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Initial Jobless Claims Bounce From 53-Year-Lows

Initial Jobless Claims Bounce From 53-Year-Lows Initial jobless claims rose from a 53-year low at 194k to 222k last week... Source: Bloomberg The total number of Americans on some form of government dole remains above 2 million... The only cohort that saw an increase in overall claims was 'Regular State'... Virginia and Texas saw the biggest drop in claims last week. North Carolina the biggest jump... So claims are hovering at their lowest in 5 decades... yeah, maybe it's time to taper. Tyler Durden Thu, 12/02/2021 - 08:38.....»»

Category: personnelSource: nytDec 2nd, 2021

Futures Rebound From Post-CPI Rout As China Property Stocks Soar

Futures Rebound From Post-CPI Rout As China Property Stocks Soar US futures rose and European bourses once again rebounded from overnight lows, this time after concerns that scorching US and Chinese CPI and PPI prints will prompt central banks to tighten much sooner than expected. The bounce was aided by a surge in Chinese property developers which booked their best two-day gain in six years, joined by a jump in technology stocks, as investors speculated Beijing may soften regulatory crackdowns on the two industries. At 730am S&P futures were up 16.75 ot 0.36 to 4,658.50, Dow Jones futs were up 40 points or 0.11% and Nasdaq futures were up 97.50 or 0.61%. The dollar index rose and cash Treasurys are closed today for Veterans day. Wednesday’s stronger-than-forecast data on U.S. consumer prices finally crushed the argument that inflation is transitory and weighed on the tech sector in particular as Treasury yields spiked. Tesla shares rose 5% in premarket trading following filings that showed Chief Executive Officer Elon Musk sold $5 billion in stock in the electric-vehicle maker a few days after the shares hit a record high. Disney dropped 4.8% in premarket trading to lead declines among Dow components after reporting the smallest rise in Disney+ subscriptions since the service's launch and posted downbeat profit at its theme park division. SoFi rose as much as 16% in premarket after Jefferies said the fintech’s third-quarter results were a “strong” beat. Amazon-backed electric-vehicle maker Rivian Automotive jumped 4.9%, adding to the nearly 30% gain on its blockbuster trading debut. Chinese tech stocks got some comfort from a report that ride-hailing company Didi Global Inc. is getting ready to relaunch its apps in China by the end of the year as an investigation wraps up. Here are some of the biggest U.S. movers today: Beyond Meat (BYND US) shares plunged 20% in premarket after the maker of plant-based meats released a disappointing sales projection for 4Q. Fossil (FOSL US) jumped 33% premarket after the accessory maker boosted its net sales forecast for the full year. Bumble (BMBL US) the dating app that lets women make the first move, reported earnings in the third quarter that missed analysts’ estimates. The shares fell 7% premarket. Disney (DIS US) shares fall as much as 5.3% in premarket, with analysts flagging softness in its Disney+ subscribers and net income in its fiscal fourth quarter. Rivian (RIVN US) jumps 8% in premarket after the electric truck maker soared in its trading debut on Wednesday. Didi (DIDI US) gains 4% in premarket after Reuters reported that the company is preparing to reintroduce its apps in China by the end of the year as regulators wrap up their investigations into the ride- hailing giant. Marqeta (MQ US) gains 17% premarket, with analysts saying the payments platform delivered a strong beat-and-raise report for 3Q. SoFi Technologies (SOFI US) rises 15% premarket with Jefferies saying the fintech’s 3Q results are a “strong” beat. Figs (FIGS US) shares sank 14% in postmarket trading on Wednesday, after the seller of scrubs for health-care workers reported a third-quarter profit in line with analysts’ estimates. Oscar Health (OSCR US) fell 10% postmarket Wednesday after the upstart health insurer projected a deeper adjusted Ebitda loss for the full year. Payoneer Global (PAYO US), the payment solutions company, gained 8% premarket after its full- year revenue forecast beat the average analyst estimate. Wish (WISH US) fell 2% after the e-commerce services company posted an Ebitda loss for the fourth quarter Despite today's mini relief rally, investors are bracing for tighter monetary policy sooner rather than later, after Wednesday’s stronger-than-forecast data on U.S. consumer prices dealt a blow to the argument that inflation is transitory. Meanwhile, Bloomberg reported that the European Central Bank could stop buying bonds as early as next September if inflation looks to have sustainably returned to the official target, Governing Council member Robert Holzmann said. “This is the perfect time to gravitate toward defensive plays, to take profit and to be in the sectors that are strategically positioned toward this volatile market that presents a lot of challenges,” Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, said on Bloomberg Television. Market participants were also watching developments around the nomination of the Federal Reserve Chair, with President Joe Biden still weighing whether to keep Jerome Powell for a second term or elevate Fed Governor Lael Brainard to the post In Europe, equities pushed into the green after a muted start, with the Stoxx 600 Index up 0.1% while the Euro Stoxx 50 is little changed as France's CAC outperformed and the U.K.’s exporter-heavy FTSE 100 Index rose as the pound held near an 11-month low after better-than-expected economic growth data. Basic resources, construction and banking names are the strongest sectors; travel and oil & gas the notable laggards. The Stoxx Europe 600 basic resources sub-index rose as much as 2.9%, the most in about a month, as iron ore rebounds and other metals rise. Anglo American, Rio Tinto, BHP, Glencore and Norsk Hydro among those leading gains by index points.ArcelorMittal also rallied after 3Q results. Miners are outperforming gains on the Stoxx Europe 600, which is up 0.2%. Iron ore’s rout halted as expectations build for an easing of the real-estate turmoil in China that’s battered demand, while aluminum jumped as supplies of the metal tighten. And speaking of Europe, ECB-dated OIS rates now price ~20bps of hikes by end-2022 as STIRs globally wrestle with the latest hot inflation prints. Here are some of the biggest European movers this morning: Auto Trader jumped as much as 15% to a record high, with Jefferies saying its new guidance should drive mid-single-digit upgrades to consensus estimates for the online car listings platform. Sika shares surge as much as 12% following the acquisition of construction chemicals peer MBCC, with Baader, Vontobel and Morgan Stanley all positive on the deal. ArcelorMittal shares rise as much as 4.4% after the steelmaker’s results, with Citi saying the update has a positive tone despite the numbers missing estimates. Siemens shares rise as much as 2.8% with analysts saying the German industrial group’s update was encouraging, with its dividend among the main positives. Johnson Matthey shares plummet as much as 20% after the company warned on its current trading and said it will exit its battery business. Burberry shares slump as much as 10% after the luxury goods company’s comparable store sales missed market expectations, with analysts saying consensus estimates are likely to remain unchanged, and the focus will be on the upcoming management change. Earlier in the session, Asia’s regional benchmark declined, on track for a third day of losses, after monthly U.S. consumer prices rose at the fastest annual pace since 1990, raising concerns over costs and monetary policy moves. The MSCI Asia Pacific Index slid as much as 0.6%, before paring most of the losses, with several tech hardware stocks weighing on the benchmark and Tencent the biggest drag after its 3Q revenue missed analyst estimates. Still, the Hang Seng Tech Index ended the day higher after Reuters reported that Didi Global is getting ready to relaunch apps in China by the end of the year. Investors have been cautiously eyeing inflation data as the next market catalyst amid the ongoing pandemic. China helped lead Asian stocks lower Wednesday after reporting a spike in producer prices. “The inflation number spoke to scope for greater and longer-lasting tightening, which understandably hurt the tech sector,” said Ilya Spivak, head of Greater Asia at DailyFX. “The vulnerability there is to longer-term financing, because near-term is pretty well locked in for the most part,” he said. India, Taiwan and the Philippines posted the steepest declines Thursday, while Australian equities slid after unemployment unexpectedly jumped in October. China was the top performer as property developers rallied, while Japan’s benchmarks posted their first rise in five sessions as the yen weakened.  Japanese equities rose, rebounding after after a four-day loss, as electronics and auto makers climbed while the yen weakened. Trading houses and machinery makers were also among the biggest boosts to the Topix, which rose 0.3%. Fanuc and SoftBank Group were the biggest contributors to a 0.6% gain in the Nikkei 225. The yen slightly extended its 0.9% overnight loss against the dollar. Tokyo shares fluctuated in early trading after U.S. stocks fell by the most in a month and Treasury yields spiked. Labor Department data showed consumer prices rose last month at the fastest annual pace since 1990, putting pressure on the Federal Reserve to end near-zero interest rates sooner than expected “Investors had been selling value stocks and buying up growth stocks, but now that’s being reversed,” said Mamoru Shimode, chief strategist at Resona Asset Management. Going forward “the environment will be a favorable one for Japanese equities,” he said, noting the local market’s underperformance against global peers. In rates, Treasury futures are mixed with a curve-flattening bent, remaining near low end of Wednesday’s range, when above-estimate CPI and poor 30-year bond auction caused a selloff across the curve. As noted above, the Cash Treasuries market is closed Thursday for Veteran’s Day. Treasury 10-year yields closed Wednesday at 1.549%, nearly 10bp higher on the day; EGBs and gilts are slightly richer on the day out to the 10-year sector, while curves are mildly steeper. Wednesday’s price action in the U.S. sent ripples through European markets, which now price 20bps of ECB rate hikes in December 2022 for the first time since the start of the month.  Euribor futures add 4-6 ticks in red and green packs. Bunds and gilts bear steepen gently. Peripheral spreads widen at the margin. Short end Italy underperforms despite a decent reception at today’s auctions. In FX, the Bloomberg Dollar Spot Index reached its strongest level in a year and the greenback advanced against all of its Group-of-10 peers, with the biggest losses seen among some commodity currencies. Cable inched lower to trade below $1.34 for the first time since December 2020. The U.K. economy grew more strongly than expected in September after a surge in service industries and construction. GDP rose 0.6% from August, the Office for National Statistics said Thursday. That was quicker than the 0.4% pace anticipated by economists. The Australian and New Zealand dollars were the worst G-10 performers; Aussie fell and Australian sovereign yields trimmed an opening spike after the nation’s jobless rate jumped to 5.2%. The initial move was in line with Treasuries, which plunged after U.S. inflation came in at the hottest since 1990. In commodities, crude futures fade a pop higher after quiet Asian trade; WTI is little changed near $81.20, Brent stalls below $83. Spot gold rises back toward Wednesday’s best levels, trading near $1,860/oz. Base metals are in the green with LME aluminum outperforming To the day ahead now, and the main data highlight will be the UK’s preliminary Q3 GDP reading. From central banks, the ECB will be publishing their Economic Bulletin, and speakers include the ECB’s Makhlouf, Schnabel and Hernandez de Cos, along with the BoE’s Mann. Otherwise, the European Commission will be releasing their latest economic forecasts, and it’s the Veterans’ Day Holiday in the United States. Market Snapshot S&P 500 futures up 0.4% to 4,658.25 STOXX Europe 600 up 0.1% to 484.44 MXAP little changed at 197.72 MXAPJ down 0.2% to 647.07 Nikkei up 0.6% to 29,277.86 Topix up 0.3% to 2,014.30 Hang Seng Index up 1.0% to 25,247.99 Shanghai Composite up 1.2% to 3,532.79 Sensex down 0.8% to 59,898.81 Australia S&P/ASX 200 down 0.6% to 7,381.95 Kospi down 0.2% to 2,924.92 Gold spot up 0.7% to $1,862.18 U.S. Dollar Index up 0.19% to 95.03 German 10Y yield little changed at -0.24% Euro down 0.2% to $1.1461 Brent Futures up 0.7% to $83.18/bbl Top Overnight News from Bloomberg The European Central Bank could stop buying bonds as early as next September if inflation looks to have sustainably returned to the official target, Governing Council member Robert Holzmann said China’s efforts to limit fallout from China Evergrande Group’s crisis are gathering steam. A series of articles published in state media in the past few days signal support measures are on the way to help developers tap debt markets, potentially easing a liquidity crunch that began with Evergrande’s meltdown five months ago Customers of international clearing firm Clearstream received overdue interest payments on three dollar bonds issued by Evergrande, a spokesperson for Clearstream said A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed as positive Chinese developer headlines including news of Evergrande payments, helped the region partially shrug off the losses seen stateside where duration sensitive stocks underperformed as yields surged following a hot CPI print and a soft 30yr auction. ASX 200 (-0.6%) declined with the index led lower by tech and energy which followed suit to the heavy losses in their US counterparts and with disappointing jobs data adding to the headwinds. Nikkei 225 (+0.6%) coat-tailed on the advances in USD/JPY which briefly climbed above the 114.00 level and with a slew of earnings releases providing a catalyst for individual stock prices. Hang Seng (+1.0%) and Shanghai Comp. (+1.2%) were varied with notable strength in property names after Evergrande was reported to have paid the overdue interest on three bonds to avoid a default and with China said to be considering moderating property curbs to help troubled developers unload assets. In addition, the PBoC continued with its mild liquidity efforts and it was also reported that the Biden-Xi virtual meeting is tentatively scheduled for next Monday, although weakness in tech capped upside in the Hong Kong benchmark with shares in index heavyweight Tencent pressured post-earnings as the Beijing crackdown decelerated revenue growth to the slowest pace since the Co. listed in 2004. Finally, 10yr JGBs suffered spillover selling from global peers including T-notes which declined by a point to below 131.00 and with prices also hampered after a weak 30yr auction, while focus in Japan shifted to the enhanced liquidity auction for longer dated government bonds which printed a lower b/c although the highest accepted spread returned positive. Top Asian News Indonesian Stocks Close at Record High on Economic Rebound Signs of Easing as Delayed Bond Coupons Paid: Evergrande Update Asia Stocks Slip After U.S. Inflation Spike, Weak Tencent Sales Kaisa Tells Investors It May Not Make Coupon Payments: REDD European equities (Eurostoxx 50 -0.1%) broadly trade mixed following on from this week’s firm inflation reports from the US and China. The handover from APAC was also mixed with focus on China amid notable strength in property names after Evergrande was reported to have paid the overdue interest on three bonds to avoid a default. Furthermore, the PBoC continued with its mild liquidity efforts and it was also reported that the Biden-Xi virtual meeting is tentatively scheduled for next Monday. Stateside, futures are a touch firmer (ES +0.2%) in the wake of yesterday’s cash market losses which saw duration sensitive stocks underperform as yields surged. From a macro perspective, Axios reported overnight that inflation concerns could see US Senator Manchin “punt” President Biden's Build Back Better agenda into next year. Eyes on the Wall St. open will be on Tesla after CEO Musk offloaded USD 5bln of stock in the Co. Back to Europe, Goldman Sachs outlook for 2022 sees a price target for the Stoxx 600 of 530 (vs. current 483) which would deliver a total return of around 13% and mark a continuation of the current bull market, albeit at a slower pace. Sectors in Europe are somewhat mixed with Basic Resources a clear outperformer amid broad strength in mining names and following earnings from ArcelorMittal (+2.9%) which sent the Co.’s shares to the top of the CAC. Banking names are also on a firmer footing amid the favourable yield environment post-CPI with Lloyds (+1.3%) and Commerzbank (+3.0%) supported by broker upgrades at Keefe Bruyette and Morgan Stanley respectively. To the downside, Oil & Gas names are softer as the crude complex struggles to recoup recent losses. Retail names have been weighed on by Burberry (-6.2%) post-earnings with the Co. noting that performance in Europe remains under pressure. Renault (-3.1%) sits at the foot of the CAC after Daimler opted to sell its stake in the Co. for USD 364mln. Finally, Johnson Matthey (-16.3%) is the clear laggard in the region after its CEO announced his decision to step down and the Co. announced it is to exit the battery materials business. Top European News U.K. Growth Data Leave December BOE Rate Rise in the Balance Scholz Aims to ‘Winter Proof’ Germany Against New Covid Wave Kering Says Creative Head Daniel Lee to Leave Bottega Veneta Gas Crunch Fuels RWE Profits as Energy Giant Burns Coal In FX, the Dollar took some time out for reflection and a rest after extending yesterday’s post-US CPI gains with the additional thrust of a supply-related ramp up in Treasury yields following a poor new long bond auction. However, the index could not quite muster enough bullish momentum to touch 95.000 until APAC buyers got a chance to respond to the strength of the inflation data and bear-steepening reaction in debt markets that evolved after initial bear-flattening. The DXY subsequently reset, refuelled and cleared the psychological barrier more convincingly, at 95.101 before fading again as several basket components found underlying bids and technical support around key levels, but still seems bid and upwardly mobile in thinner trading volumes due to Veteran’s Day. NZD/AUD - Perhaps perversely given overnight macro fundamentals, the Kiwi is lagging down under with Aud/Nzd cross elevated near 1.0400, though this could be in recognition of a sharp retreat in NZ food prices and mitigating factors leading to Aussie labour metrics missing consensus by some distance right across the board. Whatever the rationale, Nzd/Usd is lower than Aud/Usd in absolute terms even though the former is holding above 0.7100 and latter has now lost 0.7300+ status. CAD - Weaker WTI crude (in relative terms rather than on the day per se) is not helping the Loonie’s cause after it managed to contain losses on Wednesday, as Usd/Cad hovers near the top of a 1.2535-1.2473 range awaiting the BoC’s Q3 Senior Loan Officer Survey tomorrow for further direction from a Canadian perspective. CHF/EUR/JPY/GBP - All giving up more ground to the Greenback, but to varying degrees with the Franc trying to keep sight of 0.9200, the Euro defend 1.1450 having closed below 1.1500 and a key Fib retracement just shy of the round number, the Yen stay within touching distance of 114.00 and Sterling stop the rot after letting go of the 1.3400 handle again. On that note, a late December 2020 low in Cable at 1.3361 remains intact ahead of 1.3350 for semi-sentimental reasons and then a deep channel trendline from 1.3330-20, while Usd/Jpy has scope to be drawn to decent option expiry interest at 113.70 (1.6 bn) if not similar size spanning 113.60-00. In commodities, WTI and Brent have been choppy this morning with catalysts limited and conditions thinner than normal on account of Veteran’s Day. Price action thus far has seen the benchmarks print a range in excess of USD 1.00/bbl in a narrow timespan, note, that these parameters remain comfortably within yesterday’s levels; currently, both WTI and Brent are at the lower-end of this band as any initial attempt at a recovery has fizzled out with the USD likely a factor. While newsflow directly for the complex has been sparse attention remains on the monthly oil surveys, COVID-19 and geopolitics. Firstly, the OPEC MOMR is scheduled for release today and as a reminder the EIA STEO, under greater focus given US crude/SPR watch, raised 2021 world oil demand growth forecast by +60k BPD to 5.11mln BPD Y/Y increase this week, but cut its 2022 forecast by 130k BPD to 3.35mln BPD Y/Y increase. On COVID, the demand-side is attentive to increasing cases in areas such as Germany with the effective Chancellor-in-waiting Scholz saying further measures will be needed through Winter; additionally, the Netherlands outbreak team are recommending a short lockdown and Beijing has implemented various local measures. Finally, geopolitics is attentive to the situation in Belarus after Lukashenko said they will respond to any sanctions and has suggested closing gas and goods transit through the area. Moving to metals, spot gold and silver remain towards the top-end of yesterday’s parameters, but are only modestly firmer on the session, as newsflow has been slim and the USD’s more gradual upside and lack-of cash UST action is providing a respite from yesterday’s upside. Action that saw spot gold supported by almost USD 40/oz from opening levels. Elsewhere, ArcelorMittal’s earnings update featured a forecast for global steel demand to increase between 12-13% this year excluding China given a softening of real demand. US Event Calendar 9:45am: Nov. Langer Consumer Comfort, prior 49.2 Central Banks Nothing major scheduled DB's Jim Reid concludes the overnight wrap Yesterday was one of those days to just go “wow” at. The headline YoY US CPI rate of 6.2% was the highest since the 6.3% in 1990, which means that unless you’re at least 50 this will be the highest US inflation print of your career. In fact, apart from 2 months in 1990 at 6.3%, you’d have to go back to 1982 to find a higher print. So you’d have to probably be at least 60 to remember anything like this in your work life, other than that brief spike in 1990. In more detail, for the 6th time in the last 8 months, the headline print came in above the consensus estimate on Bloomberg, with prices up by +0.9% on a month-on-month basis (vs. +0.6% expected). If you look at the reading to two decimal places, it was actually the strongest monthly inflation since July 2008, so hardly a sign that those pressures have been dimming as we move towards year end. We’ll go through some of the moves in more depth below, but markets didn’t react well to the prospect of a more inflationary future, with both bonds and equities moving lower as investors moved to price in earlier and a more rapid pace of future rate hikes by the Fed. A horrible 30 year auction 4.5 hours later cemented a big rise in yields on the day. Note US bond markets are closed today for Veterans Day. Equities remain open but trading will be thin. Just completing the inflation picture, the October price rise was a fairly broad-based one that included upward pressure across all the main categories, including components that are tied to more persistent inflation. Admittedly, a big driver was energy inflation (+4.8% on a monthly basis), but even if you stripped out the more volatile factors, core inflation was still up +0.6% (vs. +0.4% expected), sending the annual core inflation measure up to its highest since 1991, at +4.6% (vs. +4.3% expected). There were also further signs of pressure from the housing categories, with owners’ equivalent rent (+0.44%) seeing its largest monthly increase since June 2006. This housing inflation is coming in bang on script (see page 19 of my 1970s chart book here). Medical care services (+0.49%) was also a big contributor to the upside surprise. The broad-based price gains drove trimmed mean and median CPI, measures of underlying trend inflation, to their highest levels since 1983. There’ll understandably be questions for the Fed off the back of this release, and markets responded by bringing forward their pricing of the first rate hike to the July 2022 meeting. In fact, by the close of trade, roughly an extra 13bps of hikes were priced in by end-2022 relative to the previous day. It’s also worth noting that the latest CPI release means that the real fed funds rate in October was beneath -6%, which is lower than at any point in the 1970s, where the bottom was -5% (see page 3 in the same 1970s chart book and draw the line down another few tenths of a basis point). So by this measure, monetary policy is even more accommodative now than it was back then, in a decade that saw inflation get progressively out of control. For more on those 1970s comparisons, take a look at our full note from last month (link here.) Treasuries understandably sold off, led by the front end and belly of the curve, as investors brought forward the likely timing of future rate hikes. 5yr Treasuries increased +13.5bps (the biggest one-day increase since February), and 10yrs +11.4bps (largest increase since September). The yield curve flattened, with 5s30s down -4.9bps to 68.5bps, the flattest since March 2020. Longer-dated yields were drifting higher through the New York session but accelerated after a 5.2bp tail in the 30yr Treasury auction. The tail was the highest since 2011, and primary dealer takedown was almost 2 standard deviations above average over the last year. Unlike after less-than-stellar auctions earlier this year, bonds stabilised for the rest of the day, with the 30yr +8.6 bps higher, only +1.7bps above pre-auction trading. After all, 30yr yields have rallied 26.0bps since early October, inclusive of today’s poor auction, as there has been some long-end duration demand. Indeed, even with the policy rate repricing, 5y5y rates, one proxy for long-run or terminal policy rates, remain below 2%, after increasing just +6.2bps. This is also manifest in record low real yields through the curve. 10yr real yields initially sunk to an all-time low intraday at -1.253% after the CPI print before ultimately increasing +3.0bps on the day to -1.17%. Likewise, 5yr real yields touched -1.97% in the aftermath of the CPI print, and closed the day +2.5bps higher than Tuesday’s close at -1.88%. With nominal yields outpacing real yields, inflation compensation increased across the curve: 5yr breakevens increased +11.1bps to 3.10%, an all-time high, whilst 10yr breakevens increased +6.4bps to a post-2006 high of 2.71%. Gold (+0.97%), and other precious metals, including silver (+1.37%) and platinum (+0.75%) gained, as did Bitcoin, which clipped another all-time high, $68,992, intraday. The dollar (+0.90%) also benefitted. The continued prevalence of high inflation is having increasing political ramifications, and President Biden put out a statement following the release, commenting on the inflation data (as well as the more positive weekly jobless claims). He said that reversing the trend in inflation was “a top priority for me” and laid a decent chunk of the blame at rising energy costs. He said that he’d directed the National Economic Council to look at further ways of reducing energy costs, and that he’d also “asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector”. However, we also heard from moderate Democratic senator Joe Manchin of West Virginia, who tweeted that “the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse. … DC can no longer ignore the economic pain Americans feel every day.” Manchin is a key swing vote on Biden’s Build Back Better Plan, and he has already influenced cutting the bill from the $3.5tn initially envisaged to a framework half that size, due in part to the potential inflationary impact of additional spending. From the Fed however, the only signal we got came from San Francisco Fed President Daly (one of the most dovish FOMC members), who gave an interview with Bloomberg TV shortly following the CPI print. She notably referred to inflation as “eye-popping”, but demurred when asked about changing the course of Fed policy, asserting that it would be premature to “start changing our calculations about raising rates” or to accelerate the pace of tapering. Higher inflation and pricing of aggressive Fed tightening was not a good combination for US risk. The S&P 500 fell -0.82% in its second consecutive decline (which feels like its own record after the recent run), and was down more than a percent intraday. Energy (-2.97%) led the declines (more below) but, tech (-1.68%) and communication services (-1.25%) each declined more than a percent due to the increase in discount rates. Commensurate with the big rate selloff, the Nasdaq (-1.66%) also underperformed. Meanwhile, European equities outperformed, with the STOXX 600 up +0.22% to reach an all-time high, just as the DAX (+0.17%) and the CAC 40 (+0.03%) also hit new records. To be fair, US equities were only slightly down on the day when European bourses closed. Sovereign bonds echoed the US moves however, and a selloff across the continent saw yields on 10yr bunds (+4.9bps), OATs (+6.8bps) and BTPs (+9.5bps) all move higher. Stocks in Asia are trading mixed overnight with CSI (+0.89%) leading the pack, followed by the Shanghai Composite (+0.59%), and the Nikkei (+0.56%) in the green while the Hang Seng (-0.16%) and KOSPI (-0.59%) have lost ground. Staying on inflation, Japan’s PPI for October came out at 8.0% year-on-year (7.0% consensus and 6.3% previous), the highest since 1981. Elsewhere, in Australia the unemployment rate for October saw a big surprise, jumping to 5.2% (4.9% consensus, 4.6% previous) as many people re-entered the labour force after lockdowns. The participation rate rose to 64.7% from 64.5% in September. Futures are indicating a muted start to the day in the US & Europe with S&P 500 futures (+0.08%) up but DAX futures (-0.28%) catching down with the late US sell-off. One solace on the inflation front was a decline in energy prices yesterday, with both Brent crude (-2.52%) and WTI (-3.34%) losing ground. That followed 3 consecutive gains and came after the US EIA reported that crude oil inventories had risen by +1.00m barrels last week. There was also another decline in natural gas prices, with US futures falling -1.99% in their 4th consecutive decline, whilst European futures were down -4.06%. Looking at yesterday’s other data, the weekly initial jobless claims for the US over the week through November 6 fell to 267k (vs. 260k expected). That’s their 6th successive weekly decline and takes the measure to a post-pandemic low. To the day ahead now, and the main data highlight will be the UK’s preliminary Q3 GDP reading. From central banks, the ECB will be publishing their Economic Bulletin, and speakers include the ECB’s Makhlouf, Schnabel and Hernandez de Cos, along with the BoE’s Mann. Otherwise, the European Commission will be releasing their latest economic forecasts, and it’s the Veterans’ Day Holiday in the United States. Tyler Durden Thu, 11/11/2021 - 07:48.....»»

Category: personnelSource: nytNov 11th, 2021

Futures Melt Up To New Record High Ahead Of Payrolls

Futures Melt Up To New Record High Ahead Of Payrolls US index futures continued their relentless meltup on the last day of the week, before today's jobs report which is expected to bounce strongly from last month's disappointing print (exp. 450K, up from 194K), and could set the pace for the Fed's taper into 2022 if it is too much of an outlier in either direction. At 730am, e-mini S&P futures were up 8.25 or 0.18% to 4,681.5, a new all time high; Nasdaq futures rose 48 points or 0.29% and Dow futures were up 35 or 0.1%. 10Y yields were flat at 1.53% and the dollar index jumped, while Brent traded just above $80 after yesterday's rout. “Investors took comfort from the Federal Reserve’s slow and steady approach when announcing the time-line for its taper program,” said Michael Hewson, chief market analyst at CMC Markets in London. “Today’s payrolls report should confirm that the U.S. labor market is still improving.” After one of the busiest earnings days this season, it has been a furious session with Expedia to News jumping in premarket trading on better-than-expected results.  Airbnb jumped 7.7% after the travel website reported record sales and earnings that exceeded analyst estimates. Meanwhile, Peloton crashed 33% after the fitness company cut its annual revenue forecast by as much as $1 billion because of declining demand in the post-pandemic economy.  Here are some of the biggest U.S. movers today: Peloton (PTON US) shares tanked 32% in U.S. premarket trading after analysts said its results and reduced guidance implied weaker demand than expected, and that the home-fitness company’s business model may need a rethink Square (SQ US) shares drop 4.5% in U.S. premarket trading after its 3Q results fell short of the consensus estimate, but its outlook remains strong, analysts say. The weakness in its Cash App and Bitcoin revenue could have been predicted, they added. Airbnb (ABNB US) shares rose 8% in U.S. premarket after the vacation-rental giant reported record sales and earnings that beat analysts’ estimates. RBC and Barclays hiked their price targets, citing improving earnings and supply-demand dynamics in 2022 NRX Pharmaceuticals (NRXP US) and Relief Therapeutics (RLF SW), which are partners on a drug to treat Covid-19, tumbled after the U.S. Food and Drug Administration declined to issue an emergency use authorization for the medication. GoPro (GPRO US) shares soar 17.2% premarket Tuesday after the maker of mountable and wearable cameras reported third-quarter results that exceeded analyst estimates Expedia (EXPE US) shares rally in premarket trading, as the online travel agency reports third-quarter revenue and adjusted earnings that beat expectations. The company’s CEO also gave positive commentary about a recovery in the travel industry Novavax (NVAX US) climbs as much as 6% after the biotech company said it filed with the World Health Organization for emergency use listing for its Covid vaccine Pinterest (PINS US) rises 5% in premarket trading after the company reported stronger-than-expected profit and revenue that met analysts’ estimates Microchip (MCHP US) gains 2.5% in premarket trading after projecting revenue and adjusted EPS that exceeded the average analyst estimates Ontrak (OTRK US) jumped 24% postmarket after the tele-health company boosted its full-year guidance Grid Dynamics (GDYN US) jumped 18% in postmarket trading after the information-technology services company forecasts full-year revenue that beat the average analyst estimate Pfizer (PFE) surged more than 10% after the company announced it would seek approval for a new covid pill after strong trial data. Looking ahead now, we’ll cap off a very busy macro week today with the US jobs report for October As previewed earlier, consensus expects +450k increase in nonfarm payrolls, which in turn would send the unemployment rate down a tenth to a post-pandemic low of 4.7%. The last couple of jobs reports have seen some downside surprises, but if realized, that +450k number would be the strongest jobs growth in 3 months. We’ve had some fairly positive labor market data in advance of the jobs report too, with the ADP’s report of private payrolls exceeding expectations on Wednesday at 571k (vs. 400k expected), and yesterday the weekly initial jobless claims for the week through October 30 fell to a fresh post-pandemic low of 269k (vs. 275k expected). The Fed made it clear this week that labor market evolution after the delta variant will be a key determinant in the future path of monetary policy. In any case, risk euphoria was strong with Europe as well, where stocks scaled another record peak as consumer and tech companies led the Stoxx Europe 600 Index up 0.2% to an all-time high poised for the longest winning streak since mid-June. FTSE MIB and FTSE 100 outperformed at the margin. Technology stocks outperformed, while energy and travel and leisure stocks declined. Among the biggest movers, Allegro.eu SA soared 7.8% after Poland’s largest e-commerce bought a Czech peer in a $1 billion deal. Euronext NV fell 4.4% after the exchange operator’s third-quarter results undershot expectations. However, most travel stocks dropped as a fourth wave of the pandemic hits the continent, with Germany reporting record infections. European stocks extended October’s recovery to return to their all-time highs, as investors scooped up the region’s stocks thanks to a reassuring earnings season and as central banks signal they are in no hurry to raise interest rates just yet. “We’ve seen a fairly benign reaction to the earnings season, in some respects. Perhaps people were a little bit nervous going into it,” Alastair George, chief investment strategist at Edison Group, said by phone. “The market troughed in the early part of October and has bounced back since then, and if we look at earnings revisions, they’re not as robust as they were earlier on in the Covid recovery cycle, but we’re not seeing downgrades,” George added. Asian equities fell, as a slide in bond yields globally and a decline in Hong Kong-listed tech shares weighed on sentiment. The MSCI Asia Pacific Index slid as much as 0.5%, led lower by consumer discretionary and utility shares. Alibaba and Tencent were the biggest drags with analysts accessing earnings outlooks ahead of the companies’ quarterly results announcements. Hong Kong’s Hang Seng Tech Index fell 1.6%, while the benchmark Hang Seng Index dropped 1.4%. Traders are now awaiting the U.S. jobs report later Friday for further cues on monetary policy tightening. “Markets will be seeking confirmation on whether the job market recovery warrants a mid to late-2022 lift-off in rates as reflected in the Fed funds futures,” Jun Rong Yeap, market strategist at IG Asia, wrote in a note. The Asian stock benchmark is set for a weekly rise of less than 1% as the earnings season progresses. Supply-chain constraints and inflation worries are being cited as concerns by many of the largest companies in the region, with several seeing their shares tumble as the chip shortage prompts them to slash their annual profit forecasts. India’s stock market was closed for a holiday Friday. Japanese stocks fell as the yen held its strength against the dollar and investors assessed the potential supply response from the U.S. to a gradual hike in production from OPEC+. The Topix index dropped 0.7% to close at 2,041.42 in Tokyo, while the Nikkei 225 declined 0.6% to 29,611.57. Toyota Motor contributed the most to the Topix’s loss, decreasing 1.4%. Out of 2,181 shares in the index, 540 rose and 1,589 fell, while 52 were unchanged. Japan’s currency was little changed at 113.64 yen per dollar, after gaining 0.2% on Thursday Australia's S&P/ASX 200 index rose 0.4% to 7,456.90, its highest close since Sept. 16. The benchmark gained 1.8% for the week.  Eight of the 11 subgauges finished Friday trade higher, with miners and healthcare stocks driving the gains.  The Reserve Bank of Australia struck an upbeat note on the economy, while maintaining that faster wages growth and inflation will take some time and the first interest-rate increase is unlikely before 2024. Administration soared after receiving a conditional, non-binding indicative takeover proposal from investment fund Carlyle Asia Partners V. Clinuvel tumbled after it was cut to hold at Jefferies.  In New Zealand, the S&P/NZX 50 index rose 1% to 13,074.61. In FX, the Bloomberg Dollar Spot Index reached its strongest level in more than three weeks as the greenback was steady or higher versus all of its Group-of-10 peers. The euro traded near its cycle lows following strong U.S. data and renewed dovish commentary by European Central Bank officials and options now paint a similar outlook. The slowdown in inflation next year may not be as intense and quick as the European Central Bank had anticipated a few months ago, ECB Vice President Luis de Guindos says. The pound fell against all its Group-of-10 peers and gilts rallied, sending yields down by as many as 5 basis points. Money markets no longer fully price the Bank of England raising its key rate to 1% in Dec. 2022, pushing bets out to Feb. 2023. Labor market data is an important piece of the jigsaw for the BOE, Governor Andrew Bailey says in an interview with BBC Radio 4. Australia’s 10-year bonds had their first weekly gain in more than two months after the BOE joined the RBA and the Fed in pushing back against aggressive rate-hike bets; the Aussie and Kiwi weakened. The yen rose as traders unwound bearish bets on the currency before the release of key U.S. jobs data and repricing of the outlook for policy tightening. In rates, the 10Y yield was unchanged at 1.53%. Gilts extend Thursday’s post-BO shockE rally, richening ~5bps across the curve in a modest flattening move. Short sterling futures add 2.5-3 ticks in red and green packs as expectations for higher rates are pared back. MPC-dated OIS rates factor in only 11bps of hike by the December meeting and no longer fully price the Bank’s rate at 1% by end-2022. Bunds follow, cash USTs drift ahead of today’s payrolls release. In commodities, crude futures hold a narrow range after OPEC+ rebuffed U.S. demands for accelerated output.with WTI trading just below $80. Spot gold drifts higher, briefly testing $1,800/oz. Base metals are mixed: LME lead and tin rally, zinc drops over 1.5% with canceled warrants hitting the highest since August To the day ahead now, and the main data highlight will be the aforementioned US jobs report, but European data will also include September figures on Euro Area retail sales and German and French industrial production. Central bank speakers will include the ECB’s Vice President de Guindos, as well as the ECB’s Holzmann, Centeno and Panetta, in addition to the BoE’s Ramsden, Pill and Tenreyro. Market Snapshot S&P 500 futures little changed at 4,674.25 STOXX Europe 600 up 0.1% to 483.89 German 10Y yield little changed at -0.24% Euro little changed at $1.1558 MXAP down 0.4% to 198.36 MXAPJ down 0.3% to 645.66 Nikkei down 0.6% to 29,611.57 Topix down 0.7% to 2,041.42 Hang Seng Index down 1.4% to 24,870.51 Shanghai Composite down 1.0% to 3,491.57 Sensex up 0.5% to 60,067.62 Australia S&P/ASX 200 up 0.4% to 7,456.94 Kospi down 0.5% to 2,969.27 Brent Futures up 0.8% to $81.22/bbl Gold spot up 0.4% to $1,798.55 U.S. Dollar Index little changed at 94.35 Top Overnight News from Bloomberg Germany reported record Covid-19 infections for a second straight day, as a fourth wave of the pandemic hits Europe and threatens to overwhelm hospitals in some hot spots The increasingly influential expectations gap between bond traders and central bankers faces a fresh test Friday -- U.S. jobs data that could reignite or damp out the inflation concerns policy makers tried to downplay this week A shortage of homes for sale and a buoyant labor market are expected to underpin the U.K. housing market as consumers come under pressure from soaring inflation and higher interest rates, according to Halifax A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded cautiously following a somewhat mixed handover from the US where the S&P 500 and Nasdaq extended on fresh record highs with outperformance in rate-sensitive stocks alongside the rally in global bonds. However, the DJIA lagged but with only marginal losses as attention shifted to the upcoming NFP jobs data, while Chinese developer default concerns provided headwinds in Asia after reports Kaisa Group missed a payment on its wealth management product. ASX 200 (+0.4%) was underpinned by strength in the mining-related sectors as gold producers benefitted from the recent advances in the precious metal which approached just shy of the USD 1800/oz level and with sentiment also helped by the continued dovish tone by the RBA in its quarterly Statement on Monetary Policy, although advances were capped amid losses in tech and with energy names suffering due to lower oil prices. Nikkei 225 (-0.6%) weakness was a function of recent adverse currency flows but with downside stemmed as participants digest a slew of earnings releases and reports the government is considering cash handouts of JPY 100k to under-18s. Hang Seng (-1.4%) and Shanghai Comp. (-1.0%) were both subdued with Hong Kong pressured by losses in the blue chip financial, tech and energy stocks and with property names also constrained by the missed Kaisa Group payment which the Shenzhen-based developer plans to repay in instalments. It was also reported that China told certain smaller banks to limit wealth products, although the losses in the mainland were cushioned after the PBoC upped its liquidity effort despite still resulting in a net daily drain. Finally, 10yr JGBs were higher following on from the gains in global counterparts which were spurred by the surprise BoE hold on rates and with the weakness in Japanese stocks also helping keep bond prices afloat, with price action also unfazed by the lack of purchases from the BoJ which were instead seeking to buy corporate bonds with 1yr-3yr maturities for Nov. 10th. Top Asian News Japan Eases Many Covid-Era Border Restrictions as Cases Slump Developer in China Misses Payment on Loan Backed by Fantasia World’s Largest Pension Fund GPIF Posts $17 Billion Gain HSBC Requests All of Its Hong Kong Staff to Get Vaccinated European equities broadly trade on a marginally firmer footing (Euro Stoxx 50 +0.4%; Stoxx 600 +0.2%) with the Stoxx 600 set to close the week out with gains of around 1.6%. Macro commentary for the session has been relatively light thus far in the wake of yesterday’s BoE surprise. The handover from the APAC session was predominantly a negative one with Hang Seng (-1.4%) and Shanghai Comp. (-1%) both subdued as stocks in Hong Kong were pressured by losses in the blue-chip financial, tech and energy stocks and with property names also constrained by the missed Kaisa Group payment which the Shenzhen-based developer plans to repay in instalments. Stateside, futures have been inching higher ahead of the latest US jobs report with consensus looking for a 450k addition in nonfarm payrolls. Events in Washington are also worth keeping an eye on after CNN’s Raju reported yesterday that House Dems see Friday as the day they can finish the rule, USD 1.75tln Build Back Better bill and infrastructure bill. The Infrastructure bill would then go to Biden’s desk and the USD 1.75tln bill would go to the Senate for further negotiation with Manchin and other Senate Dems. Back to Europe, sectors are relatively mixed with Telecom names outperforming amid gains in BT (+1.8%) who sit at the top of the FTSE 100 as speculation continues to rumble on that billionaire investor Patrick Drahi could make a move for the Co. Deutsche Telekom is also providing support for the sector after confirming that IFM is to buy 50% in Co's Glasfaserplys GmbH for EUR 900mln. To the downside, Travel & Leisure names lag as opening gains for IAG (-2.1%) proved to be fleeting with the Co. warning of a potential EUR 3bln FY loss alongside Q3 earnings. Elsewhere, Oil & Gas names are trading lower alongside losses in the crude complex, with Basic Resources also near the foot of the leaderboard. Top European News Adler Pressure Builds With Idle Cranes and Angry Berlin Buyers Axa Jumps to More Than 3-Year High After Share Buyback Plan Europe Gas Prices Rebound as Traders Eye Russia’s Next Move ECB’s Guindos Says Inflation Will Slow in 2022 ‘Without a Doubt’ In FX, the Dollar index has gained some traction and has broken out of the 94.273-417 APAC range in the run-up to the US labour market report – with the headline NFP print forecast at 450k (full preview available in the Newsquawk Research Suite), although anything short of an extreme jobs reports this month will likely not sway the Fed's dials following the taper announcement earlier this week - which will commence later this month. On the fiscal front, the US House is to meet at 12:00GMT/08:00EDT to debate the procedural rule to put the social spending bill on the floor. Democrats hope to debate and vote on the social spending and infrastructure bills today, according to Fox. From a technical perspective, DXY eyes yesterday 94.475 high ahead of the YTD peak at 94.563. GBP, EUR - Sterling is the marked laggard thus far in what is seemingly a hangover on the day after the BoE coupled with Brexit risk, as the UK and EU's Brexit negotiators are set to meet in a bid to temper down cross-channel frictions. Governor Bailey made an appearance on UK radio this morning but failed to provide much in the way of additional colour regarding yesterday's policy decision – with markets currently assigning a 2/3 chance of a 15bps hike in December. On that note, BoE's new Chief Economist Pill, alongside MPC members Tenreyro and Ramsden, are all slated to speak throughout the session. Over to Brexit developments, RTE's Connelly recently reported that there is a "growing expectation" that the UK will trigger Article 16 - suggesting that "the view is that the EU's response could be much swifter and more 'radical' than expected.", although a special meeting of the bloc's leaders will likely be needed before any move. From a technical standpoint, EUR/GBP breached overnight resistance at 0.8565 before briefly topping the 200 DMA at 0.8584. In turn, GBP/USD declined from its 1.3508 high to a base sub-1.3450, with some traders suggesting the pair ran into sellers just ahead of a Fib level at 1.3511. EUR is supported by the EUR/GBP cross, with EUR/USD relatively flat on the day and still above yesterday's 1.1527 low. EUR/USD also looks ahead to some OpEx – with EUR 1.4bln between 1.5555-60 alongside some EUR 725mln at strike 1.1575. AUD, NZD, CAD - The high-beta non-US dollars all post modest intraday losses. The Aussie sits at the bottom of this bunch after the RBA's SoMP overnight reiterated a patient approach, with headwinds also felt by a decline in iron ore prices overnight whilst copper trades lacklustre. NZD is softer in sympathy whilst the Loonie bears the brunt of lower post-OPEC crude prices. AUD/USD has declined from a 0.7408 peak and dips under its 200 DMA (0.7379) ahead of the 50 DMA (0.7364). NZD/USD meanwhile loses ground under the 0.7100 mark – which also coincides with its 21 and 200 DMAs. USD/CAD eyes its 200 DMA at 1.2479 from a 1.2450 base in the run-up to the Canadian jobs report – with the pair also cognizant of USD 1.3bln in OpEx between 1.2500-05. In commodities, WTI and Brent front-month futures consolidate following yesterday's post-OPEC+ declines and heading into today's main event – the US labour market report. To recap the OPEC+ confab, ministers opted to continue the current plan to hike monthly output by 400k BPD (despite calls from the US to up output by 600-800k BPD), whilst reports also suggested that there will be no compensation for the underproduction seen from some nations. Traders are now on the lookout for a US response, with Washington yesterday reiterating the use of tools against oil prices. As a reminder, US Energy Secretary Granholm in an FT interview in October raised the prospect of an SPR release, whilst also refusing to rule out a ban on oil crude oil exports, suggesting “it is also a tool”. From the demand side, China’s economic slowdown has prompted JPM to downgrade the nation’s GDP growth forecast by 1ppt to 4.0%, citing the lingering impact of the power crunch and resurgence in COVID. It’s also worth noting that next week will see the Chinese inflation metrics, with oil prices expected to contribute to another Y/Y rise in PPI. WTI Dec trades just under USD 80/bbl (vs 78.96/bbl low) whilst Brent Jan trades on either side of USD 81/bbl (vs low 80.26/bbl). Turning to metals, spot gold and silver are uninteresting heading into the US jobs report whilst LME copper remains under USD 9,500/t. Overnight, Dalian iron ore futures fell once again to log a fourth consecutive week of losses amid China’s crackdown on the raw material. US Event Calendar 8:30am: Oct. Change in Nonfarm Payrolls, est. 450,000, prior 194,000 Change in Private Payrolls, est. 420,000, prior 317,000 Unemployment Rate, est. 4.7%, prior 4.8% Underemployment Rate, prior 8.5% Labor Force Participation Rate, est. 61.7%, prior 61.6% Average Hourly Earnings YoY, est. 4.9%, prior 4.6% Average Hourly Earnings MoM, est. 0.4%, prior 0.6% Average Weekly Hours All Emplo, est. 34.8, prior 34.8 3pm: Sept. Consumer Credit, est. $16b, prior $14.4b DB's Jim Reid concludes the overnight wrap Markets had another buoyant session yesterday as they received a dovish surprise from the Bank of England, just as they were digesting the Fed’s tapering decision from the previous evening. In response, markets shifted gear and pushed back pricing of future rate hikes, which in turn led to a sharp rally across the curve in sovereign bond markets in every major economy. And with investors lowering the odds of a near-term removal in monetary policy support, that helped equities take another leg higher, with the S&P 500 (+0.42%) advancing for the 15th time in the last 17 sessions to reach a fresh all-time high. We’ll start with the BoE as they generated the main headlines, and contrary to building expectations that a potential rate hike could be imminent, the MPC in fact voted by 7-2 to keep Bank Rate on hold at 0.1%, with only the most hawkish members favouring a 15bps increase. This came in spite of the fact that the BoE upgraded their inflation forecasts yet again, now seeing CPI peaking “at around 5% in April 2022”. The meeting summary did say that if the data was in line with their projections it would “be necessary over coming months to increase Bank Rate”, but overall it was a pretty dovish decision, with the MPC also voting by 6-3 to continue with its existing QE program. In their forecasts that were conditioned on the market-implied path for Bank Rate, they said “a margin of spare capacity is expected to emerge”, and that CPI would be beneath target at the end of the forecast period, so again pushing back against market pricing that had been looking for multiple hikes in 2022. In response, our UK economists have shifted their call for lift-off of 15bps to December, before seeing further 25bps hikes in May 2022 and February 2023. For more details, see their reaction note (link here). Markets reacted strongly to the decision as investors were surprised by the extent of the BoE’s dovishness. Gilts rallied sharply and outperformed sovereign bonds elsewhere, with 5yr yields (-20.0bps) seeing their biggest move lower in over 5 years, back in the immediate aftermath of the 2016 Brexit referendum. The 2yr yield was also down a massive -21.1 bps, marking its own biggest move lower since the initial market panic over Covid-19 back in March 2020. And sterling (-1.37%) had its worst performance against the dollar so far this year, which therefore left it as the worst performer among the G10 currencies too. The BoE meeting triggered a rally of global sovereign bonds, though whilst the gilt curve bull steepened, most other curves wound up flatter on the day. In the US, yields on 10yr Treasuries fell -7.7 bps to 1.53%, marking their biggest move lower since August, whilst the 2yr Treasury yield retreated -4.4bps. Real yields continue to drive the treasury curve, with the 10yr real yield down -8.6 bps to move back beneath -1% again. Elsewhere in Europe, yields on 10yr bunds (-5.6bps), OATs (-6.4bps) and BTPs (-11.4bps) all declined as well, with lower real yields the driver once again. This dramatic shift to price in greater monetary support for longer was good news for equities yesterday, with the major indices pressing on to fresh all-time highs. By the close of trade, the S&P 500 (+0.42%) had hit a new record, though in reality it was a fairly narrow-based advance, with fewer than half of the companies in the index actually moving higher on the day, whilst financials (-1.34%) underperformed against the backdrop of lower yields and a flatter curve. Interest-sensitive tech stocks did much better, with the NASDAQ (+0.81%) also at a record high as it achieved a 9th consecutive daily advance, its longest winning streak since 2019, whilst the FANG+ index of megacap tech stocks advanced +1.29% to reach a fresh high of its own. Over in Europe, the STOXX 600 (+0.41%) hit a record high too, even if the index was similarly hampered by financials (-0.86%), and records were also attained by Germany’s DAX (+0.44%) and France’s CAC 40 (+0.53%). That rally in equities hasn’t carried over into Asia this morning where indices including the Nikkei (-0.72%), the KOSPI (-0.65%), the Hang Seng (-0.96%) and the Shanghai Composite (-0.25%) are all trading lower. However, the surge in sovereign bonds has been echoed elsewhere, with yields on Australian 10yr debt down -4.0bps this morning, and bonds also advanced in China after the PBOC increased their short-term cash injections yet again. Speaking of Chinese debt, Kaisa Group Holdings Ltd, a developer, and its units listed in Hong Kong were suspended from trading after the company missed payments on wealth products and raised liquidity concerns. Meanwhile, the latest Covid-19 outbreak in China continued to spread, with a further 90 new cases reported on Friday, 22 of which were asymptomatic. Otherwise, S&P 500 futures (+0.01%) are almost unchanged this morning and yields on 10y Treasuries have moved up +1.2bps. Looking ahead now, we’ll cap off a very busy macro week today with the US jobs report for October, which is out at 12:30 London time. In terms of what to expect, our US economists are looking for a +400k increase in nonfarm payrolls, which in turn would send the unemployment rate down a tenth to a post-pandemic low of 4.7%. The last couple of jobs reports have seen some downside surprises, but if realised, that +400k number would be the strongest jobs growth in 3 months. We’ve had some fairly positive labour market data in advance of the jobs report too, with the ADP’s report of private payrolls exceeding expectations on Wednesday at 571k (vs. 400k expected), and yesterday the weekly initial jobless claims for the week through October 30 fell to a fresh post-pandemic low of 269k (vs. 275k expected). The Fed made it clear this week that labour market evolution after the delta variant will be a key determinant in the future path of monetary policy. Speaking of the Fed, it was reported by Dow Jones that Fed Chair Powell was seen visiting the White House yesterday. It comes with just 3 months left until the end of Powell’s current 4-year term, and follows President Biden saying on Tuesday that an announcement on the Fed position would come “fairly quickly”. For reference, the decision on who would be nominated as Fed Chair had already been announced at this point 4, 8 and 12 years ago. As well as the BoE, the other important meeting was that from the OPEC+ group, who rejected the demands from President Biden and others for a larger increase in oil production. They decided to increase output by +400k b/d in December, though afterwards oil actually gave up its surge earlier in the day to end the session lower, with WTI moving all the way from an intraday peak where it was up +3.17% to close down by -2.54%. A spokesperson for the US National Security Council said that the US would consider a range of tools to deal with oil prices, and Energy Secretary Granholm said last month that releasing crude oil from the strategic petroleum reserve was being considered. Lastly on the data front, the Euro Area composite PMI for October was revised down a tenth from the flash reading to 54.2, whilst the services PMI was also revised down a tenth to 54.6. Separately, the Euro Area PPI reading for September came in at +16.0% year-on-year (vs. +15.4% expected). Lastly, the preliminary Q3 reading of nonfarm productivity showed an annualised decline of -5.0% (vs. -3.1% expected), which was its largest quarterly decline since 1981. To the day ahead now, and the main data highlight will be the aforementioned US jobs report, but European data will also include September figures on Euro Area retail sales and German and French industrial production. Central bank speakers will include the ECB’s Vice President de Guindos, as well as the ECB’s Holzmann, Centeno and Panetta, in addition to the BoE’s Ramsden, Pill and Tenreyro. Tyler Durden Fri, 11/05/2021 - 08:12.....»»

Category: personnelSource: nytNov 5th, 2021

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

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

Category: blogSource: zerohedgeNov 4th, 2021

Futures Slide Dragged Lower By Amazon And Apple

Futures Slide Dragged Lower By Amazon And Apple US equity futures fell along with European and Asian stocks on Friday after tech giants Amazon and Apple and Starbucks sank in premarket trading after their earnings missed expectations, signaling a possible drop of around $180 billion in combined market value when the U.S. reopens, while dizzying bond-market gyrations sparked by surprise central bank announcements amid concerns over inflation and monetary tightening left investors scrambling to guess what happens next. A failure by Biden and the Democrats to pass their massive Build Back Better stimulus package added to the bearish sentiment. At 7:15 a.m. ET, Dow e-minis were down 45 points, or 0.12%, S&P 500 e-minis were down 22 points, or 0.5%, and Nasdaq 100 e-minis were down 138 points, or 0.88%. 10Y yields rose 3bps to 1.61%; the dollar rose while bitcoin was flat at $61,000. “Disappointment on Apple and Amazon results will likely weigh on the market sentiment,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “And there is little to improve the mood, as Joe Biden is still struggling to pass his mega spending bill, the Covid delta-plus cases are surging and the U.S. growth fell short of expectations in the latest read.” There was some relief out of China, where some Evergrande Group bondholders were said to receive an overdue interest payment shortly before the expiry of a grace period, buying more time for the debt-stricken property developer as it tries to raise cash through asset sales. Separately, Joe Biden was dealt a setback on Thursday as the House of Representatives abandoned plans for a vote on an infrastructure bill with progressives seeking more time to consider his call for a separate $1.75 trillion plan for social initiatives. Here are some of the biggest U.S. movers today: Apple slides 3.6% in U.S. premarket trading after the iPhone maker reported disappointing fourth-quarter results and warned about the impact of chip shortages, rekindling worries about the key holiday quarter Amazon slumps 5% in premarket trading after its forecast for holiday sales fell short of analysts’ estimates, signaling the pandemic’s boost to online shopping continues to fade Meta Materials up 2.9% in premarket trading after soaring as much as 32% Thursday postmarket as investors mistook it for Facebook Inc. following the Internet giant’s rebrand Western Digital shares drop 10% in premarket trading after its earnings forecast missed estimates U.S. Steel surges 8% in premarket trading as investors cheer a stock buyback and a hike in dividends Starbucks shares decline as much as 4.9% in U.S. premarket trading as the $20b in new payouts to shareholders failed to offset quarterly results that fell short of expectations B. Riley Financial gained in Thursday late trading after announcing a $4 dividend, composed of a $3 special one-time payout and a doubling of its regular quarterly dividend to $1 DaVita Inc.fell 6.7% in after-hours trading after cutting the top end of its forecast for 2021 adjusted earnings per share from continuing operations Plantronics tumbled 12% postmarket after the headset maker reported second- quarter revenue that missed its own guidance, as well as analyst estimates A10 Networks shares rose 7.5% in extended trading on Thursday after the computer networking products company said it is confident in accelerating growth beyond the previous targets of 6-8% Tailwind Two shares rose 4.9% Thursday postmarket after Terran Orbital Corp., a builder of small satellites, said it is merging with the SPAC and plans to go public in the first quarter of 2022 Focus now turns to the latest readings on U.S. consumer spending and the Federal Reserve’s preferred inflation gauge, the core PCE price index, due at 8:30 a.m. ET, for clues on the health of the economy ahead of the central bank’s policy meeting next week. “(The data) will carry rather more weight with markets. High prints may see the Fed taper trade priced into the end of the week, with stocks lower, especially above the one-two punch from Apple and Amazon,” said Jeffrey Halley, senior market analyst, Asia Pacific, OANDA. “Some actual concrete progress on the U.S. spending bills instead of empty rhetoric could give a pleasant boost to markets in the end of the week as well.” In Europe, the Stoxx 600 index extends losses to hit session low, with most sectors declining, as data showing accelerating euro-area inflation stoked concern of faster rate hikes. The Index was -0.8% as of 11:28 am in London, trims best monthly gain since March Real estate, technology sectors are worst performers, while insurance and energy outperform. BBVA jumped 6.1% in Madrid after it announced the start of a planned stock buyback and reported earnings that beat estimates. Asian equities headed for their third day of declines as disappointing results weighed on big technology stocks, and financials fell as bond-yield curves continued to flatten. The MSCI Asia Pacific Index slid as much as 0.6%, with TSMC, Tencent, AIA and Ping An among the biggest drags. The regional benchmark was set for a weekly loss of 1.1%, its worst in four weeks. The U.S. Treasury yield curve inverted between 20 and 30 years on Thursday, a sign that investors expect central-bank policy tightening to lead to slower economic growth and inflation. Meanwhile, Apple and Amazon.com slid in late trading after reporting weak sales, hurt by the global supply-chain crisis.  “U.S. stock futures and South Korean stocks fell following the drop in Apple,” said Hiroshi Namioka, chief strategist at T&D Asset Management Co. “Investor sentiment deteriorated on concerns about the impact of supply constraints on stocks beyond firms related to Apple.” Benchmarks in Hong Kong, the Philippines, India and Australia were also among the worst performers. The biggest gains were in Indonesia, China and New Zealand In rates, the 10-year US Treasury yield climbed to 1.61% before easing 1 basis point. The curve between 20- and 30-years has inverted for the first time since the U.S. government reintroduced a two-decade maturity in 2020 as inflation pressures and the prospect of interest-rate hikes are whipsawing bond markets. Treasury futures remain near lows of the day into early U.S. session, after trading heavy during Asia session, when Australian bond yields surged as the central bank’s decision not to defend its yield target on Friday fueled bets that policy makers may soon scrap the program. In Treasury futures, multiple block trades shortly after 6am ET were consistent with a curve-steepening wager. Yields were cheaper by 2bp-3bp across the curve, keeping spreads broadly within 1bp of Thursday’s close; 10-year yields around 1.605% are around 1bp richer vs bunds and gilts. Aussie 10-year yields closed 21.8bp cheaper vs U.S. amid speculation that policy makers may soon scrap the yield-curve control program. In the US, 2s10s and 5s30s curves remain flatter on week after reaching most compressed levels in months on Thursday; month-end flows may support long-end Friday, with Bloomberg Treasury index set to extend by an estimated 0.08yr in 4pm rebalancing European bonds extended Thursday’s retreat as data on Eurozone economic growth and inflation topped analysts’ estimates, reinforcing conviction that interest-rate increases are on the horizon after European Central Bank President Christine Lagarde offered only mild pushback against traders’ bets on a hike as soon as October next year. The euro slipped after jumping 0.7% on Thursday, but remains on track for a third week of gains. “In the very near term, because many global central banks are just dipping their feet into taper, not even into quantitative tightening, the aggregate liquidity could remain very supportive,” Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, said on Bloomberg Television. “Although I think you get very much more discriminatory moves and much more selective moves in the equity markets.” In FX, the U.S. dollar ticked up from a one-month low and crude oil fluctuated and the Bloomberg Dollar Spot Index advanced as much as 0.2% as the greenback rose versus all its Group-of-10 peers apart from the Swiss franc; the Kiwi and Scandinavian currencies were the worst performers. The euro pared about half of Thursday’s advance against the dollar and European bond yields rose. Italian bonds led peripheral underperformance vs. euro-area peers and ECB policy-tightening bets gained momentum as markets continued to digest Lagarde’s lack of reassurance in her comments on Thursday. The pound inched lower in the European session. Gilts’ aggressive flattening moves in previous sessions paused as yield increases were most pronounced in the long end. Australian bond yields surged as the central bank’s decision not to defend its yield target on Friday fueled bets that policy makers may soon scrap the program. The currency hovered under its 200-day moving average. In commodities, Brent and WTI both rose about 0.3%. Spot gold flat on the day, trades just below $1,800/oz. Base metals fall on the LME, with zinc, nickel and aluminum declining the most. Ethereum finally hit a new all-time-high, rising briefly above $4400. Chinese coal futures extended a dramatic decline as China’s government said there’s further room for prices to fall, ratcheting up interventions in the market aimed at easing an energy crisis. Looking at today's data we get preliminary September industrial production, preliminary Q3 GDP from Euro Area, Germany, France and Italy, preliminary October CPI from Euro Area, France and Italy, UK September mortgage approvals, Canada August GDP, US September personal spending, personal income, October MNI Chicago PMI and final October University of Michigan consumer sentiment index are due. In corporate earnings, ExxonMobil, Chevron, AbbVie, Charter Communications, Daimler, BNP Paribas, Aon and NatWest Group are among companies reporting. Market Snapshot S&P 500 futures down 0.4% to 4,567.00 STOXX Europe 600 down 0.5% to 472.83 German 10Y yield up 3.3 bps to -0.103% Euro down 0.2% to $1.1663 Brent Futures up 0.2% to $84.49/bbl Gold spot down 0.3% to $1,793.54 U.S. Dollar Index up 0.14% to 93.48 MXAP down 0.5% to 197.77 MXAPJ down 0.7% to 649.27 Nikkei up 0.3% to 28,892.69 Topix little changed at 2,001.18 Hang Seng Index down 0.7% to 25,377.24 Shanghai Composite up 0.8% to 3,547.34 Sensex down 0.9% to 59,417.39 Australia S&P/ASX 200 down 1.4% to 7,323.74 Kospi down 1.3% to 2,970.68 Top Overnight News from Bloomberg The returns on carry trades are roaring back in the currency markets of the world’s major developed countries, thanks to surging commodity prices, low volatility and the growing ranks of central banks that are tightening monetary policy U.K. households are under increasing financial stress just as the Bank of England contemplates weaning the nation off near-zero interest rates, according to debt-collection firm Lowell China’s junk dollar bonds had their steepest two-month decline in a decade as stress builds in the battered real estate sector and defaults mount to a record France and Italy drove economic growth in the 19-nation euro area in the third quarter following the suspension of most Covid-19 curbs. A surge in consumer spending propelled French output to 3% in the three months through September, exceeding all but one estimate in a Bloomberg survey. Italy reported an expansion of 2.6% that was bolstered by industry and services As the prospect of interest-rate hikes whipsaws bond markets, bears can be forgiven for betting the recent 10-year Treasury selloff will resume in earnest given the inflationary pressures building everywhere. But with a key section of the U.S. yield curve inverting on growth fears, the likes of AXA Investment Managers to HSBC Holdings Plc can find a receptive audience to make a case that the 40-year bull market is alive and well A more detailed look at global markets courtesy of Newsquawk Asia-Pac equities initially traded lower but later painted a mixed picture as the tailwinds from Wall Street dissipated. The S&P 500 and Nasdaq closed at record highs, whilst the DJIA and R2K posted solid gains. Aftermarket earnings saw reports from Apple (-3.5% AM) and Amazon (-4.7% AM), who both fell over 5% at one point, in turn hitting the NQ, with both firms citing supply chain issues. US equity futures overnight resumed trade modestly firmer but then drifted lower as APAC sentiment seeped into the Western futures. The ASX 200 (-1.5%) was dragged lower by its Telecoms and Financials sectors, whilst the KOSPI (-1.3%) conformed to the risk tone. The Nikkei 225 (+0.3%) was initially hampered with some of the export-heavy sectors towards the bottom of the bunch, although later recovered as the JPY eased, and with Japan also looking ahead to the lower house election on Sunday. The Shanghai Comp (+0.8%) saw its opening losses cushioned after another daily net CNY 100bln injection by the PBoC, for a net weekly injection of CNY 680bln – the largest in 21 months. Hang Seng (-0.7%) failed to recover amid post-earnings losses from BYD, Ping An Insurance, and Petrochina, whilst Alibaba and Tencent are also in the red. Finally, the RBA once again refrained from defending the April 2024 yield, with the bond extending its rise to 0.77% vs the RBA's 0.10% target range. Top Asian News Taiwan Growth Slows in Third Quarter Despite Record Exports Asia Stocks Set for Third Day of Losses as Tech, Financials Fall Taiwan 3Q GDP Expands 3.80% Y/Y; Survey Est. 4.3% Malaysia Unveils Biggest Budget to Spur Post-Lockdown Recovery European bourses commenced the session on the back foot, Euro Stoxx 50 -0.9%, though performance throughout the morning has been choppy with indices having been unchanged and lower by as much as 1.0% on the session thus far. The morning’s busy docket hasn’t changed the dial too much, with the action perhaps more a factor of participant’s digesting the US/APAC leads and earnings updates. APAC was subdued with pressure Stateside most pronounced in the NQ (-0.8%) after earnings from Apple (AMZN) and Amazon (AAPL), which both fell around 5.0% in after hours trading, with attention being placed on supply chain issues impacting performance. In Europe, all sectors started in the red, though banking names have picked up given the ongoing drive higher in yields offsetting poorly received updates from the likes of NatWest (-4.5%); attention is on the company’s money laundering provisions of some GBP 300mln. Elsewhere, real estate names are hampered amid reports that UK banks/building societies are to begin increasing mortgage rate given inflation. Auto’s are towards the top of the pile driven by updates from Daimler (+1.7%) and the CFO remarking that market demand is high, could expect an increase in 2022 passenger car sales. Finally, the energy sector is in-focus amid OPEC+ JTC sourced reports (see commodities) and as we have a number of key names due to report stateside, including Exxon (XOM) following Chevron beating on top and bottom lines, +2.1% pre-market. Top European News NatWest Shares Fall as Margin Pressures Overshadow Profit Surge Agnellis Agree to Sell PartnerRe to Covea for $9 Billion Euro-Area Economy Bolstered by France, Italy Growth: GDP Update Telenet Falls as HSBC Cuts to Hold on ‘Drastic’ Strategy In FX, the Dollar has regained some poise following yesterday’s sell-off, largely on the back of a post-ECB rebound in the Euro that knocked the index down to a new w-t-d base and gave other Greenback rivals a lift indirectly. However, the index remains toppy towards the bottom of 94.024-93.277 extremes within a narrow 93.592-320 range, wary about residual or final rebalancing flows that a German bank model suggests is more prominent vs the Pound and Yen. From a tech perspective, the 50 DMA could be pivotal and comes in at 93.415 today after the DXY tested, but respected the 100 DMA circa 94.000 on several occasions, while fundamental drivers may come via a raft of data and survey releases, including PCE price metrics and the Chicago PMI. Aside from all this, yields remain elevated and curves are re-steepening irrespective of a downturn in broad risk sentiment, or perhaps in response to the ongoing bond rout, with safe-haven benefits for the Buck. NZD/AUD - Yet another change in fortunes for the Kiwi and Aussie, as the Antipodean cross rebounds amidst several positive factors for the latter, like much stronger than forecast final retail sales and a pick-up in ppi, while ramp higher in 3 year cash continues unchecked. Hence, Aud/Nzd is eyeing 1.0500 again and Aud/Usd is consolidating near 0.7550, but Nzd/Usd has slipped back below 0.7200. EUR - Some consolidation and a partial loss of the aforementioned ECB-inspired recovery momentum has pushed the Euro back down, with Eur/Usd now testing support and underlying bids around 1.1650 even though flash Eurozone inflation came in well above expectations and most preliminary Q3 GDP prints beat consensus (Germany the exception). Nevertheless, the headline pair looks less inclined to be drawn to the latest option expiries close to 1.1600 (1.5 bn in a band ending at 1.1590) and adjacent to similar size between the half round number and 1.1660 (1.4 bn to be precise). CHF/CAD/GBP/JPY - The Franc is marginally outpacing the Buck and extending its outperformance against the Euro to the brink of 0.9100 and not much further away from 1.0600 respectively in wake of an upbeat Swiss KOF leading indicator, but the SNB could be on edge amidst a sharp ratchet up in implied interest rates via the 3 month strip. Elsewhere, the Loonie is idling either side of 1.2350 vs its US peer in line with crude prices ahead of Canadian monthly GDP and ppi that might provide tangible justification for the BoC’s hawkish shift on QE and rate guidance, Sterling continues encounter resistance circa 1.3800 and 0.8450 against the Euro awaiting developments on the UK-French fishing row front rather than reacting to stronger than forecast BoE mortgage lending and approvals. Similarly, the Yen has taken a raft of Japanese data in stride as it straddles 113.50 in lock-step with its US counterpart and UST/JGB yield differentials In commodities, WTI and Brent are essentially unchanged on the session, and reside towards the mid-point of the week’s range thus far. Newsflow has been limited and we look to energy giant earnings later for further impetus; though, the benchmarks did come under modest pressure on JTC source reports ahead of next week’s OPEC+ gathering. Namely, sources said that the JTC had trimmed its 2021 oil demand forecast to 5.7mln BPD (prev. 5.8mln BPD), though explained that the downward revision was ‘nothing to worry about’ and was due to updated data and rounding effects. Elsewhere, spot gold and silver have been contained within narrow ranges in the European morning with spot gold not experiencing a meaningful move away from the USD 1800/oz handle. Base metals are a touch softer from the contained performance seen in APAC hours where attention was more on thermal coal, following China’s State Planner said there is room for continued adjustments of coal prices; initial investigation results show coal production costs are significantly below current coal spot prices. In wake of this, thermal coal futures once again hit 10% limit down. US Event Calendar 8:30am: Sept. Personal Income, est. -0.3%, prior 0.2%; Personal Spending, est. 0.6%, prior 0.8% 8:30am: Sept. PCE Deflator YoY, est. 4.4%, prior 4.3%; PCE Deflator MoM, est. 0.3%, prior 0.4% 8:30am: Sept. PCE Core Deflator YoY, est. 3.7%, prior 3.6%; Core Deflator MoM, est. 0.2%, prior 0.3% 9:45am: Oct. MNI Chicago PMI, est. 63.5, prior 64.7 10am: Oct. U. of Mich. Sentiment, est. 71.4, prior 71.4; Current Conditions, est. 77.9, prior 77.9; Expectations, est. 67.2, prior 67.2 10am: Oct. U. of Mich. 5-10 Yr Inflation, prior 2.8% 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.8%, prior 4.8% DB's Jim Reid concludes the overnight wrap The last 36-48 hours has seen a silent rate tantrum that has caused some remarkable volatility at the front end. Silent as equities don’t care for now as US bourses again hit fresh record highs again last night before weak results from Amazon after the bell slightly dented the mood. Although there wasn’t much new in the ECB meeting, the event seemed to calm markets down (even if purely coincidental timing wise) after a pretty stressful Asian and London morning session. To give you a flavour of this 2yr Canadian yields opened (lunchtime London) another +12 bps higher (around +38bps in less than 24 hours) before rallying 25bps over the next 3 hours and then steadying to close -6.5bps on the session, ‘only’ +13.5bps above where they were before Wednesday’s shock BoC news. As another gauge, US 2s10s which on Wednesday morning was at +120bps, rallied another 6bps in Asia and London morning to a low of under +98bps. We closed back at +108.7bps though after a big re-steepening. As we highlighted in yesterday’s CoTD (link here) there was seemingly a big positioning shock that the Canadian and then Aussie news from 24 hours ago encouraged. The latest from the Australian market is that after a +29.7bps move yesterday, 2yr yields have climbed by another +27bps this morning and now sit at 0.8% having been at 0.15% on Wednesday. Remarkable moves and this could set the stage for another frantic London session. The yield on 10yr (+26bps) also jumped as the RBA once again didn’t defend its yield target this morning, contrary to market expectations, leading to speculation that it may be abandoned altogether as early as at the meeting next Tuesday. So this is setting the stage for a seismic event for global markets as there is a huge gap between the 0.1% target and 0.8% where the April 24 note is now trading. Overall government bonds have been all over the place over the last couple of days and the resteepening in the US meant that 10yr yields rose +3.9bps yesterday after rallying early in the session. We’re up another +2.3bps this morning. 20yrs inverted versus 30yrs yesterday for the first time since the issue was re-introduced last year, and this curve finished the session at -2.4bps. On the inflation compensation front, 10yr breakevens narrowed for the second day on the bounce, declining -8.4bps to 2.59% which means that real yields actually rose +12.0bps - their biggest climb since immediately after the June FOMC. European yields rose as 10yr bunds (+4.3bps), OATs (+4.6bps) and BTPs (+10.7bps) and Gilts (+2.3bps) all marched higher, while 2yr yields were +2.5bps, +0.8bps, +9.4bps, and +8.9bps higher respectively. So a mixed bag of curve moves after the BoC/Australia/ECB developments. As in the US, 10yr breakevens narrowed across Europe as well; German, French, Italian, and UK breakevens declined -6.8bps, -4.9bps, -6.0bps, and -1.9bps, respectively. The ECB meeting was the main macro event of the day. Our Europe team offers a more thorough breakdown here, but the three main takeaways are: 1) the ECB recognised that inflation is going to be higher for longer, dropping that it is ‘largely temporary’ from its statement; 2) President Lagarde offered some (but not total) pushback on market pricing, remarking liftoff in 2022 or anytime soon thereafter was inconsistent with the ECB’s forecast and forward guidance; and 3) President Lagarde gave the firmest guidance yet that PEPP would finish in March. Her press conference came hours after Spain reported a +2.0% jump in October inflation versus +1.2% expected, while the German CPI (+0.5%), released just shortly before the press conference, also beat forecasts (+0.5% vs +0.4%). US data was mixed, with a miss in advance Q3 GDP, which came at +2.0% versus +2.6% expected as well as surprising a slowdown in pending home sales (-2.3% vs +0.5% expected), boosted the narrative of slower growth. Meanwhile initial jobless claims (281k versus 288k expected) saw a fresh post pandemic low and personal consumption decelerated slower than expected (+0.9%), coming in at +1.6%. In terms of equities, another string of positive earnings surprises lifted stocks, with the Nasdaq and S&P 500 reaching their record highs by the close. Every sector in the two indices, plus the DJIA finished in the green, with the Nasdaq up +1.39%, the S&P 500 +0.98% higher and the DJIA closing up +0.68%. Strong results from Ford and Caterpillar also added to the bullish outlook. Ford reported that demand was strong and that the semiconductor shortages were easing, prompting them to revise higher profit estimates for the year. Caterpillar also noted end-user demand was strong, and expects it to be strong through next year, but supply chain difficulties will limit their ability to fill orders. After the close, earnings from Amazon and Apple weighed on sentiment. Amazon missed on revenue and earnings, and noted the near-term outlook wasn’t great, due to labour shortages and supply chain woes. Apple was also hit by supply chain issues, which caused them to miss revenue estimates. S&P futures are trading lower by -0.3% ahead of the open this morning. In total, of the 52 S&P companies that reported yesterday, 44 beat on earnings while 34 beat revenue estimates. The dynamic was less optimistic on the other side of the Atlantic, where the STOXX 600 (+0.24%) rose moderately, as it was pulled down by a steep drop in energy (-1.85%) after Royal Dutch Shell missed on earnings as well as faced calls to break up its business from an activist hedge fund. Country-wise, we saw the CAC 40 (+0.75%) and the IBEX 35 (+0.60%) outperforming the DAX (-0.06%) and the FTSE 100 (-0.05%). In Asia, equities are mixed after the late earnings misses in the US and disappointing regional economic data. The Nikkei 225 (+0.29%) and the Shanghai composite (+0.16%) are higher, while the KOSPI (-0.62%) and the Hang Seng (-0.47%) is down. In data releases, industrial production in Japan (-5.4% vs -2.7% expected) and South Korea (-1.8% vs +2.0% expected) declined, heavily missing consensus. Tokyo CPI (+0.1%) was also below projections (+0.4%). Meanwhile, China’s National Development and Reform Commission communicated that coal prices can continue to decrease further, extending the decline in coal futures (-8.68%), as the country faces an acute energy crisis. Elsewhere the dollar is trading higher this morning (+0.05%), while gold (-0.15%) retreated from its gains during yesterday’s European session. In energy markets, oil futures are mixed, as WTI (-0.08%) is marginally lower and Brent (+0.23%) is advancing. Natural gas prices, however, continued to decline yesterday, falling in the US (-1.71%) and Europe (-11.75%). President Biden addressed the nation to sell the public (and, ostensibly, his own party) on a $1.75 trillion social and climate spending framework after prolonged negotiations. Along with the big outlays, the proposal includes revenue raising measures via higher tax surcharges on those making more than $10 million, a 15% minimum corporate tax rate, a 1% excise tax on stock buybacks, and funding to improve IRS enforcement of the current tax code. If Congressional Democrats can agree on the new social bill, it should also enable a vote on the separate $550 billion bi-partisan infrastructure plan. Nothing was tabled for a vote yesterday as progressive Democrats were waiting to see the detailed proposal of the social spending bill before giving the bi-partisan infrastructure bill their imprimatur. Nevertheless, it appears that out of the flurry of headlines, yesterday saw some progress in DC negotiations. In today’s data releases, Japan September jobless rate, preliminary September industrial production, preliminary Q3 GDP from Euro Area, Germany, France and Italy, preliminary October CPI from Euro Area, France and Italy, UK September mortgage approvals, Canada August GDP, US September personal spending, personal income, October MNI Chicago PMI and final October University of Michigan consumer sentiment index are due. In corporate earnings, ExxonMobil, Chevron, AbbVie, Charter Communications, Daimler, BNP Paribas, Aon and NatWest Group are among companies reporting. Tyler Durden Fri, 10/29/2021 - 07:47.....»»

Category: blogSource: zerohedgeOct 29th, 2021

Futures Slide On Stagflation Fears As 10Y Yields Spike

Futures Slide On Stagflation Fears As 10Y Yields Spike US index futures dropped after IBM and Tesla fell after their quarterly results, with investors turned cautious awaiting more reports to see the see the adverse impact of supply chain disruption and labor shortages on companies even as jitters remained over elevated inflation and the outlook for China’s property sector. The dollar reversed an overnight drop, while Treasuries fell pushing the 10Y yield to a 5-month high of 1.68%. At 745 a.m. ET, Dow e-minis were down 98 points, or 0.3%, S&P 500 e-minis were down 14 points, or 0.31%, and Nasdaq 100 e-minis were down 49.25 points, or 0.32%. In the premarket, Tesla fell 1% in premarket trading as it said on Wednesday its upcoming factories and supply-chain headwinds would put pressure on its margins after it beat Wall Street expectations for third-quarter revenue. AT&T rose 1% in pre-market trading after exceeding Wall Street’s expectations for profit and wireless subscriber growth. PayPal Holdings also climbed as it explores a $45 billion acquisition of social media company Pinterest Inc., in what could be the biggest technology deal of the year. Dow gained 1.1% after it posted a more than a five-fold jump in third-quarter profit as economic recovery boosted prices for chemicals. IBM plunged 4.7% after it missed market estimates for quarterly revenue as its managed infrastructure business suffered from a decline in orders. Some other notable premarket movers: Digital World Acquisition (DWAC US) surges 30% after the blank-check company agreed to merge with Trump Media & Technology. Former U.S. President Donald Trump says the new company plans to start a social media firm called Truth Social. Denny’s (DENN US) rises 1.4% as the restaurant chain is upgraded to buy from hold at Truist Securities, which sees upside to 3Q estimates, partly due to expanding operating hours. ESS Tech (GWH US) adds 4.6% as Piper Sandler says the stock offers a compelling entry point for investors seeking exposure to energy storage, initiating coverage at overweight. As Bloomberg notes, corporate results have tempered but not dissipated worries that cost pressures could slow the pandemic recovery. Among S&P 500 companies that have disclosed results, 84% have posted earnings that topped expectations, a hair away from the best showing ever. Yet, the firms that surpassed profit forecasts got almost nothing to show for it in the market. And misses got punisheddearly, by the widest margin since Bloomberg started tracking the data in 2017. European equities faded early losses but remain in small negative territory. Euro Stoxx 50 is 0.4% lower having dropped ~0.8% at the open. IBEX lags peers. Miners led a retreat in Europe’s Stocks 600 index, while industrial commodities including copper and iron ore reversed earlier gains; retail and banks were also among the weakest sectors. Concerns about the inflationary impact of higher prices have risen in recent days, with everyone from Federal Reserve officials to Tesla weighing in on cost pressures. Unilever Plc pushed rising raw material costs onto consumers, increasing prices by the most in almost a decade. Meanwhile, Hermes International said sales surged last quarter, showing resilience compared to rival luxury-goods makers. European autos dropped after Volvo Group warned that the global semiconductor shortage and supply-chain challenges will continue to cap truckmaking. Here are some of the biggest European movers today: Soitec shares gain as much as 7.3% in Paris, the stock’s best day since June, after reporting 2Q results and raising its full- year sales forecast. BioMerieux shares rise as much as 5.9%. Sales in 3Q were well ahead of expectations on strong U.S. demand for BioFire respiratory panels, Jefferies (hold) writes in a note. Randstad shares rise as much as 4.7%, the most intraday since Dec. 2020, with RBC (sector perform) saying the staffing firm’s 3Q earnings topped estimates. Sodexo shares rise as much as 4.8% after activist investor Sachem Head took a stake in the French catering co., saying the investment is passive and that Sodexo is going “activist on itself.” Zur Rose shares fall as much as 8.1% after the Swiss online pharmacy cut its growth guidance and posted 3Q sales that Jefferies says missed consensus expectations. Nordic Semi shares drop as much as 7% before recovering some losses, after results; Mirabaud Securities says any weakness in the stock is a “great buying opportunity.” Eurofins shares drop as much as 7.5%, the most in nearly a year, after the laboratory-testing company left its 2021 Ebitda and free cash flow guidance unchanged, which Morgan Stanley says implies a lower Ebitda margin versus previous guidance. Bankinter shares fell as much as 6.6%, most intraday since December. Jefferies highlighted the weaker trend for the Spanish lender’s 3Q net interest income. Earlier in the session, Asian equities fell in late-afternoon trading as investors sold Japanese and Hong Kong-listed tech shares, which helped trigger broader risk aversion among investors. Ailing China Evergrande Group sank on a worsening cash squeeze, while other developers rallied after regulators said their funding needs are being met. The MSCI Asia Pacific Index slid as much as 0.8%, with Japanese equities slumping by the most in over two weeks as the yen -- typically seen as a safe haven -- strengthened against the dollar, likely boosted by technical factors. Toyota Motor and Alibaba were the biggest drags on the regional benchmark as higher bond yields weighed on sentiment toward the tech sector. The story “shapes up to be worries about higher inflation and the follow-on policy response,” said Ilya Spivak, head of Greater Asia at DailyFX. Bucking the downtrend were Chinese developers, which shrugged off China Evergrande Group’s scrapping of a divestment plan and climbed after regulators said risks in the real estate market are controllable and reasonable funding needs are being met. China was one of the region’s top-performing equity markets.  Still, Asian stocks continue to feel pressure from higher U.S. bond yields as the 10-year rate surpassed 1.6%. In addition, earlier optimism about earnings is being muted by the outlook for inflation and supply-chain bottlenecks. Chinese growth, global supply constraints and inflation are “acting as a bit of a brake on markets,” said Shane Oliver, head of investment strategy & chief economist at AMP Capital. However, with U.S. equities trading near a record high, investors are “a bit confused,” he said. Japanese equities fell by the most in over two weeks, extending losses in afternoon trading as the yen strengthened against the dollar. Electronics and auto makers were the biggest drags on the Topix, which fell 1.3%, with all 33 industry groups in the red. Tokyo Electron and Fast Retailing were the largest contributors to a 1.9% loss in the Nikkei 225. S&P 500 futures and the MSCI Asia Pacific Index similarly extended drops. “There has been a general turn in equity market sentiment evident by the afternoon decline in U.S. equity futures and main regional equity indexes,” said Rodrigo Catril, senior foreign-exchange strategist at National Australia Bank Ltd. “The reversal in risk-sensitive FX pairs like the AUD is reflecting this u-turn.” The Japanese currency gained 0.2% to 114.05 per U.S. dollar, while the Australian dollar weakened. The yen is still down 9.5% against the greenback this year, the worst among major currencies. Yen Faces Year-End Slump as U.S. Yield Premium Spikes With Oil The gain in the yen on Thursday probably followed technical indicators suggesting the currency was oversold and positioning seen as skewed, said Shusuke Yamada, head of Japan foreign exchange and rates strategy at Bank of America in Tokyo. The rally may be short-lived, as rising oil prices are expected to worsen Japan’s terms of trade, and monetary policies between Japan and overseas are likely to diverge further In FX, the Bloomberg Dollar Spot Index reversed an earlier loss to rise as much as 0.2% as the greenback advanced versus all its Group- of-10 peers apart from the yen; risk-sensitive currencies, led by the New Zealand dollar, were the worst performers. The pound weakened against the dollar and was little changed versus the euro into the European session. U.K. government borrowing came in significantly lower than official forecasts, but a surge in debt costs sent a warning to the government ahead of the budget next week. The U.K.’s green gilt may price today, subject to market conditions, after being delayed earlier this week. The Australian and New Zealand dollars reversed intraday gains on sales against the yen following losses in regional stock indexes. A kiwi bond auction attracted strong demand. The yen headed for a second session of gains as a selloff in Japanese equities fuels haven bids. Government bonds consolidated. In rates, the Treasury curve flattened modestly as yields on shorter-dated notes inched up, while those on longer ones fell; the bund curve shifted as yields rose about 1bp across the curve. Yields were richer by less than 1bp across long-end of the curve, flattening 2s10s, 5s30s spreads by ~1bp each; 10-year yields rose to a 5 month high of 1.68%, outperforming bunds by 2bp and gilts by 4bp on the day. Long end USTs outperform, richening ~2bps versus both bunds and gilts. Peripheral spreads tighten slightly. U.S. breakevens are elevated ahead of $19b 5Y TIPS new issue auction at 1pm ET. In commodities, oil slipped from 7 year highs, falling amid a broad-based retreat in industrial commodities, though trader focus was glued to a surging market structure as inventories decline in the U.S.; Oil’s refining renaissance is under threat from the natural gas crisis; American drivers will continue to face historically high fuel prices. WTI was lower by 0.5% to trade near $83 while Brent declined 0.8% before finding support near $85. Spot gold is range-bound near $1,785/oz. Base metals are mixed. LME nickel and copper are deep in the red while zinc gains 1.5%.  Bitcoin was volatile and dropped sharply after hitting an all time high just above $66,500. Looking at the day ahead now, and data releases from the US include the weekly initial jobless claims, existing home sales for September, the Conference Board’s leading index for September, and the Philadelphia Fed’s business outlook for October. Central bank speakers will include the Fed’s Waller and the ECB’s Visco, while the Central Bank of Turkey will be making its latest monetary policy decision. Otherwise, earnings releases include Intel, Danaher, AT&T and Union Pacific. Market Snapshot S&P 500 futures down 0.3% to 4,515.25 STOXX Europe 600 down 0.2% to 469.02 MXAP down 0.7% to 199.61 MXAPJ down 0.4% to 659.34 Nikkei down 1.9% to 28,708.58 Topix down 1.3% to 2,000.81 Hang Seng Index down 0.5% to 26,017.53 Shanghai Composite up 0.2% to 3,594.78 Sensex down 1.1% to 60,560.47 Australia S&P/ASX 200 little changed at 7,415.37 Kospi down 0.2% to 3,007.33 Brent Futures down 1.0% to $84.98/bbl Gold spot up 0.2% to $1,785.09 U.S. Dollar Index up 0.11% to 93.67 German 10Y yield up 0.7 bps to -0.119% Euro down 0.1% to $1.1639 Top Overnight News from Bloomberg China Evergrande Group scrapped talks to offload a stake in its property-management arm and said real estate sales plunged about 97% during peak home-buying season, worsening its liquidity crisis on the eve of a dollar-bond deadline that could tip the company into default. Its shares plunged as much as 14% on Thursday. China’s goods imports from the U.S. have only reached about 53% of the $200 billion worth of additional products and services it promised to buy under the trade deal signed last year, far behind its purchasing target. Signs that policy makers are accelerating toward an interest-rate hike have traders fumbling around to figure out what that means for sterling. Money managers at Jupiter Asset Management and Aberdeen Asset Management turned neutral in recent days, following similar moves by Amundi SA and William Blair Investment Management. The price on eight out of 10 bonds sold in the first three quarters of this year by European investment-grade borrowers fell after issuance, wiping almost 23.5 billion euros ($27.3 billion) from portfolios. The Turkish lira is looking vulnerable as speculation grows that policy makers will cut interest rates again despite the deteriorating inflation outlook. Option traders see a more than 60% chance that the currency will weaken to an all-time-low of 9.50 per U.S. dollar over the next month, according to Bloomberg pricing. That’s the next key psychological threshold for a market trading largely in uncharted territory ahead of Thursday’s decision. A more detailed look at global markets courtesy of Newsquawk Asia-Pac indices traded somewhat mixed after the similar performance stateside where the broader market extended on gains in which the DJIA touched a fresh record high and the S&P 500 also briefly approached within 5 points of its all-time peak as attention remained on earnings, although the Nasdaq lagged with tech and duration-sensitive stocks pressured by higher longer-term yields. ASX 200 (+0.1%) was positive as Victoria state approaches the end of the lockdown at midnight and with the index led by outperformance in mining stocks and real estate. However, gains were capped amid weakness in energy as shares in Woodside Petroleum and Santos were pressured following their quarterly production results in which both posted a decline in output from a year ago, albeit with a jump in revenue due to the rampant energy prices, while Woodside also flagged a 27% drop in Wheatstone gas reserves. Nikkei 225 (-1.9%) felt the pressure from the pullback in USD/JPY and with focus shifting to upcoming elections whereby election consulting firm J.A.G Japan sees the LDP losing 40 seats but win enough to maintain a majority with a projected 236 seats at the 465-strong Lower House. Hang Seng (-0.5%) and Shanghai Comp. (+0.2%) were varied despite another respectable PBoC liquidity effort with the mood slightly clouded as Evergrande concerns persisted with Co. shares suffering double-digit percentage losses after it resumed trade for the first time in three weeks and after its deal to sell a stake in Evergrande Property Services fell through, while reports that Modern Land China cancelled its USD 250mln bond repayment plan on liquidity issues added to the ongoing default concerns although it was later reported that Evergrande secured a three-month extension on USD 260mln Jumbo Fortune bond which matured on October 3rd. Finally, 10yr JGBs traded flat with the underperformance in Japanese stocks helping government bonds overlook the pressure in global counterparts and continued losses in T-note futures following the weak 20yr auction stateside, although demand for JGBs was limited by the absence of BoJ purchases. Top Asian News China Vows to Keep Property Curbs, Evergrande Risk Seen Limited Abu Dhabi Funds Hunt for Asian Unicorns Ahead of IPOs: ECM Watch Biden’s Pick for China Envoy Draws Sharp Lines With Beijing Carlyle, KKR Among Firms Said to Mull $2 Billion Tricor Bid Bourses in Europe have held onto the downside bias seen since the cash open, but with losses less pronounced (Euro Stoxx 50 -0.4%; Stoxx 600 -0.2%) despite a distinct lack of news flow in the EU morning, and as Chinese property woes weighed on APAC markets, but with earnings seasons picking up globally. US equity futures are also softer with modest and broad-based losses ranging from 0.2-0.3%. Back to Europe, the Netherland’s AEX (+0.3%) outperforms as Unilever (+3.3%) also lifts the Personal & Household Goods sector (current outperformer) following its earnings, whereby underlying sales growth of +2.5%, as +4.1% price growth offset a -1.5% decline in volumes, whilst the group noted: "Cost inflation remains at strongly elevated levels, and this will continue into next year". The AEX is also lifted by Randstad (+4.5%) post earnings after underlying EBITDA topped forecasts. Sectors in Europe are mixed with a slight defensive bias. On the downside, there is clear underperformance in Basic Resources as base metals pull back, whilst Oil & Gas names similarly make their way down the ranks. In terms of individual movers. ABB (-5%) resides at the foot of the SMI (+0.2%) as the group sees revenue growth hampered by supply constraints. Nonetheless, flows into Food & Beverages supports heavy-weight Nestle (+1.0%) which in turn supports the Swiss index. Other earnings-related movers include Barclays (-0.4%), SAP (+1.5%), Carrefour (+1.5%), Nordea (-1.8%), and Swedbank (+2.7%). Top European News Volvo Warns More Chip Woes Ahead Will Curtail Truck Production Hermes Advances After Dispelling Worries on China Demand Stagflation Risk Still Means Quick Rate Hikes for Czech Banker Weidmann Exit Could Pave Way for Bundesbank’s First Female Chief In FX, the Dollar has regained some composure across the board amidst a downturn in broad risk sentiment, but also further retracement in US Treasuries from bull-flattening to bear-steepening in wake of an abject 20 year auction that hardly bodes well for the announcement of next week’s 2, 5 and 7 year issuance, or Usd 19 bn 5 year TIPS supply due later today. In index terms, a firmer base and platform around 94.500 appears to be forming between 93.494-701 parameters ahead of initial claims, the Philly Fed and more housing data as the focus switches to existing home sales, while latest Fed speak comes via Daly and Waller. However, the DXY and Greenback in general may encounter technical resistance as the former eyes upside chart levels at 93.884 (23.6% Fib of September’s move) and 93.917 (21 DMA), while a major basket component is also looking in better shape than it has been of late as the Yen reclaims more lost ground from Wednesday’s near 4 year lows to retest 114.00 in the run up to Japanese CPI tomorrow. NZD/AUD/NOK - No real surprise to see the high beta Antipodeans bear the brunt of their US rival’s revival and the Kiwi unwind some of its post-NZ CPI outperformance irrespective of the nation’s FTA accord in principle with the UK, while the Aussie has also taken a deterioration in NAB quarterly business business confidence into consideration. Nzd/Usd is back below 0.7200 and Aud/Usd has retreated through 0.7500 after stalling just shy of 0.7550 before comments from RBA Governor Lowe and the flash PMIs. Elsewhere, the Norwegian Crown has largely shrugged off the latest Norges Bank lending survey showing steady demand for credit from households and non-financial institutions, but seems somewhat aggrieved by the pullback in Brent from just above Usd 86/brl to under Usd 85 at one stage given that Eur/Nok is hovering closer to the top of a 9.7325-9.6625 range. EUR/CHF/GBP/CAD - All softer against their US counterpart, albeit to varying degrees as the Euro retains a relatively secure grip around 1.1650, the Franc straddles 0.9200, Pound pivots 1.3800 and Loonie tries to contain declines into 1.2350 having reversed from yesterday’s post-Canadian CPI peaks alongside WTI, with the spotlight turning towards retail sales on Friday after a passing glance at new housing prices. SEK/EM - Some traction for the Swedish Krona in a tight band mostly sub-10.0000 vs the Euro from a fall in the nsa jobless rate, but the Turkish Lira seems jittery following a drop in consumer confidence and pre-CBRT as another 100 bp rate cut is widely expected, and the SA Rand is on a weaker footing ahead of a speech by the Energy Minister along with Eskom’s CEO. Meanwhile, the Cnh and Cnh have lost a bit more momentum against the backdrop of ongoing stress in China’s property market, and regardless of calls from the Commerce Ministry for the US and China to work together to create conditions for the implementation of the Phase One trade deal, or fees on interbank transactions relating to derivatives for SMEs being halved. In commodities, WTI and Brent Dec futures have gradually drifted from the overnight session peaks of USD 83.96/bbl and USD 86.10/bbl respectively. The downturn in prices seems to have initially been a function of risk sentiment, with APAC markets posting losses and Europe also opening on the back foot. At the time of writing, the benchmark resides around under USD 83/bbl for the former and sub-USD 85/bbl for the latter. Participants at this point are on the lookout for state interventions in a bid to keep prices from running. Over in China, it’s worth keeping an eye on the COVID situation – with China's Beijing Daily stating "citizens and friends are not required to leave the country, do not gather, do not travel or travel to overseas and domestic medium- and high-risk areas", thus translating to lower activity. That being said, yesterday’s commentary from the Saudi Energy Minister indicated how adamant OPEC is to further open the taps. UBS sees Brent at USD 90/bbl in December and March, before levelling off to USD 85/bbl for the remainder of 2022 vs prev. USD 80/bbl across all timelines. Elsewhere, spot gold and silver are relatively flat around USD 1,785 and USD 22.25 with nothing new nor interesting to report thus far, and with the precious metals moving in tandem with the Buck. Base metals meanwhile are softer across the board as global market risk remains cautious, with LME copper trading on either side of USD 10k/t. US Event Calendar 8:30am: Oct. Continuing Claims, est. 2.55m, prior 2.59m 8:30am: Oct. Initial Jobless Claims, est. 297,000, prior 293,000 8:30am: Oct. Philadelphia Fed Business Outl, est. 25.0, prior 30.7 9:45am: Oct. Langer Consumer Comfort, prior 51.2 10am: Sept. Existing Home Sales MoM, est. 3.6%, prior -2.0% 10am: Sept. Leading Index, est. 0.4%, prior 0.9% 10am: Sept. Home Resales with Condos, est. 6.09m, prior 5.88m DB's Jim Reid concludes the overnight wrap I watched the first of the new series of Succession last night. I like this program as it makes me think I’ve got a totally normal and non-dysfunctional family. It’s a good benchmark to have. There are few dysfunctional worries in equities at the moment as even with the pandemic moving back onto investors’ radars, the resurgence in risk appetite showed no sign of diminishing yesterday, with the S&P 500 (+0.37%) closing just a whisker below early September’s record high. It’s an impressive turnaround from where the narrative was just a few weeks ago, when the index had fallen by over -5% from its peak as concerns from Evergrande to a debt ceiling crunch set the agenda. But the removal of both risks from the immediate horizon along with another round of positive earnings reports have swept away those anxieties. And this has come even as investors have become increasingly sceptical about the transitory inflation narrative, as well as fresh signs that Covid-19 might be a serious issue once again this winter. Starting with the good news, US equities led the way yesterday as a number of global indices closed in on their all-time highs. As mentioned the S&P 500 rallied to close just -0.02% beneath its record, which came as part of a broad-based advance that saw over 75% of the index move higher. Elsewhere, the Dow Jones (+0.43%) also closed just below its all-time high back in August. After the close, Tesla fell short of revenue estimates but beat on earnings, despite materials shortages and port backlogs that have prevented production from reaching full capacity, a common refrain by now. Overall 17 out of 23 S&P 500 companies beat expectations yesterday, meaning that the US Q3 season beat tally is now 67 out of 80. Meanwhile in Europe, equities similarly saw advances across the board, with the STOXX 600 (+0.32%) hitting its highest level in over a month, as it moved to just 1.2% beneath its record back in August. For sovereign bonds it was a more mixed picture, with 10yr Treasury yields moving higher again as concerns about inflation continued to mount. By the close of trade, the 10yr yield had risen +2.0bps to 1.57%, which was driven by a +4.6bps increase in inflation breakevens to 2.60%, their highest level since 2012. That came as oil prices hit fresh multi-year highs after the US EIA reported that crude oil inventories were down -431k barrels, and gasoline inventories were down -5.37m barrels, which puts the level of gasoline inventories at their lowest since November 2019. That saw both WTI (+1.10%) and Brent crude (+0.87%) reverse their earlier losses, with WTI closing at a post-2014 high of $83.87/bbl, whilst Brent hit a post-2018 high of $85.82/bbl. Yields on 2yr Treasuries fell -1.0bps however, after Fed Vice Chair Quarles and President Mester joined Governor Waller in pushing back against the more aggressive path of Fed rate hikes that has recently been priced in. Even so however, money markets are still implying around 1.75 hikes in 2022, about one more hike than was priced a month ago. Separately in Europe, sovereign bonds posted a much stronger performance, with yields on 10yr bunds (-2.0bps), OATs (-2.6bps) and BTPs (-3.4bps) all moving lower. Overnight in Asia stocks are trading higher this morning with the Shanghai Composite (+0.46%), CSI (+0.35%) and KOSPI (+0.23%) all advancing, whilst the Hang Seng (-0.20%) and the Nikkei (-0.45%) have been dragged lower by healthcare and IT respectively. Meanwhile Evergrande Group (-12.60%) fell sharply in Hong Kong after news that it ended talks on the sale of a majority stake in its property services division to Hopson Development. And we’ve also seen a second day of sharp moves lower in Chinese coal futures (-11.0%) as the government is mulling measures to curb speculation. And there have also been a number of fresh Covid cases in China, with 21 new cases reported yesterday, as the city of Lanzhou moved to shut down schools in response. Elsewhere in Asia, with just 10 days now until Japan’s general election, a poll by Kyodo News found that the ruling Liberal Democratic Party would likely maintain its parliamentary majority. Futures markets are indicating a slow start for markets in the US and Europe, with those on the S&P 500 (-0.09%) and the DAX (-0.05%) both pointing lower. As we’ve been mentioning this week, the Covid-19 pandemic is increasingly returning onto the market radar, with the number of global cases having begun to tick up again. This has been reflected in a number of countries tightening up restrictions, and yesterday saw Russian President Putin approve a government proposal that October 31 to November 7 would be “non-working days”. In the Czech Republic, it was announced that mask-wearing would be compulsory in all indoor spaces from next week, and New York City moved to mandate all municipal workers to get vaccinated, with no alternative negative test result option now available. In Singapore, it was announced that virus restrictions would be extended for another month, which includes a limit on outdoor gatherings to 2 people and a default to work from home. Finally in the UK, the weekly average of cases has risen above 45k per day, up from just under 30k in mid-September. There is lots of talk about the need to put in place some additional restrictions but it feels we’re a fair way from that in terms of government-mandated ones. From central banks, it was announced yesterday that Bundesbank president Weidmann would be stepping down on December 31, leaving his position after just over a decade. He said that he was leaving for personal reasons, and in his letter to the Bundesbank staff, said that “it will be crucial not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either.” It’ll be up to the next government to decide on the new appointment. Staying on Europe, our economists have just released an update to their GDP forecasts, with downgrades to their near-term expectations as supply shortages for goods and energy have created headwinds for the recovery. They now see 2021 growth at +4.9% (down -0.1pp from their previous forecast), whilst 2022 has been downgraded to 4.0% (-0.5pp). Alongside that, they’ve also included the latest oil and gas price movements into their inflation forecasts, and now project Euro Area 2022 HICP at 2.3%, although they don’t see this above-target inflation persisting, with their 2023 HICP forecast remaining unchanged at 1.5%. You can read the full note here. Speaking of inflation, we had a couple of inflation releases yesterday, including the UK’s CPI data for September, which came in slightly beneath expectations at 3.1% (vs. 3.2% expected), whilst core CPI also fell to 2.9% vs. 3.0% expected). As we discussed earlier this week though, there was some downward pressure from base effects, since in September 2020 we had a recovery in restaurant and cafe prices after the government’s Eat Out to Help Out scheme in August ended, and that bounce back has now dropped out of the annual comparisons. UK inflation will rise a fair amount in the months ahead. Otherwise, we also had the CPI release from Canada for September, which rose to 4.4% (vs. 4.3% expected), which is its highest reading since February 2003. Finally, bitcoin hit an all-time high, with the cryptocurrency up +2.92% to close at a record $65,996, which was slightly down from its intraday peak of $66,976. Bitcoin has surged over recent weeks, and as it stands it’s up +49.3% so far this month at time of writing, which would mark its strongest monthly performance so far this year. This latest move has occurred along with the first trading of options on Bitcoin-linked ETFs, which the US first listed the day prior. To the day ahead now, and data releases from the US include the weekly initial jobless claims, existing home sales for September, the Conference Board’s leading index for September, and the Philadelphia Fed’s business outlook for October. Central bank speakers will include the Fed’s Waller and the ECB’s Visco, while the Central Bank of Turkey will be making its latest monetary policy decision. Otherwise, earnings releases include Intel, Danaher, AT&T and Union Pacific. Tyler Durden Thu, 10/21/2021 - 08:20.....»»

Category: blogSource: zerohedgeOct 21st, 2021

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000 One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest labor market data and inflation eased stagflation fears for the time being. . The 10-year Treasury yield rose and the dollar was steady. Goldman Sachs reports on Friday. At 715 a.m. ET, Dow e-minis were up 147 points, or 0.42%, S&P 500 e-minis were up 16.5 points, or 0.37%, and Nasdaq 100 e-minis were up 42.75 points, or 0.28%. Oil futures topped $85/bbl, jumping to their highest in three years amid an energy crunch that’s stoking inflationary pressures and prices for raw materials. A gauge of six industrial metals hit a record high on the London Metal Exchange.  Energy firms including Chevron and Exxon gained about half a percent each, tracking Brent crude prices that scaled the 3 year high. Solid earnings in the reporting season are tempering fears that rising costs and supply-chain snarls will hit corporate balance sheets and growth. At the same time, the wider debate about whether a stagflation-like backdrop looms remains unresolved. “We don’t sign up to the stagflation narrative that is doing the rounds,” said Hugh Gimber, global strategist at the perpetually optimistic J.P. Morgan Asset Management. “The economy is being supported by robust consumer balance sheets, rebounding business investment and a healthy labor market.” “After a choppy start to the week, equity markets appear to be leaning towards a narrative that companies can continue to grow profits, despite the combined pressures of higher energy prices and supply chain disruptions,” said Michael Hewson, chief market analyst at CMC Markets in London. Bitcoin and the crypto sector jumped after Bloomberg reported late on Thursday that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry. Bitcoin traded off session highs having tested $60k during Asian hours, but will likely rise to new all time highs shortly. Also overnight, Joe Biden signed a bill providing a short-term increase in the debt limit, averting the imminent threat of a financial calamity. But it only allows the Treasury Department to meets its financial obligations until roughly Dec. 3, so the can has been kicked for less than two months - brace for more bitter partisan battles in the coming weeks. This week’s move into rate-sensitive FAAMG growth names looked set to continue, with their shares inching up. Moderna rose 3.0% after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people. Western Digital slipped 2.5% as Goldman Sachs downgraded the storage hardware maker’s stock to “neutral” from “buy”. Here are some of the key premarket movers on Friday morning: Virgin Galactic (SPCE US) shares slump as much as 23% in U.S. premarket trading as the firm is pushing the start of commercial flights further into next year after rescheduling a test flight, disappointing investors with the unexpected delay to its space tourism business plans Cryptocurrency-exposed stocks rise in U.S. premarket trading after a report that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading.  Bit Digital (BTBT US) +6.7%, Riot Blockchain (RIOT US) +4.6%, Marathon Digital (MARA US) +3.6% Alcoa (AA US) shares jump 5.6% in thin volumes after co. reported profits that beat the average analyst estimate and said it will be paying a dividend to its shareholders Moderna (MRNA US) extends Thursday’s gains; Piper Sandler recommendation on Moderna Inc. to overweight from neutral, a day after co.’s Covid-19 booster got FDA nod for use in older, high-risk people Duck Creek Technologies (DCT US) shares fell 12% in Thursday postmarket trading after the software company projected 2022 revenue that fell short of the average analyst estimate 23andMe Holdings (ME US) soared 14% in Thursday postmarket trading after EMJ Capital founder Eric Jackson called the genetics testing company “the next Roku” on CNBC Corsair Gaming (CRSR US) shares fell 3.7% in post-market trading after it cut its net revenue forecast for the full year Early on Friday, China's PBOC broke its silence on Evergrande, saying risks to the financial system are controllable and unlikely to spread. Authorities and local governments are resolving the situation, central bank official Zou Lan said. The bank has asked lenders to keep credit to the real estate sector stable and orderly. In Europe, gains for banks, travel companies and carmakers outweighed losses for utilities and telecommunications industries, pushing the Stoxx Europe 600 Index up 0.3%. Telefonica fell 3.3%, the most in more than four months, after Barclays cut the Spanish company to underweight. Temenos and Pearson both slumped more than 10% after their business updates disappointed investors. Here are some of the biggest European movers today: Devoteam shares rise as much as 25% after its controlling shareholder, Castillon, increased its stake in the IT consulting group to 85% and launched an offer for the remaining capital. QinetiQ rises as much as 5.4% following a plunge in the defense tech company’s stock on Thursday. Investec upgraded its recommendation to buy and Berenberg said the shares now look oversold. Hugo Boss climbs as much as 4.4% to the highest level since September 2019 after the German apparel maker reported 3Q results that exceeded expectations. Jefferies (hold) noted the FY guidance hike also was bigger than expected. Mediclinic rises as much as 7.7% to highest since May 26 after 1H results, which Morgan Stanley says showed strong underlying operating performance with “solid metrics.” Temenos sinks as much as 14% after the company delivered a “mixed bag” with its 3Q results, according to Baader (sell). Weakness in Europe raises questions about the firm’s outlook for a recovery in the region, the broker said. Pearson declines as much as 12%, with analysts flagging weaker trading in its U.S. higher education courseware business in its in-line results. Earlier in the session, Asian stocks headed for their best week in more than a month amid a list of positive factors including robust U.S. earnings, strong results at Taiwan Semiconductor Manufacturing Co. and easing home-loan restrictions in China.  The MSCI Asia Pacific Index gained as much as 1.3%, pushing its advance this week to more than 1.5%, the most since the period ended Sept. 3. Technology shares provided much of the boost after chip giant TSMC announced fourth-quarter guidance that beat analysts’ expectations and said it will build a fabrication facility for specialty chips in Japan. Shares in China rose as people familiar with the matter said the nation loosened restrictions on home loans at some of its largest banks.  Conditions are good for tech and growth shares now long-term U.S. yields have fallen following inflation data this week, Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “If data going forward are able to provide an impression that demand is strong too -- on top of a sense of relief from easing supply chain worries -- it’ll be a reason for share prices to take another leap higher.”  Asia’s benchmark equity gauge is still 10% below its record-high set in February, as analysts stay on the lookout for higher bond yields and the impact of supply-chain issues on profit margins.  Japanese stocks rose, with the Topix halting a three-week losing streak, after Wall Street rallied on robust corporate earnings. The Topix rose 1.9% to close at 2,023.93, while the Nikkei 225 advanced 1.8% to 29,068.63. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,180 shares in the index, 1,986 rose and 155 fell, while 39 were unchanged. For the week, the Topix climbed 3.2% and the Nikkei added 3.6%. Semiconductor equipment and material makers rose after TSMC said it will build a fabrication facility for specialty chips in Japan and plans to begin production there in late 2024.  U.S. index futures held gains during Asia trading hours. The contracts climbed overnight after a report showed applications for state unemployment benefits fell last week to the lowest since March 2020.  “U.S. initial jobless claims fell sharply, and have returned to levels seen before the spread of the coronavirus,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo. “The fact that more people are returning to their jobs will help ease supply chain problems caused by the lack of workers.” Australian stocks also advanced, posting a second week of gains. The S&P/ASX 200 index rose 0.7% to close at 7,362.00, with most sectors ending higher.  The benchmark added 0.6% since Monday, climbing for a second week. Miners capped their best week since July 16 with a 3% advance. Hub24 jumped on Friday after Evans & Partners upgraded the stock to positive from neutral. Pendal Group tumbled after it reported net outflows for the fourth quarter of A$2.3 billion. In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,012.19 In rates, the U.S. 10-year Treasury yield rose over 3bps to 1.54%. Treasuries traded heavy across long-end of the curve into early U.S. session amid earning-driven gains for U.S. stock futures. Yields are higher by more than 3bp across long-end of the curve, 10- year by 2.8bp at about 1.54%, paring its first weekly decline since August; weekly move has been led by gilts and euro-zone bonds, also under pressure Friday, with U.K. 10-year yields higher by 3.3bp. Today's bear-steepening move pares the weekly bull-flattening trend. U.S. session features a packed economic data slate and speeches by Fed’s Bullard and Williams.   In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback weakened against most of its Group-of-10 peers; the euro hovered around $1.16 while European and U.S. yields rose, led by the long end. Norway’s krone led G-10 gains as oil jumped to $85 a barrel for the first time since late 2018 amid the global energy crunch; the currency rallied by as much as 0.6% to 8.4015 per dollar, the strongest level since June. New Zealand’s dollar advanced to a three-week high as bets on RBNZ’s tightening momentum build ahead of Monday’s inflation data; the currency is outperforming all G-10 peers this week. The yen dropped to a three-year low as rising equities in Asia damped demand for low-yielding haven assets. China’s offshore yuan advanced to its highest in four months while short-term borrowing costs eased after the central bank added enough medium-term funds into the financial system to maintain liquidity at existing levels. In commodities, crude futures trade off best levels. WTI slips back below $82, Brent fades after testing $85. Spot gold slips back through Thursday’s lows near $1,786/oz. Base metals extend the week’s rally with LME nickel and zinc gaining over 2%. Today's retail sales report, due at 08:30 a.m. ET, is expected to show retail sales fell in September amid continued shortages of motor vehicles and other goods. The data will come against the backdrop of climbing oil prices, labor shortages and supply chain disruptions, factors that have rattled investors and have led to recent choppiness in the market. Looking at the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Market Snapshot S&P 500 futures up 0.3% to 4,443.75 STOXX Europe 600 up 0.4% to 467.66 German 10Y yield up 2.4 bps to -0.166% Euro little changed at $1.1608 MXAP up 1.3% to 198.33 MXAPJ up 1.2% to 650.02 Nikkei up 1.8% to 29,068.63 Topix up 1.9% to 2,023.93 Hang Seng Index up 1.5% to 25,330.96 Shanghai Composite up 0.4% to 3,572.37 Sensex up 0.9% to 61,305.95 Australia S&P/ASX 200 up 0.7% to 7,361.98 Kospi up 0.9% to 3,015.06 Brent Futures up 1.0% to $84.83/bbl Gold spot down 0.5% to $1,787.54 U.S. Dollar Index little changed at 93.92 Top Overnight News from Bloomberg China’s central bank broke its silence on the crisis at China Evergrande Group, saying risks to the financial system stemming from the developer’s struggles are “controllable” and unlikely to spread The ECB has a good track record when it comes to flexibly deploying its monetary instruments and will continue that approach even after the pandemic crisis, according to policy maker Pierre Wunsch Italian Ministry of Economy and Finance says fourth issuance of BTP Futura to start on Nov. 8 until Nov. 12, according to a statement The world’s largest digital currency rose about 3% to more than $59,000 on Friday -- taking this month’s rally to over 35% -- after Bloomberg News reported the U.S. Securities and Exchange Commission looks poised to allow the country’s first futures-based cryptocurrency ETF Copper inventories available on the London Metal Exchange hit the lowest level since 1974, in a dramatic escalation of a squeeze on global supplies that’s sent spreads spiking and helped drive prices back above $10,000 a ton A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today. Top Asian News Hong Kong Probes Going Concern Reporting of Evergrande U.S. Futures Hold Gains as Oil Hits 3-Year High: Markets Wrap Toyota Cuts November Outlook by 15% on Parts Shortage, Covid Yango Group Wires Repayment Fund for Onshore Bond Due Oct. 22 Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance. Top European News Autumn Heat May Curb European Gas Demand, Prices Next Week Bollore Looking for Buyers for Africa Logistics Ops: Le Monde U.K. Offers Foreign Butchers Visas After 6,000 Pigs Culled Europe’s Car-Sales Crash Points to Worse Year Than Poor 2020 In FX, the Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams. GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus. CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters. EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday. In commodities, WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand. US Event Calendar 8:30am: Sept. Retail Sales Advance MoM, est. -0.2%, prior 0.7% 8:30am: Sept. Retail Sales Ex Auto MoM, est. 0.5%, prior 1.8% 8:30am: Sept. Retail Sales Control Group, est. 0.5%, prior 2.5% 8:30am: Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 2.0% 8:30am: Oct. Empire Manufacturing, est. 25.0, prior 34.3 8:30am: Sept. Import Price Index MoM, est. 0.6%, prior -0.3%; YoY, est. 9.4%, prior 9.0% 8:30am: Sept. Export Price Index MoM, est. 0.7%, prior 0.4%; YoY, prior 16.8% 10am: Aug. Business Inventories, est. 0.6%, prior 0.5% 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 3.0% 10am: Oct. U. of Mich. Sentiment, est. 73.1, prior 72.8 10am: Oct. U. of Mich. Current Conditions, est. 81.2, prior 80.1 10am: Oct. U. of Mich. Expectations, est. 69.1, prior 68.1 DB's Jim Ried concludes the overnight wrap A few people asked me what I thought of James Bond. I can’t say without spoilers so if anyone wants my two sentence review I will cut and paste it to all who care and reply! At my age I was just impressed I sat for over three hours (including trailers) without needing a comfort break. By the time you email I will have also listened to the new Adele single which dropped at midnight so happy to include that review as well for free. While we’re on the subject of music, risk assets feel a bit like the most famous Chumbawamba song at the moment. They get knocked down and they get up again. Come to think about it that’s like James Bond too. Yesterday was a strong day with the S&P 500 (+1.71%) moving back to within 2.2% of its all-time closing high from last month. If they can survive all that has been thrown at them of late then one wonders where they’d have been without any of it. The strong session came about thanks to decent corporate earnings releases, a mini-collapse in real yields, positive data on US jobless claims, as well as a further fall in global Covid-19 cases that leaves them on track for an 8th consecutive weekly decline. However, inflation remained very much on investors’ radars, with a range of key commodities taking another leg higher, even as US data on producer prices was weaker than expected. Starting with the good news, the equity strength was across the board with the S&P 500 experiencing its best daily performance since March, whilst Europe’s STOXX 600 (+1.20%) also put in solid gains. It was an incredibly broad-based move higher, with every sector group in both indices rising on the day, with a remarkable 479 gainers in the S&P 500, which is the second-highest number we’ve seen over the last 18 months. Every one of the 24 S&P 500 industry groups rose, led by cyclicals such as semiconductors (+3.12%), transportation (+2.51%) and materials (+2.43%). A positive start to the Q3 earnings season buoyed sentiment, as a number of US banks (+1.45%) reported yesterday, all of whom beat analyst estimates. In fact, of the nine S&P 500 firms to report yesterday, eight outperformed analyst expectations. Weighing in on recent macro themes, Bank of America Chief, Brian Moynihan, noted that the current bout of inflation is “clearly not temporary”, but also that he expects consumer demand to remain robust and that supply chains will have to adjust. I’m sure we’ll hear more from executives as earnings season continues today. Alongside those earnings releases, yesterday saw much better than expected data on the US labour market, which makes a change from last week’s underwhelming jobs report that showed the slowest growth in nonfarm payrolls so far this year. In terms of the details, the weekly initial jobless claims for the week through October 9, which is one of the most timely indicators we get, fell to a post-pandemic low of 293k (vs. 320k expected). That also saw the 4-week moving average hit a post-pandemic low of 334.25k, just as the continuing claims number for the week through October 2 hit a post-pandemic low of 2.593m (vs. 2.670m expected). We should get some more data on the state of the US recovery today, including September retail sales, alongside the University of Michigan’s consumer sentiment index for October. That optimism has fed through into Asian markets overnight, with the Nikkei (+1.43%), the Hang Seng (+0.86%), the Shanghai Comp (+0.29%) and the KOSPI (+0.93%) all moving higher. That came as Bloomberg reported that China would loosen restrictions on home loans amidst the concerns about Evergrande. And we also got formal confirmation that President Biden had signed the debt-limit increase that the House had passed on Tuesday, which extends the ceiling until around December 3. Equity futures are pointing to further advances in the US and Europe later on, with those on the S&P 500 (+0.30%) and the STOXX 50 (+0.35%) both moving higher. Even with the brighter news, inflation concerns are still very much with us however, and yesterday in fact saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices, with WTI (+1.08%) closing at $81.31/bbl, its highest level since 2014, just as Brent Crude (+0.99%) hit a post-2018 high of $84.00/bbl. Both have posted further gains this morning of +0.58% and +0.61% respectively. Those moves went alongside further rises in natural gas prices, which rose for a 3rd consecutive session, albeit they’re still beneath their peak from earlier in the month, as futures in Europe (+9.14%), the US (+1.74%) and the UK (+9.26%) all moved higher. And that rise in Chinese coal futures we’ve been mentioning also continued, with their rise today currently standing at +13.86%, which brings their gains over the week as a whole to +39.02% so far. As well as energy, industrial metals were another segment where the recent rally showed no sign of abating yesterday. On the London metal exchange, a number of multi-year milestones were achieved, with aluminum prices (+1.60%) up to their highest levels since 2008, just as zinc prices (+3.73%) closed at their highest level since 2018. Separately, copper prices (+2.56%) hit a 4-month high, and other winners yesterday included iron ore futures in Singapore (+1.16%), as well as nickel (+1.99%) and lead (+2.43%) prices in London. With all this momentum behind commodities, inflation expectations posted further advances yesterday. Indeed, the 10yr US Breakeven closed +1.0bps higher at 2.536%, which is just 3bps shy of its closing peak back in May that marked its highest level since 2013. And those moves came in spite of US producer price data that came in weaker than expected, with the monthly increase in September at +0.5% (vs. +0.6% expected). That was the smallest rise so far this year, though that still sent the year-on-year number up to +8.6% (vs. +8.7% expected). That rise in inflation expectations was echoed in Europe too, with the 10yr UK breakeven (+5.6bps) closing at its highest level since 2008, whilst its German counterpart also posted a modest +0.7bps rise. In spite of the rise in inflation expectations, sovereign bonds posted gains across the board as the moves were outweighed by the impact of lower real rates. By the end of yesterday’s session, yields on 10yr Treasuries were down -2.6bps to 1.527%, which came as the 10yr real yield moved back beneath -1% for the first time in almost a month. Likewise in Europe, yields pushed lower throughout the session, with those on 10yr bunds (-6.3bps), OATs (-6.2bps) and BTPs (-7.1bps) all moving aggressively lower. To the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Tyler Durden Fri, 10/15/2021 - 07:50.....»»

Category: personnelSource: nytOct 15th, 2021

Futures Surge As Banks Report Stellar Earnings; PPI On Deck

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

Category: blogSource: zerohedgeOct 14th, 2021

Futures Fade Rally With Congress Set To Avert Government Shutdown

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

Category: blogSource: zerohedgeSep 30th, 2021

Markets Looking Up in a Holiday-Shortened Week

Should these levels continue, it will be our first week closing in the green since the week ended December 10th. Thursday, December 23, 2021We are in the final half-day of trading in a holiday-shortened week (Merry Christmas, by the way), and we see a whole host of economic prints hitting the tape at the same time, an hour ahead of the opening bell. At this hour, we’re not seeing any impact on early trading: the Dow is +100 points, the S&P 500 is +12 and the Nasdaq +25. Should these levels continue, it will be our first week closing in the green since the week ended December 10th.Initial Jobless Claims stayed constant week over week, matching the slightly downwardly revised 205K new claims made from the previous week. These remain off pandemic lows of 188K the week after Thanksgiving, but other than being back above the psychologically significant 200K, this is still a good headline.Continuing Claims, on the other hand, have once again set a new low in the pandemic era: 1.859 million is slightly below the upwardly revised 1.867 million from the previous week. Longer-term jobless claims are reported a week in arrears from new claims, so if the initial claims are any indication, we may see a plateauing in continuing claims in the weeks to come. Then again, we’re at an atypical point in the calendar year, so perhaps we’ll withhold expectations until 2022 gets rolling.The latest Personal Consumption Expenditures (PCE) Price Index came in at a healthy +0.6% on headline, with nominal personal income in-line with expectations at +0.4% and nominal consumer spending at +0.6%. Core inflation month over month matched the previous month’s +0.5%. These figures are from November, and for the most part they follow an even more robust October.Year over year, the PCE deflator comes in at +5.7% — the highest single-month read in almost 40 years. It also follows an upwardly revised +5.1% from October. With what we know about the overall strength in the economy from other metrics already reported, these figures are less surprising than supportive. They are also closely followed by the Fed, which remains active in its pursuit of aligning monetary policy with the economy’s overall needs.Preliminary Durable Goods Orders, also for November, beat expectations by 100 basis points to +2.5%. The previous month’s revision swung from a negative -0.4% to a positive +0.1%. However, strip out volatile month-over-month Transportation orders and we see this read fall to +0.8%. Non-defense, ex-aircraft (a proxy for “normal” business spending) came in at -0.1%, which is obviously not so desirable.We know that Boeing BA had a big month in filling aircraft orders, which demonstrates the wisdom of looking at monthly durables numbers absent the transportation sector. What economists would like to see going forward is the auto industry getting back on track; supply chain issues, often relating to microchips used in new car dashboards, created a bottleneck of sorts in this industry earlier in the year. We’ll keep an eye on this in the months to come, as well.After the market opens, we’ll see even more economic data: New Home Sales for November are expected to ramp up to 766K, a new University of Michigan survey for December looks for a steady 70.4, and 5-year inflation expectations as of this month are currently +3.0%. Again, as none of this morning’s reads seem to be influencing the early trade, we don’t suspect these later prints will, either.Questions or comments about this article and/or its author? Click here>> Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Boeing Company (BA): Free Stock Analysis Report Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research 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.....»»

Category: topSource: zacksDec 23rd, 2021

Stock Market News for Dec 17, 2021

Benchmarks closed sharply lower on Thursday after investors worked their way through the Federal Reserve's hawkish stance on monetary policies and an array of economic data. Benchmarks closed sharply lower on Thursday after investors worked their way through the Federal Reserve’s hawkish stance on monetary policies and an array of economic data.How Did the Benchmarks Perform?The Dow Jones Industrial Average (DJI) skid 29.79 points, or 0.1%, to close at 35,897.64 led into the red with a 3.9% decline in shares of Apple Inc. AAPL. The iPhone maker carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The S&P 500 fell 41.18 points, or 0.9%, to close at 4,668.67 on Thursday, dragged into the red with 2.9% and 2.2% decline in the technology and consumer discretionary sectors, respectively. Three of the 11 major sectors of the broader index closed in the red, and overshadowed gains from financials and materials sectors.News of revamp in the monetary policy rattled the tech-laden Nasdaq Composite Index, it closed at 15,180.43, after declining steeply 385.15 points, or 2.5%. It is Nasdaq’s biggest one-day point and percentage loss since Sep 28. Among the index’s biggest decliners was Adobe Inc. ADBE, shares plunged 10.2% on Thursday despite record performance in the fourth-quarter fiscal 2021, leading to revenue exceeding $15 billion for the financial year. For the quarter, Adobe reported earnings of $3.20 per share, above the Zacks Consensus Estimate of $3.18. Investors’ sentiment got clouded as the company’s guidance came in lower than expected.On Thursday, the fear-gauge CBOE Volatility Index (VIX) increased 6.6%, to close at 20.57. Advancing issues outnumbered declining ones on the NYSE by a 1.38-to-1 ratio. The S&P 500 recorded 69 new 52-week highs and three new lows, while the Nasdaq Composite posted 39 new highs and 106 new lows.Fed’s Hawkish Stance Weighs on Markets On Wednesday, Federal Reserve Chairman Jerome Powell announced a more aggressive plan to hike rates in 2022 and wind down asset purchases from $15 billion per month to $30 billion per month effective January. The majority of the Fed members are expecting three rate hikes in 2022, which will be followed by two rate hikes in 2023 and 2024. While investors were digesting FOMC’s statement from the day before, news from European banks hit investors. The Bank of England announced an interest rate hike leading the benchmark to 0.25% from 0.10%. This unexpected rate hike makes BOE the first major central bank to lift interest rates since the pandemic began. Additionally, the European Central Bank announced a plan to further slow purchases of assets under its Pandemic Emergency Purchase Program, in the first quarter of 2022 and bring a close in by March. However, there were no signals of a rate hike in 2022.While Fed’s hawkish stance did not come as a surprise to investors, tech and other growth-oriented sectors took a hit and fell sharply. Shares of tech and semiconductor companies declined significantly. Skyworks Solutions, Inc. SWKS and Xilinx, Inc. XLNX closed at least 8.2% lower, followed by a 7.5% decline in Trip.com Group Limited TCOM. Tech bigwigs like Tesla, Inc. TSLA fell 5%, and FAANG stocks closed at least 1% lower.Initial Jobless Claims Remain Near Lowest LevelsYesterday the government reported that for the week ending on Dec 11, initial jobless claims increased to 206,000, above the consensus estimate of 197,000 and upwardly revised figure from the prior week of 188,000. Though the increase was tied to seasonal and temporary hiring, claims are still significantly low, and hovering around the lowest level since 1969. Businesses are trying to fill up open jobs by offering higher incentives and avoiding layoffs due to the historical labor shortage.For the week ending Dec 4, continuing claims declined by 154,000 to 1.85 million and have now returned to pre-pandemic levels.Housing Starts and Building Permits Up in NovemberOn Thursday, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that building permits of new housing units increased 3.6% in November, at a seasonally adjusted annual rate of 1,712,000. The consensus estimate for last month was 1,660,000 and October’s figures were also upwardly revised to 1,653,000.The report also stated that housing starts in November were at a seasonally adjusted annual rate of 1,679,000, a 12% from October, and above the consensus estimate of 1,566,000. A strong optimism among home builders with millennials reaching the prime home-buying years is driving strong demand.Industrial Output Edge UpIn a separate report, the Federal Reserve stated that industrial productions rose 0.5% in November, slightly lower than the consensus estimate of 0.6% and the previous month’s upwardly revised gain of 1.7%. Capacity utilization also rose to 76.8% from 76.5% in October. The figure was in line with consensus estimates and reflects the parameter is at the strongest since before the coronavirus outbreak. Manufacturing has risen at a 5.3% annual rate in November and is at its highest level since September 2019, led by strong gains in mining, which includes oil production. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related 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 Apple Inc. (AAPL): Free Stock Analysis Report Xilinx, Inc. (XLNX): Free Stock Analysis Report Skyworks Solutions, Inc. (SWKS): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report Tesla, Inc. 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Category: topSource: zacksDec 17th, 2021

Stocks, Yields Tumble As Quad-Witching Fears Add To Broader Market Slide

Stocks, Yields Tumble As Quad-Witching Fears Add To Broader Market Slide US futures tumbled after hitting an all time high less than 24 hour ago, as the favorable if paradoxical bounce in risk from the hawkish FOMC pivot faded from memory and as investors questioned whether global stocks are due for a rough ride on the backdrop of growing risks from inflation and the omicron virus variant. S&P 500 futures slumped about 0.5% Friday morning, while the U.S. 10-year Treasury yield fell for a second straight day to 1.394%, the lowest since Dec. 6. Futures were dragged down by tech stocks as volatility surged amid mounting concerns about monetary tightening and the omicron coronavirus variant. “Rates hikes do not end bull markets, but reversal of central banks’ liquidity means less speculative froth and more volatility,” said Barclays strategist Emmanuel Cau. “Policy angst may be here to stay, but following months of unclear guidances and conflicting signals, the direction of travel is clear now.” Investors are also bracing for the quarterly rebalancing of the S&P 500 Index after the market close and the triple witching expiration of equity derivatives that could magnify market moves. General Motors dropped in premarket trading after the company said Cruise unit Chief Executive Officer Dan Ammann is leaving the company.  Here are some of the other notable premarket movers today: Tesla (TSLA US) shares fall as much as 2.4% in U.S. premarket trading as CEO Elon Musk sells another chunk of shares in the electric vehicle maker. FedEx (FDX US) boosted its adjusted earnings-per-share forecast for the full year, with the guidance beating the average analyst estimate. Shares rose about 4.8% in premarket trading. Spruce Biosciences (SPRB US) shares soar as much as 30% in U.S. premarket trading after Oppenheimer initiated coverage with an outperform rating and a $15 price target that implies 500% upside in the stock from Thursday’s closing price. Cerner (CERN US) shares rise 17% in U.S. pre- trading hours amid a report that Oracle is in talks to buy the medical-records company for about $30b. Rivian Automotive (RIVN US) shares slump 9% in U.S. premarket trading after the electric pickup maker reported results. Piper Sandler says that after- hours share-price loss is “noise,” and remains positive following earnings call. General Motors (GM US) dropped postmarket after it said Cruise Chief Executive Officer Dan Ammann is leaving the company. Steelcase (SCS US) declined in the after hours session after the furniture company reported 3Q revenue that missed the average analyst estimate due to supply chain disruptions. U.S. Steel Corp. (X US) shares declined premarket after it warned fourth-quarter results will be lower than Wall Street had been expecting. In Europe, technology companies and carmakers were among the worst-performing industries, dragging the Stoxx Europe 600 Index down 1%. Tech, autos and utilities are the weakest sectors. Miners and travel are the only Stoxx 600 sectors in small positive territory.  Cellnex slumped 4.1% to a six-month low after a British regulator said the Spanish company’s purchase of CK Hutchison Holdings’s European telecommunication towers raised “significant” competition concerns. Asian stocks slid, as a risk-off mode resumed amid concerns over tighter monetary policies and ongoing tensions between the U.S. and China. The MSCI Asia Pacific Index dropped as much as 1%, set for the fifth decline over the past six days. Technology shares around the region took a hit, led by Chinese giants including Tencent and Alibaba Group, as a global sector selloff continued on higher rate fears. China was among the region’s worst performers after the Biden administration added 34 Chinese targets to its banned-entity list, weighing on sentiment. Japanese stocks held their losses after the Bank of Japan lengthened its cautious withdrawal from emergency pandemic aid. Asia’s benchmark was set to cap a more than 1% slide this week as central banks around the world attempt to curb inflation, dampening prospects for the usual year-end rally. The Federal Reserve plans to double the pace of its asset-tapering program and the Bank of England hiked interest rates, prompting investors to edge away from riskier assets. “I expect the choppy price action to continue to spoof fast-money players into the year-end, both in the U.S. and elsewhere,” said Jeffrey Halley, a senior market analyst at Oanda. In Australia, the S&P/ASX 200 index rose 0.1% to close at 7,304.00, snapping a three-day losing streak. Material and energy shares led the advance on the back of strong commodity prices. Gold miner Norther Star was the best performer on the benchmark. Domain Holdings was the worst performer, followed by Afterpay, after the U.S. government said it launched a regulatory probe into buy now, pay later companies. In New Zealand, the S&P/NZX 50 index fell 0.5% to 12,717.94 In rates, treasuries were mixed with the yield curve flatter as U.S. trading begins, retracing a portion of Thursday’s bull-steepening move that unfolded as futures further marked down likelihood of Fed rate increases beyond mid-2022. Yields out to the 10-year are within 1bp of Thursday’s closing levels, with longer maturities lower by 1bp-2bp; 5s30s is flatter by ~2bp after steepening 7.2bp Thursday, remains ~4bp steeper on week. Yields remain lower on week led by the 5Y, which declined 8.1bp Thursday.  Bunds bull flatten a touch, long-end richer by ~2bps, brushing off some hawkish comments from ECB’s Muller. Peripheral spreads tighten slightly. Gilts are bear steeper, cheaper by 2.5bps at the back end. In FX, the Bloomberg Dollar Spot Index was steady and the greenback was mixed versus its Group-of-10 peers, with most currencies confined to narrow ranges. Treasury yields rose by up to 2bps, led by the belly. The euro was flat at $1.1330 and bund yields were little changed. The pound steadied amid seasonal flows into the dollar and as the boost from Thursday’s surprise Bank of England rate hike wore off. U.K. retail sales last month rose 1.4% from October, when they grew a revised 1.1%, the Office for National Statistics said. Economists had expected an increase of 0.8%. Sales excluding auto fuel grew 1.1%. The yen edged higher on concerns about the risk that eventual draw-down in central bank liquidity could trigger a reversal in the rally. Japanese government bonds were in ranges as they shrugged off the Bank of Japan’s status quo outcome. Australian and New Zealand dollar led G-10 declines as falling stocks and mounting virus numbers sapped demand for risk currencies. Turkish lira once again goes sharply offered, briefly weakening over 9% to print through 17/USD before further central bank intervention. In commodities, WTI dropped 1.5%, holding above $71 so far; Brent trades slips below $74. Spot gold holds Asia’s gains, near $1,804/oz. Base metals are in the green with LME tin outperforming. Bloomberg’s Markets Live team is running an anonymous survey on asset views for 2022. It takes about two minutes and the results will be shared in the latter part of December. Looking at the day ahead, data releases include Germany’s Ifo business climate indicator for December, as well as November data on German PPI and UK retail sales. From central banks, we’ll also hear from the Fed’s Waller and the ECB’s Rehn. Market Snapshot S&P 500 futures down 0.8% to 4,635.00 MXAP down 0.9% to 191.41 MXAPJ down 0.8% to 618.58 Nikkei down 1.8% to 28,545.68 Topix down 1.4% to 1,984.47 Hang Seng Index down 1.2% to 23,192.63 Shanghai Composite down 1.2% to 3,632.36 Sensex down 1.5% to 57,011.01 Australia S&P/ASX 200 up 0.1% to 7,303.97 Kospi up 0.4% to 3,017.73 STOXX Europe 600 down 0.6% to 473.64 German 10Y yield little changed at -0.36% Euro little changed at $1.1330 Brent Futures down 1.4% to $73.99/bbl Gold spot up 0.5% to $1,808.56 U.S. Dollar Index little changed at 95.98 Top Overnight News from Bloomberg Boris Johnson suffered a seismic political upset as his ruling Conservatives lost a key parliamentary election, a result that will heap intense pressure on the U.K. prime minister and may even call his position into question Leading central banks made a big call this week, deciding that the coronavirus is no longer calling the shots in their economies, and inflation is now the bigger threat Bank of France Governor Francois Villeroy de Galhau said the difference between the new forecast for 1.8% inflation in 2023 and 2024 and the ECB’s 2% target is within the “margin of uncertainty.” In a Bundesbank report showing German inflation will run above 2% through 2024, Jens Weidmann urged vigilance as he sees “risks to the upside” throughout the currency bloc ECB Governing Council member Olli Rehn said “there’s considerable uncertainty about the path which inflation will take” Germany’s main gauge of business expectations slipped to 92.6 in December, falling for a sixth month, according to the Ifo institute. That’s a bigger decline than predicted by economists in a Bloomberg survey. Current conditions were also assessed as weaker than in November EU leaders failed to reach a deal on how to react to the unprecedented gas crisis that sent energy prices to record levels after Poland and the Czech Republic demanded stronger action to cap the costs of pollution A more detailed look at global markets courtesy of Newsquawk Asian equity markets were mostly lower with sentiment in the region downbeat after the tech-led declines in the US and yesterday’s central bank frenzy. Overnight US equity futures held a downside bias. The ASX 200 (+0.1%) traded positively amid notable outperformance in the commodity-related sectors which was spearheaded by gold miners as the precious metal reclaimed with the USD 1800/oz level and with sentiment also helped by the announcement of a UK-Australia trade deal. The Nikkei 225 (-1.8%) was the biggest laggard as exporters suffered from detrimental currency inflows and following the BoJ announcement to scale back its pandemic relief measures in March. The Hang Seng (-1.2%) and Shanghai Comp. (-1.2%) were lacklustre after further restrictive measures by the US on Chinese companies including the passage of the Uyghur bill aimed at China which bans imports from Xinjiang unless the US government determines they were not produced with forced labour, while tech suffered after the US included several Chinese companies to its investment and trade restrictions lists. Finally, 10yr JGBs were flat despite the steepening seen in the US and underperformance of Japanese stocks, with demand subdued amid the BoJ decision to scale back pandemic relief measures. Top Asian News Japan Expedites Virus Boosters for Some as Omicron Looms Hong Kong Stock Exchange to Allow SPAC Listings Next Month Thailand May Impose Stock-Trading Tax to Lift Government Revenue Asian Stocks Drop as Worries on Global Policy Tightening Linger European equities have succumbed to the weakness seen on Wall Street and across most APAC markets (Euro Stoxx 50 -1.1%; Stoxx 600 -0.6%) as global central banks turn hawkish and Quad Witching gets underway in holiday-thinned liquidity. US equity futures have also drifted lower, with the March 2022 contracts softer to the tune of 0.1-0.3% across the ES, NQ, YM and RTY. On the recent central bank pivots, analysts at Barclays suggest that rate hikes do not end bull markets, but reduced liquidity means “less speculative froth”. Barclays sees persisting inflation as a risk to markets and Omicron as an increasing downside risk to European growth, albeit the impact is contained thus far. Back to trade, Eurozone bourses see broad-based weakness whilst the UK’s FTSE 100 (+0.2%) holds its head above water – aided by outperformance in the basic materials sector and a softer Sterling. Overall sectors kicked off the day with a defensive bias, albeit that theme has since faded, with some cyclicals making their way up the ranks. Sectors are mostly in the red, however. Auto names are the laggards, with European car registrations -17.5% in November (prev. -30% MM). Tech also resides towards the bottom amid outflows from growth, and with the hefty valuations state-side also stoking some concerns. Chip names are also hit amid news Apple (-0.8% pre-market) is reportedly planning to build a new office to bring wireless chips in-house which may replace parts from Broadcom and Skyworks. STMicroelectronics (-3%), ASM (-2.4%), BE Semiconductor (-2.6%) are among the biggest losers in the Stoxx 600. Top European News European Gas Plunges After Russia Books Pipeline at Last Minute Stellantis Revamps Auto-Finance Business With BNP, Santander Cellnex Drops Most in 11 Months on CK Hutchison Deal Woes Johnson Suffers Humiliating Defeat in U.K. Special Election In FX, it feels like Friday fatigue has set in and markets are already in weekend mode as the Greenback sticks to relatively tight lines against most G10 peers and the index holds close to the 96.000 level within a narrow 96.118-95.875 band. Consolidation and sideways price action is hardly a surprise given this week’s extremely volatile trade on a combination of thin seasonal volumes and the abundance of final global Central Bank policy meetings for the year all scheduled within a few days. However, the Dollar and a few of its key counterparts may also be tied up in option expiry interest that ranges from large to huge in certain cases, awaiting comments from Fed’s Waller as the first official post-FOMC speaker. CHF/EUR/GBP/JPY - The Franc remains above 0.9200 vs the Buck and is testing 1.0400 against the Euro again in wake of an unchanged SNB yesterday, while the single currency is holding above 1.1300 vs the Greenback even though Germany’s latest Ifo survey was downbeat and perhaps underpinned by hawkish remarks from ECB’s Simkus and Muller over the comparatively neutral/dovish Rehn. Elsewhere, Sterling retains an element of its post-BoE hike momentum, but not enough for Cable to breach the 30 DMA that comes in at 1.3344 today or stay above a Fib retracement at 1.3321 irrespective of Chief Economist Pill expressing the view that further tightening is likely. Conversely, the BoJ stuck to its dovish stance and balanced the termination of corporate and commercial QE by extending the COVID-19 funding facility for SMEs another 6 months, to leave the Yen meandering between 113.86-44, though nearer 113.50 amidst the latest bout of risk aversion. Note also, Usd/Jpy will likely be contained by a swathe of option expiries stretching from 113.00 up to 114.50 and the same can be said for Eur/Usd and the Pound given the sheer size of interest at various strikes rolling off today - see 7.24GMT post on the Headline Feed for details. NZD/AUD/CAD - A further deterioration in NBNZ business outlook and decline in own activity have compounded the aforementioned downturn in overall sentiment to the detriment of the Kiwi more than Aussie or Loonie that is feeling the heat from renewed weakness in WTI crude. Hence, Nzd/Usd is nearer 0.6750 than 0.6800, while Aud/Usd is hovering within a 0.7185-53 range and Usd/Cad sits just above 1.2800. In commodities, WTI and Brent futures have been trundling lower in tandem with risk appetite – with WTI Jan closer to USD 71/bbl (vs high USD 72.26/bbl) whilst Brent Feb resides under USD 73/bbl (vs high USD 74.98/bbl). The morning did see updates on the Iranian nuclear front whereby sources suggested the parties in the Vienna talks have been able to reach a new draft by incorporating Iran's views, which, if finalised, will be the basis for upcoming talks. Although nothing is yet set in stone, this is much more constructive than had been the case this time last week. Further, the oil complex juggles the fluid COVID situation as the steeper rise in global cases backs the notion of stricter measures. That being said, reports thus far continue to suggest the lower severity of the Omicron variant. Analysts at Goldman Sachs said Omicron hasn't had much of an impact on mobility and oil demand, while it sees strong oil demand in 2022 from rising CAPEX and infrastructure construction. Furthermore, it stated that average oil demand is to hit record highs in 2022 and 2023. Elsewhere, spot gold remains firm after topping the group of DMAs yesterday (21 at 1787, 100 at 1788, 200 at 1794 and 50 at 1798) alongside the USD 1,800/oz mark. LME copper hovers around the USD 9,500/t mark awaiting the next catalyst, whilst Dalian iron ore continued to gain overnight with traders citing a recovery in steel demand. US Event Calendar No economic events 1pm: Fed’s Waller Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Well this is my last EMR of 2021. Henry will be in charge on Monday and Tuesday of next week but by then I’ll be catching up on sleep to prepare myself for the onslaught of Xmas with three hyper excitable kids. Thanks for all your support and interactions over the past year. Hopefully you’ll continue to read in 2022. Try to have as exciting a holiday season as the virus permits and see you on the other side. As I have done most years, at the end today I’m listing my favourite TV series and films of the year. I used to do favourite albums of the year but I’m ashamed to say that the person who used to buy a few hundred albums a year and try out all sorts of new music has turned into someone who listens to playlists and old albums. All a bit dull. The odd film and lots of TV continues to keep me sane after a day working in financial markets. So I hope you enjoy the countdown. Talking of countdowns, yesterday was probably the last active market day of the year with a slew of Central Bank activity over the last 36 hours. However the FOMC-inspired risk rally peaked out by lunchtime in Europe and the S&P 500 eventually shed -0.87% amidst significant declines in technology stocks (Nasdaq -2.47%). Meanwhile there was continued caution about the Omicron variant among investors, as many of the key economies await a fresh wave of cases over the coming weeks. We’ll start with the ECB, who yesterday said that they would be ending net asset purchases under their Pandemic Emergency Purchase Programme (PEPP) at the end of March 2022, and that purchases over Q1 would be “at a lower pace than in the previous quarter”. Nevertheless, they also moved to soften the blow by confirming a step up in purchases by the Asset Purchase Programme (APP) to €40bn a month in Q2 2022, followed by a reduction to €30bn in Q3, and then €20bn a month from October “for as long as necessary to reinforce the accommodative impact of its policy rates.” They also said that they expected net purchases would conclude “shortly before it starts raising the key ECB interest rates.” Overall this was a somewhat hawkish decision (see European economists’ recap here), since although APP purchases will be increasing, those volumes are fixed and will taper out, whilst expectations were that the ECB may retain more flexibility with the APP. That flexibility seems confined to PEPP reinvestments, which will grant policy optionality as the inflation outlook remains uncertain. That said, it seems like the ECB communicated a set path for policy during 2022, with rate hikes not coming until 2023, according to our economists. Sovereign bond yields ended the day higher across most of the continent, although they gave up some of that increase towards the close, with those on 10yr bunds (+1.1bps), OATs (+2.2bps) and BTPs (+5.5bps) all rising. However, some shorter-dated yields did move lower, with those on 2yr bunds (-1.3bps) and OATs (-0.2bps) declining. When it comes to the ECB’s inflation forecasts, these were upgraded yet again, with the central bank now expecting 2022 inflation at +3.2% (vs. +1.7% in September), whilst their 2023 and 2024 projections now stand at +1.8%. However, the 2023 and 2024 projections are still beneath the ECB’s 2% target, and in their forward guidance they’ve said that they wouldn’t raise raises until inflation was seen reaching the target “durably for the rest of the projection horizon”, so even with the upgrade to 2023 they’re still forecasting inflation beneath target then. The other central bank decision came from the BoE yesterday, who hiked rates by 15bps to 0.25%. The consensus had been expecting them to keep rates on hold given the Omicron variant, hence the decision came as something of a surprise to markets, although we should say that DB’s own UK economist made an out-of-consensus but accurate call for a 15bps hike. In the minutes, the decision was described as “finely balanced” due to the uncertainty around Covid, but an 8-1 majority on the MPC voted in favour, and Governor Bailey said afterwards in a BBC interview that “We’ve seen evidence of a very tight labour market and we’re seeing more persistent inflation pressures, and that’s what we have to act on”. It comes as inflation has continued to surpass the BoE’s own forecasts, and the summary of the latest meeting said that Bank staff were now expecting inflation to peak “around 6% in April 2022”, up from its current level of 5.1%. Given the decision came as a surprise to many, there was a sharp rise in gilt yields in response, with those on 10yr gilts initially up +10bps before following the global bond rally which meant we only closed up +2.2bps to 0.75%. That move was entirely driven by higher real rates, and the 10yr inflation breakeven fell -5.5bps as investors moved to price in a lower trajectory for inflation, with the 5yr breakeven down by an even larger -12.3bps. Meanwhile investors also moved to price in a faster pace of hikes over the coming months, with the next 25bps hike fully priced in by the time of the March 2022 meeting, and a +73% chance of one priced in at the next meeting in February. In terms of DB’s own expectations, our UK economist writes in his reaction note (link here) that he now expects the next 25bps hike as soon as February 2022, followed by two further hikes in November 2022 and May 2023. Against this backdrop there was a fairly mixed equity reaction on either side of the Atlantic. The S&P 500 fell -0.88% as mentioned, with the NASDAQ seeing a major -2.47% decline, erasing their post-FOMC gains. In Europe however there was a much stronger performance as they caught up with the US rally following the Fed’s policy decision, and the STOXX 600 advanced +1.23%. Separately, US Treasuries also diverged from their European counterparts, with the 10yr yield down -4.6bps at 1.41%. In terms of the latest on the pandemic, there was a further record number of cases in the UK yesterday, with 88,376 reported, which beats the previous record set only the day before. Against that backdrop, France moved to restrict travel from the UK, with tourist and non-essential business travel prohibited. Separately in South Africa, hospitalisations now stand at 7,614, which is currently up +59% on the previous week. When it comes to the economic impact, yesterday’s release of the December flash PMIs from around the world pointed to weakening growth momentum across the major economies. Indeed, the composite PMI declined on the previous month in the US, Euro Area, Germany, France, UK, Japan and Australia. The headline numbers were the Euro Area composite PMI, which fell to a 9-month low of 53.4 (vs. 54.4 expected), whilst the US composite PMI fell to 56.9. So both still above the 50-mark that separates expansion from contraction, but some way down from their peaks in the middle of the year. Over in the US, it appears the gap between Democratic senators on President Biden’s Build Back Better bill is just too big, as Democratic leaders acknowledged that negotiations and votes could well drag over into next year. In a statement, President Biden said that “It takes time to finalize these agreements, prepare the legislative changes, and finish all the parliamentary and procedural steps needed to enable a Senate vote. We will advance this work together over the days and weeks ahead”. Obviously longer-term outlooks will hinge on whether or not the bill passes, but there’s implications for 2022 growth, too, as the bill was set to extend child tax credits that comprise a not-insubstantial portion of consumer income. Overnight in Asia the main equity indices are trading lower, with the KOSPI (-0.33%), Shanghai Composite (-0.90%), Hang Seng (-1.28%), CSI (-1.31%) and the Nikkei (-1.75%) all declining amidst losses in technology stocks. Some of the main headlines came from the Bank of Japan however, which kept its main policy rates unchanged, announced that it would slowly reduce its corporate debt holdings, but also extended a special covid loans program by six months to end in September 2022, which aims to support small and medium-sized firms. Futures markets in US & Europe are also indicating a slow start, with those on the S&P 500 (-0.14%) and the DAX (-0.67%) both trading in the red. In terms of yesterday’s other data, the weekly initial jobless claims in the US moved up from their half-century low the previous week to 206k (vs. 200k expected). In spite of the uptick however, it was still enough to push the 4-week moving average down to 203.75k. Otherwise, US industrial production grew by +0.5% in November (vs. +0.6% expected), housing starts accelerated to an annualised rate of 1.679m (vs. 1.567m expected), their highest level in 8 months, and building permits rose to an annualised 1.712m (vs. 1.661m expected). To the day ahead now, and data releases include Germany’s Ifo business climate indicator for December, as well as November data on German PPI and UK retail sales. From central banks, we’ll also hear from the Fed’s Waller and the ECB’s Rehn. Tyler Durden Fri, 12/17/2021 - 08:07.....»»

Category: blogSource: zerohedgeDec 17th, 2021

"Santa Rally Is Finally Here": Futures Hit All Time High Day After Powell Goes Full Jean-Claude Trichet

"Santa Rally Is Finally Here": Futures Hit All Time High Day After Powell Goes Full Jean-Claude Trichet One day before what everyone knew would be a hawkish pivot by the Fed, the mood was dour with tech names tumbling and futures hanging one for dear life. One day after, Jerome Powell confirmed he would go full Jean-Claude Trichet as the Fed would not only turbo-taper into a sharply slowing economy, ending its QE program by March but then proceed with hiking rates as many as 3 times in 2022 (more than the 2 hike consensus), with the BOE shocking markets moments ago with a surprise rate hike and even the ECB trimming its turbo QE, and futures are.... at all time highs. That's right - eminis are higher by 140 points in 24 hours because the Fed was more hawkish than consensus expected.  At 8:00 a.m. ET, Dow e-minis were up 215 points, or 0.61%, S&P 500 e-minis were up 27.25 points, or 0.57%, and Nasdaq 100 e-minis were up 100 points, or 0.61%. Treasury yields jumped alongside European bonds after the BOE became the first major central bank to raise rates since the pandemic, while the dollar fell and the pound jumped. The Euro also hit session highs after the ECB seemed to turn ever so slightly more hawkish as its monthly QE is set to shrink in the coming year. "The market likes facts it can digest. With the uncertainty now gone, it finds relief,” said Frederik Hildner, a portfolio manager at Salm-Salm & Partner. Gradual rising rates “provides more firepower for the next downturn, as it displays the ability normalize monetary policy.” On Wednesday, Jerome Powell said the U.S. economy no longer needed increasing amounts of policy support as annual inflation has been running at more than double the central bank's target in recent months, while the economy nears full employment. Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety as the benchmark S&P 500 inches closer to a record high. "Is the Santa Rally finally here? Markets certainly seem to have a spring in their step... the prospect of three interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control," Russ Mould, investment director at AJ Bell wrote in a client note. "Equally, it isn't being too aggressive to trip up the economy. This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets" Bell said, clearly goalseeking his narrative to the market's response as just 24 hours later he would be saying just the opposite when futures were tanking of hawkish Fed fears. Big tech stocks and banks led gains in premarket trading. Shares in Tesla, Microsoft, Meta and Amazon.com rose between 0.7% and 2.4%, with the lift pushing Apple shares nearer to an historic market value of $3 trillion. Bank stocks including JPMorgan, Morgan Stanley, Bank of America, Wells Fargo and Citigroup all gained between 0.7% and 0.8%. Here are some of the biggest U.S. movers today: Apple (APPL) and other big U.S. tech stocks rise after the Federal Reserve said that it would speed up its taper, joining in with a broader relief rally across risk assets. Apple shares are up 0.6%, with the stock drawing nearer to an historic market capitalization of $3 trillion. Also Thursday, Goldman Sachs said lead times for Apple’s iPhone have declined in the latest week. Assertio (ASRT US) shares rise 4% after the company announced the $44 million acquisition of the Otrexup device from Antares Pharma. Blue Bird (BLBD US) dropped 6% after the school bus-maker provided a weaker-than-expected sales outlook. The company also offered $75m shares at $16/share in a private placement. Danimer Scientific (DNMR) falls 10% after announcing that it plans to offer $175 million of convertible senior notes. Delta Air Lines (DAL) is up 2% after saying it expects to report a profit for the fourth quarter, citing a strong demand for travel over the winter holiday period and a decline in jet fuel prices. Other airline stocks are also higher. DocuSign (DOCU) falls 2% as Morgan Stanley issued a downgrade, saying third-quarter results changed the firm’s view regarding the durability of growth through tough post-pandemic comparables. Freyr Battery (FREY) gains 14% after executing its inaugural offtake agreement for at least 31 GWh of low-carbon battery cells. IronNet (IRNT US) slumps 25% after the cybersecurity company’s results fell short of expectations, prompting a Street-low target from Jefferies. Lennar Corp. (LEN US) declined 6% after it reported a forecast for purchase contracts that was weaker than expected. Plug Power (PLUG) gains 5% after signing an agreement with Korean electric-vehicle manufacturer Edison Motors to develop an electric city bus powered by hydrogen fuel cells. Syndax Pharmaceuticals (SNDX) falls 8% after pricing 3.2 million shares at $17.50 each. Tesla (TSLA) is up 2%, rising with other electric vehicle stocks amid a broader gain in technology stocks and U.S. futures on hopes that the Federal Reserve’s policy tightening will fight high inflation without hampering economic growth. Wayfair (W) falls 2% after BofA downgraded the stock to underperform, citing weak near-term data and difficult comparisons through the first quarter of 2022 for the online furniture retailer. European equities rally with Euro Stoxx 50 up as much as 2.1% before drifting off best levels. The U.K.’s exporter-heavy FTSE 100 Index pared some gains after the BOE decision, while European dipped modestly after the European Central Bank’s meeting.  Miners, tech and autos are the best performers, utilities and media names lag. Equities have whipsawed in recent weeks as investors attempted to price in the prospect of rate hikes, while assessing risks from the spread of the omicron variant. The market’s early response to the Fed signals some relief arising from policy clarity, and optimism that the rebound from pandemic lows can weather the pivot away from ultra-loose monetary settings. “The market is breathing a sigh of relief that the FOMC meeting suggested that it is taking inflation risks in the United States more seriously,” Ann-Katrin Petersen, an investment strategist at Allianz Global Investors, said in an interview with Bloomberg TV. “The question really will be whether the Fed will dare to do even more in order to taper the inflation risk.” Asian stocks rose, halting a four-day slide, as confidence in Federal Reserve policy allowed investors to take on riskier assets. The MSCI Asia Pacific Index climbed as much as 0.8%, buoyed by energy and technology shares. Japan was Asia’s top performer, aided by a weaker yen. Hong Kong and China stocks eked out gains amid ongoing concern over U.S. sanctions. Australian equities declined for a third day. Asia’s benchmark advanced for the first time this week on hopes the Fed will effectively combat surging prices without choking off economic growth. The U.S. central bank said it will double the pace of its asset tapering program to $30 billion a month and projected three interest-rate increases in 2022. In the run-up to the Fed’s decision, Asia’s equity gauge slumped almost 2% over the past four days, keeping it below the 50-day moving average.    The short-term boost to stock market sentiment is from Fed Chair Jerome Powell’s comments about wage inflation not being the main issue for now, and expectations that there’ll be full employment next year, said Ilya Spivak, head of Greater Asia at DailyFX. However, there’s a “meaningful risk” that the Fed’s latest policy stance will trigger liquidation as Asia stock portfolios are de-risked, Spivak said. Japan’s stocks rose for a second day after the yen weakened and U.S. stocks rallied amid speculation the Federal Reserve will combat surging prices without choking off economic growth. The Topix index climbed 1.5% to close at 2,013.08 in Tokyo, while the Nikkei 225 Stock Average advanced 2.1% to 29,066.32. Keyence Corp. contributed the most to the Topix’s gain, increasing 2.5%. Out of 2,181 shares in the index, 1,674 rose and 421 fell, while 86 were unchanged. “It wouldn’t be strange to see the discount on Japanese equities narrowing following the FOMC meeting results, with market interest centered around electronics, machinery, automakers and marine transportation stocks,” said Takashi Ito, an equity market strategist at Nomura Securities. Electronics firms and automakers helped lift the Topix as the yen headed for a four-day slump against the dollar, with the currency falling 0.1% to 114.19 Australia's S&P/ASX 200 index fell 0.4% to close at 7,295.70, extending its losing streak to a third day.  CSL was the worst performer after the benchmark’s second-biggest company by weighting completed a placement to fund its Vifor acquisition. Mesoblast was the top performer after saying it plans to conduct an additional U.S. Phase 3 trial of rexlemestrocel-L in patients with chronic low back pain.  Investors also digested November jobs data. Australian employment soared last month, smashing expectations and pushing the jobless rate lower as virus restrictions eased on the east coast. In New Zealand, the S&P/NZX 50 index fell 0.7% to 12,777.54 In rates, cash USTs bull steepened, bolstered by a large curve steepener that blocked in early London. Bunds are soft at the back end, peripherals slightly wider ahead of today’s ECB meeting. Gilts bear steepen slightly, white pack sonia futures are lower by 2-3.5 ticks. In FX, the dollar slipped for a second day and oil rose; cable snapped to best levels of the week after the BOE unexpectedly hiked rates.  The Bloomberg Dollar Spot Index fell for a second day as the greenback weakened against all its Group-of-10 peers apart from the yen; Tresury yields fell, led by the belly of the curve. Commodity currencies were the best G-10 performers, led by the krone, which reversed an earlier loss after Norway’s central bank raised its interest rate for the second time this year and flagged another increase in March as officials acted to cool the rebounding economy despite renewed coronavirus concerns. The Australian and New Zealand dollars reversed earlier losses amid upbeat stock markets; the Aussie earlier weakened as RBA Governor Lowe hinted at the prospect of no rate hikes next year. The yen fell as the Federal Reserve’s decision reaffirmed yield differentials ahead of the Bank of Japan’s outcome on Friday. Bonds rose after a solid auction. Elsewhere in FX, NOK outperforms in G-10 after Norges Bank rate action, other commodity currencies are similarly well bid. In commodities, Crude futures hold a narrow range around best levels of the session. WTI is up 1.1% near $71.70, Brent near $74.70. Spot gold grinds higher, adding ~$9 near $1,786/oz. LME copper outperforms in a well-bid base metals complex To the day ahead now, and the main highlights will be the aforementioned policy decisions from the ECB and the BoE. On the data side, we’ll also get the flash PMIs for December from around the world, the Euro Area trade balance for October, and in the US there’s November data on industrial production, housing starts and building permits, as well as the weekly initial jobless claims. Finally, EU leaders will be meeting for a summit in Brussels. Market Snapshot S&P 500 futures up 0.5% to 4,734.25 STOXX Europe 600 up 1.2% to 476.39 MXAP up 0.8% to 193.11 MXAPJ up 0.5% to 623.76 Nikkei up 2.1% to 29,066.32 Topix up 1.5% to 2,013.08 Hang Seng Index up 0.2% to 23,475.50 Shanghai Composite up 0.8% to 3,675.02 Sensex up 0.1% to 57,851.57 Australia S&P/ASX 200 down 0.4% to 7,295.66 Kospi up 0.6% to 3,006.41 Brent Futures up 1.0% to $74.59/bbl Gold spot up 0.5% to $1,786.03 U.S. Dollar Index down 0.36% to 96.16 German 10Y yield little changed at -0.36% Euro up 0.2% to $1.1316 Top Overnight News from Bloomberg The greenback is set for its biggest annual gain in six years and its rally appears to be far from over, market participants say. The prime mover: a hawkish Federal Reserve that’s drawn a roadmap of interest-rate increases over the next three years, while other central banks look much more reticent to withdraw stimulus The ECB is poised to unveil a gradual withdrawal from extraordinary pandemic stimulus in the face of soaring inflation whose path is further clouded by the omicron coronavirus variant The “phenomenal pace” at which the new Covid-19 omicron strain is spreading across the U.K. will trigger a surge in hospital admissions over the holiday period, according to Boris Johnson’s top medical adviser The Swiss National Bank kept both the deposit and the policy rate at -0.75%, as widely predicted by economists. With the global economic recovery on shaky footing due to the omicron variant, President Thomas Jordan and fellow policy makers also reiterated their pledge to supplement subzero rates with currency interventions as needed France will impose tougher rules on people traveling from the U.K., including a ban on non-essential trips and a requirement to self-isolate, as it tries to slow the spread of the omicron variant IHS Markit said its index tracking output across the U.K. economy fell to 53.2 this month from 57.6 in November, reflecting weaker-than-expected growth in service industries including hotels, restaurants and travel-related businesses. Business-to-business services stalled European power prices soared to records after Electricite de France SA said that two nuclear reactors will stop unexpectedly and two will have prolonged halts -- just as the continent heads for a cold snap with already depleted gas inventories Hungary’s central bank increased the effective base interest rate for the fifth time in as many weeks to tackle the fastest inflation since 2007 and shore up the battered forint A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed as the region digested the FOMC meeting. The ASX 200 (-0.4%) was negative with heavy losses in the healthcare sector and as COVID infections remained rampant. There were also notable comments from RBA Governor Lowe that the board discussed tapering bond purchases in February and ending it in May or could even end purchases in February if economic progress is better than expected, although it is also open to reviewing bond buying again in May if the data disappoints. The Nikkei 225 (+2.1%) outperformed and reclaimed the 29k level after the Lower House recently passed the record extra budget stimulus and with the latest trade data showing double-digit percentage surges in Imports and Exports, despite the latter slightly missing on expectations. The Hang Seng (+0.2%) and Shanghai Comp. (+0.8%) were varied with Hong Kong pressured by losses in the big tech names amid ongoing frictions between the world’s two largest economies and as US lawmakers proposed a bill to allow the US oversight of China audits, although the mainland was kept afloat amid further speculation of a potential LPR cut this month, as well as reports that China will boost financial support for small businesses and offer more longer-term loans to manufacturers. Finally, 10yr JGBs were indecisive despite the constructive mood in Tokyo and with price action stuck near the 152.00 focal point, while demand was also sidelined amid mixed results at the 20yr JGB auction and as the BoJ kickstarts its two-day meeting. Top Asian News Indonesia Reports First Omicron Case in Jakarta Facility Asia Stocks Snap Four-Day Drop as Traders Take on Risk After Fed Shimao Group Shares Set for Best Day in Month Money Manager Vanishes With $313 Million From China Builder Equities in Europe have taken their cue from the post-FOMC rally seen across Wall Street (Euro Stoxx 50 +1.6%; Stoxx 600 +1.1%) following somewhat mixed APAC trade. As a reminder, markets saw relief with one of the major risk events out of the way, and with Chair Powell refraining from throwing hawkish curveballs. That being said, the forecast does see three rate hikes next year, whilst the Fed Board next year will also be more hawkish – at least within the rotating voters - with George, Mester and Bullard poised to vote from 2022. Nonetheless, US equity future continues grinding higher with all contracts in the green and the RTY (+1.3%) outperforming vs the NQ (+0.7%), ES (+0.6%), and YM (+0.5%). Bourses in Europe also experience broad-based gains with no real outliers, although the upside momentum somewhat waned amid some softer-than-expected PMI metrics ahead of ECB. Sectors in Europe paint a clear pro-cyclical bias. Tech outperforms following a similar sectorial performance seen on Wall Street. Basic Resources and Oil & Gas follow a close second, with Autos and Travel & Leisure also among the biggest gainers. The downside sees Personal & Household Goods, Telecoms and Food & Beverages. Healthcare meanwhile fares better than its defensive peers as Novartis (+4%) is bolstered after commencing a new USD 15bln buyback, highlighting confidence in growth and pipeline. On the flip side, EDF (-12%) shares have slipped after it narrowed FY EBITDA forecasts and highlighted some faults with some nuclear reactors amid corrosion. Top European News Britain’s Covid Resurgence Cuts Growth to Slowest Since Lockdown SNB Says Franc Is Highly Valued as Omicron Clouds Outlook Norway Delivers Rate Hike That Omicron Had Threatened to Derail Erdogan Approves Third Capital Boost for State Banks Since 2019 In FX, not much bang for the Buck fits the bill accurately as it is panning out in the FOMC aftermath even though market expectations were matched and arguably exceeded in terms of dot plots showing three hikes in 2022 vs two anticipated by most and only one previously, while the unwinding of asset purchases will occur in double quick time to end in March next year instead of June. However, there appears to be enough in the overall statement, SEP and Fed chair Powell’s post-meeting press conference to offset the initial knee-jerk spike in the Dollar and index that lifted the latter very close to its current y-t-d peak at 96.914 vs 96.938 from November 24. Indeed, the terminal rate was maintained at 2.5%, no decision has been taken about whether to take a break after tapering before tightening, and the recovery in labour market participation has been disappointing to the point that it will now take longer to return to higher levels. In response, or on further reflection, the DXY has recoiled to 96.141 and through the 21 DMA that comes in at 96.238 today. NZD/AUD/CAD/GBP/EUR/CHF - All on the rebound vs their US counterpart, with the Kiwi back on the 0.6800 handle and also encouraged by NZ GDP contracting less than feared in Q3, while the Aussie is hovering around 0.7200 in wake of a stellar jobs report only partly tempered by dovish remarks from RBA Governor Lowe who is still not in the 2022 hike camp and non-committal about ending QE next February or extending until May. Elsewhere, the Loonie has clawed back a chunk of its losses amidst recovering crude prices to regain 1.2800+ status ahead of Canadian wholesale trade that is buried between a raft of US data and survey releases, Sterling is flirting with 1.3300 in advance of the BoE that is likely to hold fire irrespective of significantly hotter than forecast UK inflation, the Euro is pivoting 1.1300 pre-ECB that is eyed for details of life after the PEPP and the Franc is somewhat mixed post-SNB that maintained rates and a highly valued assessment of the Chf with readiness to intervene as required. Note, Usd/Chf is meandering from 0.9256 to 0.9221 vs Eur/Chf more elevated within a 1.0455-30 band. JPY - The Yen is underperforming on the eve of the BoJ and looking technically weak to compound its yield and rate disadvantage after Usd/Jpy closed above a key chart level on Wednesday (at 114.03). As such, Fib resistance is now exposed at 114.38 vs the circa 114.25 high, so far, while decent option expiry interest may be influential one way or the other into the NY cut given around 1.3 bn at the 114.25 strike, 1.7 bn at 114.30 and 1.2 bn or so at 114.50. In commodities, WTI and Brent front-month futures are taking advantage of the risk appetite coupled with the softer Buck. WTI Jan trades on either side of USD 71.50/bbl (vs low USD 71.39/bbl) while Brent Feb sees itself around USD 74.50/bbl (vs low USD 74.28/bbl). Complex-specific news has again been on the quiet end, with prices working off the macro impulses for the time being, and with volumes also light heading into Christmas trade. Elsewhere spot gold and silver ebb higher – in tandem with the Dollar, with the former eyeing a group of DMAs to the upside including the 100 (1,788/oz), 21 (1,789/oz) 200 (1,794/oz) and 50 (1,796/oz). Turning to base metals, LME copper has been catapulted higher amid the risk and weaker Dollar, with prices re-testing USD 9,500/t to the upside. Meanwhile, a Chinese government consultancy has said that China's steel consumption will dip 0.7% on an annual basis in 2022 amid policies for the real estate market and uncertainties linked to COVID-19 curb demand. US event calendar 8:30am: Dec. Initial Jobless Claims, est. 200,000, prior 184,000; Continuing Claims, est. 1.94m, prior 1.99m 8:30am: Nov. Housing Starts MoM, est. 3.1%, prior -0.7% 8:30am: Nov. Housing Starts, est. 1.57m, prior 1.52m 8:30am: Nov. Building Permits MoM, est. 0.5%, prior 4.0%, revised 4.2% 8:30am: Nov. Building Permits, est. 1.66m, prior 1.65m, revised 1.65m 8:30am: Dec. Philadelphia Fed Business Outl, est. 29.6, prior 39.0 9:15am: Nov. Manufacturing (SIC) Production, est. 0.7%, prior 1.2%; Industrial Production MoM, est. 0.6%, prior 1.6% 9:45am: Dec. Markit US Manufacturing PMI, est. 58.5, prior 58.3 9:45am: Dec. Markit US Services PMI, est. 58.8, prior 58.0 DB's Jim Reid concludes the overnight wrap Yesterday’s biggest story was obviously the Fed. In line with our US economists call (their full recap here), the FOMC doubled the pace of taper to $30bn a month, which would bring an end to QE in mid-March. The new dot plot showed three rate hikes in 2022, up from the Committee being split over one hike in September. Farther out, the median dot had 3 additional hikes in 2023 and 2 hikes in 2024, bringing fed funds just below their estimate of the longer-term rate. Notably, all 18 Committee members have liftoff occurring next year, and 10 have 3 hikes penciled in, suggesting consensus behind the recent hawkish turn was strong. Short-end market pricing increased in line and now has around 2.9 hikes priced for 2022. The first hike is fully priced for the June meeting, but notably, meetings as early as March are priced as live, more on that in a bit. In the statement, the Committee admitted that inflation had exceeded target for some time (dropping ‘transitory’ completely), and that liftoff would be tied to the economy reaching full employment. By the sounds of the press conference, progress toward full employment has proceeded pretty rapidly. Chair Powell noted that while labour force participation progress has been disappointing, almost every other measure of labour market strength shows a very strong labour market, and could create upside risks to inflation should wage growth start to increase beyond productivity. It is within that context that he framed the decision to taper faster, it will leave the Fed in a position to react as needed, providing optionality. In that vein, he stressed a few times that the lag between the end of taper and liftoff need not be as long as it was in the last cycle, and that the Fed will raise rates after taper is done whenever needed, hence meetings as early as March being live. Notably on Omicron, the Chair, like the rest of us, recognises we don’t know much about the variant yet, but seemed optimistic about the economy’s ability to withstand subsequent Covid shocks, regardless of Omicron’s specifics. While Covid shocks can tighten supply chains, discourage labour participation, and reduce demand, as more people get vaccinated those impacts should dwindle over time, so his argument went. Hammering the point home, he sounded confident that the economy can handle whatever Omicron brings without any additional QE, justifying the accelerated taper path despite Covid risks. The hawkish turn had been well forecast through Fed speakers since the last meeting, not least of which the Chair himself during Congressional testimony, which served to dull the market impact. Treasury yields were slightly higher, (2yr Tsys +0.6bps and 10yr Tsys +1.5 bps) but were quite docile for an FOMC afternoon. The dollar initially strengthened on the statement release before reversing course and ending the day -0.24% lower. Stocks were the real outperformers, as the S&P 500 rallied through the FOMC events, gaining +1.63%, the best daily performance in two months, while the Nasdaq increased +2.15%. The Russell 2000 matched the S&P, gaining +1.65%. Obviously the market was anticipating the change in policy, but if doubling taper and adding three rate hikes in the next year isn’t enough to tighten financial conditions, what is? The Chair was asked about that in so many words in the press conference, where he responded by noting financial conditions could change on a dime. Indeed, they will have to tighten from historically easy levels if the Fed is to bring inflation back to target through policy. The Fed may be out of the way now, but the central bank excitement continues today as both the ECB and the BoE announce their own policy decisions later on. We’ll start with the ECB, who like the Fed have faced much higher than expected inflation lately, with the November flash estimate coming in at +4.9%, which is the highest since the formation of the single currency. Whilst Omicron has cast a shadow of uncertainty, with Commission President von der Leyen saying yesterday that it was likely to become dominant in Europe by mid-January, our European economics team doesn’t think there has been anything concrete enough to alter the ECB from their course (like the Fed). In our European economists’ preview (link here) they write the ECB appears on track to initiate a transition to a monetary policy stance based more on policy rates and rates guidance and less on liquidity provision. The ECB is set to confirm that PEPP net purchases will end in March, but will cushion the blow by working flexibility into the post-PEPP asset purchase arrangement. They are also set to make the policy framework more flexible to better respond to inflation uncertainties. One thing to keep an eye out for in particular will be the latest inflation projections, with a report from Bloomberg suggesting that they’ll show inflation beneath the 2% target in both 2023 and 2024. So if that’s true, that could offer a route to arguing against a tightening of monetary policy for the time being, since the ECB’s forward guidance has been that it won’t raise rates until it sees inflation at the target “durably for the rest of the projection horizon”. Today’s other big decision comes from the BoE, where our UK economist is expecting that there’ll be a 15bps increase in Bank Rate, taking it up to 0.25% although they suggest it’s a very close call. See here for the rationale. Ahead of that decision later on, we received a very strong UK inflation print for November, with CPI rising to +5.1% (vs. +4.8% expected), up from +4.2% in October and the fastest pace in a decade. That’s running ahead of the BoE’s own staff forecasts in the November Monetary Policy Report, which had seen inflation at just +4.5% that month, so six-tenths beneath the realised figure. We’ll get their decision at 12:00 London time, 45 minutes ahead of the ECB’s. In terms of the latest on the Omicron variant, there are continued signs of concern in South Africa, with cases coming in at a record 26,976 yesterday, whilst the number in hospital at 7,339 is up +73% compared to a week ago. Meanwhile the UK recorded their highest number of cases since the pandemic began, at 78,610. England’s Chief Medical Officer, Chris Whitty, said that a lot of Covid records would be broken in the coming weeks, and also that a majority of cases in London were now from the Omicron variant. Separately, the French government is set to hold a meeting tomorrow on Covid measures, and EU leaders will be discussing the pandemic at their summit today. When it comes to Omicron’s economic impact, we could see some light shed on that today as the December flash PMIs are released from around the world. Overnight we’ve already had the numbers out of Australia and Japan where hints of a slowdown are apparent. Japan's Manufacturing PMI came out at 54.2 (54.5 previous) and the Composite at 51.8 (53.3 previous) while Australia’s Manufacturing and Composite came in at 57.4 and 54.9 respectively (59.2 and 55.7 previous). Overnight in Asia stocks are trading mostly higher led by the Nikkei (+1.78%) followed by the Shanghai Composite (+0.28%), and KOSPI (+0.22%). However the CSI (-0.07%) and Hang Seng (-0.81%) are losing ground on concerns of US sanctions on Chinese tech companies. In Australia, the November employment report registered a strong beat by adding 366.1k jobs against 200k consensus. This is being reflected in a +12.75 bps surge in Australia's 3y bond. Elsewhere, in India wholesale inflation for November rose +14.2% year on year, levels last seen in 2000 against a consensus of +11.98% on the back of higher food and input prices. DM futures are indicating a positive start to markets today with S&P 500 (+0.19%) and DAX (+1.04%) contracts both higher as we type. Ahead of the Fed, European markets had put in a fairly steady performance yesterday, with the STOXX 600 up +0.26%. That brought an end to a run of 5 successive declines, with technology stocks in particular seeing an outperformance. Sovereign bond markets were also subdued ahead of the ECB and BoE meetings later, with yields on 10yr bunds (+0.9bps), OATs (+0.5bps) and gilts (+1.2bps) only seeing modest moves higher. In DC, despite optimistic sounding talks earlier in the week, the latest yesterday was President Biden and Senator Manchin remained far apart on the administration’s build back better bill, imperiling its chances of passing before Christmas. Elsewhere, reports suggested the President would have more nominations for the remaining Fed Board vacancies this week. Looking at yesterday’s other data, US retail sales underwhelmed in November with growth of just +0.3% (vs. +0.8% expected), and measure excluding gas and motor vehicles was also up just +0.2% (vs. +0.8% expected). Also the NAHB’s housing market index for December moved up to a 10-month high of 84, in line with expectations. To the day ahead now, and the main highlights will be the aforementioned policy decisions from the ECB and the BoE. On the data side, we’ll also get the flash PMIs for December from around the world, the Euro Area trade balance for October, and in the US there’s November data on industrial production, housing starts and building permits, as well as the weekly initial jobless claims. Finally, EU leaders will be meeting for a summit in Brussels. Tyler Durden Thu, 12/16/2021 - 08:29.....»»

Category: blogSource: zerohedgeDec 16th, 2021

Futures Flat Ahead Of Taper Accelerating Payrolls

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

Category: blogSource: zerohedgeDec 3rd, 2021

November Payrolls Preview: Strong Enough To Justify The Accelerated Taper?

November Payrolls Preview: Strong Enough To Justify The Accelerated Taper? With Powell's Fed having telegraphed it will accelerate the taper at this month's meeting so it can start presumably start hiking as soon as June of 2022, the November payrolls report may be moot although traders will be looking for barbell signs: will it be strong enough to validate an accelerated taper, or could it come so far below expectations that the Fed will be forced to delay its taper-boosting plans. Looking at the expectations, Newsquawk reminds us that analysts look for 550k nonfarm payrolls to be added to the US economy in November, similar to October's 531k; the jobless rate is seen falling by one-tenth of a percent to 4.5%. While as noted above the Fed appears almost certain to announce a quickening in the pace of QE tapering, analysts will be carefully watching measures of labor market slack to gauge the progress towards the Fed's 'three tests' for rate hikes: i) Participation was unchanged in October, ii) employment-population ticked up by 0.1ppts, while iii) the U6 measure of underemployment fell 0.2ppts. With the inflation tests met, the labor market data will form a key part of the Fed's arguments for rate hikes, and any significant  improvement in these metrics may see markets further price in tighter rates next year. Meanwhile, labor market gauges have generally been constructive in November: the rate of initial jobless claims going into the November survey period improved relative to the October window; ADP's gauge of payrolls was in line with expectations, though the pace eased vs October; business surveys saw employment sub-indices improve and are alluding to a very tight labor market, while today's Challenger job cuts fell to the lowest since 1993. Here is a summary of expectations: Nonfarm payrolls are expected to print 550k in November vs 531k in October (private payrolls expected at 530k vs 604k prior, manufacturing payrolls expected at 45k vs prior 60k); the 3-month average nonfarm payrolls trend rate eased to 442k in October (vs 629k in September), the 6-month average rose to 666k (from 622k) and the 12-month average eased to 481k (from 494k). The unemployment rate is seen declining by 0.1ppts in November to 4.5%; Labor market participation was unchanged at 61.6% in October (vs 63.6% in February 2020), U6 underemployment declined by 0.2ppts to 8.3% (vs 7.0% in February 2020), and the employment-population ratio rose 0.1ppts to 58.8% (vs pre-pandemic 61.1%). Average hourly earnings are seen rising 0.4% M/M, with the annual measure expected to rise by 0.1ppts to 4.0% Y/Y, Average workweek hours are likely to be unchanged at 34.7hrs. POLICY FOCUS: Fed Chair Powell this week delivered hawkish testimony to lawmakers, where he stated that the economy had continued to strengthen, the labor market had continued to improve, and he sees inflation moving down significantly over the next year. He added that it was appropriate to consider wrapping up the tapering of asset purchases a few months sooner, which participants will discuss at the December FOMC. Powell telegraphing the debate in advance may have taken some of the sting out of incoming economic data -- the rationale being that the Fed is set to accelerate the taper barring any significant deterioration in labor market and inflation data before the December 15th confab -- but Powell still suggested that there was a three-part test for raising rates (economy at maximum employment, inflation at 2%, inflation on track to moderately exceed 2% for some time); Fed officials have attempted to break the link between tapering and eventual rate hikes, but forward-looking markets will be assessing incoming data within the context of the three tests, and will price expectations of the Fed rate hike trajectory accordingly. The inflation test has been met, but Powell said there was still ground to cover to reach maximum employment, though he has previously said that could be achieved by the middle of next year; this week's labor market data, therefore, remains a key part of the eventual rate hike debate. SLACK: Taking an aggregate of the headline since March 2020, there are still some 4.44mln nonfarm payrolls to be recouped to get back to pre-pandemic levels. Goldman Sachs explains that it has been childcare constraints and elevated fiscal transfers which have likely weighed on participation, but these factors should have only a small effect going forward, but it may still take some time for some people to feel comfortable in returning to work, leaving some potential for longer-lasting drags. "We continue to expect that the labor force participation rate will increase in the nearterm, but we have nudged down our participation rate forecast to 1ppt below trend at end-2021 (61.9%) and 0.5ppts below trend at end-2022 (62.1%)," the bank says, "but because jobs are abundant and residual weakness in participation in mid-2022 will likely be due to changes in fiscal policy, wealth, and worker preferences, we expect that the FOMC will judge any participation shortfall that remains at that point to be structural or voluntary and will update their maximum employment goal accordingly." JOBLESS CLAIMS: In the week that traditionally coincides with the BLS survey window for the jobs report, initial jobless claims were little changed at 270k from the prior week's 269k; but since the October jobs report survey window, claims have eased from 351k. Continuing claims, meanwhile, printed 2.049mln in the survey week, down from 2.11mln in the prior week, and lower than the 2.81mln in the October survey period. Pantheon Macroeconomics said that the trend in initial jobless claims remains firmly downward, but the read may not be clear in the holiday season: "Unfortunately the numbers will be volatile over the holidays, as usual, and the next clean read on the data will be in mid-January," and by then, "we think claims will be close to the lows seen in the pre-COVID cycle, about 210K." ADP: The ADP's national employment gauge saw 534k job additions to the US economy in November, more or less in line with the 525k forecast; the prior was revised down trivially by 1k to 570k. ADP's economists noted that the labor market recovery continued to "power through" its challenges last month. "Job gains have eclipsed 15 million since the recovery began, though 5 million jobs short of pre-pandemic levels," ADP said, "service providers, which are more vulnerable to the pandemic, have dominated job gains this year." On the pandemic, ADP's economists said it was too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months. BUSINESS SURVEYS: Within the ISM manufacturing report, the employment index rose by 1.3 points to 53.3, remaining in expansion for a third month, with the report noting some indications that the ability to hire is improving, though this is being partially offset by the challenges of turnover and backfilling. "Survey panellists’ companies are still struggling to meet labour-management plans, but there were modest signs of progress," ISM said, "an increasing share of comments noted improvements regarding employment," where "an overwhelming majority of panellists indicate their companies are hiring or attempting to hire." 51% of those surveyed were expressing difficulties in filling positions, with the situation becoming more acute in the month. Meanwhile, the services ISM is released after this month's jobs data, but using the IHS Markit flash November PMIs as a proxy, similar themes have been seen. IHS Markit said that pressure on capacity persisted amid labour shortages, with backlogs of work rising at the second-fastest pace on record. "Firms sought to expand their workforce numbers, but employment growth was held back by challenges finding suitablecandidates." JOB CUTS: Challenger's November report said that announced job cuts had dropped to 14,875 from the 22,822 in October, the lowest monthly total since May 1993. Year-to-date, employers have announced plans to cut 302,918 jobs from their payrolls, the lowest January-November total on record, and vs 2,227,725 vs the same period in 2020. Challenger said that "with the Omicron variant emerging and the unknowns that come with its spread, coupled with the ongoing difficulty hiring and retaining workers, it’s no surprise job cuts are at record lows," adding that "employers are spread thin, planning best- and worst-case scenarios in terms of COVID, while also contending with staff shortages and high demand." Speaking of Goldman, the bank is more optimistic than consensus and estimates nonfarm payrolls rose 575k in November, above the 531k gain in October and higher than the bank's initial forecast of +550k (which is in line with consensus). The bank expects no change in government payrolls, and thus private payrolls will also rise +575k in November (vs. consensus +525k).  According to the bank, the summer expiration of federal unemployment insurance benefits in some states boosted job-finding rates there, and the programs expired in the remaining states on September 5th. Over 4.6mn people have dropped off the unemployment benefit rolls since early September, and we assume 300-400k found new jobs during the November payroll month. Goldman also believes upward revisions to prior-month nonfarm payrolls are fairly likely in tomorrow’s report. The chart below reveals a trend of increasingly large upward revisions over the course of the year, with prior-month job growth revised up on net in each of the last six reports (including +235k with last month’s release). There are two potential explanations, both of which could potentially lead to upward revisions in tomorrow’s report as well. First, some reopening establishments may respond to the BLS survey with a lag (e.g. 1-2 months after reopening). This would result in positive revisions to the not-seasonally-adjusted data that occurred in May, July, August, and September (dark blue bars below). Second, the seasonal factors may be overfitting to the advance releases, mistakenly attributing some of the strong job creation to an evolution of seasonality (light blue lines below). ARGUING FOR A STRONGER REPORT: End of federal enhanced unemployment benefits. The expiration of federal benefits in some states boosted job-finding rates over the summer, and all remaining such programs expired on September 5. The 239k pickup in job growth in October relative to September is consistent with a boost from improved labor supply, and with 4.6 mn individuals no longer receiving benefits versus in early September, this tailwind is expected to continue in tomorrow’s report and beyond. Public health. The Delta wave coincided with a late-summer slowdown in job growth, with leisure and hospitality employment growth slowing sharply in September and October (see Exhibit 1). With covid infection rates falling since September, restaurant seatings on OpenTable have rebounded,and economists expect strong gains in leisure and hospitality and in other services. Job availability. The Conference Board labor differential—the difference between nthe percent of respondents saying jobs are plentiful and those saying jobs are hard to get—increased to a record-high of 46.9. JOLTS job openings decreased by 191kin September to 10.4mn but remained significantly higher than the pre-pandemic record. Jobless claims. Initial jobless claims fell during the November payroll month, averaging 257k per week vs. 320k in October. Continuing claims in regular state programs decreased 283k from survey week to survey week. Education seasonality. Education payrolls weighed on the previous two reports, declining 170k cumulatively in September and October (public and private). This reflects some janitors and support staff declining to return for the fall school year. While schools will eventually fill these open positions, the start-of-year catalyst for a large rise in education jobs has passed, and we are assuming only second derivative improvement in tomorrow’s report, such as a flat reading or a modest gain (mom sa). Employer surveys. The employment components of business surveys generally increased in November. Goldman's services survey employment tracker increased 0.5pt to 55.1 and its manufacturing survey employment tracker increased 0.7pt to 59.6. The Goldman Sachs Analyst Index (GSAI) increased 4.3pt to 77.2 in November, and the employment component rose 1.6pt to a record-high of 75.6. Job cuts. Announced layoffs reported by Challenger, Gray & Christmas declined by 10% month-over-month in November after increasing by 18% in October (SA by GS),and remain near their three-decade low. ARGUING FOR A WEAKER REPORT: Supply constraints in retail. Labor supply constraints may have weighed on pre-holiday hiring in the retail industry, for which the BLS seasonal factors anticipate net hiring of around 350k. If so, retail payroll could fall on a seasonally adjusted basis. Vaccine mandates. The vaccine mandates announced by the Biden administration nin September apply to roughly 25mn unvaccinated workers, and may have weighed on November job growth in healthcare and government. While the federal deadline for compliance is generally not until early January and faces an uncertain future in the court system, early adoption in some states may have reduced job growth at the margin in tomorrow’s report. NEUTRAL FACTORS Big Data. High-frequency data on the labor market were mixed. Three of the four measures available this month indicate another sizeable gain. However, the Homebase data that directionally flagged the September payroll missindicates an outright decline ADP. Private sector employment in the ADP report increased by 534k in November, in line with consensus expectations for a 525k gain and consistent with strong growth in the ADP panel. Tyler Durden Thu, 12/02/2021 - 21:40.....»»

Category: personnelSource: nytDec 3rd, 2021

Jobless claims rebound to 222,000 in second-lowest weekly read of 2021

Continuing claims, which track Americans receiving continuous unemployment benefits, slid below 2 million for the first time in the pandemic recovery. Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort, Kentucky, U.S. June 18, 2020.Bryan Woolston/Reuters Weekly jobless claims rose to 222,000 last week, rising above the previous week's 52-year low. Economists expected claims to jump to 240,000 after marking a full pandemic recovery the week prior. Continuing claims dropped to 1.96 million for the week that ended November 20, also beating estimates. More Americans filed for unemployment insurance last week, placing claims back above pre-crisis levels, if only very slightly.Jobless claims rose to 222,000 last week, the Labor Department said Thursday. That came in below the median forecast of 240,000 claims from economists surveyed by Bloomberg. The print marked the largest uptick since July but was still the second-lowest read of the year.The previous week's 52-year low total was revised even further downward, to 194,000 from 199,000. The initial print showed claims plunging to the lowest level since 1969 and completing a recovery to pre-pandemic lows.Continuing claims — which track people filing for continuous UI support — dropped to 1.96 million for the week that ended November 20. Economists forecasted a decline to 2 million claims. The reading sets a new pandemic-era low and the first time since early 2020 that continuing claims landed below 2 million.!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r.....»»

Category: topSource: businessinsiderDec 2nd, 2021

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears U.S. index futures regained some ground alongside Asian markets while European stocks slumped to session lows in a delayed response to yesterday's late Omicron-driven US selloff, as markets remained volatile following the biggest two-day plunge in more than a year, spurred by concern about the omicron coronavirus variant and Federal Reserve tightening. Investors await data for unemployment claims, as well as earnings from companies including Dollar General and Kroger. Tech is the weakest sector, dropping in sympathy after Apple warned its suppliers of slowing iPhone demand. Nasdaq futures pared earlier gains of up to 0.8% to trade down 0.1% while S&P futures are only 0.2% higher after rising as much as 0.9%. While the knee-jerk reaction of stock investors may “continue to be to take profits before the end of the year,” there is “plenty of liquidity available to drive stock prices higher as dip-buyers enter the market,” Ed Yardeni wrote in a note. The U.S. economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labor shortages, the Federal Reserve said in its Beige Book survey Tuesday. Cruise-ship operator Carnival jumped 3.8% in premarket trading, while Pfizer and Moderna fell as the World Health Organization said that existing vaccines will likely protect against severe cases of the variant. Boeing contracts gained 3.4% after a report that the flagship 737 Max aircraft has regained airworthiness approval in China. With lots of uncertainty surrounding the pandemic and Fed policy, the size of potential market swings is still considerable.  Here are some other notable premarket movers today: Apple (AAPL US) shares fell 1.8% in premarket trading after the iPhone maker was said to tell suppliers that demand for its flagship product has slowed. Wall Street analysts, however, remained bullish. U.S. stocks tied to former President Donald Trump rise in premarket trading following a report his media group is in talks to raise new financing. Digital World Acquisition (DWAC US) +24%, Phunware (PHUN US) +38%. Katapult (KPLT US) shares sink 14% in premarket after the financial technology firm said its gross originations over a two-month period were lower than 2020 levels. Vir (VIR US) shares jump 8.1% in premarket trading after its Covid-19 antibody treatment, co-developed with Glaxo, looked to be effective against the new omicron variant in early testing. Snowflake (SNOW US) is up 17% premarket following quarterly results that impressed analysts, though some raise questions over the data software company’s valuation. CrowdStrike (CRWD US) shares jumped 5.1% in premarket after it boosted its revenue forecast for the full year. Square’s (SQ US) shares are 0.4% higher premarket. Corporate name change to Block Inc. indicates “a symbolic rebirth,” according to Barclays as it shows a broader set of possibilities than those of a pure payments company. Okta’s (OKTA US) shares advanced in postmarket trading. 3Q results show the cybersecurity company is well- positioned to deliver growth, even if some analysts say its guidance looks conservative and that its growth was not as strong as in prior quarters. The Omicron variant also hurt risk appetite, making the safe-haven bonds more attractive to investors, pushing yields down - although yields picked up again in early European trading. Volatility in equity markets as measured by the Vix hit its highest since February on Wednesday, before easing on Thursday, but remained well above this year’s average and almost twice as high as a month ago. Investors are braced for volatility to continue through December, stirred by tightening central-bank policies to fight inflation just as the omicron variant complicates the outlook for the pandemic recovery. The recent market turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. "Investors will need to maintain their calm during a period of uncertainty until the scientific data give a clearer picture of which scenario we face," said Mark Haefele, chief investment officer at UBS Global Wealth Management in Zurich. “This, in turn, will help shape the reaction of central bankers." Also weighing on stock markets, and flattening the U.S. yield curve, were remarks by Federal Reserve Chair Jerome Powell, who said that he would consider a faster end to the Fed's bond-buying programme, which could open the door to earlier interest rate hikes. In his second day of testimony in Congress on Wednesday, Powell reiterated that the U.S. central bank needs to be ready to respond to the possibility that inflation does not recede in the second half of next year. read more "In this past what we’ve seen is central banks using COVID as an excuse to remain dovish, and what we're seeing is central banks turn hawkish despite rising concerns around COVID, so it is a bit of a shift in communication," said Mohammed Kazmi, portfolio manager at UBP.  That said, the market is now so oversold, this is where we usually see aggressive dip-buying. In Europe, tech companies were the worst performers after Apple warned its component suppliers of slowing demand for its iPhone 13, the news dragged index heavyweight ASML Holding NV more than 4%. Meanwhile, travel shares were among the worst performers as the omicron variant continued to pop upin countries around the world, including the U.S., Norway, Ireland and South Korea. The Euro Stoxx 50 dropped as much as 1.7% while the Stoxx 600 Index fell 1.5%, extending declines to trade at a session low, with all sectors in the red and led lower by technology and travel stocks. The Stoxx 600 Technology Index slumped as much as 3.9%, the most in two months. Vifor Pharma surged by a record 18% following a report that Australia’s CSL is in advanced talks to acquire Swiss drugmaker. Here are some of the biggest European movers today: Vifor Pharma shares rise as much as 18% on a report that Australia’s CSL is in advanced talks to acquire the Swiss-based drug maker and developer while working with BofA on a A$4 billion funding package. Argenx jumps as much as 9.5% after Kepler Cheuvreux upgrades the stock to buy, saying the biotech company is on the brink of launching its first commercial product. Duerr gains as much as 7.2%, most since Aug. 10, after Deutsche Bank upgrades to buy and sets aa Street-high PT of EU60 for the German engineering company, citing the digitalization of the industry. Daily Mail & General Trust rises as much as 3.9% after Rothermere Continuation raised its bid for all DMGT’s Class A shares by 5.9% to 270p a share in cash. Klarabo surges as much as 54% as shares start trading on Nasdaq Stockholm after the Swedish property company raised SEK750m in an IPO. Eurofins Scientific declines for a fourth session, falling as much as 3.2%, as Goldman Sachs downgrades the company to neutral from buy “following strong outperformance YTD.” Deliveroo drops as much as 6.4% after an offering of 17.6m shares by CEO Will Shu and CFO Adam Miller at a price of 278p a share, representing a 4.2% discount to the last close. M&S falls as much as 3.4% after UBS cut its rating to neutral from buy, citing limited upside to its new price target as well as “little room for meaningful upgrades.” Earlier in the session, Asian stocks erased an earlier loss to trade slightly up, as traders continued to assess the potential impact of the omicron virus strain and the Federal Reserve’s efforts to keep inflation in check.  The MSCI Asia Pacific Index rose 0.2% after falling 0.4% in the morning. South Korea led regional gains, helped by large-cap chipmakers, while Japan was among the worst performers after the government dropped a plan for a blanket halt to all new incoming flight reservations. Asia’s equity benchmark is still down about 4% so far this year after rebounding in the past two sessions from a one-year low reached earlier this week. Despite the region’s underperformance against the U.S. and Europe, cheap valuations and foreign-investor positioning have prompted brokerages including Credit Suisse Group AG and Nomura Securities Co. Ltd. to turn bullish on Asia’s prospects next year. “Equity markets continue to play omicron tennis and traders looking for short-term direction should just wait for the next virus headline and then act accordingly,” said Jeffrey Halley, a senior market analyst at Oanda Corp. “Volatility, and not market direction, will be the winner this week.” Chinese technology shares including Alibaba Group Holding slid after Beijing was said to be planning to close a loophole used by the sector to go public abroad, fueling concern over existing overseas listings. Japanese equities declined, following U.S. peers lower after the first American case of the omicron coronavirus variant was confirmed. Electronics makers and telecoms were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and TDK were the largest contributors to a 0.7% loss in the Nikkei 225.  The S&P 500 posted its worst two-day selloff since October 2020 after the first U.S. case of the new strain was reported. Federal Reserve Chair Jerome Powell reiterated that officials should consider a quicker reduction of monetary stimulus amid elevated inflation. “Truth is, there’s probably a lot of people who are wanting to buy stocks at some point,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “But, with omicron still an unknown, people are responding sensitively to news development, and that’s keeping them from buying.” India’s benchmark equity index climbed for a second day, led by software exporters, on an improving economic outlook and as investors grabbed some beaten-down stocks after recent declines. The S&P BSE Sensex Index rose 1.4% to close at 58,461.29 in Mumbai, the biggest advance since Nov. 1. Its two-day gains increased to 2.5%, the most since Aug. 31. The NSE Nifty 50 Index also surged by a similar magnitude. All of the 19 sector sub-indexes compiled by BSE Ltd. were up, led by a gauge of utilities companies. “India underperformed the global markets in recent weeks. Investors are now going for value buying in stocks at lower levels,” said A. K. Prabhakar, head of research at IDBI Capital Market Services. The Sensex gained in three of the past four sessions after plunging 2.9% on Friday, the biggest drop since April. The rally, however, is in contrast to most global peers which are witnessing volatility on worries over the spread of the omicron variant. High frequency indicators in India, such as tax collection and manufacturing activities, have shown robust growth in recent months, while the country’s economy expanded 8.4% in the quarter ended in September, according to an official data release on Tuesday. Mortgage lender HDFC contributed the most to the Sensex’s gain, increasing 3.9%. Out of 30 shares in the index, 27 rose and three fell. In rates, trading has been relatively quiet as bunds and gilts bull steepen a touch with risk offered, while cash TSYs bear flatten, cheapening ~5bps across the curve.Treasuries retraced part of yesterday’s rally that sent the benchmark 30-year rate to the lowest since early January. A large buyer of 5-year U.S. Treasury options targets the yield dropping around 17bps. 5s10s, 5s30s spreads flattened by ~1bp and ~2bp to multimonth lows; 10-year yields around 1.43%, cheaper by more than 3bp on the day while bunds and gilt yields are richer by ~1bp. Front-end and belly of the curve underperform vs long-end, while bunds and gilts outperform Treasuries. With little economic data slated, speeches by several Fed officials are main focal points. Peripheral spreads tighten with 10y Spain outperforming after well received auctions, albeit with a small size on offer. U.S. economic data slate includes November Challenger job cuts (7:30am) and initial jobless claims (8:30am) In FX, the Bloomberg Dollar Spot Index fell to a day low in the European session and the greenback traded mixed versus its Group-of-10 peers as most crosses consolidated in recent ranges. Two-week implied volatility in the major currencies trades in the green Thursday as it now captures the next policy decisions by the world’s major central banks. Euro- dollar on the tenor rises by as much as 138 basis points to touch 8.22%, highest in a year; the relative premium, however, remains below parity as realized has risen to levels unseen since August 2020. The pound rose along with some other risk- sensitive currencies following the British currency’s three-day slump against the dollar. Long-end gilts underperformed, leading to some steepening of the curve. The yen fell for the first day in three while the Swiss franc fell a second day. The Hungarian forint rose to almost a three-week high after the central bank in Budapest raised the one-week deposit rate by 20 basis points to 3.10%. Economists in a Bloomberg survey were evenly split in predicting a 10 or 20 basis point increase. The Turkish lira resumed its slump after President Recep Tayyip Erdogan abruptly replaced his finance minister amid deepening rifts in the administration over aggressive interest-rate cuts that have undermined the currency and fueled inflation. Poland’s central bank Governor Adam Glapinski sent the zloty to a three-week high against the euro on Thursday with his changed rhetoric on inflation, which he no longer sees as transitory after prices surged at the fastest pace in more than two decades. Currency market volatility also rose, with euro-dollar one-month volatility gauges below Monday's one-year peak but still at elevate levels . "Liquidity in some areas of the market is still quite poor as people grapple with this news and as we head towards year-end, a lot of it is really liquidity driven, which is leading to some volatility," said UBP's Kazmi. "Even in the most liquid market of the U.S. treasury market we've seen some fairly large moves on very little newsflow at times." In commodities, crude futures extend Asia’s gains. WTI adds 2.2% near $67, Brent near $70.50 ahead of today’s OPEC+ meeting. Spot gold finds support near Tuesday’s, recovering somewhat to trade near $1,774/oz. Base metals are mixed: LME aluminum drops as much as 1.1%, nickel, zinc and tin hold in the green Looking at the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Market Snapshot S&P 500 futures up 0.7% to 4,540.25 STOXX Europe 600 down 1.0% to 466.37 MXAP up 0.2% to 192.07 MXAPJ up 0.7% to 629.36 Nikkei down 0.7% to 27,753.37 Topix down 0.5% to 1,926.37 Hang Seng Index up 0.5% to 23,788.93 Shanghai Composite little changed at 3,573.84 Sensex up 1.3% to 58,436.52 Australia S&P/ASX 200 down 0.1% to 7,225.18 Kospi up 1.6% to 2,945.27 Brent Futures up 2.4% to $70.53/bbl Gold spot down 0.6% to $1,771.73 U.S. Dollar Index little changed at 96.03 German 10Y yield little changed at -0.35% Euro little changed at $1.1320 Top Overnight News from Bloomberg Federal Reserve Bank of Cleveland President Loretta Mester said she’s “very open” to scaling back the Fed’s asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed A United Nations gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table. It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest nations to import food, worsening a hunger crisis Germany is poised to clamp down on people who aren’t vaccinated against Covid-19 and drastically curtail social contacts to ease pressure on increasingly stretched hospitals Some investors buffeted by concerns about tighter monetary policy are turning their sights to China’s battered junk bonds, given they offer some of the biggest yield buffers anywhere in global credit markets Pfizer Inc. says data on how well its Covid-19 vaccine protects against the omicron variant should be available within two to three weeks, an executive said GlaxoSmithKline Plc said its Covid-19 antibody treatment looks to be effective against the new omicron variant in early testing A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded tentatively following the declines on Wall St where all major indices extended on losses and selling was exacerbated on confirmation of the first Omicron case in the US, while the Asia-Pac region also contended with its own pandemic concerns. ASX 200 (-0.2%) was subdued amid heavy losses in the tech sector and with a surge of infections in Victoria state, although downside in the index was cushioned amid inline Retail Sales and Trade Balance, as well as M&A optimism after Woolworths made a non-binding indicative proposal for Australian Pharmaceutical Industries. Nikkei 225 (-0.7%) weakened after the government instructed airlines to halt inbound flight bookings for a month due to fears of the new variant and with auto names also pressured by declines in monthly sales amid the chip supply crunch. KOSPI (+1.6%) showed resilience amid expectations for lawmakers to pass a record budget today and recouped opening losses despite the record increase in daily infections and confirmation of its first Omicron cases, while the index also shrugged off the highest CPI reading in a decade which effectively supports the case for further rate increases by the BoK. Hang Seng (+0.6%) and Shanghai Comp. (-0.1%) were choppy following another liquidity drain by the PBoC and with tech pressured in Hong Kong as Alibaba shares extended on declines after recently slipping to a 4-year low in its US listing. Beijing regulatory tightening also provided a headwind as initial reports suggested China is to crack down on loopholes used by tech firms for foreign IPOs, although this was later refuted by China, and the CBIRC is planning stricter regulations on major shareholders of banks and insurance companies, as well as confirmed it will better regulate connected transactions of banks. Finally, 10yr JGBs were higher as prices tracked gains in global counterparts and amid the risk aversion in Japan, although prices are off intraday highs after hitting resistance during a brief incursion to the 152.00 level and despite the marginally improved metrics from 10yr JGB auction. Top Asian News Asia Stocks Swing as Investors Weigh Omicron Impact, Fed Views Apple Tells Suppliers IPhone Demand Slowing as Holidays Near Moody’s Cuts China Property Sales View on Financing Difficulties Faith in Singapore Leaders Hit by Record Covid Wave, Poll Shows Bourses across Europe have held onto losses seen at the cash open (Euro Stoxx 50 -1.4%; Stoxx -1.2%), as the region plays catchup to the downside seen on Wall Street – seemingly sparked by a concoction of hawkish Fed rhetoric and the discovery of the Omicron variant in the US. Nonetheless, US equity futures are firmer across the board but to varying degrees – with the cyclical RTY (+1.1%) and the NQ (+0.3%) the current laggard. European futures ahead of the cash open saw some mild fleeting impetus on reports GlaxoSmithKline's (-0.3%) COVID treatment Sotrovimab retains its activity against Omicron variant, and the UK MHRA simultaneously approved the use of Sotrovimab – but caveated that it is too early to know whether Omicron has any impact on effectiveness. Conversely, brief risk-off crept into the market following commentary from a South African Scientist who warned the country is seeing an exponential rise in new COVID cases with a predominance of Omicron variant across the country – with the variant causing the fastest ever community transmission - but expects fewer active cases and hospitalisations this wave. Back to Europe, Euro indices see broad-based losses whilst the downside in the FTSE 100 (-0.7%) is less severe amid support from its heavyweight Oil & Gas sector – the outperforming sector in the region. Delving deeper, sectors see no overarching theme nor bias – Food & Beverages, Autos and Banks are towards the top of the bunch, whilst Tech, Telecoms, and Travel &Leisure. Tech is predominantly weighed on by reports that Apple (-2% pre-market) reportedly told iPhone component suppliers that demand slowed down. As such ASML (-5.0%), STMicroelectronics (-4.4%) and Infineon (-3.6%) reside among the biggest losers in the Stoxx 600. Deliveroo (-5.3%) is softer following an offering of almost 18mln at a discount to yesterday's close. In terms of market commentary, Morgan Stanley believes that inflation will remain high over the next few months, in turn supporting commodities, financials and some cyclical sectors. The bank identifies beneficiaries including EDF (-1.5%), Engie (-1.2%), SSE (-0.2%), Legrand (-1.3%), Tesco (-0.5%), BT (-0.8%), Michelin (-1.6%) and Sika (-0.9%). Top European News Shell Kicks Off First Wave of Buybacks From Permian Sale Omicron Threatens to Prolong Pain in Bid to Vaccinate the World Apple, Suppliers Drop Premarket After Report Demand Slowed Valeo, Gestamp Gain After Barclays Raises to Overweight In FX, currency markets are still in a state of flux, or limbo bar a few exceptions, and the Greenback is gyrating against major peers awaiting the next major event that could provide clearer direction and a more decisive range break. Thursday’s agenda offers some scope on that front via US initial jobless claims and a host of Fed speakers, but in truth NFP tomorrow is probably more likely to be influential even though chair Powell has effectively given the green light to fast-track tapering from December. In the interim, the index continues to keep a relatively short leash around 96.000, and is holding within 96.138-95.895 confines so far today. JPY/CHF - Although risk considerations look supportive for the Yen, on paper, UST-JGB/Fed-BoJ differentials coupled with technical impulses are keeping Usd/Jpy buoyant on the 113.00 handle, with additional demand said to have come from Japanese exporters overnight. However, the headline pair may run into offers/resistance circa 113.50 and any breach could be capped by decent option expiry interest spanning 113.60-75 (1.5 bn). Similarly, the Franc has slipped back below 0.9200 on yield and Swiss/US Central Bank policy stances plus near term outlooks, and hardly helped by a slowdown in retail sales. GBP/CAD/NZD - All firmer vs their US counterpart, though again well within recent admittedly wide ranges, and the Pound perhaps more attuned to Eur/Gbp fluctuations as the cross retreats to retest 0.8500 and Cable rebounds to have another look at 1.3300 where a fairly big option expiry resides (850 mn). Indeed, Sterling has largely shrugged off the latest BoE Monthly Decision Maker Panel release that in truth did not deliver any clues on what is set to be another knife-edge MPC gathering in December. Elsewhere, the Loonie is straddling 1.2800 with eyes on WTI crude ahead of Canadian jobs data on Friday and the Kiwi is hovering above 0.6800 after weaker NZ Q3 terms of trade were offset to some extent by favourable Aud/Nzd headwinds. AUD/EUR - Both narrowly mixed against US Dollar, with the Aussie pivoting 0.7100 in wake of roughly in line trade and retail sales data overnight, but wary about the latest virus outbreak in the state of Victoria, while the Euro is sitting somewhat uncomfortably on the 1.1300 handle amidst softer EGB yields and heightened uncertainty about what the ECB might or might not do in December on the QE guidance front. In commodities, WTI and Brent front-month futures are firmer intraday as traders gear up for the JMMC and OPEC+ confabs at 12:00GMT and 13:00GMT, respectively. The jury is still split on what the final decision could be, but the case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening against the backdrop of Omicron coupled with the coordinated SPR releases (an updating Rolling Headline is available on the Newsquawk headline feed). As expected, OPEC sources have been testing the waters in the run-up, whilst yesterday's JTC/OPEC meetings largely surrounded the successor to the Secretary-General position. Oil market price action will likely be centred around OPEC+ today in the absence of any macro shocks. WTI Jan resides around USD 66.50/bbl (vs low USD 65.41/bbl) whilst Brent Feb briefly topped USD 70/bbl (vs low USD 68.73/bbl). Elsewhere, spot gold has eased further from the USD 1,800/oz after failing to sustain a break above the 50, 100 and 200 DMAs which have all converged to USD 1,791/oz today. LME copper is on the backfoot amid the cautious risk sentiment, with the red metal back under USD 9,500/t but off overnight lows. US Event Calendar 7:30am: Nov. Challenger Job Cuts -77.0% YoY, prior -71.7% 8:30am: Nov. Initial Jobless Claims, est. 240,000, prior 199,000; 8:30am: Nov. Continuing Claims, est. 2m, prior 2.05m 9:45am: Nov. Langer Consumer Comfort, prior 52.2 DB's Jim Reid concludes the overnight wrap With investors remaining on tenterhooks to find out some definitive information on the Omicron variant, yesterday saw markets continue to see-saw for a 4th day running. Following one of the biggest sell-offs of the year on Friday, we then had a partial bounceback on Monday, another bout of fears on Tuesday (not helped by the prospect of faster tapering), and yesterday saw another rally back before risk sentiment turned sharply later in the day as an initial case of the Omicron variant was discovered in the US. You can get some idea of this by the fact that Europe’s STOXX 600 (+1.71%) posted its best daily performance since May, whereas the S&P 500 moved from an intraday high where it had been up +1.88%, before shedding all those gains and more to close -1.18% lower. In fact, that decline means the S&P has now lost over -3% in the last two sessions, marking its worst 2-day performance in over a year, and this heightened volatility saw the VIX index close back above 30 for the first time since early February. In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines “will still protect against severe disease as they have against the other variants”. On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%. That’s up from 4,373 cases the day before, and 2,273 the day before that, so all eyes will be on whether this trend continues, and also on what that means for hospitalisation and death rates over the days ahead. Against this backdrop, calls for fresh restrictions mounted across a range of countries, particularly on the travel side. In the US, it’s been reported already by the Washington Post that President Biden could today announce stricter testing requirements for arriving travellers. Meanwhile, France is moving to require non-EU arrivals to show a negative test before arrival, irrespective of their vaccination status. The EU Commission further said that member states should conduct daily reviews of essential travel restrictions, and Commission President von der Leyen also said that the EU should discuss the topic of mandatory vaccinations. There was also a Bloomberg report that German Chancellor Merkel would recommend mandatory vaccinations from February 2022, according to a Chancellery paper that they’d obtained. That came as Slovakia sought to incentivise vaccination uptake among older citizens, with the cabinet backing a €500 hospitality voucher for residents over 60 who’ve been vaccinated. As on Tuesday, the other main headlines yesterday were provided by Fed Chair Powell, who re-emphasised his more hawkish rhetoric around inflation before the House Financial Services Committee. Notably he said that “We’ve seen inflation be more persistent. We’ve seen the factors that are causing higher inflation to be more persistent”, though yields on 2yr Treasuries (-1.4bps) already had the shift in stance priced in. New York Fed President Williams echoed that view in an interview, noting it would be germane to discuss and decide whether it was appropriate to accelerate the pace of tapering at the December FOMC. 10yr yields (-4.1bps) continued their decline, predominantly driven by the turn in sentiment following the negative Omicron headlines. That latest round of curve flattening left the 2s10s slope at its flattest level since early January around the time of the Georgia Senate race that ushered in the prospect of much larger fiscal stimulus. In terms of markets elsewhere, strong data releases helped to support risk appetite earlier in yesterday’s session, with investors also looking forward to tomorrow’s US jobs report for November that will be an important one ahead of the Fed’s decision in less than a couple of weeks’ time. The ISM manufacturing release for November saw the headline number come in roughly as expected at 61.1 (vs. 61.2 expected), and also included a rise in both the new orders (61.5) and the employment (53.3) components relative to last month. Separately, the ADP’s report of private payrolls for November likewise came in around expectations, with a +534k gain (vs. +526k expected). Staying on the US, one thing to keep an eye out over the next 24 hours will be any news on a government shutdown, with funding currently set to run out by the weekend as it stands. The headlines yesterday weren’t promising for those hoping for an uneventful, tidy resolution, as Politico indicated that some Congressional Republicans would not agree to an expedited process to fund the government should certain vaccine mandates remain in place. An expedited process is necessary to avoid a government shutdown at the end of the week, so one to watch. After the incredibly divergent equity performances in the US and Europe, we’ve seen a much more mixed performance in Asia overnight, with the KOSPI (+1.09%), Hang Seng (+0.23%), and CSI (+0.23%) all advancing, whereas the Shanghai Composite (-0.05%) and the Nikkei (-0.60%) are trading lower. In terms of the latest on Omicron, authorities in South Korea confirmed five cases, which came as the country also reported that CPI in November rose to its fastest since December 2011, at +3.7% (vs +3.1% expected). Separately in China, 53 local Covid-19 cases were reported in Inner Mongolia, whilst Harbin province reported 3 local cases. Looking forward, futures are indicating a positive start in the US with those on the S&P 500 (+0.64%) pointing higher. Back in Europe, sovereign bonds lost ground yesterday, and yields on 10yr bunds (+0.5bps), OATs (+1.1bps) and BTPs (+4.2bps) continued to move higher. Interestingly, there was a continued widening in peripheral spreads, with the gap between both Italian and Spanish 10yr yields over bunds reaching their biggest level in over a year, at 135bps and 77bps, respectively. Another factor to keep an eye on in Europe is another round of increases in natural gas prices, with futures up +3.42% to their highest level since mid-October yesterday. Lastly on the data front, the main other story was the release of the manufacturing PMIs from around the world. We’d already had the flash readings from a number of the key economies, so they weren’t too surprising, but the Euro Area came in at 58.4 (vs. flash 58.6), Germany came in at 57.4 (vs. flash 57.6), and the UK came in at 58.1 (vs. flash 58.2). One country that saw a decent upward revision was France, with the final number at 55.9 (vs. flash 54.6), which marks an end to 5 successive monthly declines in the French manufacturing PMI. One other release were German retail sales for October, which unexpectedly fell -0.3% (vs. +0.9% expected). To the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Tyler Durden Thu, 12/02/2021 - 07:57.....»»

Category: dealsSource: nytDec 2nd, 2021

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

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

Category: blogSource: zerohedgeNov 24th, 2021

Futures Tumble, Oil And Treasury Yields Plunge As Lockdowns Return

Futures Tumble, Oil And Treasury Yields Plunge As Lockdowns Return Having briefly touched new all time highs of 4,723.5 overnight, S&P futures tumbled shortly after Europe opened as a fourth wave of the pandemic in Europe resulted in a new lockdown in Austria and the prospect of similar action in Germany wiped out earlier gains and forced stock markets down close to 1% as it overshadowed optimism about corporate earnings and the economic recovery. Friday is also a major options-expiry day, which could trigger volatility in equities. Two progressive Democratic senators said they oppose the renomination of Federal Reserve Chair Jerome Powell to a second term, because he "refuses to recognize climate change" joining Elizabeth Warren in urging President Joe Biden to choose someone else. S&P and Dow futures fell tracking losses in banks, airlines, and other economically sensitive sectors. Uncertainty over rising inflation and the Federal Reserve's tightening also kept demand for value stocks low. At 745am Dow e-minis were down 218 points, or 0.609%. S&P 500 e-minis were down 12.25 points, or 0.26% and Nasdaq 100 e-minis were up 68 points, or 0.41%. With the lockdown trade storming back, Nasdaq futures hit a record high on Friday as investors sought economically stable sectors after a small delay in voting on President Joe Biden's $1.75 trillion spending bill, while fears of Europe-wide lockdowns sent yields plunging. The U.S. House of Representatives early on Friday delayed an anticipated vote on passage of Biden's social programs and climate change investment bill, and will instead reconvene at 8 a.m. EST (1300 GMT) to complete the legislation “Everyone is holding his and her breath to find out who will be the next Fed Chair,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “More or less dovish, will it really matter? The one that will take or keep the helm of the Fed will need to hike rates at some point.” Among major premarket movers, Intuit Inc jumped 10.3% as brokerages raised their price targets on the income tax software company after it beat quarterly estimates and raised forecast. The stock was the top S&P 500 gainer in premarket trade. Chipmaker Nvidia also boosted Nasdaq futures, rising 1.7% in heavy trade after posting strong quarterly results late Wednesday. On the other end, Applied Materials dropped 5.7% after the chipmaker forecast first-quarter sales and profit below market estimates on supply chain woes. Oil firms Exxon and Chevron slipped 2.1% and 1.8% as crude prices sank, while big banks including JPMorgan and Bank of America were down between 0.9% and 1.1%, tracking a fall in U.S. Treasury yields. Carriers Delta Air Lines, United Airlines and American Airlines and cruiseliners Norwegian Cruise Line and Carnival Corp fell between 1.4% and 2.3%. Here are all the other notable movers: Farfetch (FTCH US) shares drop 23% after the online apparel retailer reported 3Q revenue that missed estimates and trimmed its FY forecast for digital platform gross merchandise value growth. Analysts see scope for the shares to stay in the “penalty box” in the near term, but recommend buying on weakness. Workday (WDAY US) analysts say that the software firm’s strong quarterly results and guidance were not quite enough to meet high expectations. The stock dropped as much as 11% in extended trading on Thursday. Intuit (INTU US) climbed 9.7% in premarket as analysts said the tax software company posted strong results that were ahead of expectations and raised its outlook. Several increased their price targets for the stock, including a new Street high at Barclays. Palo Alto Networks (PANW US) shares rise 2.8% in U.S. premarket trading after the cyber- security firm reports results and hikes full-year sales guidance, with RBC saying co. saw a strong quarter. Tesla (TSLA US) shares dip 0.5% in premarket trading. The EV maker’s price target is raised to a joint Street-high at Wedbush, with the broker saying that the EV “revolution” presents a $5t market opportunity over the next decade. Datadog (DDOG US) rises 1.8% after it is upgraded to outperform from sector perform at RBC, with the broker saying that it has more conviction on the software firm following its TMIT conference. Mammoth Energy (TUSK US) jumps as much as 34% in U.S. premarket trading after the energy-services company said a subsidiary has been awarded a contract by a major utility to help build electric-vehicle charging station infrastructure. Ross Stores (ROST US) shares dropped 2.2% in postmarket trading on Thursday after its profit outlook for fourth quarter missed the average analyst estimate. In Europe, banks and carmakers led the Stoxx Europe 600 Index down 0.3%, reversing early gains. Fears of fresh lockdowns have hit travel stocks, but boosted the delivery sector and other pandemic winners, with German meal-kit company HelloFresh jumping as much as 7.1% to a record. Stoxx Europe 600 index tumbled after Germany’s health minister said he couldn’t rule out a lockdown as infections surge relentlessly in the region’s largest economy. That came after Austria said it would enter a nationwide lockdown from Monday. Here are some of the biggest European movers today: Ocado shares jump as much as 8.4%, the most intraday since November 2020, after a Deutsche Bank note on joint venture partner Marks & Spencer highlighted scope for a potential transaction. VGP shares gain as much as 7.7% to a record after KBC raised its rating to accumulate from hold, based on a “strong” 10-month trading update. HelloFresh shares surge as much as 7.1% and other lockdown beneficiaries including Delivery Hero, Logitech and Zalando gain after the German health minister says a lockdown can’t be ruled out. Mall landlords Unibail and Klepierre and duty-free retailer Dufry drop. Truecaller shares rise as much as 14% after it received its first analyst initiations after last month’s IPO. Analysts highlighted the company’s potential for continued strong growth. JPMorgan called current growth momentum “unparalleled.” Hermes shares jump as much as 5.2% to a fresh record, rising for a seventh day, amid optimism that the stock may be added to the Euro Stoxx 50 Index as soon as next month. Shares also rise after bullish current- trading comments of peer Prada. Kingfisher shares drop as much as 5.8%, even after the home-improvement retailer said it expects profit to be toward the higher end of its forecast. Investor focus has probably shifted to 2022, and Friday’s update doesn’t have any guidance for next year, according to Berenberg. GB Group shares tumble as much as 18%, the most since October 2016, after the identity-verification software company raised about GBP300m in a placing of new shares at a discount. Mode Global shares sink as much as 19%, reversing most of this week’s gains, after it said some brands had withdrawn the company as an affiliate. In Fx, the Bloomberg Dollar Spot Index jumped at the London open and the greenback was higher versus all of its Group-of-10 fears apart from yen. Norway’s krone was the biggest loser as energy prices prices dropped after Austria announced a nationwide lockdown starting on Monday, while Germany’s health minister refused to rule out closures in the country.  The pound fell on the back of a stronger dollar; data showed U.K. retail sales rose for the first time in six months as consumers snapped up toys, sports equipment and clothing, while the cost of servicing U.K. government debt more than tripled in October from a year earlier due to surging inflation The euro plunged by 1% to a new YTD low of $1.1255 as the repricing in the front-end of euro options suggests the common currency is settling within a new range. The euro is also falling at the end of the week following the announcement that Austria will begin a 20-day full Covid-19 lockdown from Monday in response to surging case numbers which have far surpassed last year's peak. While fatalities remains well below the peak, they are accelerating and the government is clearly keen to arrest it before the situation potentially becomes much worse. With Germany seeing a similar trend, the question now becomes whether the regions largest economy will follow the same path. Its Health Minister, Jens Spahn, today suggested nothing can be ruled out and that they are in a national emergency. In rates, Treasury yields fell by around 4bps across the board and the bunds yield curve bull flattened, with money markets pushing back bets on a 10bps ECB rate hike further into 2023. Treasury 10-year yields richer by 4.5bp on the day at around 1.54% and toward lows of the weekly range -- bunds, gilts outperform Treasuries by 1bp and 1.5bp in the sector as traders reassess impact of future ECB rate hikes. Treasuries rally across the curve, following wider gains across EGB’s and gilts as investors weigh the impact of further European lockdowns amid a fourth wave of Covid-19. Flight-to-quality pushes Treasury yields lower by up to 5bp across front- and belly of the curve, which slightly outperform.  Bunds and Treasury swap spreads widen, while gilts move tighter as risk assets mostly trade to the downside and demand for havens increases on news regarding coronavirus restrictions. German 10-year swap spreads climbed above 50bps for the first time since March 2020. In commodities, spot gold is little changed around $1,860/oz, while base metals are in the green, with LME copper and aluminum leading peers. Oil tumbled with WTI and Brent contracts down well over 2%.  Brent crudes brief dip below $80 was short-lived on Thursday and prices were continuing to recover on the final trading day of the week until Austria announced its lockdown. Brent crude quickly reversed course and trades almost 2% lower on the day as it takes another run at $80. Oil has been declining over the last week as demand forecasts have been pared back, OPEC and the IEA have warned of oversupply in the coming months and the US has attempted to coordinate an SPR release with China and others. The market still remains fundamentally in a good position but lockdowns are now an obvious risk to this if other countries follow Austria's lead. A move below $80 could deepen the correction, perhaps pulling the price back towards the mid-$70 region. This looks more likely now than it did a day ago and if Germany announces similar measures, it could be the catalyst for such a move. Perhaps OPEC+ knows what it's talking about after all. Looking at To the day ahead now, there is no macro news; central bank speakers include ECB President Lagarde, Bundesbank President Weidmann, Fed Vice Chair Clarida, the Fed’s Waller and BoE Chief Economist Pill. Separately, data highlights include UK retail sales and German PPI for October. Market Snapshot S&P 500 futures down 0.09% to 4,696.25 STOXX Europe 600 up 0.2% to 488.66 MXAP little changed at 199.11 MXAPJ down 0.2% to 648.18 Nikkei up 0.5% to 29,745.87 Topix up 0.4% to 2,044.53 Hang Seng Index down 1.1% to 25,049.97 Shanghai Composite up 1.1% to 3,560.37 Sensex down 0.6% to 59,636.01 Australia S&P/ASX 200 up 0.2% to 7,396.55 Kospi up 0.8% to 2,971.02 Brent Futures little changed at $81.17/bbl Gold spot up 0.1% to $1,860.34 U.S. Dollar Index up 0.43% to 95.96 German 10Y yield little changed at -0.32% Euro down 0.6% to $1.1304 Top Overnight News from Bloomberg Germany’s Covid crisis is about to go from bad to worse, setting the stage for a grim Christmas in Europe. With infections surging relentlessly and authorities slow to act amid a change in power, experts warn that serious cases and deaths will keep climbing Austria will enter a nationwide lockdown from Monday as a record spike in coronavirus cases threatens to overwhelm the country’s health care system The pundits are coming for the Fed and Chair Jerome Powell. Mohamed El-Erian, chief economic adviser to Allianz SE and a Bloomberg Opinion columnist, recently said the central bank has made one of the worst inflation calls in its history. Writing in the Financial Times, the economist Willem Buiter called on the Fed to abandon the more flexible inflation target it established last year Bitcoin continued its slide Thursday, falling for a fifth consecutive day as it slipped below $57,000 for the first time since October, in a retreat from record highs. The world’s largest cryptocurrency hasn’t slumped that long since the five days that ended May 16 House Democrats pushed expected passage of President Joe Biden’s $1.64 trillion economic agenda to Friday as Republican leader Kevin McCarthy delayed a vote with a lengthy floor speech that lasted into the early morning hours ECB President Christine Lagarde said policy makers “must not rush into a premature tightening when faced with passing or supply- driven inflation shocks” Markets are increasingly nervous about the common currency with the pandemic resurgent, geopolitical tensions rising and gas supply issues mounting A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly positive after the mixed performance stateside where the S&P 500 and Nasdaq notched fresh record closes, but cyclicals lagged as comments from Senator Manchin cast some uncertainty on the Build Back Better bill. The ASX 200 (+0.2%) was rangebound with upside in healthcare and consumer stocks offset by weakness in tech and a lacklustre mining sector. Crown Resorts (CWN AT) was the stellar performer after it received an unsolicited, non-binding takeover proposal from Blackstone (BX) valued at AUD 12.50/shr which boosted its shares by around 16%, although gains in the broader market were limited as COVID-19 concerns lingered following a further jump of cases in Victoria state. The Nikkei 225 (+0.5%) benefitted from a mostly weaker currency and after PM Kishida confirmed the details of the incoming stimulus package valued at a total JPY 79tln including JPY 56tln in fiscal spending. The KOSPI (+0.8%) was also positive but with gains initially capped as South Korean wholesale inflation surged to a 13-year high and further added to the case for the BoK to hike rates for the second time this year at next week’s meeting. The Hang Seng (-1.1%) and Shanghai Comp. (+1.1%) were mixed with the mainland kept afloat amid press reports that China is considering measures to reduce taxes and fees by up to CNY 500bln, although the mainland was initially slow to start after another liquidity drain by the PBoC and with stocks in Hong Kong spooked amid substantial losses in Alibaba following a miss on its earnings and Country Garden Services suffered on reopening from the announcement of a 150mln-share placement. Finally, 10yr JGBs were rangebound with mild gains seen after the modest bull flattening stateside, but with upside restricted amid the gains in Japanese stocks and lack of BoJ purchases, as well as the incoming fiscal spending and extra budget from the Kishida government. Top Asian News Bitcoin Falls Almost 20% Since Record as Crypto Bulls Retreat Singapore’s Insignia Ventures Intensifies Push Into Healthtech Binance Chief Zhao Buys His First Home in ‘Pro-Crypto’ Dubai Property Stocks Surge; Land Sale Rules Eased: Evergrande Update The earlier positive sentiment in Europe dissipated amid a string of back-to-back downbeat COVID updates – with Austria now resorting to a full-scale lockdown and Germany sounding alarms over their domestic COVID situation and not ruling out its own lockdown. European bourses flipped from the mostly positive trade at the open to a negative picture (Euro Stoxx 50 -0.5%; Stoxx 600 Unch), with headlines also flagging the European stock market volatility gauge jumping to three-week highs. It is also worth noting the monthly option expiries for stocks today, with desks pointing to the second-largest expiry day on record. US equity futures have also seen headwinds from the pullback in Europe, but US futures are mixed with the NQ (+0.4%) benefitting from the slide in yields. Back to Europe, Austria’s ATX (-1.0%) sit as the laggard after the Austrian Chancellor said a full domestic COVID lockdown will be imposed as of Monday for a maximum of 20 days with compulsory vaccination from 1st February 2022. Switzerland’s SMI (+0.2%) owes its gains to the defensive flows into healthcare propping up heavyweights Novartis (+0.5%) and Roche (+0.7%). Sectors overall are mostly negative with Healthcare the current winner, whilst Tech benefits from the yield slump and Basic Resources recover from yesterday’s slide as base metals rebound. The downside sees Banks on yield dynamics, whilst Oil & Gas lost the ranks as crude prices were spooked by the COVID headlines emanating from Europe. In terms of individual movers, Ocado (+6%) resides at the top of the FTSE 100 – with some citing a Deutsche Bank note which suggested shareholder Marks & Spencer could be mulling a buyout, although the note is seemingly speculation as opposed to chatter. Top European News Ryanair Drops London Listing Over Brexit Compliance Hassles ECB Mustn’t Tighten Despite ‘Painful’ Inflation, Lagarde Says Austria to Lock Down, Impose Compulsory Covid Vaccinations German Covid Measures May Bolster ECB Stimulus Stance: El-Erian In FX, it remains to be seen whether the Dollar can continue to climb having descended from the summit, and with no obvious fundamental drivers on the agenda in terms of US data that has been instrumental, if not quite wholly responsible for the recent bull run. However, external and technical factors may provide the Greenback and index with enough momentum to rebound further, as the COVID-19 situation continues to deteriorate in certain parts of Europe especially. Meanwhile, the mere fact that the DXY bounced off a shallower low and appears to have formed a base above 95.500 is encouraging from a chart perspective, and only the Yen as a safer haven is arguably capping the index ahead of the aforementioned w-t-d peak within 95.554-96.090 extremes. Ahead, more Fed rhetoric and this time via Waller and Clarida. EUR - The Euro has been hit hardest by the Greenback revival, but also the latest pandemic waves that have forced Austria into total lockdown and are threatening to see Germany follow suit. Moreover, EGBs are front-running the latest squeeze amidst risk-off trade in stocks, oil and other commodities to widen spreads vs Treasuries and the divergence between the ECB/Fed and other more hawkishly or less dovishly positioned. Hence, Eur/Usd has reversed further from circa 1.1374 through 1.1350 and 1.1300, while Eur/Yen is eyeing 128.50 vs almost 130.00 at one stage and Eur/Chf is probing fresh multi-year lows around 1.0450. NZD/GBP/AUD/CAD - All catching contagion due to their high beta, cyclical or activity currency stature, with the Kiwi back under 0.7000, Pound hovering fractionally above 1.3400, Aussie beneath 0.7250 and Loonie striving to contain declines beyond 1.2650 pre-Canadian retail sales against the backdrop of collapsing crude prices. JPY/CHF - As noted above, the Yen is offering a bit more protection than its US counterpart and clearly benefiting from the weakness in global bond yields until JGBs catch up, with Usd/Jpy down from 114.50+ towards 113.80, but the Franc is showing its allure as a port in the storm via the Euro cross rather than vs the Buck as Usd/Chf holds above 0.9250. In commodities, WTI and Brent front month futures retreated with the trigger point being back-to-back COVID updates – with Austria confirming a full-scale lockdown from Monday and Germany not ruling out its own lockdown. Crude futures reacted to the prospect of a slowdown in activity translating to softer demand. That being said, COVID only represents one factor in the supply/demand equation. Oil consuming nations are ramping up rhetoric and are urging OPEC+ to release oil. The White House confirmed the US discussed a possible joint release of oil from reserves with China and other countries, while it reiterated that it has raised the need for available oil supply in the market with OPEC. Meanwhile, the Japanese Cabinet said it will urge oil-producing nations to increase output and work closely with the IEA amid risks from energy costs. Further, energy journalists have also been flagging jitters of Chinese crude demand amid the likelihood of another tax probe into independent refiners. All in all, a day of compounding bearish updates (thus far) has prompted the contracts to erase all of their APAC gains, with WTI Dec just above USD 76/bbl (76.06-79.33/bbl range) and Brent Jan back under USD 79/bbl (78.75-82.24/bbl range). Elsewhere, spot gold saw a pop higher around the flurry of European COVID updates and despite a firmer Buck – pointing to haven flows into the yellow metal – which is nonetheless struggling to convincingly sustain a breach its overnight highs around USD 1,860/oz and we are attentive to a key fib at USD 1876/oz. Base metals prices are relatively mixed but have waned off best levels amid the risk aversion that crept into the markets, but LME copper holds onto a USD 9,500+/t status. US Event Calendar Nothing major scheduled Central Banks 10:45am: Fed’s Waller Discusses the Economic Outlook 12:15pm: Fed’s Clarida Discusses Global Monetary Policy Coordination DB's Jim Reid concludes the overnight wrap It was another mixed session for markets yesterday, with equities and other assets continuing to trade around their recent highs even as a number of risk factors were increasingly piling up on the horizon. By the close of trade, the S&P 500 had advanced +0.34% to put the index at its all-time high, whilst oil prices pared back their losses from earlier in the day to move higher. That said, there was more of a risk-off tone in Europe as the latest Covid wave continues to gather pace, with the STOXX 600 (-0.46%) snapping a run of 6 successive gains and being up on 17 out of the previous 19 days as it fell back from its all-time high the previous day, as haven assets including sovereign bonds were the beneficiaries. Starting with those equity moves, it was difficult to characterise yesterday’s session in some ways, since although the S&P advanced +0.34%, it was driven by a relatively narrow group of sectors, with only a third of the index’s components actually moving higher on the day. Indeed, to find a bigger increase in the S&P 500 on fewer advancing companies, one needs to go back to March 2000 (though it came close one day in August 2020, when the index advanced +0.32% on 153 advancing companies). Consumer discretionary (+1.49%) and tech (+1.02%) stocks were the only sectors to materially advance. Nvidia (+8.25%), the world’s largest chipmaker, was a key outperformer, and posted very strong third quarter earnings and revised higher fourth quarter guidance. Following the strong day, Nvidia jumped into the top ten S&P 500 companies by market cap, ending yesterday at number eight. The S&P gain may have been so narrow due to some negative chatter about President Biden’s build back better package, with CNN’s Manu Raju tweeting that Senator Joe Manchin “just told me he has NOT decided on whether to vote to proceed to the Build Back Better bill.” Manchin’s position in a 50-50 senate has given him an enormous amount of influence, and separate comments created another set of headlines yesterday on the Fed Chair decision, after The Hill reported Manchin saying that he’s “looking very favourably” at supporting Chair Powell if he were re-nominated, following a chat between the two about inflation. Mr Manchin is seemingly one of the most powerful people in the world at the moment. While the Senate still presents a hurdle for the President’s build back better bill, House Democrats are close to voting on the bill but couldn’t last night due to a three hour speech by House Republican leader McCarthy. It will probably happen this morning. This follows the Congressional Budget Office’s ‘score’ of the bill, which suggested the deficit would increase by $367bn as a result of the bill, higher figures than the White House suggested, but low enough to garner support from moderate House Democrats. Over in Europe there was a much weaker session yesterday, with the major equity indices falling across the continent amidst mounting concern over the Covid-19 pandemic. Germany is making another forceful push to combat the recent increase in cases, including expanded vaccination efforts, encouraging work from home, and restricting public transportation for unvaccinated individuals. Elsewhere, the Czech Republic’s government said that certain activities will be limited to those who’ve been vaccinated or had the virus in the last six months, including access to restaurants and hairdressers. Slovakia also agreed a similar move to prevent the unvaccinated accessing shopping malls, whilst Hungary is expanding its mask mandate to indoor spaces from Monday. Greece imposed further restrictions for its unvaccinated population. So a theme of placing more of the restrictions in Europe on the unvaccinated at the moment and trying to protect the freedoms of those jabbed for as long as possible. That risk-off tone supported sovereign bonds in Europe, with yields on 10yr bunds (-3.0bps), OATs (-4.1bps) and BTPs (-5.5bps) all moving lower. That was a larger decline relative to the US, where yields on 10yr Treasuries were only down -0.3bps to 1.59%, with lower real yields driving the decline. One asset class with some pretty sizeable moves yesterday was FX, where a bunch of separate headlines led to various currencies hitting multi-year records. Among the G10 currencies, the Swiss Franc hit its strongest level against the euro in over 6 years yesterday on an intraday basis. That came as the Covid wave has strengthened demand for haven assets, though it went on to weaken later in the day to close down -0.15%. Meanwhile, the Norwegian Krone was the weakest G10 performer (-0.72% vs USD) after the Norges Bank said it would be stopping its daily foreign exchange sales on behalf of the government for the rest of the month. Finally in EM there were some even bigger shifts, with the Turkish Lira falling to a record low against the US dollar, which follows the central bank’s decision to cut interest rates by 100bps, in line with expectations. And then in South Africa, the Rand also fell to its weakest in over a year, in spite of the central bank’s decision to hike rates, after the decision was interpreted dovishly. Overnight in Asia stocks are trading mostly higher led by the Nikkei (+0.45%), KOSPI (+0.43%), Shanghai Composite (+0.34%) and CSI (+0.18%). The Hang Seng (-1.76%) is sharply lower and fairly broad based but is being especially dragged down by Alibaba which dived -11% after it downgraded its outlook for fiscal year 2022 and missed sales estimate for the second quarter. Elsewhere in Japan headline CPI for October came in at +0.1% year-on-year (+0.2% consensus & +0.2% previous) while core CPI matched expectations at +0.1% year-on-year. The numbers reflect plunging mobile phone fees offsetting a 21% surge in gas prices. If the low mobile phone costs are stripped out, core inflation would be at 1.7% according to a Bloomberg calculation. Prime Minister Fumio Kishida is expected to deliver a bigger than expected stimulus package worth YEN 78.9 trillion ($690 bn) according to Bloomberg. We should know more tomorrow. Moving on futures are pointing to a positive start in US and Europe with S&P 500 (+0.42%) and DAX (+0.39%) futures both up. Turning to commodities, oil prices had been on track to move lower before paring back those losses, with Brent Crude (+1.20%) and WTI (+0.83%) both up by the close and edging up around half this amount again in Asia. That comes amidst continued chatter regarding strategic oil releases, and follows comments from a spokeswoman from China’s National Food and Strategic Reserves Administration, who Reuters reported as saying that they were releasing crude oil reserves. New York Fed President, and Vice Chair of the FOMC, John Williams, upgraded his assessment of inflation in public remarks yesterday. A heretofore stalwart member of team transitory, he noted that they wouldn’t want to see inflation expectations move much higher from here, and that recent price pressures have been broad-based, driving underlying inflation higher. Williams is one of the so-called core members of FOMC leadership, so his view carries some weight and is a useful barometer of momentum within the FOMC. Indeed, Chicago Fed President Evans, one of the most resolutely dovish Fed Presidents, expressed similar sentiment, recognising that rate hikes may need to come as early as 2022 given the circumstances. There wasn’t much in the way of data yesterday, though the weekly initial jobless claims from the US for the week through November 13 came in higher than expected at 268k (vs. 260k expected), and the previous week’s reading was also revised up +2k. That said, the 4-week moving average now stands at a post-pandemic low of 272.75k. Otherwise, the Philadelphia Fed’s manufacturing business outlook survey surprised to the upside at 39.0 in November (vs. 24.0 expected), the highest since April. That had signs of price pressures persisting, with prices paid up to 80.0, the highest since June, and prices received up to 62.9, the highest since June 1974. Finally, the Kansas City Fed’s manufacturing index for November fell to 24 (vs. 28 expected). To the day ahead now, and central bank speakers include ECB President Lagarde, Bundesbank President Weidmann, Fed Vice Chair Clarida, the Fed’s Waller and BoE Chief Economist Pill. Separately, data highlights include UK retail sales and German PPI for October. Tyler Durden Fri, 11/19/2021 - 08:11.....»»

Category: personnelSource: nytNov 19th, 2021

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

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

Category: blogSource: zerohedgeNov 18th, 2021

Markets Close at or Near Record Highs; Sales Misses for AAPL, AMZN, SBUX

Most of these economic metrics and earnings reports are a peek in the rearview mirror; the real news is ahead of us. Brand new all-time closing highs greeted the closing bell for both the S&P 500 and the Nasdaq this afternoon, while the Dow remains a couple dozen points or so below its record high set Tuesday this week. The Dow was up +239 points, +0.67%, while the S&P was +0.98% to narrowly below 4600. The Nasdaq grew 212 points, +1.39%, to 15,448. The small-cap Russell 2000 outpaced the field, +2.02% on the day.While U.S. Congress draws closer to an infrastructure deal — now reportedly shrunken to $1.75 billion from $3.5 billion initially bandied about — and no discerning future taxation to hamper higher-income Americans (at least at this stage), in addition to Q3 earnings reports that are generally handling supply chain constraints with aplomb, market indexes don’t seem to have much choice but to go up. Vaccinations continue to help the U.S. move toward herd immunity, and booster shots coming online are giving consumers confidence to head out to shops, restaurants and entertainment venues. In short, Q3 — and now early Q4 — are demonstrating real economic strength.We’re also at post-Covid lows on weekly jobless claims, both initial and continuing, as we saw in this mornings report. Even with Q3 GDP coming in at a disappointing +2.0% in its first print, and Pending Home Sales from last month swinging to a negative, -2.3%, the markets do not seem to mind. After all, most of these economic metrics and earnings reports are a peek in the rearview mirror; the real news is ahead of us.Speaking of Q3 earnings, Amazon AMZN posted big misses on both top and bottom lines for the quarter, with earnings of $6.12 per share badly short of the $8.712 in the Zacks consensus and roughly half the year-ago EPS of $12.37, and $110.81 billion in sales about a million dollars off analyst estimates. Further, Q4 revenue guidance has been lowered to $130-140 billion, from the $141.91 billion analysts were expecting.With an already established slowing economy, as well as higher spending on goods and workforce, Amazon is fighting through a tough part of the year, ahead of holiday shopping season. Online stores missed estimates to come in at $9.94 billion, although Amazon Web Services (AWS) surprised nicely to $16.11 billion, +39% year over year.Supply-chain issues is the story for Apple’s AAPL fiscal Q4 results, as the company met earnings estimates of $1.24 per share exactly, on $83.36 in sales, which came in below the $85.5 billion expected. These supply shortages of microchips from foundries overseas — which had their own Covid outbreaks in the quarter — were the culprit in Apple’s relatively weak period, costing the company a reported $6 billion in the quarter.Shares had been falling 5% in late trading, as supply issues look to continue into fiscal 2022 for Apple. iPhone sales came in at 38.9 million, down from the 41.5 million expected. Share selling is moderating, however, leveling off closer to -3.5% in the after-market. Apple shares are +17% year to date, shy of the greater S&P 500 over the same time period, but +32% year over year.Meanwhile, Starbucks SBUX met earnings estimates of $1.00 per share in its fiscal Q4 report, on $8.15 billion in sales which were light of estimates for $8.26 billion. Global comps missed expectations to +17% in the quarter, with U.S. coming in at +22% and International +3%. It’s the toughest quarter for Starbucks in quite some time; the last time the world’s leading coffee shop missed on the bottom line was way back in fiscal Q4 2015.Gilead Pharma GILD, however, trounced estimates after the bell on its Q3 earnings report on significant gains in its Covid treatment remdesivir. Expectations had been for roughly $630 million for remdesivir sales; that actual number came in at $1.9 billion. An increase in Covid hospitalizations, especially in under-vaccinated regions during Q3, gave a boost to the company, whose earnings of $2.65 per share and sales of $7.42 billion were well beyond the $1.72 per share and $6.23 billion in revenues, respectively.Questions or comments about this article and/or its author? Click here>> Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related 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 Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Starbucks Corporation (SBUX): Free Stock Analysis Report Gilead Sciences, Inc. (GILD): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research 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.....»»

Category: topSource: zacksOct 29th, 2021