U.S. moves to cut off Huawei from chip suppliers

Futures Rise Ahead Of Nvidia Earnings Despite European PMI Bloodbath US futures have erased much of their earlier gains but were modestly higher, led by tech with NVDA higher premarket for the third consecutive day ahead of the chipmaker's much anticipated earnings report after the close. As of 7:30am, S&P futures were up 0.2%, erasing an earlier gain of as much as 0.5%; Nasdaq futures were 0.1% higher. Asian stocks gained for a 2nd straight day despite China markets resuming their slump, while Europe tumbled after dismal service PMI data.  Bonds are rallying around the globe as traders pare bets on additional rate hikes by the BOE and ECB after dismal PMI data from the UK and euro area which is also hitting the Euro. 10Y TSY yields drop to 4.26% from 4.32% (4.25% had been a support level). USD is strengthening with the global bond rally and commodities mixed with strength in metals, weakness in energy, and Ags mixed. Bonds gain as traders pare bets on additional rate hikes by the BOE and ECB after dismal PMI data from the UK and euro area. Both regions saw a surprise contraction in their respective service sectors while manufacturing remained in the doldrums. UK 10-year yields are down 12bps while German 10-year yields fall 10bps. Today's US Flash PMIs may highlight either the growth divergence among the G7 or, assuming a Services miss, that those long-and-variable lags may finally be taking hold potentially creating dovish risk to future CPI prints. In either case, Tech may benefit, acting as either a Cyclical or Defensive play. NVDA earnings are the main data point today and analysts are predicting that Nvidia’s second-quarter revenue may come in higher than the forecast it gave three months ago. The options market is also bracing for a move of about 10% following the results. “The market is in a wait-and-see mode for the main catalysts this week: Nvidia earnings and Jackson Hole,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “Given the strong yield increase since July, the Jackson Hole meeting is of particular interest for investors.” Investors are looking for clues on the outlook for interest rates, after the Fed last month lifted them to a range of 5.25% to 5.5%, the highest level in 22 years. US PMI figures measuring August activity due later Wednesday will provide insights on the strength of the economy, before Powell’s remarks on Friday. “One risk for the Fed of now arriving so close to its inflation target is that the bond market gets ahead of it and re-stimulates the economy with a big shift down in yields,” said Stephen Auth, chief investment officer for equities at Federated Hermes. While Powell is unlikely to “surrender the hard-won credibility of the past year with a premature shift back to policy looseness,” it will be difficult for him to appear too hawkish, given inflation is clearly in decline and deflationary pressures are looming from China, Auth added. In premarket trading, it has been a consumer bloodbath, with Foot Locker tumbled 32% after cutting its 2023 earnings forecast and pausing its dividend. Foot Locker suppliers including Nike (NKE) and Under Armour (UA) drop 3.5% and 2.9% respectively. Peloton plunged more than 30%, after giving a weak revenue forecast for the current quarter, signaling that a turnaround effort under Chief Executive Officer Barry McCarthy is bogging down. Here are some other notable premarket movers: AMC Entertainment tumbles 18% with shares on track to suffer a third day of double-digit losses following a Delaware Supreme Court’s ruling that the company’s stock conversion can proceed. Apellis Pharmaceuticals jumped 27% on Wednesday as analysts noted that rates of retinal vasculitis remains low after the biopharmaceutical company provided an update. Arcus Biosciences and iTeos Therapeutics jumped after competitor Roche AG said data from a critical study of its new cancer medicine was accidentally released. Arcus is up 35% and iTeos surges 40% before the market open. Urban Outfitters shares are up 4.9% after the clothing retailer reported second-quarter earnings per share that beat estimates. Analysts reacted positively to the results, highlighting the strength in the company’s Free People and Anthropologie segments, which offset weakness in the Urban Outfitters brand. Wider markets are marking time ahead of a speech from Federal Reserve Chair Jerome Powell on Friday at the Jackson Hole Economic Policy Symposium. A resilient US economy has prompted investors to position for the Fed to keep borrowing costs elevated. Treasury yields fell on Wednesday, tracking moves in Europe. Europe led a rally in global bonds as signs of a quickening downturn in the euro area prompted traders to trim interest-rate hike bets. The Euro area composite flash PMI decreased by 1.6pt to 47.0, below consensus expectations, on the back of a further meaningful decline in services activity. Across countries, the decline in the area-wide index was led by Germany and, to a lesser extent, the periphery, while the composite index in France remained unchanged. In the UK, the composite flash PMI decreased by 2.9pt to 47.9, also below consensus expectations. The euro tumbled after the region’s PMI data, while the Stoxx 600 stock benchmark trimmed gains led by gains in the real estate, utilities and insurance sectors.  Here are the most notable European movers: Roche gains as much as 4.8%, the most since September 2022, after data from its hotly awaited Skyscraper-01 cancer medicines study was inadvertedly released, showing promising results Bavarian Nordic gains as much as 14%, the most since May 2022, after the Danish vaccines maker reported strong second-quarter numbers, driven by its smallpox and mpox vaccine Jynneos Rotork shares rise as much as 4.2%, their biggest gain in four months, after the UK-based flow products maker was upgraded to buy from add at Peel Hunt. The broker cites confidence in the firm JD Sports rises as much as 3.1% and is among Wednesday’s best performers on the FTSE 100, rebounding from a slide triggered by weak results at US peer Dick’s Sporting Goods EQT falls as much as 5.6%, the biggest laggard on the Stoxx 600 benchmark, after a report in Swedish media highlighted that the expiration of a lock-up agreement might lead to a share sale Alfen plunged after the Dutch energy-equipment company reported a 43% drop in first-half earnings, weighed down by challenges in electric-vehicle charging. Jefferies sees double-digit consensus cuts ahead Autoneum drops as much as 4.9% after the Swiss car-parts supplier reported results. While 1H benefited from a strong recovery of car production, market volumes are expected to be flat in 2H Sensirion shares fall as much as 3.5% after the Swiss maker of gas and liquid flow sensors published 1H numbers that Stifel says reflect a clear drop in its businesses while 2023 “looks bad” XTB drop as much as 5.2% after Parkiet newspaper reported that Polish financial regulator KNF sees “benefits” of restricting marketing of contract-for-difference products in a similar way to Spain Earlier in the session, Asian equities rose, on course for their first back-to-back gain this month, boosted by financial and technology shares. The MSCI Asia-Pacific Index advanced as much as 0.3%, extending Tuesday’s 0.9% rise. Key gauges advanced in Taiwan and Australia. Hong Kong shares fluctuated while mainland China benchmarks fell following a puzzling late rally on Tuesday which saw the local plunge-protection team engaged. Tech hardware stocks including TSMC extended climbs ahead of a key earnings report from US chipmaker Nvidia. Baidu, Kuaishou and Anta Sports all rallied in Hong Kong after results. In addition to Nvidia’s report, investors await a speech from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium later this week. The meeting comes amid a renewed surge in US Treasury bond yields that along with China’s economic woes has sapped global risk appetite. China's CSI 300 Index fell as much as 1.6%, extending losses in late trading, as foreign investors continue to dump onshore China stocks amid weak sentiment. A gauge of information technology stocks drops as much as 3%, leading declines, while a gauge of telecom services drops 2.2%. Foreign investors sold a net 10.7 billion yuan worth of Chinese shares via the trading link as of 2:33 p.m., on track for a 13th-straight day of outlfows. In Hong Kong, the Hang Seng Index and Hang Seng China Enterprises Index are each up 0.3%. Japan's Nikkei 225 pared opening losses although the upside was capped ahead of the 32,000 level after mixed PMI figures, and with Japan facing backlash from China and Hong Kong for its plan to release Fukushima water. Australia's ASX 200 was led higher by strength in consumer stocks and the mining sector, with the index unfazed by weaker PMI data from Australia which showed manufacturing at a 6th consecutive monthly contraction. Stocks in India gained for a third consecutive session, tracking advances in Asian peers. State-run banks and capital goods companies were among key gainers. The S&P BSE Sensex rose 0.3% to 65,433.30 in Mumbai, while the NSE Nifty 50 Index advanced 0.2%. Most Asian peers advanced boosted by financial and technology shares. “Investors confidence is very good,” said Rajat Agarwal, Societe Generale’s Asia equity strategist. India has so far received more than $16 billion of foreign flows this year, which is “disproportionate” compared to rest of emerging market peers in Asia excluding China and shows confidence investors have in local firms’ earnings growth, according to Agarwal. In Fx, the Bloomberg Dollar Spot Index erases Asia-session declines and edges up 0.1% as the pound and euro suffered after dismal service PMIs (see above), weakening by 0.6% and 0.3% against the greenback. The yen is the best performer among the G-10s, rising 0.3%. EUR/USD falls 0.3% to 1.0810, its lowest since mid-June; EUR/GBP down as much as 0.3% to 0.8493, before reversing losses. Traders are betting on a 40% chance of an ECB rate rise in September, down around 5 basis points before the PMIs release The pound sank 0.5% against the dollar to 1.2672, lowest since Aug. 11. Traders pared wagers on further hikes from the Bank of England; money markets see a peak rate of ~5.90%, compared to more than 6% earlier. In rates, bonds gained as traders pare bets on additional rate hikes by the BOE and ECB after dismal PMI data from the UK and euro area. Both regions saw a surprise contraction in their respective service sectors while manufacturing remained in the doldrums. UK 10-year yields are down 12bps while German 10-year yields fall 10bps. US treasuries advanced, boosted by wider gains across bunds. Outperformance of core European rates drags Treasury yields lower by 5bp to 7bp across the curve with gains on the day led by intermediates. US 10-year yields drop to around 4.26%, remain near lows of the day and richer by 6.5bp vs. Tuesday close; bunds and gilts outperform in the sector by 4.5bp and 6bp following wave of soft European economic data. Treasury auctions resume with $16 billion 20-year bond sale at 1pm New York, while $8 billion 30-year TIPS sale is scheduled for Thursday. US focus is on manufacturing PMI, while Treasury auctions resume with 20-year bond sale later in the session. In commodities, crude futures decline, with WTI falling 0.9% to trade near $78.90. Spot gold rises 0.3%. To the day ahead now, and data releases include the flash PMIs for August from the US and Europe, US new home sales for July, and the preliminary Euro Area consumer confidence reading for August. In the US, there’s also the preliminary benchmark revisions for nonfarm payrolls. Today’s earnings releases include Nvidia. Finally in the political sphere, there’ll be the first US Republican primary debate tonight. Market Snapshot S&P 500 futures up 0.6% to 4,424.00 MXAP up 0.4% to 158.75 MXAPJ up 0.2% to 497.07 Nikkei up 0.5% to 32,010.26 Topix up 0.5% to 2,277.05 Hang Seng Index up 0.3% to 17,845.92 Shanghai Composite down 1.3% to 3,078.40 Sensex up 0.4% to 65,453.15 Australia S&P/ASX 200 up 0.4% to 7,148.42 Kospi down 0.4% to 2,505.50 STOXX Europe 600 up 0.6% to 454.61 German 10Y yield little changed at 2.53% Euro down 0.2% to $1.0820 Brent Futures down 0.5% to $83.60/bbl Gold spot up 0.3% to $1,903.73 U.S. Dollar Index up 0.19% to 103.76 Top Overnight News The contraction of private-sector activity in the euro area intensified in August as services ceased being a bright spot and followed the industrial sector into a downturn UK private sector firms suffered their first contraction in seven months, revealing the growing economic toll of higher interest rates and the squeeze on households The leading association of global chip companies is warning that Huawei Technologies Co. is building a collection of secret semiconductor-fabrication facilities across China, a shadow manufacturing network that would let the blacklisted company skirt US sanctions and further the nation’s technology ambitions Talks to avoid strikes at Australia’s biggest liquefied natural gas export terminal began Wednesday morning, as the threat to supply continues to rock global markets for the fuel A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed amid a slew of earnings releases alongside the latest PMI data from the region, but with price action relatively rangebound heading closer to the Jackson Hole Symposium. ASX 200 was led higher by strength in consumer stocks and the mining sector, with the index unfazed by weaker PMI data from Australia which showed manufacturing at a 6th consecutive monthly contraction. Nikkei 225 pared opening losses although the upside was capped ahead of the 32,000 level after mixed PMI figures, and with Japan facing backlash from China and Hong Kong for its plan to release Fukushima water. Hang Seng and Shanghai Comp were mixed with trade in Hong Kong indecisive and the mainland subdued amid several earnings releases, and as participants await results from China’s big banks. Top Asian News US Commerce Secretary Raimondo met with China's ambassador to the US Xie Feng and shared a productive discussion ahead of Raimondo's upcoming trip to Beijing and Shanghai, while Raimondo raised issues of importance to the US, American businesses and workers, according to Reuters. RBNZ Chief Economist Conway said he is mindful of the drop in NZD and said they would lower the OCR sooner than they have signalled if there was a more significant slowdown in China than the RBNZ expects. Chinese regulators will continue to propel domestic companies to seek listing at overseas markets and further facilitate long-term overseas funds to invest in the A-share market, according to Global Times citing the CSRC Vice Chairman. European bourses are firmer, Euro Stoxx 50 +0.5%, but off of pre-data highs as the morning's dismal PMIs sparked selling pressure given the negative growth outlook; however, this proved short-lived amid the broader backdrop of a marked pullback in yields. Sectors are mostly in the green with Utilities, Real Estate and Basic Resources outperforming while Auto names lag modestly. Stateside, futures are firmer and attempt to claw back some of Tuesday's pressure, ES +0.6%, directional action in-fitting with the above European moves given an absence of specific catalysts. Focus ahead includes a handful of data points before NVIDIA earnings after the bell, the name is currently +1.5% in pre-market trade after closing lower by 2.8% on Tuesday. Top European news British small businesses saw sales fall by over 20% over the past year, according to research by Sage cited by Bloomberg. A mini-reshuffle among UK ministers is expected at the end of next week, according to GBNews' Hope, Defence Secretary Wallace is expected to leave; a wider reshuffle is expected in October. FX Buck benefits at the expense of the Euro and Sterling after dire PMIs. DXY rallies to 103.840 as EUR/USD hovers between decent option expiries at 1.0830-25 and 1.0800, while Cable reverses towards 1.2650 from 1.2764 at best. Yen outperforms as yields tumble and JPY crosses recede, USD/JPY down from 145.89 through importer bids at 145.50 and aiming for expiry interest at 145.00. Aussie underpinned on 0.6400 handle vs Buck as iron ore continues to soar and Yuan via another much stronger than forecast PBoC fix, USD/CNY around 7.2900 and USD/CNH circa 7.3000. PBoC set USD/CNY mid-point at 7.1988 vs exp. 7.3050 (prev. 7.1992) Fixed Income Dire EU PMIs revive debt futures and trim the probability of ECB/BoE policy tightening. Bunds up to 132.49 from 131.20 low, Gilts reach 93.74 from 92.38 at one stage and T-note towards the top of 109-16+/00+ range awaiting US PMIs and 20-year supply amidst busy PM agenda. UK DMO to undertake gilt syndication via re-opening the 4.0% 2063 line, transaction planned for the week of September 4th. Commodities Crude benchmarks are under-pressure amid a firmer USD and factors on both the supply- and demand-side of the equation, WTI & Brent -1.0%. On the demand side, PMIs noted a reduction in manufacturing output again in Germany alongside broader negative growth expectations. Supply wise, the resumption of flows on the Iraqi-Turkish pipeline serves as a headwind. For LNG, Woodside is meeting unions for discussions later today though an exact time is not currently known, as a reminder the ballot opens on Thursday for Chevron’s Gorgon and Wheatstone workers; more recently, Woodside said there is no update yet. A remark which came alongside renewed pressure in TTF. In terms of metals, silver is the standout gainer with limited fundamental updates but desks are attentive to bullish technicals incl. the 50-DMA. While spot gold remains firmer despite the USD upside as it takes cues from the yield environment. US Energy Inventory Data (bbls): Crude -2.4mln (exp. -2.9mln), Gasoline 1.9mln (exp. -0.9mln), Distillate -0.2mln (exp. +0.2mln), Cushing -2.2mln. Woodside Energy (WDS AT) is meeting unions for talks as strike threats loom over Australian LNG facilities. Talks are expected to continue until the evening, according to Bloomberg. More recently, Woodside Energy says there is no update yet on LNG strike talks. Turkish Energy Minister says an agreement has been reached to resume the flow of oil from the Iraqi-Turkish pipeline, according to Sky News Arabia. An oil tanker broke down at the northern entrance to the Bosphorus Strait, according to a shipping agency cited by Al Arabiya. Iran's Oil Minister Owji says crude output will reach 3.4mln BPD by end-September (3.19mln BPD in August), via SNN. Geopolitics Moscow airports suspended flights after Ukrainian drone attacks, according to TASS. Furthermore, Moscow's Mayor said a drone hit a building in central Moscow and another drone was downed over the Moscow region, while the Russian military announced it downed three drones that tried to attack Moscow and the US State Department also commented that the US does not encourage drone attacks in Russia, according to Reuters. Russian Security Council Deputy Chairman Medvedev said Russia may annex Georgian breakaway regions of South Ossetia and Abkhazia, according to TASS. China Coast Guard patrolled the territorial waters of the Diaoyu Islands, which is a disputed territory and also known as Japan's Senkaku Islands, to conduct right-protection cruises, according to Reuters. Brazilian President says "we are ready to join efforts for a cease-fire in Ukraine", according to Al Jazeera. US event calendar 07:00: Aug. MBA Mortgage Applications, prior -0.8% 09:45: Aug. S&P Global US Services PMI, est. 52.2, prior 52.3 09:45: Aug. S&P Global US Manufacturing PM, est. 49.0, prior 49.0 09:45: Aug. S&P Global US Composite PMI, est. 51.5, prior 52.0 10:00: Prelim. Benchmark Revision to Establishment Survey Data 10:00: July New Home Sales MoM, est. 1.0%, prior -2.5% 10:00: July New Home Sales, est. 704,000, prior 697,000 DB's Henry Allen concludes the overnight wrap Markets put in a pretty subdued session over the last 24 hours, with low volumes and a pause in the selloff of longer dated bonds, even as the ‘higher-for-longer’ narrative continued at the front-end. There weren’t really any new catalysts to drive things, but that should start to change as we move towards the end of the week and Fed Chair Powell’s speech at Jackson Hole. Indeed, we’ve got several events on the calendar happening today, including the August flash PMIs, Nvidia’s earnings after the US close, along with the latest revisions to nonfarm payrolls. Those flash PMIs should offer an initial indication of how the global economy has fared so far this month, so all eyes will be on the US readings in particular to see if their economy maintains its recent strength. Overnight, we’ve begun to see some of the readings out of Asia, with Japan’s composite PMI ticking up to a 3-month high of 52.6, whereas Australia’s composite PMI fell back to a 19-month low of 47.1. So there’s not been an obvious trend so far at a global level. Later this morning we’ll get the European numbers, where the recent softening in the PMIs has been among the arguments in favour of a hard landing, particularly in manufacturing where the July PMI was at its lowest since the first Covid wave. As we look forward to those releases, markets continued to price in a higher-for-longer rates view, with Fed pricing for the December 2024 meeting ticking up another +4.9bps to 4.41%, which is the highest so far this cycle. As a result, that meant that front-end Treasuries were one of the few bonds to sell off yesterday, with the 2yr Treasury yield up +4.5bps to 5.05%. That’s its second-highest close since the GFC, and the only day it’s closed higher in this cycle was on March 8, when they reached 5.07% just before the market turmoil surrounding SVB began. But apart from front-end Treasuries, yesterday saw the relentless bond selloff finally ease up,with yields turning lower throughout the world. In the US, the 10yr Treasury yield closed -1.4bps lower at 4.32%. And in Europe the declines were even larger, with yields on 10yr bunds (-5.8bps), OATs (-6.8bps) and BTPs (-9.4bps) all falling back. That trend has continued overnight as well, with yields on 10yr Treasuries down a further -1.6bps to 4.31%. For equities, there was also a relative outperformance in Europe relative to the US. The S&P 500 (-0.12%) was near flat on the day, with banks (-2.41%) in the index underperforming after the move by S&P to downgrade the rating of several firms. The textiles & apparel segment (-1.66%) also underperformed after an outlook downgrade by Dick’s Sporting Goods (-24.15% yesterday) weighed on the broader sports apparel sector. The NASDAQ was little changed (-0.06%), with chipmaker Nvidia (-2.77%) reversing some of Monday’s +8.47% jump ahead of its eagerly anticipated results after the close today. Over in Europe there was a much stronger performance, and the STOXX 600 (+0.68%) posted a second daily advance that was led by technology companies. That outperformance from Europe came in spite of a fresh rise in natural gas prices yesterday, which were up another +5.21% to €42.91 per megawatt-hour. That takes them to their highest closing level since April, and comes amidst a potential strike at a key LNG facility in Australia that could start on September 2. Today is an important day in the negotiations as well, since the Offshore Alliance who represent two of the unions, have said they would take strike action if an agreement weren’t reached by close of business today. Overnight in Asia, we’ve seen some further equity declines this morning, with the CSI 300 (-0.72%) and the Shanghai Comp (-0.55%) both losing ground, along with South Korea’s KOSPI (-0.44%). That said, other indices have been more positive, with the Hang Seng up +0.35%, and the Nikkei up +0.15%. US equity futures are also pointing to a solid start, with those on the S&P 500 up +0.24%. Looking ahead, another release to watch out for today will be the US Quarterly Census of Employment and Wages (QCEW) for Q1. Importantly for markets, they provide a benchmark for other data series, including the monthly nonfarm payrolls series. Our US economists have a preview of the release (link here), and they point out that the latest federal withheld income tax data suggests that this QCEW could point to a softer labour market relative to our current understanding from the monthly employment data. Recent months have already seen a slowing in the nonfarm payrolls numbers, with the two most recent figures running beneath 200k for the first time since 2020. Elsewhere on the data side, we had a few US releases out yesterday. Existing home sales in July fell back to an annualised rate of 4.07m (vs. 4.15m expected), which is their lowest level in 6 months. Meanwhile, we received mixed regional activity surveys. The Richmond Fed’s manufacturing index for August came in at a 7-month high of -7 (vs. -10 expected), while the Philadelphia Fed’s non-manufacturing index fell from +1.4 to -13.1, largely reversing its improvement in July. To the day ahead now, and data releases include the flash PMIs for August from the US and Europe, US new home sales for July, and the preliminary Euro Area consumer confidence reading for August. In the US, there’s also the preliminary benchmark revisions for nonfarm payrolls. Today’s earnings releases include Nvidia. Finally in the political sphere, there’ll be the first US Republican primary debate tonight. Tyler Durden Wed, 08/23/2023 - 08:17.....»»

Hologic, Inc. (NASDAQ:HOLX) Q3 2023 Earnings Call Transcript July 31, 2023 Hologic, Inc. beats earnings expectations. Reported EPS is $0.93, expectations were $0.89. Operator: Good afternoon, and welcome to the Hologic’s Third Quarter Fiscal 2023 Earnings Conference Call. My name is Cynthia, and I am your operator for today’s call. Today’s conference is being recorded. […] Hologic, Inc. (NASDAQ:HOLX) Q3 2023 Earnings Call Transcript July 31, 2023 Hologic, Inc. beats earnings expectations. Reported EPS is $0.93, expectations were $0.89. Operator: Good afternoon, and welcome to the Hologic’s Third Quarter Fiscal 2023 Earnings Conference Call. My name is Cynthia, and I am your operator for today’s call. Today’s conference is being recorded. All lines have been placed on mute. I would now like to introduce Ryan Simon, Vice President, Investor Relations, to begin the call. Please go ahead. Ryan Simon: Thank you, Cynthia. Good afternoon, and thank you for joining Hologic’s third quarter fiscal 2023 earnings call. With me today are Steve MacMillan, the company’s Chairman, President and Chief Executive Officer; and Karleen Oberton, our Chief Financial Officer. Our third quarter press release is available now on the Investors section of our website. We will also post our prepared remarks to our website shortly after we deliver them, as well as an updated corporate presentation. And a replay of this call will be available on our website for the next 30 days. Before we begin, we would like to inform you that certain statements we make today will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the safe harbor statement included in our earnings release and SEC filings. Also during this call, we will discuss certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. Two of these non-GAAP measures are one, organic revenue which we define as revenue excluding the divested blood screening business and revenue from acquired businesses owned by Hologic for less than one year; and two, organic revenue, excluding COVID-19, which excludes COVID-19 assay revenue, revenue related to COVID-19 and sales from discontinued products in Diagnostics. Finally, any percentage changes we discuss will be on a year-over-year basis and revenue growth rates will be in constant currency, unless otherwise noted. Now, I’d like to turn the call over to Steve MacMillan, Hologic’s CEO. Stephen MacMillan: Thank you, Ryan, and good afternoon, everyone. We’re pleased to discuss our financial results for the third quarter of fiscal 2023. Our results were solid. Total revenue was $984 million, and non-GAAP earnings per share were $0.93. Revenue exceeded our prior guidance and EPS finished at the high end of our range. These results showcase the power of our transformed business and demonstrate that Hologic is built for the long-term with the broadest, strongest foundation we’ve ever had. On top of this transformation, with our strong cash flow and outstanding balance sheet, we continue to operate from a position of strength, with strong operational discipline as we forge ahead. Once again, the proof is in the numbers. Total company organic growth, excluding COVID was rather remarkable at 18.4%. By division, we posted 11.8% organic diagnostics growth ex-COVID and 14.5% growth in Surgical. Standing alone, these growth rates are impressive. Given a wider context, we view these performances as exceptionally strong, because we delivered these results on top of 15% growth in Diagnostics and 9.7% growth in Surgical in Q3 of 2022, both very high bars from a year ago. And in Breast Health, as expected, we delivered another strong quarter of 27.5% growth as chip supply and gantry availability continue to improve and track to our expectations. For this fiscal year, we remain on pace to achieve or exceed our 2023 low double-digit organic growth targets, excluding COVID. In fact, our expected growth rate for fiscal ’23 is now more than double our 5% to 7% long-term growth target. Based on our strong performance for a number of quarters now, combined with our continued confidence in our growth ahead, we’ve recently given serious consideration to raising our long-term target. But given the uncertain macro environment we face, 5% to 7% is still very much a solid long-term outlook. Put simply, there are two reasons why. First, as you all well know, growing 5% to 7% on top of double-digit growth is clearly more challenging than growing 5% to 7% against single-digit comps. For example, in fiscal 2024, we will lap several prior periods of double-digit growth throughout the year. Net, we’ll be entering 2024 already much bigger and stronger than when we first set the goal. And second, there are macro business and geopolitical challenges that persist today, which did not exist back in 2021 when we first set our guide. We will expand on this aspect later in today’s call. Taken together, overcoming this combination of challenges, while maintaining 5% to 7% growth is in some ways an even last year goal than when we first established it. On that note, let’s move on to our focus for today. First, we will highlight the strengths of our business that underpin our strong Q3 results. Our strengths are diverse and durable. And second, with a discussion of the unique advantages we provide our customers, we hope you’ll share our confidence that Hologic is built for the long-term. Moving forward to our Q3 growth drivers. As mentioned, excluding COVID, each division posted double-digit organic growth for the quarter. Equally impressive is the year-over-year consistency of our growth drivers, a direct result of execution against our business strategy. In Diagnostics, the division’s overall 11.8% organic growth rate, excluding COVID, was again driven by strong performance in molecular. For the quarter, Molecular Diagnostics posted approximately 13% growth ex-COVID, on top of growing over 20% a year ago. Growth in molecular was driven by a combination of both newer assays like BV, CV/TV and contributions from Amgen and HSV, each growing well into the double digits as well as strong growth from our longstanding women’s health menu. Rounding out Molecular Diagnostics, our Biotheranostics acquisition continues to shine, being both accretive to our top and bottom lines. Cytology and Perinatal led by cytology, also contributed strong growth this quarter, growing nearly 10%. Cytology’s elevated growth for Q3 was driven by the timing of a few large orders placed in the last week of the quarter before the extended July 4 holiday. We view this as a one-time lift as opposed to a shift in the trajectory of the business. That said, co-testing, which includes the Pap+HPV continues to be the preferred cervical cancer screening method for medical practitioners. These are the same practitioners who are on the front lines who know the science and who have seen the overwhelmingly positive impact of the Pap and co-testing firsthand. By our estimates, nearly 99% of cervical cancer screening today in the United States is performed using a combination of the Pap alone or co-testing. Why? The reason is clear. The Pap test has been the most successful cancer screening test in history. Since the Pap was introduced over 80 years ago, the rate of cervical cancer, which was the leading cause of death among women, has fallen by more than 70%. As an advocate of women’s health for over 35 years, we continue to support best-in-class care for women, and for cervical cancer screening, the gold standard is co-testing with ThinPrep, the Pap+HPV. Shifting to Breast Health. As expected, we posted another exceptional quarter, growing revenue 27.5%. This strong performance was driven primarily by the ongoing return of our Mammography business as well as solid contributions from service. In Mammography, as we guided in May, we delivered more gantries in Q3 than Q1 and slightly less than in Q2. Demand for our clinically differentiated gantries remains high. In addition, our backlog is still at historically elevated levels. We are in great shape to work down this backlog to more normal levels throughout our fiscal 2024 and possibly beyond. In breast service, our business continues to grow and is becoming an even larger part of the division’s mix. Our strong service performance represents stable contracted recurring revenue and demonstrates deepening relationships with our customers. Now moving on to Surgical and our International business. The newer pillars of growth for our company that may not be fully appreciated. In Surgical, the business continues to grow stronger for longer, growing 14.5% in Q3. Revenue growth was again driven by MyoSure and the Fluent Fluid Management System. With contributions from NovaSure V5 and our newer laparoscopic portfolio. Specifically, while still early days in smaller dollars, Bolder continues its strong growth as we leverage our relationships with our GYN customers and explore adjacent surgical channels. The transformation of our Surgical business over recent years has been phenomenal. It underscores the value of both internal innovation plus product line additions through M&A, a winning formula across Hologic. In Surgical, the sum of both strategies has injected new life into the business and transformed it into a meaningful growth driver for the company. Our international business also continues to impress, growing 20.9% in the quarter, excluding COVID. In May, our global leadership team traveled to our Brussels office as part of our annual strategic planning process, spending a week in Brussels reinforced a sense of pride within our leadership team. We are proud of the strides we’ve made expanding our global footprint and even more important, we are proud of the energy and culture we’ve built around the world. Coupled with a strong base of talent we have developed over the past few years. We firmly believe our highly engaged workforce and purpose-driven culture truly set us apart. As we’ve said before, the revenue growth rate for our international business is accretive to our overall growth rate. We expect this trend to continue throughout our long-term horizon. Related, earlier in today’s call, we referenced persistent macro challenges in the context of our long-term guide. When we first announced our 5% to 7% guide, we were expecting tailwinds in places like China and Russia, rather than the headwinds they have become. Despite these challenges, we remain committed to our targets and with strong performance in other geographies where we operate, our international growth remains on track. This is a testament to the commitment, grit, and determination of all our employees that support and drive our efforts around the world. Now shifting gears to discuss the advantage we provide to our customers and how we are poised for long-term success. To fully appreciate where we’re going, we must reflect on where we’ve been. From there, we will shed light on our unwavering patient and customer focus, which sets the stage for our bright future. Our transformation has been years in the making. It started even before COVID and as we know, accelerated during the pandemic. In the early days of COVID, when fear and uncertainty led to closures and shutdowns, we delivered our highly accurate COVID molecular diagnostic tests around the globe, playing a pivotal role in helping get the world back on its feet. With COVID surges and high testing volumes now further in the rearview mirror, our ongoing performance shows that we are much more than a great pandemic story. Without a doubt, we are a bigger, stronger company with more durable and diverse growth drivers and positioned well for the long haul. On top of this transformation, with our strong cash flow and exceptional balance sheet, we operate today from a position of strength and continue to exercise operational discipline. As we look ahead, we are laser focused on our purpose, passion and promise and never lose sight of the needs of our patients and our customers. This is the magic within our business. Today, our customers face the challenge of navigating this new operating environment. They seek vendors who can help them operate as efficiently as possible. For labs and hospitals, pressures from inflation and labor shortages remain despite recent improvement. With efficiency a priority, when our customers think of Hologic, they see opportunity. The opportunity to consolidate around our portfolio of products in Diagnostics, Breast Health and Surgical that offer innovative solutions to dramatically improve their operational efficiency. Seconds can turn to minutes and days of time and labor savings throughout the course of a year. In each of our businesses, we feature products that streamline workflows and create real advantages that our customers not only love, but need. From our sophisticated automation with Panther and advances in AI with digital cytology and Diagnostics to our industry-leading gantry scan speed, and streamlined biopsy process with Brevera in Breast Health. And finally, our efficient fluid management approach with Fluent in Surgical. Workflow efficiency is in the DNA of our entire portfolio. In addition, the fact that we have specialized service teams to focus on the unique needs of our customers adds to our competitive advantage. Our customers know that when they choose Hologic, they not only receive world-class products but also world-class service. Between our robust portfolio of industry-leading products and specialized service capabilities, we create a very attractive opportunity for our customers. We offer real and measurable efficiencies that improve their bottom lines. And more importantly, improve the standard of care for patients. This combination sets us up well to meet our customers’ needs, both today and into the future. and creates an incredible pathway for Hologic’s success. In closing, there are many companies that can sell products. There are fewer who can consistently deliver so many leadership brands and sector-leading margins over the long-term and there are even fewer who can succeed financially, while also helping the world. At Hologic, we do all three. We are tremendously proud to continue our journey, delivering outstanding top-line growth and profitability. Driving value for all our stakeholders and further enabling our ability to make a profound impact on patients’ lives and women’s health around the world. With that, I will now turn the call over to Karleen. Karleen Oberton: Thank you, Steve, and good afternoon, everyone. In my statements today, we will briefly revisit our divisional revenue results, walk down our income statement, and speak to a few balance sheet and cash flow items. We will wrap up with our guidance for the full-year and fourth quarter of fiscal 2023. As Steve highlighted, our third quarter financial results were strong, showcasing the durability of our business and the diversified contributions to our growth. Total revenue came in at $984 million, exceeding our estimates, and non-GAAP earnings per share were $0.93, meeting the high end of our previous guidance range. Now starting with our divisional revenue performance. In Diagnostics, global revenue of $439.7 million declined 21.3%. However, excluding COVID assay and related ancillary revenues, the division grew 11.8% in the quarter. We are once again thrilled by the solid performance, which reinforces the underlying strength of our Diagnostics business. As Steve shared, Molecular Diagnostics grew approximately 13% during our third quarter, excluding the impact of COVID. Additionally, the Cytology and Perinatal business posted nearly 10% growth in our fiscal third quarter. For reasons previously discussed, when modeling, we would advise not to extrapolate this level of growth going forward to our Cytology and Perinatal segment. Moving to Breast Health. Total third quarter revenue of $360.3 million increased 27.5%. In conjunction with our Q2 performance, these results provide further evidence of strong demand for the division’s portfolio of products and services. While the current cares revenue growth rate was assisted by supply chain headwinds in the prior year, we are encouraged by the trajectory of the business and the increasing predictability of our semiconductor chip supply. Moving next to Surgical. Third quarter revenue of $157.3 million increased nearly 15% compared to the prior year. Our internal R&D efforts, international execution, and recent laparoscopic acquisitions are contributed to an increasingly diverse and robust business. And finally, in our Skeletal business, revenue of $27.1 million was also very strong, increasing 25%. Now let’s move on to the rest of the non-GAAP P&L for the third quarter. Gross margin of 60.8% was driven by strong performance in our base business, and COVID-19 testing revenues, which came in slightly above our expectations. Total operating expenses of $313.9 million in the third quarter increased nominally by 0.9%. This increase was driven by higher sales and R&D expenses, but partially offset by lower marketing spend. Below operating income, other income once again represented a gain in our fiscal third quarter. We continue to benefit from higher interest rates as interest income from our cash balance of nearly $2.8 billion, and the favorable impact of our interest rate hedge has more than offset higher interest expense on our floating rate debt. Our tax rate in Q3 was 21.4%, higher than previously anticipated. The increase in this quarter’s effective tax rate represents a cumulative catch-up in the current period to increase our annual tax rate from 19% to 19.75%. The increase in our tax rate for fiscal 2023 is driven by stronger than forecasted domestic performance and losses outside the U.S., which we cannot claim benefit from at this time. Putting these pieces together, operating margin for Q3 came in at 28.9% and net margin was 23.5%. Non-GAAP net income finished at $231.3 million and non-GAAP EPS was $0.93. Finally, while up to this point, we have discussed non-GAAP financial metrics, we feel it’s important to call out a non-cash impairment charge related to Mobidiag, which is excluded from our non-GAAP results. To be clear, we continue to be excited about Mobidiag and its long-term potential. As we’ve previously shared, due to various challenges our entry to the U.S. market will be materially beyond our initial deal model expectations. During our annual strategic planning process in Q3 the need to lower the carrying value of primarily Mobidiag’s intangible assets became evident. As a result, we booked a GAAP write-down of $197 million in the quarter specific to Mobidiag, which primarily impacts cost, but also operating expenses. Moving on from the P&L. Cash flow from operations was $332.7 million in our third quarter. We ended the quarter with $2.77 billion of cash on our balance sheet and a net leverage ratio of 0.1x. In addition, we repurchased 1.4 million shares of $114 million in the period. Year-to-date, we have purchased 3.6 million shares of $264 million. As it relates to our longer-term capital allocation strategy, we continue to operate from a position of strength with underlying strong organic growth in each of our businesses. With the growth and margin profile we have today, our hurdle rate to achieve accretion is notably higher than in years past. In addition, we want to make clear that while we are now open to looking at transactions that could be slightly larger, these are by no means the only targets in our funnel. We are prioritizing the right deals not necessarily larger deals and continue to be active, diligent, and patient. Now let’s move on to our updated non-GAAP financial guidance for the fourth quarter and full-year fiscal 2023. For the full-year fiscal 2023, we are again increasing our guidance at midpoints and expect total revenue in the range of $3.995 billion to $4.035 billion and EPS of $3.87 to $3.94. With only one quarter remaining in our fiscal year, this annual guidance implies revenue of $910 million to $950 million and EPS of $0.80 to $0.87 for our fiscal fourth quarter. With respect to foreign exchange, we are assuming an FX headwind of slightly less than $40 million for the full-year, a marginal improvement compared to our previous guidance. Turning to our divisions. We want to reiterate that each business should grow double-digits in our fiscal 2023, excluding the impact of COVID. However, it is important to remember that 2023 is a unique fiscal year. As a reminder, part of our elevated growth this year has been due to weak comps from supply chain headwinds and COVID’s impact on procedural volumes in fiscal 2022. In addition, 2023 is a 53-week fiscal year. Therefore, as we move closer to our fiscal 2024, as Steve discussed, it is appropriate to model our base business revenue growth within our previously outlined 5% to 7% long-term range. Reinforce Steve’s comments, this growth is even more impressive than when we introduced the target given our recent base business outperformance and headwinds from the macro environment. Starting with Diagnostics. We expect to close out the year with another strong quarter led by molecular. Our growth continues to be driven by improving utilization and menu expansion on Panther, coupled with increasing contribution from Biotheranostics. Closing out non-COVID diagnostics, we expect blood revenue approximately $35 million for the year. In terms of COVID revenue, we expect COVID assay sales to be approximately $10 million in our fourth quarter of 2023 and slightly more than $235 million for the full-year. COVID related items are expected to be slightly more than $25 million in the fourth quarter and slightly less than $120 million for the full-year. As we look forward with COVID testing revenue, demand and public concern for the disease continue to abate. Therefore, although we plan financially conservative in our COVID estimates, areas of significant upside to our COVID guidance are likely in the rearview mirror. It is also key to recognize that COVID is an accretive product and therefore, as COVID testing revenue shift lower in the next several quarters, this will represent a headwind to margins. Moving to Breast Health. In Q4, we anticipate similar performance to Q3, delivering double-digit revenue growth aided by strong demand as weak comps in the prior period, as well as weak comps in prior periods. Finally, in Surgical, we expect healthy double-digit growth for the full-year, but assume growth rates will start to moderate in Q4 given the elevated comparable period revenue we generated in the prior year. Moving down to P&L. For the full-year, we expect our non-GAAP gross margin percentage to be in the low 60s and our non-GAAP operating margin percentage to be approximately 30%. Within this operating margin profile, we have again incorporated temporary elevated cost pressures in our guidance. On this point, we remind everyone that our elevated cost profile is less related to current movements in spot prices, which have been receiving. For example, one of the primary drivers of our higher assumed costs is semiconductor chips, we have previously procured at higher prices. As we work down our backlog in Breast Health, we’ll see this higher cost amortized through the P&L over the next several quarters and persist into our fiscal 2024. We continue to work down the P&L. We expect operating expenses in Q4 to be relatively flat compared to Q3. Below operating income, we assume that other income net to be an expense of slightly more than $10 million in Q4. Our guidance is based on an annual effective tax rate of approximately 19.75%, and diluted shares outstanding are expected to be approximately $249 million for the full-year. To conclude, our strong third quarter results highlights a durable business that is poised to sustainably grow over the long-term. Our growth in the quarter was diverse, with each business again growing double-digits organically, excluding COVID. As we close out our fiscal 2023 and look to 2024, we are excited about the unique growth drivers in each of our franchises and the optionality provided by our pristine balance sheet. Our stakeholders can count on Hologic to deliver against our financial commitments, while also advancing the global state of women’s health. With that, we ask the operator to open the call for questions. Q&A Session Follow Hologic Inc (NASDAQ:HOLX) Follow Hologic Inc (NASDAQ:HOLX) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] And we will take our first question from Patrick Donnelly with Citi. Please go ahead. Patrick Donnelly: Hey guys, thanks for taking the question. Steve, maybe we can start on the molecular side, obviously, started to come up against some more difficult comps here. You guys have put up some good numbers. Can you just talk about the underlying performance here? I know you’ve called out a few growth assays, the Panther usage on non-COVID assays a bit. Any metrics? I know you guys don’t want to talk utilization anymore, but any metrics you can point to just in terms of the future growth, obviously a big contributor to that 5% to 7% next year as well, I’m sure. I just wanted to dive into that a little bit? Stephen MacMillan: Yes. I think the big piece. We’ve got, obviously the core women’s health menu continues to do well. And I think what keeps getting not fully appreciated, Patrick, is all those additional Panthers we placed during COVID. We kept saying many of those are going to be adopting our new menu, and that’s exactly what we’re seeing playing out. So the core women’s health menu, frankly, some of the virals especially outside the United States, and then the new products, the organic growth of BV/CV, which has really just been off to a tremendous start. And while that’s not going to exactly replace COVID, certainly not at its peak, it rapidly will become one of the largest assays we’ve ever developed organically. So I think we just keep seeing tremendous growth for really years to come as they keep ramping up. Karleen? Karleen Oberton: Yes. And I would just add that, Biotheranostics continues to be a strong double-digit grower contributing to the molecular performance. Stephen MacMillan: Yes. [indiscernible]. Patrick Donnelly: Okay, that’s helpful. Yes. And then, Karleen, maybe one on the margins. You talked a little bit about some of the headwinds, whether it’s pandemic COVID or the chip cost. Second half, I think the second half is 28% and change in terms of the op margins. I believe the Street is almost 31% next year. So what’s the right way to think about just the cadence as we work our way into next year. You obviously talked a little bit about the growth, but on that margin side, do some of those headwinds alleviate or should we be resetting next year a little closer to what we’re seeing the exit rate at here on the margin side? Karleen Oberton: Yes. So a couple of comments. First, we haven’t provided guidance for fiscal ’24, and we’re not doing that on this call. I would say that what we’re seeing here in Q3 and Q4 for operating margins in that 29% range are probably the trough of the low, and we do expect margins to improve over the course of ’24. Again, we haven’t given that exact percentage, but would expect them to improve from here as some of the inflationary pressures do abate over time. Operator: We will take our next question from Mike Matson with Needham & Company. Please go ahead. Michael Matson: Yes. Thanks. Let’s see here. So I guess just starting with the comments on China and Russia, maybe you can provide a little more detail there. Can you talk about, I guess Russia exposure? How much is that? Is that going to zero because of the latest sanctions? And then China, do you think there’s kind of a longer-term slowdown in your business there? Stephen MacMillan: Yes, Mike, I think Russia for us was really opportunistic. When we developed our strat plan, we went to the 5% to 7%. We were virtually nonexistent in Russia, but we had big plans to expand. So the good part is we’re not losing business. It’s really the lack of the opportunity and the upside. China, frankly, we’re pretty happy that only 2% to 3% of our revenue comes from China right now given all of the issues going on there. So again, I think we’ve been able to weather that storm reasonably well. And again, it’s just not going to be the growth that we would have expected. So I think that the higher way to think about this is when we put out the 5% to 7%, we saw China and Russia becoming clearly accretive to that. They’re now — Russia is effectively flatlined at zero, and China is not the headwind or the tailwind that we had hoped. So what it really means is our core businesses and our core geographies are growing even faster than what we had originally modeled at that time. Michael Matson: Okay. And just in terms of your operating margin, I have to go back pretty far because of the Aesthetics deal, but I think it was like ’20 — fiscal 2016, it was kind of in the 33% to 34% range. Is there any reason in the longer term that you can’t get back to those levels and that decline from the kind of low 30s to the high 20s that you’re at now. Obviously, we have COVID in between, but I mean, is that decline for the kind of non-COVID business really all due to inflation? Or are there other factors? Because the business mix didn’t really look that different back then. Karleen Oberton: Yes. So I’ll tackle this with a couple of points. So one, from earnings growth. If we talk about the 5% to 7% top line, we ground ourselves in growing EPS faster than that and likely in that double-digit, low double-digit range. If we want to ground ourselves in operating margins, we point you to Q2 ’20, which was 31.5%. I think compared — going back to 2016, I think the business is a little more diversified and probably a growing business outside the U.S. compared to 2016. So as we know, OUS has been growing double digits on the top line, but there is kind of diluted from the total margin perspective. And then as we kind of move out of 2030 into ’24, as I talked about, it looks like this back half of ’23 is kind of the low point of the 29%. We would expect continuing improvement into ’24 as higher costs on the semiconductor as well as other higher inflationary pressures such as freight continue to abate over the course of the year. So I think what we try to manage, again, growing EPS low double-digit and still investing in things like R&D and marketing initiatives to grow the top line, not exactly driving to that historical operating margin percentage. Operator: We will take our next question from Jack Meehan with Nephron Research. Please go ahead. Jack Meehan: Thank you. Good afternoon. Stephen MacMillan: Hi, Jack. Jack Meehan: Steve, so the number one question I’ve been getting on Hologic is actually related to Illumina. So I was wondering if you could just share some brief thoughts on your decision to join as Chairman there and just comment on your ongoing commitment to Hologic as Chairman and CEO? Stephen MacMillan: Yes, sure. Let’s be really clear. I’m at Hologic through the end of my useful life in terms of what I’ve worked for, built for. And as a reminder to everybody, I am personally a top 15 shareholder in Hologic. So this is my day job. This is my passion. This is my love. What I have to see is the company five minutes away, that’s troubled that I thought, frankly, I could also help out in a different role, which is as Chairman of the Board. And I’m very proud that I think I can do both. If I didn’t have the great team around me at Hologic wouldn’t be able to. Frankly, over there, it’s going to be about also just getting a great CEO in place. And we’re making a couple of key decisions there, which are probably pretty obvious. And then it’s going to be a normal Chairmanship from there. So this is my love and my passion and frankly, where I’m fully engaged sometimes more than my teams would like. Karleen Oberton: I would add. Jack, that last week, we had all the teams together for our quarterly business reviews and Steve was as engaged as ever. Stephen MacMillan: I want to add… Jack Meehan: I love it. That’s what I want to hear. Sounds good. Okay. And then another question, I think get a lot from investors is just on guidelines as it pertains to co-testing. So it was good to see the strong cytology quarter, but I was just hoping you could share your latest thinking on the USPSTF. If you have a sense for when some update might come on cervical cancer screening and how — just latest thinking on how that may or may not impact the business? Thank you. Stephen MacMillan: Yes, Jack, I think the interesting stuff on the USPSTF guidelines, as they relook at cervical cancer screening, is we don’t have an exact time line. It could be months from now. It could be any time, could be late this year, early next. You’re never quite sure where that plays out. I think the biggest piece, the way I look at all of this is there’s the headline the day any of those guidelines, whether it’s breast cancer or cervical cancer screening guidelines get tweaked. And then there’s the reality of how it plays out in the marketplace with the physicians. And I think just as when USPSTF raised the age of Mammography years ago and said, women should really wait until they’re 50 instead of 40 and you have those kind of shifts, medical practice didn’t change that much. And now when they reversed it and came back to 40 just like that, it’s not going to dramatically change because it never changed that much in the first place. We think that is very true as well in cervical cancer. The Pap test has truly been one of the gold standards, as we’ve said, probably has had more impact on women’s health and changing cervical cancer from one of the number one killers of women to going way down the food chain in terms of that because of how well it’s been — how well it’s performed over time. And so while not necessarily the greatest procedure for somebody to have to have. It has worked out incredibly well over time, and we think it’s going to continue to be strong. So it will be a little headline stuff. We still hope that, frankly, patient groups and the medical community’s opinions will properly be listened to. And then frankly, the guideline shouldn’t change much. But even if they do, I think very little impact to our business over certainly a several year period. Thank you. Operator: We will take our next question from Vijay Kumar with Evercore ISI. Please go ahead. Vijay Kumar: Hi, Steve, thanks for taking my questions. Steve, so maybe my first one on — just so I understand this fiscal ’24 commentary, what you’re saying is the base business, ex-COVID should be 5% to 7%, inclusive of headwinds. Are Russia and China headwinds to fiscal ’24, if they are, could you perhaps give some color on how much of a headwind there are. And when you give that 5% to 7%, should we be perhaps thinking about the bottom half just given some of the macro commentaries you made? Stephen MacMillan: Yes. The 5% to 7% as we related it to Russia and China, which I answered earlier is they’re basically like Russia is just a lack of growth opportunity. So it’s not a headwind — yes, it’s not an headwind. It’s just the lack of what could have been a tailwind in our strat plan. So I think we feel very good about being in that range. We’ll give guidance on our November call. Vijay Kumar: Sorry, is China a headwind, Steve, for next year? Stephen MacMillan: Not additionally to this year, in our minds probably. Vijay Kumar: Understood. Understood. Stephen MacMillan: We feel very good. I think the gist that we keep trying to say here is we feel better and better about the growth of our base businesses in all of our core geographies today. Vijay Kumar: Understood. Karleen, one for you. Gross margin here sequentially came down. You’re talking about inventories flowing through the P&L. So it looks like this could flow through to the first half of next year. Are we — just given the P&L dynamics, is there some cost controls, any offsets to this at the OpEx line item? Or how should we think about margins? Should we be expecting any expansion next year? Karleen Oberton: Yes. So I think as I had — if you go from Q2 to Q3, the gross margin declines primarily lower COVID revenue. So again, we had over $70 million of COVID assay revenue in Q2 and just under $30 million here in Q3. So that’s probably the bigger as well as lower gantry revenue, which our gantries in our Breast Health business, their gross margins are accretive to the corporate average. So that explains the sequential. As I had talked about operating margins, we feel that here in the second half of ’23, this roughly 29% operating margin is probably the low point and as we move through ’24, we should see improvement as we have on revenue growth in the base business, but also some of those headwinds on higher costs will abate over the course of the year. And again, we’ll give guidance on the November call. Operator: We will take our next question from Tim Daley with Wells Fargo. Please go ahead. Timothy Daley: Great, thanks. So Steve, in the prepared remarks, you called out tough comps along with macro factors is the reason for not raising the long-term growth outlook. So just hoping to get a bit more color on this dynamic specifically to breast. I think the guidance gets to around $350 million or so for the fourth quarter. And just curious if that’s like a clean run rate for quarterly revenues to think about? Or is that still impacted by the chips on the high end or maybe backlog work down on, I guess on the upside case. Just curious about how we should kind of think about that moving forward as kind of a clean quarterly number we can grow from? Karleen Oberton: Yes. I would say it’s not an unreasonable number. It’s probably still a little low from historical levels. I think prior to the chip supply headwind, we would, in each quarter do roughly 1,100 to 1,200 gantries a quarter. This is below that level seemed in Q3 and Q4. I think as we look into ’24, I think we’re still having recovery in the breast business as we believe our backlog will be worked through over the course of ’24. Timothy Daley: All right. Helpful. And then just wanted to touch on Mobidiag. So the write-down equated to nearly a quarter of the acquisition price just rough calculations. So can you give us an update on either, I guess, how the European dynamics are going? Or any update on the USA launch time line of Novo [ph]? Thank you. Stephen MacMillan: Yes. I think overall, as you know, we did about six acquisitions in COVID time, feeling really good that certainly five of them are delivering good growth for us right now. Mobi is just a little more work, frankly, to get it to the U.S. market. As we dug in deeper, a little more redesign is required of both the cartridge and the machine and what we got. We still like the technology. But as we dug in, it’s just going to be further out, and that just affected the cash flows, combined with the interest rates and all of that. But we still are very excited about what that will bring. And frankly, the positive is in a weird way, it’s going to hit a little later in our strat plan horizon, and the growth for the next few years looks so good anyway, but it will come in at a really good time for us. Operator: We will take our next question from Tejas Savant with Morgan Stanley. Please go ahead. Tejas Savant: Hey guys. Good evening and thanks for the time. So Steve, Jack stole my question on your side hustles becoming your full-time hustles. And I’m glad to hear you stay at the Hologic. My question is maybe one on M&A. I know you guys sort of mentioned being open to deals of all sizes in your prepared remarks. And I think Karleen called out the tuck-in pipeline also being pretty active here. But any color you can share on the pipeline for those larger needle-moving assets and on a related note, you’ve called out the success you’ve had in Biotheranostics, a bunch over the last few quarters. Could that be a precursor for us seeing you making a bigger push in cancer testing, perhaps not sort of the NGS-based testing that people often think about, but like PCR-based approaches? Stephen MacMillan: Yes, Tejas, I think the way to think about our M&A strategy right now and Karleen and I have been out with some of our largest shareholders over the last month-ish, and I think they’ve all reminded us that as you look at our fundamental growth rate and our margin profile, reminding us that, that alone looks pretty damn good. And it’s hard to find deals that are really going to enhance either our growth rate as it’s accelerated or our margin structure. And so we are being cautious. And I would tell you, I think it’s the beauty of a strong base business, so we are looking in those areas, but we sort of have that luxury right now of time on our side because of the base performance. So more likely to just stay more cautious here, continuing to drive the good deals that we’ve done. Obviously, with the Biotheranostics in the portfolio, it opens up the aperture to look at certain things, but nothing wildly dilutive by any stretch. And I think we like things that already have a little bit of an established revenue base like a Biotheranostics that we can then turbocharge with our operational efficiencies and our sales forces and our marketing in those areas. So I think it will be in those areas. Tejas Savant: Got it. Makes sense. And then a quick follow-up on GYN Surg. Any updates there on the hospital staffing situation just on a quarter-over-quarter basis. And you talked about sort of that low double-digit growth moderating here in fiscal ’24. I mean outside of tough comps, is there anything else to be thinking about? I think, Steve, in the past, you’ve talked about I think it was almost a quarter of that portfolio is now outside of MyoSure and NovaSure. And presumably, that’s growing better than 7% for you guys. So just curious as to any color you can share there. Stephen MacMillan: Yes. I think clearly, we figure there’s probably earlier this year, some catch-up in procedures, this and that. But overall, I think there’s still some of that to come. Hospital staffing is clearly tight. But I think in general, the hospitals are figuring out how to manage that. We’re figuring out how to manage it and help again as, frankly, so many of our products add efficiencies, including things like Fluent. And so we’re really kind of a go-to partner for the hospitals, and I think just feel really good about having both a — now a laparoscopic portfolio in addition to the hysteroscopic. Karleen Oberton: Yes. I would just add on the Surgical business. We’ve really seen probably over the last four or five, six quarters, international turbocharge for the Surgical business, a small base, but really starting to take traction. Operator: We will take our next question from Puneet Souda with Leerink Partners. Please go ahead. Puneet Souda: Steve. Thanks for taking the questions. Stephen MacMillan: Thanks, Puneet. Puneet Souda: Hey, great. Thanks. So first on Panther utilization. It’s talked about quite a bit, and I know you’ve given percentages for customers that are using two tests versus three tests. But wondering what you’re seeing today versus a year ago in terms of customers? Are they — are certain customers that are using it more aggressively versus those that are not? Maybe just help us sort of understand the landscape out there in reference labs versus hospital labs. Where are you seeing some of the more utilization? Because I totally understand some of those percentage numbers that you provided in the past, those are average. But — just trying to get a bit more color on where you stand today because this is more of a cleaner picture for utilization at this point in time past COVID. Stephen MacMillan: It’s pretty broad-based between both our hospital customers, the smaller labs and the big labs. It’s remarkably broad-based and also in terms of the menu and increasingly the geographic footprint that so many of the Panthers we placed during COVID were also international. And so we’re seeing that as well. So it’s hard to fully — it’s not like we can sit there and say, hey, 50% of the additional has come from a few customers or just an area. It’s really remarkably broad-based. Puneet Souda: Okay. Thanks. Good to hear. And if one — if I may ask a bit of a broader question, this is regarding AI, you talked a little bit about it. Just given the some momentum that we’re seeing in MedTech essentially for AI technologies. Just trying to understand how do you expect to utilize AI, where does AI augment Hologic’s product. Maybe just walk us through a bit. Obviously, there’s quite a bit of discussion out there on AI. So I just want to get a sense of how Hologic is looking at that? Stephen MacMillan: Yes. I think the simplest thing is we’ve had a number of — I go back to when we refer to really things as machine learning. When you think about both cytology as well as breast, a lot of it is pattern recognition. And that’s what the technology that underlies some of the computer-rated design programs that we’ve got within our Mammography system, but also our digital cytology that’s now been approved in — basically EC mark or got the mark for the EU. And we’re working to get that cleared by FDA as well in the United States. Again, it’s pattern recognition. And doing the same thing really within the Breast Health space. And I think it’s where our installed base, our knowledge, just the sheer sample size is big. There’s a lot of complexities, clearly in terms of getting them through the agency and owning the data to be able to get some of those. But I think we feel really good about the partnerships that we’ve been able to get and our ability to play strong roles, particularly in those two areas. Karleen Oberton: Yes. I would just add that we’re also, even in our field service organization, using predictive analytics to predict certain part failures that allow us to coordinate with our customers to prevent unscheduled downtime, unscheduled visits, which is great for the customers and creates operational efficiency for us. Stephen MacMillan: Thanks, Puneet. Operator: We will take our next question from Anthony Petrone with the Mizuho Group. Please go ahead. Anthony Petrone: Thanks. And maybe a high-level one, Steve, and then a modeling question for Karleen. Maybe, Steve, you mentioned aspirational top line, 7% to 9%, but you called out macro headwinds to some extent here, both just geographically as well as operational to some of the businesses. If those were not there, is it feasible that the profile is a low double-digit sustainable year, right? The organic profile has been there, excluding COVID. So just maybe thoughts on if we didn’t have some of these headwinds here, how could it have settled out in the next two to three years? And then I’ll have a follow-up for Karleen on the model. Stephen MacMillan: Yes. Anthony, I’d like to correct you. There was no reference at all of an aspirational number. We feel really good about the 5% to 7%. This year, we are delivering double that, is what we said, but we feel great about the 5% to 7% in this environment to be a company and people can count on for that. Anthony Petrone: That’s helpful. And then Karleen, maybe just couple of quick ones on the model. Can you give us an idea of what the Breast Health backlog recapture was in the quarter? And then when we think about earnings growth, do you need lower nonoperational costs to achieve the low double-digit earnings profile? Thanks again. Karleen Oberton: Yes. So we haven’t given specifics on backlog recapture. I think what we have said is that the backlog continues to be high. It’s something that will work through over several quarters to come. I think we’re always looking at operational efficiencies to drive earnings results. As I think about ’24, I think we’ll kind of hit the whole P&L between higher revenue growth, probably some improvement at gross margins and always looking at how do we best manage our operating expenses to deliver that earnings growth. Operator: We will take our next question from Ryan Zimmerman with BTIG. Please go ahead. Ryan Zimmerman: Hey, thanks for squeezing me in on the questions here. I’ll try and keep it as tight as I can. Just a quick point of clarification. If you look at next year’s revenue growth, I think the Street is looking at about 4.1%. And it’s like 3.7% organic. So is it unreasonable to think that we would be below your long-term guidance in capacity. Again, I appreciate what you said about the 5% to 7%, but I just want to make sure the Street is clear that at the low end, 5% to 7% or 5%, excuse me, is the right number relative to kind of where the Street is at today? Stephen MacMillan: Yes. We kind of run our business as opposed to the Street estimates. My hunch is there’s a lot more COVID still in people’s numbers for next year. I think what we feel really good about is the base. Ryan Zimmerman: Okay. All right. I appreciate that, Steve. And then one last one for me. Talked about M&A, we’re mostly focused on diagnostics, but I’m a simple MedTech analyst. You’re doing well in Bolder, you’re doing well in laparoscopic. But help us understand, I mean, with all the shift to robotic surgery, particularly in women’s health, I mean is your aperture beyond, say a laparoscopic tuck-in in that arena? I mean, is it unreasonable to think that there are robotic technologies that could one day make it into Hologic’s portfolio on the GYN Surgical side? Stephen MacMillan: We’re looking at our Surgical business, both within the GYN world, but also things like Bolder have kind of gotten us into thinking about sort of more specialty surgery because it’s getting us into pediatrics in addition to traditional guidance. So I think we’re opening our aperture and to your point is understanding the MedTech world way, I think about our company right now is we’re able to generate a lot of cash flow out of Diagnostics or MedTech and the ability to spend it where it could possibly give the better return as we’ve done with things like Bolder and MedTech. There’ll probably be some other areas in that space that we will be looking at, whether — and robotics is a piece. But frankly, they’ve spent a lot of money chasing robotics right now. That’s also — every once in a while that reminds me a little bit of some of the NIPT spaces or other things. So we’re going to continue to be looking for where the profits can be generated. Operator: We will take our next question from Andrew Cooper with Raymond James. Please go ahead. Andrew Cooper: Hey everybody. Thanks for the questions. I know we’re at the end here. So I’ll try to be quick. Maybe just one on sort of the chip supply and the visibility here. I fully understand you’re not going to guide for ’24 at this point. But when you sit here today on July 31 versus a quarter ago or a couple of quarters ago when you think about how comfortable you are in out quarters. Can you just give us a sense for sort of where you are from that visibility perspective, what you’re hearing from the suppliers and how we should think about maybe the trajectory there and the sustainability of that backlog work down, over the course of the end of this year and next year? Stephen MacMillan: Yes, we’re incredibly comfortable with where we stand right now on the chip supply. So feel really good. Karleen Oberton: Yes, we’ve deepened our business. Andrew Cooper: Is that safe to assume that, that translates to getting the allocations that you are looking for? Stephen MacMillan: Yes. Yes. Andrew Cooper: Okay, thank you. Operator: We’ll take our next question from Andrew Brackmann with William Blair. Stephen MacMillan: Yes. So we’ll take this question and one more to close out the call for today. Andrew Brackmann: Okay. Thanks. I’ll keep it to one. But maybe just going back to Jack’s question around USPSTF for cervical cancer guidelines. Steve, you mentioned Mammography guidelines. But I believe ACS updated their recommendations a few years ago, maybe just in the spirit of giving investors’ confidence around whatever USPSTF said. Can you maybe just sort of talk about what you saw in the market following that decision, what you saw sort of from customers and their utilization patterns? Thanks. Stephen MacMillan: Yes. I think all of these changes create headline — much more headline noise that I know investors look at. I go back to even recently, was it in May when the new Breast Health guidelines came out. And our stock moves like 7% in 20 minutes. At the end of the day, these things have very little impact one way or the other over the short-term and are really much more — the way — I’ve been in health care now for about, 30-plus years, moves happen glacially. And even as any of these guidelines change, they get the headlines, but the reality in practice is very minimal slow changes. Final question. Andrew Brackmann: Thanks. Operator: We’ll take our final question from Liza Garcia with UBS. Please go ahead. Elizabeth Garcia: Thanks so much for squeezing me in guys. Really appreciate it. Stephen MacMillan: It is pleasure. Elizabeth Garcia: Great. Just to kind of quickly touch on [indiscernible] since I know that. I just wanted to make sure I caught Steve comments that we’re working through the backlog through fiscal 2024 and possibly beyond — and just to kind of get some context, if that’s correct, what could be the beyond factors and how to kind of think about that. And then if I could just parlay that into a bigger and broader modeling question since I know that now the 2024, but just to think about the long-term algo maybe and to think about segment mix and margins and how to think about that as we think about our models more broadly? Stephen MacMillan: Yes, I think the big picture question on the backlog is, I think we’ll — as we currently look we’ve got pretty much a years-plus worth of backlog, and we’ll continue to get more orders in the meantime. So that will keep pushing that backlog well out. So that’s the highest level piece. And I’ll hand the harder part of that question over to Karleen. Karleen Oberton: Yes. So I think when we think about the long-term growth rate, we talked about the 5% to 7%, we’ve talked about that all the divisions on a worldwide basis would be in that range and think about Breast Health kind to the lower end of the range, Diagnostics and Surgical to the higher end of the range. And as we talked about earlier, Molecular potentially even above that. So again, we feel good about all the businesses being in that growth range. We continue to see international being a bigger piece of the business growing faster than the U.S. And as I’ve talked about previously, we haven’t given guidance for ’24, but we believe that we’re hitting the low mark of margins here at the back half of ’23, and we’ll see improvements as we work through that backlog and some of the inflationary pressures subside. Elizabeth Garcia: Great. Thanks. Operator: That concludes today’s question-and-answer session. And this now concludes Hologic’s third quarter fiscal 2023 earnings conference call. Have a good evening. Follow Hologic Inc (NASDAQ:HOLX) Follow Hologic Inc (NASDAQ:HOLX) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Futures Drop And Dollar Spikes As Bulls Get Cold Feet S&P futures are are weaker to start the new month with bond yields flat and Bloomberg Dollar Spot Index climbed to session highs, dragging down all Group-of-10 currencies, as the rally that sent the S&P 500 to a 16-month high in July lost momentum after a flurry of companies reported disappointing earnings. Commodities are mixed as China's Caixin PMI-Mfg prints 49.2, down from 50.5 and missing the est. 50.1. As of 7:40am, S&P futures traded down 0.3% to 4,600 as the bizarre last minute spike in the S&P yesterday melted away, while Nasdaq 100 futures traded down 0.4%. Europe's Estoxx 50 drops almost 1% with Asian stocks also lower. The US Dollar was boosted by weak Chinese data as well as the surprise RBA decision to leave rates unchanged. Treasury yields were little changed, while UK and Europe bond markets are similarly listless. Gold and oil fell, while Bitcoin slid nearly 1% and headed for a third straight day of losses. WTI futures fall less than 0.5%. A quick look at seasonals: August/Sept are typically the weakest 2 months of the year, so we may see increasing calls for a pullback, before resuming the squeeze higher. Keep an eye on oil, bond yields, and vol as we await macro data, Jackson Hole, and the Sept Fed meeting. Today’s macro data focus includes ISM-Mfg, JOLTS, Construction Spending, and Regional Fed data. In premarket trading, major technology and internet stocks are edging lower in premarket trading with Advanced Micro Devices, Electronic Arts and Pinterest all set to report after the close. Arista Networks shares rose as much as 18%, after the communications equipment company reported second-quarter results that beat expectations and gave a revenue forecast that is above the consensus analyst estimate. Analysts note that the company’s earnings are boosted by its diversified revenue streams. CVS Health rose as much as 1.5% after the Wall Street Journal reported that the pharmacy chain operator said it would cut about 5,000 jobs to help reduce costs. Here are some other notable premarket movers: Emergent BioSolutions shares soared as much as 12% after the maker of medical countermeasures was awarded a 10-year US government contract valued at up to $704 million. Rambus shares slide 8.2% as Jefferies notes that the semiconductor device company expects headwinds for DDR4 buffer chipset inventory to continue for the rest of the year. ZoomInfo Technologies shares fall as much as 20%, after the infrastructure software company cut its full-year revenue forecast. Analysts note continued weakness in software spending, though they remain optimistic about the company’s long-term prospects. Deutsche Bank downgraded its rating on the stock saying there’s a “persistent lack of visibility.” While futures suggest a weaker open on Wall Street later, the buoyant mood of the past months has prompted a retreat among bears as market returns and economic data continue to challenge expectations. The S&P 500 on Tuesday received its most bullish outlook from Oppenheimer Asset Management, which raised its year-end S&P price target to 4,900 and predicts further strength in stocks as the Federal Reserve nears a pivot and the US economy stays resilient. As BBG notes, with the S&P 500 now less than 5% away from an all-time high, there are signs that investors are taking a pause before a Bank of England interest rates decision on Thursday and US employment figures Friday. The line-up of blockbuster earnings still to come this week includes tech heavyweights Apple and Amazon.com Inc. “When we look forward from here, we feel that the drivers for the rally may become a little bit more mixed,” said Karim Chedid, head of EMEA iShares investment strategy at BlackRock International. “We still don’t feel that the trough in earnings has come yet. Whilst the macro picture has been stronger than expected, there is no doubt that the tightening from central bank policy is starting to come through.” Meanwhile, China's economic weakness reminded markets it isn't going away any time soon: Chinese new home sales plunged by the most in a year last month, underscoring why policymakers need to address faltering demand and a liquidity crunch in the sector. Caixin PMI figures showed factory activity contracted in July, missing economists’ estimates for a small expansion. In Europe, the Stoxx 600 is down 0.5% with auto shares leading declines as BMW dropped more than 6% after warning about higher costs for developing electric cars, while logistics giant DHL Group gave a profit guidance that missed analyst estimates. The results highlight growing concern about the durability of corporate earnings and questions about whether stocks can keep rallying after notching big gains in July. In other individual stock moves, HSBC Holdings Plc provided one of the bright spots in Tuesday’s company results, rising after the bank announced a new share repurchase program and earnings that outpaced estimates. Energy names outperform as BP rallies after raising its dividend despite disappointing profit. Here are the most notable European movers: HSBC gains as much as 3% in London after the banking giant delivered a strong beat on revenue in the second quarter and a buyback near the high end of analyst expectations BP shares rise as much as 2.5%, reversing initial losses, after the energy company’s dividend hike and buyback announcement eclipsed what analysts said was a drab set of results Diageo rises as much as 3.3% as the UK alcoholic beverages group offered reassurance over its key US market, offsetting lackluster yearly sales and operating profits Weir Group gains as much as 6.6%, the steepest advance since March 1, after first-half results beat estimates on most metrics Redcare Pharmacy jumps as much as 13%, the most since January, after the German online pharmacy formerly known as Shop Apotheke presented strong 1H earnings that confirmed the company’s solid market-share gains, analysts say Galapagos NV rises as much as 4.6% after being raised to accumulate at KBC, which says it has conviction in the biotechnology company’s experienced management and point-of-care model for CAR-T cell therapy BMW shares slide as much as 5.9% after the carmaker gave cautious comments on a potential second-half headwind, while also raising guidance for 2023 DHL Group shares fall as much as 4.8% in Frankfurt after the logistics firm’s improved FY23 earnings guidance came short of market expectations, even as the company posted a 2Q beat, Citi writes Daimler Truck falls as much as 3.4% after reporting second-quarter earnings. Morgan Stanley notes a measure of free cash flow missed consensus Nexi shares fall as much as 5.9% after the payment firm reported slowing consumption volume growth across key markets amid concerns that a recession could weigh on consumer spending Man Group shares drop as much as 7.9%, the most in more than 10 months, after the world’s largest publicly traded hedge fund firm reported 2Q results which reflected a lower-margin long-only focus from clients Greggs shares fell as much as 7.9% after the sandwich- and-bakery products retailer kept its 2023 outlook unchanged and posted 1H results that weren’t strong enough to push the rally higher Earlier in the session, Asian stock benchmarks were steady in the first day of August trading, as investors snapped up some bigger tech shares but Chinese equities took a breather after recent gains. The MSCI Asia Pacific Index was little changed after six-straight days of gains. Samsung, Alibaba and TSMC were among the biggest boosts. Korea’s Kospi rose, poised to reach a fresh year-to-date high, and Australian stocks gained ahead of the central bank’s policy decision due later Tuesday. Benchmarks in Indonesia, Malaysia and Singapore fell. Key gauges in Hong Kong and mainland China failed to extend Monday’s gains after their best week in months. Investors await further stimulus measures after the latest Politburo meeting as the world’s second-largest economy continues to struggle. China investors “are still waiting to see some meaningful comeback in high frequency indicators,” Alec Jin, investment director of Asian equities at abrdn, wrote in a note. “We would expect targeted measures that can boost consumer income and demand in sectors like autos, electronics and household products,” as well as more support for the property sector, he added. The MSCI Asia gauge is coming off its best month since January, flirting with its highest close since April 2022. It rose 4.6% in July amid improved sentiment on China, an AI-driven rally in chip stocks and expectations of a soft landing in the US. Japan's Nikkei 225 was underpinned by a weaker currency and with headlines in Japan dominated by earnings releases, while a recent poll by Bloomberg also showed that BoJ watchers don’t expect a further policy shift from the central bank this year with April 2024 now seen as the likely timing for a policy change. Australia's ASX 200 traded positive amid strength in tech and the commodity-related sectors with further upside after the RBA kept rates unchanged. In FX, the Bloomberg dollar index climbed by about 0.3% to a three-week high before the release of US economic data including ISM manufacturing and JOLTS job openings. The Aussie is the weakest of the G-10 currencies after the RBA left rates on hold for a second straight meeting, falling 1.2% versus the greenback. Relief rallies in the Aussie were limited as leveraged funds maintained short positions in expectation of further selling following the RBA decision, traders said. The rate-sensitive three-year government bond yield slumped as investors speculated the central bank may be close to wrapping up its tightening campaign. The yen traded weaker against the dollar, adding to Monday’s decline, amid sluggish demand at a 10-year bond auction. While investors had earlier anticipated that the Bank of Japan is moving toward letting yields rise after a tweak to its yield-curve control policy, it bought bonds on Monday to anchor rates. In rates, treasuries were slightly cheaper from the belly to long end of the curve, unwinding gains seen in Asia session after the RBA left policy rates steady while keeping the door ajar to future hikes. US 10-year yield sit around 3.98%, cheaper on the day; yields across the curve are within one basis point of Monday’s close. 10-year gilts lag Treasuries by around 1bp while bunds trade broadly in line. Bunds and gilts are both in the red with German and UK 10-year yields rising by 1bps and 2bps respectively.  Traders’ focus during the US session will be on activity data including PMI and ISM manufacturing gauges, as well as JOLTS job openings. In commodities, crude futures decline with WTI falling 0.5%. Spot gold drops 0.4% Looking to the day ahead, we have a data heavy day. From the US, we have the July ISM index, the Dallas Fed services activity and the June JOLTS report, as well as total vehicle sales and construction spending. In Europe, we have the Eurozone unemployment rate for June, as well as the Italian July PMI, the new car registrations, budget balance and June unemployment rate. From Germany, we have the July unemployment rate, and finally the Canadian PMI for July. We also have several key earnings releases, including Pfizer, AMD, Caterpillar, Starbucks, Uber, Altria, Marriott, Pioneer Natural Resources, Electronic Arts, Devon Energy and Pinterest. Market Snapshot S&P 500 futures down 0.3% to 4,602.00 MXAP down 0.2% to 170.47 MXAPJ down 0.3% to 539.82 Nikkei up 0.9% to 33,476.58 Topix up 0.6% to 2,337.36 Hang Seng Index down 0.3% to 20,011.12 Shanghai Composite little changed at 3,290.95 Sensex little changed at 66,477.12 Australia S&P/ASX 200 up 0.5% to 7,450.71 Kospi up 1.3% to 2,667.07 STOXX Europe 600 down 0.5% to 469.13 German 10Y yield little changed at 2.51% Euro down 0.2% to $1.0974 Brent Futures down 0.5% to $85.04/bbl Gold spot down 0.5% to $1,955.71 U.S. Dollar Index up 0.30% to 102.17 Top Overnight News Australia’s RBA leaves rates unchanged, signaling further that it is done hiking (markets were mostly looking for unchanged, although economists were more split, with some calling for a 25bp hike). RTRS China’s Caixin manufacturing PMI for Jul came in at 49.2, missing the Street’s 50.1 forecast and falling from 50.5 in June. RTRS Foreign investors are returning to China's stock market en masse, signaling a bullish shift in sentiment after months of skepticism. Overseas funds added a net 49 billion yuan ($6.9 billion) worth of mainland stocks via trading links with Hong Kong in the past five sessions, encouraged by the new pro-growth policies. The buying spree has taken the year-to-date net purchase to a new high of 230 billion yuan. BBG The eurozone unemployment rate has fallen to a record low, indicating that the single currency bloc’s labor market remains healthy despite concerns about weak growth. Eurostat, the EU’s statistical agency, said on Tuesday the June unemployment rate was 6.4 per cent — an all-time low in the eurozone — as it also revised down the rate in the previous two months from 6.5 percent to 6.4 percent. FT Trump’s lead within the GOP primary seems increasingly insurmountable. Trump and Biden are tied at 43% in a new poll looking at a 2024 rematch. NYT Top active fund managers say they are struggling to attract money from large investors who are holding back in the face of volatile markets and cash accounts offering the best yields in years. Institutional investors such as pension funds, endowments, and foundations control billions in capital and are responsible for the majority of allocations to the biggest asset managers. Cash sitting in US institutional money market accounts now totals almost $3.5tn, according to the Investment Company Institute, a sum that has climbed steadily this year even as stock markets gather strength. FT BMW shares slide in Europe despite boosting guidance for 2023 as Q2 auto EBIT margins missed and investors focus on this line from the release (“expects higher expenses for suppliers due to inflation and the supply chain to continue to be a headwind in the second half of the year”). RTRS BP hiked its dividend by 10%, well above guidance, and announced another $1.5 billion buyback. The surprise payout eclipsed a big profit miss and weakness in oil trading. CEO Bernard Looney sees a strong outlook for oil prices and demand growth on top of "huge demand" for green electricity. BBG AMZN aims to double its same-day delivery facilities in the “coming years” as it works to extend its e-commerce advantage, although investors question all this spending amid paltry margins in the retail business. Fortune A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly higher following the positive lead from Wall St where the S&P 500 notched its 5th consecutive monthly gain, while participants also digested disappointing Chinese Caixin Manufacturing PMI data and the  RBA rate decision. ASX 200 traded positive amid strength in tech and the commodity-related sectors with further upside after the RBA kept rates unchanged. Nikkei 225 was underpinned by a weaker currency and with headlines in Japan dominated by earnings releases, while a recent poll by Bloomberg also showed that BoJ watchers don’t expect a further policy shift from the central bank this year with April 2024 now seen as the likely timing for a policy change. Hang Seng and Shanghai Comp managed to shrug off the disappointing Chinese Caixin Manufacturing PMI data which slipped into contraction territory for the first time in 3 months with Hong Kong boosted by tech strength and the mainland kept afloat by further support efforts from China. Top Asian News China's NDRC issued a notice to promote private economy development in China and said it will extend loan support tools for small and micro firms until the end of 2024. RBA maintained its Cash Rate Target unchanged at 4.10% (vs split views between 25bps hike and unchanged) and noted that some further tightening of monetary policy may be required. RBA reiterated that the Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that, while it also reaffirmed a priority to return inflation to target within a reasonable timeframe and expects inflation will be back at 2-3% target range in late 2025. European bourses are in the red, Euro Stoxx 50 -1.0%; as sentiment has deteriorated gradually since the European cash open and was impacted further by the morning's Final PMIs. Sectors are similarly negative, with Autos lagging amid marked losses in BMW despite a guidance update as associated H2 commentary flagged headwinds. Basic Resource names are similarly dented post-Fresnillo. To the upside, Energy is the only sector in the green bolstered by Q2 earnings from BP who announced a buyback and increased their dividend while Banks derive support from HSBC. Stateside, futures are modestly softer and have been drifting in-line with European peers throughout the morning but with magnitudes more contained ahead of key data points; ES -0.3%. Top European News Germany's VDMA says German engineering orders in June -15% Y/Y (domestic -18%; Foreign -14%). German Economy Ministry says the European Commission has made important progress on subsidies for hydrogen power plant talks, but no approval yet. FX A session of firm gains thus far for the Dollar amid the broader risk aversion across the market coupled with continued weakness in the JPY against major peers. Antipodeans remain the marked laggards amid a combination of subdued risk and RBA opting to pause. Traditional havens are also on the back foot against the Dollar but to a lesser extent vs the non-US dollar counterparts. JPY continues to feel headwinds following the BoJ policy decision and subsequent off-schedule bond purchases conducted yesterday. EUR and GBP are subdued against the Dollar with little initial reaction seen to the final release of the S&P Manufacturing PMIs, which underscored increasing risks of recession, although prices have been moving favourably amid sharply deteriorating demand. PBoC set USD/CNY mid-point at 7.1283 vs exp. 7.1495 (prev. 7.1305) Fixed Income EGBs slip while USTs are mixed/tentative with drivers limited overall ahead of a busy PM agenda; EGBs are under bearish pressure despite deteriorating risk sentiment and welcome EZ PMI commentary re. inflation. Bunds at the lower-end of 132.64-133.06 parameters with attention still on Friday's 131.81 low, specific catalysts remain light aside from the referenced PMI commentary. USTs are more mixed with the short-end bid and the long-end soft though magnitudes are relatively minimal and from a yield perspective it is only resulting in very modest curve flattening Commodities WTI and Brent front-month futures are modestly softer intraday as the Dollar remains firm and risk sentiment tilts lower. Spot gold is pressured by the firmer Dollar awaiting the US ISM and JOLTS data, with the yellow metal sandwiched between its 100 and 21 DMAs at USD 1,968.25/oz and USD 1,950.60/oz respectively. Base metals are on the back foot amid the broader risk aversion, stronger Greenback, and the surprise contraction in the Caixin Manufacturing PMI. Geopolitics White House's Kirby said the US is not encouraging attacks inside Russia and that the decision is for Ukraine to make, according to a CNN interview. A drone hit a high-rise building in Moscow and a second drone was downed in Moscow's suburbs, according to agencies quoting emergency services. China's Defence Ministry said it lodged solemn representations to the US side regarding US military arms sales to Taiwan and urges the US to stop all forms of military collusion with Taiwan, according to Reuters. US Event Calendar July Wards Total Vehicle Sales, est. 15.7m, prior 15.7m 09:45: July S&P Global US Manufacturing PM, est. 49.0, prior 49.0 10:00: June JOLTs Job Openings, est. 9.6m, prior 9.82m 10:00: July ISM Manufacturing, est. 46.9, prior 46.0 10:00: June Construction Spending MoM, est. 0.6%, prior 0.9% 10:30: July Dallas Fed Services Activity, prior -8.2 DB's Jim Reid concludes the overnight wrap Welcome to August, the last month of an increasingly wet summer here in the UK. A bright spot yesterday was a tremendous climax to the Ashes where England levelled a barn-storming series 2-2 after 6 weeks of high drama, a diplomatic incident, interventions from both prime ministers, and a series where but for the weather England could have won 3-2 after being 2-0 down. This will mean nothing to 99% of global readers but it was nothing short of a sensational series. Unlike with the Ashes, July ended quietly for markets but the month overall was largely positive for assets across the board. Commodities, and oil, stole the show, as supply cuts spurred upward pressure on prices, but the AI excitement saw both S&P 500 and the NASDAQ extend their rally, securing their fifth and fourth consecutive month of positive returns, respectively. However, fixed income took a hit in July, as central banks continued their hiking cycle and near-term cuts continue to be priced out. All-in-all, we had the strongest month in performance terms since January, with 32 of the 38 non-currency assets in our sample ending July in positive territory. In YTD terms, 36 out of 38 non-currency assets are now in the green. See the full review in your inboxes shortly. Turning to yesterday, it was a relatively quiet day in markets with the main event the Federal Reserve’s senior loan officers' opinion survey (SLOOS) late in the US session. This continues to be one of the few data points to argue against a soft-landing narrative. The share of banks reporting tighter credit standards for commercial & industrial loans increased (from +46 to +51). The four times since the start of the SLOOS in 1990 (as we know it today) that have seen such tightening have all been associated with recessions. The decline in demand for C&I loans eased a touch (from -56 to -52) but remains very negative. Commercial real estate (CRE) remained a focal point of the tightening in credit conditions, as “banks reported tighter standards and weaker demand for all CRE loan categories”. There were some more encouraging details on the residential side, as the slowdown in demand for mortgages was the least severe since H1 2022. But in all, while activity and inflation data have been more encouraging of late, it would take an unusual decoupling of the US economy from the bank credit cycle to avoid a recession. Clearly the market is expecting such a "this time is different" narrative. Standby for the June US JOLTS data and ISM today for the next data instalment. In markets, the SLOOS survey hardly moved the needle and the positive mood from Friday continued, albeit in a subdued session. The S&P 500 gained a modest +0.15% and 10yr US Treasury yields inched up by +0.9bps despite dovish commentary from the Chicago Fed’s Goolsbee. A known dove, Goolsbee emphasised that the most recent inflation prints were “fabulous news” and that the US was now on what he called the “golden path”. However, he was careful to note that the Fed still needed to “play by ear” and did not commit to a view on the September meeting, with the potential for cuts only arising when inflation recedes. There was little change to market expectations following Goolsbee’s interview, with the probability of a Fed hike in September unchanged at 19%. An 18% chance of a further 25bps hike is priced in for November. Overall, the market is anticipating just over a third of another hike this Fed hiking cycle, and 115bps of rate cuts in total by December 2024. Across the Atlantic, following the German and French CPI prints on Friday, eyes were on the release of the Euro area flash CPI data for July, with headline HICP as expected at 5.3%, easing from 5.5% in June. However, core inflation surprised to the upside at 5.5% (vs 5.4% expected) rising above the headline result for the first time since the start of 2021. Will it be enough to justify a pause on September 14th? There is still a fair amount of data before then but only one inflation print. Within the same data package was the euro area economic growth for Q2, which overshot expectations to hit +0.3% quarter-on-quarter (vs +0.2% expected). However, markets did not lend much credence to the beat. When digging into the details, it’s apparent Ireland (+3.3% quarter-on-quarter) created a sizeable upward distortion, while French numbers (+0.5% quarter-on-quarter, expectations were for +0.1%) were also distorted, by the delivery of a cruise ship. In contrast, Germany recorded no growth (0% quarter-on-quarter), and Italy a contraction (-0.3% quarter-on-quarter) With markets taking on board these prints, European overnight index swaps are now pricing 61% chance of an additional 25bps hike by the end of 2024, down from nearly 90% prior to last Thursday’s ECB meeting. Off the back of this, German fixed income fluctuated over the day, with the 10yr struggling for direction before eventually closing down -0.2bps, while the 2yr was down -1.3bp. US equities continued their rally on Monday, albeit at a slower pace, with the S&P up +0.15% after a late rally, securing its fifth consecutive month of advances (+3.11% in price terms in July), the longest streak since August 2021. At the sectoral level, the energy sector outperformed on the day, up +2.00%, as WTI and Brent Crude rounded up their third consecutive day of gains, climbing +1.51% and +0.67%, respectively. On the oil side, the market will be watching whether Saudi Arabia announces an extension of its output cut in the coming days. Real estate (+0.70%) and financials (+0.44%) equity sectors followed energy’s lead. The NASDAQ also traded modestly up by +0.21%, whilst the FANG+ index of megacap stocks outperformed with a +0.43% gain. Price action in European equities also saw the same modest risk-on sentiment, as the STOXX 600 climbed +0.12%. The consumer staples sector particularly struggled on Monday after beverage firm Heineken (-7.97%) pared back its full-year guidance, whilst energy outperformed, climbing +1.32%. As we go to print, the Reserve Bank of Australia (RBA) has just kept the official interest rate unchanged at 4.1% (the highest level since 2012), thus extending its pause for the second consecutive month to assess if further rate hikes are needed to tame inflation. Most economists expected a hike but it was a close call. 2yr yields are around -8bps lower after the decision. Asian equity markets are mostly trading higher this morning. Across the region, The KOSPI (+1.22%) is leading gains with the Nikkei (+0.74%) and the Hang Seng (+0.23%) also trading in the green. However, mainland Chinese stocks are mixed with the CSI (-0.12%) losing ground and the Shanghai Composite (+0.10%) eking out minor gains. Meanwhile, S&P 500 (+0.08%) and NASDAQ 100 (+0.09%) futures are seeing marginal gains. Early morning data showed that China’s private factory activity returned to contraction for the first time since April as the Caixin manufacturing PMI came in at 49.2 in July (v/s 50.5 in June) in contrast to market expectations of 50.1. The data comes a day after the official factory activity remained in negative territory for the fourth straight month. Elsewhere, Japan’s jobless rate unexpectedly dropped to 2.5% in June from 2.6% a month earlier amid the ongoing COVID-19 recovery. Meanwhile, the job availability ratio, fell 0.01 point from May to 1.30 (v/s 1.32 expected). In FX, the Japanese yen fell to a fresh low of 142.80 against the dollar after the Bank of Japan (BOJ) yesterday conducted an unscheduled buying operation of JGBs to cap the surge in government bond yields after the central bank tweaked its YCC policy on Friday. A 10yr auction this morning was soft but yields are fairly stable overnight. We had an update in the geopolitics arena on Monday, with Bloomberg reporting that Ukrainian President Zelensky is likely to head to the UN General Assembly in New York come September. It is anticipated that he intends to make the case for Ukraine’s “peace formula”, a blueprint for ending the conflict. Ukraine’s peace plan may also get discussed at a gathering in Saudi Arabia next weekend, with the planned meeting first reported by the Wall Street Journal on Saturday. While Russia’s withdrawal from the Black Sea grain deal, and accompanying escalation, gathered attention in July, diplomatic efforts could become an increasing topic in the coming weeks. Finally on the data side, the MNI Chicago PMI for July slipped below expectations at 42.8 (vs 43.5 expected). This was an increase from June (41.5), but still speaks to continued contraction in factory sector activity. The Dallas Fed Manufacturing Activity surprised modestly to the upside at -20.0 (vs -22.5 expected), and the six month ahead new orders index ticked slightly higher. Now to the day ahead, we have a data heavy day. From the US, we have the July ISM index, the Dallas Fed services activity and the June JOLTS report, as well as total vehicle sales and construction spending. In Europe, we have the Eurozone unemployment rate for June, as well as the Italian July PMI, the new car registrations, budget balance and June unemployment rate. From Germany, we have the July unemployment rate, and finally the Canadian PMI for July. We also have several key earnings releases, including Pfizer, AMD, Caterpillar, Starbucks, Uber, Altria, Marriott, Pioneer Natural Resources, Electronic Arts, Devon Energy and Pinterest. Tyler Durden Tue, 08/01/2023 - 08:15.....»»

IDEX Corporation (NYSE:IEX) Q2 2023 Earnings Call Transcript July 27, 2023 Operator: Greetings and welcome to the IDEX Corporation Earnings Conference Call Second Quarter 2023. At this time, all participants are in a listen-only mode. A brief question-and-answers session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It […] IDEX Corporation (NYSE:IEX) Q2 2023 Earnings Call Transcript July 27, 2023 Operator: Greetings and welcome to the IDEX Corporation Earnings Conference Call Second Quarter 2023. At this time, all participants are in a listen-only mode. A brief question-and-answers session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Lausas, Vice-President and Chief Accounting Officer. Thank you. You may begin. Allison Lausas: Good morning, everyone. This is Allison Lausas, Vice-President and Chief Accounting Officer for IDEX Corporation. Thank you for joining us for our discussion of the IDEX second-quarter 2023 financial highlights. Last night, we issued a press release outlining our company’s financial and operating performance for the three months ending June 30, 2023. The press release, along with the presentation slides to be used during today’s webcast can be accessed on our company website at idexcorp.com. Joining me today are Eric Ashleman, our Chief Executive Officer and President; and Bill Grogan, our Chief Financial Officer. Today, we will begin with Eric providing an overview of the state of IDEX’s business. Then Bill will discuss second-quarter financial results, an update on segment performance in the markets they serve, and our outlook for the third-quarter and full-year 2023. Lastly, Eric will close the call with his final remarks. Following our prepared remarks we will open the call for your questions. If you should need to exit the call for any reason, you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll-free number 877-660-6853 and entering conference ID number 13734463 or simply log on to our company’s homepage for the webcast replay. Before we begin, a brief reminder, this call may contain certain forward-looking statements that are subject to the Safe Harbor language in last night’s press release and in IDEX’s filings with the Securities and Exchange Commission. With that, I will now turn this call over to our CEO and President, Eric Ashleman. Eric Ashleman: Thank you, Allison and good morning, everyone. I’m on Slide 6. IDEX delivered record sales and adjusted earnings per share in the second-quarter along with strong free-cash flow. Our Fluid and Metering and Fire and Safety diversified products businesses delivered exceptional performance on strong market fundamentals, both posting strong organic growth and profitability, with FMT delivering an all-time high EBITDA margin. Our Health and Science Technologies segment continue to face challenges impacted by inventory destocking in our analytical instrumentation, life sciences, biopharma and semiconductor markets. Our teams within the segment drove double-digit organic growth over the last two years, admirably executing for customers and the business in very difficult conditions. Now, on the backside of the post-pandemic recovery, our OEM partners are aggressively reducing higher inventory levels, beginning with those suppliers that have demonstrated the quickest returns to pre-pandemic lead times. Our teams are appropriately balanced as they execute targeted cost reductions to mitigate a portion of these volume declines, drive strong cash-flow overall, and continue to innovate for our customers. During our last earnings call, our revised outlook for the year assumed our industrial businesses would slow moderately in the second-half, while our HST segment would experience a modest rebound. While our view on the industrial markets has not changed, we are no longer projecting recovery in HST volumes in the second-half of the year. Our outlook is based on revised forecasts from our key customers who are reevaluating their end-market demand alongside their current inventory levels. They’re considering many factors overall, including supply-chain improvements, lower-than-expected growth in China, and overall macro pressures within their market verticals. This is a complex and rapidly evolving context, which played out for us in Q2 with a 27% year-over-year organic drop in HST orders. This moderating demand profile, net of our incremental cost containment actions drives an additional $0.45 of EPS pressure at the midpoint versus our previous guide. With that, as we noted in our press release, we are revising our full-year 2023 adjusted EPS guidance to $7.90 to $8 per share. Bill will discuss the specifics in greater detail during our segment and guidance updates. In the second-quarter, we also closed on the Iridian Spectral Technologies deal we announced earlier this year, adding another market leader in custom optical filter solutions serving the space, life science and telecommunications markets. We continue to focus on driving strong operational performance regardless of business environment, delivering and innovating for our customers. We’re driving speed and agility within our businesses taking out inventory and driving world-class lead times, positioning us best for growth cycles to come. We remain committed to managing through the short-term while not losing focus on critical investments in the development of our people, in capital deployment and in our differentiated technologies to enable our long-term growth path and deliver above market performance over the cycle. With that, I will turn it over to Bill to discuss our financial results. William Grogan: Thanks, Eric. Moving on to our second-quarter consolidated financial results on slide eight. All comparisons are against the second-quarter of 2022, unless otherwise stated. Orders of $766 million were down 9% overall, and down 13% organically, mainly driven by a 27% organic decrease in HST, due to timing of project orders for next-gen sequencing equipment, as well as OEM pressure across the life sciences, analytical, instrumentation, pharma and semiconductor markets. Record sales of $846 million were up 6% overall and up 3% organically. We experienced 10% organic growth within FMT, 8% organic growth within FSD and 6% organic decrease in HST. Gross margin of 44.7% decreased by 10 basis points compared with last year. This was driven by lower-volume leverage in HST, the dilutive impact of acquisitions and unfavorable mix. Partially offset by strong price-cost and favorable operational productivity across the segments. Adjusted EBITDA margin was 28.4%, up 90 basis points. I will discuss the drivers of adjusted EBITDA on the next slide. Our second-quarter effective tax rate was 22.4% was comparable with our prior year effective tax rate of 22.1%. Net income was $139 million, which resulted in an EPS of $1.82. Adjusted net income was $165 million with an adjusted EPS of $2.18, which was up $0.16 or 8%. Finally, cash from operations of $141 million was up 26%, primarily due to lower investments in working capital versus last year. Free cash flow for the quarter included higher CapEx and was $120 million, up 24% versus last year, coming in at 72% of adjusted net income. We drove over $20 million of inventory out of the business in the quarter through our targeted reduction efforts. And we saw inventory returns improve versus last quarter. Moving on to Slide 9, which details the drivers of our second quarter adjusted EBITDA. Adjusted EBITDA increased by $22 million compared to the second quarter of 2022. Our 3% organic growth included over 4% of price, placing volumes negative for the quarter. This lower volume unfavorably impacted adjusted EBITDA by $9 million flowing through at our prior year adjusted gross margin rate. Price cost was accretive to margins, and we drove operational productivity that offset employee related inflation. The mix was unfavorable by $3 million, mainly centered in HST due to continued volume declines in our analytical instrumentation and life science components. Resource and discretionary spending was approximately flat versus last year. We have executed tight cost controls given our volume pressure, and we continue to identify reduction opportunities for the balance of the year. Reductions and variable compensation expense based on our updated outlook contributed $5 million of benefit in the quarter. These results yielded a 60% organic flow-through. Muon and KZValve acquisitions, net of the Knight divestiture and FX contributed an additional $9 million of adjusted EBITDA. Inclusive of acquisitions, divestitures and FX, we delivered 43% flow-through. Excluding the impact of variable compensation, flow-through is about 35%. With that, I’ll provide a deeper look at our segment performance. In our fluid metering technology segment, we experienced strong sales performance with organic growth of 10%. But orders did contract by 4% organically, mainly driven by the slowing industrial landscape. Adjusted EBITDA margin expanded by 340 basis points versus the second quarter of last year, driven by strong price cost performance and volume leverage. We saw our industrial day rate decline early in the second quarter remained steady at that lower level. Customers are taking a cautious view of the second half as they process a variety of economic factors that influence their demand. Our water business performed well. The North American market continues to be positive with extreme weather, necessary technology and infrastructure upgrades and improved funding, all fueling growth. Our energy markets remain mixed. Improved chassis availability is driving strength in our mobile applications and the teams continue to work down past due backlog, but lower oil prices look to slow the pace of investment in the second half of the year. In the chemical market, we saw positive results across the US, Europe and Asia, with battery markets providing additional opportunities for growth. The agricultural demand landscape remains mixed. Farm fundamentals are positive overall, and our OEM business remains strong. However, distributor inventory levels remain high, and we have not seen a material bleed down as we have progressed through the planting season. Moving to the Health & Science Technologies segment. Organic orders contracted 27% in the quarter, driven by analytical instrumentation, life science and biopharma customers’ inventory destocking, timing of next-gen sequencing orders, soft semiconductor and slowing industrial demand. Sales were down 6% organically and adjusted EBITDA margins contracted by 420 basis points driven by unfavorable volume leverage and mix as well as higher employee-related costs, partially offset by strong price cost performance. As Eric noted, our Life Science and Analytical Instrumentation businesses are being impacted by customers’ inventory destocking and reduced demand. This was driven by a combination of improved supply chain conditions, macroeconomic factors and lower-than-expected China demand. We expect this pressure to remain throughout the balance of the year. The semiconductor market continues to experience softness resulting from memory oversupply, as well as customers feeling the impact of the US export controls. We have exposure to multiple parts of the semiconductor value chain and expect demand will stabilize in the third quarter with recovery in the fourth quarter. Our Material Processing Technology business continues to experience softness across pharma, biopharma and nutrition markets, driven by tighter capital availability and customer hesitancy due to recession concerns. We are seeing some strength in aftermarket and positive impact from our battery market opportunities and we see some signs of improved quotation activity for these early days. Industrial markets and HST slowed in the quarter in line with FMT results. Finally, turning to our Fire & Safety Diversified Products segment. Organic orders grew by 2% versus last year, mainly driven by favorable fire and safety, and dispensing results. Organic sales growth was strong at 8% with double-digit growth in both Fire & Rescue and BAND-IT. Adjusted EBITDA margins expanded by 300 basis points versus last year, largely driven by strong price cost performance, operational productivity, favorable volume leverage, and positive mix. The paint market remains mixed with positive North American results, offset by delays of Europe and Asia customer investments. Within our fire business, we continue to gain share with North America mid-tier and China OEMs through our integrated system strategy. Underlying truck demand remains positive and OEMs continue to improve their output. Rescue markets are stable overall with some distributors burning off excess inventory being balanced by growth in our E3 products. BAND-IT results remain positive. We continue to gain share in an otherwise flat automotive market, which is partially offset by slowing energy and industrial markets. With that, I’ll provide an update for our outlook for the third quarter and the full year 2023. I’m on Slide 11. In the third quarter, we are projecting GAAP EPS to range from $1.60 to $1.65 and adjusted EPS to range from $1.84 to $1.89. Organic revenue is expected to decline 7% to 8%, and adjusted EBITDA margins are estimated to be approximately 27%. We project sequential volume declines across HST and FMT with relatively flat FSD sales. On a year-over-year basis, we expect negative mid-teen organic sales decline in HST, negative low to mid-single-digit declines in FMT and low single-digit growth in FSD. Turning to the full year. As Eric mentioned, we have reduced our full year revenue guidance in response to our softening HST second half outlook. We now expect organic revenue declines of 1% to 2%. This implies high single-digit revenue contraction in HST with low to mid-single-digit growth in FMT and FSD. At the midpoint, we have reduced our EPS guidance by $0.45 with approximately $0.60 related to lower volume and the associated leverage and unfavorable mix. We offset $0.15 of this pressure with additional cost containment actions related to targeted restructuring and lower resource investment, and variable compensation along with discretionary spend. In summary, we estimate full year organic revenue contraction of 1% to 2%, GAAP EPS of $6.80 to $6.90 and adjusted EPS of $7.90 to $8. Adjusted EBITDA margin will be approximately 27%. Capital expenditures are anticipated to be about $70 million and free cash flow is expected to be 100-plus percent of adjusted net income. With that, I’ll turn it back over to Eric for his closing remarks. Eric Ashleman: Thanks, Bill. I’m on Slide 12. As we’ve said in the past, our IDEX leadership will not allow short-term economic fluctuations to alter our foundational objectives, delivering strong execution for our customers, building great global teams and deploying our capital with discipline. We’ve always invested in our best growth opportunities across our well-positioned diverse franchises. Over the last 10 years, we leveraged 80/20 to optimize business performance and fine-tune our portfolio towards faster-growing application sets. We’re now adding power and next level potential to our best advantage businesses and platforms through thoughtful and aggressive capital deployment. Our Muon business, acquired last year, supports the most difficult applications within high-quality semicon, just like our businesses in Sealing Solutions and Optical Technologies. Those optics businesses also play a critical role within space broadband markets, now complemented by our most recent acquisition of Iridian Spectral Technologies. Our acquisition of KZValve opens the door for our Banjo franchise to play even deeper within fluidic handling for precision agriculture solutions. Our Nexsight business brings more software intelligence and channel assets into the water platform. Airtech opens doors within alternate energy gensets. ABEL Pumps helps customers mine deeper to find the minerals required to power the e-mobility revolution. The reality is that, IDEX products are everywhere playing close to the core of the world’s most advanced technologies. Our components orientation allows for maximum tunability and flexibility to pivot resources to the fastest-growing mega trends. None of this is possible without talented people and teams who thrive in an outstanding entrepreneurial culture. This aspect is a source of competitive advantage for IDEX. We knew this was going to be a year of transition and dynamic recalibration with a course that would be hard to predict. We’re managing the near term urgently and appropriately, but with an enthusiasm that recognizes the potential for great things ahead. With that, I’d like to turn it over to the operator for your questions. Q&A Session Follow Financial Security Assurance Inc (NYSE:IEX) Follow Financial Security Assurance Inc (NYSE:IEX) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. We’ll now conduct a question-and-answer session. [Operator Instructions] Our first question comes from Mike Halloran with Robert W. Baird. Please proceed. Michael Halloran: Hi, good morning, everyone. Eric Ashleman: Hi, Mike. Michael Halloran: So, a couple of questions. First, let’s talk about the — obviously, the biggest piece in the quarter, the analytical instrumentation, life science, biopharma, et cetera, pressure points. And not overly surprising given what your customers are saying publicly as well. Maybe talk about a couple of things here, how you look at this bottoming curve? When you think we can get back to maybe a little bit more normalized environment in the context of some of the funding, the oversupply, over investment, et cetera? I know you don’t feel any differently about the long-term growth curve, but would love to get a sense for internally how you guys are thinking about the recovery curve? Eric Ashleman: Yes. Well, thanks for that. So, I think if we step-back and kind of think about this traversing over the course of the year. I go back to kind of the end of Q4, that’s where we went some virtually unbounded demand essentially only capacity and capability, entering the mix is a constraint. To those first signs that, okay, we’re going to have to tune this thing and get it to something more sustainable long-term, more normal. So we saw that play-out initially as a lot of focus on inventory, just too much inventory all over the place. I think over-time and here especially in the second-quarter, we saw a view of — as people start to attack that with analytics and we got a lot closer to our customers. You could see kind of the depth of it; where it was accumulated, how much it was — how long it was going to take to burn that off, that became kind of a secondary component for us in Q2. And then I think — I think the piece that’s really played out and we saw a lot of this calibration in the second-quarter was another assessment of end-markets and where they really are on the customer’s part. So, you kind of had markets clicking along kind of at the top-end of high-single-digits, I think in the pandemic, kind of moved back-down to an assumption that they would be more normal, I’d say, more mid-single digits. And I think closer now to — in the near-term at least, balance of the year, in that low single digits, with those factors that I talked about in the open remarks. And I think probably maybe strength of China being the one that was the most pronounced and started to really pop out of the page for — and the conversations that we had in Q2. So we sort of backed-up, took a look at those forecast, that situation, and as you can see here, essentially, cleared the deck for the rest of the year. I think we’ve bottomed-out from an orders perspective. We’ve seen kind of the levels that we’re at now hold here through July. Even with all the analytics, today we have an inventory, you can see the two kind of working together. So, then I think that all of the visibility shifts to probably the real spirit of your question, which is, when does this start to get back to something that’s more traditional in terms of growth rates. For us, I think, honestly, we see that past — certainly, past the six months that are ahead of us, somewhere probably out in 2024, obviously the comparatives would get a lot easier. But I think we’re still going to all have to watch. We’re going to have to watch and see what’s the long-term call on China. Is this a trough of a cycle there and there is ultimately an uptick? We’ll be listening for that intelligence as well. The funding environment, how are people leaning into kind of approving projects and outfitting plants and things that we see in the CapEx intensive sides of our business, probably the semicon piece, that I feel the best about. I mean, that’s tracked by everybody and we can kind of see — everybody pointing to better days ahead starting in kind of — for us, probably beginning of Q4 and certainly leading into the year. So I think the arrow up in 2024, probably still with some variable rates coming out of it and a lot more assessments that we’ve got to make as we go through a period that we think now it’s been derisked and sort of laid out there in a way that we can all get comfortable with. Michael Halloran: Great. No, that’s super helpful. And maybe the exact same conversation on the short-cycle industrial pieces, the weakening side of things. Obviously, Bill, in the prepared remarks gave a lot of context on where some of that softening is. I just would like to understand how you think that bottoms out and how that recovery curve plays out in the context of — clearly a lot of moving pieces out there? Eric Ashleman: Yes. And I want to emphasize that, that side of the businesses it’s kind of run its course exactly the way we thought it would. So you’ve seen here, order rates declining, that’s the normalization of backlog. I want to make it clear to everybody that you all recognize how close to normal we actually are now. So our backlog, when you net out sort of the compounded price, the aggressive price that’s happened over the last couple of years and compare it to sort of pre-pandemic levels. We’re basically pretty close. We’re a little higher-than-normal, but we’ll get there soon, certainly in the back-half of the year. So that’s on the industrial side of the business. Our quarterly coverage that we have, if you’re familiar with us, we typically talk about half the quarter covered, and the other half we have to go find. We’re there now. And so, really now we are able to see into these markets and understand and think a lot more about the future than the past. And that’s why as we kind of got — re-examined the list of markets that don’t went through. And you’re seeing, I think in many ways kind of an absence of catalysts unless it’s really, really tied to identifiable mega trend with a bunch of funding sources, like the water space for us. You’re seeing kind of that same story of, hey, hesitancy. I wonder where things are going. A little reticence to go ask for big funding of large capital projects. So, I think we’re well-positioned for what inevitably at some point will start to move-up, and I do believe that next cycle is going to be a good one. But I think here in the near-term it’s still going to be kind of a story of watching the rest of the world catch-up and kind of get to the same point of calibration that we are. And then, I think it’s going to be a much bigger, broader kind of macroeconomic conversation as we head into 2024, of which catalysts will be out there. The good news from an IDEX perspective is, I know you know, Mike, we do really well on the entry point, once we kind of hit this point and are ready to go, short lead times, rapid recovery out there at the tip of the spear with innovation. So, that’s kind of my take on where things are now with an emphasis on how close to normal the company is actually positioned. Michael Halloran: That’s great. If I could just squeeze one more in. You mentioned that, confident in the cycle, you added Slide 12, where you’re talking about how well you’re positioned for growth. Could you just give some context of what you think that growth algorithm looks like for you? What are we talking about in terms of what the sustainable organic growth profile looks, or the relative outperformance you can get versus whatever the markets are doing, maybe put that in context on a longer horizon for us? Eric Ashleman: Yes. I think the examples I cited there, particularly now that they’ve been augmented with some really, really strong capital deployment. It gets us closer to that 300% outperformance that we’ve been shooting for in terms of potential of delivery. So if, let’s say, we enter a world that has kind of a 2% nominal floor, we would be expecting to drive with combination of solid price capture, innovation, and the assets that we have, something closer to that 5% level. And then, continuing to deploy capital on top of that, which then ultimately if you kind of run it through the algorithm of contribution margins and the compounding nature of what we have as a company, that sets up the double-digits earning growth that I think everybody kind of expects and is looking-forward to from an IDEX. Michael Halloran: Thanks. Really appreciate it, Eric. Eric Ashleman: Thank you. Operator: Our next question comes from Deane Dray with RBC Capital Markets, please proceed. Deane Dray: Thank you. Good morning, everyone. Eric Ashleman: Good morning, Deane. Deane Dray: I want to follow-up on some of the commentaries, both on the HST and industrial side. And on HST, we agree, this has been well vetted in terms of the public company analytical instrument, companies discuss, saying the destocking, and we’re getting the sense that the bottoming is coming, but just share with us, you’re one-step removed as a supplier to these OE’s. So what is your level of visibility and how has that changed? And what has happened with lead times now that you’ve had — much of this destocking happening? Eric Ashleman: Yes. Well, you’re absolutely right. I mean, it’s important that people understand that the typical IDEX solution here is a component, which is going into some system or device that thins out there, it goes out into the market. And then there’s a whole bunch of other revenue streams that come with it, service and consumables and things — we don’t participate there. And so, we’re talking primarily with people in factories and supplying and purchasing change, obviously engineering on the innovation side, but typically not the first-person that they’re going to talk to you on a commercial conversation about kind of where they’re seeing. So that’s always been a little harder for us. It’s a conversation to have. And so, you can kind of think of the way this has played out as we have kind of crawled up from the factory floor into front and center commercial conversations, mainly because of our criticality. We’re in a place — we get there where others probably don’t, because of the essence of what we’re making and what it does for the end device. So, I will absolutely tell you that one of the benefits of what we’ve come through here is we have a lot deeper relationships, we’re in different conversations than we’ve been able to be into, and our understanding of kind of inventory positions and philosophy, it’s better now than it’s ever been before, because it has to be. Your second question then was related to lead times. I mean, we are in really, really in good shape and that in some ways is why you’re seeing and have seen kind of the rapid degradation of order rates. When — we did the same thing. We’re thinking about taking inventory out of the system, we essentially do 80/20. You lineup dollars of supply and your secondary factor is always assurance supply, OTD and capability. When those two things come together, you essentially hammer the orderbook. So in many ways we’ve seen that play out probably the most aggressive, given who we are and what we do. And it’s an indication of where we are from a lead-time. Our ultimate backlog position for the company, quarterly coverage of order rates is also a validation of where we are, because it’s right back to very, very typical levels for us. Deane Dray: All right. That’s really helpful. And just to flip over on the industrial side, what we’re trying to do is connect the dots here about your commentary about slowing industrial orders and slowing industrial landscape and I’m trying to parse out how much of this is just a result of the normalizing supply-chain and release of buffer inventories and shortening lead times, which in itself is kind of a normalized process. But it doesn’t sound like there’s anything disturbing on the end-market, the sell-through side of the end-market demand, but I just wanted to get clarification on that. So how much of this is strictly from a normalizing supply-chain on the industrial side versus any deterioration on the end-market demand? Eric Ashleman: Yes. I think you’re thinking about it right. I mean the predominant driver here is the normalization of the cycle. Absolutely. It’s just — I said this — I don’t know, in these calls or the last couple of times that eventually you run into physics. There’s no need to keep all this backlog around unless you’re going to alter permanently the capability of the system, and nobody wants to do that. So a lot of this is playing out. If you look at our last quarter here, particularly on the industrial side, we posted double-digit organic growth, it’s not necessarily indicative of the environment that’s out there. That’s us eating the last of the backlog in the past-due and getting our own lead times where we want to get to. As we are doing that, it’s telegraphed through to the customer who is then dropping their order rates exactly the way you’d expect that they would. Underneath all of that, this allows us to, as I said before, really see, okay, what is this environment that’s out in front of us, both today and tomorrow. And you’re right. I don’t see a lot of things in there that are overly negative. In fact, I see kind of a lot of the same behavior that we saw before this. In many ways, still some continued reluctance to make big capital purchase bets and all of those things. But to be honest, those really weren’t here over the last couple of years either. So there’s not a lot of negative noise that’s behind that recalibration curve that’s happening there. I would also say, though, there isn’t a lot of tons of super positive things there as well, where people are saying, “Well, now that this is behind us, we’re ready to go on Project A, B and C.” But I don’t know that, that’s actually different from where we’ve been. So I don’t know. I hope that’s helpful, but I think your opening statement is pretty close here that the major driver is a cycle playing out and that fundamentally underneath it, there’s not a ton of noise in terms of what’s going on market to market. Deane Dray: Alright. Eric, that’s exactly what we’re looking for, and appreciate all the color. Thank you. Eric Ashleman: Thanks Deane. Operator: Our next question comes from Alison Poliniak with Wells Fargo. Allison Poliniak: Hey, good morning. Just on the HST, thanks for the color on how to think of organic decline in Q3. On the EBITDA margin, obviously down year-over-year this quarter, does that take another step down? Or are you stemming through the decrementals now, just given the aggressive approach to cost, just any color on how we should think of that just given the sharp decline in organic next quarter? William Grogan: Yes, Allison, it’s Bill. I think in the third quarter, you’ll see a little bit of additional pressure as volume steps down in the third quarter. And we bottomed out in the orders side here in Q2. Sales will bottom out in Q3. I think margins hit its low point, and we’ll start to build back up Obviously, the additional cost actions we have taken have helped mitigate that. And then the volume leverage we’ll get as we start to build back in the fourth quarter. We’ll start to set our journey back to a 29%, 30% EBITDA-type margin as we progress through the recovery. Allison Poliniak: And then just in terms of the dislocation here in the analytical instrumentation market, is that driving any incremental sort of M&A opportunities, just given the unusual nature of it or kind of steady as it’s been? Just any color there. William Grogan: Yes. No, not really. I mean, I haven’t seen anything there. I mean the backdrop matters. It might prevent some folks from putting something out there because they want to let things clear and not be quite as noisy or something like that in the short term, but nothing that’s really topped and said because the cycle is playing out a certain way, the funnel is now composed much different than it has been for us. Allison Poliniak: Got it. And then just one last quick one. The inventory drawdown on your side. Bill, did you say you guys were largely done with that? Or is there still more to go in the second half year? William Grogan: No, there’s still more to go. I think from absolute dollars, I think we’ll continue to bleed. Inventory turns, there will be a little bit pressure just with the decreased volumes within HST, but the teams continue to track, and there’s probably another $20 million to $30 million of inventory reduction here in the back half. Allison Poliniak: Perfect. Thank you. William Grogan: Thanks a lot. Operator: Our next question comes from Vlad Bystricky with Citigroup. Vlad Bystricky: Good morning, team. Thanks for taking the call. So I just wanted to ask within FSDP, a couple of things there. In terms of the durability of the strength you’re seeing at Fire & Rescue, are you able to parse out sort of how much of that is better chassis availability with your traditional OEMs versus your growing relationships with the mid-tier OEMs and the retrofit offerings you now have available. Eric Ashleman: I don’t know that, that particular fine-tuning is a big driver here. I would say the chassis availability and that the improving nature of it is a positive catalyst for that business, and it’s something we knew when we saw that backlog extend for, frankly, a long period of time that as it would start to expand itself, we knew that would be pretty gradual but ultimately positive for us for business. The composition of who they are in terms of suppliers inside it, it’s interesting around the margins, but I would say it’s going to be — put it in the category of generally positive and probably positive for all. Vlad Bystricky: Got it, okay, that’s helpful and then just a follow-up within that segment. The strength in the North American paint dispenser business, I think it was a little surprising versus what I was expecting anyway. So were there any larger onetime type deliveries in there that contributed to that strength? And how are you thinking about the outlook for the NAM dispenser business going forward? Eric Ashleman: No. I think dispensing had a couple large project orders that they’re delivering on here as they progressed in the second quarter and within the third quarter. Then I think as we passed the end of the year, the North American replenishment cycle will be, for the most part, over. And then we look for some of the opportunities to continue on the emerging market side. Europe was a little bit slower for us this year and see if there’s a bit of a recovery going into next year to help offset that. But that business will start to decline, especially on the orders as we progress through the back half of the year. Vlad Bystricky: Okay, great, that’s helpful, thanks a lot, get back-in queue. Eric Ashleman: Thank you. Operator: Thank you. Our next question comes from Joe Giordano with TD Cowen. Joe Giordano: Hey, good morning guys. Eric, I just kind of wanted to square your commentary about like a lack of catalysts in a lot of the markets is interesting. And how do you kind of — juxtapose with confidence around and optimism around chip stack and infrastructure bill and manufacturing, non-risk spending kind of like very high levels right here. How do you kind of square all that stuff? Eric Ashleman: Well, look, I think those are all absolutely legitimate of the things we’re planning on. It’s what we’re tuning the company to be. I’m, in some ways, helping people understand what I’m describing, we’re at a position now where we can kind of see exactly the mindset of people in the current — in the next quarter in a way that for years, we have not been able to. And so I’m with you because I think many of the kind of big broader trends that are out there are going to have nice runs as we go forward. Some of them are underway now. Some are going to be in the next period to come. But I do think there’s some noise in the system where, again, people are processing a lot of their own backlog and things like that. And then it’s easier to sort of link that to those trends and say, well, there it is. That’s validation. I just — this is a unique point that it’s taken us a few years to get to that says, no, no, everything we see now is actually near term or talking about the world that’s right in front of us. So — and again, some of those things are playing out. We had that in the walk. We talked about water. We talked about some decent things happening in chemicals. We just talked about some of the chassis Eric Ashleman: Availability in this building. So I don’t want to diminish those in any way. But in some ways, I’m just trying to show that we’ve really got solid visibility here. We’ll be able to see them as they inevitably start to play in and layer in at different points along the curve as we go forward. Joe Giordano: Yes, I think that’s fair. And would you just — would you categorize — it seems like most companies this quarter are kind of like — are certainly changing their commentary around like industrial distribution and things like that. It seems to be weakening and orders are getting worse. And you guys — maybe you feel like you were just kind of there first, and this is… Eric Ashleman: I will be in a category now. I think actually, we’re in sync with distribution. We’re out there with them. We’re looking for new opportunities, and we already live that. We were seeing that when others weren’t talking about it, which is always the frustrating part of the beginning of one of these curves for us. So I knew this year was going to have this element. It puts us to the back side of it, which then says, I think you’ll see that we’ll be talking about other things, other catalysts in a solid way that maybe it’s going to take some time for others to kind of walk into, but that is a perfect example. Joe Giordano: Fair enough. Thanks guys. Operator: Thank you. Our next question comes from Nathan Jones with Stifel. Nathan Jones: Good morning, everyone. Eric Ashleman: Hey Nathan. Nathan Jones: I wanted to start with just taking a finer point on some of the inventory correction. Can you quantify what you think the headwind to growth or the dollars of inventory that are coming out of the business, or coming out of your customers’ businesses this year, that will obviously, if we get that destock complete this year won’t repeat next year. Eric Ashleman: No. Nat, let me take a crack at that. I think that’s a reasonable amount of the current volume declines as the folks have calibrated on their months of supply pulling down. So that was really our expectation in the first quarter. As they look at their end market demand and then their inventory position had a second-tier bleed down again here in the second quarter with, I think where our order patterns and our volumes are for the balance of the year, that’s holistically through. And then any volume shifts are really going to be reflective of true end market demand, really what Eric talked about is us being in sync relative to our lead times with where they’ve calibrated around new expectations of their volumes. So it’s a reasonable portion of the pressure we’ve experienced so far this year. Nathan Jones: Okay, then I’m going to ask a question on a metric that I don’t think anybody out there has really talked about for the last 3 years, which is on-time delivery, because with all the supply chain challenges, everybody’s on-time delivery metrics got blown up. Now that you’re talking about lead times being kind of fairly back to normal, how much improvement have you seen in on-time delivery metrics? Where are they relative to where they were before COVID? And how much more improvement is left to go on that? Eric Ashleman: Yes. So I mean that is a great question. Our on-time delivery is in really, really good shape. I mean, so think of this in the 90% plus. That’s where we need to be. A huge piece of that, when you think about it, is that’s measured against lead time expectations that customers have. So one of the things that’s really changed here in the last couple of years is people have potentially put orders into one or two buckets, either as soon as you can do it, please, which really is there’s no yardstick or they’ve taken the queue from businesses like ours to say, well, what’s your current capability, okay, put it in my order for that level. What’s important is you start to get better, you have to communicate it to your customers so they understand it. That’s kind of one of the first things that we teach within our own operating model, make sure people know where we are. So that, frankly, they understand that they can start to dial that into their own requirements, we can plan a better factory that way. And so you’re actually — the improvement that I’m citing is against a moving bar that moves closer with lower lead times. So that’s a really, really interesting point that we’re always on the lookout for to make sure that we’ve kind of moved out of that world of promises to actual customer requirements. And that our lead times are in sync with those, and then the ultimate metric says prove it with the OTD number. And so we’re in really, really good shape. William Grogan: That’s a really-really interesting point that we’re always-on the lookout for to make sure that we kind of moved out of that world of promises to actual customer requirements and that our lead times are in sync with those and then the ultimate metrics says prove it with the OTD number. And so we’re in a really-really good shape and I think for a couple of businesses where we’re still struggling with. Extended lead times or on-time delivery. Those are the business is actually orders have still been fairly positive, because those behaviors, haven’t been able to calibrate on their customers exact to the point Eric highlighted earlier, where we have seen all those improvements, you’ve seen new order rates comprised are aligned with shorter lead times. Nathan Jones: And just one last one on the cost actions that you’re taking here. I understand you guys plan for the long term here and that you’re probably not going to cut too deep given that this might be a short sharp correction markets could recover next year. Can you talk about the type of costs that you’re taking out and the target costs that you’re not taking out? William Grogan: Yes. I mean the first phase of cost reduction is obviously on the discretionary side, things that we’ve implemented broad-based across the portfolio. We talked about that last quarter, even in the businesses that weren’t as impacted as [indiscernible]. They helped to mitigate some of the profit shortfalls. And the second phase has been volume-related costs. We’ve done a little bit of restructuring internally. That’s saved some of the economics. But to your last point, fundamentally, we’re leveraging 80/20 and a resource allocation model to preserve a vast majority of our growth resources, as Eric’s point, I think we are going to be through this phase at some point in time next year. The investments that we’re making now will drive results into the future. Eric Ashleman: And Nathan, this is — Bill mentioned it, but this is where 80/20 really helps us as a company. And essentially, if you think of it in its simplest form, it says, take your existing people that already work here and know the company and leveraging them as powerfully as possible, so you don’t have to hire incremental head count at a time that you’re pressured. And we use 80/20 to guide that. So just make sure you’re at a point with maximum power and impact and you’d be surprised how much work people can do. And then you kind of get through this and that maintains the base. Nathan Jones: Great, thanks very much for taking my questions. Operator: [Operator Instructions]. Our next question is from Robert Wertheimer from Melius Research. Robert Wertheimer: Thanks, good morning, everybody. You’ve touched on this throughout the call, and I think you’ve been pretty clear, but if the issue is trying to figure out how channel inventory dynamics and HST relate to the rest of the business or whether there’s a risk of that happening. I wonder if you could step back a little bit and talk about how the channel in HST differs from the other 2 segments? And then I assume the analytic process that you put in the kind of focus in your comments on HST is applied broadly throughout the business. So I wonder if you can just sort of help with that understanding and that risk of the channel destock. Eric Ashleman: That was a great question that important that people understand. So everything we talked about generally in those HST markets with a massive change, those are direct relationships. So — and they’re some of the most concentrated customer sets we have. So not a lot of names, and we’re very directly linked to them. So your first point where it’s very different is when you go over into kind of the FMT world and even the industrial side of HST, those are typically distribution environments. Not a lot of stocking that happens there. But think of it, the more important element is there’s just a lot of people. So numerous markets, lots of positions, lots of partners, and so it’s just fragmented. And you just got a natural buffer there against any real swing either on the way up or the way down, you just don’t typically see it that dramatically, and you’ve got optionality. I mean some people out there will choose to carry more inventory through all of this. They’re going to make differentiated calls. But that concentrated OEM set does tend to move like a pack. And here, we’ve seen it move the most aggressively. Your last point was on analytics. We’ve always had great distribution analytics. It’s a participated model. It’s not this kind of stocking model where there’s a curtain between us and the end markets. We’re partners in this. We’ve known each other for a long time, and we actually need to participate in the cells. So because of that, we’ve got — we’ve long had good analytics on inventory positions, who we’re selling it to, how they’re thinking about things. So that’s been a staple. I’d say that the move forward to something more positive I referenced earlier, was getting even closer to the nuts and bolts of those OEM relationships where we have that direct line of sight. Robert Wertheimer: Perfect. That was educational. And just because I don’t know, and I’m not sure you say, but what is the China mix within HST. And is that weakness in China, obviously, China is weak. I don’t know if that’s general economic slowdown or something industry-specific that accentuated it for you there. Eric Ashleman: Well, it really doesn’t ping for us is a China sale because we’re typically selling to the North American partners or something like that. We’re reading through their commentary about end placement of instruments and things. Robert Wertheimer: Perfect, okay. I’ll stop there. Thank you. Eric Ashleman: Thanks. Operator: Thank you. There are no further questions in queue at this time. I would like to turn the call back to Mr. Ashleman for closing comments. Eric Ashleman: Thank you very much. Thanks for everybody joining today. Just a couple of summary takeaways here. I mean we said from the beginning, this was going to be a year of aggressive recalibration. That’s certainly proven out. But I think this is truly the final economic phase of this pandemic. It’s going to play itself out here through the balance of the year and will be done with it. And for us, that means, look, our backlog is almost back to normal. It will be here soon. Our quarterly order coverage is normal now. I don’t think we’ve got a lot of abnormal pandemic-induced order trends that we’re going to be processing and talking about, and I could not be looking more forward to that, I assure you. And then really, I’ll just go back to kind of what I talked about on that last slide in the intro here. The future is going to be really, really good. We will accelerate quicker than others is whatever the next cycle is, plays out positively for us. We’ll see that. We’re good diagnostic there. And because of the strength and resiliency we built over the last couple of years here, we’re going to perform very, very well when that happens. All of the things we talked about in terms of capital where we’ve deployed it, the work we’ve done intensively around strategy, it’s going to take us up another 100 basis points in that outperformance, and I referenced that earlier, too, as we’re thinking about outgrowing our core markets. And just last, I know a lot of our team members listen in on these calls. I really want to thank them for just solid, solid execution through all of it, in particular, our teams in HST. You might imagine to kind of go from as fast as you can go to slowing down in the amount of time — the short duration there, that has been really challenging for them. And they have absolutely stood up in the way that we know IDEX employees do all over the place. So thanks for that. Have a great day. We’ll talk to you soon. Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day. Follow Financial Security Assurance Inc (NYSE:IEX) Follow Financial Security Assurance Inc (NYSE:IEX) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Futures Rise On Optimism Of Imminent Debt Deal US equity futures are higher across the board, amid speculation that a debt deal is taking shape and may be announced as soon as today (whether or not a 0.2% spending cut "deal" is something to be proud about is a different matter) and also thanks to optimism around Nvidia and AI prospects. S&P futures are 0.2% higher, rising to 4,169 and undoing the drop from the previous two days, while Nasdaq futures are up 0.4% amid continued AI-bubble euphoria. Treasury yields are falling, most markedly at the short end, on debt ceiling optimism, while a measure of the dollar is weakening. Commodities are mostly higher led by base metals. Oil prices are set for a weekly gain, climbing higher today. Gold prices are edging higher but still set for their third weekly decline. In premarket trading, Marvell Technology shares soared 17% after the chipmaker projected AI revenue in fiscal 2024 will “at least double” from a year ago. The company also reported first-quarter adjusted earnings per share that beat estimates and provided second-quarter guidance. Analysts had a positive reaction, increasing price targets on the stock. Meanwhile Nvidia shares were little-changed in US premarket trading, pausing following yesterday’s 24% surge after the chipmaker gave a bullish forecast thanks to surging demand amid an AI boom. Here are some other notable premarket movers: Tilray Brands shares plunged 19% in premarket trading after the cannabis producer priced an offering of $150m of unsecured convertible senior notes. Gap shares jump 11% in premarket trading after the apparel retailer produced better-than-expected earnings for the first quarter, compared to Wall Street forecasts for a sizable loss for the period. Analysts pointed toward the cost management of the company, with Jefferies saying lower expense on air freight contributed to the better margin and EPS. Domo shares dropped 4.9% in postmarket trading after the application software company’s guidance for 2Q revenue missed the average analyst estimate, while analysts flagged the firm’s still-muted growth. Workday shares gained 8.5% in extended trading, after the software company narrowed its subscription revenue forecast for the full year and named Zane Rowe as new chief financial officer. Analysts are positive on the report and forecast. Yesterday, the Nasdaq rallied 2.5%, a 1.9-sigma move, as NVDA surged 24% amid forecast beat; XSD (Semiconductors ETF) added 4.5%. The NDX rally was driven by a narrow leadership as there are only 17 out of 100 companies outperformed the benchmark. On debt ceiling, headlines turned more optimistic as there seems to be a deal emerging, but gaps remains between the two parties. Today, macro focus will be the PCE and Durable Goods release. Optimism was also boosted by reports that a deal is emerging which could include a paltry $10bn spending cut. Today’s macro focus will be on PCE releases and Durable Goods Orders. “We are in a very hesitant market,” said Ariane Hayate, a fund manager at Edmond de Rothschild Asset Management. The debt ceiling is “a factor that adds up nervousness, but the market isn’t expecting that no solution will be found.” In Washington, Republican and White House negotiators have narrowed differences in talks over recent days and are moving closer to an agreement to raise the debt limit and cap federal spending for two years, according to people familiar with the matter. However, details agreed to are tentative and a final accord is still not in hand, the people said. European stocks also rose with chipmakers including ASML Holding NV advancing for a second day. Glencore Plc advanced 2.5% after a report that Viterra unit is in talks to merge with Bunge Ltd., one of the world’s largest crop merchants.  The Stoxx 600 was up 0.5% as European mining stocks rose and were among the biggest gainers on the Stoxx 600 regional benchmark as metal prices trim weekly decline, while the sector bounces on technical support and Rio Tinto gets a broker upgrade. Here are the most notable European movers: Rio Tinto rallies as much as 4.3% in London after being upgraded to overweight from equal-weight at Morgan Stanley, which says weakness in the mining company’s shares has created an opportunity European semiconductor equipment makers rise, extending Thursday’s blistering rally on hopes that adoption of chips used in artificial intelligence computing could accelerate the sector’s future growth Faurecia gains as much as 5.7% and Valeo as much as 3.7% after Jefferies upgraded the firms to buy, saying auto suppliers are starting to benefit from a more supportive operating environment Atos shares rise as much as 8.8% after the company got a favorable decision in litigation involving Syntel, now part of Atos, in the US, with Oddo calling the judgement “very favorable” at first sight Coface jumps as much as 7.8% after reporting earnings that Deutsche Bank says could lead to mid-single-digit consensus upgrades as the French financial services company “continues to demonstrate its quality” Asos shares rise as much as 8.9% after the UK online fast fashion retailer announced capital raising plans. The new debt financing and equity raise provide “much needed visibility on liquidity,” Citi analysts say Casino shares slump as much as 11% after the debt-laden French retailer said a Paris court decided to open conciliation procedures amid talks with its creditors Ninety One falls as much as 2.1% after being downgraded to underperform at Avior, which says the current market environment favors fixed-income instruments over stocks, putting equity performance at risk Asian stocks traded mixed following the mild positive bias stateside where the tech sector surged on Nvidia’s blockbuster report and with sentiment underpinned by firm US data and progress in debt ceiling talks. The Shanghai Comp. was subdued amid the closure of Hong Kong markets and Stock Connect trade but with the downside cushioned after the meeting between the US and China’s commerce chiefs where concerns were raised about recent actions taken against US companies in China, as well as US chip policy and export curbs Japan's Nikkei 225 outperformed and reclaimed the 31,000 level with the index lifted by recent currency weakness and mostly softer-than-expected Tokyo CPI, while tech stocks benefitted from the ripple effect which stemmed from the rally in US counterparts. Australia's ASX 200 was indecisive with price action rangebound and risk sentiment contained by disappointing Retail Sales data. Indian stocks were the best performers among major Asian markets this week, even as investors awaited the outcome of ongoing negotiations to raise the US debt ceiling. The S&P BSE Sensex rose 1% to 62,501.69 in Mumbai, while the NSE Nifty 50 Index advanced by the same magnitude. The Sensex gained 1.3% this week, while the Nifty climbed 1.6%. The advance has mainly been supported by information technology, pharmaceuticals and consumer staple firms. Investors kept a close eye on US debt-ceiling talks. Republican and White House negotiators are making progress toward a deal to raise the debt limit. Strategists warn that any break down in negotiations could have serious implications for global economic growth. In FX, the Bloomberg Dollar Spot Index is also lower by 0.2%, snapping a four-day run of gains; it is on course to end the week in positive territory, posting its third straight week of gains. The Swedish krona is the best performer among the G-10’s.  The Bloomberg Dollar Spot Index edged down 0.2%, USD/JPY slipped 0.3% on easing Treasury yields and as Japan’s 10-year breakeven inflation rate hit an eight-year high. In rates, Treasuries are richer across the curve with gains led by front-end, steepening spreads from Thursday’s close. US session focus includes a flood of economic data, headed by PCE deflator at 8:30am New York.  US yields richer by up to 5bp across front-end of the curve with 2s10s, 5s30s spreads flatter by 1bp and 1.5bp on the day; 10- year yields around 3.78%, richer by 4bp on the day with bunds lagging by 1.5bp in the sector. The two-year Treasury yield slipped 4bps to 4.49%, pulling back from a two-month high around 4.55% hit the previous day. Markets are pricing in 23 basis points of Fed tightening in July, down 3 basis points from Thursday but still reflecting the likelihood of a 25 basis point hike in two months’ time; Boston Fed President Collins on Thursday said the central bank may have reached, or be approaching, the point at which it can pause interest-rate increases In commodities, crude futures advance with WTI rising 0.5% to trade near $72.20. Spot gold adds 0.6% to around $1,953. Bitcoin falls 0.2% Looking to the day ahead now, and data releases from the US include PCE inflation for April, along with personal income and personal spending for April, preliminary durable goods orders for April, and the University of Michigan’s final consumer sentiment index for May. Meanwhile in Europe, there’s UK retail sales for April. Otherwise from central banks, we’ll hear from the ECB’s Lane and Vujcic. Market Snapshot S&P 500 futures down 0.3% to 4,170 MXAP up 0.5% to 159.93 MXAPJ up 0.7% to 506.87 Nikkei up 0.4% to 30,916.31 Topix little changed at 2,145.84 Hang Seng Index down 1.9% to 18,746.92 Shanghai Composite up 0.4% to 3,212.50 Sensex up 0.8% to 62,392.17 Australia S&P/ASX 200 up 0.2% to 7,154.76 Kospi up 0.2% to 2,558.81 STOXX Europe 600 up 0.3% to 457.36 German 10Y yield little changed at 2.52% Euro little changed at $1.0729 Brent Futures little changed at $76.23/bbl Gold spot up 0.6% to $1,953.26 U.S. Dollar Index down 0.15% to 104.09 Top Overnight News from Bloomberg European stocks rose and Treasury yields ticked lower on signs that US negotiators are moving closer to striking a debt deal. Republican and White House negotiators are nearing a deal to raise the debt limit and cap federal spending for two years, according to people familiar with the matter, as time grows short to avert a catastrophic US default With investor attention on the US sovereign credit rating rising as the federal government gets ever closer to running out of cash, Moody’s Investors Service says that a mid-June payment of interest on Treasuries will be critical for maintaining the top, AAA grade. Germany has been Europe’s economic engine for decades, pulling the region through one crisis after another. But that resilience is breaking down, and it spells danger for the whole continent. In 2020, just after George Floyd’s murder in the US, one of the most senior Black professionals in the City of London, KPMG UK Partner and Vice-Chair Richard Iferenta, appealed to CEOs and chairpeople of the business community “to stamp out racism of all forms.” Three years later, he has yet to see the change and ambition he asked for. Morgan Stanley is letting go of at least six managing directors, including some key China bankers, as part of broader job cuts in Asia where dealmaking has been stymied by growing China-US tensions and tepid economic growth. Barclays Plc lost three senior investment bankers including John Miller, all of whom are joining Jefferies Financial Group Inc., according to people with knowledge of the matter. A more detailed look at global markets courtesy of Newsquawk European bourses began the session on the front foot but have since pulled back from best levels and now see a mixed picture, Euro Stoxx 50 -0.1%. Sectors in Europe are mixed (vs a mostly positive open). Basic Resources outperform as base metals claw back some recent losses, with Tech the next best performer as NVIDIA’s surge continues to reverberate globally. The downside meanwhile consists of Utilities, Telecoms, and Banks.  US equity futures traded horizontally overnight but saw a slight uptick shortly after the cash open, in tandem with Europe, but have since pulled back; ES -0.1%. Top European News UK ministers look to reshape the pensions lifeboat fund to provide a boost to business, according to FT. ECB's Lane on "How quickly will inflation return to target?" - reiterates guidance from the 4th May ECB Meeting. There is no sense of certainty in the terminal rate; uncertainty in models is high; some upside risks to wage growth. ECB's Vujcic says inflation momentum is still persistent and it is questionable that we will be able to get to 2% in the next two years. Riksbank's Breman says increasing asset sales is something we could think about if we see the crown continuing to weaken. Adds, increasing asset sales is something we should think about, doesn't need to be next meeting. APAC stocks traded mixed following the mild positive bias stateside where the tech sector surged on Nvidia’s blockbuster report and with sentiment underpinned by firm US data and progress in debt ceiling talks. ASX 200 was indecisive with price action rangebound and risk sentiment contained by disappointing Retail Sales data. Nikkei 225 outperformed and reclaimed the 31,000 level with the index lifted by recent currency weakness and mostly softer-than-expected Tokyo CPI, while tech stocks benefitted from the ripple effect which stemmed from the rally in US counterparts. Shanghai Comp. was subdued amid the closure of Hong Kong markets and Stock Connect trade but with the downside cushioned after the meeting between the US and China’s commerce chiefs where concerns were raised about recent actions taken against US companies in China, as well as US chip policy and export curbs Top Asian News US Commerce Secretary Raimondo met with Chinese Commerce Minister Wang in Washington and raised concerns about the recent spate of Chinese actions taken against US companies in China. Furthermore, China's MOFCOM said Wang and Raimondo agreed to keep communication on trade concerns and that China expressed concerns on US chip policy and export curbs, while the meeting was candid and constructive, according to Reuters. China's top server makers asked suppliers to suspend shipments of modules containing chips made by Micron (MU) following Beijing's partial ban on Micron products, according to SCMP. FX The broader Dollar and index have pulled back from overnight highs. mostly amid the strength in G10 counterparts. The non-US Dollars are firmer against the Dollar to varying degrees, AUD/USD outperforms as base metals rebound. Sterling resides as one of today’s outperformers on the back of the stronger-than-expected Retail Sales data (+0. 5% M/M vs exp. 0.3%), coupled with hawkish commentary from BoE’s Haskel yesterday. The SEK stands as the current G10 outperformer with strength seen amid hawkish commentary from Riksbank Deputy Governor Bremen. PBoC set USD/CNY mid-point at 7.0760 vs exp. 7.0752 (prev. 7.0529) Fixed Income Core benchmarks are mixed with USTs bid as the risk tone slips while EGBs/Gilts are softer, but directionally infitting. EGBs and Gilts were initially weighed on by strong UK Retail data which adds to the factors in-favour of further BoE tightening. Though, market pricing for the BoE hasn't altered significantly from the post-CPI pricing of 100bp of tightening by end-2023. Stateside, yields are lower across the curve and towards troughs given the above benchmark pricing Commodities WTI and Brent futures are relatively flat on either side of the unchanged mark following the downside yesterday, which was due to a concoction of weak German GDP data and comments from Russia Deputy PM Novak. Spot gold has firmed in the European morning as the DXY pulled back, while the yellow metal also found support near its 100 DMA (USD 1,934.86/oz) in APAC hours. Base metals are firmer across the board following the losses seen throughout the majority of this week. India weather office says El Nino seen emerging during monsoon season. Geopolitics Japan is to place additional sanctions against Russia in which it will freeze the assets of 78 groups and 17 individuals in Russia as part of new sanctions, according to a government bulletin. Furthermore, Chief Cabinet Secretary Matsuno said Japan is to ban providing construction and engineering services in Russia, while they condemned Russia's plan to deploy tactical nuclear weapons to Belarus as it intensifies the situation around Ukraine, according to Reuters. Regarding Sweden's NATO accession, Sweden said Turkish President Erdogan's demands are impossible to meet as Sweden has not received a list of relevant individuals from Turkey, according to a senior Swedish official cited by WSJ.   DB's Jim Reid concludes the overnight wrap After some rough sessions earlier in the week, the newsflow has been a lot more positive for markets over the last 24 hours. First, there’s now some more optimism again around the debt ceiling, particularly after comments from Speaker McCarthy suggested that a deal was near, and that he would be staying in town over the long weekend to work on a deal. Second, tech stocks saw a big outperformance thanks to excitement surrounding AI, which followed Nvidia’s positive outlook from the previous day. And third, US economic data yesterday ran ahead of expectations, thus helping to ease fears about an imminent recession. But with all this newfound optimism, investors are once again dialling up their expectations for future rate hikes, and sovereign bonds saw a decent selloff in response. In the meantime, the gains for equities were actually very narrow and solely driven by the large tech stocks. Starting with the debt ceiling, we still don’t have a deal yet, but the latest developments yesterday raised hopes that an agreement can be reached ahead of the deadline (whenever that actually is). Shortly after the US open, markets reacted to comments from Speaker McCarthy, who said “I thought we made some progress” in the discussions on Wednesday. Furthermore, he said “I don’t think everybody is going to be happy at the end of the day”, which was seen as laying the groundwork for any potential compromise, and hence positive for the likelihood of reaching a deal. Last night it was reported by Reuters that the two sides were just $70bn apart on discretionary spending levels, with the overall deal likely smaller in scope than what was first reported. While there was no deal when the sides went home, the tone from the top from Speaker McCarthy and President Biden is more encouraging than earlier this week. After the US close the Treasury disclosed their cash balances had fallen to $49.5bn, down from $76.5bn the day earlier and $140bn on May 12, so the clock is indeed ticking. With that more positive backdrop to the talks, there were clear signs of market stress starting to ease again. For instance, the yield on the T-bill maturing on June 8 (so close to the potential X-date) came down by -32.4bps on the day to 6.48%, and it was a similar story for other bills around the X-date. Those moves were also in the opposite direction to the broader move toward higher yields yesterday, which further demonstrates how the debt limit was driving those moves. However, even with the growing optimism from yesterday, it’s worth noting that yields on bills around the X-date are trading with a 6 handle, which shows how investors are still wanting a premium to hold the Treasuries that might be affected by a potential default. Just as better news was coming through on the debt ceiling, we also had a decent round of releases on the US economy that further supported risk appetite. One was the weekly initial jobless claims, which came in at 229k over the week ending May 20 (vs. 245k expected), and we also heard that the state of Massachusetts had downwardly revised three months of data due to fraudulent applications. Alongside that, it turned out that growth in Q1 was stronger than initially thought, having been revised up to a +1.3% annualised rate (vs. 1.1% previously), whilst core PCE inflation was revised up to +5.0% (vs. +4.9% previously). With all that positive news coming through, it means that markets are putting increasing weight on the prospect of another rate hike from the Federal Reserve. By the close, futures had raised the chances of a June hike up to 54%, which is the first time since SVB’s collapse back in March, so it’s a prospect that investors are taking more and more seriously. At the same time, there’s been growing speculation that the Fed might skip a hike in June and move again in July, which means that if you look at the chances that we’ve had a hike by July, they’re now up to a very strong 94% probability. That’s a big shift from where we were after the Fed’s last meeting at the start of the month, when the consensus view was that they were done hiking, and the next move was more likely to be a cut than a hike. As markets priced in more rate hikes, sovereign bonds sold off across the board once again. In the US, yields on 10yr Treasuries (+7.6bps) hit a post-SVB high of 3.817%, having now risen for 9 of the last 10 sessions. And the 10yr real yield (+7.9bps) closed above 1.5% for the first time since the SVB turmoil as well. In Europe yields were set to close lower than they did before a late comment from ECB board member Knot (a noted hawk) who said that rate hikes were needed over the next two months, that he was “open-minded” about September, and finally that the market pricing of rates cuts is “overly optimistic”. This resulted in yields on 10yr bunds (+5.0bps), OATs (+5.0bps) and BTPs (+5.9bps) all moving higher after being close to finishing just higher than unchanged. Overnight swap pricing is still nearly fully pricing in the next two hikes (97% for June and 80% for July ), while the chance of a rate cut in February of next year is now the lowest it has been in 3 weeks. But it was gilts that saw the biggest declines once again, with the 10yr yield (+16.0bps) closing at 4.37%, which isn’t far off its closing high just after the September mini-budget, when it reached 4.50%. That comes as our UK economist has updated his call for the BoE, where he now thinks we’ll get another three 25bp hikes that take us up to a terminal rate of 5.25%. See his latest call here. For equities, there were several factors at play yesterday, and the S&P 500 (+0.88%) ultimately ended the day in positive territory. But it’s worth stressing that this was down to incredible strength among tech stocks, with only just over 40% of the index actually ending the day in positive territory. In fact, on an industry basis, semiconductors were up +11.0% and software was up +3.6%, with transports the next best at +1.2%. 15 of the 24 other industries were lower on the day. So clearly tech outperformance was the big story with the NASDAQ recovering +1.71% after declining over the last couple of days. Nvidia (+24.37%) was one of the biggest outperformers, and was single-handedly responsible for most of the NASDAQ’s gains. In addition, the company’s strength meant that the FANG+ Index (+2.51%) extended its YTD gains to +55.19%. Elsewhere, the Philadelphia Stock Exchange Semiconductor Index was up +6.81%, and individual companies like Advanced Micro Devices surged +11.13%. Marvell kept the semi's ball rolling after hours by reporting better-than-expected results and forecasting AI-related revenues to at least double for this fiscal year. Their stock was +16.74% higher after the close. Overnight in Asia, the Nikkei 225 (+0.62%) and the Kospi (+0.17%) are advancing just as the Shanghai Composite (-0.14%) lags. Some of the gains continue to be driven by AI sentiment – IT is the best-performing sector in the Topix and companies like TSMC (+4.05%) and SK Hynix (+5.51%) are rallying further on Marvell’s earnings. In terms of economic data in the region, the Tokyo CPI slowed to 3.2% from 3.5% YoY, coming in below estimates of 3.4%. The yen has strengthened +0.23% against the dollar. In terms of US assets, Marvell’s $42bn market cap has done little to lift Nasdaq futures (-0.18%), with the S&P 500 (-0.18%) contracts also falling. Meanwhile, Treasury yields are down by at least 1bps across most of the curve. In Germany, there was another round of weak data yesterday, as their Q1 GDP number was revised to show a -0.3% contraction, rather than a flat reading as initially thought. Given that the economy saw a -0.5% contraction in Q4, that means there were two consecutive contractions that meet the technical definition of a recession. So assuming the data isn’t revised further in future, it turns out there was a winter recession amidst the energy shock, despite hopes the country might have just about managed to avoid one. To the day ahead now, and data releases from the US include PCE inflation for April, along with personal income and personal spending for April, preliminary durable goods orders for April, and the University of Michigan’s final consumer sentiment index for May. Meanwhile in Europe, there’s UK retail sales for April. Otherwise from central banks, we’ll hear from the ECB’s Lane and Vujcic. Tyler Durden Fri, 05/26/2023 - 08:19.....»»

Futures Rally Fizzles As Banking Fears Resurface US index futures are fractionally higher, led by tech, however continued turmoil surrounding First Republic Bank which tumbled as much as 30% this morning after losing half its value yesterday, has sapped much of the earlier optimism and gains. Yesterday was the SPX’s worst day in a month and was April’s second move that exceeded 1%, in either direction. As of 8:00am ET, S&P futures were up 0.1%, while Nasdaq futures gained 0.8%, but both were well of their highs. Google parent Alphabet and Microsoft Corp. both beat first-quarter earnings expectations in results published after the market close. Microsoft gained in the premarket Wednesday, while Alphabet reversed an advance to move into the red. Meta Platforms is due to report after the bell today. Pre-mkt MSFT +7.4%, AMZN +3.7%, NVDA +2.1%, META +2.0%, GOOGL, +0.5%, AAPL +0.4%. PACW seemingly gives more evidence that FRC is idiosyncratic. V is +0.9% pre-mkt after posting earnings; the more impactful news may be that the company states that the consumer remains in good shape amid decreasing inflation. Here are some other notable premarket movers: Boeing shares jump 4.1% in premarket trading, after the planemaker’s first-quarter revenue and cash flow both beat expectations.  Shares off some Boeing suppliers also rose premarket. Spirit AeroSystems up 2.5%, Arconic up 1%, Howmet up 1.9%. Microsoft jumps as much as 7.7% after the software company’s third-quarter results beat expectations. Analysts highlighted strength in the company’s Azure cloud business and were optimistic about the overall resiliency of the business, leading at least 16 of them to raise their price target on the stock. Alphabet rises as much as 1.9% after the Google parent reported first-quarter results that beat expectations. Analysts noted strength in the company’s search business, as well as positive momentum in cloud. This coupled with strong results from fellow tech juggernaut Microsoft eased concerns that tech shares’ year-to-date rally is overdone. Midsize US banks, including First Republic (FRC US), rally following an update from peer PacWest which showed that deposits stabilized toward the end of March and rose in April, calming worries over the lender’s health. Enphase Energy shares plummet as much as 16%, on track for their worst day since June 2020, with analysts cutting their price targets on the solar equipment maker after its second-quarter revenue guidance missed expectations due to weakness in its US market and higher interest rates. Brokers say that Enphase’s first quarter performance was overall strong, and are positive regarding its prospects for the longer-term. Getty falls as much as 6.7% after the media firm rebuffed a takeover bid of almost $4 billion from Trillium, saying the activist investor hasn’t provided any evidence that its proposal, valuing the shares at nearly double the pre-offer price, is “sufficiently credible.” IonQ gains 3.6% after Morgan Stanley initiates coverage with an equal-weight recommendation, saying the quantum computing company is an early leader in the space, though the technology risk is high as quantum advantage is still unproven. While layoffs dominate headlines, the US is still net adding jobs this year, from a strong starting point, 3.5% unemployment. The yield curve is steeper with USD lower; cmdtys staging a relief rally. Today, the macro data focus is on durable/cap goods, inventories, and mtge applications. There may be a vote on McCarthy’s debt ceiling bill in the House, though this bill will fail in the Senate but is seeing a stronger negotiating move. Debt ceiling fears will continue to permeate markets near-term “The question is to what extent central banks and regulators can contain market sentiment and make clear to investors they need to keep a cool head, to give depositors confidence that there is no need to run to other banks,” said Tatjana Puhan, deputy chief investment officer at Tobam SAS. “So far the Fed has been very clear that they will continue to hike rates as long as needed to contain inflation.” European stocks fall to their lowest level in two weeks as investors continue to fret over the health of the global banking system. Software producer Dassault Systemes sank more than 8% after missing revenue estimates. The Stoxx 600 is down 0.8% with industrials, healthcare and tech the worst performing sectors. Bank stocks were leading declines at one stage but recovered after a positive premarket open for First Republic. Dutch chip-tool maker ASM International slumped more than 10% after offering a tepid outlook for the rest of the year. Roche Holding AG retreated even as its first-quarter sales exceeded expectations. Beats from Standard Chartered Plc and Sweden’s SEB AB failed to bolster sentiment. Here are the most notable European movers: Kindred shares jump 15% after the online gambling firm said it initiated a review of strategic alternatives, including a sale. Goodbody analyst says the firm is an “attractive asset” Temenos shares jump as much as 11%, the most in a year, after the Swiss financial software firm delivered a strong beat in the first quarter, even if its outlook remains clouded Persimmon shares gain as much as 5.3% after showing an improving outlook in its 1Q report, with other UK homebuilders also gaining. Peel Hunt says the report offers “comfort” SSAB rallies as much as 5.2% after reporting adjusted Ebitda for the first quarter that beat estimates, with analysts expecting the Swedish steelmaker’s estimates to rise SEB shares rise by as much as 6.2%, the most in a year, after the Swedish lender reported net interest income for the first quarter that beat the average analyst estimate Vonovia rises 5.9% after it sells minority common equity participation in “Suedewo” portfolio to Apollo on behalf of its affiliated and third party insurance clients and other investor ASM International shares fall as much as 13% in Amsterdam, their biggest intraday decline since 2020, after the Dutch chip-tool maker offered a tepid outlook for rest of the year Dassault Systemes shares fall as much as 7.8%, their biggest intraday decline since May 2022, after the French firm reported weaker-than-expected software license sales for 1Q CRH shares drop as much as 5% after the Irish building materials company reported 1Q like-for-like sales growth below that of peers, impacted by weather effects Axfood falls as much as 6.5% after the Swedish grocer reported 1Q adjusted Ebitda and net sales slightly below expectations, a miss Kepler Cheuvreux attributes to logistics arm Dagab Handelsbanken falls as much as 4.4% after its CET1 ratio missed the consensus, while Citi noted that a small beat in net interest income was driven by a reclassification of funding costs “The markets are very much focused on some of the earnings story, but possibly overlooking the weight of economic deceleration that is playing through right now, particularly in the United States,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “I’m looking at a whole range of technical signals, which seem to be suggesting a risk-off environment.” Earlier in the session, Asia stocks fell for a fourth straight day as weak US consumer confidence data sapped risk appetite, although the selloff in Chinese equities paused. The MSCI Asia Pacific Index slipped as much as 0.5%, trading near a one-month low, led by benchmarks in Japan and the Philippines. The moves come after declines in US markets overnight amid a drop in consumer confidence and a re-emergence of banking concerns.  Hong Kong shares outperformed with gains, while mainland China equities trimmed earlier losses as traders sought catalysts after the rout this month. China’s high frequency indicators show the economy continued to expand in April, though geopolitical concerns are keeping optimism in check. “The macro overlay is probably dominating the performance of equities, particularly in China,” said John Woods, Asia Pacific chief investment officer at Credit Suisse, told Bloomberg Television. “I’m looking at a whole range of technical signals which seem to be suggesting a risk-off environment” globally, he added. Despite strong results from Microsoft and Alphabet, a gauge of major tech stocks in the region was among the biggest sectoral decliners Wednesday. Earnings are front and center this week, with more than 800 members of the MSCI Asia gauge scheduled to report, as the market attempts to find direction amid low volatility.  Japanese stocks fell amid renewed concern over the health of the global banking system after First Republic Bank shares plunged on a proposed asset sale and decline in deposits. The Topix fell 0.9% to close at 2,023.90, while the Nikkei declined 0.7% to 28,416.47. Keyence contributed the most to the Topix decline, decreasing 2%. Out of 2,158 stocks in Topix, 329 rose and 1,767 fell, while 62 were unchanged. “I think it is unlikely that the problem of US banks will develop into a financial crisis,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “However, there is a possibility that lending will tighten mainly for small and medium-sized companies, and attention must be paid to the risk of economic deterioration.” Australian stocks were flat, as cooler inflation boosted the case for holding rates; the S&P/ASX 200 index was little changed to close at 7,316.30, as losses in mining shares offset gains in industrials and energy stocks. Australia’s core inflation decelerated in the first three months of 2023, lending weight to the Reserve Bank’s view that prices will steadily come down and supporting the case for it to extend an interest-rate pause. Read: Australia’s Cooler Inflation Boosts Case to Keep Rates on Hold In New Zealand, the S&P/NZX 50 index fell 0.8% to 11,934.98. In FX, the Bloomberg Dollar Spot Index fell 0.3%, unwinding most of Tuesday’s gain, as US futures rose. Euro and pound outperform among G10 currencies, with both climbing more than 0.5% against the greenback. Australia’s dollar dropped against all its major peers as the country’s slower-than-estimated inflation supported the case for the central bank to extend its rate-hike pause. The trimmed-mean inflation gauge rose 1.2% in 1Q from the previous quarter, falling short of the 1.4% gain estimated by economists; it comes after the Reserve Bank of Australia paused its almost year-long tightening cycle earlier this month. The Swedish krona also dropped after the Riksbank signaled smaller rate increases going forward. In rates, treasuries held on to Tuesday’s sharp gains following minimal price action during Asia session and London morning. US yields are 1bp lower on the day with 10-year around 3.39%, trailing bunds by 4bp in the sector. European bonds also gained, with German and UK 10-year yields falling by 5bps and 2bps respectively.  The treasury auction cycle continues with $43b 5-year note sale at 1pm, following small tail in Tuesday’s 2-year sale. WI 5-year yield at ~3.43% is ~23bp richer than March auction, which stopped 1bp through the WI level. Crude futures advance with WTI rising 0.5% to trade near $77.50. Spot gold is little changed around $2,000. Bitcoin is firmer and has lifted back towards the USD 29k mark, but is yet to mount a convincing test of the figure with the high thus far circa. USD 100 shy; action which keeps BTC comfortably above last-week's parameters but shy of the USD 30k+ seen earlier in April. Looking to the day ahead now, and data releases from the US include preliminary durable goods orders and core capital goods orders for March. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Herodotou. Lastly, earnings releases include Meta and Boeing. Market Snapshot S&P 500 futures up 0.1% to 4,098.00 MXAP down 0.1% to 159.64 MXAPJ up 0.2% to 510.57 Nikkei down 0.7% to 28,416.47 Topix down 0.9% to 2,023.90 Hang Seng Index up 0.7% to 19,757.27 Shanghai Composite little changed at 3,264.10 Sensex up 0.1% to 60,210.93 Australia S&P/ASX 200 little changed at 7,316.30 Kospi down 0.2% to 2,484.83 STOXX Europe 600 down 0.7% to 463.89 German 10Y yield little changed at 2.35% Euro up 0.6% to $1.1037 Brent Futures up 0.5% to $81.17/bbl Gold spot up to $1,997.49 U.S. Dollar Index down 0.43% to 101.43 Top Overnight News BOJ widely expected to leave policy unchanged this week, but COVID could be dropped in the statement as a risk factor, a move that might be interpreted as the first step toward tightening measures later in the year. RTRS Australian inflation eased from 33-year highs in the first quarter as the cost of living saw the smallest rise in more than a year, while core inflation dipped below forecasts suggesting less pressure for another hike in interest rates. Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 1.4% in the March quarter, just above market forecasts of 1.3% but the smallest increase since late 2021. RTRS South Korea will have a say in planning a potential U.S. nuclear response to a North Korean attack in return for not developing its own nuclear weapons. WSJ Sweden’s Riksbank raises rates by 50bp, as expected (although two members at the bank voted for 25bp), and guided for one additional increase at its June or Sept meeting, suggesting the tightening process is nearly over. BBG The White House chief of staff, Jeff Zients, said that while he can’t comment on specific banks, “you can be reassured that that the regulators are deeply involved in monitoring the situation and will take the necessary actions”. WSJ Almost one in five cars sold worldwide this year will be an electric vehicle, the International Energy Agency has forecast, after sales already passed the 10mn mark for the first time globally. The remarkable surge in demand for battery-powered models means electric vehicles will account for 18 per cent of global car sales compared with just 4 per cent of global car sales in 2020, according to the agency’s annual outlook. FT Opposition mounts in the House among Republicans to McCarthy’s debt ceiling bill, meaning it prob. can’t pass without revisions (the goal had been for a vote to take place today). The Hill   US crude stockpiles slumped more than 6 million barrels last week, the API is said to have reported. That would be the biggest drop in four weeks if confirmed by the EIA today. Inventories at Cushing edged higher. Gasoline supplies resumed their decline, while distillate inventory climbed. BBG Stanley Druckenmiller is betting against the US dollar as his only high-conviction trade in what he believes is the most uncertain environment for markets and the global economy in his 45-year career. FT The SPAC boom took hundreds of risky companies to the stock market. The next stop for many is bankruptcy court. Dozens of companies that merged with SPACs are running out of cash, joining at least 12 that have already gone bankrupt after combining with special-purpose acquisition companies. WSJ A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly lower after the losses on Wall St where banking sector fears resurfaced as First Republic Bank shares fell by 50% due to an exodus of deposits and with the lender considering up to USD 100bln in asset sales, although US equity futures found some reprieve overnight from the big tech earnings. ASX 200 was lacklustre but with downside stemmed as participants digested somewhat mixed inflation data in which the headline CPI readings for Q1 topped forecasts, but all other components were softer than expected and supported the view that the economy has passed peak inflation. Nikkei 225 declined amid pressure in the banking sector and disappointment in Japan after the failed lunar module landing which resulted in a glut of sell orders for ispace shares. Hang Seng and Shanghai Comp were mixed with early weakness in tech after US Republican senators urged for US government measures to address Chinese cloud companies including placing sanctions on Huawei Cloud and adding Alibaba Cloud to the export control list, although it was also reported that China's State Council pledged to expand the export and import scale of key products and will properly respond to unreasonable foreign trade restrictions. Top Asian News RBNZ proposed to ease LVR restriction from June 1st and it assessed that risks to financial stability from high-LVR lending have reduced to a level where current restriction may be unnecessarily reducing efficiency, according to Reuters. Japanese panel is reportedly reviewing utility prices to look for a lower hike, according to NTV. European bourses are lower across the board, Euro Stoxx 50 -0.6%, with pressure emanating from the softer APAC handover which itself was impacted by FRC-induced banking concern with European names impacted. More recently, earnings from heavyweights Safran and ASM International are weighing on the Industrial Goods and Tech sectors respectively. For reference, after the European cash open broader sentiment slipped to fresh lows with bourses posting downside in excess of 1.0%; though, this magnitude was somewhat shortlived and occurred without a fresh catalyst at the time. Stateside, US futures are somewhat mixed with ES marginally firmer but relatively contained while the NQ +1.3% is the standout outperformer after well-received Big Tech after-market updates ahead of the likes of Meta and Boeing on Wednesday. Alphabet Inc (GOOGL) - Top- and bottom-line beats, Q1 EPS 1.17 (exp. 1.07), Q1 Revenue 69.8bln (exp. 68.9bln), a USD 70bln share buyback, and decent ad revenue saw GOOG rise over 1.5% in afterhours trading. +1.1% in pre-market trade Microsoft Corp (MSFT) - Rose over 8% in afterhours trading following top and bottom-line beats on cloud growth. Q3 EPS 2.45 (exp. 2.23), Q3 revenue USD 52.9bln (exp. 51.02bln), Q3 Cloud revenue 28.5bln (exp. 28.19bln). +7.9% in pre-market trade Top European News Riksbank hikes its Rate by 50bps to 3.50% as expected; Dissent from Bremen and Floden (3-2 vote split); forecast indicates a 25bps hike in June or September; peak rate seen at 3.65% (prev. 3.33%), Q2-2026 average 3.35%; reiterates language on SEK.. Click here for details, reaction and newsquawk analysis. ECB's Vujcic commented that there is no choice but to raise rates further, according to Delo. German Economy Ministry says industrial electricity pricing concept is to be introduced next week. EU Commission proposes that countries with a budget gap larger than 3% of GDP will have to cut the deficit by at least 0.5% of GDP annually, until they are below the 3% ceiling. In-fitting with earlier FT reports. FX Swedish Krona crushed after 'dovish' 50bp Riksbank hike as 2 doves dissent, guidance suggests 1/4 point rise next time and repo path shows cut by Q2 2026, EUR/SEK eyes April high near 11.4500. DXY recoils within 101.890-320 range to the benefit of Euro and Pound especially, EUR/USD tops 1.1050 and pulls away from multiple option expiries, Cable reclaims 21 DMA on the way to towards 1.2500. Aussie continues to underperform as mostly softer than consensus inflation data underscores the probability of another RBA pause, AUD/USD probes 0.6600. Yen extends recovery rally vs Buck on spot month end amidst broad risk aversion and pre-BoJ positioning, USD/JPY towards the base of a 133.40-86 range. PBoC set USD/CNY mid-point at 6.9237 vs exp. 6.9250 (prev. 6.8847) Fixed Income Core benchmarks are mixed and in relative proximity to the unchanged mark, though retain an upward bias, as Bunds/Gilts faded from their initial 135.75 and 102.12 respective peaks. The morning's dual-issuance via Germany sparked little reaction given the pullback from above best by around 40 ticks to near neutral had already occurred. Stateside, USTs are similarly contained though the benchmark contrasts slightly in being softer on the session in limited 115.18-25 parameters ahead of supply and data, with yields big as such and action as has been the case recently more evident at the short-end of the curve. Commodities WTI and Brent June futures eked mild gains overnight but trimmed those gains in early European hours in what has been a choppy morning for the complex. Spot gold continues to trade indecisively as the yellow metal balances a softer Dollar with the deteriorating risk profile across the market. Base metals meanwhile are mostly firmer, benefiting from the pullback in the Dollar, but with upside capped as the risk tone remains cautious. Russian Deputy PM Novak says total balance of oil supply and demand has not changed; says OPEC+ is effective, there are risks to energy security without OPEC+; says OPEC+ are not regulating prices. US Energy Inventory Data (bbls): Crude -6.1mln (exp. -1.5mln), Gasoline -1.9mln (exp. -0.9mln), Distillate 1.7mln (exp. -0.8mln), Cushing 0.5mln. European Commission VP Sefcovic said 80 companies signed up to the EU's platform for joint natgas purchases that launched on Tuesday, according to FT. Geopolitics Russia said two of its strategic missile carrier bombers flew over the Barents and Norwegian seas, according to Reuters. Drone reportedly fell on the grounds of Moscow City court, according to Izvestia newspaper; drone did not carry any objects. China and Russia signed a memorandum of understanding on maritime law enforcement cooperation, according to Chinese state media. China's Defence Ministry says they are willing to work with the Pakistani military to further deepen and expand practical cooperation. China Maritime Administration said China will conduct live firing drills in the East China Sea today, according to Reuters. China Taiwan Affairs Office commented on a recent media report that an EU diplomat called for EU navy patrols in the Taiwan Strait in which it stated that authorities will be prepared and they will be on high alert for possible harm to China's national sovereignty and territory, according to Reuters. Turkish President Erdogan cancelled election campaign rallies on Wednesday on his Doctors suggestion amid an unexpected health issue. US Event Calendar 07:00: April MBA Mortgage Applications +3.7%, prior -8.8% 08:30: March Durable Goods Orders, est. 0.7%, prior -1.0%; Durables Less Transportation, est. -0.2%, prior -0.1% March Cap Goods Ship Nondef Ex Air, est. 0.1%, prior -0.1% March Cap Goods Orders Nondef Ex Air, est. -0.1%, prior -0.1% 08:30: March Retail Inventories MoM, est. 0.2%, prior 0.8% 08:30: March Wholesale Inventories MoM, est. 0.1%, prior 0.1% 08:30: March Advance Goods Trade Balance, est. -$90b, prior -$91.6b DB's Jim Reid concludes the overnight wrap If I'm not thinking straight this morning forgive me as my brain was disturbed by an awful noise last night that I can't get out of my head. Yes my 5-yr old twins came home from school yesterday after their first ever violin lesson and insisted on giving me a rendition. I'd imagine torture is easier to endure. The noises from the market over the last 24 hours haven’t been pleasant either with the S&P 500 (-1.58%) experiencing its worst day in over a month. The slump had several drivers, including weak earnings reports, poor data releases, continued fears around the debt ceiling, and even a renewed bout of concern about the banking sector. Taken together, that’s cast increasing doubt on the sustainability of the rally over recent weeks, with investors once again pricing in a growing chance of rate cuts later this year. More positive tech earnings after the US bell were the one bright spot and are boosting US futures in Asia. We’ll start with the banking concerns, as one of the biggest stories yesterday was the latest slump in First Republic Bank (-49.37%), which was the worst performer in the entire S&P 500. That follows their earnings release after the close on Monday, which was always going to be a focal point of the week. It showed a bigger-than-expected decline in deposits and saw them announce a workforce reduction of around 20-25% in Q2. Additionally, yesterday it was reported that the lender was looking to divest $50-100bn of long-dated mortgages and securities that are underwater in order to clean up their balance sheet. According to reports, First Republic could offer incentives such as warrants or preferred equity to buyers in order to move the assets. This highlights how vital it appears to them to shed those assets and how little others might want them. The news brought on a further bout of selling, with shares down -29% before the asset sale news and then dropping a further -25% in the hour or so after the news broke. The latest fall in the share price takes it down to an all-time low ($8.10), and well below the 12-16 share price range of the last month where things had stabilised. It was at around $147 in early February. The losses were evident among banks more broadly, with all but one of the 22 members of the KBW Banks Index (-3.45%) losing ground. Those declines among bank stocks were at the forefront of a broader equity sell-off as earnings season continues apace. After the close yesterday, we heard from Microsoft (+8.64% after-market, -2.25% yesterday) and Alphabet (+1.68% after-market, -2.03% yesterday). They both reported above consensus revenues and EPS, with the latter also announcing an additional $70bn share buyback program. Alphabet’s ad-sales grew enough to quell some concerns there, while Microsoft’s strong cloud services demand bolstered sentiment after the close. Earlier in the day, UPS (-9.99%) struggled after they warned that their revenue for the year would be at the lower end of their forecast range from January. In the meantime, McDonald’s (-0.58%) outperformed the broader market as it beat estimates and is generally a defensive stock, whilst General Motors (-4.02%) was another that struggled after reporting. Today we get Meta and Boeing leading the way. An additional factor not helping matters yesterday was weak US data. It’s true that some housing measures surprised on the upside, but they were more backward looking for February and March. By contrast, the Conference Board’s consumer confidence reading for April fell back to 101.3 (vs. 104.0 expected), and the expectations component hit a 9-month low at 68.1. In turn, the weak data plus the latest banking woes led investors to price in further rate cuts for this year, with the futures-implied rate for December down by -13.0bps on the day to 4.355%. That is the biggest move lower on the December rate projection in over three weeks. Markets are pricing in a 79% chance of a 25bp hike next week, with just a 9% chance of a hike in the following meeting. This negative mood music meant that sovereign bonds rallied across the board, and 10yr US Treasuries (-9.1bps) saw their biggest daily decline in over a month, taking them down to 3.3996%. Early in the US session the 1m3m yield curve steepened to near its highs from last week, trading at around 165bps as fears about a potential debt ceiling crisis mount. However, by the end of the session, investors had flipped positioning and the curve flattened -37.4bps to close at 111.9bps. That is the flattest the curve has been since last Monday. See my CoTD here from yesterday for more on that topic. Back in Europe, there was also a serious decline in sovereign bond yields, with those on 10yr bunds (-12.4bps), OATs (-12.0bps) and BTPs (-10.4bps) all moving lower. The shifts were in line with the broader risk-off move, as we didn’t much new info on the way of ECB policy. We did hear from Chief Economist Lane who gave an interview to Le Monde, but he only said that “we should raise rates again”, rather than offering any clue on the size of a potential hike. For equities there was a similarly downbeat tone, and the STOXX 600 fell back -0.40%. Overnight in Asia, stocks are trying to shake off the banking system worries following upbeat results from US big tech so far. Chief among the decliners is the Nikkei (-0.72%) amid a more defensive price action away from financials. The Shanghai Composite (-0.31%) and the Kospi (-0.14%) are also in the red. The picture is brighter for Hong Kong indices, with the Hang Seng (+0.53%) rebounding amid robust gains in tech (Hang Seng TECH is up by +1.22% so far). Tailwinds to the sector are coming from the aforementioned US big tech results, with Nasdaq 100 (+1.27%) and the S&P 500 (+0.42%) futures both gaining this morning. Otherwise, both US Treasuries and the dollar are steady. On the political side, US President Biden formally announced yesterday that he would be standing for re-election in 2024, calling on voters to back him so he could “finish this job”. The announcement ends any speculation about whether Biden would in fact run for re-election, and will also enable him to raise funds for the campaign. There was also confirmation that Vice President Kamala Harris will remain as his running mate, and the pair do not face any serious opposition from inside their party for the nomination. On the Republican side, former President Trump remains the polling front-runner, and recent polls this month have shown him expanding his lead over Florida Governor Ron DeSantis, who hasn’t yet announced a candidacy. Incidentally, if Biden and Trump were the respective nominees for 2024, it would be the first time that the same two nominees have faced each other in a direct re-match since 1956. Looking at yesterday’s other data, US new home sales rose by more than expected in March, up to an annualised rate of 683k (vs. 632k expected), marking their highest level in a year. We also had the FHFA house price index for February, which showed growth at a 9-month high of +0.5% (vs. -0.1% expected). To the day ahead now, and data releases from the US include preliminary durable goods orders and core capital goods orders for March. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Herodotou. Lastly, earnings releases include Meta and Boeing. Tyler Durden Wed, 04/26/2023 - 08:07.....»»

Demand worries due to weakness in certain markets and raw material cost inflation pose headwinds for the Zacks Chemicals Diversified industry. APD, DD, ALB and CBT are poised to navigate the industry challenges. The Zacks Chemicals Diversified industry is bearing the brunt of a spike in raw material costs as well as higher supply-chain, energy and logistics costs, made worse by the Russia-Ukraine conflict. Weakness in certain markets, COVID-related impacts in China and the slowdown in Europe may also impact demand for chemicals.Industry players like Air Products and Chemicals, Inc. APD, DuPont de Nemours, Inc. DD, Albemarle Corporation ALB and Cabot Corporation CBT are banking on strategic measures, including operating cost reductions and aggressive price hikes to tide over the challenging environment.About the IndustryThe Zacks Chemicals Diversified industry consists of manufacturers of basic chemicals, plastics, specialty chemicals and agricultural chemicals. Companies in this space serve a host of end markets, such as automotive, building & construction, transportation, electronics, aerospace and agriculture. Basic chemicals are produced in large quantities, and include petrochemicals and intermediates (such as ethylene, propylene and benzene), polymers (including plastic resins such as polyethylene, polypropylene and polyvinyl chloride), and inorganic chemicals (such as chlorine, caustic soda and titanium dioxide). Specialty chemicals that include catalysts, specialty polymers and coating additives are used in specific fields based on their performance. Agricultural chemicals include herbicides, fungicides and insecticides that are used to protect crops from disease, pests and weeds.What's Shaping the Future of the Chemicals Diversified Industry?Demand Worries From End-market Weakness, China Slowdown: Companies in the chemical-diversified space are facing headwinds from a slowdown in certain key markets. The semiconductor shortage has led to reduced automotive builds around the world, curbing chemical demand in this major market. The Russia-Ukraine conflict has triggered a fresh round of global microchip shortage. Both these countries are major suppliers of raw materials required for global semiconductor production. The chip crisis is unlikely to abate anytime soon, given the impact of the war. The sluggishness in the building & construction market and customer destocking in consumer durables are other concerns. Also, the slowdown in economic activities in China due to the restrictions following a resurgence in COVID-19 infections is hurting chemical demand. The softness in China has resulted in a higher level of near-term economic uncertainty, which may continue to affect chemical volumes over the near term.Higher Input Costs Pose Margin Headwinds: The industry players are exposed to cost pressure associated with raw materials resulting from short supply. These companies also face challenges arising from higher supply-chain and logistics costs. The disruption in the supply chain has pushed up the prices of inputs. Russia's invasion of Ukraine and new government-mandated lockdowns in China have also put more pressure on the global supply chain. These companies are also facing headwinds from higher energy costs, especially in Europe, which has witnessed a significant spike in costs amid the ongoing war in Ukraine. The lingering impacts of these bottlenecks are expected to continue over the short term. Higher raw material, energy and logistics costs are, thus, likely to hurt the margins of diversified chemical companies.Strategic Actions to Aid Results: The companies in this space are taking a host of strategic measures, including cost-cutting and productivity improvement, operational efficiency improvement and actions to strengthen the balance sheet and boost cash flows. In particular, the industry participants are aggressively implementing actions to bring down costs. These include the reduction of discretionary spending and traveling expenses. The industry players are also raising selling prices to counter raw material and logistics cost inflation. These moves are likely to help the industry in sustaining margins amid the prevailing challenges. Zacks Industry Rank Indicates Downbeat ProspectsThe Zacks Chemicals Diversified industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #198, which places it at the bottom 21% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Outperforms Sector and S&P 500The Zacks Chemicals Diversified industry has outperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.The industry has gained 14.1% over this period compared with the S&P 500’s decline of 7.9% and the broader sector’s decline of 6.7%. One-Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 9.16X, below the S&P 500’s 12.09X and above the sector’s 7.84X.Over the past five years, the industry has traded as high as 12.80X, as low as 5.89X and at the median of 8.45, as the chart below shows. Enterprise Value/EBITDA (EV/EBITDA) Ratio  Enterprise Value/EBITDA (EV/EBITDA) Ratio  4 Chemicals Diversified Stocks to Keep a Close Eye onAir Products: Based in Pennsylvania, Air Products is a leading industrial gases company. It is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. It remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows.Air Products is also boosting productivity to improve its cost structure. APD is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins. Air Products also has been benefiting from higher pricing. Higher merchant demand is also driving its volumes.Air Products, a Zacks Rank #3 (Hold) stock, has expected earnings growth of 9.4% for the current fiscal year. APD beat the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an average earnings surprise of roughly 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  Price and Consensus: APD  DuPont: Delaware-based DuPont provides technology-based materials and solutions to markets including electronics, transportation, construction, water and healthcare. DuPont is benefiting from strong demand in water solutions. Healthy demand in industrial end-markets including aerospace and healthcare is also likely to aid its performance.The company is also expected to gain from its productivity and pricing actions. It continues to implement strategic price increases to offset raw material and energy cost inflation. These actions are likely to support its margins. DD remains focused on driving growth through innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. It remains committed to driving returns from its R&D investment.DuPont, carrying a Zacks Rank #3, has a projected earnings growth rate of around 10% for the current year. DD also beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 13.8%.Price and Consensus: DD  Albemarle: North Carolina-based Albemarle is a premier specialty chemicals company with leading positions in attractive end markets globally. It is benefiting from higher volumes in its lithium business. Healthy customer orders and plant productivity improvements are supporting volumes. Higher lithium prices due to tight market conditions are also supporting its performance. Its bromine business is gaining from higher demand, a rebound in certain end markets, higher pricing and cost-saving actions.ALB is also strategically executing its projects aimed at boosting its global lithium derivative capacity. It remains focused on investing in high-return projects to drive productivity. Albemarle is also benefiting from cost-saving and productivity initiatives.Albemarle, currently carrying a Zacks Rank #3, has expected earnings growth of 34.1% for the current year. ALB has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 15.7%. Price and Consensus: ALB  Cabot: Massachusetts-based Cabot is a global specialty chemicals and performance materials company. It is expected to benefit from an uptick in volumes following the end of consumer destocking. Improved volumes, favorable pricing and customer agreements are likely to drive results in its Reinforcement Materials segment. Its Performance Chemicals unit is also expected to gain from demand growth in battery materials and inkjet applications and higher volumes.Cabot, currently carrying a Zacks Rank #3, has expected earnings growth of 2.2% for the current fiscal year. CBT has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 10.2%. Price and Consensus: CBT 4 Oil Stocks with Massive Upsides Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."  Zacks Investment Research has just released an urgent special report to help you bank on this trend.  In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations. Download your free report now to see them.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 Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report DuPont de Nemours, Inc. (DD): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Cabot Corporation (CBT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

"Markets Are Tense": Futures Slide As Central Bank Jitters Rise US equity futures showed no sign of rebounding on Tuesday from the Nasdaq’s worst single-day drubbing in over a month, with investors growing nervous ahead of this week’s barrage of central bank meetings which include the BOE and ECB Thursday and start tomorrow, when the Fed is expected to hike rates by 25bps; a barrage of earnings reports from some of the world’s biggest companies is also keeping investors busy. Futures for the Nasdaq 100 and the S&P 500 indexes slipped 0.6% and 0.3%, recovering from even bigger losses earlier in the session as doubts continue to grow about the sustainability of a four-month old rally, which has accelerated further since the start of the year. The Nasdaq benchmark tumbled more than 2% on Monday, its largest decline since Dec. 22 . Despite the pre-Fed jitters, however, both the S&P 500 and the Nasdaq 100 are poised for their best start to a year since 2019 as optimism over slowing inflation and resilient economic growth fueled appetite for risk. However, the start of the earnings season with corporate warnings and reiteration of the Fed’s resolve to raise rates have put a damper on the recovery. Treasury yields dipped, the dollar edged higher and oil extended its recent losses. In premarket trading, chipmaker stocks slumped with NXP Semiconductors NV dropping more than 4% after a disappointing first-quarter forecast. Exxon Mobil surpassed profit expectations for the ninth time in 10 quarters, but shares are down premarket as the company signaled investors won’t see any additional rewards. McDonald’s also fell as much as 1.8% after its operating margin for the fourth quarter misses the consensus estimate. Its 2023 forecast for the measure also trailed. Moderna and BioNTech are also dropping in US premarket trading after Pfizer’s 2023 outlook included softer revenue estimates for its Covid vaccine and pill than analysts expected (MRNA dips 2.4% and BNTX, which is partner on PFE’s shot, falls 2%). On the plus side, General Motors jumped more than 5% after posting forecasts that beat analysts’ estimates; its results lifted shares of automakers Ford and Stellantis. Here are some other notable premarket movers: Shares in NXP Semiconductors drop 4% in US premarket trading after the chipmaker gave a forecast for first-quarter revenue that missed estimates. The company saw weak demand in its mobile, industrial and smart home businesses, while its autos segment remained resilient. Shares of semiconductor companies are falling in US premarket trading on Tuesday, after Samsung Electronics said it expects the smartphone market to contract in 2023 and NXP Semiconductors (NXPI US) reported a sales decline in its mobile business. Micron leads chip stocks lower in US premarket trading after Samsung Electronics said it expects the smartphone market to contract in 2023 and NXP Semiconductors reported a sales decline in its mobile business. Comstock Resources (CRK US) shares rise as much as 6% in US premarket trading, ahead of the oil and gas company’s inclusion in the S&P SmallCap 600 index. Health insurance stocks and managed-care providers could come under pressure in the short term, analysts said, after a Medicare audit rule was finalized under which the agency will seek around $4.7 billion over 10 years in clawback payments. Shares in insurers including Humana (HUM US) and UnitedHealth (UNH US) declined in US postmarket trading on Monday. FibroGen Inc. (FGEN US) gained in postmarket trading Monday after William Blair raised the recommendation to outperform from market perform, joining at least two other analysts who have lifted their ratings this month. Integer Holdings Corp. (ITGR US) declined postmarket Monday after the medical device outsource manufacturer announced the launch of a $375m convertible senior notes offering. Harmonic (HLIT US) dropped in postmarket trading Monday after forecasting adjusted earnings per share for 2023 that missed the average analyst estimate. “Markets are tense,” said Raphael Thuin, head of Capital Markets Strategies at Tikehau Capital. “They haven’t made up their minds about the ongoing earnings season,” he said, noting visibility also remains low on the outlook for inflation and how policy makers intend to keep price growth in check. He warned that a surprisingly hawkish tone from the Fed could trigger a backlash across markets. The US central bank will conclude its meeting on Wednesday and is widely expected to raise rates by 25 basis points. Signs of earnings pressure are complicating the picture for investors hopeful that the Fed will ease off on its aggressive rate-hike cycle: According to data compiled by Bloomberg, earnings per share estimates for the S&P 500 have fallen since peaking in June 2022, while revenue projections have flatlined. Margins are coming under pressure as slowing inflation erodes pricing power. “The prospect of a stabilization of interest rates at 5% after March is shifting the focus from the rate side to the growth side,” said Willem Sels, chief investment officer at HSBC Private Bank. “Mixed earnings will probably continue to lead to some volatility in coming weeks, so we are neutral on developed-market equities for now.” European stocks extended a decline after data suggested the euro area will avoid a recession after unexpectedly expanding at the end of 2022, prompting traders to ramp up bets on monetary tightening by the ECB. The Stoxx 600 was down 0.7% with miners, financial services and energy the worst performing sectors. Gross domestic product edged up by 0.1% in the final quarter, Eurostat said Tuesday, defying economist estimates for a contraction of 0.1%. While German and Italian output shrank, France and Spain recorded expansion. There was also stronger-than-anticipated data on Monday from Ireland. Among individual stock movers in Europe on Tuesday, Swiss lender UBS Group AG dropped more than 3% after reporting a slump in revenue at its key wealth management business. Unicredit SpA surged after the Italian lender reported better-than-expected profit. Here are some of the biggest European movers on Tuesday: UniCredit shares rise as much as 9.6% after the Italian lender beat expectations across the board, including delivering what KBW says is a “monster” capital return Swedbank jumps as much as 5% after the lender’s 4Q net interest income (NII) fueled a strong profit beat. Analysts say they expect positive revisions to earnings estimates for 2023-2024 Diageo gains as much as 2.1% after Investec upgraded the drinks giant to buy from hold, saying the shares are “a rare bargain” after their post-earnings decline SEB rises as much as 9.2%, their biggest jump since October 2021, after the French household-appliances maker reported 4Q sales that beat the average analyst estimate. UBS shares fall as much as 4.1% in early trading with analysts saying the Swiss banking and wealth management group’s results look mixed when delving into the details Tele2 shares fall as much as 5% after the telecom operator forecast low-single-digit growth in Ebitda after-leases for 2023, which analysts say was “soft” compared to consensus Rheinmetall shares fall as much as 7.2% after the defense company said it plans to offer of two series of unsubordinated, unsecured convertible bonds with an aggregate principal amount of €1 billion Wartsila shares fall as much as 5.8%. The power plant services company posted a “heavy” 50% miss on its fourth-quarter EPS, driven by legacy pricing and one-time items, RBC says AMS-Osram shares fall as much as 4.9% after the Swiss semiconductor company announced a CEO change, a move Vontobel described as “unexpected” and adding uncertainty Darktrace drops as much as 7.6% to a record low after Quintessential Capital Management issued a 70-page report explaining why it’s short the shares of the cybersecurity firm Trelleborg shares drop as much as 4.6%, retreating from yesterday’s record close, as Citi writes in note that it appears too early for a re-rating in the industrial firm’s stock Asian stocks fell for a second day as mainland Chinese shares pulled back after Monday’s advance, with traders awaiting key decisions from major central banks this week. The MSCI Asia Pacific Index declined as much as 1.2%, dragged lower by technology shares after Samsung Electronics posted weaker-than-expected fourth-quarter results. Equity markets in Hong Kong, South Korea and Taiwan retreated. China’s CSI 300 Index fell even after the latest economic data showed manufacturing and services expanded for the first time in four months as the nation exited from Covid Zero. The benchmark gauge shied away from a bull market after a recent rally fueled by the return of foreign investors took a breather. “Stocks generally have had a very good run recently despite concerns of a US recession and Fed hawkishness,” said Chetan Seth, an Asia Pacific equity strategist at Nomura. “So there is naturally a huge focus on US payrolls data this Friday and what Chair Powell has to say this coming Thursday early morning in Asia.” Interest-rate decisions are scheduled this week for the Federal Reserve, the European Central Bank and the Bank of England. The Fed is widely expected to raise rates by a quarter percentage point, with investors on the lookout for any changes in the future tightening path.  The MSCI’s Asian benchmark was poised for a monthly gain of around 8%, its best January performance since 1994. The gauge has rallied 23% since Oct. 31 on China’s rebound, beating the S&P 500 by 19 percentage points Japanese equities erased earlier gains, ending the day lower ahead of major central-bank decisions this week.    The Topix Index fell 0.4% to 1,975.27 as of the market close in Tokyo, while the Nikkei declined 0.4% to 27,327.11. Daiichi Sankyo Co. contributed the most to the Topix’s decline, decreasing 4.9%. Out of 2,165 stocks in the index, after its 3Q results. 1,382 rose and 696 fell, while 87 were unchanged. “This week we have the US jobs report and the FOMC meeting,” said Hideyuki Suzuki, general manager at SBI Securities. “We’ll have to monitor the Fed meeting.”  Interest-rate decisions are scheduled this week for the Federal Reserve, the European Central Bank and the Bank of England. Australian stocks also dipped, with the S&P/ASX 200 index edging 0.1% lower to close at 7,476.70, dragged by losses in mining and real estate shares.  Australian retail sales declined for the first time in 2022 in December, suggesting consumers are beginning to rein in spending in response to rapid inflation and rising interest rates. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,967.72.  Indian stocks closed little changed amid a volatile session ahead of the federal budget’s presentation on Wednesday. HDFC Bank and software makers were key drags on benchmark index. Adani Group stocks were mostly higher as the conglomerate’s flagship firm successfully concluded its $2.5 billion follow-on share sale, helped by demand from institutional investors. Seven out of 10 companies controlled by Adani Group advanced while the decliners were led by Adani Total Gas, which plunged 10%. The S&P BSE Sensex rose slightly less than 0.1 percent to 59,549.90 in Mumbai, while the NSE Nifty 50 Index moved by a similar amount. Fifteen of the 20 sector sub-gauges compiled by BSE Ltd. advanced, led by services-sector companies, while energy firms were the worst performers. Stocks in Asia and Europe were mostly lower as investors await key decisions from major central banks this week. Cigarette and FMCG-products maker ITC contributed the most to the Sensex’s gain, increasing 2.2%. Half the 30 shares in the Sensex index rose and half fell. In FX, the Bloomberg Dollar Spot Index rose 0.2% to its highest level since Jan. 24, as broader market sentiment turned cautious with the Federal Reserve set to kick off its two-day meeting, while the European Central Bank and the Bank of England both issue policy decisions on Thursday. The Norwegian krone and Australian dollar are the weakest among the G-10’s while the Japanese yen outperforms. “The price action suggests market participants are nervous over a hawkish policy surprise from central banks including the Fed this week, and/or a lot of good news has already been priced into markets now in anticipation of China’s economy reopening more fully,” MUFG analysts wrote in a note The euro falls as much as 0.5% versus the dollar before clawing back some losses; the Euro Stoxx 50 index slips 0.7%, taking a hit on the back of mixed corporate earnings as investors focus on growing pressures on banks, tech, other sectors The pound slipped 0.3% vs the dollar, weighed down by month-end selling. Ahead of Thursday’s BOE rate decision, a survey of economists suggests a half-point hike is most likely with a three-way vote split The Norwegian krone stumbles to its weakest against the euro in more than two years, after the country’s central bank said it would raise its FX purchases next month. Its wealth fund reported its biggest loss since the 2008 global financial crisis. The yen edged up, while the yield on 10-year JGBs rises toward the Bank of Japan’s 0.5% policy ceiling as solid demand for central bank loans fails to quell speculation that another policy change is in store In rates, treasuries edge up, pushing the 10-year yield 2bps lower to 3.51%, with gilts underperforming by ~1bp in the sector, helping unwind some Treasury gains seen in Asia session. Gilts lag, and markets trade with a broad risk-off tone with S&P 500 futures lower, adding to Monday’s slide. The two-year yield slips 0.2bps to 4.23%, keeping the inverted two-year/10-year yield curve little changed. Bunds gain, led by a 2.5 basis point slide in the five- year yield to 2.33%. German 10-year yields are lower by 2bps while the UK equivalent is unchanged. US economic slate includes employment cost index and consumer confidence. In commodities, crude futures decline, with WTI down 1.7% to trade near $76.60. Spot gold falls roughly $18 to trade near $1,905 Looking to the day ahead now, and data releases include the first look at Q4 GDP for the Euro Area. Alongside that, we’ll get the French CPI release for January, as well as German unemployment for January and UK mortgage approvals for December. In the US, there’s then the Conference Board’s consumer confidence for January, the ECI, the MNI Chicago PMI for January, and the FHFA house price index for November. Finally, earnings releases include ExxonMobil, Pfizer, McDonald’s, UPS, and Caterpillar. Market Snapshot S&P 500 futures down 0.3% to 4,019.75 MXAP down 1.1% to 167.63 MXAPJ down 1.4% to 548.11 Nikkei down 0.4% to 27,327.11 Topix down 0.4% to 1,975.27 Hang Seng Index down 1.0% to 21,842.33 Shanghai Composite down 0.4% to 3,255.67 Sensex down 0.1% to 59,437.41 Australia S&P/ASX 200 little changed at 7,476.66 Kospi down 1.0% to 2,425.08 STOXX Europe 600 down 0.7% to 451.36 German 10Y yield little changed at 2.29% Euro down 0.3% to $1.0822 Brent Futures down 1.1% to $83.95/bbl Gold spot down 0.9% to $1,905.51 U.S. Dollar Index up 0.20% to 102.49 Top Overnight News China’s NBS PMIs rebound in January, w/manufacturing at 50.1 (up from 47 in Dec and inline w/the St’s 50.1 forecast) and non-manufacturing 54.4 (up from 41.6 in Dec and ahead of the St’s 52 forecast). RTRSThe Biden administration has stopped providing US companies with licences to export to Huawei as it moves towards imposing a total ban on the sale of American technology to the Chinese telecom equipment giant. FT US President Biden is to end COVID-19 emergency declarations on May 11th, according to the White House. US President Biden announces funding for major transportation projects funded by the bipartisan infrastructure law; USD 1.2bln across nine projects. The Biden administration plans to release the president’s budget on March 9th, according to Punchbowl sources. The euro area is on course to avoid a recession after euro zone Q4 GDP edged up by 0.1% in the final quarter, despite double- digit inflation and Russia’s invasion of Ukraine. While German and Italian output shrank, France and Spain recorded expansion France’s CPI for Jan rose vs. Dec, but was relatively inline w/ St expectations (+7% vs. +6.7% in Dec). Germany’s CPI for Jan was due out this morning but will be delayed a few days because of technical issues. RTRS France has signalled openness to sending fighter jets to Ukraine as western countries weigh the next steps in military assistance to help Kyiv resist Russian attacks. FT IMF issues a bullish update on the global economy, increasing its 2023 GDP growth forecast from +2.7% to +2.9%. IMF  German retail sales unexpectedly fell in December as a Christmas shopping period weighed down by high inflation and the energy crisis revived fears of a more marked slowdown in Europe's largest economy. Retail sales decreased by 5.3% in December compared with the previous month, the federal statistics office said on Tuesday. Analysts polled by Reuters had forecast a 0.2% rise in price-adjusted terms. RTRS Biden will herald a $300MM grant for the Gateway Program, which aims to build a new rail tunnel beneath the Hudson River, during an appearance in NYC on Tuesday. Politico   Gautam Adani did it. The $2.5 billion equity sale by his flagship company was fully subscribed, a reprieve after Hindenburg's attack on his empire. Today's the final day of bidding in the follow-on offering by Adani Enterprises, which climbed 2.8%. Adani Total plunged by the 10% daily limit to lead losses in most of the group's stocks. BBG Asian stocks fell for a second day as mainland Chinese shares pulled back after Monday’s advance, with traders awaiting key decisions from major central banks this week The International Monetary Fund raised its global economic growth outlook for the first time in a year, with resilient US spending and China’s reopening buttressing demand against a litany of risks The US Treasury is set to keep the size of its quarterly sale of longer-term securities unchanged in an announcement this week, with bond dealers seeing little scope for changes to issuance strategy amid a partisan battle over expanding the government’s borrowing authority A more detailed look at global markets courtesy of Newsquawk APAC stocks declined following the weak lead from global counterparts added to the cautiousness heading into the upcoming risk events, while a rebound in Chinese PMI data failed to inspire a rally as the region also digested a slew of earnings updates. ASX 200 was subdued as the outperformance in defensives was offset by losses in tech and with Retail Sales at a larger-than-expected contraction. Nikkei 225 softened amid a deluge of earnings releases which impacted several of the largest movers in the index, although losses were contained by better-than-expected data releases. KOSPI suffered amid losses in its largest constituent Samsung Electronics which posted its lowest quarterly operating profit in 8 years and flagged macroeconomic uncertainties will persist this year. Hang Seng and Shanghai Comp. were pressured despite the strong Chinese PMI data which topped forecasts and returned to expansion territory, while attention was also on preliminary earnings and reports that US President Biden's team is weighing fully cutting off Huawei from US suppliers. Top Asian News US Commerce Department notified companies it would no longer grant them licences to export to Huawei as the White House mulls fully cutting off Huawei from US suppliers, according to FT and Bloomberg. US is pushing for military sites in the Philippines to counter China, according to WSJ. Indian Gov't Economic Survey: 2023/24 GDP Growth 6.0-6.8%, baseline GDP growth pegged at 11% nominal and 6.5% in real terms. Chinese Premier Li says will keep economic operations within a reasonable range, according to state media; maintaining financial stability and fending off risks still long-term and arduous tasks, will keep the Yuan exchange rate basically stable. European bourses are lower across the board, Euro Stoxx 50 -0.6%, as the upside after France's CPI fizzled out and reverted back to APAC performance. Sectors are mostly in the red with Banking names outperforming post-earnings while Basic Resources lag given the risk tone and USD. Stateside, futures are similarly pressured and have been in-fitting with European peers throughout the session ahead of key Employment Cost data, ES -0.5%. Top European News IMF raised its 2023 global GDP growth forecast to 2.9% from 2.7% citing resilience in advanced economies and China reopening but cut its 2024 global GDP growth forecast to 3.1% from 3.2% due to steeper monetary policy tightening. Click here for more detail. French and German Economy Ministers are to head to the US on February 6th-7th, to attempt to "iron out" the disagreement sparked by the US' Inflation Reduction Act, via Politico citing sources. UK PM Sunak has been warned by two former negotiators, including Lord Frost not to trade off the power to overrule the EU in Northern Ireland in order to make a deal with Brussels, according to The Telegraph. Riksbank Governor Thedeen says high inflation and increasing interest rates are testing the resilience of the Swedish financial system. UK Dec. Mortgage Approvals Fall to 31-Month Low of 35.6k UK to Be Only G-7 Economy in Recession This Year, IMF Says Norway’s Wealth Fund Loses 14% as Inflation, War Hit Markets Tesco in Talks to Buy Paperchase Brand, Other IP Assets: Sky UniCredit CEO Says Current Valuations Don’t Allow M&A FX The USD is on the front-foot as the DXY benefits from the downturn in risk sentiment and as such continues to extend above 102.00 to a 102.61 peak, though the 102.50 mark is proving sticky ahead of data. EUR/USD tested 1.08 to the downside following below/in-line with consensus French inflation while the subsequent Flash/Prelim. GDP print for Q4, which was unexpectedly positive, failed to spur any sustained EUR upside. Antipodeans are the current laggards with soft Australian retail sales hampering the AUD and more-than-offsetting any positivity from China's PMIs; AUD/USD down to 0.6999 and NZD/USD to 0.6421 troughs vs 0.7065 and 0.6479 peaks. JPY is little changed overall with comparably softer USD yields and the risk tone offsetting the USD's dominance, USD/JPY in a narrow 130.05-130.53 range. PBoC set USD/CNY mid-point at 6.7604 vs exp. 6.7607 (prev. 6.7626) Fixed Income EGBs are currently mixed/flat, despite pronounced action throughout the session in the wake of French and EZ data points, Bunds are currently towards the lower-end of 136.54-137.30 parameters. The complex experienced an initial bid on the in-line/slightly cooler than consensus French inflation metrics before slipping following unexpectedly positive EZ Q4 QQ GDP, as the more resilient economy provides the ECB with the necessary cover to continue tightening. Amidst this, Gilts and USTs have been directionally in-fitting but with magnitudes more contained ahead of Thursday's BoE and today's key US data ahead of the FOMC; currently, US yields are a touch softer with action slightly more pronounced at the short-end of the curve. Commodities Crude benchmarks have been moving lower throughout the session as sentiment sours somewhat as we move closer to the week's key risk events. Thus far, WTI March has dipped under USD 77/bbl (from a USD 78.14/bbl high) while its Brent April counterpart fell under USD 83.50/bbl (from a USD 84.80/bbl high). Russia banned domestic oil exporters from adhering to Western price caps and called on the energy ministry to devise an approach for monitoring prices of Russian oil exports by March 1st. Spot gold has tested USD 1900/oz to the downside, though the figure at 21-DMA at USD 1901/oz is seemingly providing support with the yellow metal yet to move below the figure; LME Copper is downbeat given the above risk tone and firmer USD. Geopolitics Russia and Belarus began joint military staff training, according to the Belarusian Defence Ministry. US President Biden said the US will not send Ukraine F-16 jets, according to CBS News. S. Korean and US Defence Chiefs pledge to expand the level and scale of joint military drills. NATO Secretary General Stoltenberg said to Japan that the war in Ukraine demonstrates that their security is closely interconnected and he appreciates the support Japan provides including cargo capabilities, while he added that they will continue to strengthen the partnership between Japan and NATO, according to Reuters. US Event Calendar 08:30: 4Q Employment Cost Index, est. 1.1%, prior 1.2% 09:00: Nov. S&P CS Composite-20 YoY, est. 6.70%, prior 8.64% S&P/CS 20 City MoM SA, est. -0.65%, prior -0.52% S&P/Case-Shiller US HPI YoY, prior 9.24% 09:00: Nov. FHFA House Price Index MoM, est. -0.5%, prior 0% 09:45: Jan. MNI Chicago PMI, est. 45.0, prior 44.9, revised 45.1 10:00: Jan. Conf. Board Consumer Confidence, est. 109.0, prior 108.3 Present Situation, prior 147.2 Expectations, prior 82.4 10:30: Jan. Dallas Fed Services Activity DB's Jim Reid concludes the overnight wrap After putting in a very strong start to 2023, markets lost a fair bit of ground yesterday as investors grew a little concerned about the sustainability of the current rally. There were several factors driving that, but an important one was the stronger-than-expected Spanish inflation print for January, which added to fears that inflation could prove more persistent than feared, meaning that central banks would need to keep up their hawkish stance for some time yet. That led equities and bonds to sell off over the last 24 hours, with the S&P 500 (-1.30%) putting in its worst start to a week so far this year, and second worst day of the year, just as 10yr Treasury yields rose +3.3bps as well. Clearly there’s still plenty to navigate over the course of the week, but with US financial conditions having eased to their most accommodative in months, there’s an awareness that the Fed could seek to reassert their hawkish credentials through tomorrow’s decision. In terms of the specific moves, risk assets struggled for the most part, with big tech leading the declines as fears about higher rates ramped up again. That saw the NASDAQ shed -1.96% on the day (worst day since December 22nd), whilst the FANG+ index of megacap tech stocks saw an even larger decline of -3.41% (also the worst day since December 22nd). While megacap tech stocks led the declines, 80% of S&P 500 constituents lost ground yesterday with the worst single sector actually being energy (-2.29%) on lower oil prices, as Brent crude was down -2.03%. In fact, the only major sector to just finish positive on the day was the defensive consumer staples (+0.07%) group. On this side of the continent, the STOXX 600 (-0.17%) saw more modest declines and finished near the highs of the day before the last part of the US sell-off As mentioned at the top, the day got off to a rough start after the Spanish inflation print for January came in significantly higher than expected. The release saw CPI come in at 5.8% on the EU-harmonised measure, which was an increase from the previous month’s 5.5% and a full point above the expected decline to 4.8%. In addition, core inflation (using the national definition) moved up to another multi-decade high of 7.5%, having been at 7.0% in December. So that’s bad news for hopes that we were now firmly trending downwards, and the acceleration of core inflation will raise concerns about how persistent its still proving. Next up is French inflation today with German consumer prices, slated for today, now being postponed to next week, seemingly due to technicalities over new base effects. Very intriguing! Staying with inflation, the US employment cost index (ECI) is a very important release today, especially ahead of the FOMC. Even before the Spanish numbers, investors were already expecting that the ECB would be the most hawkish central bank this week, but that print served to ratchet that up further. For instance, investors are now fully anticipating a 50bps hike on Thursday, but pricing further out now points to 147bps of further hikes by July, which was up +8.9bps on the day. In turn, that led European sovereigns to underperform their counterparts elsewhere, with yields on 10yr bunds (+7.9bps), OATs (+8.3bps), Spanish bonds (+9.1bps) and BTPs (+10.2bps) all rising on the day. Back to Germany, and we got a further piece of bearish news yesterday after data showed their Q4 GDP growth came in at a contractionary -0.2%, which was beneath expectations for an unchanged reading. That’s a bit of a knock since it goes against the more positive narrative recently that high gas storage and falling prices would aid the economy. It also means that if there’s another contraction in Q1, then the technical definition of a recession would be met. In other news, it was widely reported yesterday that the EU are set to respond to the US’ Inflation Reduction Act by loosening the rules on tax credits. The proposals are set to be published tomorrow, but according to a Bloomberg who’d seen a draft it included a Net-Zero Industry Act to simplify regulations, among others. European Commission President von der Leyen is giving a speech on the issue tomorrow, and ahead of that, our European economists put out a report (link here) where they assess the technical details behind various policy options along with their pros and cons. Back in the US, Treasuries might not have struggled as much as their European counterparts, but it was still a tough day as investors positioned ahead of tomorrow’s Fed decision. That meant yields on 10yr Treasuries were up +3.3bps, and the more policy-sensitive 2yr yield was up +3.5bps at 4.234%. As with the ECB, those moves were in part because investors ramped up their hawkish expectations of the Fed, with terminal rate pricing for June up +2.0bps on the day to a nearly 3-week high of 4.931%. Late in the US session, there was news that the Biden administration was weighing fully cutting off Chinese technology company Huawei from American suppliers, including US chipmakers such as AMD, Intel, and Qualcomm. President Trump’s administration had initially named Huawei a national security concern, which meant that US companies were required to receive approval from the government before transacting with Huawei. According to Bloomberg, Huawei sales make up less than 1% of revenue for AMD, Intel, and Qualcomm. However, investors should keep an eye on possible knock-on effects if the US does ban sales to the Chinese company. This morning in Asia equity markets across the region are trading in negative territory, taking their cue from Wall Street declines overnight. Those negative moves have come despite fresh economic data out of China showing a bounce in activity (more on this below). As I type, the Hang Seng (-1.27%) is the largest underperformer with the CSI (-0.79%) and the Shanghai Composite also drifting lower. Elsewhere, the KOSPI (-0.72%) is also losing ground as index heavy-weight Samsung Electronics' (-2.74%) operating profit plunged in 4Q of last year amid the global chip downturn. Meanwhile, the Nikkei (-0.21%) is also edging lower. US stock futures are indicating a muted start with those on the S&P 500 (-0.01%) just below flat while contracts tied to the NASDAQ 100 (-0.22%) are seeing slightly deeper losses. Coming back to China, the official manufacturing PMI swung back to expansion in January after reporting a reading of 50.1 (in-line with consensus), up from a 34-month low of 47.0 in December as the nation ended strict Covid curbs. At the same time, sentiment among service-led businesses improved dramatically as the non-manufacturing PMI came in at an upbeat 54.4 figure (v/s 52.0 expected), marking the healthiest expansion since June 2022. Meanwhile in Japan, the unemployment rate remained unchanged at 2.5% in December with the job-to-applicant ratio staying at 1.35 (v/s 1.36 expected). Separately, retail sales rebounded +1.1% m/m in December, beating the market forecast for a +0.7% rise and against an upwardly revised -1.3% decline in the prior month. Industrial Production also beat a -1.0% consensus with a -0.1% m/m figure for December and compared to a +0.2% increase in November. Elsewhere, the International Monetary Fund (IMF) upgraded its 2023 global growth estimates while stating that the EM growth slowdown may have bottomed out in 2022. They forecast that global GDP will likely expand 2.9% in 2023, an improvement of +0.2 percentage from its October prediction, mainly due to resilient demand in the US and Europe coupled with China’s reopening. Additionally, for 2024 it expects global growth to accelerate to 3.1%. In terms of yesterday’s other data, it was generally on the more positive side. For instance, the European Commission’s economic sentiment indicator for the Euro Area in January moved up for a third consecutive month to 99.9 (vs. 97.0 expected), which is its highest level since June. Meanwhile in the US, the Dallas Fed’s manufacturing index rose to its highest since May at -8.4 (vs. -15.0 expected) To the day ahead now, and data releases include the first look at Q4 GDP for the Euro Area. Alongside that, we’ll get the French CPI release for January, as well as German unemployment for January and UK mortgage approvals for December. In the US, there’s then the Conference Board’s consumer confidence for January, the ECI, the MNI Chicago PMI for January, and the FHFA house price index for November. Finally, earnings releases include ExxonMobil, Pfizer, McDonald’s, UPS, and Caterpillar. Tyler Durden Tue, 01/31/2023 - 08:05.....»»

Futures Tick Higher Ahead Of Key PCE Print US stock futures edged higher after Thursday’s slump as investors weighed strong job data and prospects of further policy tightening to cool inflation ahead of today's closely watched core PCE print which may reverse the negative sentiment (especially if it comes at 4.5% Y/Y or lower) and send stocks sharply higher (see here for more). Contracts on the Nasdaq 100 and the S&P 500 gained 0.3% by 7:30 am ET one day after the S&P 500 cash index plunged 1.5% on Thursday and was set for a third consecutive weekly loss, the longest losing streak since September. The index is also on pace for its second-worst December on record, while the Nasdaq 100 is on course for its steepest slump in the month since 2002. In premarket trading Friday, Tesla Inc. shares rose after Elon Musk said he isn’t planning to sell any more shares for two years. Meme stock AMC Entertainment slid after the movie theater chain operator proposed converting preferred equity units into common shares. Meanwhile, avocado supplier Mission Produce reported fiscal fourth-quarter revenue and adjusted earnings per share that missed the average analyst estimates and predicted lower pricing in the first quarter. Sentiment on Wall Street took a hit Thursday as jobless claims came in lower than expected, signaling the Federal Reserve has more work to do on inflation, while earnings disappointments sparked fears among investors of a recession. Technically, the set up isn’t looking good, according to Bloomberg intelligence strategist Gina Martin Adams, with a descent in equities that began at the start of 2022 looking set to persist into early 2023. “Momentum and breadth remain weak and industry cues hint at a prolonged struggle,” she wrote in a note. With stocks sliding, global equity funds saw record weekly outflows of almost $42 billion in the week to Dec. 21, which were largely driven by US stock funds shedding $37 billion of assets, according to EPFR Global data. The outflows were mostly due to seasonal redemptions from US ETFs, Citigroup strategists said. And as a catastrophic year for stocks draws to a close, investors have also had a warning from strategists that they should brace for more pain heading into 2023. “I think it’s going to be a very difficult year,” said James Athey, investment director at Abrdn. “The fact of the matter is that there’s been a significant monetary tightening we haven’t seen in a long time,” he said. “The effect of that on a global economy which is drowning in debt is highly likely to be deleterious.” “Markets are in a state of flux at the moment, we have quite high inflation and interest rates that don’t quite seem able to catch up,” Richard Harris, chief executive officer at Port Shelter Investment Management, said in an interview on Bloomberg TV.  “You have to be careful with equities, but they are still a better bet than bonds at the moment.” Notable headlines overnight:  Joe Biden said it will take time to get inflation back to normal levels, according to Yahoo News. Tesla CEO Musk said he will not sell any more Tesla stock for at least 18-24 months; waiting to see the extent of a recession before share buybacks, via Twitter Space. Musk said the economy will be in a "serious recession" in 2023, and demand will be lower. Investors are now awaiting the PCE deflator, a key inflation measure tracked by the Fed. Analysts polled by Bloomberg expect a year-on-year 5.5% headline print, slowing from October’s 6%. In Europe, the Stoxx 600 was on the rise, led by real estate, basic resources and retail stocks, and was headed for the first weekly gain in three as risk appetite returned before the Christmas holiday. Earlier in the session, Asian stocks fell, on track for a second-straight weekly loss on concerns about aggressive US interest-rate hikes and the spread of the coronavirus in China. The MSCI Asia Pacific Index fell as much as 1.2%, with technology and energy stocks falling the most and dragging down South Korean and Taiwanese benchmarks. Trading was thin in much of the region ahead of year-end holidays.  US economic growth in the third quarter was firmer than previously estimated, pushing a pause in the Federal Reserve’s policy tightening further out of reach. Investors are also wary that the core PCE deflator — a key US inflation measure — due later Friday may add to reasons for tighter policy. Meantime, a weaker sales outlook by memory maker Micron weighed on the chip sector. Friday’s decline put the MSCI Asia gauge on track for a 0.6% loss this week. While some strategists are optimistic that the year ahead could bring a rally after this year’s double-digit drop, the first half of 2023 looks riddled with challenges to profits as the global economy slows down and China’s path to reopening remains uncertain “The Grinch selloff is firmly in place after Micron delivered a gloomy outlook and as better-than-expected US economic data supported the Fed’s case for more ongoing rate increases,” Edward Moya, a senior market analyst at Oanda, wrote in a note. “Global coordinated central bank tightening has yet to fully impact most of the economic readings for the major economies and that should have investors nervous over earnings downgrades and credit risks.” Key measures of Hong Kong and mainland stocks fell as the market digested China’s rising infection numbers and a sharp slowdown in economic activity. Japan's Nikkei 225 posted its worst week since June on fears that the Bank of Japan has begun to exit its easy-money policy.  On Friday, Japanese stocks declined as resilient US economic data renewed investor worries that the Federal Reserve will continue raising interest rates aggressively. The Topix fell 0.5% to close at 1,897.94, while the Nikkei declined 1% to 26,235.25. Toyota Motor Corp. contributed the most to the Topix decline, decreasing 1.2%. Out of 2,162 stocks in the index, 677 rose and 1,384 fell, while 101 were unchanged. US Third-Quarter GDP Revised Higher to 3.2% on Firmer Spending “How long the Fed maintains its hawkish stance will depend on inflation,” said Tatsushi Maeno, a senior strategist at Okasan Asset Management. “There may be a mood of restrained buying ahead of the US PCE data this evening,” which could provide the next clue on the Fed’s moves In Fx, the Bloomberg Dollar Spot Index weakened for first time in three days. The dollar pulled back against a basket of currencies and was headed for a weekly decline, having risen for the two previous weeks. The yen firmed, bringing this week’s gains to almost 3%, thanks to the Bank of Japan’s sudden hawkish policy pivot announced on Tuesday. In rates, Treasury yields grind higher, following similar price action in bunds where ECB hike premium has edged up over early London session on no immediate catalyst. US session focus includes a busy data slate which includes PCE deflator and University of Michigan sentiment. Early 2pm New York close for cash Treasuries, recommended by SIFMA. US 10-year yields around 3.71%, cheaper by 3bp vs. Thursday close and trading broadly inline with bunds and gilts. 2-year TSY yields are steady at 4.27% while 10-year yields gain 1.1bps to 3.69%. In Thursday’s trading session yields rose after stronger-than expected US economic data with 2-year tenor gaining 5bps while 10-year finished up 2bps. Spreads pare portion of Thursday’s flattening move with Treasury 2s10s, 5s30s curves steeper by 1.4bp and 1.2bp on the day. In commodities, crude oil is firmer with WTI & Brent up by roughly $2.0/bbl, with WTI needing another USD 1.00/bbl of upside to test Thursday’s WTD peak of USD 79.90/bbl; early on Friday Russia said it could cut oil output by 5-7% early next year as a response to the Western price caps, according to RIA citing Deputy PM Novak;  Spot gold/silver are incrementally firmer given the Dollar continues to languish, though the yellow metal remains capped by USD 1800/oz and as such is well within recent ranges. Looking at today's busy calendar slate, we get Personal income and spending as well as the Fed's favorite inflation metric, core PCE; we also get Durable Capital goods and new orders as well as the UMichigan sentiment indicator and new home sales. Market Snapshot S&P 500 futures little changed at 3,848.50 MXAP down 1.0% to 155.37 MXAPJ down 1.1% to 503.74 Nikkei down 1.0% to 26,235.25 Topix down 0.5% to 1,897.94 Hang Seng Index down 0.4% to 19,593.06 Shanghai Composite down 0.3% to 3,045.87 Sensex down 1.6% to 59,868.93 Australia S&P/ASX 200 down 0.6% to 7,107.69 Kospi down 1.8% to 2,313.69 STOXX Europe 600 up 0.3% to 428.34 German 10Y yield little changed at 2.40% Euro little changed at $1.0600 Brent Futures up 1.8% to $82.45/bbl Gold spot up 0.2% to $1,796.18 U.S. Dollar Index little changed at 104.37 Top Overnight News from Bloomberg Oil Pushes Higher as Russia May Cut Output in Response to Cap Jan. 6 Panel Releases Report Blasting Trump for Capitol Assault Tencent Rant, Sea Pay Freeze Hint at Deepening Gaming Crisis Sea Dives After Pay Freeze, Bonus Cuts Suggest Tougher 2023 Biogen’s ALS Drug Raises Stakes in War Over Fast Drug Approvals Trump Asked About Using Troops on Protesters, Esper Told Panel Bankman-Fried’s $250 Million Bail Doesn’t Mean He Has Money US Stocks Snap Two Days of Gains; Dollar Rises: Markets Wrap Tech Bulls Face Worst December in 20 Years as Fed Anxiety Grows Well-Timed Shorts See Value Investor Notching 40% Gains for 2022 Storm Upends Holiday Travel, Triggers White House Warning A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly lower but drifted off worst levels following a similar session stateside.  ASX 200 saw all of its sectors in the red with losses led by Tech, Energy and gold miners. Nikkei 225 was dragged lower by its industrial sector, whilst Japanese Core CPI in November rose at the fastest annual pace since 1981. Hang Seng and Shanghai Comp were mixed in which the former succumbed to the regional losses and the latter briefly moved into the green, whilst the PBoC injected a net CNY 704bln in the week via OMO - the largest weekly cash in nearly two months, according to Reuters calculations. Top Asian News China reported zero new COVID deaths in the mainland on Dec 22nd vs zero a day earlier, according to Reuters. PBoC injected CNY 2bln via 7-day reverse repos with the rate maintained at 2.00%; injects CNY 203bln via 14-day reverse repos with the rate maintained at 2.15%; daily net injection CNY 164bln. PBoC injected a net CNY 704bln in the week via OMO; the largest weekly cash in nearly two months, according to Reuters calculations. Japanese PM Kishida could conduct a cabinet reshuffle as early as January 10th, according to ANN. Japanese government official said the next wave of food inflation is likely to come in February 2023; effects of government subsidies to cushion energy bills will likely start affecting CPI from February 2023, according to Reuters. BoJ October meeting minutes (two meetings ago): One member said the effects of BoJ's easing may be heightening as a moderate increase in inflation expectations push down real interest rates. China reportedly estimates the COVID surge is affecting 37mln people per day, via Bloomberg. Indian Health Minister says in the next week, planning to make COVID-19 negative test report compulsory for passengers from nations with a high case load. European bourses are marginally firmer, Euro Stoxx 50 +0.2%, with the Stoxx 600 on track to end the week with upside of circa. 0.6%. Sectors are, after a mixed open, mostly in the green though Utilities and Travel & Leisure remain incrementally softer. Stateside, futures are similarly supported, ES +0.3%, though we await US monthly PCE metrics for another factor into the Fed's deliberations. TSMC (TSM/2330 TT) is said to be in talks with suppliers over its first European plant, according to FT sources; Senior executives are heading to Germany early next year for discussions. Top European News Janus Henderson’s New CEO To Expand In Latin America, Asia Meet the Improbable Stars of Turkey’s Year of Inflation Infamy Russia Says It May Cut Daily Oil Output by 700,000 Barrels Japan Begins Defense Upgrade With 26% Spending Increase for 2023 Russia’s Novak: Decisions on Turkey Gas Hub May Be Taken in 2023 Poland Sues EU Over Mounting Fine in Rule-of-Law Dispute Geopolitical Senior Chinese Diplomat Wang Yi spoke to US Secretary of State Blinken and said US must stop supressing China's development and should not challenge China's red lines, according to Reuters. Chinese Foreign Ministry announced sanctions on Yu Maochun and Todd Stein as countermeasures to US’ sanction on two Chinese officials, citing human rights issues in Xizang (Tibet), according to Global Times. N. Korea has fired what could be a ballistic missile, via Japanese Coast Guard; Yonhap reports this as being a ballistic missile; landed outside of Japan's EEZ. FX Dollar wanes after GDP and IJC boost as the focus switches to PCE amidst a partial recovery in risk appetite, DXY roams from 104.160 to 104.510. Kiwi claws back losses vs Aussie and Buck as AUD/NZD retreats through 1.0650, NZD/USD breaches 200 DMA and AUD/USD scales 100 DMA with a slight lag. Pound, Euro and Loonie take advantage of softer Greenback, but Yen hampered by high yields, Cable firmer on 1.2000 handle, EUR/USD resilient around 1.0600, USD/CAD probing 1.3600 and USD/JPY hovering above 132.50. PBoC sets USD/CNY mid-point at 6.9810 vs exp. 6.9885 (prev. 6.9713) Fixed Income Debt remains in virtual freefall, with Bunds extending losses sub-135.00, Gilts towards 100.00 and the T-note rooted within a 113-09+/15+ range Curves re-steepen marginally as the spotlight turns to US PCE data as the last potential macro market mover before the Xmas break Commodities Crude benchmarks are firmer on the session with magnitudes more pronounced than across other asset classes; currently, WTI & Brent Fed’23 are firmer by just shy of USD 2.0/bbl, with WTI needing another USD 1.00/bbl of upside to test Thursday’s WTD peak of USD 79.90/bbl. Spot gold/silver are incrementally firmer given the Dollar continues to languish, though the yellow metal remains capped by USD 1800/oz and as such is well within recent ranges. Russia could cut oil output by 5-7% early next year as a response to the Western price caps, according to RIA citing Deputy PM Novak; Russia may cut oil output by 500-700k BPD, according to Tass citing Deputy PM Novak Colorado Interstate Gas Co. declared force majeure at CIG Wamsutter compressor station, according to Reuters. Phillips 66 (PSX) Wood River, Illinois (380k BPD) refinery reports a unit upset. US Event Calendar 08:30: Nov. Durable Goods Orders, est. -1.0%, prior 1.1%; -Less Transportation, est. 0%, prior 0.5% Cap Goods Orders Nondef Ex Air, est. 0%, prior 0.6% Cap Goods Ship Nondef Ex Air, est. -0.3%, prior 1.5% 08:30: Nov. Personal Income, est. 0.3%, prior 0.7% Personal Spending, est. 0.2%, prior 0.8% Real Personal Spending, est. 0.1%, prior 0.5% 08:30: Nov. PCE Deflator MoM, est. 0.1%, prior 0.3% PCE Deflator YoY, est. 5.5%, prior 6.0% PCE Core Deflator MoM, est. 0.2%, prior 0.2% PCE Core Deflator YoY, est. 4.6%, prior 5.0% 10:00: Dec. U. of Mich. Sentiment, est. 59.1, prior 59.1 U. of Mich. Current Conditions, est. 60.3, prior 60.2 U. of Mich. Expectations, est. 58.5, prior 58.4 U. of Mich. 1 Yr Inflation, est. 4.6%, prior 4.6%; 5-10 Yr Inflation, est. 3.0%, prior 3.0% 10:00: Nov. New Home Sales, est. 600,000, prior 632,000 Nov. New Home Sales MoM, est. -5.1%, prior 7.5% Tyler Durden Fri, 12/23/2022 - 08:03.....»»

Analysts are raising their earnings projections, share performance has been rock-solid, and Oceaneering International (OII) has strong growth prospects. Oil/Energy remains the best S&P 500 sector this year, even as fears revolving around high inflation and slowing growth have somewhat clouded its outlook. The space has generated a total return of more than 28% in 2022 compared with the S&P 500’s loss of around 21%.Apart from a constructive fundamental picture, the sector is enjoying support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity.Agreed, oil has pulled back from those lofty levels. However, the commodity still has enough reasons to stay elevated in the near-to-medium term, with the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC sticking to a conservative production profile.Naturally, some stocks have been impressive since the start of the year. These also have strong earnings trends to back up their moves.One such company is Oceaneering International OII. It is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. Headquartered in Houston, TX, the company provides specialized products and services for all phases of the offshore oilfield lifecycle — from exploration to decommissioning — with a focus on deep water.The company operates in five business segments namely Subsea Robotics, Manufactured Products, Offshore Projects Group, Integrity Management & Digital Solutions and Aerospace and Defense Technologies.Let’s discuss the reasons that make Oceaneering International an attractive pick:Solid Rank and VGM ScoreOceaneering is a Zacks Rank #2 (Buy) stock in the Zacks Oil and Gas - Field Services industry, which carries a Zacks Industry Rank #18 — placing it in the top 7% of around 250 Zacks industries. In addition to the favorable rank, OII enjoys a Zacks Value and Momentum Style Scores of B each to help it round out with a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.Estimate-Beating Recent EarningsOII posted robust Q3 results on Oct 26, with adjusted EPS of 23 cents handily beating the Zacks Consensus Estimate of 13 cents and turning around from the year-earlier loss of a penny. The outperformance could be attributed to improved offshore activity and pricing, especially in the Gulf of Mexico. In particular, Oceaneering’s ‘Subsea Robotics’ and ‘Offshore Projects Group’ segments were the prime beneficiaries of the positive market findamentals.Current Price Levels a Buying OpportunityAfter OII shares bottomed out (around $2) during the start of the pandemic, they have turned it around in style. Oceaneering International peaked in March at over $18 but has fallen slightly to around $16 since then. Despite this drop, the stock is still up 43.4% year to date, while the markets have gone lower. This powerful uptrend during a down market indicates that investors should take advantage of the discounted levels and start looking at the name to see if it’s right for their portfolio. With the company experiencing the best market conditions in years, we believe that the OII stock has enough firepower left to keep chugging along. Image Source: Zacks Investment Research Analyst Estimates RaisedOII’s earnings revisions have also trended in the right direction over the last 60 days, as analysts have consistently taken up their numbers. As a matter of fact, the Zacks Consensus Estimate for Oceaneering’s 2022 bottom line has gone up from a profit of 16 cents to a profit of 31 cents during this timeframe, while next year’s number suggests a rise from a profit of 79 cents per share to 82 cents.Fundamental StrengthOne of the leading suppliers of integrated technology solutions, Oceaneering boasts an impressive portfolio of diversified products and services. It is well positioned to supply equipment for the deep-water projects and is active at all phases of the offshore oilfield lifecycle. Oceaneering owns a geographically diversified asset base spread across the United States and rest of the world. The company's revenue profile is evenly split between its international and domestic operations, lowering Oceaneering’s risk profile.Oceaneering’s ‘Subsea Robotics’ unit, which provides cutting-edge technology solutions for remote working, performed impressively in the most recent quarter. The unit’s revenues of $169.4 million increased from $143.7 million in the year-ago quarter on the back of solid utilization. The analysts believe that the segment should perform well on growing international activity.Finally, OII's strong relationships with high-quality customers provide revenue visibility and business certainty. The clients, mostly well-capitalized, blue-chip E&P companies with long-term production growth plans, are likely to be less susceptible to commodity price fluctuations. This should ensure multi-year earnings stability for Oceaneering.Attractive ValuationThe valuation for this name isn’t low, but there is solid growth. OII has a forward P/E of 20.09, above the industry average of 17.18. However, investors should know that the company is coming off a quarter that saw top-line growth of nearly 20%. Moreover, although expensive, the value is significantly below the 52-week high of 67.93.  OII’s P/S of 0.72 is also much lower than the industry’s 1.89.Bottom LineGiven this backdrop, it should be prudent to consider buying shares of Oceaneering International. While there are some apprehensions that the company may have gotten too far ahead of itself, especially with the prevailing inflationary pressures, the supportive demand/supply fundamentals for its services and robust commodity prices should keep backlog and sales elevated going forward. This suggests strong long-term cash flows that should support higher price points for its shares.Other Energy Stocks to BuyAlong with Oceaneering International, investors interested in the energy sector might look at Halliburton HAL, Nine Energy Service NINE and Patterson-UTI Energy PTEN, each sporting a Zacks Rank #1, currently.You can see the complete list of today’s Zacks #1 Rank stocks here.Halliburton: Halliburton is valued at some $34 billion. The Zacks Consensus Estimate for HAL’s 2022 earnings has been revised 3.4% upward over the past 60 days.Halliburton, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 5.5%, on average. HAL shares have gained 68.9% so far this year.Nine Energy Service: Nine Energy Service is valued at some $350.5 million. The Zacks Consensus Estimate for NINE’s 2022 earnings has been revised 1,325% upward over the past 60 days.Nine Energy Service, headquartered in Houston, TX, delivered a 137.5% beat in Q3. NINE shares have surged 1,157% year to date.Patterson-UTI Energy: PTEN beat the Zacks Consensus Estimate for earnings in three of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 169.2%, on average.Patterson-UTI is valued at around $3.7 billion. PTEN has seen its shares gain 96.7% in 2022. Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>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 Halliburton Company (HAL): Free Stock Analysis Report PattersonUTI Energy, Inc. (PTEN): Free Stock Analysis Report Oceaneering International, Inc. (OII): Free Stock Analysis Report Nine Energy Service, Inc. (NINE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Raw material cost pressure and demand worries due to chip shortage and the slowdown in China pose headwinds for the Zacks Chemicals Diversified industry. APD, ALB, UNVR and IOSP are poised to survive the industry challenges. The Zacks Chemicals Diversified industry is grappling with raw material cost inflation as well as higher supply-chain, energy and logistics costs, made worse by the Russia-Ukraine conflict. Semiconductor shortage, which is hurting the automotive sector, and pandemic-related restrictions in China may also impact demand for chemicals. Industry players like Air Products and Chemicals, Inc. APD, Albemarle Corporation ALB, Univar Solutions Inc. UNVR and Innospec Inc. IOSP are banking on strategic measures, including operating cost reductions and aggressive price hikes to tide over the challenging environment.About the IndustryThe Zacks Chemicals Diversified industry consists of manufacturers of basic chemicals, plastics, specialty chemicals and agricultural chemicals. Companies in this space serve a host of end markets, such as automotive, building & construction, transportation, electronics, aerospace and agriculture. Basic chemicals are produced in large quantities, and include petrochemicals and intermediates (such as ethylene, propylene and benzene), polymers (including plastic resins such as polyethylene, polypropylene and polyvinyl chloride), and inorganic chemicals (such as chlorine, caustic soda and titanium dioxide). Specialty chemicals that include catalysts, specialty polymers and coating additives are used in specific fields based on their performance. Agricultural chemicals include herbicides, fungicides and insecticides that are used to protect crops from disease, pests and weeds.What's Shaping the Future of the Chemicals Diversified Industry?Higher Input Costs Pose Margin Headwinds: The industry players are exposed to cost pressure associated with raw materials resulting from short supply. These companies also face challenges arising from higher supply-chain and logistics costs. The disruption in the supply chain has pushed up the prices of inputs. Russia's invasion of Ukraine and new government-mandated lockdowns in China have also put more pressure on the already strained global supply chain. These companies are also facing headwinds from higher energy costs, especially in Europe, which has witnessed a significant spike in costs amid the ongoing war in Ukraine. The lingering impacts of these bottlenecks are expected to continue over the short term. Higher raw material, energy and logistics costs are, thus, likely to hurt the margins of diversified chemical companies.Demand Worries From Chip Crunch, China Slowdown: Companies in the chemical-diversified space face headwinds from the slowdown in the global automotive industry. The semiconductor shortage has led to reduced automotive builds around the world, causing a slowdown in chemical demand in this major market. The Russia-Ukraine conflict has triggered a fresh round of global microchip shortage. Both these countries are major suppliers of raw materials required for global semiconductor production. The chip crisis is unlikely to abate anytime soon, given the impact of the war. The slowdown in automotive production may create a short-term demand headwind. The slowdown in economic activities in China due to the restrictions following a resurgence in COVID-19 infections is also impacting chemical demand. The restrictions in China have resulted in a higher level of near-term economic uncertainty, which may continue to affect chemical volumes.Strategic Actions to Aid Results: The companies in this space are taking a host of strategic measures, including cost-cutting and productivity improvement, operational efficiency improvement and actions to strengthen the balance sheet and boost cash flows. In particular, the industry participants are aggressively implementing actions to bring down costs. These include the reduction of discretionary spending and traveling expenses. The industry players are also raising selling prices to counter raw material and logistics cost inflation. These moves are likely to help the industry in sustaining margins amid the prevailing challenges. Zacks Industry Rank Indicates Downbeat ProspectsThe Zacks Chemicals Diversified industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #186, which places it at the bottom 25% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Outperforms S&P 500The Zacks Chemicals Diversified industry has outperformed the Zacks S&P 500 composite while modestly underperforming the broader Zacks Basic Materials sector over the past year.The industry has lost 0.7% over this period compared with the S&P 500’s decline of 16.3% and the broader sector’s decline of 0.1%. One-Year Price Performance Industry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 7.84X, below the S&P 500’s 12.18X and above the sector’s 7.27X.Over the past five years, the industry has traded as high as 13.44X, as low as 5.38X and at the median of 8.03X, as the chart below shows. Enterprise Value/EBITDA (EV/EBITDA) Ratio  Enterprise Value/EBITDA (EV/EBITDA) Ratio  4 Chemicals Diversified Stocks to Keep a Close Eye onInnospec: Colorado-based Innospec makes and markets a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific. It is witnessing a recovery across all its businesses from the pandemic-led slowdown. Strength in the personal care segment is driving sales in the company’s Performance Chemicals division.IOSP’s investment in capacity expansion will also offer incremental growth opportunities in this business. Its Fuel Specialties unit is benefiting from the expansion of technologies in areas such as renewable diesel, low-sulfur marine fuel and gasoline direct injection engines.Innospec carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 30.4% for the current year. The Zacks Consensus Estimate for IOSP's current-year earnings has been revised 5.7% upward over the last 60 days. The company beat the Zacks Consensus Estimate for earnings in each of the last four quarters at an average of roughly 25.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.  Price and Consensus: IOSP  Air Products: Based in Pennsylvania, Air Products is a leading industrial gases company. It is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. It remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows.Air Products is also boosting productivity to improve its cost structure. APD is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins. Air Products also has been benefiting from higher pricing. Higher merchant demand is also driving its volumes.Air Products, a Zacks Rank #3 (Hold) stock, has expected earnings growth of 9.3% for the current fiscal year. APD beat the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an average earnings surprise of roughly 1.7%. Price and Consensus: APD  Albemarle: North Carolina-based Albemarle is a premier specialty chemicals company with leading positions in attractive end markets globally. It is benefiting from higher volumes in its lithium business on continued recovery in global economic activities. Healthy customer orders and plant productivity improvements are supporting volumes. Higher lithium prices due to tight market conditions are also supporting its performance. Its bromine business is also gaining from higher demand, a rebound in certain end markets, higher pricing and cost-saving actions.ALB is seeing strong demand for flame retardants. The company is also strategically executing its projects aimed at boosting its global lithium derivative capacity. It remains focused on investing in high-return projects to drive productivity. Albemarle is also benefiting from cost-saving and productivity initiatives.Albemarle, currently carrying a Zacks Rank #3, has expected earnings growth of 420.3% for the current year. ALB has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.6%. Price and Consensus: ALB  Univar: Illinois-based Univar is a leading commodity and specialty chemical and ingredient distributor. It is benefiting from market share gains, operational execution, acquisitions, cost minimization and a robust liquidity position. UNVR remains committed to cost-cutting, expense management and productivity actions that are helping it minimize operational costs and boost margins.The acquisition of Nexeo Solutions has also enhanced the company’s capabilities and accelerated its ability to create significant value for customers, supplier partners, employees and shareholders. The buyout of Brazilian ingredients and specialty chemicals distributor Sweetmix is also anticipated to drive growth for the company’s Food Ingredients portfolio in Brazil and generate growth and cost synergies.Univar, carrying a Zacks Rank #3, has a projected earnings growth rate of 56.8% for the current year. UNVR's consensus estimate for the current year has been revised 2.7% upward over the last 60 days. It beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 16.8%. Price and Consensus: UNVR   7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them 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 Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Innospec Inc. (IOSP): Free Stock Analysis Report Univar Solutions Inc. (UNVR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

US Firms Pull Staff From China's Top Chip Maker As Economic War Worsens The Biden administration's new technology restrictions are already causing disruptions in China as US semiconductor equipment suppliers are telling staff based in the country's top memory chip maker to leave, according to WSJ, citing sources familiar with the matter.  State-owned Yangtze Memory Technologies Co. has seen US chip semiconductor equipment companies, including KLA Corp. and Lam Research Corp., halt business activities at the facility. This includes installing new equipment to make advanced chips and overseeing highly technical chip production.  The US suppliers have paused support of already installed equipment at YMTC in recent days and temporarily halted installation of new tools, the people said. The suppliers are also temporarily pulling out their staff based at YMTC, the people said. --WSJ  As noted earlier this week, the US Commerce Department last Friday unveiled sweeping new regulations that limit the sale of semiconductors and chip-making equipment to Chinese customers, striking at the foundation of the country's efforts to advance its own chip industry. The agency also added 31 organizations to its unverified list, including Yangtze Memory.  The move is the Biden admin's most aggressive yet as it tries to stop China from developing technological capabilities it sees as a threat.  Bloomberg noted that Washington's bold moves against China could extend well beyond semiconductors and into industries that rely on high-end chips, from electric vehicles and aerospace to simple gadgets like smartphones. The two countries are now officially in an "economic war," Dylan Patel, chief analyst at SemiAnalysis, said. A Chinese analyst said there is "no possibility of reconciliation" any longer. KLA and Lam are vital to Yangtze Memory's daily operations, and if the halt of US expertise to highly technical chip production tools is extended for a long enough time, this could produce supply disruptions and or the inability to develop new chips.  Chinese state media and officials raged against Biden's sweeping new regulations last weekend, warning of economic consequences and stirring speculation about potential retaliation. We suspect a comment from Beijing is imminent, as well as retaliation.  Tyler Durden Wed, 10/12/2022 - 09:04.....»»

Semiconductors Emerge As Battleground In US-China Race Authored by Jessica Mao via The Epoch Times (emphasis ours), 300-millimeter wafers are pictured in a machine for coating with gold in a clean room during the mass production of semiconductor chips at the Bosch's semiconductor plant in Dresden, eastern Germany, on July 12, 2022. (Photo by Jens Schlueter/AFP via Getty Images) As every aspect of modern life becomes more and more digitized, not just the economies of nations but their sovereign influence will rely more and more on the command of technology. Although the United States and China are not engaged in traditional warfare, they are engaged in a war of ideas, trade, and technology, especially in semiconductor hegemony, where both sides are battling for supply and advancement. In recent years, the United States has made a series of moves to hinder and outpace Chinese development in semiconductors, including persuading Asian semiconductor powerhouses to join its alliance, passing a massive spending bill to aid domestic chip production, and banning exports of high-end chipmaking equipment to China. In late July, the United States expanded its bans on exports to China of equipment that can make semiconductors up to 14 nanometers in size, according to major U.S. chipmaking equipment suppliers, such as Lam Research Corp. and KLA, who were notified by the government about the expanded restrictions. Previously, the United States had banned the sale of equipment that can produce chips of 10 nm or smaller to Chinese chip manufacturers. Generally in semiconductor fabrication, the smaller the process technology, the more advanced the chip. The smaller the technology node, the higher the transistor density and the lower the chip power consumption, resulting in higher performance. However, the smaller manufacturing process requires more advanced material and equipment, and will incur a greater cost in R&D and production. Semiconductors are seen on a circuit board that powers a Samsung video camera at the Samsung MOBILE-ization media and analyst event in San Jose, Calif., on March 23, 2011. (Justin Sullivan/Getty Images) The development follows a historic $52 billion bill passed by U.S. congress on July 27 to aid domestic chip makers in research, development, and production volume. One of the conditions is that the companies receiving the funds will not increase advanced chip production in mainland China. The U.S. Department of Commerce said the tightening policies impair “PRC efforts to manufacture advanced semiconductors to address significant national security risks to the United States.” Meanwhile, the United States is also reportedly planning to ban the exports of U.S. chipmaking equipment that produces advanced NAND chips to major Chinese chipmakers, such as Yangtze Memory Technologies Corp (YMTC). YMTC is a state-owned company and China’s only storage NAND flash memory manufacturer competing with major U.S. manufacturers. Its global market share is about 5 percent. In a report released by the White House in June 2021, YMTC was identified as the “national champion” enterprise of the Chinese regime, having received $24 billion in subsidies from the Chinese government. NAND chips are used to store data in a wide range of electronic devices such as smartphones and personal computers, as well as in the data centers of companies such as Amazon, Facebook, and Google. If the NAND chip initiatives are officially issued, they will be the first time that the United States uses trade restrictions to contain China’s ability to produce non-military use memory chips, broadening the scope of protecting the U.S.’s national security and dealing a massive blow to Chins’s memory chip industry. On Aug. 1, U.S. senators, including Senate majority leader Chuck Schumer (D-N.Y.), requested that the Department of Commerce add YMTC to the U.S. trade blacklist. The move could further hamper the growth of China’s semiconductor industry and protect American companies; the only two U.S. memory chip makers, Western Digital and Micron Technology. The two account for about a quarter of the NAND chip market share. According to a Bloomberg report, the United States is also pushing the Netherlands and Japan to stop the chipmaking equipment suppliers, ASML and Nikon, from selling lithography machines to China. The move could potentially deal a severe blow to major Chinese chipmakers such as Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong Semiconductor Ltd. US CHIPS Act On July 26, the U.S. Senate voted to advance its Chips and Science Bill aimed at boosting domestic semiconductor production and improving technological competitiveness with China. The bill was later passed in the U.S. House of Representatives on July 28 and signed into law by President Joe Biden on Aug. 2. Senate Majority Leader Chuck Schumer (D-N.Y.) speaks alongside a bipartisan group of U.S. Senators, including (L-R) Roger Wicker (R-Miss.); Mark Warner (D-Va.); Todd Young (R-Ind.), and Maria Cantwell (D-Wash.), following the passage of the CHIPS Act, providing domestic semiconductor manufacturers with $52 billion in subsidies to cut reliance on foreign sourcing, at the U.S. Capitol in Washington, D.C., on July 27, 2022. (SAUL LOEB/AFP via Getty Images) The legislation will provide $280 billion in funding to prop up and kickstart domestic semiconductor manufacturing and research; the price tag is far above previous legislation that aimed to provide just $52 billion to manufacturers. Officially dubbed the CHIPS [Creating Helpful Incentives to Produce Semiconductors for America] Act of 2022, the measure would provide tens of billions of dollars in subsidies and tax breaks to technology corporations in an effort to spur new market growth, as well as funding for government-backed tech research. Proponents of the legislation have long said that it’s necessary in order to maintain a competitive edge with China, which is pouring money into its own domestic chip production. The legislation also clarifies that entities receiving U.S. government funding are prohibited from engaging in transactions involving substantial expansion of semiconductor manufacturing in China or any other foreign country of concern for at least ten years after the Act takes effect. These restrictions are designed to prevent chipmakers from significantly expanding the production of chips more advanced than 28nm in China within the next decade. Even though the 28-nanometer chips are a few generations behind today’s advanced semiconductors, they are still widely used in cars, lower-end smartphones, appliances, and more. Chip 4 Alliance The United States has also been working to persuade Asian semiconductor powerhouses to participate in its “Chip 4 alliance.” The U.S.-led alliance aims to strengthen cooperation in the semiconductors industry among the United States and the East Asian powerhouses of Taiwan, South Korea, and Japan to build a secure supply chain that excludes China. Taiwan and Japan have already agreed to participate in the Chip 4 alliance proposed by the United States this March, pending South Korea’s decision to join. The United States has reportedly given South Korea a deadline to decide whether it will join the “Chip 4 alliance” by Aug. 31, according to local South Korean reports citing unnamed sources in Washington. Read more here... Tyler Durden Mon, 08/08/2022 - 16:50.....»»

Futures, Yields And Oil All Rise On Last Day Of Turbulent Week After several extremely volatile days, US equity futures are ending the week in the green (for now) with European equities snapping two days of declines sparked by the Federal Reserve’s plan for aggressive monetary-policy tightening, and Asian stocks trading higher. S&P 500 and Nasdaq 100 futures trimmed earlier gains to trade 0.3% higher as traders weighed the latest developments about the war in Ukraine. Contracts on U.S. stock benchmarks trim earlier gains as traders weigh developments about the war in Ukraine.Nasdaq 100 futures flat; S&P 500 futures +0.1%; Dow Jones futures +0.2%. The dollar rose for a 7th consecutive week and US Treasuries sold off across the curve; gold and bitcoin were flat. Oil was steady after three days of losses stoked by plans to release millions of barrels of crude from strategic reserves and China’s demand-sapping virus outbreak. Markets had a subdued session yesterday after sinking more than 4% in the previous two days as hawkish signals from the Federal Reserve sent Treasury yields surging. Among notable premarket moves, Robinhood slid 3% after Goldman Sachs, not too long ago the lead underwriter on the company's IPO, cut their rating on the stock to sell, saying softening retail engagement levels and profitability concerns will likely limit any outperformance. Some other notable premarket movers: Alcoa (AA US) is 1.2% lower as Credit Suisse analyst Curt Woodworth trims his recommendation to neutral as he views LME aluminum prices near peak levels. Quidel (QDEL US) gained in extended trading Thursday after it posted preliminary revenue for the first quarter that beat the average analyst estimate. CrowdStrike (CRWD US) advanced 4.1%. Analysts responded positively after management set a framework to reach $5 billion in annual recurring revenue (ARR) by 2026, during the cybersecurity company’s investor briefing. WD-40 (WDFC US) is poised to gain after producing a “solid” beat in the second quarter, Jefferies said, adding that an increased market share and new product launches would support volume growth of 3% in 2022. Kura Sushi (KRUS US) shares rose in postmarket trading after the restaurant chain reported a year-over-year jump in quarterly sales. ACM Research (ACMR US) edged lower in extended trading Thursday after saying in a release its first quarter revenue would be “significantly below” expectations, but reiterated full-year revenue guidance for 2022. U.S. stocks are on course to snap a three-week winning streak with investors shedding risk assets following indications from the Fed of a faster-than-expected pace of tightening in monetary policy. Concerns are also growing about the impact of high inflation and slowing economic growth on corporate earnings. The two-year Treasury yield rose five basis points and the 10-year yield climbed one point, reversing some of the curve steepening seen in the wake of the Fed minutes Wednesday, which outlined plans to pare the central bank’s balance sheet by more than $1 trillion a year alongside interest-rate hikes. Global equities are nursing losses for the week as markets grapple with the Fed’s campaign against elevated price pressures, Russia’s grinding war in Ukraine and China’s Covid travails. The lockdown in Shanghai -- which recorded more than 21,000 new daily virus cases -- has become one of President Xi Jinping’s biggest challenges. Expectations are growing that China will take steps to support its economy. “Stocks have had a little bit of a harder time this week digesting the fact that interest rates are going to be higher” amid a major shift in expectations around monetary policy, Anthony Saglimbene, global market strategist at Ameriprise Financial Inc., said on Bloomberg Television. Still, U.S. equities saw a second straight week of inflows at $1.5 billion, with large-cap and growth stocks outperforming small-cap and value sectors, according to Bank of America strategists. Marija Veitmane, a senior strategist at State Street Global Markets, also said stocks still appeared to be the safest option. “Cash gives you nothing with 7% inflation, bonds just had one of the worse quarters in history, and then if you look at stocks, we still have decent earnings outlook, and to me the biggest attraction is really strong balance sheets,” she said on Bloomberg TV. In the latest news out of Ukraine, dozens were killed Friday morning as Russian troops allegedly bombed civilians waiting at a train station to be evacuated from the Donetsk region. Meanwhile, U.S. officials warned that the war may last for weeks, months or even years, as Kyiv’s foreign minister pleaded for urgent military assistance. Here are the latest Ukraine war developments: Ukraine intends to establish up to 10 humanitarian corridors on Friday, those leaving Mariupol will need to use private vehicles. Ukrainian advisor Podolyak says negotiations with Russia continue online constantly, but the mood changed after Bucha events, via Reuters. Kremlin says it does not understand EU concerns about European countries paying for Russian gas in RUB, adds Commission President von der Leyen probably needs more information. On planned EU ban of Russian coal, says coal is in high demand. Special operation in Ukraine could be completed in the foreseeable future, given aims are being achieved and work is being carried out by peace negotiators and the military. EU ready to release EUR 500mln for arms to Ukraine, according to AFP citing EU chief. Russia says it has destroyed a training centre for foreign mercenaries within Ukraine, was located north of Odesa, via Tass. Japan's Industry Ministry plans to reduce Russian coal imports gradually while looking for alternative suppliers, according to Reuters. Ukraine PM says they have large stocks of grain, cereals and vegetable oil. Are able to provide themselves with food; this year's harvest will be 20% less YY. Ukraine gas grid warns that Russian actions could impact gas flows to Europe, via Reuters. On Thursday, St Louis Fed president James Bullard said he prefers boosting the policy rate to 3%-3.25% in the second half of 2022. Chicago Fed President Charles Evans and his Atlanta counterpart Raphael Bostic said they favor raising rates to neutral while monitoring the economy’s performance. The steepening in the Treasury yield curve contrasts with the flattening and inversions that have vexed markets this year. The two-year rate topped the 10-year last week for the first time since 2019, a possible warning of recession. “We’re seeing a tactical re-steepening right now but the curve is going to continue to flatten,” Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, said on Bloomberg Television. “That’s because the Fed has told us, we’d like to get to neutral expeditiously. On top of that, they may need to tighten beyond neutral. Front-end yields can still go higher.” In Europe, Euro Stoxx 50 rallies over 1.8% before stalling while the Stoxx 600 index climbed 1.2% but drifted off best levels as investors took advantage of beaten-down stock valuations with energy, banks and autos the strongest-performing sectors. Banks outperformed as Banco BPM SpA surged after Credit Agricole SA bought a 9.2% stake in the Italian lender. An Asia-Pacific share index eked out a small increase.  Here are some of the biggest European movers today: Scout24 shares rise as much as 17%, the most intraday since December 2018, after a report that Hellman & Friedman, EQT and Permira have discussed taking the firm private. Banco BPM shares rise as much as 17% after Credit Agricole bought a 9.2% stake in the Italian lender, with Bank of America saying the deal is a reminder that real value should be based on fundamentals. Sodexo shares jump as much as 7.4%, their biggest single-day gain in a month, after RBC Capital Markets upgrades the French caterer to outperform from sector perform. K+S gains as much as 10% after JPMorgan double-upgraded the shares to overweight from underweight, seeing a very positive environment for fertilizers amid supply disruptions and high energy prices. Atlantia shares rise as much as 4.5% following a report in a Italian newspaper that the Benetton family and Blackstone may start their takeover offer for Atlantia at more than EU22 per share. Saab rise as much as 5% as SEB upgrades the shares to buy from hold on the Swedish defense firm’s sales potential in the coming decade in the wake of Russia’s invasion of Ukraine. Moncler shares rise as much as 4.2% after Barclays upgrades the Italian luxury company to overweight, citing an “attractive” defensive profile in the current environment. Genmab fall as much as 10%, the most since September 2020, after saying a tribunal decided in favor of Janssen Biotech over two issues surrounding the cancer drug daratumumab (Darzalex). Ahead of this weekend's French election, Macron's lead is shrinking: the current President led his rivals in the April 10 election with 26.2% support, down from 27.2% a day earlier, according to a polling average calculated by Bloomberg on April 8. Macron was 3.5 percentage points ahead of second-placed Marine Le Pen, down from 4.1 points. Asian stocks edged higher on Friday, poised to snap three days of declines as traders assessed the prospect of policy easing by Beijing.  The MSCI Asia Pacific Index erased early losses of as much as 0.4% to climb 0.2%. Chinese property and infrastructure-related stocks surged on hopes for fiscal as well as monetary easing as the government seeks to prop up growth.   For the week, the Asian benchmark was down 2% as investors turned cautious on risk assets after latest comments from the Federal Reserve suggested aggressive tightening lies ahead. Tech shares were hit hard in particular, with the MSCI Asia-Pacific Information Technology Index losing 4% this week, on track for its worst performance since end-January. “There appears to be speculation that monetary easing by the PBOC might be imminent,” said Kazutaka Kubo, senior economist at Okasan Securities. There are also expectations that once lockdowns are over, the economy could be supported by pent-up demand, he added.  Chinese authorities have repeatedly vowed to support the economy and markets in thet past few weeks, as rising Covid-19 infections and lockdowns darken the outlook for growth. The pledges have spurred bets that some form of monetary easing may come soon.  Movements in most national benchmarks in the region were modest on Friday, gaining less than 1%. Stocks in the Philippines and Indonesia outperformed, while Singapore shares fell.  Indian stocks gained after the Reserve Bank of India kept borrowing costs at a record low, while India’s 10-year bond yield hit 7% - the highest since 2019 - as the nation’s central bank boosted an inflation forecast. The central bank also announced the start of policy normalization as the pandemic’s impact fades. The S&P BSE Sensex climbed 0.7% to 59,447.18 in Mumbai to complete a second week of gains, while the NSE Nifty 50 Index rose 0.8%. Gauges of small- and mid-sized companies gained 1% and 0.9%, respectively. The Reserve Bank of India’s monetary policy panel held the benchmark rate at 4%, in line with predictions of all 36 economists surveyed by Bloomberg. RBI Governor Shaktikanta Das said the central bank will start focusing on withdrawal of banking liquidity accommodation to target inflation but such a move would be “multi-year” and carried out without disrupting the markets. “Equity markets will like the RBI’s continued focus on growth and its commitment to an accommodative stance,” said Abhay Agarwal, a fund manager at Mumbai-based Piper Serica Advisors Pvt.  The RBI’s commentary means adequate flow of liquidity will continue and immediate beneficiaries will be consumers who are borrowing to purchase real estate and autos, he added. All but one of 19 sectoral sub-indexes compiled by BSE Ltd. advanced, led by a gauge of power companies. Reliance Industries Ltd. was a key gainer on the Sensex, which saw 22 of its 30 components advance. The RBI has comforted markets by refraining from being aggressive, unlike its global peers, and by ensuring that the liquidity withdrawal will be gradual, Yesha Shah, head of equity research at Samco Securities wrote in a note.  “On the growth front, one can assume that the central bank expects private investment to ramp up now that capacity utilization has improved further,” she said, adding the policy lays the framework for a possible rate increase in coming reviews. Australian stocks advanced - the S&P/ASX 200 index rose 0.5% to close at 7,478.00 - supported by materials and industrial stocks. GrainCorp shares surged to a record high, after the firm upgraded its FY22 earnings guidance as high levels of rain in Australia lay a path for a bumper crop.  Platinum Asset plunged to an all-time low after the company reported net outflows of A$222 million in March. In New Zealand, the S&P/NZX 50 index was little changed at 12,066.27. In rates, Treasuries fell across the curve, with the front-end of the Treasuries curve pressured lower, flattening 2s10s spread by ~5bp as 2-year yields trade more than 7bp cheaper on the day at ~2.54%. S&P 500 futures near top of Thursday’s range, following bigger advance for European stocks after three straight declines. Yields across long-end of the curve are little changed on the day, as flattening extends out to 5s30s spread which is tighter by ~4bp; 10-year yields around 2.683%, cheaper by 2.5bp vs Thursday close; bunds and gilts outperform by 1bp-2bp in the sector. Bunds reversed opening gains, adding to a three-day run of declines; French debt underperformed bunds ahead of presidential elections beginning Sunday. The German curve bull-flattens, richening 2bps across the back end. Peripheral spreads widen to core with Italy underperforming. In FX, Bloomberg dollar index advanced a seventh consecutive day and neared the strongest level since July 2020 as the greenback advanced against all of its Group-of-10 peers apart from the Norwegian krone. The euro pared losses after touching a one-month low against the dollar in early London trading. The pound fell to the lowest in more than three weeks as bets for aggressive policy tightening by the Federal Reserve boost the dollar. Gilts rose across the curve as U.S. Treasury yields stabilized following the recent selloff. The Australian and New Zealand dollars were the worst-performing G-10 currencies; Australia’s yield curve steepened following a similar move in Treasuries on Thursday. Most Japanese government bonds rose, thanks to support from the central bank’s regular purchase operations. The yen briefly reversed early an Asia session loss after an ex-BOJ official said there’s likelihood of a policy shift as soon as this summer. Bitcoin is contained and unable to derive traction either way from the broader risk tone. Strike payment platform launches Shopify (SHOP) integration, which allows merchants to accept Bitcoin (BTC), according to Bloomberg. In commodities, crude futures trade within Thursday’s range; WTI holds above $96, Brent stalls near $102. Spot gold holds steady near $1,930/oz. Most base metals trade well: LME zinc and lead outperforming, tin lags. To the day ahead now. Central bank speakers include the ECB’s de Cos, Centeno, Panetta, Stournaras, Makhlouf and Herodotou. Italian retail sales for February and Canadian employment for March round out this week’s data. Market Snapshot S&P 500 futures up 0.5% to 4,517.00 STOXX Europe 600 up 1.4% to 461.27 MXAP up 0.2% to 176.33 MXAPJ up 0.3% to 584.66 Nikkei up 0.4% to 26,985.80 Topix up 0.2% to 1,896.79 Hang Seng Index up 0.3% to 21,872.01 Shanghai Composite up 0.5% to 3,251.85 Sensex up 0.9% to 59,558.63 Australia S&P/ASX 200 up 0.5% to 7,477.99 Kospi up 0.2% to 2,700.39 Brent Futures up 1.2% to $101.76/bbl Gold spot down 0.0% to $1,931.38 U.S. Dollar Index up 0.14% to 99.89 German 10Y yield little changed at 0.68% Euro down 0.1% to $1.0865 Top Overnight News from Bloomberg The Bank of Russia delivered a surprise cut in its key interest rate Friday, reversing some of the steep increase it made after the invasion of Ukraine as the ruble recovered. The central bank lowered the rate to 17% from 20% and said further cuts could be made at upcoming meetings if conditions permit EU countries agreed to ban coal imports from Russia, the first time the bloc’s sanctions have targeted Moscow’s crucial energy revenues. Japan is also looking to curb imports, in what could be a shift in policy from one of the world’s largest energy buyers The EU is aiming to lock in progress on trade and technology disputes with the U.S. during President Joe Biden’s first term amid concerns that any gains could otherwise be easily reversed The relationship between Australia’s equities and currency has become the closest in a decade as commodity prices surge. The 180-day correlation between the country’s stock benchmark and the Australian dollar has climbed to the highest level since late 2011, according to data compiled by Bloomberg. The strengthened ties come as rallies in materials from oil to iron ore have boosted both the nation’s equities and the Aussie The ECB will look past threats to economic growth from the war in Ukraine, ending asset purchases in the summer and setting the stage for a first interest-rate increase in more than a decade in December, according to a survey of economists Junk bond sales across Europe are experiencing their longest drought in more than 10 years, as the Russian invasion of Ukraine and the prospect of rising interest rates neuter risk appetite A more detailed look at global markets courtesy of Newsquawk: Asia-Pacific stocks were choppy and eventually conformed to a mixed picture; some weakness was seen shortly after the Chinese cash open. ASX 200 bucked the trend and was propped up by its energy and gold names. Nikkei 225 was choppy and moved in tandem with action in USD/JPY whilst the KOSPI was weighed on by its chip and telecoms sectors. Hang Seng remained pressured by losses across its large constituents - Alibaba and JD.com. Shanghai Comp swung between gains and losses but overall remained supported by reports from China's Securities Journal which noted of a potential PBoC RRR in Q2. Top Asian News Hong Kong Tycoons Heed China, Endorse John Lee to lead City Chinese Tech Stocks Fall as Tencent Shuts Game Streaming Site Abu Dhabi’s IHC Invests $2 Billion in Billionaire Adani’s Empire ADDX Rolls Out Private Market Services for Wealth Managers European bourses are firmer across the board, Euro Stoxx 50 +1.5%, bouncing in a morning of quiet newsflow with the broader tone modestly risk-on. Albeit, benchmarks are still negative on the week and some way from earlier WTD peaks; unsurprisingly, sectors are all in the green with defensive-bias names lagging. Stateside, futures are similarly in the green, ES +0.2%, though magnitudes are more contained ahead of a limited US schedule to round off the week. Top European News U.S. Sanctions Russian Miner Producing 30% of World’s Diamonds Atlantia Gains After Reports of Offer Price Above EU22/Share Generali CEO Says He Won’t Change Plan Challenged by Investors Baader Downgrades Six Chemical Firms, Citing Ukraine War In FX: DXY touches 100.000 as US Treasury yields continue to soar and curve steepen, but unable to break barrier. Kiwi underperforms awaiting NZIER Q1 survey, while Aussie holds up better after hawkish warning in RBA FSR; NZD/USD around 0.6950, AUD/USD nearer 0.7460. Yen sub-124.00 as Japanese export supply is absorbed, Euro supported by bids circa 1.0850 and Sterling treading water above 1.3000. Rouble relatively resilient in the face of 300 bp CBR rate reduction as it remains above pre-conflict highs. Fixed income: Choppy trade in bonds approaching the end of another very bearish week. Bunds and Gilts nurse losses mostly above par around 157.00 and 120.00 handles vs fresh cycle lows of 156.40 and 119.83. US Treasuries most seeing red, but curve less steep in correction after hawkish FOMC minutes and Fed commentary, via Brainard and Bullard especially Central Banks: RBA Financial Stability Review: important that borrowers are prepared for an increase interest rates; global asset markets are vulnerable to larger-than-expected rate increases, via Reuters. RBI leave rates unchanged as expected, retains "accommodative" stance as expected; will focus on withdrawing accommodation going forward. RBI is to restore LAF corridor to 50bps and floor to be constituted by SDF, according to Reuters. CBRT April survey sees Turkish End-Year CPI at 46.44% (prev. 40.47%) CNB Minutes (March): Dedek and Michl voted in the minority for stable rates. Board assessed risks and uncertainties of winter forecast as being markedly inflationary, particularly in short-term CBR cuts its Key Rate to 17.00% (prev. 20.00%) as of April 11th; holds open the prospect of further key rate reduction at its upcoming meetings. In commodities, WTI and Brent are bolstered amid broader sentiment, though crude/geopolitical specific developments have been limited In-fitting with equities, the benchmarks are negative on the week and some way shy of best levels as such. New York will suspend the state gas tax from June 1st to December 31st, according to Reuters. Barclays raises oil forecasts by USD 7-8/bb assuming no material disruption in Russian supplies beyond Q2 2022, according to Reuters. Spot gold is marginally firmer, but, remains drawn to USD 1930/oz after marginally eclipsing the level overnight; base metals bid in-line with sentiment. US Event Calendar 10:00: Feb. Wholesale Trade Sales MoM, est. 0.8%, prior 4.0% 10:00: Feb. Wholesale Inventories MoM, est. 2.1%, prior 2.1% DB's Henry Allen concludes the overnight wrap Yesterday’s ECB minutes reinforced what we learned from the March FOMC minutes and soon-to-be Vice Chair Brainard earlier this week – there are no doves in fox holes – by casting doubt on the likelihood of inflation returning to target this year. We also heard from St. Louis Fed President Bullard, the hawk leading the charge, who called for a fed funds rates above 3% this year. That would beckon a faster pace of hikes along with more aggregate tightening. Regional Presidents Bostic and Evans, non-voters each, meanwhile, want to get rates to neutral. The tighter path of global policy continued to drive sovereign yields higher and equity indices lower. Market-implied ECB policy rates by the end of the year increased +6.0bps to +62.3bps, the highest level this cycle. Sovereign yields rose to multi-year highs of their own, with those on 10yr bund (+3.4bps), OATs (+4.4bps) and BTPs (+3.5bps) moving higher, with 10yr breakevens falling in Germany (-1.9bps) and France (-0.7bps) for the first time in five days, while Italian breakevens were essentially flat (+0.2bps). Meanwhile, fed funds futures by end-2022 staged a slight retreat, falling -1.2bps to 2.50%, albeit +10bps higher than a week ago. While the probability of a +50bp hike in May remained steady at 85.4%. 2yr yields fell in line, declining -1.2bps, while 10yr Treasuries gained +6.0bps, leaving the curve at +19.2bps. If you’re up on the yield curve discourse, you’ll know the Fed discounts the signal coming from 2s10s, instead preferring shorter-dated measures of the yield curve, which wound up flattening yesterday. Yesterday’s yield curve steepening should not be viewed in a vacuum. The 2s10s curve has taken a 58.3bp round trip over the last two weeks, falling from +23.1bps two weeks ago, to -8.0bps last Friday, to +19.2bps at yesterday’s close. The fundamental outlook hasn’t changed dramatically over that time span. Instead, this likely reflects the elevated rates volatility environment we currently sit in. This, all before QT has even begun. Real Treasury yields continue to march higher in the back end, with 10yr real yields gaining +5.3bps to -0.19%, their highest level since March 2020, having gained +25.1bps this week alone, and +91.3bps YTD. Despite higher rates and more restrictive language, the S&P 500 ended the day +0.43% higher, after losing -2.21% the previous two sessions. The S&P 500 is now -5.58% YTD following the massive repricing of Fed expectations, while the Bloomberg Financial Conditions index is just a hair tighter than the post-2010 average. Monetary policy may need to adjust tighter yet to engineer the demand slowdown commensurate with a return of inflation to target. European equities were modestly lower, with the STOXX 600 slipping -0.21% and the DAX down -0.52%. The CAC (-0.57%) underperformed the STOXX 600 for the seventh consecutive session, on the back of growing Presidential election jitters. Polls between President Macron and his closest rival, Marine Le Pen, tightened. In particular, one poll (caveat emptor) from Atlas actually put Le Pen marginally ahead of Macron in a head-to-head runoff for the first time, by 50.5%-49.5%. The news immediately saw the French 10yr spread over bund yields widen in response, ending the day at 54.2bps, its widest since March 2020. While one poll a race does not make, it’s worth noting the broader poll narrowing over the last month. That has seen Macron’s lead in the first round over Le Pen go from 30%-17% a month ago (according to Politico’s average), to just 27%-22% now. In the second round, polls are likewise pointing to a tight contest, with Macron ahead of Le Pen by 52-48% (Ifop) and 53%-47% (Ipsos). For those looking for more details on the presidential race, DB’s Marc de-Muizon put out a guide yesterday (link here), where he looks at the current state of play in the election, the main aspects of both Macron and Le Pen’s programmes, as well as some potential challenges for both candidates. Back to the US, in a rare show of bi-partisanship, the Senate voted 100-0 to discontinue normal trade relations with Russia and Belarus and to ban Russian oil imports. Brent crude prices fell below $100/bbl for the first time since mid-March intraday, ultimately falling -0.48% to close at $100.58/bbl. The EU also moved to include a Russian coal embargo in its fifth round of sanctions. The opprobrium was global, with the UN General Assembly voting to suspend Russia from the Human Rights Council following its human rights violations, the first such suspension since Libya in 2011. On the ground, the Kremlin admitted to enduring heavy troop losses, and while the locus of the war still seems set to shift eastward, Ukrainian commanders have their guard up for a renewed assault on Kyiv. Elsewhere, Judge Ketanji Brown Jackson was confirmed to the Supreme Court. It’s expected the Senate will now turn to approving President Biden’s nominations for the Fed Board of Governors later this month, which will still have one empty seat following Sarah Bloom Raskin withdrawing her nomination. Asian equity markets this morning aren’t matching Wall Street’s resilience from yesterday. The Hang Seng (-0.57%) is leading the moves lower with the Nikkei (-0.08%), Kospi (-0.10%), Shanghai Composite (-0.06%) and CSI (-0.10%) all slightly on the wrong foot. Along with tighter global monetary policy, China’s Covid outbreak is worsening and dragging on sentiment. US stock futures are unperturbed, with S&P 500 and Nasdaq futures virtually unchanged. Meanwhile, the aforementioned rates volatility continues to rear its head, with the curve snapping back flatter as we go to press, with 2yr Treasuries +4.2bps higher and the 10yr a bit softer at -0.5bps. Oil prices are extending their decline this morning with Brent futures (-0.74%) sliding below $100/bbl. On the data side, Japan’s current account swung back to surplus in February to +¥1.6 trillion, following a -¥1.2 trillion deficit in January - the second-biggest deficit on record. The main release yesterday came from the US weekly initial jobless claims, which fell to their lowest level since 1968, with just 166k initial claims in the week through April 2 (vs. 200k expected). In addition, the previous week was revised down to 171k from 202k, which left the smoother 4-week moving average at 170k, the lowest ever in the entire data series going back to 1967. Euro Area retail sales grew by +0.3% in February (vs. +0.5% expected), and German industrial production grew by +0.2% that same month, in line with expectations. To the day ahead now. Central bank speakers include the ECB’s de Cos, Centeno, Panetta, Stournaras, Makhlouf and Herodotou. Italian retail sales for February and Canadian employment for March round out this week’s data. Tyler Durden Fri, 04/08/2022 - 07:51.....»»

Equinor (EQNR) plans to continue drilling on the field to increase cash flow in the future. Equinor ASA EQNR reduced its estimate of total recoverable reserves in the Mariner oilfield to 180 million barrels of oil equivalent from its initial consideration of 275 million barrels.The downward revision led to an impairment charge of $1.8 billion in the area. The Mariner oilfield is situated on the East Shetland Platform of the U.K. North Sea. Equinor operates the field with a 65.1% interest.The Mariner oilfield, which commenced production in 2019, comprises two reservoirs — Heimdal and Maureen. The field’s reserves have a significant degree of uncertainty due to the high subsurface complexity and its early production phase.Equinor’s revision of Mariner reserves is associated with an updated seismic interpretation and experience of production from the Maureen reservoir. This has brought forth a revised reservoir model, the outcomes of which are further supported by the results of the first well into the Heimdal reservoir.When the oilfield came into operation, it was expected to extract more than 300 million barrels of oil over a 30-year period. Mariner is expected to produce 22,000 barrels per day (bpd) in the near term, declining from an average of 30,000 bpd last year.The Mariner field development involves a production, drilling and quarters platform based on a steel jacket. Crude oil produced from the oilfield is shipped to a floating storage unit, which is then transported to shore through tankers. Notably, the field is expected to produce oil for the next 30 years.Equinor is ready to collaborate with the Mariner joint venture partners to seek opportunities to improve recovery and production. EQNR intends to continue drilling on the field to increase cash flow in the future.Company Profile & Price PerformanceHeadquartered in Stavanger, Norway, Equinor is one of the leading integrated energy companies in the world.Shares of EQNR have outperformed the industry in the past six months. The stock has gained 43.7% compared with the industry’s 26.9% growth. Image Source: Zacks Investment Research Zacks Rank & Stocks to ConsiderEquinor currently carries a Zack Rank #3 (Hold).Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PetroChina Company Limited PTR is the largest integrated oil company in China. PetroChina is one of the largest producers of crude oil and natural gas in the world. The company’s natural gas business offers lucrative growth prospects in the coming years as China moves from coal to natural gas.PetroChina currently has a Zacks Style Score of A for both Value and Momentum. In the first six months of 2021, PetroChina's upstream segment posted an operating income of RMB 30.9 billion, nearly tripling from the year-ago profit of RMB 10.4 billion.Oceaneering International, Inc. OII is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. OII owns a geographically diversified asset base spread across the United States and the rest of the world. The company's revenue profile is evenly split between its international and domestic operations, lowering Oceaneering’s risk profile.Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty. The clients, mostly well-capitalized, blue-chip E&P companies with long-term production growth plans, are likely to be less susceptible to commodity price fluctuations. This should ensure multi-year earnings stability for the company.China Petroleum and Chemical Corporation SNP, also known as Sinopec, is one of the largest petroleum and petrochemical companies in Asia. SNP is the second-largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products in China.Sinopec has made major progress in identifying attractive and economically viable oil and natural gas reserves. Notably, Sinopec’s balance sheet strength can boost its financial flexibility. At the end of the first nine months of 2021, the firm had a total long-term loan of only 49,167 million yuan, while cash and cash equivalents were higher at 203,955 million yuan. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>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 PetroChina Company Limited (PTR): Free Stock Analysis Report China Petroleum & Chemical Corporation (SNP): Free Stock Analysis Report Oceaneering International, Inc. (OII): Free Stock Analysis Report Equinor ASA (EQNR): Free Stock Analysis Report To read this article on Zacks.com click here......»»

You can still get in on the ground floor of the marijuana market, which will only get hotter as more states and countries move toward legalization. Ben Rains shows several ways to invest before the floodgates open. Legal marijuana is a smoking hot growth industry in the U.S., Canada, and beyond. The global cannabis market is projected to soar from $20.5 billion back in 2020 to $90.4 billion by 2026.¹ And these estimates are likely conservative, as the U.S. moves closer to wide-ranging federal legalization and European nations, including economic powerhouse Germany, prepare to do the same in 2022.The best part about investing in legal marijuana right now is that despite all of the progress, there are ample opportunities to get in right near the ground floor given where we are in the legal lifecycle. Plus, many top pot stocks are trading near all-time lows heading into the new year, after they were beaten down in 2021, along with other former covid high-flyers and growth stocks.Still in the Early InningsThe legal recreational cannabis market has come a long way in the last few years. Yet the growth runway remains massive. Eighteen states have legalized adult-use marijuana as of December—up from zero in 2011. Meanwhile, Canada is one of only a couple countries to legalize marijuana nationally and it did so in 2018.Luckily, more U.S. states are poised to join the legal ranks in 2022, while others could add to the number of medical marijuana states to help take the country well above the current 36 states. Crucially, multiple bills are circulating around Washington, D.C. right now that aim to introduce sweeping Federal marijuana legalization, which will be an overnight game-changer and supercharge the space and the stocks.Even Republicans, the party historically opposed to legal weed, have started to roll out their own legalization proposals including one high-profile effort introduced in November. All of this is to say that Washington appears ready to enact some form of Federal legalization soon.The heightened political drive follows increased bipartisan support that matches the polling data—68% of U.S. adults are in favor of legal marijuana, including 50% of Republicans. Legalization at the national level will open the floodgates for U.S. growers to list on the NYSE and the Nasdaq, and for money to pour in from established players far outside the current pot space looking to cash in and make a big splash.Before those floodgates open, savvy investors are starting to focus on companies that are direct plays within the booming marijuana industry. These stocks are primed to continue growing and receiving institutional investment both before and after federal legalization.Continued . . .------------------------------------------------------------------------------------------------------Marijuana Stocks? There’s Never Been a Better TimeToday we’re on the verge of bipartisan marijuana legislation at the Federal level. Once the bill is passed, money is likely to flow into current and brand-new stocks at a rate that has never been seen in this industry.Thirty-six states plus D.C. have already legalized medicinal marijuana and 18 states plus D.C. made recreational use legal. There’s no stopping this trend, and now is the time to join the rush for profits. Global sales are predicted to skyrocket from $20.5 billion back in 2020 to $90.4 billion by 2026.Zacks recently closed marijuana trades of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months. Plus, new stocks are being lined up that could greatly surpass these gains.²See Zacks' latest pot stocks now >>------------------------------------------------------------------------------------------------------Don’t Touch the Plant Only Canadian marijuana growers can list on U.S. exchanges given the current standing of cannabis at the Federal level. Fortunately, outside of growers and pure-play pot companies, an array of stocks and industries provide access to legal marijuana because they maintain just enough distance from cannabis.Don’t touch the plant stocks also theoretically provide greater stability amid the current legal grey area in the U.S. The growing niche within pot investing includes real estate investment trusts, suppliers and equipment makers, tech firms, product safety and testing operations, pharmaceutical giants, and beyond.Hydroponics & High-Tech Farming Marijuana, even with all of the complicated new ways to consume it, is a plant. Therefore, the companies that directly support the growing of cannabis are some of the most straightforward and essential of the don’t touch the plant stocks.Today’s cannabis companies run grow operations that more often resemble high-tech, spotless computer chip factories than anything close to a farm. Hydroponic gardening or farming, which simply means growing without the use of soil, by utilizing formulated, mineral nutrient solutions in water, is front and center of modern cannabis cultivation.Marijuana is planted in an inert growing media and constantly supplied with nutrient-rich solutions, oxygen, and water, while light, temperature, and carbon dioxide levels are carefully controlled through various gadgets and other devices. Hydroponics allows for year-round growing, larger yields, and nearly complete control of the process.The global hydroponics market, which spans from multi-billion dollar operations to home grows, reportedly hit around $10 billion in 2020, and it's expected to reach well over $20 billion before the end of the decade. Many public hydroponics and indoor farming companies have posted 60% or higher revenue growth over the last several years.Plus, large institutional investors are pouring money into hydroponics stocks, with most holding at least 50% institutional ownership, compared to pure-play pot stocks that are closer to 15% or less.Real Estate Expansion Huge, high-tech marijuana growers require tons of capital and cash to start and operate. Yet, marijuana’s classification under federal law makes running successful U.S. pot businesses complex and cumbersome, especially when it comes to money. Most local and national banks don’t want anything to do with the legal marijuana market because of all the various state laws and expensive compliance standards.A few companies have helped fill the void for firms that don’t have access to traditional banking services. This backdrop enables cannabis-focused real estate investment trusts or REITs to essentially lend millions of dollars to cannabis companies that don’t have easy access to other sources of capital and collect extremely high interest rates for doing so, on long-term agreements. And like all REITs, they are required to distribute 90% of their taxable income to shareholders.Cannabis Tech Technology dominates our lives and the market, so of course, it plays a vital role in legal pot. There are multiple companies that sell cannabis-specific software to help growers, dispensaries, and others operate more effectively and efficiently in the highly-regulated space.Various publicly traded companies offer solutions for compliance, data, taxation, payments, plant tracking, and much more. The opportunity for expansion is huge in the marijuana tech world and a few companies are in the midst of rapid consolidation to try to capture more market share ahead of U.S. federal legalization that will likely require increasingly stringent guidelines.Extracting Profits from Plants The transition from the black market to labs and hydroponics ushered in the age of endless, hyper-specific marijuana strains. Outside of traditional flower that’s smoked, tons of growth is coming from edible products, oils, and other highly concentrated forms of cannabis.In order to transform cannabis plants and marijuana buds into new-age consumption methods, from concentrates to topical creams, detailed and varied extraction processes must be completed. There are various extraction methods that must be performed repeatedly and precisely, often on a massive scale.Extraction is growing more crucial given the global scope and the increasing demand for non-flower products, which includes widely popular non-psychoactive CBD products.Marijuana Testing  Medical-grade and adult-use cannabis products sold in legal markets are required by law to be clearly labeled with ingredients, cannabinoid levels, dosage recommendations, and tons of other information. Like all industries, from food to medicine, tons of testing is involved at various stages of the cultivation process.Cannabis testing is a potentially huge segment and it will garner even more attention at the national level, especially amid a rise in laced black market drugs. The broader field includes regulatory compliance, quality control, research, and beyond. There are currently multiple cannabis testing companies out there, and a few publicly traded names stand out through their exposure to other areas outside of marijuana.Pharmaceuticals and Biotech Far outside of medical marijuana exists the nascent world of cannabis-based medicine. There are a few stocks making waves in this growing field. One such public company sells the first prescription, plant-derived cannabis-based medicine approved by the FDA and the European Commission.The drug is used in the treatment of seizures associated with various syndromes in patients one year or older. Another more home-run style stock has attracted investment for its potential first-in-class therapeutics targeting the endocannabinoid system that aims to address needs in multiple diseases and conditions, including anorexia, cancer, pain, and inflammation.Multiple Opportunities for Investors As mentioned, this space looks to explode from $20.5 billion in 2020 to $90.4 billion by 2026. Yet only a few growers, pharmaceuticals, financial firms, suppliers - both established and start-ups - are the true innovators and offer historic profit potential.So if you don't want to devote constant attention and painstaking analysis to find these often little-known tickers, we can find them for you.Today, as the legalized marijuana floodgates are about to open, you’re invited to take part in our portfolio service Zacks Marijuana Innovators.This approach is responsible and vigilant, but we look for aggressive growth. Recently, we closed gains of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months.²Right now you can follow the live buys and sells inside Marijuana Innovators, and be among the first to get in on new buys that I’m lining up.Bonus Report: Speaking of industries with explosive growth potential, when you check our marijuana recommendations you are also invited to download our Special Report, One Semiconductor Stock Stands to Gain the Most. From 35 semiconductor stocks, you can get an early look at Zacks’ top pick during today’s chip shortage crisis.We can’t let everyone in on our marijuana portfolio, so your chance to gain access must end at midnight this Sunday, December 26. Sorry, no extensions.See Zacks' Marijuana Innovators Trades and Bonus Semiconductor Report Now >>Good Investing,Ben RainsEditorBen Rains develops strategies that enable investors to profit from the growing legal market in the U.S. and beyond. Ben uses his extensive experience and concentrated industry study to direct our unique portfolio service, Zacks Marijuana Innovators.¹ Source for marijuana industry growth estimate: Research and Markets ² The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position.  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 To read this article on Zacks.com click here. Zacks Investment Research.....»»

Apple is reportedly hiring talent to develop RF solutions, modem chips and other wireless semiconductors in house, sparking market concerns about possible impacts on its suppliers including Qualcomm, Broadcom and Skyworks, but Taiwan semiconductor supply chain may gain from the US tech giant's efforts to self-supply more chip components, according to industry sources......»»

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga Much of the overnight session was a snooze fest with stocks drifting first higher then lower after surging on Tuesday, as the narrative meandered from "omicron fears ease" optimism to "vaccines won't work" pessimism, before futures took a sudden leg lower, dropping into the red just after 530am ET, following news that UK's Boris Johnson would introduce new restrictions in England to curb Omicron spread, sparking fears that Omicron is more dangerous that expected (and than futures reflected). However, this episode of pessimism proved short-lived because just an hour later, the WSJ confirmed that Omicron is really just a pitch for covid booster shots when it reported that even though the covid vaccine loses significant effectiveness against Omicron in an early study, this is miraculously reversed with a booster shot as three doses of the vaccine were able to neutralize the variant in an initial laboratory study, and the companies said two doses may still protect against severe disease. Futures quickly shot up on the news, spiking above the gamma "all clear" level of 4,700 in a move best summarized with the following chart. And so, after going nowhere, S&P futures climbed for a third day, last seen 12 points, or 0.3% higher, just around 4,700 after rising the most since March on Tuesday. Europe’s Stoxx 600 Index rose following the biggest jump in more than a year. In addition to the omicron soap opera, which as we noted yesterday turns out was just one staged covid booster shot advertisement (because Pfizer and Moderna can always do with a bigger yacth), sentiment was also lifted by Chinese authorities' reversal to "easing mode" and aggressive efforts to limit the fallout from property market woes which lifted risk assets in Asia even as key debt deadlines at China Evergrande Group and Kaisa Group Holdings Ltd. passed without any sign of payment. "Clearly in the very short term uncertainty has risen over the Omicron virus... but overall at this stage we do not believe it will derail the macro picture in the medium-term," said Jeremy Gatto, multi-asset portfolio manager at Unigestion. Treasury yields were little changed after rising across the curve Tuesday. The VIX spiked first on the FT news, then dropped back into the red, while the dollar was flat and crude rose after turning red. Besides macro, micro was also in play and here are some other notable premarket movers Apple (AAPL US) ticks 1% higher in premarket trading following a Nikkei report that the tech giant told suppliers to speed up iPhone output for Nov.-Jan, citing people it didn’t identify. Amazon.com (AMZN US) shares in focus after an Amazon Web Services outage is wreaking havoc on the e-commerce giant’s delivery operation Stitch Fix (SFIX US) tumbles 25% in U.S. premarket trading after a 2Q forecast miss that analysts called “surprising,” while customer additions also disappointed Pfizer (PFE US) shares drop 2% in U.S. premarket trading after an early study showed that the company’s vaccine provides less immunity to the omicron variant Dare Bioscience (DARE US) soars 41% in premarket trading after Xaciato gets FDA approval for treating bacterial vaginosis EPAM Systems (EPAM US) soars 8% in premarket after S&P Dow Jones Indices said co. will replace Kansas City Southern in the S&P 500 effective prior to the opening of trading on Dec. 14 Goodyear Tire & Rubber (GT US) upgraded to buy from hold and target boosted to Street-high $32 from $29 at Deutsche Bank with the company seen as a major beneficiary from the shift to electric vehicles. Shares up 4.3% in premarket trading NXP Semiconductor (NXPI US) shares slide 2.2% in U.S. premarket trading after the chipmaker got a new sell rating at UBS Dave & Buster’s (PLAY US) gained 3.5% postmarket after the dining and entertainment company reported EPS that beat the average analyst estimate and authorized a $100 million share buyback program "Every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won't be the curveball to throw the recovery off course," wrote Deutsche Bank strategist Jim Reid in a note to clients. In Europe, the Stoxx Europe 600 Index initially drifted both higher and lower then bounced 0.3% on the favorable Pfizer and BioNTech news one day after posting its bigger surge in a year. European benchmark index earlier rose as much as 2%, dropped 2.1%. Health care sub-index leads gains, rising 1.2%, followed by travel stocks. The Stoxx 600 closed 2.5% higher on Tuesday, biggest gain since November 2020 Earlier in the session, Asia stocks also rose for a second day as concerns about the omicron variant and China’s economic slowdown eased. The MSCI AsiaPacific Index climbed as much as 0.9% after capping its biggest one-day gain in more than three months on Tuesday. Technology and health-care shares provided the biggest boosts. Benchmarks in New Zealand and India -- where the central bank held rates at a record low -- were among the day’s best performers. “The biggest point appealing to investors is that the Omicron variant doesn’t seem to be too fatal,” which is encouraging to those who had been going short to close out their positions, said Tomoichiro Kubota, a senior market analyst at Matsui Securities in Tokyo. “Worry that the Chinese economy will lose its growth momentum has subsided quite a bit.” Thus far, Omicron cases haven’t overwhelmed hospitals while vaccine developments indicate some promise in dealing with the variant. While vaccines like the one made by Pfizer and BioNTech SE may be less powerful against the new strain, protection can be fortified with boosters. The two-day rally in the Asian stock benchmark marks a sharp turnaround following weeks of declines since mid-November. Stocks in China also climbed for a second day. The nation’s central bank said Monday it will cut the amount of cash most banks must keep in reserve from Dec. 15, providing a liquidity boost and helping restore investor confidence In FX, news on the Omicron variant rippled through G-10 currencies after a report the Pfizer vaccine could neutralize the Omicron variant boosted risk appetite. The pound underperformed other Group-of-10 peers, extending declines after reports that the U.K. government is poised to introduce new Covid-19 restrictions.  A gauge of the dollar’s strength fluctuated as Treasuries pare gains and stocks rally after a report that said Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. EUR/USD rose 0.1% to 1.1277; USD/NOK falls as much as 0.8% to 8.9459, lowest since Nov. 25 Sterling fell against the euro and the dollar, as traders pare bets on the path of Bank of England rate hikes following reports that the U.K. could introduce fresh Covid-19 restrictions such as working from home and vaccine passports for large venues. Money markets pare rate hike bets, with just six basis points of interest rate hikes priced in for the BOE meeting next week. GBP/USD falls as much as 0.6% to 1.3163, testing the key level of 1.3165, the 38.2% Fibonacci retracement of gains since March 2020. EUR/GBP gains as much as 0.7% to 0.85695, the highest since Nov. 11. “The market will probably see this as more U.K. specific and therefore an issue for the pound at least in the short term,” said Stuart Bennett, FX strategist at Santander. In rates, Treasuries were mixed with markets reacting in a risk-on manner to the Dow Jones report that Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. Yields remain richer by less than 1bp across long-end of the curve while front-end trades cheaper on the day, flattening curve spreads. Session’s focal points include $36b 10-year note reopening at 1pm ET, following Tuesday’s strong 3-year note auction. Treasury 10-year yields around 1.475%, near flat on the day; gilts outperform slightly after Financial Times report that further Covid restrictions will be announced imminently to curb the variant’s spread. U.S. 2-year yields were cheaper by 1bp on the day, rose to new 2021 high following Pfizer vaccine report; 2s10s spread erased a flattening move In commodities, crude futures turned red, WTI falling 0.8%, popping back below $72. Spot gold holds Asia’s modest gains, adding $8 to trade near $1,792/oz. Looking at the day ahead, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Market Snapshot S&P 500 futures up 0.2% to 4,693.75 STOXX Europe 600 little changed at 480.55 MXAP up 0.7% to 194.84 MXAPJ up 0.6% to 632.78 Nikkei up 1.4% to 28,860.62 Topix up 0.6% to 2,002.24 Hang Seng Index little changed at 23,996.87 Shanghai Composite up 1.2% to 3,637.57 Sensex up 1.8% to 58,654.25 Australia S&P/ASX 200 up 1.3% to 7,405.45 Kospi up 0.3% to 3,001.80 Brent Futures down 0.5% to $75.04/bbl Gold spot up 0.3% to $1,790.33 U.S. Dollar Index down 0.17% to 96.20 German 10Y yield little changed at -0.38% Euro up 0.2% to $1.1286 Brent Futures down 0.5% to $75.04/bbl Top Overnight News from Bloomberg The omicron variant of Covid-19 must inflict significant damage on the euro-area economy for European Central Bank Governing Council member Martins Kazaks to back additional stimulus “The current phase of higher inflation could last longer than expected only some months ago,” ECB vice president Luis de Guindos says at event The earliest studies on omicron are in and the glimpse they’re providing is cautiously optimistic: while vaccines like the one made by Pfizer Inc. and BioNTech SE may be less powerful against the new variant, protection can be fortified with boosters U.K. Prime Minister Boris Johnson is set to announce new Covid-19 restrictions in England, known as “Plan B,” to stop the spread of the Omicron variant, the Financial Times reported, citing three senior Whitehall officials familiar with the matter. French economic activity will continue to rise in December, despite another wave of the Covid-19 pandemic and fresh uncertainty over the omicron variant, according the Bank of France The Kingdom of Denmark will sell a sovereign green bond for the first time next month to help the Nordic nation meet one of the world’s most ambitious climate targets Tom Hayes, the former UBS Group AG and Citigroup Inc. trader who became the face of the sprawling Libor scandal, has lost his bid to appeal his U.K. criminal conviction Poland is poised for a hefty increase in interest rates after a spike in inflation to a two- decade high convinced central bankers that spiraling price growth isn’t transitory. Of 32 economists surveyed by Bloomberg, 20 expect a 50 basis-point hike to 1.75% today and 10 see the rate rising to 2%. The other two expect a 25 basis-point increase Australia is weighing plans for a central bank-issued digital currency alongside the regulation of the crypto market as it seeks to overhaul how the nation’s consumers and businesses pay for goods and services Bank of Japan Deputy Governor Masayoshi Amamiya dropped a strong hint that big firms are in less need of funding support, a comment that will likely fuel speculation the BOJ will scale back its pandemic buying of corporate bonds and commercial paper A detailed summary of global markets courtesy of Newsquawk Asian equity markets traded positively as the region took impetus from the global risk momentum following the tech-led rally in the US, where Apple shares rose to a record high and amid increased optimism that Omicron could be less dangerous than prior variants. This was after early hospitalisation data from South Africa showed the new variant could result in less severe COVID and NIH's Fauci also suggested that Omicron was 'almost certainly' not more severe than Delta, although there were some slight headwinds in late Wall Street trade after a small study pointed to reduced vaccine efficacy against the new variant. The ASX 200 (+1.3%) was underpinned in which tech led the broad gains across sectors as it found inspiration from the outperformance of big tech stateside, and with energy bolstered by the recent rebound in underlying oil prices. The Nikkei 225 (+1.4%) conformed to the upbeat mood although further advances were capped after USD/JPY eased off the prior day’s highs and following a wider-than-expected contraction to the economy with the final annualised Q3 GDP at -3.6% vs exp. -3.1%. The Hang Seng (+0.1%) and Shanghai Comp. (+1.2%) were less decisive and initially lagged behind their peers as sentiment was mired by default concerns due to the failure by Evergrande to pay bondholders in the lapsed 30-day grace period on two USD-denominated bond payments and with Kaisa Group in a trading halt after missing the deadline for USD 400mln in offshore debt which didn’t bode well for its affiliates. Furthermore, China Aoyuan Property Group received over USD 650mln in repayment demands and warned it may not be able to meet debt obligations, while a subdued Hong Kong debut for Weibo shares which declined around 6% from the offer price added to the glum mood for Hong Kong’s blue-chip tech stocks, as did reports that China is to tighten rules for tech companies seeking foreign funding. Finally, 10yr JGBs languished after spillover selling from T-notes and due to the heightened global risk appetite, but with downside stemmed by support at the key psychological 152.00 level and amid the presence of the BoJ in the market today for over JPY 1.0tln of JGBs. Top Asian News China Clean Car Sales Spike as Consumers Embrace Electric Gold Edges Higher as Traders Weigh Vaccine Efficacy, Geopolitics Paint Maker Avia Avian Falls in Debut After $763 Million IPO Tokyo Prepares to Introduce Same-Sex Partnerships Next Year Equities in Europe shifted to a lower configuration after a mixed open (Euro Stoxx 50 -0.7%; Stoxx 600 -0.1%) as sentiment was dented by rumours of tightening COVID measures in the UK. Markets have been awaiting the next catalyst to latch onto for direction amidst a lack of fresh fundamentals. US equity futures have also been dented but to a lesser extent, with the YM (-0.1%) and ES (Unch) straddling behind the NQ (+0.2%) and RTY (+0.2%). Sources in recent trade suggested an 85% chance of the UK implementing COVID Plan B, according to Times' Dunn; reports indicate such restrictions could be implemented on Thursday, with the potential for an announcement today. In terms of the timings, the UK cabinet is penciled in for 15:45GMT and presser for 17:30GMT on Plan B, according to BBC's Goodall. Note, this will not be a formal lockdown but more so work-from-home guidance, vaccine passports for nightlife and numerical restrictions on indoor/outdoor gatherings. APAC closed in the green across the board following the tech-led rally in the US. The upside overnight was attributed to a continuation of market optimism after early hospitalisation data from South Africa showed the new variant could result in less severe COVID, albeit after a small study pointed to reduced vaccine efficacy against the new variant. Participants will be closely watching any updates from the vaccine-makers, with the BioNTech CEO stating the drugmaker has data coming Wednesday or Thursday related to the new COVID-19 variant, thus markets will be eyeing a potential update this week ahead of the Pfizer investor call next Friday. Back to European, the UK’s FTSE 100 (Unch) and the Swiss SMI (+0.8%) are largely buoyed by their defensive stocks, with sectors seeing a defensive formation, albeit to a slightly lesser extent vs the open. Healthcare retains its top spot closely followed by Food & Beverages, although Personal & Household Goods and Telecoms have moved down the ranks. On the flip side, Retail, Banks and Travel & Leisure trade at the bottom of the bunch, whilst Tech nursed some earlier losses after opening as the lagging sector. In terms of individual movers, Nestle (+1.8%) is bolstered after announcing a CHF 20bln share repurchase programme alongside a stake reduction in L'Oreal (+1.0%) to 20.1% from 23.3% - worth some EUR 9bln. L’Oreal has shrugged off the stake sale and conforms to the firm sectoral performance across the Personal & Household Goods. Meanwhile, chip names are under pressure after Nikkei sources reported that Apple (+0.8% pre-market) was forced to scale back the total output target for 2021, with iPhone and iPad assembly halted for several days due to supply chain constraints and restrictions on the use of power in China, multiple sources told Nikkei. STMicroelectronics (-1.7%) and Infineon (-5.0%) are among the losers, with the latter also weighed on by a broker downgrade at JPM. Top European News ECB’s Kazaks Sets High Bar for Omicron-Driven Extra Stimulus Biden Is Left Guessing Over Putin’s Ultimate Aim in Ukraine Byju’s Buys Austria’s GeoGebra to Bolster Online Math Courses Scholz Elected by Parliament to Take Charge as German Chancellor In FX, the Dollar index continues to hold above 96.000, but bounces have become less pronounced and the range so far today is distinctly narrower (96.285-130) in fitting with the generally restrained trade in pairings within the basket and beyond, bar a few exceptions. Price action suggests a relatively muted midweek session unless a major game-changer arrives and Wednesday’s agenda does not bode that well in terms of catalysts aside from JOLTS and the BoC policy meeting before the second leg of this week’s refunding in the form of Usd 36 bn 10 year notes. AUD/EUR - Notwithstanding the largely contained currency moves noted above, the Aussie is maintaining bullish momentum on specific factors including strength in iron ore prices and encouraging Chinese data plus PBoC easing that should have a positive knock-on effect for one of its main trading partners even though diplomatic relations between the two nations are increasingly strained. Aud/Usd has also cleared a couple of technical hurdles on the way up to circa 0.7143 and Aud/Nzd is firmer on the 1.0500 handle ahead of the RBA’s latest chart pack release and a speech by Governor Lowe. Elsewhere, the Euro has regained composure after its sub-1.1250 tumble on Tuesday vs the Buck and dip through 0.8500 against the Pound, but still faces psychological resistance at 1.1300 and the 21 DMA that comes in at 1.1317 today, while Eur/Gbp needs to breach the 100 DMA (0.8513) convincingly or close above to confirm a change in direction for the cross from a chart perspective. CHF/CAD/JPY/GBP/NZD - All sitting tight in relation to their US counterpart, with the Franc paring some declines between 0.9255-30 parameters and the Loonie straddling 1.2650 in the run up to the aforementioned BoC that is widely seen as a non-event given no new MPR or press conference, not to mention the actual changes in QE and rate guidance last time. Nevertheless, implied volatility is quite high via a 63 pip breakeven for Usd/Cad. Meanwhile, Sterling lost grip of the 1.3200 handle amidst swirling speculation about the UK reverting to plan B and more Tory MPs calling for PM Johnson to resign, the Yen is rotating around 113.50 eyeing broad risk sentiment and US Treasury yields in context of spreads to JGBs, and the Kiwi is lagging after touching 0.6800 awaiting independent impetus from NZ manufacturing sales for Q3. SCANDI/EM - The Nok extended its advantage/outperformance against the Sek as Brent rebounded towards Usd 76/brl in early trade and Riksbank’s Jansson retained reservations about flagging a repo rate hike at the end of the forecast horizon, while the Mxn and Rub also initially derived some support from oil with the latter also taking on board latest hawkish talk from the CBR. However, the Cny and Cnh are outpacing their rivals again with some assistance from a firmer PBoC midpoint fix to hit multi-year peaks vs the Usd and probe 6.3500 ahead of option expiry interest at 6.3000 and a Fib retracement at 6.2946, in stark contrast to the Try that is unwinding recent recovery gains with no help from the latest blast from Turkish President Erdogan - see 10.00GMT post in the Headline Feed for more. Conversely, the Czk has taken heed of CNB’s Holub underscoring tightening signals and expectations for the next rate convene and the Pln and Brl are anticipating hikes from the NBP and BCB. In commodities, crude futures have been hit on the prospect of imminent COVID-related measures in the UK, albeit the measures do not involve lockdowns. Brent and WTI front month futures slipped from European highs to breach APAC lows. The former dipped below USD 74.50/bbl from a USD 76.00/bbl European peak while its WTI counterpart tested USD 71.00/bbl from USD 72.50/bbl at best. Overnight the benchmarks traded on either side the USD 75/bbl mark and just under USD 72/bbl after the weekly Private Inventories printed a larger-than-expected draw (-3.6mln vs exp. -3.1mln), albeit the internals were less bullish. Yesterday also saw the release of the EIA STEO, cut its 2021 world oil demand growth forecast by an insignificant 10k BPD but raised the 2022 metric by 200k BPD – with the IEA and OPEC monthly reports poised to be released next week. On the vaccine front, a small preliminary study of 12 people showed a 40x reduction in neutralization capacity of the Pfizer vaccine against Omicron, but early hospitalisation data from South Africa showed the new variant could result in less severe COVID. BioNTech CEO said they have data coming in on Wednesday or Thursday related to the new Omicron variant. The geopolitical space is also worth keeping on the radar, with US President Biden yesterday warning Russian President Putin that gas exports via Nord Stream 2 will be targeted and more troops will be deployed if he orders an invasion of Ukraine. Further, reports suggested, an Indian army helicopter crashed in Tamil Nadu, with Chief of Defence staff reportedly on board, according to Sputnik. Note, Tamil Nadu is located towards the south of the country and away from conflict zones. Elsewhere spot gold was supported by the overnight pullback in the Dollar, but the recent risk aversion took the yellow metal above the 100 DMA around USD 1,790/oz, with nearby upside levels including the 200 DMA (1,792/oz) and the 50 DMA (1,794/oz). Copper prices meanwhile consolidated within a tight range, with LME copper holding onto a USD 9,500/t handle (just about). Dalian iron ore extended on gains in a continuation of the upside seen in recent trade. US Event Calendar 7am: Dec. MBA Mortgage Applications, prior -7.2% 10am: Oct. JOLTs Job Openings, est. 10.5m, prior 10.4m DB's Jim Reid concludes the overnight wrap A reminder that we are currently conducting our special 2022 survey. We ask about rates, equities, bond yields and the path of covid in 2022, amongst other things, and also return to a festive question we asked in 2019, namely your favourite ever Christmas songs. The link is here and it’ll be open until tomorrow. All help filling in very much appreciated. My optimism for life has been shattered this morning. Not from the markets or the virus but just as I woke this morning England cricketers finally surrendered and collapsed in a heap on the first day of the Ashes - one the oldest international rivalries in sport. It was all I could do not to turn round and go back to bed. However out of duty I’m soldering on. After the twins nativity play went without incident yesterday, this morning it’s Maisie’s turn. Given she’s in a wheelchair at the moment she can’t get on stage so they’ve given her a solo singing spot at the start. I’m going so I can bring a bucket for all my wife’s tears as she sings!! If I shed a tear I’ll pretend it’s because of the cricket. The global market rebound continued to gather strength yesterday as investors became increasingly optimistic that the Omicron variant wouldn’t prove as bad as initially feared. To be honest, it was more the absence of bad news rather than any concrete good news helping to drive sentiment. Late in the US session we did see some headlines suggesting that the Pfizer vaccine may provide some defence against Omicron but also that the new variant does evade some of the immunity produced by this vaccine. This report of the small study (12 people!!) from South Africa lacked substance but you could take positives and negatives from it. More information is clearly needed. For the markets though, every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won’t be the curveball to throw the recovery off course. Indeed, to get a sense of the scale of the market rebound, both the S&P 500 and the STOXX 600 in Europe have now clocked in their strongest 2-day performances of 2021 so far, with the indices up by +3.27% and +3.76% respectively since the start of the week. Meanwhile, the VIX fell below 25 for the first time in a week. On the day, the S&P 500 (+2.07%) put in its strongest daily performance since March, whilst the STOXX 600 (+2.45%) saw its strongest daily performance since the news that the Pfizer vaccine was successful in trials back in November 2020. Once again the gains were incredibly broad-based, albeit with cyclical sectors leading the way. The Nasdaq (+3.03%) outperformed the S&P 500 for the first time in a week as tech shares led the rally. Small cap stocks also had a strong day, with the Russell 2000 up +2.28%, on the back of Omicron optimism. This recovery in risk assets was also seen in the bounceback in oil prices, with Brent crude (+3.23%) and WTI (+3.68%) now both up by more than $5.5/bbl since the start of the week, which puts them well on the way to ending a run of 6 consecutive weekly declines. For further evidence of this increased optimism, we can also look at the way that investors have been dialling back up their estimates of future rate hikes from the Fed, with yesterday seeing another push in this direction. Before the Omicron news hit, Fed fund futures were fully pricing in an initial hike by the June meeting, but by the close on the Monday after Thanksgiving they’d moved down those odds to just 61% in June, with an initial hike not fully priced until September. Fast forward just over a week however, and we’re now not only back to pricing in a June hike, but the odds of a May hike are standing at +78.8%, which is actually higher than the +66.1% chance priced before the Omicron news hit. A reminder that we’re just a week away now from the Fed’s next decision, where it’s hotly anticipated they could accelerate the pace at which they’ll taper their asset purchases. With investors bringing forward their bets on monetary tightening, front-end US Treasury yields were hitting post-pandemic highs yesterday, with the 2yr Treasury yield up +5.8bps to 0.69%, a level we haven’t seen since March 2020. Longer-dated yield increases weren’t as large, with the 10yr yield up +3.9bps to 1.47%, and the 5s30s curve flattened another -1.8bps to 54.4bps, just above the post-pandemic low of 53.7bps. Over in Europe there was similarly a rise in most countries’ bond yields, with those on 10yr bunds (+1.4bps), OATs (+1.0bps) and BTPs (+4.4bps) all moving higher, though incidentally, the 5s30s curve in Germany was also down -2.2bps to its own post-pandemic low of 50.0bps. One pretty big news story that markets have been relatively unperturbed by so far is the rising tensions between the US and Russia over Ukraine. Yesterday saw a video call between US President Biden and Russian President Putin. The US readout from the call did not offer much in the way of concrete details, but if you’re looking for any optimistic news, it said that both sides tasked their teams with following up. Setting the background for the call, there were reports immediately beforehand that the US was considering evacuating their citizens and posturing to stop Nord Stream 2 if Russia invaded Ukraine. The Ruble appreciated +0.42% against the dollar, and is now only slightly weaker versus the dollar on the week. Overnight in Asia stocks are trading mostly higher led by the Nikkei (+1.49%), CSI (+1.11%), Shanghai Composite (+0.86%) and the KOSPI (+0.78%) as markets respond positively to the Pfizer study mentioned at the top. The Hang Seng (-0.12%) is lagging though. In Japan, the final Q3 GDP contracted -3.6% quarter on quarter annualised against consensus expectations of -3.1% on lower consumer spending than initially estimated. In India, the RBI left the key policy rate unchanged for the ninth consecutive meeting today while underscoring increasing headwinds from the Omicron variant. Futures markets indicate a positive start in the US and Europe with S&P 500 (+0.41%) and DAX (+0.12%) futures trading in the green. Back on the pandemic, despite the relative benign news on Omicron, rising global case counts mean that the direction of travel is still towards tougher restrictions across a range of countries. In fact here in the UK, we saw the 7-day average of reported cases move above 48,000 for the first time since January. In terms of fresh restrictions, yesterday saw Canada announce that they’d be extending their vaccine mandate, which will now require employees in all federally regulated workplaces to be vaccinated, including road transportation, telecommunications and banking. In Sweden, the government is preparing a bill that would see Covid passes introduced for gyms and restaurants, while Poland put further measures in place, including remote schooling from December 20 until January 9, while vaccines would become mandatory for health workers, teachers and uniformed services from March 1. One move to ease restrictions came in Austria, where it was confirmed shops would be reopening on Monday, albeit only for those vaccinated, while restaurants and hotels would reopen the following week. If you see our daily charts you’ll see that cases in Austria have dropped sharply since the peaks a couple of weeks ago, albeit still high internationally. In DC, Congressional leaders apparently agreed to a deal that would ultimately lead to the debt ceiling being increased, after some procedural chicanery. Senate Majority Leader McConnell voiced support for the measure, which is a good sign for its ultimate prospects of passing, but it still needs at least 10 Republican votes in the Senate to pass. McConnell indicated the votes would be there when the Senate ultimately takes it up, which is reportedly set to happen this week. The House passed the measure last night. Yields on Treasury bills maturing in December fell following the headlines. Looking ahead, today will mark the end of an era in Germany, as Olaf Scholz is set to become Chancellor in a Bundestag vote later on, marking an end to Chancellor Merkel’s 16-year tenure. That vote will simply be a formality given the three parties of the incoming coalition (the centre-left SPD, the Greens and the liberal FDP) have a comfortable majority between them, and the new cabinet will feature 7 SPD ministers, 5 Green ministers, and 4 from the FDP. Among the positions will include Green co-leader Robert Habeck as Vice Chancellor, Green co-leader Annalena Baerbock as foreign minister, and FDP leader Christian Lindner as finance minister. Running through yesterday’s data, the US trade deficit narrowed to $67.1bn in October (vs. $66.8bn expected), marking its smallest level since April. Meanwhile in the Euro Area, the latest Q3 growth estimate was left unchanged at +2.2%, but both Q1 and Q2’s growth was revised up a tenth. Over in Germany, industrial production grew by a stronger-than-expected +2.8% in October (vs. +1.0% expected), with the previous month’s contraction also revised to show a smaller -0.5% decline. In addition, the expectations component of the December ZEW survey fell by less than expected to 29.9 (vs. 25.4 expected), but the current situation measure fell to a 6-month low of -7.4 (vs. 5.7 expected). To the day ahead now, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Tyler Durden Wed, 12/08/2021 - 07:58.....»»

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.....»»

Futures Meltup To New All Time High As November Begins With A Bang US futures and European stocks rose to a new record high to start the historically stellar month of November... ... and Asian markets jumped amid positive earnings surprises and as concerns of a global stagflation and central bank policy error faded for a few hours (they will return shortly). TSLA melted up by another $35BN in market cap "because gamma." S&P 500 futures climbed 0.4% after the cash index posted the biggest monthly gain since last November. Treasury Secretary Janet Yellen expressed confidence in the continuing recovery from the pandemic, helping spur gains in equity markets. Health-care shares rallied in Europe. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting to announce the start of tapering (which will then lead to rate hikes next July according to Goldman). Oil rebounded on fresh supply concerns. In addition to the now absolutely batshit insane meltup in Tesla, which won't end until the SEC cracks down on gamma squeeze manipulation, other mega-cap technology stocks such as Google, Meta, Microsoft, Amazon.and Apple, aka oddly enough GAMMA, traded mixed. Exxon and Chevron added about 0.7% each as JP Morgan raised its price target on the oil majors following their strong quarterly results last week. Major Wall Street banks gained between 0.2% and 0.8%. The broader S&P 500 financials sector slipped last week, breaking a three-week winning streak. Lucid Group Inc. rose 4.8% in premarket, extending its advance from last week, after the new U.S. tax plan included a proposal to make EV tax credits more widely available. Harley-Davidson Inc jumped 8.2% after the European Union removed retaliatory tariffs on U.S. products including whiskey, power boats and company’s motorcycles. Here are the most notable pre-market movers: Tesla shares rise 2.3% in U.S. premarket trading after their biggest monthly gain in almost a year in October ABVC BioPharma jumps more than 700% as thelittle known biotechnology company garners attention from retail traders on social media Ocugen and Zosano (ZSAN US) are some other top gainers among retail trader stocks in premarket A largely upbeat earnings season has helped investors look past a mixed-macro economic picture, with the benchmark S&P 500 and the tech-heavy Nasdaq recording their best monthly performance since November 2020 in October. Of the 279 S&P 500 companies that have reported quarterly results, 87% have met or exceeded estimates. Among members of Europe’s Stoxx 600 index, 68% surpassed expectations. On the economic data front, readings on October factory activity data from IHS Markit and ISM are due after market open, followed by non-farm payrolls on Friday. Focus is now on the Fed’s two-day policy meeting which concludes at 2pm on Nov 3, where the central bank will announce the tapering of its $120 billion monthly bond buying program by $15 billion. With recent U.S. data showing inflation pressures building, the market has also started pricing in rate hikes next year. November and December tend to be among the strongest months for stocks and any hawkish tilt in the Fed’s message could catch equities by surprise.  Meanwhile, Biden’s economic agenda seemed to be on track as Democratic lawmakers worked to overcome their differences on a $1.75 trillion social-spending plan. “Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalization.” European stocks hit the afterburner out of the gate with the Euro Stoxx 50 adding as much as 1% before drifting off best levels. FTSE MIB and IBEX outperform, FTSE 100 lags slightly. Banks, construction and travel are the strongest sectors; tech the sole Stoxx 600 sector in the red. Barclays Plc fell 1.5%. Chief Executive Officer Jes Staley stepped down amid a U.K. regulatory probe into how he characterized his ties to the financier and sex offender Jeffrey Epstein. Asian stocks were poised to snap a three-day decline thanks to a rally in Japanese equities, which got a boost from an election victory for the country’s ruling party and Prime Minister Fumio Kishida.  The MSCI Asia Pacific Index advanced as much as 0.6%, while Japan’s benchmark Topix and the blue-chip Nikkei 225 Stock Average each added more than 2%. Sony Group, Toyota Motor and Tokyo Electron were among the single-largest contributors to the regional measure’s rise. By sector, industrials and information-technology companies provided the biggest boosts.  Japan’s ruling Liberal Democratic Party defied worst-case scenarios to secure a majority by itself in a closely-watched election Sunday. Analysts said the outcome signals political stability, paving the way for economic stimulus to be executed as anticipated (see Street Wrap).  “Indicators of market activity show that there will be a positive market impact to the election, as although it was not greatly different than expectations, the LDP clearly surpassed some of the more dire polls of last week and there will not likely be any party shake-up in the intermediate-term,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management wrote in a note.  The market is also “reacting positively” to Friday’s share-price gains in the U.S., Vail said. Futures on the S&P 500 rose during Asian trading hours after the underlying gauge added 0.2%.  Asia’s regional benchmark capped a weekly drop of 1.5%, its worst such performance since early October, as disappointing results weighed on big technology stocks. More than half of the companies on the MSCI Asia Pacific Index have reported results for the latest quarter with about 37% posting a positive surprise, according to data compiled by Bloomberg. Australia's S&P/ASX 200 index rose 0.6% to 7,370.80, recouping some losses after Friday’s 1.4% plunge. Health and consumer discretionary stocks contributed the most to the benchmark’s gain. WiseTech was among the top performers, snapping a four-day losing streak. Westpac was the worst performer after the bank delivered a smaller share buyback than some had expected. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,030.31. In rates, fixed income trades heavy with gilts leading the long end weakness. Treasuries were slightly cheaper on the long-end of the curve as S&P 500 futures exceed last week’s record highs. Yields are cheaper by 2bp to 2.5bp from belly out to long-end, with front-end slightly outperforming and steepening 2s10s spread by 1.7bp; 10-year yields around 1.58% with gilts underperforming by 1.1bp, Italian bonds by 3.5bp. Gilts and Italian bonds lag, with Bank of England rate decision due Thursday. In the U.S., weekly highlights include refunding announcement and FOMC Wednesday and Friday’s October jobs report. Bund and gilt curves bear steepen with gilts ~1bps cheaper to bunds. Peripheral spreads swing an early tightening to a broad widening to core with Italy the weakest performer. Overnight futures and options flows included block seller in 5-year note futures (3,900 at 3:09am ET) and a buyer of TY Week 1 129.00 puts at 3 on 10,000, says London trader. In FX, the Bloomberg dollar index held a narrow range. SEK and CHF top the G-10 score board, GBP lags with cable snapping below 1.3650. TRY outperforms EMFX peers. The BBDXY inched up and the greenback traded mixed against its Group-of-10 peers, with many of the risk-sensitive currencies leading gains The pound retraced some losses against the dollar, after dipping earlier in the European session. The yield on 2-year gilts hit the highest since May 2019. Financial markets are almost fully pricing in a 15-basis point increase in the Bank of England’s benchmark lending rate on Nov. 4, while economists increasingly share that view, even as they see the decision as a far closer call. A record share of U.K. businesses are expecting to increase prices, adding to the inflationary pressures confronting Bank of England policy makers ahead of their meeting on Thursday Australian bonds extended opening gains as traders positioned for the Reserve Bank’s policy decision Tuesday. The Aussie fell, tracking losses in iron ore prices following a weak China PMI, which showed signs of further weakness in October The yen fell for a second day after the ruling Liberal Democratic Party retained its outright majority in a lower-house election, reinforcing bets for fiscal stimulus and reforms. Hedge funds boosted net short positions on the yen to the most since January 2019, raising the risk of a squeeze should risk appetite deteriorate suddenly and demand for havens rise The Turkish lira edged higher after Turkish President Recep Tayyip Erdogan said he had “positive” talks with U.S. President Joe Biden In commodities, crude futures drift higher. WTI adds 40c to trade near $84; Brent rises ~1% near $84.50. Spot gold is quiet near $1,786/oz. Base metals are mixed: LME nickel and tin outperform, zinc lags. Looking at today's calendar, earnings continue on Monday with PG&E and ON Semiconductor reporting pre-market, and NXP Semiconductors post-market. We also get the latest Mfg PMI print and the October Mfg ISM print. Market Snapshot S&P 500 futures up 0.3% to 4,612.25 STOXX Europe 600 up 0.8% to 479.40 MXAP up 0.4% to 198.04 MXAPJ down 0.3% to 645.49 Nikkei up 2.6% to 29,647.08 Topix up 2.2% to 2,044.72 Hang Seng Index down 0.9% to 25,154.32 Shanghai Composite little changed at 3,544.48 Sensex up 1.3% to 60,079.40 Australia S&P/ASX 200 up 0.6% to 7,370.78 Kospi up 0.3% to 2,978.94 Brent Futures up 0.3% to $83.95/bbl Gold spot down 0.0% to $1,783.20 U.S. Dollar Index little changed at 94.14 German 10Y yield little changed at -0.091% Euro up 0.1% to $1.1571 Top Overnight News from Bloomberg House Democratic leaders are pushing hard to get Biden’s package finalized, with votes on both that bill and a smaller infrastructure plan this week -- the latest in a string of self- imposed deadlines. The Senate, which already approved the public-works bill, is likely to vote on the larger package later in the month Leaders of the Group of 20 countries agreed on a climate deal that fell well short of what some nations were pushing for, leaving it to negotiators at the COP26 summit in Glasgow this week to try to achieve a breakthrough The U.K. said it will trigger legal action against France within 48 hours unless a dispute over post-Brexit fishing rights is resolved, as the growing spat threatens to overshadow the United Nations’ climate summit Treasury Secretary Janet Yellen said she believes Federal Reserve Chair Jerome Powell has taken “significant action” in the wake of revelations over the personal investments of U.S. central-bank policy makers; Yellen dismissed recent moves in the bond market that have signaled concern about monetary policy makers squelching economic growth, and expressed confidence in the continuing recovery from the Covid-19 pandemic The U.S. and the European Union have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year Asia-Pac bourses traded mostly higher amid tailwinds from last Friday's fresh record highs in the US where Wall St. topped off its best monthly performance YTD, but with some of the advances in the region capped as participants digested mixed Chinese PMI data and ahead of this week’s slew of key risk events including crucial central bank policy announcements from the RBA, BOE and FOMC, as well as the latest NFP jobs data. ASX 200 (+0.8%) was led higher by the consumer-related sectors amid a reopening play after Australia permitted fully vaccinated citizens to travel internationally again and with several M&A related headlines adding to the optimism including the Brookfield-led consortium acquisition of AusNet Services and Seven West Media’s takeover of Prime Media. Conversely, the largest weighted financials sector failed to join in on the spoils with Westpac shares heavily pressured following its FY results which fell short of analyst estimates despite more than doubling on its cash earnings. Nikkei 225 (+2.5%) was the biggest gainer with the index underpinned by favourable currency flows and following the general election in which the ruling LDP maintained a majority in the lower house although won fewer seats than previously for its slimmest majority since 2012, while the KOSPI (+0.4%) was kept afloat but with upside limited by slightly softer than expected trade data. Hang Seng (-1.5%) and Shanghai Comp. (+0.1%) were subdued amid a slew of earnings releases and following mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts with the former at a second consecutive contraction, although Caixin Manufacturing PMI was more encouraging and topped market consensus. Finally, 10yr JGBs initially declined amid gains in stocks and recent pressure in T-notes due to rate hike bets with analysts at Goldman Sachs bringing forward their Fed rate hike calls to July 2022 from summer 2023 citing inflation concerns, although 10yr JGBS then recovered despite the mixed results from the 10yr JGB auction which showed a higher b/c amid lower accepted prices and wider tail in price. Top Asian News Japan’s Kishida Mulls Motegi for LDP Secretary General: Kyodo Home Sales Slump; Another Bond Deadline Looms: Evergrande Update Two Thirds of China’s Top Developers Breach a ‘Red Line’ on Debt Hedge Fund Quad Sells Memory Stocks Citing Demand Uncertainty European equities (Stoxx 600 +0.6%) have kicked the week off on the front-foot with the Stoxx 600 printing a fresh all-time-high. The handover from the APAC session was a largely constructive one with the Nikkei 225 (+2.6%) the best in class for the region amid favourable currency flows and the fallout from the Japanese general election which saw the ruling LDP party maintain a majority in the lower house. Elsewhere, performance for the Shanghai Composite (-0.1%) and Hang Seng (-0.9%) was less impressive amid a slew of earnings releases and mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts. US equity index futures are trading on a firmer footing (ES +0.5%) ahead of Wednesday’s FOMC announcement and Friday’s NFP data. The latest reports from Washington suggest that House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. Back to Europe, a recent note from JPM stated that Q3 European earnings “are coming in well ahead of expectations in aggregate”, adding that results are healthy when considering the “trickier operating backdrop”. Sectors in the region are higher across the board with Auto names top of the leaderboard. Renault (+3.3%) sits at the top of the CAC 40 with the name potentially gaining some reprieve from agreement to resolve the US-EU steel and aluminium trade dispute (something which the Co. has previously noted as a negative). Also following the resolution, Thyssenkrupp (+2.8%) and Salzgitter (+4.5%) are both trading notably higher. Barclays (-2.0%) shares are seen lower after news that CEO Staley is to step down with immediate effect following the investigation into his relationship with sex offender Jeffrey Epstein; Barclays' Global Head of Markets, Venkatakrishnan is to take over. UK homebuilders (Persimmon -2.1%, Taylor Wimpey -1.9%, Barratt Developments -1.9%, Berkeley Group -1.7%) are softer on the session amid concerns that the sector could fall victim to higher mortgage rates given the shape of the UK yield curve. Ryanair (+1%) shares are higher post-earnings which saw the Co. continue its recovery from the pandemic, albeit still expects a loss for the year. Furthermore, the board is considering the merits of retaining its standard listing on the LSE. Finally, BT (+4.2%) is the best performer in the Stoxx 600 ahead of earnings on Thursday with press reports suggesting that the Co. could announce that its GBP 1bln cost savings target will be met a year earlier than the guided March 2023. Top European News SIG Proposed Offering for EU300m Senior Secured Notes Due 2026 Delivery Hero’s Turkey Unit CEO Nevzat Aydin to Step Down Goldman Sachs Says ‘Lost Decade’ Is Looming for 60/40 Portfolios URW Sells Stake in Paris Triangle Tower Project to AXA IM Alts In FX, the Greenback is holding above 94.000 in index terms and gradually ground higher after pausing for breath and taking some time out following its rapid resurgence last Friday to eclipse the 94.302 month end best at 94.313 before waning again. Hawkish vibes going into the FOMC are underpinning the Dollar and helping to offset external factors that are less supportive, including ongoing strength in global stock markets on solid if not stellar Q3 earnings and economic recovery from COVID-19 lockdown or restricted levels. Hence, the DXY is keeping its head above the round number and outperforming most major peers within and beyond the basket, awaiting Markit’s final manufacturing PMI, the equivalent ISM and construction spending ahead of the Fed on Wednesday and NFP on Friday. JPY/AUD - Little sign of relief for the Yen from victory by Japan’s ruling LDP part at the weekend elections as the 261 seat majority secured is down from the previous 276 and the tightest winning margin since 2012. Moreover, Security General Amari lost his constituency and new PM Kishida concedes that this reflects the public’s adverse feelings towards the Government over the last 4 years. Usd/Jpy is eyeing 114.50 as a result and the Aussie is looking precarious around 0.7500 against the backdrop of weakness in commodity prices even though perceptions for the upcoming RBA have turned markedly towards the potential for YCT to be withdrawn following firm core inflation readings and no defence of the 0.1% April 2024 bond target. NZD/EUR/CHF/CAD/GBP - All narrowly mixed vs their US counterpart, and with the Kiwi also taking advantage of the aforementioned apprehension in the Aud via the cross, while the Euro has pared declines from just under 1.1550, but still looks top-heavy into 1.1600. Elsewhere, the Franc is pivoting 0.9160 and 1.0600 against the Euro with more attention on a rise in Swiss sight deposits at domestic banks as evidence of intervention than a fractionally softer than expected manufacturing PMI, the Loonie is keeping afloat of 1.2400 ahead of Markit’s Canadian manufacturing PMI and Sterling is striving to stay above 1.3600, but underperforming vs the Euro circa 0.8470 amidst the ongoing tiff between the UK and France over fishing rights. SCANDI/EM - Robust Swedish and Norwegian manufacturing PMIs plus broad risk appetite is underpinning the Sek and Nok, in contrast to the Cnh and Cny following disappointing official Chinese PMIs vs a more respectable Caixin print, but the EM laggard is the Zar in knock-on reaction to Gold’s fall from grace on Friday, increasingly bearish technical impulses and SA energy supply issues compounded by Eskom’s load-shedding. Conversely, the Try has pared some declines irrespective of a slowdown in Turkey’s manufacturing PMI as the CBRT conducted a second repo op for Lira 27 bn funds maturing on November 11 at 16%. In commodities, WTI and Brent are firmer this morning with gains of between USD 0.50-1.00/bbl, this upside is in-spite of a lack of fundamental newsflow explicitly for the complex and is seemingly derived from broader risk sentiment, as mentioned above. Nonetheless, Energy Ministers are beginning to give commentary ahead of Thursday’s OPEC+ event and so far Angola, Kuwait and Iraq officials have voiced their support for the planned 400k BPD hike to production in December. This reiteration of existing plans is in opposition from calls from non-OPEC members such as the US and Japan that the group should look to increase production quicker than planned, in a bid to quell rising prices. Separately, Saudi Aramco reported Q3 earnings over the weekend in which its net profit doubled given strong crude prices and sales volumes improving by 12% QQ; subsequently, some analysts have highlighted the possibility for a end-2021 special dividend. Elsewhere, base metals are mixed and fairly contained in-spite of the EU and US announcing an agreement to resolve the ongoing aluminium and steel trade dispute. While spot gold and silver are modestly firmer this morning as the yellow metal remains contained after its slip from the USD 1800/oz mark in the tail-end of last week. Currently, spot gold is pivoting its 100-DMA at USD 1786 with the 50- and 200-DMAs residing either side at USD 1780/oz and USD 1791/oz respectively. US Event Calendar 9:45am: Oct. Markit US Manufacturing PMI, est. 59.2, prior 59.2 10am: Oct. ISM Manufacturing, est. 60.5, prior 61.1 10am: Sept. Construction Spending MoM, est. 0.4%, prior 0% DB's Jim Reid concludes the overnight wrap Welcome to November. I had three halloween parties over the weekend which is probably more than the entire number I went to before I had kids. I still have some spooky make up on this morning that I just couldn’t get off from last night. So there’s a reason alone to zoom into the call at 3pm today. As it’s the 1st of November Henry is about to publish our monthly performance review. It was a hectic month of higher inflation expectations and commodities, and also the best S&P 500 month of the year. Bonds underperformed across the board but these small negatives masked great volatility and stress under the surface, especially in the last week. See the report that should be out in the next 30-60mins. With all due respect to our readers in Australia, I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes the most important event of the week could be the RBA meeting tomorrow. 2 year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond. I’ve absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I’ve always disliked the forward guidance era as it encourages markets to pile on to much riskier, one way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change. It's unclear if the full implications of last week’s carnage at the global front end has yet been cleared out. There is lots of speculation about large unwinds, big stop losses etc. Liquidity was also awful last week. Much might depend on central banks this week. Make no mistake though there is considerable pain out there. The latest this morning in Aussie rates is that the 2y yield is down around -7bps while the 10y yield is down -19.0bps. So we wait with baited breath for tomorrow. Elsewhere in Asia, the Nikkei 225 (+2.42%) is charging ahead this morning as Japan’s Liberal Democratic Party kept its majority after lower house elections, thus boosting optimism about a potential fiscal stimulus. Elsewhere, the KOSPI (+0.43%) and the Shanghai composite (+0.07%) are outperforming the Hang Seng (-1.10%). In terms of data, China’s official manufacturing PMI fell from 49.6 to 49.2 (49.7 expected), not helped by commodities price rises and electricity shortages. The non-manufacturing PMI also fell to 52.4 from 53.2 (consensus 53). The Caixin manufacturing PMI did beat at 50.6 this morning (consensus 50). In terms of virus developments in the region, Shanghai Disneyland is closed amid recent COVID outbreaks, while Singapore is adding ICU beds in response to high levels of serious cases. The S&P 500 mini futures is up +0.23% this morning, the US 10y Treasury is at 1.56% (+1.2bps). It’s strange to have a likely Fed taper announcement on Wednesday be third billing for the week but the BoE on Thursday might be the next most important meeting as it’s still a finely judged call as to whether they hike this week or not. DB (preview here) think they will raise rates by 15bps with two 25bps hikes in February and May. They’ll also end QE a month earlier than planned. So over to the third billing, namely the Fed. They will announce a well flagged taper on Wednesday. In line with recent guidance, DB expect that the Fed will announce monthly reductions of $10bn and $5bn of Treasury and MBS purchases, respectively. With the first cut to purchases coming mid-November, this will bring the latest round of QE to a conclusion in June 2022. The Fed has some flexibility with this timetable but it will be interesting to hear how much Powell pushes back on markets that price in two hikes in 2022, including one almost fully priced for before the taper ends. If markets attacked the Fed in the same way they have the RBA the global financial system would have a lot of issues so it’s a fine balance for the Fed. They won’t want to push back too aggressively on market pricing given the uncertainty but they won’t want an outright attack on forward guidance. Moving on, a lowly fourth billing will be reserved for US payrolls on Friday. DB expect the headline gain (+400k forecast, consensus +425k vs. +194k previously) to modestly outperform that of private payrolls (+350k vs. +317k) and for the unemployment rate to fall by a tenth to 4.7% and average hourly earnings to post another strong gain (+0.4% vs. +0.6%) amidst still-elevated hours worked (34.8hrs vs. 34.8hrs). Outside of all this excitement, we have the COP26 which will dominate all your news outlets. The other main data highlight are the global PMIs (today and Wednesday mostly) which will give insight into how the economic recovery has progressed in the first month of Q4 with the surveys shedding light onto how inflation is affecting suppliers. There is lots more in store for us this week but see the day by day calendar at the end for the full run down The market also enters the second half of the 3Q earnings season. There are 168 S&P 500 and 85 Stoxx 600 companies reporting this week with 52% of the S&P 500 and 48% of the STOXX 600 having already reported. DB’s Binky Chadha published an update on earnings season over the weekend (link here). In the US, the size of the earnings beat has declined over the course of the season and is on track to hit 7%, well below the record 14-20% range post pandemic. Excluding the lumpy loan-loss reserve releases by banks, the beat is even lower at 5%, bringing it back in line with the historical norm. Quarterly earnings are on track to be down sequentially from Q2 to Q3 by -1.1% (qoq seasonally adjusted), the first drop since Q2 2020. The flat to down read of earnings is broad based across sector groups. Forward consensus estimates have fallen outside of the Energy sector. The S&P 500 nevertheless has seen one of the strongest earning season rallies on record. See much more in Binky’s piece. This week’s highlights include NXP Semiconductors, Zoom, and Tata Motors today before Pfizer, T-Mobile, Estee Lauder, BP, Mondelez, Activision Blizzard, and AP Moller-Maersk tomorrow. Then on Wednesday we’ll hear from Novo Nordisk, Qualcomm, CVS, Marriott, Albemarle, and MGM resorts. Thursday sees reports from Toyota, Moderna, Square, Airbnb, Uber, and Deutsche Post and then a busy Friday with Alibaba Group, Dominion Energy, Honda, and Mitsubishi. Looking back now and reviewing last week in numbers, it was a week of heightened intraday volatility within rates, as markets brought forward the expected timing of central bank policy actions across advanced economies while revising down growth expectations. Position stop outs almost certainly played a role as the magnitude of the moves were out of sync with macro developments while FX and equity markets were not nearly as volatile. Global front end rates started moving in earnest on Wednesday, following the Bank of Canada’s surprise decision to end net asset purchases, while bringing forward the timing of liftoff, which sent 2yr Canadian bonds more than +20bps higher. In the following days, the RBA opted not to defend their yield curve control target, and ECB President Lagarde did not use her press conference to provide much of a forceful pushback on recent repricing. All told, almost every DM economy saw their 2 yr bond selloff, including the US (+4.4 bps, +0.8 bps Friday), UK (+4.9 bps, +5.9 bps Friday), Germany (+5.2 bps, +3.2 bps Friday), Canada (+23bps) and Australia (+65bps). The long end went the other direction in the core countries, with many curves twist flattening over the week as negative growth sentiment weighed on the back end. Nominal 10yr yields declined -6.2 bps (-2.8 bps Friday) in the US, -11.1 bps (+2.5 bps Friday) in the UK, and were flat in Germany (+3.0 bps Friday). Unlike the rest of October, the decline in nominal yields coincided with declining inflation breakevens (albeit from historically high levels), with 10yr breakevens declining -5.2 bps (-0.6 bps Friday) in the US, -25.4 bps (-8.5 bps Friday) in the UK, and -16.3 bps (-11.5 bps Friday) in Germany. Note that outside the core there were some bond markets that moved higher in yield with 10yr bonds in Canada (+7bps), Australia (+30bps) and Italy (+19bps) all higher for different reasons. Some of the bond moves above don’t do the intra-day volatility any justice though. Elsewhere Crude oil prices dipped to close out what was otherwise another very good month, with Brent and WTI -1.34% (+0.07% Friday) and -0.23% (+0.92% Friday) lower. Meanwhile, equity markets marched to the beat of a different drum. The S&P 500 (+1.33%, +0.19% Friday), Nasdaq (+2.71%, +0.33% Friday), and DJIA (+0.40%, +.25% Friday) all set new all-time highs, while the STOXX 600 increased +0.77% (+0.07% Friday), cents below the all-time high set in August. Generally strong earnings relative to a worried market prior to the season again supported equity markets. Calls were replete with mentions of supply chain woes and labour shortages though, but companies sounded an optimistic note on end-user demand. Many big tech stocks reported, to more mixed results than the broader index. Alphabet and Microsoft beat on both revenue and earnings, Facebook and Apple missed analyst revenue estimates, while Amazon and Twitter missed revenue and earnings estimates. Ford and Caterpillar, two bellwethers particularly exposed to current supply chain and labour maladies, fared especially well. So far this season 279 companies have reported, with 206 beating on revenue and 237 beating on earnings Out of D.C., after prolonged negotiations within the Democratic Party, US President Biden unveiled a new social and climate spending framework, containing $1.75 trillion in spending measures as well as revenue-raising offsets. Once the text is finalized, it should enable a vote on the social spending package as well as the separately-negotiated bi-partisan infrastructure bill. More is likely to come this week. Tyler Durden Mon, 11/01/2021 - 07:59.....»»