as 2022 started. Soaring inflation since mid-2021 has compelled the Fed to terminate the quantitative easing program and raise the benchmark lending rate in March.The March FOMC minutes also revealed that Fed officials almost unanimously agreed that the central bank must reduce the size of its $9 trillion balance sheet by around $95 per month starting May. Moreover, the minutes revealed that most officials have agreed that the Fed must raise the interest rate by 50 basis points in the next two FOMC’s in May and June. Consequently, the blood bath in the technology sector is visible year to date.The Philadelphia Semiconductor Index (SOX) has tumbled 21% year to date. However, the recent market turmoil has made several U.S. chipset bigwigs attractive at the current market valuations. We have selected five semiconductor stocks with a favorable Zacks Rank, which should bolster one’s portfolio going forward. These are — NVIDIA Corp. NVDA, Analog Devices Inc. ADI, Broadcom Inc. AVGO, GLOBALFOUNDRIES Inc. GFS and Micron Technology Inc. MU.Strong Demand for ChipsetsThe use of chipsets is increasing rapidly in various industries. From consumer electronics to automakers, high-tech computers, medical devices and fighter jet missile systems, are using chipsets. However, the coronavirus-induced breakdown of the global chipset supply-chain system has created a ruckus within the economy, resulting in soaring inflation across the world.Electronics, which aid efficiency and automation, have become ubiquitous. The chip set industry has been gaining from increased demand for electronic goods and appliances, fueled by the coronavirus-induced safety rules and precautions. The ongoing global digital wave has been driving growth of electronic components and cloud services, benefiting the semiconductor industry.The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal and electrical performance, are driving demand for semiconductor packaging as well as test technologies. The growing requirement for advanced packaging is gaining traction in the semiconductor industry and is a key catalyst for the industry participants.In January, the Biden administration reported that a global semiconductor shortage will persist until at least the second half of 2022.  The report said “there is a significant, persistent mismatch in supply and demand for chips.”Several giant chipset manufacturers in the United States, Asia and Europe are ramping up capital spending creating new facilities for chipset production to cater to massive pent-up demand. The demand for chipsets will remain strong due to the complexity of new leading-edge technologies.Future Catalyst for Semiconductor IndustryThe White House has put pressure on U.S. Congress to quickly pass legislation to provide $52 billion to help computer chip manufacturers and ease the shortage of components vital to a range of industries.The Biden administration has expressed concerns that the United States had a 37% share of the global semiconductor and microelectronic production in 1990, which has drastically dropped to just 12%. Consequently, U.S. businesses, especially the auto and high-tech industries, are suffering from an acute shortage of chipsets owing to the breakdown of the global supply chain during the pandemic.Our Top PicksWe have narrowed our search to five U.S. semiconductor giants that are currently trading on the dip. These stocks have positive growth potential for 2022 and have witnessed solid earnings estimate revisions within the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The chart below shows the price performance of our five picks year to date.Image Source: Zacks Investment ResearchNVIDIA is benefiting from the coronavirus-induced work and learn-at-home wave. NVIDIA is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, a surge in Hyperscale demand remains a tailwind for NVIDIA’s Data Center business.The expansion of NVIDIA GeForce NOW is expected to drive its user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon. The collaboration with Daimler-owned Mercedes-Benz is expected to strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics spaces.Zacks Rank #1 NVDA has an expected earnings growth rate of 25% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the last 60 days. NVIDIA is currently trading at a 35.9% discount from its 52-week high.Analog Devices has strength across communication, consumer, industrial and automotive end-markets. Further, solid demand for high-performance analog and mixed-signal solutions was a tailwind. Growing momentum across the electric vehicle space on the back of robust Battery Management System solutions remains a positive for ADI.Further, growing power design wins are the other positives for Analog Devices. The solid momentum of the HEV platform across cabin electronics ecosystem remains a tailwind for ADI. Moreover, Analog Devices remains optimistic about the growth prospects associated with its Maxim acquisition and 5G.Zacks Rank #2 ADI has an expected earnings growth rate of 30.5% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 7 days. Analog Devices is currently trading at a 17.6% discount from its 52-week high.Micron Technology is witnessing growing demand for memory chips from cloud-computing providers and acceleration in 5G cellular network adoptions. The rising mix of high-value solutions, enhancement in customer engagement and improvement in cost structure are the other growth drivers of MU.Further, 5G adoption beyond mobile is likely to spur demand for memory and storage, particularly in Internet of Things devices and wireless infrastructure. These will act as major positives for Micron Technology going forward.Zacks Rank #2 MU has an expected earnings growth rate of 57.4% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the last 30 days. Micron Technology is currently trading at a 26.5% discount from its 52-week high.GLOBALFOUNDRIES operates as a semiconductor foundry worldwide. GFS manufactures integrated circuits, which enable various electronic devices that are pervasive. The company delivers feature-rich solutions which enable its customers to develop innovative products for pervasive chips.GLOBALFOUNDRIES manufactures a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units, and microelectromechanical systems.The Zacks Rank #2 GFS has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 6.1% over the last 60 days. GLOBALFOUNDRIES is currently trading at a 31% discount from its 52-week high.Broadcom is riding on continued strength across both Semiconductor solutions and Infrastructure software verticals. In fourth-quarter fiscal 2021, Semiconductor revenues benefited from higher demand for wireless solutions and continued momentum in networking and broadband solutions.Networking revenues of AVGO were driven by routing from service providers in the expansion of 5G networks for backhaul, metro, and call, as well as major share gains in ethernet network interface controllers within data centers. Synergies from acquisitions of CA and Symantec’s enterprise security business aided the results of Broadcom.The Zacks Rank #2 AVGO has an expected earnings growth rate of 27.4% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 7 days. Broadcom is currently trading at a 12.6% discount from its 52-week high. Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI): Free Stock Analysis Report Micron Technology, Inc. (MU): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report GlobalFoundries Inc. (GFS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksApr 14th, 2022

Meet the college basketball player turned US senator who pitched a tax on billionaires like Elon Musk to fund Biden"s economic agenda

Sen. Ron Wyden's optimism is being tested in the 50-50 Senate as he tries to bring Joe Manchin on board. Sen. Ron Wyden is playing a big role trying to revive Biden's economic agenda after a Democratic holdout torpedoed it last year.Ron Wyden; Marianne Ayala/InsiderThe shot-clock is about to hit zero to pass President Joe Biden's economic agenda as the midterm elections draw near. But Sen. Ron Wyden of Oregon says he's far from beaten.Wyden, 72, chairs the Senate Finance Committee, a powerful panel with major sway over tax and health policy. He's spent much of the past year wheeling and dealing on Biden's social- and climate-spending package that's withered in the Senate for over three months.Congress is about to get a closer look at what can happen when an unstoppable force meets an immovable object.The Oregon Democrat is confident he can lock down a holdout standing between the party's failure or victory: Sen. Joe Manchin of West Virginia, the conservative Democrat who sank the legislation at the end of last year. "I talked to him a few minutes ago," he told Insider at the US Capitol on February 1.Not even 2 1/2 minutes had passed (or the full length of Marvin Gaye and Tammi Terrell's "Ain't No Mountain High Enough") before Manchin walked past him and killed the bill all over again."What Build Back Better bill?" Manchin told Insider when asked about the future of Biden's economic agenda. "I don't know what you're all talking about.""It's dead," he said, re-emphasizing his opposition to the House bill as if to double-check it had no pulse. Despite Manchin's dismissal, Wyden accepts he has a crucial but uphill battle to revive the Build Back Better plan in some form. He's near the center of the effort to pull the Democratic agenda from the shredder that Manchin threw it in. The midterms are approaching, and voters will likely judge Democrats on pledges to curb prescription drug costs and provide financial relief for families. But the evenly divided Senate has also tested the limits of Wyden's optimism in a chamber where every Democrat is a president with veto power."Rounding up 50 votes in the Senate is not for the faint-hearted," Wyden told Insider in two wide-ranging interviews. "Legislating is not a spectator sport. You've got to be hands-on."Wyden has played a key role in shepherding several COVID-19 relief packages through Congress over the past two years. Those measures briefly expanded the safety net with direct payments and enhanced unemployment insurance to buoy struggling Americans. It demonstrated that the US can reduce poverty even in the middle of one of the worst economic crises since the Great Depression.Now, Wyden's focus is on reviving a bill without any of the chaos and blown deadlines from last fall. The mercurial Manchin says he's open to cutting a deal, floating a summer deadline to pass legislation without committing to it. But Wyden and other Democrats haven't managed yet to sort through the wreckage of their domestic ambitions to assemble another bill that fits his narrow demands.Some Democrats, particularly progressives, are souring on the odds he'll ever vote for anything. "Another week, another Manchin," Rep. Alexandria Ocasio-Cortez of New York told Insider in early March. "The moment he's actually willing to do something, I'll be listening. But as long as he's talking about doing something, I don't really have much faith."There are signs of a similar pessimism spilling into Democratic leadership. Sen. Dick Durbin of Illinois, the second-ranked Senate Democrat, openly conceded he had effectively thrown in the towel on the social and climate package. He laid the blame on Manchin and Sen. Kyrsten Sinema of Arizona, another holdout.Rounding up 50 votes in the Senate is not for the faint-hearted. Sen. Ron WydenWyden acknowledged the numerous obstacles still separating Democrats from success on the centerpiece of their economic agenda."This is a uniquely challenging political time," Wyden said, noting war in Ukraine and supply-chain breakdowns at home contributing to the highest inflation in four decades. "I've never seen anything coming at us with this kind of velocity."But Wyden seems determined not to call it quits just yet even with time running short."Ron Wyden is one of the biggest optimists I've ever encountered," Josh Kardon, Wyden's former longtime chief of staff, said in an interview. "He wakes up every morning believing that he can make a difference, even when all the evidence around him suggests that's not so. It's really quite extraordinary."Sen. Joe Manchin of West Virginia, left, and Wyden before a 2018 Senate committee hearing.Tom Williams/CQ Roll CallThe brigade to put Build Back Better back on trackSince he sided with the GOP to sink most of Biden's economic agenda, Manchin has dropped hints about his priorities. "Just fix the tax code," he said in February. "We have to basically get our financial house in order," he said another time. For Biden and Democrats in Congress, decoding Manchin is comparable to interpreting hieroglyphs — but without a Rosetta Stone to crack the meaning.He sketched out a smaller bill focused on prescription-drug savings, stepping up taxes on the rich, climate-related spending, and deficit reduction. Yet he's grown skeptical of domestic initiatives he views as social programs like affordable childcare. He told Insider in February that he "wants nothing to do with that."Wyden wants to meet him somewhere in the middle. Almost immediately after the talks went off the rails in December, the Oregon Democrat outlined a possible alternative centered on Obamacare subsidies to reduce the price of health insurance, cutting prescription drug costs, and clean-energy tax credits.There has been occasional speculation that Manchin could switch parties. But Wyden thinks negotiations with the conservative Democrat have been in good faith. "We all get an election certificate to represent the people in our state," he said.He's kept hitting the phones and dialed up fellow Democrats on reviving the party's broader agenda. Sens. Ed Markey of Massachusetts, Patty Murray of Washington, Jeff Merkley of Oregon, Sheldon Whitehouse of Rhode Island, Tom Carper of Delaware, and Sherrod Brown of Ohio are a few members forming a Build Back Better brigade to put the bill back on track, Democratic aides and offices said."My wife in fact said, 'Is there any day when these discussions about these next efforts on health and climate don't take place?'" Wyden said in late February. "I said, 'They're every day.' I've been in several today already. And it's only 5 o'clock, and I got probably two more to go."Sen. Elizabeth Warren, left, and Wyden at the US Capitol.Drew Angerer/Getty ImagesThe Democratic two-step on chasing billionaire wealthAmong Wyden's top responsibilities is designing a litany of new taxes on the richest Americans and large corporations to finance the suite of climate, health, and childcare programs. But he's faced a familiar Democratic two-step on many of his ideas, including one of his biggest hopes: taxing billionaires.Wyden pitched ambitious tax plans through 2021, such as a tax on carbon emissions and ending the step-up loophole.  But fellow Democrats nixed them one-by-one. Then Sinema closed the door on rolling back swaths of the 2017 GOP tax cuts, depriving the party's plans of about $700 billion in new revenue from raising individual and corporate rates.The last-minute scramble for cash led Wyden to dust off what's perhaps his most audacious plan that had been in the works for two years.In the fall, he unveiled a billionaires' income tax to finance a large chunk of the package, targeting about 700 of the richest Americans who tend to park growing fortunes in tradable assets like stocks. The tax would apply to all the gains in value on those investments from the time they were first purchased.The novel plan took a cue from Sen. Elizabeth Warren of Massachusetts, who pushed a wealth tax on the superrich during her 2020 presidential campaign that proved popular with voters.But Wyden's plan didn't get a warm reception among his colleagues: Plenty of Democrats treaded cautiously around the largely untested measure, and a few powerful ones assailed it. Manchin branded it as divisive within hours, and House Speaker Nancy Pelosi privately slammed it as a "public-relations stunt."Wyden also made a rival out of a tech titan. Tesla CEO Elon Musk unleashed vulgar attacks on Wyden and other prominent Democrats as the party debated his billionaire-tax proposal. That measure would have slapped Musk with a $10 billion annual tax bill over the first five years. He brushed off Musk. "I knew a long time ago that people say stuff online that can't exactly go into the old-fashioned community newspaper," Wyden said. "I just do my job. I've got my hands full trying to get stuff done that helps people."Biden recently unveiled a billionaire tax proposal of his own, the first time the White House had drafted a plan specifically aimed at some of the richest people in America. Wyden was on board. But it was dead within 12 hours after Manchin came out against it.To make up some of the lost revenue, Wyden is looking overseas to domestic companies paying little or no taxes if they're headquartered abroad."He's put together a very solid revenue package," Sen. Mark Warner of Virginia, a member of the Senate Finance Committee, told Insider. "If and when we get something through, it'll have a lot of those international components."From left, Democratic Sens. Debbie Stabenow, Wyden, and Chuck Schumer and Commerce Secretary Gina Raimondo attend a press conference about supply-chain issues.Joshua Roberts/Getty Images'He's just situated impossibly'Democrats can go only so far with needle-thin majorities. They don't have a vote to spare in the Senate after their surprise victories in the 2021 Georgia runoffs handed them control of the White House and Congress for the first time in a decade. Democrats control the 50-50 upper chamber with a tie-breaking vote from Vice President Kamala Harris.The party also holds only a three-seat House majority. The near-unanimity needed to pass legislation means they're bound to settle for much less than the original aim to strengthen the American welfare state and invest enormous sums on healthcare, education, clean energy, and tax credits for low-income families."Wyden is trying to deal with the fact that the Senate is composed of 50 Republicans who will always say no," Steve Rosenthal, a senior fellow at the Tax Policy Center, said in an interview. "And can he bring along Sinema, Manchin, and a few other Democrats in a direction that advances the Democratic agenda?" Rosenthal added: "He's just situated impossibly.""Chairman Wyden knows how to reach a deal," said Kardon, now a partner at the lobbying firm Capitol Counsel. "He learned long ago not to allow the perfect be the enemy of the good."The party's first big priority after the 2020 elections was muscling through a $1.9 trillion stimulus law to pump fresh money to Americans, hospitals, and state and local governments. Wyden initially sought to restore the $600-per-week unemployment insurance established early in the pandemic. He calculated the original amount — meant to fully replace a worker's lost wages — on his iPhone in a meeting with then-Treasury Secretary Steven Mnuchin in March 2020.He settled for less, and Democrats nearly lost the whole package due to Manchin's 11th hour demands to cut federal unemployment benefits. "This is the best that can be done for people who are hurting now," Wyden said in an interview at the time."He's cared about this stuff," Sen. Michael Bennet of Colorado, an architect of the expanded child tax credit, said in an interview. "He's done it because he's passionate about trying to make the tax code fair for working people and for families."No Republican in either chamber voted for the package, foreshadowing their unified opposition to the Build Back Better plan. The ongoing partisan warfare has prompted Wyden to grow more circumspect on the big bipartisan compromises he once sought."It's always a heavy lift. It's clearly much harder today," Wyden said. But on restricting prescription-drug costs, there might be a brief window of opportunity. Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance panel, told Insider he believed a bipartisan agreement can be struck while Democrats still control Congress. He teamed up with Wyden on a drug bill in 2019. But it didn't go anywhere, partly because Mitch McConnell, then the Senate majority leader, sabotaged his efforts."We know what the situation is in the Congress of the United States when you put Republicans and Democrats together," Grassley said. "Even if Republicans control the Congress next time, there's going to be a lot of new members. I know what we got now, and we ought to move now."From left, Sens. Max Baucus, Mike Crapo, and Wyden speak at the US Capitol in December 2012. Baucus was the last Democrat before Wyden to serve as Senate finance chair.Bill Clark/CQ Roll Call'The value of having a gavel'Congress today couldn't be more different from the one that a lanky, younger Wyden first stepped into. A former college basketball player and the son of a journalist, Wyden was first elected to the House in 1980. He later became the first US senator to win an election conducted entirely by mail in 1996.In the Senate, Wyden carved out a profile as a liberal unafraid to work with Republicans. Over the years, he's partnered with Sen. Lisa Murkowski of Alaska on campaign-finance reform, former Rep. Jason Chaffetz on GPS privacy, and former GOP Sens. Orrin Hatch of Utah and Bob Bennett of Utah on healthcare reform. After President Barack Obama took office in 2009, Democrats saw a once-in-a-generation opportunity to push through healthcare reform.Wyden reintroduced legislation alongside Republicans like Sen. Lindsey Graham of South Carolina to secure universal healthcare for Americans by expanding private insurance. Though the plan gathered dust, its guardrails preventing insurers from denying coverage to people with pre-existing conditions ended up in what became the Affordable Care Act, the law that expanded health coverage to many Americans.Wyden's chief of staff at the time thinks that era formed a valuable learning experience the senator still draws from.Democrats overcame Republican opposition and internal splits to forge the ACA. Sen. Max Baucus of Montana, the last Democratic chair of the Senate Finance Committee before Wyden, tried courting a handful of GOP votes for Obama's healthcare plan only for it to sputter out. Then Wyden fought with Baucus to make the law more ambitious in scope. But Baucus won out, helped get the bill over the finish line and signed into law in March 2010. "I think the senator above all learned the value of having a gavel," Kardon said of Wyden."As chairman, it remains to be seen what can be accomplished in this particular environment in a bipartisan fashion," Kardon said. "But those skills also have lent themselves to his dealings with the more conservative side of his caucus."Wyden takes the stage to speak at the "Time to Deliver" Home Care Workers rally and march on November 16 in Washington, DC.Jemal Countess/Getty Images for SEIUWyden's willpowerThe economy is in far better shape compared to a year ago. In 2021, the economy grew at its fastest rate since the Reagan years, creating a record 6.4 million jobs with wages rising at their fastest pace in years. But inflation is wiping out those pay increases and surveys indicate that Americans are souring on the economy.Democrats face enormous challenges hanging onto their narrow majorities this year — and Wyden is warning of blowback if the party fails to keep its campaign promises. I've never seen anything coming at us with this kind of velocity. Ron Wyden"My point has been, 'Senators, how many times have we promised that we were going to get serious about holding down the cost of medicine?" Wyden said in a Zoom interview, banging his fist on the desk. "How do you keep a straight face when you go home if you're not serious about doing this?" Other Democrats are keenly aware of the high stakes, particularly if they end up losing the House, Senate, or both. "We're not giving up," Sen. Sherrod Brown of Ohio said in a brief interview. "There's too many important things."For now, Wyden is taking a lead role in bipartisan efforts to revoke trade relations with Russia, a step that essentially treats the country as an international pariah. He doesn't intend to sit around like a "potted plant" while Manchin makes up his mind about casting a vote on a smaller climate and energy bill."Every single day, he wakes up, reads about eight newspapers, starts quizzing his staff, and tries to figure out how to move the ball," Kardon said. "That's who the guy is." Read the original article on Business Insider.....»»

Category: dealsSource: nytApr 1st, 2022

US Equity Futures Reverse Overnight Decline, Turn Positive As Oil Surges

US Equity Futures Reverse Overnight Decline, Turn Positive As Oil Surges U.S. equity futures and European bourses stocks reversed modest overnight losses and turned higher as US traders got to their desks on Monday as crude oil extended a climb and investors monitored diplomatic efforts to bring an end to Russia’s almost month-old war in Ukraine.  S&P futures rose 0.07% or 3 points after earlier sliding almost 30 points; Nasdaq futures were flat. Focus on Monday will be on a speech by Fed Chair Jerome Powell after the central bank kicked off a rate-hiking cycle last week.  Powell is set to speak at the annual meeting of the National Association for Business Economics at 12pm ET; text release and Q&A are expected. In addition to concerns about Russian crude supply, which Russia's deputy prime minister Novak said could surge to $300/bbl if Russian oil is shunned, also jumped after Saudi Arabia announced a “temporary reduction” in oil output at an Aramco facility after Yemen’s Houthi rebels launched multiple cross-border attacks on Sunday .A drone assault on the YASREF refinery, in the Yanbu Industrial City on the Red Sea, has “led to a temporary reduction in the refinery’s production, which will be compensated for from the inventory,” the energy ministry said in a statement. WTI rose as high as $108, surging $15 from prices hit last Tuesday, with Brent trading around $113. The S&P 500 last week had its biggest gain since November 2020 and European equities recouped all of their losses triggered by Russia’s invasion of Ukraine nearly a month ago as peace negotiations and the lure of cheap valuations drew investors back. But that optimism may not be justified, given the “increasingly brutal measures that Russian forces are taking,” according to  Michael Hewson, chief analyst at CMC Markets in London. “There appears to be a growing disconnect between what markets are doing and what is happening on the ground in Ukraine,” he said in a report. “Commodity markets continue to chop wildly” and “concerns about inflation are still posing awkward questions for central banks,” Hewson wrote. A key question is whether last week’s stock rebound and drop in volatility are durable. European equities have recouped all of their losses triggered by Russia’s invasion of Ukraine nearly a month ago as optimism around peace negotiations and the lure of cheapened valuations draw investors back. But a historic spike in commodity prices on supply concerns shows little sign of easing, keeping traders on high alert over inflation and shaking their faith in the Federal Reserve to douse price pressures while keeping the economic recovery on track. “The Fed comes out last week and basically tells you they have to do more -- into higher inflation but slowing growth,” Brian Weinstein, head of global fixed income at Morgan Stanley Investment Management, said in an interview with Bloomberg TV. “It certainly looks like the market is afraid of a traditional Fed goes too much, slows the economy down, and we don’t get the much-anticipated soft landing.” In premarket trading, Boeing stock tumbled 6.6% after a China Eastern Airlines Boeing 737-800NG (yes, THE 737 MAX) plane carrying 132 people crashed in southwestern China. Additionally, US-listed Chinese stocks slumped in premarket trading Monday, following their Asian peers lower, as investors were disappointed after Chinese banks left the loan prime rate unchanged despite expectations of some easing. Large-cap technology stocks are leading the decline including Alibaba -5.6%, JD.com -6%, NetEase -5.7%, Pinduoduo -5.6% and Baidu -3.4%. Among other China stocks listed in the U.S. that are lower this morning: Nio -2%, Li Auto -4.2%, XPeng -4.3%, Didi -5.9%, KE Holdings -6.4%, Lufax -3.2%, Trip.com -6.2%, Bilibili -7.6% and Tencent Music -7.5%. Other notable premarket movers: Anaplan (PLAN US) shares jump 27% in U.S. premarket after Thoma Bravo agreed to acquire U.S. enterprise software company in a deal valued at $10.7 billion, adding to a string of deals this year by cash-rich private equity firms. Nielsen Holdings (NLSN US) shares decline in U.S. premarket after it rejected an acquisition proposal from a private equity consortium, valuing the company at $25.40/share, a price that doesn’t “adequately compensate shareholders for Nielsen’s growth prospects.” Uber (UBER US) shares are slightly lower in U.S. premarket trading after price target is lowered at RBC Capital Markets, with broker less positive on the ride-hailing giant versus peer Lyft following proprietary driver supply analysis. Alleghany Corp. (Y US) shares could be active as Berkshire Hathaway Inc. is buying it for $11.6 billion in cash. In the latest developments, Ukraine rejected a Russian demand that its forces lay down their arms Monday and leave the besieged southern port of Mariupol, which has been under intense Russian bombardment. Morgan Stanley’s chief U.S. equity strategist Michael Wilson said the recent rebound in U.S. stocks is an opportunity to sell and position more defensively.  Meanwhile, U.S. President Joe Biden will speak with European leaders ahead of his trip to the continent this week. Senior U.S. officials will also meet with executives of Exxon Mobil Corp., JPMorgan Chase & Co. and other firms about the impact of the invasion and sanctions.  European equities had a subdued start to the week with most indexes opening flat. Euro Stoxx 50 and DAX rise slightly, while the FTSE MIB outperformed gaining 0.7%. Energy and mining stocks lead gains, tech and travel are in the red. Commodity-linked stocks are the biggest gainers on the Stoxx Europe 600 as prices rally with the war in Ukraine nearing the end of its first month with no conclusion in sight. The basic resources sub-index rises 1.8% as the energy sub-index gains 1.5%. Rio Tinto, Glencore and Anglo American are among the miners rising while Shell, BP and Equinor lead gains among energy stocks. Meanwhile, Europe’s formerly “unstoppable” luxury stocks are facing a swath of new challenges, from rising rates, war in Ukraine and China risks, leaving investors and analysts divided on whether valuations have fallen far enough yet. The MSCI Europe Textiles Apparel & Luxury Goods Index is down 14% this year, following three years of outsized gains. Hermes, the maker of $10,000 Birkin bags, is among top decliners, down 21% after a whopping 75% jump last year. Louis Vuitton owner LVMH, meanwhile, recently lost its crown as Europe’s biggest company to food giant Nestle. Investors were already dumping pricey luxury stocks in favor of cheaper shares amid concerns about rate hikes, while the war in Ukraine added further uncertainty. Valuation-wise, the group now trades at about a 60% premium to the broader market, near pre-pandemic levels and below its 5-year average. Asia stocks fell after China’s lenders kept borrowing costs unchanged. The MSCI Asia Pacific Index was down 0.5% as of 3:13 p.m. in Singapore, erasing an earlier gain of 0.4%, weighed by declines in financials and communication services. The regional benchmark’s bumpy day followed its best week since February 2021. “Some may have clung to expectations for an LPR cut today, which I think will come later when they assess the growth drag from the outbreak,” said Wai Ho Leong, strategist at Modular Asset Management. “Peace talks and the Xi-Biden call also did not deliver substantive outcomes.” Stocks climbed last week as China pledged to stabilize its markets, and some traders had expected some help from banks’ loan prime rate announcement Monday. Talks between Xi Jinping and Joe Biden held Friday also failed to excite investors, although China’s top envoy to Washington pledged his country “will do everything” to de-escalate the war in Ukraine.  Hong Kong Lifts Overseas Flight Ban; Cuts Hotel Quarantine Shares slid in China and Hong Kong, erasing earlier gains. Stocks in South Korea and Malaysia led declines in the region. Japanese markets were closed for a holiday. India’s stocks took a breather on Monday after a sharp rally last week, as a drop in financial and consumer goods companies weighed on the indexes. The S&P BSE Sensex fell 1% to 57,292.49 in Mumbai, while the NSE Nifty 50 Index dropped by an equal measure. The gauges posted their biggest single-day drop since March 15. All but three of the 19 sector sub-indexes compiled by BSE Ltd fell, led by a gauge of utility companies. “Slowing rural sector is a risk even as urban consumption is showing signs of relatively better performance,” according to JM Financial analyst Dhananjay Sinha. Lower than expected growth and higher inflation are a key risk to Indian companies’ profitability, he added. Metal stocks were among gainers as Vedanta, Hindalco Industries and Coal India rose on the back of rising prices and worsening demand-supply scenario.   ICICI Bank contributed the most to Sensex’s decline, decreasing 1.3%. Out of 30 shares in the Sensex, 25 fell, while 5 declined. In FX, most FX majors are range-bound, as the DXY hovers on 98.000 handle awaiting speeches from Fed’s Bostic and chair Powell. Loonie underpinned by strong oil prices -Usd/Cad straddling 1.2600. Franc firm ahead of SNB policy assessment as Swiss sight deposits suggest less intervention; USD/CHF near 0.9300 and EUR/CHF sub-1.0300. Euro straddles 1.1050 with hawkish ECB commentary supportive, but hefty option expiries capping the upside (almost 2.8bln at 1.1100) Aussie unwinding recent gains on technical grounds and in wake of defeat for PM Morrison’s liberal party in local election - Aud/Usd back below 0.7400. Sterling still smarting after last week’s dovish BoE hike - Cable around 1.3150 and Eur/Gbp probing 100 DMA at 0.8415. In rates, Treasuries followed wider losses across gilts while front-end leads the move lower, flattening the curve.  2Y-5Y yields cheaper by ~4bp, flattening 5s30s spread by ~3bp; 10-year yields around 2.18%, higher by ~2bp vs ~4bp for U.K. 10- year. Bunds and gilts bear steepen, cheapening roughly 3bps across the back end. Cash USTs open bear flatter with short dated yields up close to 5bps. Peripheral spreads are slightly wider to core. In commodities, crude futures extend Asia’s gains; WTI adds ~4% to trade just shy of a 109-handle. Spot gold trades a narrow range in small positive territory near $1,924/oz. Base metals are mixed; LME nickel trades limit down for the fourth straight session. LME aluminum gains 3.8%, trading just off the late-Asia highs after Australia, the world’s biggest exporter of alumina, announced a ban on shipments to Russia. Bitcoin is modestly pressured but contained within last week's parameters overall, holding above USD 41k. Today's calendar is relatively quiet, with just the Chicago Fed National Activity Index on dex (exp 0.5, down from 0.69). Powell speaks at NABE at 12pm although it is unlikely he will make any monetary policy comments. Market Snapshot S&P 500 futures up 0.1% to 4,448.75 STOXX Europe 600 little changed at 455.00 MXAP down 0.5% to 177.54 MXAPJ down 0.7% to 579.14 Nikkei up 0.7% to 26,827.43 Topix up 0.5% to 1,909.27 Hang Seng Index down 0.9% to 21,221.34 Shanghai Composite little changed at 3,253.69 Sensex down 0.8% to 57,428.60 Australia S&P/ASX 200 down 0.2% to 7,278.55 Kospi down 0.8% to 2,686.05 Brent Futures up 3.8% to $112.03/bbl Gold spot up 0.2% to $1,924.77 U.S. Dollar Index little changed at 98.27 German 10Y yield little changed at 0.39% Euro little changed at $1.1048 Brent Futures up 3.8% to $112.03/bbl Top Overnight News from Bloomberg Ukraine rejected a Russian demand to surrender of the embattled southern port city of Mariupol, and an aide to President Volodymyr Zelenskiy said Russian forces are using “more destructive artillery.” More talks on ending the war are expected on Monday after Turkey said the two sides had made progress on key points Chinese banks left borrowing costs unchanged in line with expectations as the focus shifts to other possible easing measures from the central bank after top leaders pledged to boost the economy European Central Bank Vice President Luis de Guindos has yet to see any indication that soaring inflation rates are leading to higher wage demands, according to an interview with Handelsblatt Oil rose for a third day as the war in Ukraine neared the end of its first month with no end in sight, and Iranian-backed rebels attacked energy facilities in key exporter Saudi Arabia Hong Kong will lift a ban on flights from nine countries including the U.S. as of April 1, and cut the time incoming travelers need to spend in hotel quarantine in half provided they test negative, Chief Executive Carrie Lam said China and Russia’s trade relationship has become more complicated since the war started more than three weeks ago, raising questions about the future flow of energy, metals and crops between the two powerhouses A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were choppy with sentiment clouded amid the uncertain geopolitical climate and higher oil prices. ASX 200 was indecisive as outperformance in tech was offset by losses in financials and with PM Morrison’s Liberal Party defeated in South Australia's state election, raising concerns for the government ahead of the federal election in two months Nikkei 225 was closed for the Vernal Equinox holiday. Hang Seng and Shanghai Comp. swung between gains and losses with an early surge in Hong Kong tech stocks ahead of a widely speculated relaxation to COVID restrictions after the city’s daily cases fell to a threeweek low and with China’s tech hub of Shenzhen resuming normal work output. However, the gains were wiped out with the mainland hampered as Shanghai tussles with a COVID-19 outbreak, while the PBoC also kept its Loan Prime Rates unchanged, as expected. Top Asian News Indonesia Ends Quarantine Requirement for Overseas Travelers Asia Stocks Edge Down as Concerns Linger on China Policy Support Russia’s War Lifts Default Risk for Distressed Economies China Confirms Ambassador Met With Russian Defense Official European bourses are contained and haven't differed too far from the unchanged mark overall, Euro Stoxx 50 +0.1%, as we await updates on Russia-Ukraine. Developments throughout the morning have been limited, and commentary from the Kremlin is predominantly infitting with last-week's/weekend updates. US futures are pressured, ES -0.2%, awaiting geopolitical catalysts with Fed speak, including Chair Powell, ahead. China Eastern airlines passenger jet flying from Kunming to Guangzhou on Monday experienced an accident in Guangxi, via State Media; unknown injuries/deaths from the accident. Craft was a Boeing (BA) 737 . Subsequently, China's Aviation Regulator confirms the crash of the China Eastern airlines passenger jet carrying 132 people. Boeing -8.3% in the pre-market Berkshire Hathaway (BRK/B) is to purchase Alleghany Corp (Y) for USD 848.02/shr (vs. close USD 676.75 /shr) in a USD 11.6bln transaction. Top European News ECB’s Lagarde Says She’s Not Seeing Elements of Stagflation Now LSE Group to Sell BETA+ to Motive Partners, Clearlake: Sky S&T CEO’s Grosso Tech to Offer EU15.30/Shr for ~5.5m S&T Shares Julius Baer Says Sanctioned Clients in ‘Low Single Digits’ In FX, DXY hovers on 98.000 handle awaiting speeches from Fed’s Bostic and chair Powell. Loonie underpinned by strong oil prices -Usd/Cad straddling 1.2600. Franc firm ahead of SNB policy assessment as Swiss sight deposits suggest less intervention; USD/CHF near 0.9300 and EUR/CHF sub-1.0300. Euro straddles 1.1050 with hawkish ECB commentary supportive, but hefty option expiries capping the upside (almost 2.8bln at 1.1100) Aussie unwinding recent gains on technical grounds and in wake of defeat for PM Morrison’s liberal party in local election - Aud/Usd back below 0.7400. Sterling still smarting after last week’s dovish BoE hike - Cable around 1.3150 and Eur/Gbp probing 100 DMA at 0.8415. In commodities, WTI and Brent have been dipping from best-levels, but remain underpinned on the session amid weekend geopolitical premia.; albeit, the European morning's developments have been more limited. WTI May resides around USD 107/bbl (vs high ~108.20/bbl) while its Brent counterpart trades just under USD 112 /bbl (vs high ~112.75/bbl). Saudi-led coalition reported that Yemen Houthis targeted a gas station in Khamis Mushait on Saturday which resulted in material damage to civilian cars and homes but no casualties, according to the state news agency. Saudi-led coalition also said it destroyed an explosive-laden boat to thwart an attack on shipping in the Red Sea, while it was also reported that Aramco’s petroleum products distribution plant in Jeddah was attacked and production at a Saudi oil refinery in Yanbu declined momentarily after an attack by Houthis. Saudi Aramco reported FY net income USD 110.0bln vs prev. USD 49.0bln Y/Y, while the CEO expects oil demand to return to pre-pandemic levels by year-end and said they are seeing healthy demand especially in Asia. Saudi Aramco's CEO also noted that there is limited spare capacity which is declining every month with global spare capacity around 2mln bpd and that the market is very tight in terms of available barrels. US Event Calendar and Central Bank speakers 8am: Fed’s Bostic Gives Speech at NABE Conference 8:30am: Feb. Chicago Fed Nat Activity Index, est. 0.50, prior 0.69 12pm: Fed Chair Powell speaks at NABE DB's Jim Reid concludes the overnight wrap After a few weekends with some dramatic news of late, this weekend was relatively sparse in terms of new incremental news flow. The conflict and negotiations continue but without any major developments. Last week was the best for US and European equities since November 2020’s US election week; so markets are coming to terms with the current state of the conflict. Over the weekend, Ukrainian officials rejected an offer given by the Russian military for its forces and civilians to surrender the city of Mariupol as shelling continued in Kyiv. Separately, the White House announced that President Joe Biden will travel to Poland in his upcoming trip to Europe for urgent talks with NATO and European allies. Mr. Biden is also hosting a call with his counterparts in the UK, Germany and Italy today at 11am UK time. Overnight, Turkey’s Foreign Minister Mevlut Cavusoglu indicated that Ukraine and Russia are close to an agreement following progress in peace talks and is hopeful for a ceasefire if both the sides do not backtrack from their current positions. However there is no other developments on the current state of negotiations. Asian equity markets have started the week on a weaker footing with the Hang Seng (-0.69%), reversing its early morning gains after it rose more than 1%. Mainland Chinese stocks are also dipping as I type with the CSI (-0.66%) and Shanghai Composite (-0.10%) lower after the PBOC kept the one-year loan prime rate unchanged at 3.7%. Elsewhere, markets in Japan are closed for a holiday. Moving on, stock futures in the DMs are also falling, as contracts on the S&P 500 (-0.42%), Nasdaq (-0.60%) and DAX (-0.58%) are all down. Oil prices are up this morning with Brent futures advancing +3.08% to $111.25/bbl while WTI futures are up +3.23% at $108.08/bbl, as I type. Elsewhere, today's holiday in Japan means no USTs trading in Asia. One of the key events this week will be Thursday’s March flash PMIs from around the world where we’ll see the first impact of the Russia/Ukraine conflict on activity, especially in Europe. Outside of that, UK CPI data on Wednesday is going to be very interesting after the BoE warned on both growth and inflation last week in their surprisingly dovish hike. See our UK economist’s review here. There is also the Spring UK (Budget) Statement on Wednesday (preview here) where all things fiscal will be in focus. Wednesday's new home sales, Friday's pending home sales and Thursday's durable goods are the main economic releases in the US. There's plenty of Fed speak to sharpen up the message from last week's FOMC but don't expect a chorus line singing from the same song sheet. The dot plot showed the range of YE '22 Fed funds rates, as forecast by the committee, was a historically wide 1.4% to 3.1%. Boston (non-voter hawk) and Chair Powell himself are up today with the latter also on the docket on Wednesday. Williams (dove) will be on a panel tomorrow but also gives a speech on Friday. Daly (non-voter / dove) speaks tomorrow, Wednesday and Friday. Mester (voter / hawk) speaks tomorrow. Bullard (voter / hawk) is up on Wednesday and remember he was the lone 50bps dissenter last week. Kashkari (non-voter / dove), Governor Waller (hawk) and Chicago President Evans (non-voter / dove) speak on Thursday. Barkin (non-voter / hawk) concludes the Fed's business for the week on Friday. Looking back at last week now and the conflict raged on but peace negotiations between Ukraine and Russia continued, with the headlines presenting a staccato back and forth about Ukrainian and Russian leaders’ current perceptions of the negotiation outlook. Markets seemed to look through this back-and-forth and took solace that negotiations were even happening, which was a material step up from where we were but a short time ago. In particular, both sides reported common ground on Ukraine’s neutral status and lack of NATO membership as a positive. Another positive came on Friday after Presidents Biden and Xi Jinping spoke. China’s support for Russia remained a key unknown, but following the call both sides expressed aspirations for a peaceful resolution to the conflict, and for tensions to not escalate any further. Ahead of the meeting, US diplomatic officials warned that the US would impose costs on China were it to support the Russian invasion. Russian sovereign bond payments made their way to creditors via custodians, despite some uncertainty, avoiding a default. Nevertheless, S&P cut the rating on Russian sovereign debt another notch, considering it at high risk of default. However, Russia’s remaining interest repayments this month will keep investors anxious as a $447 million payment is due on March 31, followed by a $2 billion payment as a bond comes due on April 4. Dragging on sentiment were American intelligence reports that President Putin was prepared to re-engage in nuclear sabre rattling should the conflict drag on. That drove futures lower at the time of release but was not enough to drag risk negative on the week. That said it was a good week for risk with the S&P 500 and STOXX 600 gaining +6.16% (+1.17% Friday) and +5.43% (+0.91% Friday) over the week, respectively. That marked the best weekly performance for both indices since the week of the US Presidential election in November 2020. Financials and mega cap tech stocks performed even better. The S&P and STOXX bank indices gained +6.60% (-0.15% Friday) and +8.72% (+0.22% Friday), respectively, while the FANG+ gained +13.61% (+3.37%). That was the best weekly performance ever for the FANG+, which also put in its best daily performance ever on Wednesday following the Fed meeting, and more positive Chinese state support news (the index contains Baidu and Alibaba), gaining +10.19%. Speaking of the Fed, after two years at the zero lower bound, the FOMC raised policy rates by 25 basis points, with the dots projecting an additional 150 basis points of tightening this year, in line with DB expectations. Further, the Fed’s projections put policy into an explicitly restrictive stance by 2023. Despite the tightening, Chair Powell did not place particularly high risks on a recession occurring in the next year, which was apparently enough to help equities, with the S&P gaining +2.24% the day of the meeting in addition to the gangbusters day for the FANG+ index. The Fed also announced plans to start reducing their bond holdings at a coming meeting. Chair Powell noted the asset holding reductions would roughly equate to an additional 25 basis points of tightening this year and could commence as early as the FOMC’s next meeting in May. Money markets ended the week pricing around 167 basis points of additional policy rate tightening, suggesting some probability of a 50 basis point hike this year, which the Chair did not rule out. 10yr Treasury yields gained +15.8bps (-2.1bps Friday) on the week, driven entirely by real yields, which increased +22.7bps (+1.5bps Friday). The 2s10s yield curve continued its flattening, as 2yr yields gained +18.8bps (+2.2bps Friday), bringing the level to 20.5bps, the lowest since early March 2020. The Bank of England also hiked rates, raising the Bank Rate by 25 basis points in an 8-1 decision. The lone dissenter preferred to keep policy rates on hold, in contrast to the four dissenters in the February meeting which voted for a 50 basis point increase. Forward guidance added to the dovish tone, as it emphasised two-sided risks around the outlook, with downside impacts to growth featuring as prominent as upside risks to inflation, in contrast with recent advanced economy central bank communications. In line, 10yr gilt yields lagged other DM yields, gaining +0.6bps (-6.8bps Friday), as 10yr bunds increased +12.4bps (-1.2bps Friday). 2yr gilt yields priced out hikes, falling -10.9bps (-8.9bps Friday). Markets are pricing the Bank Rate to end the year at 1.87%, as opposed to 2.0% a week ago. Meanwhile, the Bank of Japan left policy unchanged, and warned of downside risks to growth stemming from the invasion of Ukraine, picking up the BoE’s dovish mantle. In line with the improvement in risk sentiment, crude oil prices fell a modest -3.97% over the week (+1.21% Friday), but still put in some large intraday swings. Prices also eased following reports that progress on the Iran nuclear deal would not be handcuffed by sanctions on Russia. European natural gas also fell -23.42% (-0.65% Friday). Given the volatility in energy markets, French President Macron warned the state may need to seize control of some energy firms. Elsewhere, sentiment was boosted by reports that China would actively introduce policies that benefit markets and take steps to avoid the most spartan lockdown measures. Tyler Durden Mon, 03/21/2022 - 07:52.....»»

Category: blogSource: zerohedgeMar 21st, 2022

The Catalyst for The Great Rotation – Crescat Capital

Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an […] Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an inflationary cycle in the US and globally that will elevate consumer prices at a much higher annualized rate and for significantly longer than priced into financial markets today. The factors driving our view include structural shortages in primary resource industries due to chronic underinvestment, incipient wage-price spirals, and unsustainably high government debt-to-GDP imbalances which make a new inflationary trend the policy path of least resistance. As an overarching macro investment theme at Crescat today, we are calling for what we have dubbed the Great Rotation. This theme is a highly probable and pending shift, in our view, out of crowded, hyper-overvalued, long-duration financial assets, including mega-cap tech and negative-real-yielding fixed income securities, and into the less populated and more undervalued segment of the market that is focused on the tangible assets at the core of the global economy. In our analysis, the companies involved in these industries are driven by both intrinsic and calculable fundamental value and offer some of the best value and appreciation potential in the market. Rising inflation expectations and the Fed attempting to tighten financial conditions are the catalyst for this critical inflection point. Policy makers are far from doing what is necessary to halt what is already the most inflationary environment since the 1970s when they are instead: Running twin deficits at double digit percentages of GDP. Holding the Fed funds rate at 0% for another seven months. Planning to add $400 billion more in QE before beginning to raise rates. Restricting commodity companies from exploring, developing, and producing natural resources.   Crescat’s Global Macro and Long/Short Equity strategies are hedge funds with significant short positions in the overvalued areas that we believe the investor masses will be rotating out of, as well as long positions in the undervalued areas, where we believe the smart money will be rotating into, in this likely-to-be epic regime change. At Crescat, these two strategies are the most comprehensive ways to play the Great Rotation. Large Cap and the Precious Metals strategies, on the other hand, are ways to play the long side of the Great Rotation without the short component. Note how the relative fundamental valuation, using enterprise value relative to sales, between the Russell Growth vs. Value indices is re-testing the peak tech bubble levels that we saw in 2000. Tech Looks Ready to Roll Over Technology stocks have retained the limelight in the press and investor consciousness year to date as well as price momentum but are now facing an outlook of significantly deteriorating growth and profitability. Meanwhile, primary resource stocks in the energy, materials, and industrial sectors have had equally strong momentum since the March 2020 Covid crash but possess eminently better intermediate-term growth, value, and appreciation potential as the world continues to emerge from the pandemic. The real aggregate free-cash-flow yield among tech companies in the S&P 500 is now even lower than it was at the peak of the Tech Bubble. With three of the big-five mega cap tech stocks (FB, AMZN, AAPL) missing Q3 revenue and/or earnings expectations and warning of a weak Q4, this is a fundamental signal of a major US market top in the making. Add to that Elon Musk boldly cashing in on $6.9 billion worth of his Tesla shares this week, the largest sale ever by a CEO. This at the same time as one of the best performing and most persistent hedge fund short sellers of the last decade was forced to throw in the towel due to client redemptions. Those clients are fools. Russell Clark is a legend and so is his performance on this much needed and now almost vacant side of the market. Hat tip to him. Our research shows that, across a composite of valuation metrics, the stock market is more overvalued than it was in 2000, as well as any other time in history, including 1929. However, our models also show that we are headed towards an inflationary bubble burst, like that of 1973-74, when popular large cap growth stocks were decimated at the same time as commodity prices and resource stocks exploded to the upside. This is a unique type of bear market and economy that we envision, because it is much different than the deflationary-style meltdowns of 1929-32 or 2008-09. The 2000-02 tech bust and 1973-74 stagflationary shock are much better case studies for the type of macro environment we envision and want to be positioned for over the next one-to-three years. These were abrupt regime shifts in macro environments where bubbles burst in overpopulated segments while new secular bull markets began in others. There was much money to be made on both the long and short side of the market by being in the right industries on each side. There was also much pain for those who ignored valuation, changing fundamentals, and macro indicators in their approach and just kept hanging on, or worse if they bought the dip of the prior popular trend instead. Crypto Software based crypto assets, in the CIO’s opinion, are in a broad speculative mania along with the entire software industry akin to the Dotcom bubble on steroids. No doubt, distributed ledger technologies and tokenization are brilliant innovations that have value and will have endurance, just like the Internet did at its investment craze peak in early 2000. Crescat is not short crypto assets though the idea has been tempting due to the excessive level of speculation, along with their abundance and questionable intrinsic value. They are not securities with underlying fundamentals that can be valued based on a discounted-free-cash-flow model or with macro data that makes any sense to us today. For now, we see too much risk to being short crypto assets due to their crazy popularity and dogmatic following, including as a form of inflation protection. We couldn’t agree more with the need for inflation protection, but fervently believe there is a much more prudent way to get that when one’s nest egg is considered. Primary Resources Industries According to our macro and fundamental models, the most desirable assets to own in today’s changing investing climate, are the hard and soft commodities that are the core building blocks of the global economy. In our analysis, some of the best prospective risk-adjusted performance in the financial markets over the next three years (our target investment horizon) should accrue to the companies that own and produce these resources. These firms offer some of the highest relative revenue, earnings, and free cash flow growth for the foreseeable future along with low stock price multiples today, a powerful setup. These companies are spread throughout the energy, materials, industrial, and agricultural sectors of the economy. Based on a discounted free cash flow valuation approach, they predominate the list of highest appreciation potential stocks in Crescat’s fundamental equity model. We expect the leadership in primary resource industries of the economy to continue over the next several quarters and years due to acute raw material shortages at the root of the supply chain, as well as increased demand due to fiscal and monetary policies, including the resource intensive push to a cleaner and greener economy. Heightened environmental and social pressure have only made the supply and demand imbalances more extreme. Strong fiscally driven tailwinds including the new $1.1 trillion Infrastructure Investment and Jobs Act just passed by Congress, and about to be signed by the president, add fuel to this fire. Supply-side constraints to producing the materials needed to run the new as well as the existing economy are not easily reversed due to long lead times and the multiple years of declining capital investment trends. We are already experiencing a domino effect among natural resources. It started with spikes in lumber prices, then oil and gas, lead, zinc, and coal. If we look at ammonia prices, a key ingredient in fertilizer, agricultural commodities are a whole new set of commodities likely to be spiking next, potentially creating food shortages. Crescat’s Large Cap, Global Macro, and Long/Short strategies own many positions in the broad resource sectors identified by our models. Among our favorites is precious metals. The Fundamental Opportunity in Precious Metals Gold and silver producers are trading at historically low free-cash-flow multiples and strong near-term growth prospects. We love them. But even more, we are enamored with high-quality gold, silver, and select copper and base metal explorers with high-grade targets who are aggressively growing new resource ounces in top mining jurisdictions globally. The companies with competent management and technical teams in this segment offer unbelievable value and appreciation potential according to our DCF model. Owning gold in the ground in a carefully constructed portfolio of these firms is one of the most asymmetric reward-to-risk opportunities we have ever seen. Precious Metals, A Key Focus Today With inflation continuing to surprise to the upside, precious metals mining stocks are ripe for a major breakout after taking the strong early lead among all S&P industry groups in the immediate four months after the March 2020 Covid crash. Until last month, gold and silver stocks had been consolidating, but with their underlying fundamentals only getting better, we believe they are poised for another major leg up. We are constructive regarding our potential to deliver a strong finish to 2021 based on the incredibly strong fundamental and macro set-up. That is our goal. At Crescat, we recently became so excited about the deep-value opportunity for precious metals ahead of a likely new secular bull market, that we created two focused strategies based on it, the Precious Metals separately managed account strategy launched in June 2019 and the private Precious Metals Fund in August of 2020, both industry specific mandates. Here is some quick math to illustrate the set up likely ahead of us. The monthly price of gold is now above its 2011 highs. If miners were to re-test the same levels, it would imply a 61% appreciation from here. More importantly, the fundamental story behind these companies today is unquestionably better than back then. Precious Metals Fund Description The Precious Metals Fund is an activist private fund. It is a macro and fundamental-driven industry specialist fund focused exclusively on the precious metals. This fund can short, in addition to going long, but chooses to be long-only today, given where we believe we are in the precious metals cycle, early in a new secular bull market. It also has an active futures account associated with it. The Precious Metals Fund participates in private as well as public transactions and holds a substantial equity warrant portfolio. We have partnered with renowned exploration geologist, Quinton Hennigh, PhD to help us manage the precious metals portfolios across the firm. He has been advising Crescat for the past two years and has recently joined the team full-time as an equity owner/member of the firm and its geologic and technical advisor. We remain locked and loaded with an extensive portfolio of undervalued gold and silver in the ground. We have significant copper and other base metal exposure too where gold and silver are significant byproducts. Our activist precious metals portfolio companies are focused on substantial organic growth in high-grade resource ounces through exploration and drilling. We expect industry M&A to heat up significantly over the next several quarters and our companies to be coveted. In a segment that has seen declining exploration spending for a decade,we have over 300 million target gold equivalent resource ounces in our portfolio which is thanks to Quinton’s expertise. Total global gold production in not even 100 million ounces. Global Macro Fund Description Crescat Global Macro remains the firm’s most comprehensive strategy and can trade any asset class globally, long and short, across currencies, commodities, fixed income, and equites. The Global Macro Fund was launched in 2006 to express investment themes via a broad set of instruments in addition to equities. The Global Macro Fund includes an active futures account and as well as equity account and several ISDA relationships with large bank counterparties to trade swaps that are not otherwise traded on an active exchange, such as our Chinese yuan and Hong Kong dollar put options that we own today. Long/Short Fund Description Long/Short is a classic equity hedge fund and is our second broadest mandate. It also exploits Crescat’s firmwide themes but is focused exclusively on equities. Long/Short is Crescat’s second longest running strategy. It was launched in 2000 and has persistently delivered strong alpha through multiple business cycles. Large Cap SMA Description Large Cap is a separately managed account strategy also focused on equities, but in the large and mid-cap realm. Think of it as a souped-up, blue-chip portfolio. Like all Crescat strategies, Large Cap is driven by our firmwide models and themes. It is focused on the best large and mid-cap long equity opportunities therein. It is diversified across select industries without being “diworsified” across all of them. Large Cap is Crescat’s longest running strategy. It was launched in 1999. It has been through the Tech Bubble, Tech Bust, Housing Bubble, Global Financial Crisis, and the longest bull market ever followed by both the Covid Crash and recovery. Precious Metals SMA Description The Precious Metals separately managed account strategy is a long-only separately managed account strategy designed for investors who do not qualify for our private fund, but who still want exposure to our management and publicly listed holdings. The Precious Metals SMAs do not participate in private placements and pre-IPO investments, nor do they get the warrants frequently associated with those investments, but they can still participate in our favorite public gold and silver stocks in a managed portfolio. We are long a selective basket of miners in the precious metals industry across all five strategies at Crescat today due to rising actual and expected inflation worldwide and ultra-cheap valuations. However, it is important to understand that Crescat is more than a precious metals focused investment firm. We remain a comprehensive, value-driven investment firm guided by fundamental equity and macro models across five differentiated strategies. In addition to the two precious metals strategies, we manage a Large Cap long-only SMA, a Long/Short Equity hedge fund, and a Global Macro hedge fund. Each of these three strategies has an increasingly broader mandate in that order. Crescat Hedge Fund Term Sheet Crescat SMA Term Sheet Fundamental Equity Quant Model Both Crescat Large Cap and Long/Short have beaten their benchmarks since inception, net of fees, on an absolute and risk-adjusted basis over multiple business cycles. One constant behind these strategies has been Crescat’s fundamental equity quant model. The CIO originally began developing it in 1995. He, along with Crescat and its predecessor firms, have continuously refined and applied the equity model to managing client money since 1997. The equity model has always been an important tool in driving the firm’s stock picking in addition to helping define macro themes. Crescat has invested heavily in improving our equity model over the last year. We are more excited than ever about its current condition and potential to continue to help the firm deliver alpha. Macro Models Crescat also relies on macro models for developing its investment themes. Co-portfolio manager, Tavi Costa, helped take Crescat’s macro modeling to a new level after he joined the firm in 2014. Today, Crescat applies a variety of its own macro models in addition to our equity model to source and support its firmwide investment themes and positions. Global Macro Positioning Crescat Global Macro, being our most comprehensive strategy, maintains exposures to Crescat’s themes and most of the positions in our equity-oriented mandates, but it will also add exposures to currencies, commodities, and/or fixed income asset classes. Today, Global Macro holds two substantial fixed income short positions in asymmetric reward-to-risk put options, because we are at the lowest level of real yields in post-World War II history without a bond bear market already having occurred. One is overdue, in our view, and most investors are not ready. The first fixed income position is a junk bond short via the iShares iBoxx $ High Yield Corporate Bond ETF which long investors today are effectively paying, in the form of negative real yields at an historic level, for the dubious privilege of accepting default risk. The second is a significant put option position in 10-year Treasury Note futures. With rising inflation in the form of both CPI and expectations, the Fed must do something credible to fight the steep rise in the price of consumer goods and services. It has already announced that it will be tapering its fixed income asset purchases. At the same time, the Treasury department is in extreme deficit spending mode relative to GDP while aggressively extending its maturities post a record Covid-T-Bill issuance. With the Fed out of the game, who is going to take-up the slack to digest the increased supply of long-duration Treasuries in a rising inflation environment? Shorting UST 10s from a starting nominal yield of 1.5% with CPI running at 6.2% simply makes a ton of sense to us here. China is the Black Swan trade of the century that the market still just doesn’t get in our view. We remain committed to Plan A here in Global Macro, an asymmetric trade with minimal downside risk through low volatility option premium paid and large upside potential through long USD calls versus short CNH and HKD puts. We have been risking about 1 to 1.5% quarterly with notional upside to devaluation and de-peg that has ranged from 500 to 1000%. China has been melting down before the world’s eyes all year. We believe its currency is the ultimate shoe to drop. We are continuing with this strategy. Summary The Fed is trapped into moving forward with its plan to scale back its debt monetization. For now, this includes pressure from the yield curve to raise rates next year. The taper matters big time as the catalyst for financial asset bubbles to burst along with actual inflation. This reduction of monetary stimulus is a huge liquidity drain on the margin given the formerly outrageous QE levels and asset bubbles they have created. Whether it is now or within just several months from now, we believe we are very close to a major twin top in US equity and credit markets. We need to be ready and positioned for it now. Across the firm, we are doing everything we can on that front. We are determined to make money on short side of the market in Global Macro and Long/Short when the Great Rotation burst gets going in earnest. The shorts have been holding those funds back YTD but we strongly believe that will not be the case forever. Many fund managers are precluded from shorting. We are not. The team here is working extremely hard and focused on delivering value across all our strategies. October Performance Crescat delivered robust performance in October across all strategies with precious metals long positions being the biggest driver. These holdings comprise our highest conviction forward-looking expected return vs. risk macro theme at Crescat. Thus, precious metals, and gold and silver mining equities, are widespread positions across all Crescat’s strategies. November has started off extremely well MTD, with short positions adding value in Global Macro and Long Short on top of strong gains in precious metals. Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate miwahashi@crescat.net Cassie Fischer Client Service Associate cfischer@crescat.net Linda Carleu Smith, CPA Member & COO lsmith@crescat.net © 2021 Crescat Capital LLC Article by Crescat Capital Updated on Dec 20, 2021, 3:29 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 20th, 2021

Stocks, Futures, Oil Tumble On Omicron Lockdowns, Manchin Shockwave

Stocks, Futures, Oil Tumble On Omicron Lockdowns, Manchin Shockwave Global stocks and US equity futures are sharply lower to start the otherwise very quiet holiday week, dragged lower by Manchin's shock decision to kill Biden's economic agenda (which Goldman said would cut US Q1 GDP from 3% to 2%), accelerating government measures to counter the fast-spreading omicron variant and fears over the growth outlook amid a tightening Fed. US equity futures tumbled almost 100 points from their Friday close (and more than 200 points from Thursday's all time high before paring some losses buoyed by optimism from news that Moderna’s booster vaccine increases antibodies 37-fold against omicron. Treasury yields also pared a sharp drop as low as 1.35% and the dollar held a jump from Friday, while crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. As of 730am S&P 500 futures were down down 1.1%, Nasdaq 100 -1.3%, and Dow -1.0%. Global stocks have retreated from record highs in recent weeks amid concerns about Covid-19 hurting the economic recovery and as central banks pivot toward fighting inflation. Federal Reserve Governor Christopher Waller said a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March. “In our view, markets can look through omicron concerns, and the gradual pace of monetary tightening won’t bring the equity rally to an end,” UBS Global Wealth Management wrote in a note. “Overall, the latest news does not change our outlook for equities.” Luke Hickmore, investment director at Standard Life Investments, also recommended buying the dip. “The prospects for growth will improve rapidly from here,” he said. “The market will likely see a recovery in the new year when liquidity returns.” In the weekend's biggest news, senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s $1.75 trillion tax-and-spending package, prompting a sharply critical statement from the White House which called Manchin’s decision a “sudden and inexplicable reversal.”  Biden and top Democrats must now regroup to see if a scaled-back version remains possible with little more than 10 months before midterm elections that will decide control of Congress. As noted late last night, Goldman Sachs Group Inc. cut its forecast for U.S. economic growth for next year after Manchin’s move (more below). On Monday, Chuck Schumer said the Senate will still vote “very early” in 2022 on Biden’s economic agenda, although it was unclear just what the new plan will look like now that Build Back Better is dead. Not helping matters were the latest development in the Omicron front where the biggest European countries are introducing more curbs, with U.K. officials keeping open the possiblity of stronger measures before Christmas and the Netherlands returning to lockdown, even as Biden’s chief medical advisor said further U.S. lockdowns are unlikely. In some "good" news, said a third dose of its Covid-19 vaccine saw a 37-fold increase in neutralizing antibodies against omicron. Ironically. While investors remain on edge over the outlook for economic activity, there remains little evidence that the new variant causes illness as severe as the delta variant, especially among those already vaccinated. “The main reason behind the market sell off today is the rejection of Biden’s $2 trillion tax-and-spending package, which will lead to a reduction in U.S. economic growth forecasts,” said Michel Keusch, a portfolio manager at Bellevue Asset Management. “With trading volumes getting thinner and thinner into the year end, this is the catalyst creating some short-term nervousness.”  Then there are tightening concerns: the Federal Reserve’s decision to increase the pace of tapering last week is also adding to investor nerves about the outlook for 2022. And now, without either fiscal or monetary support, economists see a policy-induced slowdown in the economy where Goldman on Sunday cut its real GDP forecast for 2022: 2% in Q1 (vs. 3% prior), 3% in Q2 (vs. 3.5% prior), and 2.75% in Q3 (vs. 3% prior). One place which is convinced the Fed will not meet its targets it the bond market where traders of eurodollar futures price rates much lower than FOMC targets for the end of 2023 and 2024. Finally, as Bloomberg notes, there is also the issue of divergent global monetary policy to contend with, as the People’s Bank of China stepped up easing overnight with the first rate cut in 20 months. Looking at the premarket, travel stocks fell the most with United Airlines down 3.4% leading declines among major U.S. carriers, while a 4% slide in Royal Caribbean Cruises led the fall among cruise operators. Energy and industrial bellwethers also declined, with Chevron, 3M and Caterpillar falling over 2% each. Major U.S. tech and internet stocks slumped hitting shares in most highly valued names, as well as in cyclicals. Apple fell as much as 2.1% premarket while fellow large- cap tech names also drop, with Facebook-owner Meta Platforms down 1.9%, Alphabet -1.2%, Amazon.com -1.7%, Twitter -2.1%, Microsoft -1.6%. Here are some of the other big U.S. movers today: Major U.S. tech and internet stocks drop in premarket trading as risk appetite sours globally amid worries over further pandemic- related restrictions, hitting shares in most highly valued names, as well as in cyclicals. Shares in U.S. renewables firms drop in premarket after U.S. Senator Joe Manchin’s surprise rejection of President Joe Biden’s $2 trillion package. Moderna (MRNA US) rises 6% in U.S. premarket after the company said that a booster dose of its Covid-19 vaccine increased antibody levels against the omicron variant. Society Pass (SOPA US) surges 22% in premarket after the loyalty platform operator said in a statement it has been added to the Russell 2000 Index. Boston Beer (SAM US) upgraded to hold at Jefferies following pullback of more than 60% in the shares related to “massive” reset in expectations for hard seltzers, removing the only negative rating on the stock. Shares up 0.3% on low volume in premarket. "After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode," Russ Mould, investment director at AJ Bell, wrote in a client note. Europe's Stoxx 600 also stumbled, now down about 1.4% after falling as much as 2.6%, weighed down the most by travel and insurance. All sectors are in red. FTSE 100 recovers slightly as energy gets a leg up, but is still off by 1.2%. Dax -2%. Germany’s new coalition government picked Joachim Nagel, a Bank for International Settlements official, as the central bank’s next president. Earlier in the session, Asian stocks were set for the biggest drop since March, as the spread of the omicron variant and a surprising setback to U.S. President Joe Biden’s economic agenda forced traders to take bets off the table. The MSCI Asia Pacific Index sank as much as 2%, headed for its lowest close since November 2020, with tech and consumer shares the biggest drags. Relatively thin trading ahead of the year-end exacerbated declines in the region, as investors grapple with fresh outbreaks of Covid-19 and monetary policy tightening globally. The MSCI Asia Pacific Index is down about 15% from a peak in February, compared with an 18% gain in the S&P 500. “Omicron’s spread over the festive holidays and Manchin” are driving the risk-off mood, said Wai Ho Leong, strategist at Modular Asset Management (Singapore). “But most of all, it is the lack of liquidity in all markets.” India was the worst performer around the region, with its benchmark index poised to enter a correction amid the spread of the omicron variant. Chinese stocks also dropped despite a cut to bank borrowing costs for the first time in 20 months In FX, the dollar reversed gains and was little changed. The pound fell in line with other risk- sensitive currencies as global market sentiment soured; gilts advanced. Hedging the major currencies over the next month comes at a similar cost, yet the pound turns expensive further out as it holds a higher beta on monetary policy divergence. The Australian and New Zealand dollars followed a broader move lower in commodity FX amid a slide in oil and stocks. The yen advanced with Japanese government bonds. The lira tumbled to another record low after Turkish President Recep Tayyip Erdogan pledged to continue cutting interest rates. In rates, Treasury yields fell by ~3bp in 5-year sector, steepening 5s30s spread by 3bp on the day as long-end yields were little changed; 10-year yields 1bp lower around 1.39%, outperforming bunds and gilts. Treasuries drifted higher Monday as global stocks extended losses. Gains were led by front- and belly of the curve, while eurodollars advanced and the amount of Federal Reserve rate-hike premium for 2024 and 2024 eased. Long-end lagged the move ahead of a 20-year bond auction Tuesday.  Bund and gilt curves are mixed. Italy lags in the peripheral complex, widening ~2bps to Germany. In commodities, Brent crude extends dropped to trade down as much as 5.3%, trading as low as $69.60/bbl before paring some losses, with Brent down 3% to $71 per barrel, and WTI -4% to around the $68-handle. Spot gold drifts below the $1,800-handle. Base metals complex under pressure; LME aluminum and nickel decline the most.  There is nothing on the economic calendar today except that Nov. Leading Index, which is estimated to print at  0.9%. Market Snapshot S&P 500 futures down 1.6% to 4,535.75 MXAP down 1.8% to 187.95 MXAPJ down 1.8% to 607.98 Nikkei down 2.1% to 27,937.81 Topix down 2.2% to 1,941.33 Hang Seng Index down 1.9% to 22,744.86 Shanghai Composite down 1.1% to 3,593.60 Sensex down 2.0% to 55,848.23 Australia S&P/ASX 200 down 0.2% to 7,292.16 Kospi down 1.8% to 2,963.00 STOXX Europe 600 down 2.2% to 463.29 German 10Y yield little changed at -0.40% Euro up 0.2% to $1.1259 Brent Futures down 3.9% to $70.67/bbl Gold spot up 0.1% to $1,800.19 U.S. Dollar Index little changed at 96.61 Top Overnight News from Bloomberg President Joe Biden faces the unexpected task of quickly rewriting his policy agenda in a crucial election year after a key Senate Democrat abruptly rejected his signature $1.75 trillion economic plan Germany’s new coalition government picked Joachim Nagel, a former Bundesbank senior official, as the central bank’s next chief, according to a person with knowledge of the matter The ECB will not raise interest rates in 2022 if inflation behaves as expected, governing council member Pablo Hernandez de Cos told Expansion newspaper in an interview Europe’s biggest countries are introducing more curbs to fight a surge in Covid-19 infections, from another lockdown in the Netherlands to stricter travel restrictions at the height of the holiday period Chinese property stocks tumbled close to a fresh five-year low after a series of asset sales underscored concern that equity investors will bear the brunt of losses as developers offload projects to repay debt Chinese banks lowered borrowing costs for the first time in 20 months, foreshadowing more monetary support to an economy showing strain from a property slump, weak private consumption and sporadic virus outbreaks A more detail look at global markets courtesy of Newsquawk Asia-Pac equities traded mostly lower following the volatile session on Wall Street on Friday, which saw the Dow Jones, S&P 500 and the Nasdaq all posting varying degrees of losses, whilst the Russell 2000 outperformed with decent gains. Overnight, US equity futures opened with a mild upside bias, albeit the optimism faded in early trade as risk aversion materialised, with the ES Mar 2022 contract falling below its 50 DMA (4,596) whilst the NQ and RTY saw losses of over 1% apiece. Sentiment was hit by the slew of concerning COVID headlines over the weekend, whilst Friday saw further hawkish rhetoric from Fed officials - with Fed’s Waller suggesting the whole point of accelerating the bond taper was to make the March Fed meeting a live meeting for the first hike, and under his base case March is very likely for lift-off, although it could be pushed back to May. The ASX 200 (-0.3%) was pressured by some large-cap miners and banks, whilst the Nikkei 225 (-2.1%) and KOSPI (-1.8%) conformed to the downbeat tone, with upside in the former also capped by recent JPY strength. The Hang Seng (-1.9%) and Shanghai Comp (-1.1%) initially saw shallower losses after the PBoC opted to cut the 1yr Loan Prime Rate by 5bps, whilst the 5yr rate was maintained, although the property sector faced more woes after S&P downgraded Evergrande to Selective Default, whilst Kaisa shares slumped after trade resumed following a two-week hiatus, with the Co. in discussions regarding a debt restructuring plan. The Hang Seng dipped below 23,000 for the first time since May 2020. Elsewhere, US 10yr futures continued edging higher as APAC risk aversion supported the haven, whilst Goldman Sachs also cut its US real GDP Growth forecasts on the Build Back Better blockade. Top Asian News Coal India Defends Quality Level of Shipments After Complaints Hong Kong Eyes New Security Law After Electing Loyalist Council Asian Stocks Drop to Lowest in 13 Months on Virus Woes, Manchin Best Way for China to Lower Market Rates is to Sell Yuan: Nomura European bourses commenced the week on the backfoot, continuing the broad pressure seen in APAC trade, as focus is firmly fixed on the Omicron variant. The downside in APAC hours was also a feature of the choppy trade in the US on Friday, and amid non-COVID catalysts such as US Senator Manchin presenting a stumbling block to BBB which effectively ends the chances it can be passed this year, while hawkish central banks is also a theme traders are cognizant of for next year. Euro Stoxx 50 -1.4%, benchmarks are lower across the board as further COVID-19 restrictions are imposed/touted; thus far, the most stringent has seen the Netherlands return to lockdowns, while the likes of the UK and Germany are mulling measures. Vaccine producer Moderna (+5.5% in premarket trade) released preliminary booster data vs Omicron, which saw a modest paring of the risk-off conditions; the vaccine boosts neutralising antibody levels by 37-fold vs pre-boost levels. All sectors remain in the red however, with underperformance in those most exposed to COVID restrictions, such as Travel & Leisure, Oil & Gas and Autos. Individual movers were predominantly dictated by the broader price action; however, THG (+12.5%) is the morning’s outperformer following reports that a notable short on the name has removed its position. Meanwhile, US futures are softer across the board (ES -1.3%) ahead of a very sparse docket where focus will, as it is in European hours, centre around the fiscal narrative and COVID. On the latter, President Biden is due to speak on the situation on Tuesday, calling for individuals to get vaccinated. Top European News Johnson Appoints Truss to Key Brexit Role After Torrid Week Germany Picks Bundesbank Veteran Nagel as Central Bank Chief Czech Billionaire Family Faces Final Showdown Over Bank Merger Flashpoints That May Heal or Deepen the Lira’s Pain in 2022 In FX, the Dollar is mixed across the board, but retaining an upward bias overall amidst greater gains vs high beta, activity and cyclical currencies compared to losses against safer havens as broad risk sentiment sours on a number of factors, but mainly COVID-19. Hence, the index is holding quite firmly above 96.500 within a 96.504-680 range even though US Treasury yields are soft and the curve is marginally flatter, with traction or the Greenback coming via hawkish comments in wake of last week’s FOMC from Fed’s Waller who would not object to lifting rates as soon as tapering is done next March. Ahead, a very sparse Monday agenda only comprises November’s leading index. JPY/EUR/CHF/XAU - As noted above, risk-off positioning due to the ongoing spread of Omicron has prompted demand for the Yen, the Euro, with added momentum from bullish Eur/Gbp cross flows, plus the Franc and Gold to lesser extents. Usd/Jpy is tethered around 113.50 in response, though unhindered by imposing option expiries in contrast to last Friday and the headline pair capped by technical resistance in the form of 21 and 50 DMAs that come in at 113.77 and 113.83 respectively today. Meanwhile, Eur/Usd is back above 1.1250 amidst mixed ECB vibes as de Cos underscores guidance for no hikes in 2022, but sources say that GC hawks wanted explicit recognition of upside inflation risks and were shouted down by chief economist Lane. However, Eur/Gbp has bounced even more firmly from sub-0.8500 lows on what looks like a combination of early year end demand or RHS orders and Pound underperformance on pandemic, political and Brexit-related factors. Elsewhere, Usd/Chf is hovering mostly sub-0.9250 and Eur/Chf is pivoting 1.0400 with latest weekly Swiss sight deposits showing no sign of intervention and Gold is rotating around Usd 1800/oz after a false upside breach of Usd 1810, but not quite enough follow-through buying to scale another upside target circa Usd 1815. GBP/AUD/NZD/CAD - The major fall guys, as Sterling loses 1.3200+ status yet again on all the aforementioned negatives, and also feels some contagion from weakness in Brent, while the Aussie is straddling 0.7100, the Kiwi is trying to keep its head above 0.6700 and the Loonie contain declines through 1.2900 alongside the latest retracement in WTI. In commodities, WTI and Brent are also risk-off, moving in tandem with the equity action, on the COVID-19 narrative and implementation/prospect of further restrictions hitting the demand-side of the equation. WTI relinquishes USD 67.00/bbl and Brent gave up the USD 70.00/bbl level. In fitting the broader market move, some easing of the initial downside was seen post-Moderna’s update. Elsewhere, in crude specifics, Libya’s NOC confirmed reports that the Petroleum Facilities Guard was blocking several fields in the region; some suggest production of oil has dropped to 950k BPD due to losses of production at El Sharara field (estimated at 280k BPD). Elsewhere, OPEC+ compliance has reportedly increased marginally in November, in-fitting with the assessments in earlier sourced reports. In metals, spot gold and silver are contained on the session with little evidence of risk-off making its self-known at this point in time, with the yellow metal pivoting USD 1800/oz. Elsewhere, copper is impacted on the risk tone but offset somewhat by Chile’s President-elect Boric saying he will oppose the Dominga copper-iron mine project. US Event Calendar 10am: Nov. Leading Index, est. 0.9%, prior 0.9% DB's Jim Reid concludes the overnight wrap As we arrive at the final week before Christmas, there’s plenty of newsflow from the weekend for markets to digest this morning. In particular, there was the announcement from the US that Senator Joe Manchin of West Virginia wouldn’t be able to support the Build Back Better Bill, which has been the subject of intense negotiations over recent weeks and marks a significant blow for President Biden’s economic agenda. Meanwhile on the Covid front, there was a further ratcheting up of concerns about the Omicron variant, with the Netherlands becoming the latest European country to go back into lockdown as of yesterday, as cases continue to spread elsewhere. But otherwise, the events calendar is looking fairly quiet for now in this holiday-shortened week, with just a few lower-tier data releases and the occasional central bank speaker. We’ll start with Omicron, since that remains one of the biggest issues for markets right now and has significantly clouded the outlook moving into year-end. In a nutshell, the news over the weekend from Europe has only pointed in the direction of further restrictions across multiple countries, with the Netherlands being the most severe as a full lockdown was announced by the Prime Minister on Saturday that leaves just supermarkets and essential shops open, with even schools shut. When it comes to socialising, people will not be allowed to receive more than 2 visitors aged 13 and over per day, although over 24-26 December, New Year’s Eve and New Year’s Day, this will be raised to 4 people. Elsewhere in Europe there was a similar pattern towards tougher measures, with the Irish PM announcing on Friday evening that there would be an 8pm closing time for bars, restaurants and theatres, among others, which would last from today until January 30. Over in Spain, Prime Minister Sánchez said in a televised address yesterday that he’d be meeting with regional leaders virtually on Wednesday to look at measures for the weeks ahead. In Italy, it’s been widely reported that the government is looking at further measures to contain the spread as well, and they’re set to meet on Thursday to discuss these, whilst here in the UK, Health Secretary Javid was not ruling out further restrictions this side of Christmas. Separately in the US, President Biden is set to deliver a speech tomorrow about Covid and the steps that the administration will be taking, with Press Secretary Jen Psaki tweeting that Biden would also be “issuing a stark warning of what the winter will look like for Americans that choose to remain unvaccinated.” For those after a bit more optimism ahead of Christmas, then a couple of DB research notes out on Friday about the new variant will definitely be of interest. The first by FX Strategist Shreyas Gopal (link here) looks at London, which is the epicentre of Omicron infections in the UK, and tracks cases there against those in the South African province of Gauteng a couple of weeks back. The good news is that if the relationship is similar, then that does suggest a peak in cases soon. The other note comes from our head of rates research Francis Yared (link here) who shows that although deaths are starting to increase in South Africa, they’re currently on a much lower trajectory relative to cases compared to previous waves. An important question for markets is whether these patterns from South Africa can be extrapolated over to the advanced economies, which have much higher vaccination rates on the one hand, but also much older populations on the other, so there are factors that could push in either direction. Keep an eye out on these leading indicators from South Africa, as well as London, since they’ll have implications for what could occur in the coming weeks elsewhere. Away from Covid, the other main piece of news over the weekend came from the US, where the moderate Democratic senator Joe Manchin said that he couldn’t support the Build Back Better package that forms a key part of President Biden’s economic agenda, with much of his proposals on social programs and climate change. The news broke in an interview from Manchin on Fox News Sunday, when Manchin said “I can’t get there” when it comes to supporting the package, and follows direct negotiations that he’d been having with the president. Manchin’s support is crucial for the bill’s passage, since the Senate is split 50-50 between the Democrats and Republicans, with the Democrats having control only by virtue of Vice President Harris’ casting vote. So with zero Republican support for the package, that required every single Democratic senator on board with the proposals, giving Manchin enormous influence. A statement from White House Press Secretary Jen Psaki in response to Manchin did not sound impressed, saying that his comments “are at odds with his discussions this week with the President, with White House staff, and with his own public utterances.” It went on to say that “we will continue to press him to see if he will reverse his position yet again, to honor his prior commitments and be true to his word.” Nevertheless, Manchin’s own written statement wasn’t using the language of compromise, saying that his “Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face.” So the implication from Manchin is that Build Back Better won’t be happening this side of the mid-terms in its current form, and would require a fundamental rethink and meaningful slimming down were it to have any chance of passing. Those twin factors of further Omicron restrictions and Manchin’s announcement have weighed heavily on Asian equities overnight, with the Nikkei (-2.17%), KOSPI (-1.66%), Hang Seng (-1.44%), CSI (-0.98%) and Shanghai Composite (-0.75%) all moving lower. In India, the benchmark NIFTY is also down 10% from its peak in October, putting the index in correction territory. However, we did get a policy easing in China, with banks lowering the 1yr prime rate by -5bps to 3.8%. That move came alongside separate remarks from Bank of Japan Governor Kuroda, who said it was too early to think about policy normalisation, and that discussion should take place once inflation is closer to the 2% target. European and US equities are set to follow Asia lower later on, with futures on both the S&P 500 (-0.97%) and the DAX (-1.63%) both pointing lower this morning. And oil prices been struggling overnight as well in light of the recent virus news, with Brent Crude down -3.02% to $71.30/bbl at time of writing. Recapping last week now, and the main events were the array of central bank meetings ahead of the holidays. In the US, the Fed doubled the pace of their tapering as expected, which would bring net asset purchases to an end in mid-March, and the median dot now expects three rate hikes in 2022. By the close on Friday, Fed funds futures were pricing in a 55% chance of an initial hike by the March meeting, and an 87% chance of one by the May meeting. The ECB was then up next, and started a wind down of net PEPP purchases that are also set to finish in March next year. The ECB is cushioning the landing though, having moved to increase APP purchases until October next year after PEPP ends, following which they’ll maintain a pace of €20bn a month until shortly before liftoff. The ECB maintained some policy optionality through flexibility on PEPP reinvestments, which our Europe economists read as a commitment to smoothing the transmission of monetary policy. In the UK, the BoE hiked Bank Rate by +15bps to 0.25%. The MPC noted the decision was finely balanced due to Covid uncertainty, but the vote was still 8-1 in favour of a hike. Over in Japan, the BoJ rounded out the major DM central bank meetings, keeping rates unchanged and announcing a slow reduction in corporate debt holdings. At the same time, they extended a special covid loans program targeted at small and medium-sized firms to September 2022. When all was said and done, many sovereign bond yields actually ended the week lower, even with the hawkish pivot from the various central banks. 10yr yields on Treasuries (-8.2bps) and bunds (-3.1bps) both declined, although those on gilts did post a small +1.7bps gain over the week. Meanwhile growing Covid pessimism served to dampen risk appetite and send global equity indices lower last week. By Friday the S&P 500 (-1.94%) had fallen for the 3rd week out of the last 4, hampered by an underperformance from tech stocks that saw the NASDAQ (-2.95%) and the FANG+ index (-4.53%) both lose significant ground. Over in Europe the moves were smaller, albeit still lower, and the STOXX 600 ended the week -0.35%.   Tyler Durden Mon, 12/20/2021 - 08:02.....»»

Category: blogSource: zerohedgeDec 20th, 2021

Asian stocks fall on concerns about Omicron variant, tighter Fed policy

"Omicron threatens to be the Grinch to rob Christmas," said Mizuho Bank's Vishnu Varathan. The market "prefers safety to nasty surprises." Asian markets are weighed by concerns about the Omicron variant of the coronavirus and tighter Fed policy.Yves Dean/Getty Images Markets in Shanghai, Tokyo, Hong Kong, and Sydney retreated at the start of the trading week. Spread of the Omicron variant of the coronavirus fueled fears of renewed curbs on business and travel. Investors are also concerned about tighter Federal Reserve policy. Asian stock markets followed Wall Street lower on Monday amid concern about the coronavirus's latest variant and tighter Federal Reserve policy.Shanghai, Tokyo, Hong Kong, and Sydney retreated at the start of a trading week that ends with many closing early for Christmas.Wall Street fell Friday as traders took money off the table after the Fed indicated it would fight inflation by speeding up the withdrawal of economic stimulus.Meanwhile, the spread of the Omicron variant fueled fears that renewed curbs on business and travel might worsen supply chain disruptions and boost inflation."Omicron threatens to be the Grinch to rob Christmas," Mizuho Bank's Vishnu Varathan said in a report. The market "prefers safety to nasty surprises."The Shanghai Composite Index fell 0.8% to 3,605.21 and the Nikkei 225 in Tokyo tumbled 2.1% to 27,942.84. The Hang Seng in Hong Kong sank 1.5% to 22,837.64.The Kospi in Seoul retreated 1.5% to 2,971.59 and Sydney's S&P-ASX 200 lost 0.2% to 7,292.10.India's Sensex opened down 2.1% at 55,811.05. New Zealand gained while Singapore and Jakarta retreated.The US government warned Sunday of a possible surge of "breakthrough infections" due to Americans traveling for the Christmas and New Year holidays.Last week, stocks briefly rallied but then fell after Fed officials said they were willing to speed up the withdrawal of stimulus that has boosted financial markets.Also potentially weighing on sentiment, Sen. Joe Manchin said on Sunday he wouldn't support President Joe Biden's $2 trillion infrastructure, social spending, and climate plan. Manchin's announcement possibly dooms the plan's chances in the evenly split Senate.On Friday, Wall Street's benchmark S&P 500 index fell 1% to 4,620.64, turning in its third losing week out of the past four. The index is 2% below its all-time high and up 23% for the year.The Dow Jones Industrial Average fell 1.5% to 35,365.44. The Nasdaq, dominated by tech stocks, slipped 0.1% to 15,169.68.Fed officials indicated Wednesday it might accelerate the reduction of bond purchases that inject money into financial markets and keep interest rates low. That sets the stage for the Fed to begin to raise rates next year.Inflation has been a growing concern throughout 2021. Higher raw materials costs and supply chain problems have been raising overall costs for businesses, which have increased prices on goods to offset the impact.Consumers have so far absorbed those price increases, but they are facing persistent pressure from rising prices and that could eventually prompt a pullback in spending. Any pullback in spending could then crimp economic growth. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 20th, 2021