Sunday, July 24, 2022

Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist Weekly Market Update: Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist

7/22/2022 4:09:44 PM

US stock markets ended the week solidly in positive territory, indicating investors’ willingness to seek bargains, perhaps feeling that the extremely bearish environment could ultimately be a contrarian buy signal. Though few seem willing to call a bottom to a selloff that has dragged the S&P 500 down 16% this year, the index did see its best weekly performance in nearly a month. Persistently high inflation, the possibility of a recession, and the war in Ukraine remained at the forefront of most investors' minds. Global interest rates moved lower despite a larger than expected rate hike from the ECB which certainly provided some cover for those looking to wade into stocks. Earnings season widened out providing a look into a number of industries outside of the banks. Some reports ushered in relief rallies by providing investors with increased confidence to scoop up beaten-down technology stocks, while other sectors like homebuilders, enterprise storage and telecoms reinforced an environment of clearly rising costs and slowing growth.

Softening economic data assumed the role of the North Star for markets this week, as global interest rates came in significantly despite central banks continued willingness to tighten. US housing data, weekly unemployment claims, and manufacturing surveys all showed decided deterioration before Friday’s European manufacturing PMIs fell into contraction territory, fanning recession fears only a day after the ECB surprised markets with a 50 bps hike and formally introduced its Transition Protection Instrument (TPI). On Friday global treasury yields dropped to the lowest levels in more than a month amid an ongoing slide in market based inflation expectation measures. The US 10-year yield tested 2.75% while the German Bund neared 1% amid resurgent talk about recession, particularly for Europe. Entering the week, futures markets were pricing in a greater likelihood the Fed would raise rates by 100 bps next week, but by Friday market expectations coalesced around a 75 bps hike and further out projected the Fed might begin cutting rates in 2023. On top of all this, the White House announced that President Biden had been infected with Covid, and though he showed only mild symptoms after treatment, it reinvigorated concerns about the health of the nearly 80-year old President. For the week, the S&P gained 2.6%, the DJIA was up 2%, and the Nasdaq added 3.3%.

The cadence of earnings reports picked up this week, starting with more mixed results from the banking sector. Goldman Sachs beat expectations, largely based on strong year on year improvement in FICC, while Bank of America lagged estimates, even though its “consumer clients remained resilient” and credit card delinquencies are near multi-year lows. Shares of AT&T and Verizon tumbled as the telecoms acknowledge cost pressures and cut guidance. Social media platforms Twitter and Snap missed analyst expectations and Snap said it would slow hiring, echoing a trend seen at a number of other firms in the communications services sector. Snap blamed fierce competition for an ad market pie that is growing slower, while Twitter said it is entirely focused on forcing Elon Musk to close the merger deal. Meanwhile Tesla shares zoomed higher after the automaker posted strong production numbers despite China shutdowns and supply issues and said the company could achieve record production in the second half of 2022. Tesla did cause a stir in the cryptocurrency community after noting it had converted 75% of its Bitcoin holdings into fiat currency during the quarter.

SAT 7/16
(HK) Macau govt extends shutdown of non-essential business from July 18th to July 22nd due to Covid outbreak
(SA) Saudi Foreign Min Farhan: We listen to our partners and friends from all over the world especially consumer countries; But at the end of the day, OPEC+ follows the market situation and will supply energy as needed

SUN 7/17
(US) White House Energy advisor Hochstein: Expects gas prices to come down further towards $4/gallon; Confident there will be a few more steps in coming weeks from OPEC in terms of oil supplies
(US) WSJ piece suggests Fed officials signaled they are likely to raise interest rates by 75bps at July 26-27th meeting; Left the door open to a larger 100bps hike at upcoming meeting, but leaning against it
(IR) Iran Senior Adviser to Supreme Leader: Iran is technically capable of producing nuclear bomb – press
BA Cuts 20-year industry-wide outlook for jets deliveries to 41,170 units (prior 43,610)

MON 7/18
(CH) SNB said to be planning to raise rates by 50bps at its Sept meeting with 75bps hike also possible on hot inflation data - financial press
(RU) Canada said to have sent Nord Stream 1 turbine to Germany; Expected to arrive only on July 24th with 3-4 additional days required for commissioning; Gas compressor unit should be ready to pump gas in early August - Russian press
(RU) According to informal discussions with Kremlin insiders, in the end of May Russian officials became confident that they would win the war with Ukraine in the long term; Putin said to now have a clear plan which would end up with building a new world order - NYT
(CN) China said to consider mortgage grace period for unfinished home projects - press
GAZP.RU Exec: Gazprom has not booked gas transit capacity for August for exports via Yamal-Europe pipeline; Does not book extra Ukraine gas transit space
(US) Reportedly several US semiconductor firms are deliberating whether to oppose CHIPS act package if the final language of subsidies legislation disproportionately benefits manufacturers like Intel - financial press
BAC Reports Q2 $0.73 v $0.77e, Rev $22.7B v $23.0Be
GS Reports Q2 $7.73 v $6.99e, Rev $11.9B v $11.0Be
PLD Reports FFO Q2 $1.11 v $1.12e, Rev $1.25B v $1.10Be
GAZP.RU *Gazprom's Export arm said to have sent notice to at least one European customer declaring force majeure on gas deliveries linked to Nord Stream 1 - press
BAC CEO: Guides Q3 NII to rise $900M-$1B q/q and increasing further in Q4; Organic growth engine is back, seen in Q2 - conf call comments
SCHW Reports Q2 $0.97 v $0.91e, Rev $5.09B v $5.04Be
*(US) JULY NAHB HOUSING MARKET INDEX: 55 V 65E (lowest since May 2020)
AAPL Reportedly plans to decelerate hiring and spending for certain teams in 2023; Will not backfill positions or add new staff in some divisions - press
BHP.AU Reports Q4 Waio Iron Ore Production: 71.7Mt v 72.8Mt y/y, Attributable Iron Ore Production: 64.2Mt v 65.2Mt y/y
(US) Reportedly Pres Biden is considering calling a national climate emergency as soon as this week - WaPo
(TW) US House Speaker Pelosi said to plan a visit to Taiwan during Aug - FT

TUES 7/19
NOVN.CH Reports Q2 Core EPS $1.56 v $1.51e, Rev $12.8B v $13.0Be
ALO.FR Reports Q1 Rev €4.00B v €3.70B y/y
EDF.FR French Govt offers to pay €12/shr and €15.64/oceane-bond in EDF re-nationalization plan for total €9.7B
7203.JP Expects Aug global production at 700K units; Guides Aug-Oct average volume at 850K units/month (prior guided July-Sept at 850K/month); Affirms FY22 global volume at 9.7M units
(IR) National Iranian Oil Company (NIOC) and Gazprom sign strategic cooperation MoU covering projects valued at $40B in total - press
*(EU) EURO ZONE JUN FINAL CPI Y/Y: 8.6% V 8.6%E; CPI CORE Y/Y: 3.7% V 3.7%E
(EU) EU Commission Official Hahn: Do not expect gas supplies to Europe from Russia through the Nord Stream 1 pipeline to restart when scheduled maintenance ends this week
DIDIY China regulator said to fine Didi over $1B for data security breaches - US financial press
FER.ES Reportedly Heathrow refuellers to go on strike later in the week after refusing latest pay offer
JNJ Reports Q2 $2.59 v $2.57e, Rev $24.0B v $23.9Be; Strengthening US dollar impacting estimate for reported results*
LMT Reports Q2 $6.32 v $6.39e, Rev $15.4B v $16.1Be; Cuts FY22 Rev outlook; Provides F-35 update
(EU) Nord Stream 1 reportedly has restarted gas flows on time after annual maintenance but at a lower level of throughput - press
(US) Atlanta Fed GDPNow: cuts Q2 GDP forecast from -1.5% to -1.6%
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -5.0% v -4.1% prior
TWTR Delaware court judge rules against Musk, allows Twitter to expedite lawsuit
NVAX US CDC Advisory Panel voted unanimously to recommend NVX-CoV2373, COVID-19 vaccine, Adjuvanted in individuals 18 years of age and older
(EU) EU considering a 15% voluntary reduction in natural gas usage for Aug-Mar due to Russia supply issues - press
(RU) Russia Pres Putin: Gazprom planning to fulfill its obligations, Another gas turbine will have to go for maintenance on July 26th; Attempts to cap Russian oil prices will lead to prices skyrocketing
(AU) Reserve Bank of Australia (RBA) Gov Lowe: Board had extended discussion on neutral real interest rate; Neutral Nominal rate is 'at least' 2.5%, higher than this if mid term inflation expectations shift higher
NVAX (US) CDC Director Rochelle Walensky endorses ACIP recommendation of use of NVX-CoV2373, COVID-19 vaccine, in individuals 18 years of age and older
(CN) China mortgage boycotts spread to 301 projects in 91 cities - press

WED 7/20
ASML.NL Reports Q2 Net €3.54 v €3.51e, Rev €5.43B v €5.27Be; Cuts FY22 Rev outlook; Notes still sees strong demand for its systems; Moves to quarterly dividend policy
*(UK) JUN CPI M/M: 0.8% V 0.7%E; Y/Y: 9.4% V 9.3%E (11th month above target and highest annual pace since Nov 1981)
(HK) Macau to reopen casinos on Saturday if virus conditions favorable; to resume business activities, including casinos, to certain level on July 23-29th; To continue shutting cinemas, bars and dining-in services - press
(CN) China Premier Li: China will not introduce super-large stimulus policies or print excessive money at the expense of sustainable development in the future for exorbitant growth targets
(IT) Italy PM Draghi: A PM who did not stand for election needs as big a parliamentary majority as possible; Governing coalition can be rebuilt - Senate address
(TW) Taiwan Jun Export Orders Y/Y: 9.5% v 6.4%e
CON.DE Reports prelim Q2 Rev €9.4B v €9.2Be
(CN) China June smartphone shipments at 27.5M +9.1% y/y v -9.1% prior - CAICT
(EU) Daily 3-month Euribor Fixing: 0.125% v 0.042% prior (highest level since 2015)
(CN) Shanghai reportedly asks citizens to take COVID test at least once a week until Aug 31st - press
GAZP.RU Exec: Daily gas exports to China are now above contracted volumes; Not received documents from Siemens on Nord Stream 1 turbine
ELV Reports Q2 $8.04 v $7.73e, Rev $38.5B v $38.1Be; Raises FY22 EPS outlook
(RU) Russia Foreign Min Lavrov: If West delivers long-range weapons to Kyiv, geographical objectives of special military operation in Ukraine will be advanced even further to Kherson, Zaporizhia and a number of other territories
BIIB Reports Q2 $5.25 v $4.10e, Rev $2.59B v $2.47Be; Raises outlook
ABT Reports Q2 $1.43 adj v $1.07e, Rev $11.3B v $10.4Be; Raises FY22 EPS and Rev outlook
*(CA) CANADA JUN CPI M/M: 0.7% V 0.9%E; Y/Y: 8.1% V 8.4%E (highest annual pace since Jan 1983)
AAPL EU antitrust regulators said to reinforce App Store investigation with new evidence but will not bring new charges - press
(US) Association of American Railroads weekly rail traffic report for week ending July 16th: 499K total units, -2.8% y/y
(US) Pres Biden: 'That’s why I and so damn many other people I grew up with have cancer' - speech on the environment
CSX Reports Q2 $0.54 v $0.47e, Rev $3.82B v $3.64Be; Automotive Rev +24% y/y
TSLA Reports Q2 $2.27 v $1.82e, Rev $16.9B v $17.1Be; Notes it focused on record-breaking H2 2022; Have converted 75% of Bitcoin holdings into fiat currency
LVS Reports Q2 -$0.34 v -$0.23e, Rev $1.05B v $955Me
AA Reports Q2 $2.67 v $2.60e, Rev $3.64B v $3.49Be; Boosts share buyback program
STLD Reports Q2 $6.73 adj v $3.35 y/y, Rev $6.21B v $4.47B y/y; Customer order entry activity continues to be healthy across All of our businesses; Invests $500M for 2 addl plant lines

THRS 7/21
(RU) Nord Stream 1 pipeline showing gas flows from Russia into Germany of 29,284,591 kwh/h for 0600-0700 CET v 0 prior; flow to resume gradually
005380.KR Reports Q2 (KRW) Net 3.09T v 1.98T y/y; Op 2.98T v 1.89T y/y; Rev 36.0T v 30.3T y/y; Expects supply issues to ease
ABBN.CH Reports Q2 Net $406M v $709M y/y, Rev $7.3B v $7.4B y/y; Confirms to exit Russia market (1-2% of annual Rev) with winding down charge of $57M
NOKIA.FI Reports Q2 €0.10 v €0.10e, Op €714M v €682M, Rev €5.87B v €6.03Be
SAP.DE Reports Q2 €0.28 v €1.14e, Rev €7.52B v €7.61Be; Cuts FY22 Op profit outlook; To buyback up to €500M in shares (0.5% of market cap)
ROG.CH Reports Q2 (CHF) Core EPS 11.76 v 11.05e, Core Op 12.7B v 11.7B y/y, Rev 32.3B v 31B y/y
DIDIY China regulators confirm to fine Didi CNY8.03B (~$1.2B) after concluding probe
(IT) Italian Presidential Office: Confirm PM Draghi again tendered resignation
(HK) Macau to provide limited public services on July 23-29th - press
(UR) Russia said to plan annexation votes in Ukraine regions by Sept 15th - press
(EU) Daily 3-month Euribor Fixing: 0.145% v 0.125% prior (highest since Sept 2014)
(LY) Libya official: Oil production back above 700K bpd; To recover to 1.2M bpd in 7-10 days
DOW Reports Q2 $2.31 v $2.14e, Rev $15.7B v $15.7Be
T Reports Q2 $0.65 adj v $0.59e, Rev $29.6B v $29.3Be; Cuts FY FCF and capex outlook
T CEO: See higher bad debt, slower bill paying in this cycle; Overdue bills started to be a trend six weeks ago - earnings call comments
DHI Reports Q3 $4.67 v $4.51e, Rev $8.79B v $8.98Be; Cuts FY22 guidance amid signs of moderating demand
F Releases new battery capacity plan, On track to ramp to 600K run rate by 2023 and 2M+ by 2026; To invest over $50B in EVs through 2026; Expects compound annual growth rate for EVs to top 90% through 2026
UNP Reports Q2 $2.93 v $2.83e, Rev $6.27B v $6.13Be
(EU) EU formally publishes details on 7th (“maintenance and alignment”) sanctions package against Russia; Confirms to introduce a new prohibition to purchase, import, or transfer, directly or indirectly, gold, if it originates in Russia and it has been exported from Russia
*(US) INITIAL JOBLESS CLAIMS: 251K V 240KE (highest in eight months); CONTINUING CLAIMS: 1.384M V 1.34ME
*(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: -12.3 V +0.8E (lowest reading since May 2020 and second straight negative print); New Orders: -24.8 v -12.4 prior
ONEM Amazon agrees to acquire One Medical at $18/shr in all-cash deal for $3.9B
(EU) ECB chief Lagarde: Taken steps to make sure inflation moves to 2% target in medium term with larger 50bps hike - Prepared remarks
(EU) ECB publishes full details on its Transmission Protection Instrument (TPI); Focus on public sector securities with remaining maturity of 1-10 years, could also consider private sector securities
*(US) JUN LEADING INDEX: -0.8% V -0.6%E (4th consecutive decline); Conference Board now sees recession 'likely' around year end
(DK) Denmark Central Bank (Nationalbanken) raises Certificate of Deposit Rate by 50bps from -0.60% to -0.10%, following ECB rate move
(US) California official: Port of Oakland's largest marine terminal has been 'essentially shut down' for second day amid trucker blockade; Three other terminals have some operations underway – press
FDX Ground Unit to scale back Sunday Delivery Services to 80% of the US population (prior ~95%) from Aug 15th - US financial press
(UK) July GfK Consumer Confidence: -41 v -42e (remains record low)

FRI 7/22
(TR) Turkey announces a deal has been reached to free Ukrainian grain exports blockaded by Russia in the Black Sea; Expected to be signed off today
(UK) JUN RETAIL SALES (EX-AUTO/FUEL) M/M: +0.4% V -0.4%E; Y/Y: -5.9% V -6.2%E
(FR) FRANCE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 20 months)
(DE) GERMANY JULY PRELIMINARY MANUFACTURING PMI: 49.2 V 50.7E (1st contraction in 25 months)
(EU) EURO ZONE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 25 months)
Honda said to cut Aug production by up to 30% in Japan citing persistent supply chain and logistical issues – press
(UK) JULY PRELIMINARY MANUFACTURING PMI: 52.2 V 52.0E (26th month of expansion but lowest since June 2020)
(EU) Daily 3-month Euribor Fixing: 0.200% v 0.145% prior (highest since 2014)
(EU) ECB's Kazimir (Slovakia, hawk): Sept rate hike may be 25bps or 50bps; ECB move is beginning of a series of 'similar' steps
(EU) EU starts 4 new separate infringement procedures against UK on Northern Ireland Protocol – press
(CN) China cabinet: China to ensure construction of property projects; Necessary housing demand should be insured
SLB Reports Q2 $0.50 v $0.40e, Rev $6.77B v $6.28Be; Raises FY22 Rev outlook
AXP Reports Q2 $2.57 v $2.37e, Rev $13.4B v $12.4Be; Raises FY22 Rev, Affirms EPS
VZ Reports Q2 $1.31 v $1.34e, Rev $33.8B v $33.7Be; Cuts FY22 outlook
TWTR Reports Q2 -$0.08 v +$0.15e, Rev $1.18B v $1.32Be; Will not provide financial guidance or host call today citing pending acquisition by an affiliate of Elon Musk
(UR) Ukraine, Turkey and the UN confirm to have signed an agreement on the export of grain
(US) White House Spokesperson Kirby: Defense department making prelim explorations into feasibility of potentially providing fighter jets to Ukraine; Providing jets to Ukraine is not something that will be executed in the near-term

Saturday, July 9, 2022

Markets show resilience but remain volatile as political turmoil compounds the familiar stagflation concerns Weekly Market Update: Markets show resilience but remain volatile as political turmoil compounds the familiar stagflation concerns

7/8/2022 4:27:35 PM

Markets saw continued volatility as they absorbed a mixed basket of data and some shocking political news this week. The government of British Prime Minister Boris Johnson collapsed as his fellow Tories resigned in droves, unable to tolerate his mounting list of scandals any longer. The GBP/USD plumbed its lowest levels since the early days of the pandemic as Johnson at first resisted resigning, but then rebounded after he agreed to step down after the party selects his replacement in October. The other political shock of the week was the assassination of former Japanese PM Abe at an outdoor campaign rally on Friday, which prompted President Biden to say he did not think the killing will lead to political instability in Japan.

China continued to battle Covid outbreaks, most recently in Macau, but still managed to post the first expansion in the Caixin PMI Services index in four months. Shanghai port data showed throughputs are still down by high single digits versus year ago in June, even as the White House continues to deliberate whether to withdraw some Trump-era tariffs on China trade. Beijing is concerned enough that it is said to be considering a large new stimulus package via a bond offering.

The US jobs market showed no signs of cooling off, as Friday’s employment report printed a better than expected payroll number and the jobless rate remained at a very healthy 3.6% for the fourth month in a row. The June labor force participation rate slipped one tenth to 62.2%, even as the May JOLTS data earlier in the week indicated higher than expected job openings still hovering near record levels. Some welcome inflation relief came from the energy market which saw crude oil prices tumble early in the week, as WTI and Brent crude futures fell below $100/bbl amid some weak growth data, particularly out of Europe. Still a Goldman analyst suggested energy and metals commodities could rebound through the rest of the year and a JP Morgan analyst theorized oil could surge as high as $380/bbl if Russia should dramatically cut production in response to the latest sanction efforts targeting Russian oil. In the Treasury market, some key yield curve pairs inverted, including the 2-/10-year spread, which may have added to recession concerns. Stocks remained constructive for most of the week and the S&P gained 1.9%, the DJIA edged up 0.8%, and the Nasdaq was up 4.6% as largecap tech attracted some bargain hunters.

In corporate news this week, Samsung notched a larger-than-expected jump in revenue for Q2, lifting semiconductor names. Levi’s assured investors by posting a beat on earnings and affirming its FY outlook. Amazon signed a partnership with GrubHub to give its Prime members $0 food delivery fees for a year, and as part of the agreement Amazon has the option to take a 2% stake in the food delivery company. Elon Musk’s plan to buy Twitter reportedly is in “serious jeopardy” amid the dispute over bots on the platform, though Twitter management said it still intends to close the deal at agreed upon terms. GameStop shares were boosted by a stock split announcement, but then dropped a day later after announcing layoffs across the company and a CFO exit.

SUN 7/3
(RU) JP Morgan predicts oil could reach up to $380/bbl if Russia imposes maximum crude oil production cut of 5Mbbs/day

MON 7/4
*(CH) SWISS JUN CPI M/M: 0.5% V 0.3%E; Y/Y: 3.4% V 3.1%E (5th month above target and fastest annual pace in 29 years)
(CN) President Biden could announce decision to cut some Chinese tariffs during week of July 4th
(HK) Macau authorities to test its 600K residents three times this week for Covid, as city is facing its worst outbreak to date
*(CN) CHINA JUN CAIXIN PMI SERVICES: 54.5 V 49.6E [first expansion in 4 months]

TUES 7/5
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -4.1% v -1.3% prior
ASML.NL US govt said to push co to stop selling key chipmaking gear to China - press
(UK) Chancellor of the Exchequer (Fin Min) Sunak tenders his resignation; Notes the public rightly expect government to be conducted 'properly, competently and seriously'
(UK) Nadhim Zahawi named new Chancellor of the Exchequer (Fin Min) following resignation of Sunak
(CN) China prelim June Vehicle Sales Y/Y: +20.9% y/y v -17.1% prior; H1 Vehicle Sales at 12.0M -7.1% y/y - CAAM

WED 7/6
OPEC Sec Gen Barkindo has passed away
TKWY.NL Amazon signs partnership with Just Eat's Grubhub; Amazon has option to take 2% stake in Grubhub, could grow to 15%
UMC Reports Jun (NT$) Rev 24.8B, +43.2% y/y; H1 Rev 135.5B, +38.2% y/y
(CN) Beijing official: To require vaccination for entering public venues from July 11th; Will resume direct international commercial flights in an orderly way
EDF.FR (FR) France Prime Minister Borne: State wants to own 100% of EDF
1810.HK Xiaomi notes it has produced first batch of smartphones in Vietnam; Did not provide details on the production capacity of the new plant
(US) June preliminary Class 8 truck orders 15K, +13% m/m, -36% y/y -
(US) Association of American Railroads weekly rail traffic report for week ending July 2nd: 500.3K total units, -2.5% y/y
005930.KR Reports prelim Q2 (KRW) Op 14.0T [highest Q2 profit since 2018] v 14.5Te (v 12.6T y/y); Rev 77.0T v 76.9Te (v 63.7T y/y)

(CN) Shanghai Port: Processed 3.8M containers during June; June Throughputs -7.4% y/y
066570.KR Reports prelim Q2 (KRW) Op 791.7B v 1.11T y/y; Rev 19.5T v 17.1T y/y
SHEL.UK Q2 update: Q2 Production expected 930-980Kbbl of oil equivalent per day; Sees extra $200M write-off; $8.5B share buyback completed for H1
*(UK) PM JOHNSON SAID TO BE PLANNING TO RESIGN; Official statement expected within hours; Johnson plans to stay on as caretaker PM until new party leader is appointed in Oct 2022
(CN) China said to be considering $220B stimulus via bond sales - press
(RU) Russia Defense Ministry spokesperson: Russian units that carried out combat missions in Ukraine got rest and are taking measures to replenish their combat capabilities
(RU) Russia govt spokesperson Peskov: Pres Putin will decide on the format of participation in the G20 summit in Nov 2022 closer to the date of this event
FUN Reports YTD through July 4th Rev $704M +20% v 2019 levels; Notes early-season trends indicate that consumer demand remains healthy
BKE Reports Jun SSS -1.7% y/y
*(EU) ECB PUBLISHES ACCOUNT OF JUNE POLICY MEETING (MINUTES): Revised medium term inflationary outlook required further steps to be taken in normalizing monetary policy
*(UK) PM JOHNSON CONFIRMS TO RESIGN FROM POSITION; To stay on as caretaker until a new leader is in place
(UK) PM Johnson: Process of choosing a new leader should begin now; Confirms to serve as caretaker PM until new leader in place - resignation speech
(US) Bank of America estimates June US credit and debit card spending +11% y/y; Comments on strength of the underlying consumer momentum
*(US) INITIAL JOBLESS CLAIMS: 235K V 230KE (highest in 6 months); CONTINUING CLAIMS: 1.38M V 1.33ME
(US) Freddie Mac: US mortgage rates drop to 5.3% from 5.7% w/w (largest drop since 2008)
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -2.1% to -1.9%
(US) Fed’s Bullard (voter, hawk): Would make sense to go by 75bps in July; It won't surprise me if we have a cool-off in the housing market; Possible rate cuts could follow once inflation moderates
COST Reports June total SSS +13% (ex-gas and FX)
TWTR Elon Musk’s plan to buy Twitter reportedly is in serious jeopardy; Musk team has 'stopped engaging in certain discussions around funding' for the deal - Wash Post
(JP) Japan May BoP Current Account: ¥128.4B v ¥172.0Be; Adjust Current Account: ¥8.2B v ¥154.9Be
(JP) Former Japan PM Abe shot while giving campaign speech in Nara - Japanese media

FRI 7/8
2330.TW Reports June (NT$) Rev 175.9B +18% y/y, -5.3% m/m; H1 Rev 1.03T +39.6% y/y
EUR/USD Declines over 0.5% below 1.01 as parity approaches
(CN) China prelim June Retail Passenger Vehicle Sales at 1.97M units +22% y/y - PCA
(JP) Former Japan PM Abe pronounced dead following shooting - press
(EU) Daily 3-month Euribor Fixing: -0.087% v -0.141% prior (highest since end-2015)
(HK) Macau authorities said to add more rounds of citywide nucleic acid testing - press
(RU) German govt said to expect Canada to release Nord Stream turbine - press
(CN) Reportedly US actively considering the possibility of banning exports of chipmaking tools to those Chinese factories, including SMIC that make advanced semiconductors at the 14nm node and smaller - press
UN01.DE Applies to German govt for stabilization measures; Proposal provides for additional debt funding through an increase in KfW credit facility and contains equity components for German govt participation in Uniper
*(US) JUN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 5.1% V 5.0%E
*(US) JUN CHANGE IN NONFARM PAYROLLS: +372K V +265KE (matches the top end of all analysts estimates range)
June Manheim Used Vehicle Value Index: -1.3% M/M; +9.7% Y/Y; Saw larger declines over the last two weeks than the prior two weeks
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -1.9% to -1.2%

Saturday, July 2, 2022

Stagflation signs sting sentiment Weekly Market Update: Stagflation signs sting sentiment

7/1/2022 4:03:04 PM

An extremely painful Q2 drew to a close this week for investors, as the Fed-led global policy tightening and its negative implications for growth remained the largest overhang to sentiment. Even a significant decline global commodity prices and a retracement in global interest rates were unable to spark any real momentum in equity markets consumed with stagflation fears. Growth worries were fanned by softening US manufacturing data which did come alongside a welcomed undershoot in May PCE readings. Meanwhile Euro Zone June CPI hit a record 8.6% y/y, and the Atlanta Fed dropped its Q2 GDP forecast to -2.1% on Friday, portending a recession if the forecast holds. A barrage of commentary out of the ECB's Sintra conference underscored the extent to which policymakers have prioritized combating inflation, even if it means risking recession. Despite the chorus of central bank rhetoric, global bond markets saw an aggressive repricing and yields slumped along with market based measures of inflation expectations. The US 5-year breakeven moved to the lowest levels of the year, while expectations for another 75 bps hike in July came out of the futures markets, which are now pricing in a reversal to rate cuts by June 2023. By Friday, the US 2- and 10-year yields traded well under 3.00%. The US dollar continued to garner safe haven flows despite the move lower in yields. For the week, the S&P lost 2.2%, the DJIA was off 1.3%, and the Nasdaq fell 4.1%.

This week’s corporate news made it evident that even the most celebrated firms are finding it difficult to escape the pinch between higher operating costs and slowing growth. Micron reported a grim outlook amid supply issues in China and weakening smartphone and PC sales. Asian press reported that some major clients of Taiwan Semi have cut their chip orders for 2022, which may potentially impact the manufacturer’s revenue forecast. General Motors disclosed that it has almost 100K vehicles in its Q2 inventory that were made without certain semiconductor components due to supply chain disruptions, but the automaker affirmed its full year outlook despite near term problems. Luxury furniture store RH, which managed to thrive during the pandemic, trimmed its FY22 outlook again after cutting it a mere three weeks ago, citing a deteriorating macro-economic environment and with the expectation that demand will continue to slow.

Nike earnings came in largely in line but its margin outlook concerned investors as Chinese market woes persist. Bed Bath and Beyond shares plunged after reporting a disastrous quarter due to an ‘acute shift in customer sentiment,’ and the retailer also announced a management shakeup. Universal Health Services cut its FY22 outlook on lower-than-expected patient volumes at its acute care facilities amid the decline in COVID. One glimmer of positivity came for global freight carrier Maersk, which said it is not seeing signs of global recession in its shipping data thus far.

SUN 6/26
(US) Pres Biden confirms G7 to announce ban on Russian gold imports; To be formally announced on June 28th - press
(RU) Belarus President Lukashenko: Lithuania's isolation of Kaliningrad is actually a declaration of war
(US) German govt official: G7 considering ways of capping Russian oil price; We are on a good path to reach an agreement - financial press
(CN) Shanghai said to gradually resume restaurants' dine-in reopening in low-risk areas from June 29th - Chinese TV
(RU) Russia is few hours away from default (the first one since 1998 and first foreign debt default since 1918) if it fails a June 26th deadline to make its $100M US-denominated debt interest payment in US dollars
(EC) Ecuador Energy Ministry: Oil production could stop in 48 hours amid escalating protests
(RU) Russia defaults on sovereign debt for the first time since the 1917 Bolshevik Revolution (grace period ended Jun 26th)
(HK) Macau to extend the suspension of public sector activities, except for emergency services, until at least July 1; negative covid tests required to enter casinos; 3rd round of mass testing to take place
(UR) US expected to announce purchase advanced medium to long range surface to air defense systems NASAMS for Ukraine during the week - CNN

MON 6/27
PRX.NL Reports FY22 Net €3.7B v €4.9B y/y, Rev €35.6B v €28.8B y/y; Announces open-ended share repurchase program; Sells 4% stake in received from Tencent for $3.67B to fund the program
(CN) BBC's China correspondent McDonell tweets: Beijing City Government announced “Zero Covid” will be maintained for the next five years
(G7) White House G7 statement: Finalizing plans for a price cap on Russian oil; US to impose blocking sanctions on major Russian state-owned defense enterprises
(LY) Libya National Oil Corp (NOC) said to consider force majeure and suspend exports in Gulf of Sirte [where many of the country's ports are] in the next three days amid a worsening political crisis - press
(UR) Ukraine Pres Zelenskiy: Want to end war by winter 2022; Now is not the time for negotiations with Russia - virtual G7 Summit address
6488.TW Said to invest around $5B in new Texas plant to manufacture silicon wafers - US financial press
Voyager Digital operating subsidiary issues notice of default to Three Arrows Capital
(US) May Pending Home Sales M/M: +0.7% v -3.9%e; Y/Y: -12.0% v -11.5% prior
*(US) JUN DALLAS FED MANUFACTURING ACTIVITY INDEX: -17.7 V -6.5E (lowest since May 2020)
(EU) EU Energy Commissioner Simson: Halt of Russia gas supplies may mean EU storage will be below 75% by Nov 1st
NKE Reports Q4 $0.90 v $0.81e, Rev $12.2B v $12.1Be; Authorizes new 4-year, $18B plan to buy back Class B stock (10% of market cap)
JPM To maintain current $1/shr dividend for Q3 following CCAR results 'in light of higher future capital requirements' - filing
3333.HK Notes wind up petition (first official one) filed by Top Shine Global on June 24th in Hong Kong over HK$862.5M obligation
(CN) China State Planner (NDRC) Vice Sec General Ou: China facing new challenges in stabilizing jobs and prices due to coronavirus and Ukraine war

TUES 6/28
(HK) Hong Kong said to be considering cutting hotel quarantines to 5 days for inbound travelers (currently 7) and would be followed by 2 days home quarantine - press
DIS Shanghai Disneyland theme park to reopen on June 30th with limited traffic - Weibo
(EU) Details of the new anti-fragmentation tool said to likely drain cash from the banking system to offset any bond purchases made to cap borrowing costs from high debt countries
(RU) G7 statement: Confirm agreement to study potential price caps for Russian oil and gas
(EU) ECB's Kazaks (Latvia, hawk): Frontloading rate hikes with 50bps in July is reasonable; Fragmentation risk can't impede monetary policy
(EU) EU Official: G7 declaration set to include push to ban import of Russian gold
(EU) ECB chief Lagarde: Need to act in a determined and sustained manner; Reiterates plans to hike 25bps at July's meeting as inflation in region is undesirably high
(RU) According to Politico sources, G7 states reached a broad agreement to seek ways to impose a price cap on Russian oil; G7 members could use their cartel power as buyers to push for a lower price - press
PTR Reportedly considers sale of Australian and Canadian assets in order to to stem losses and divert funds to more lucrative sites in the Middle East, Africa and central Asia - financial press
(RU) Russia govt spokesperson Peskov: Gazprom may ask for contractual terms to be revised if G7 proposal for price cap comes into force
SBRY.UK CEO: UK consumer market to deteriorate further in the fall 2022; Shoppers visiting stores more often but buying less on each trip
(US) Treasury Sec Yellen to vist G20 Foreign Ministers summit next week in Indonesia
VOW3.DE CEO: Chip shortage is easing; Volkswagen is earning more than ever; Sees a strong H2 2022 and expects progress in catching up with Tesla
(UK) Scotland First Min Sturgeon: Formally announces plans for a new referendum on Scotland independence for Oct 19th, 2023; Calls on UK PM Johnson to allow an independence vote, we are ready to negotiate terms
(US) May Industrial Production M/M revised lower to +0.1% (prior +0.2%), Capacity Utilization revised higher to 80.8% (prior 79.0%)
(FI) Finland President Niinisto: Turkey has agreed to support Finland and Sweden membership of NATO

WEDS 6/29
HMB.SE Reports Q2 (SEK) Pretax 4.78B v 3.59B y/y, Rev 54.5B v 46.5B y/y; To buy back SEK3.0B in shares; Sees June sales -6% y/y
(CN) China Pres Xi: Domestic development to be more self reliant and wants it to be sound in 2022; COVID zero policy is the most economic and effective way for China
MAERSKB.DK CEO: Doesn’t see signs of global recession; Despite concerns over a potential recession, freight volumes at Maersk do not show any signs of crisis yet
*(ES) SPAIN JUN PRELIMINARY CPI M/M: 1.8% V 0.5%E; Y/Y: 10.2% V 8.8%E (highest annual pace since 1985)
000002.CN Chairman: In the short term, Chinese housing market has bottomed out, but the recovery is a slow and gentle process and will take time
(US) Fed's Mester (FOMC voter, hawk): Want to see US rates above 4% in 2023; I think right now I am advocating 75bps hike - CNBC
HMB.SE CEO: Do not see any big changes in consumer sentiment in June; Ramping up expansion in North and South America; Inflation requires some price adjustments - post earnings comments
(CN) S&P affirms China sovereign rating at 'A+; Outlook stable
(CN) China Finance Ministry: To offer subsidies to refiners if international oil prices rise above $130/bbl
(US) US President Biden: Confirms US is enhancing force posture in Europe; To enhance rotational Baltics deployments and to establish perm 5th army headquarters in Poland - NATO summit comments
RDS.B CEO: LNG can't replace all of Russia pipeline gas supply, sees problematic winter; Oil refining systems are running flat out; Price caps won't work if only US and Europe participate
(EU) EU Commission proposes to ban flavored heated tobacco products - press
(CN) China Finance Ministry to extend tariff waivers on some 124 US goods until Feb 15th, 2023 - press
(UK) UK large retailer Morrisons: UK consumer environment is very fragile and difficult
(RU) Russia official: Russia will look to export its gold supplies to other countries after US ban
(NO) Norway and UK to donate long range rocket artillery to Ukraine
BBBY Reports Q1 -$2.83 v -$1.30e, Rev $1.46B v $1.52Be; Announcing 'aggressive' actions on inventory, cost and Capex
(EU) ECB PEPP reinvestment scheme said not to have targets and thresholds but could be evolved in due course - financial press
EUR/CHF Cross tests parity for the first time since Mar 2022 following mid-June unexpected SNB rate hike
*(DE) GERMANY JUN PRELIMINARY CPI M/M: 0.1% V 0.4%E; Y/Y: 7.6% V 7.9%E (annual pace moved off recent record highs)
MAERSKB.DK Issues June business update: US is experiencing unprecedented consumer demand, while consumer spending Europe and UK has dipped below historic trends; Shanghai situation is stabilizing; General ports in China are 'working well'
*(US) Q1 FINAL GDP PRICE INDEX: 8.2% V 8.1%E; CORE PCE Q/Q: 5.2% V 5.1%E
(EU) NATO Summit communique issued: Have adopted new new strategic concept till 2030; Formally invite Finland and Sweden to join NATO alliance
(EU) ECB chief Lagarde, Fed's Chair Powell and BOE Gov Bailey panel comments from Sintra conference
(US) Association of American Railroads weekly rail traffic report for week ending June 25th: 493K total units, -4.4% y/y
RH Cuts FY22 Rev again 3 wks after reporting to -5% to -2% y/y, adj op margin 21-22% (prior Rev growth +0-2%, adj op margin 23-24%); Expects demand will continue to slow throughout the year
GBTC US SEC has disapproved Bitcoin ETF application from Grayscale
*(CN) CHINA JUN MANUFACTURING PMI (GOVT OFFICIAL): 50.2 V 50.5E (1st expansion in 4 months)

THURS 6/30
*(FR) FRANCE JUN PRELIMINARY CPI M/M: 0.7% V 0.7%E; Y/Y: 5.8% V 5.7%E (record high)
*(DE) GERMANY JUN NET UNEMPLOYMENT CHANGE: +133.0K V -5.0KE (1st rise since Apr 2021); UNEMPLOYMENT CLAIMS RATE: 5.3% V 5.0%E
(US) ADP to pause jobs report in July while working on new methodology; Targeting Aug 31st for new national employment report
STZ Reports Q1 $2.66* v $2.51e, Rev $2.4B v $2.19Be
UHS Guides Q3 $2.05-2.15 v $2.60e; Cuts FY22 $9.60-10.40 v $11.38e (prior $11.9-12.90) Rev $13.2-13.4B v $13.5Be (prior $13.4-13.7B) due primarily to lower than expected patient volumes, revenues and income generated at our acute care hospitals (COVID decline)
OPEC+ Monthly meeting said to ratify Aug oil-supply increase (638K bpd), as expected; Have not made any decisions on output beyond August - press
*(US) MAY PCE DEFLATOR M/M: 0.6% V 0.7%E; Y/Y: 6.3% V 6.4%E
(US) Nevada reports May casino gaming Rev $1.30B, +5.7% y/y; Las Vegas strip Rev $732M, +11.6% y/y
(US) Atlanta Fed GDPNow: cuts Q2 GDP forecast from +0.3% to -1.0%
(US) May Dallas Fed Trimmed Mean PCE +5.3% v +2.9% m/m
(US) NY Fed takes $2.33T in RRP program at 1.55%; 108 participating and accepted counterparties (new record high)
MU Reports Q3 $2.59 v $2.44e, Rev $8.64B v $8.66Be; Guides Q4 lower, citing recent weaker demand; Raises Quarterly dividend 15% to $0.115 (indicated yield 0.82%)
MU Exec: Near the end of Q3, we saw a significant reduction in near-term industry bit demand; Data center end demand is expected to remain strong in the H2 - earnings call prepared remarks
(US) Freeport LNG terminal delays plans for partial restart of operations to Oct 2022 (prior estimate mid-Sept); Full production not to end of 2022
(RU) Russia President Putin signs decree to move (nationalize) Sakhalin 2 rights to companies from Russia - Japanese press
TSM Said that major clients have adjusted chip orders down for 2022; this could impact the co's Rev forecast, cites industry sources - Digitimes

FRI 7/1
(HK) Macau Jun Casino Rev (MOP) 2.48B v 3.34B prior; Y/Y -62.1% v -68.0% prior
*(IT) ITALY JUN MANUFACTURING PMI: 50.9 V 50.6E (24th month of expansion but lowest since Jun 2020)
*(EU) EURO ZONE JUN CPI ESTIMATE Y/Y: 8.6% V 8.5%E (record high); CPI CORE Y/Y: 3.7% V 3.9%E
GM Reports prelim Q2 Net $1.6-1.9B, adj EBIT $2.3-2.6B v $3.2B y/y; Affirms FY22 outlook; vehicle wholesale volumes were impacted by the timing of certain semiconductor shipments and other supply chain disruptions
(US) JUN FINAL S&P/MARKIT MANUFACTURING PMI: 52.7 V 52.4E (Confirms lowest reading since July 2020)
(US) JUN ISM MANUFACTURING: 53.0 V 54.5E (2-year low); PRICES PAID: 78.5 V 80.0E
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast from -1.0% to -2.1%
(US) Dockworker unions say West coast operations will continue as normal as dockworkers and employers continue talks; Will continue negotiations past July 1st with no contract