Friday, November 11, 2022

Downside CPI surprise heartens markets despite FTX collapse wounding the crypto market 

Weekly Market Update: Downside CPI surprise heartens markets despite FTX collapse wounding the crypto market

Fri, 11 Nov 04:08 PM EST/09:08 PM GMT

Investors waded into another crowded week of corporate earnings, key inflation data, and midterm elections that would likely see Republicans take control of one if not both chambers of Congress. Stocks took a step back after Tuesday’s election results didn’t turn out to be the landslide ‘red wave’ that many polls and pundits predicted. Another high-profile blowup in crypto markets added to the post-election uneasiness. Sam Bankman-Fried’s FTX saw a run on its assets wipe out the once $30B+ crypto-exchange in a matter of days after it was unsuccessful in reaching a bailout agreement with competitor Binance. Bitcoin plunged to new lows below $17K and uncertainty rippled across trading in equities and other risk assets. By Friday, FTX had declared bankruptcy and the now former CEO SBF faced serious legal allegations on a multitude of fronts.

Thursday’s CPI data shocked markets and resulted in one the largest bear market rallies in history. Led by the tech-heavy NASDAQ, stock indices exploded along with volumes. Bond yields and the US dollar reversed sharply lower after October CPI data offered the first signs of real relief for the Federal Reserve. A number of factors contributed to the shortfall in the core CPI but the most significant was a long-awaited deceleration in shelter costs. Healthcare costs unexpectedly slid, apparel prices fell for a second consecutive month rather than rebounding as expected, and the 2.4% decline in used car prices was more than twice as large as expected. The US 10-year yield dropped below 4% and the 2-year neared 4.3% after the inflation data, and the dollar index dropped over 4%, its biggest weekly decline in two and half years. Futures markets immediately took down expectations for the high in the fed funds rate next year back below 5%. Several Fed officials openly welcomed the report while also acknowledging there is still a long way to go on inflation. Positive investor sentiment largely held into Fridays Veteran’s Day trade when US bond markets were closed. Most US stock indices added to gains helped by additional reports out of China that, despite rising Covid numbers, officials there would continue relaxing certain zero-Covid restrictions. Thanks to the CPI report, stocks posted a strong week, with the S&P up 5.9%, the DJIA adding 4.2%, and the Nasdaq surging 8.1%.

Aside from the collapse of FTX and early policy stumbles at Elon Musk’s Twitter, other corporate news centered on big tech and media names this week. Disney shares tested 52-week lows after reporting much worse than expected earnings, driven by losses for its Disney+ streaming service, despite better than expected subscriber numbers on the platform. Meta, which also reported poor results last month, gave some hope to investors by announcing efforts to get costs under control, largely via job cuts. Apple said COVID-19 restrictions in China have temporarily impacted a key assembly facility, leading to lower production and shipments of iPhone 14 Pro handsets. In another sign that an economic slowdown is occurring, FedEx said it can’t provide a FY23 earnings outlook at this point, noting demand for air freight had dropped faster than expected, causing the firm to cut flights and park aircraft.

BRK.A Reports Q2 EPS (Class B) -$1.22* v $4.59 y/y, Rev $76.9B v $57.8B y/y
AAPL Provides updates on supply of iPhone 14 Pro and iPhone 14 Pro Max, COVID restrictions in China have temporarily impacted assembly, expect lower shipments; Continue to see strong demand

*(CN) CHINA OCT FOREIGN RESERVES: $3.052T V $3.039TE; Notes domestic economic fundamentals continue to support FX reserve stability
(UR) Reportedly EU and US allies in NATO identified a short-term negotiation window for Ukraine war; See Ukraine may need to re-capture Kherson city and then push for a ceasefire from a position of strength - Italian press
Oct Manheim Used Vehicle Value Index: -2.2% M/M; -10.6% Y/Y
(JP) Japan Oct FX Reserves: $1.19T v $1.24T prior

7974.JP President: No plans to raise prices on Switch; Chip supply has been recovering since Sept, have increased Switch production since Oct
(EU) According to EU's Climate Change Service, Europe saw warmest October on record, 2 degrees Celsius above the 1991-2020 reference period - press
BLDR Reports Q3 $5.20 v $3.53e, Rev $5.80B v $5.22Be
(EU) European Commission said to have told countries that there is no way to create gas price cap as requested by EU leaders at Oct 20-21st summit - press
FTX.IPO Binance signs non-binding LOI to fully acquire to help cover liquidity crunch
FDX CFO: We have cut flights and parked planes as demand drops; Decline in air demand has been quicker than expected - Baird conf comments
DIS Reports Q4 $0.30 v $0.50e, Rev $20.2B v $21.1Be
(CN) CHINA OCT CPI M/M: 0.1% V 0.3%E; Y/Y: 2.1% V 2.4%E

(US) Fetterman (D) projected to beat Oz (R) in Pennsylvania for Republican-held US Senate seat (1st potentially flipped state for Senate race) - ABC News
EOAN.DE Reports 9M Adj Net €2.13B v €2.19B y/y, Adj EBIT €4.03B v €3.93B y/y, Rev €81.6B v €48.1B y/y; Supports German govt's plans and prepares to implement gas price cap
7267.JP Reports H1 Net ¥338.5B v ¥389.2B y/y, Op ¥453.5B v ¥442.2B y/y, Rev ¥8.09T v ¥6.99T y/y; Raises FY22/23 outlook, but cuts vehicle sales forecast citing chip shortage
ADS.DE Reports Q3 Net €0.34 v €0.47e, Op €564M v €672M y/y, Rev €6.41B v €6.25Be; Cuts again FY22 outlook to reflect Yeezy partnership as its high seasonality geared towards Q4
AD.NL Reports Q3 adj €0.70 adj v €0.59e, Rev €22.4B v €18.5B y/y
7201.JP Reports H1 Net ¥64.5B v ¥168.7B y/y, Op ¥156.6B v ¥139.1B y/y, Rev ¥4.66T v ¥3.95T y/y; Raises FY22/23 Rev outlook. but cuts vehicle sales forecast; Expects chip shortage and higher costs to continue in H2
IBE.ES Presents strategic plans and profit forecasts; Expects EBITDA to reach €16.5-17B by 2025; Plans to invest €47B in its electricity networks
META Affirms Q4 outlook and cuts slightly FY23 Opex; Confirms to cut 11K employees (13% of its workforce) citing lower Rev outlook than anticipated before; Extends hiring freeze into Q1 2023 with some exceptions
PFGC Reports Q1 $1.08 v $0.79e, Rev $14.7B v $14.4Be; Raises outlook
DHI Reports Q4 $4.67 v $5.06e, Rev $9.64B v $10.0Be; Since June and continuing through today, saw a moderation in housing demand
IBM Unveils 400 Qubit-Plus quantum processor and next-generation IBM Quantum System Two; Outlines plan by 2023 end for QT2
FTX.IPO Reportedly Binance is likely to scrap bailout of FTX following initial due diligence - press
(US) Atlanta Fed GDPNow: Raises Q4 GDP forecast to 4.0% from 3.6%

TSM Reports Oct (NT$) Rev 210.3B v 134.5B y/y; Jan-Oct Rev 1.85T v 1.28T y/y
(CN) China Politburo: Urge to stick to zero-COVID policy; to target more precise but look to minimize impact on economy via more targeted control; China top leaders strive to protect normal production and life
TGT Debuts its new store strategy and larger-format store design; Will focus on this larger footprint in the next few years
(US) OCT CPI M/M: 0.4% V 0.6%E; Y/Y: 7.7% V 7.9%E (annual pace below lower-end of all analysts' expectations and records its 4th straight decline)
ASML.NL Targets Long term Rev €30-40B, gross margin 54-56%; Initiates up to €12.0B share buyback
(US) Atlanta Fed Oct Sticky-CPI annualized 5.5% v 8.5% m/m, core 5.0% v 8.3% m/m
(US) Fed's Mester (FOMC voter): October CPI shows signs of moderation on inflation; Inflation is still broad-based, with services prices not slowing
(JP) Japan Oct PPI (CGPI) M/M: 0.6% v 0.7%e; Y/Y: 9.1% v 8.8%e

(CN) China National Health Commission announced measures to minimize number of people under COVID control; Will now identify close contacts only, and no longer identify close contacts of close contacts
(UK) Q3 PRELIMINARY GDP Q/Q: -0.2% V -0.5%E; Y/Y: 2.4% V 2.1%E
(DE) GERMANY OCT FINAL CPI M/M: 0.9% V 0.9%E; Y/Y: 10.4% V 10.4%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: +0.2% V -0.3%E; Y/Y: -3.1% V -4.4%E
(CN) China Foreign Min spokesperson Zhao Lijian: China is not taking 'laid back' approach to COVID; China COVID changes do not mean relaxing containment; China and US should establish right way forward in ties
(RU) Russian Dep Foreign Min: Russia and US to hold nuclear arms treaty in end-Nov to early-Dec - Russian press
(EU) EU Commission Autumn Forecasts: Inflation peak expected at end-2022; Expects economic growth to return to Eurozone in spring 2023
(UK) BOE Gov Bailey: Expects efforts to bring inflation under control to likely take between 18 months and two years; Further increases to interest rates likely in the coming months – press
FTX.IPO Commences Chapter 11 bankruptcy proceedings in the United States; CEO Sam Bankman-Fried resigns – press

Saturday, October 29, 2022

Peak inflation debate rages on amid fresh recession signals and mixed earnings reports 

Weekly Market Update: Peak inflation debate rages on amid fresh recession signals and mixed earnings reports

Fri, 28 Oct 04:10 PM EST/09:10 PM GMT

US stock markets opened the week looking build on Friday’s momentum while rates held below cycle highs. On Monday, sovereign bond yields dropped across Europe, led by the Gilt markets, after it became clear Rishi Sunak would become the next PM. As expected, President Xi tightened his grip further at a key China Communist Party meeting. After eliminating influence of opposition and moderating voices, and signaling to markets there won’t be any change in direction on economic, tech, or COVID policies, Chinese stock markets came under significant pressure. Regardless US stock prices held up well heading into a key stretch of corporate earnings reports.

US stocks largely continued to track higher mid-week, headlined by the Dow as it neared 6-week highs. Earnings standouts like Coca-Cola, Caterpillar, and GM, helped in large part by their continued ability to pass along and benefit from price increases, offset disappointing results and weak outlooks from a host of mega-cap tech bellwethers. Also, economic data continued to soften, supporting those who believed the Fed was nearing an inflection point where they could slow the pace at which they raise rates into the end of the year. The Bank of Canada raised rates less than expected, while other central banks that led the way into this rate hike cycle also offered slightly more dovish signals, along with a bit more two-sided commentary from some Fed officials. Nevertheless, markets flashed further signals that damage may have already been done. The US 10-year yield dropped below 4% resulting in the curve inverting below that of the 3-month T-bill rate. This classic recession signal was last seen in March of 2020.

Rates popped back up on Friday after a string on shockingly high EU CPI readings. That trend was moderated somewhat by two constructive pieces of US inflation data: Both the year over year September PCE deflator and the University of Michigan 1-year inflation outlook came in one-tenth lower than expected, sparking renewed hopes that ‘peak inflation’ may have been reached. Oil prices moved a bit higher during the week, but natural gas slipped modestly lower. For the week, the S&P gained 3.9%, the DJIA surged 5.7%, and the Nasdaq rose 2.2%.

Tech earnings took center stage in corporate news this week. Alphabet posted its lowest revenue growth since 2020 as economic weakness continued to hamper online ad spend. Microsoft saw its weakest sales growth in five years amid a drop in demand for its Windows OS. Meta’s share price dropped to its lowest level since 2016 as CEO Zuckerberg continues the pursuit of his costly Metaverse venture despite declining revenue. Amazon shares tumbled after giving a dour revenue outlook for its holiday quarter as it gets set to ‘tighten its belt.’ Amid this tech gloom and doom, Apple stock propped up the markets on Friday, surging after the consumer tech giant posted beats on its top and bottom line despite seeing some weakness in iPhone sales and services. Intel shareholders also recouped some losses as the chipmaker laid out significant cost-cutting plans amid a reduction to its FY22 forecast as it reported an earnings beat.

SUN 10/23
(CN) China Pres Xi obtains the 3rd five-year presidential term (as expected); Li Qiang named new China's Premier; Politburo Standing Committee members cut to 24 from 25
2330.TW Reportedly TSMC has suspended production of advanced silicon for China-based firm Biren Technology to ensure compliance with US curbs - press
(RU) Russian state press circulate reports citing 'credible sources in Ukraine and various other countries' that Ukraine is preparing a provocation using a 'dirty bomb' or 'low-yield nuclear weapon'; Russian Defense Min Shoigu held talks with US, UK, French and Turkish Defense Ministers
(UK) Chancellor of the Exchequer (Fin Min) Hunt reportedly considers up to £20B in tax rises on high earners in his medium-term fiscal budget announcement due on Oct 31st - UK press
*(CN) CHINA SEPT RETAIL SALES Y/Y: 2.5% V 3.5%E; YTD Y/Y: 0.7% V 1.0%E
MON 10/24
PHIA.NL Reports Q3 adj EBITA €209M v €512M y/y, Rev €4.3B v €4.3B prelim; Starts restructuring, sees €300M charges in coming quarters; To cut 4,000 jobs globally (~5% of workforce)
*(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 47.4 V 47.0E (2nd straight contraction and lowest since May 2020)
*(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 45.7 V 47.0E (4th straight contraction and lowest since June 2020)
TTF European gas futures extend losses to €100/MW (lowest since early June) amid EU talks to intervene into energy markets and warmer-than-usual temperatures this autumn in Europe
*(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 46.6 V 47.9E (4th straight contraction and lowest since May 2020)
*(UK) OCT PRELIMINARY MANUFACTURING PMI: 45.8 V 48.0E (3rd straight contraction and lowest since May 2020)
7203.JP Said to be considering a reboot of its ~$38B EV strategy announced last year to better compete with rivals like Tesla; Reportedly halted some work on existing EV projects; Targets early 2023 to complete review - press
(RU) Russian govt spokesperson Peskov: West's lack of confidence does not mean that the threat of such 'dirty bomb' in Ukraine ceases to exist; The threat presents and this information was brought to the attention of Western defense ministers
VSTO Reports prelim Q2 $1.71 v $1.71e, Rev $782M v $753Me; CFO Sudhanshu Priyadarshi to depart; Andrew Keegan named interim CFO, effective immediately
(US) DOJ to hold press conference today on 'significant national security matter'
(RU) Russian Defense Ministry: Ukraine wants to present the 'dirty bomb' explosion as an abnormal operation of a Russian nuclear weapon - statement
LOGI Reports Q2 $0.84 v $0.81e, Rev $1.15B v $1.21Be; CFO to leave the company, but stay on through transition
TUES 10/25
5.HK Reports Q3 Net $2.6B v $4.3B y/y, adj Pretax $6.51B v $6.09Be, Rev $14.3B v $13.5Be: CFO to step down, confirms considering sale of Canada unit
UBSG.CH Reports Q3 Net $1.73B v $2.28B y/y, Rev $8.24B v $9.13B y/y
NOVN.CH Reports Q3 Core EPS $1.58 v $1.57e, Rev $12.54B v $12.9Be
SAP.DE Reports Q3 €1.12 adj v €1.28e, adj EBIT €2.09B v €2.05Be, Rev €7.84B v €7.59Be; Expects to accelerate Rev growth and double-digit operating profit growth in 2023
(RU) Reports circulating that a new NOTAM** notice was issued for Oct 26-29th for potential ICBM test launches from Russia's Plesetsk and SLBM test launches from the coast of the Kola Peninsula to the Kura missile range
(CN) China issues rules to promote development of individual businesses from Nov 1st; To encourage and guide venture capital institutions and social funds to support development of individual businesses - Chinese press
UPS Reports Q3 $2.99 v $2.84e, Rev $24.2B v $24.3Be
PII Reports Q3 $3.25 v $2.85e, Rev $2.34B v $2.19Be
GE Reports Q3 $0.35 v $0.47e, Rev $19.1B v $19.0Be; Cuts outlook; Plans to initiate restructuring program across GE Vernova businesses
GM Reports Q3 $2.25 v $1.89e, Rev $41.9B v $41.8Be
PHM Reports Q3 $2.69 v $2.75e, Rev $3.94B v $4.04Be
KO Reports Q3 $0.69 v $0.64e, Rev $11.1B v $10.6Be; Organic Rev +16%; Raises FY22 outlook
ADM Reports Q3 $1.86 v $1.42e, Rev $24.7B v $22.9Be
VOW3.DE Exec: We have never had the level of shortages in supply chain that we see today
ITW Reports Q3 $2.35 v $2.25e, Rev $4.01B v $3.93Be; Organic rev +16%; Raises guidance
PCAR Reports Q3 $2.21 v $2.01e, Rev $6.69B v $6.73Be
(SA) Saudi Oil Min Abdulaziz: We need to retain spare oil capacity; Having spare capacity pays off; Running out of spare capacity would have a great cost
MAERSKB.DK Exec: Congestion on West Coast has eased significantly; NA volumes remain “relatively unchanged” since September
*(US) OCT RICHMOND FED MANUFACTURING INDEX: -10 V -5E; New orders: -22 v -11 prior
ML.FR Reports 9M Rev €20.7B v €17.2B y/y; Cuts FCF forecast
MSFT Reports Q1 $2.35 v $2.29e, Rev $50.1B v $49.5Be
GOOGL Reports Q3 $1.06 v $1.25e, Rev (ex TAC) $57.3B v $58.2Be; Notes it is working to realign resources for growth
V Reports Q4 $1.93 v $1.86e, Rev $7.79B v $7.55Be; Authorizes $12.0B buyback program; Raises dividend 20% to $0.45/shr
MSFT Guides Q2 Rev $52.4-53.4B v $55.5Be - earnings call
BMY Reports Q3 $1.99 v $1.83e, Rev $11.2B v $11.0Be
*(AU) AUSTRALIA Q3 CPI Q/Q: 1.8% V 1.6%E; Y/Y: 7.3% V 7.1%E (highest annual pace since 1990)
WEDS 10/26
*(AU) AUSTRALIA Q3 CPI Q/Q: 1.8% V 1.6%E; Y/Y: 7.3% V 7.1%E (highest annual pace since 1990)
DBK.DE Reports Q3 Net €1.12B v €194M y/y, Rev €6.92B v €6.04B y/y
MBG.DE Reports Q3 Net €4.00B v €3.52B y/y, adj EBIT €5.34B v €3.11B y/y, Rev €37.7B v €31.65B y/y; Raises FY22 adj ROS outlook
BAS.DE Reports final Q3 €1.77 v €1.56 y/y, Adj EBIT €1.35B v €1.35B prelim, Rev €21.9B v €21.9B prelim
(DE) German govt reportedly approves China's Cosco to acquire 24.9% of Hamburg port's operator - press
BAS.DE CEO: To to cut costs in Europe as quickly as possible and also permanently; Number of retirements in the next few years goes up significantly; Also have positions that are not filled as we have problems getting experts and well-trained people - post earnings comments
UMC Reports Q3 (NT$) 2.19 v 1.96e, Rev 75.4B v 72.8Be; Cuts FY22 Capex outlook; Notes softening demand in consumer end markets
HLT Reports Q3 $1.31 v $1.25e, Rev $2.37B v $2.37Be
BG Reports Q3 $3.45 v $2.44e, Rev $16.8B v $15.6Be; Raises FY22 adj EPS outlook
GPI Reports Q3 $11.91 adj v $10.99e, Rev $4.16B v $4.07Be
ADP Reports Q1 $1.86 v $1.78e, Rev $4.22B v $4.15Be
BA Reports Q3 -$6.18* v -$0.01e, Rev $16.0B v $17.5Be
MNRO Reports Q2 $0.43 v $0.62 y/y, Rev $329.8M v $347.7M y/y; Did not fully pass-through Px inflation in Q2
(CA) Bank of Canada (BOC) Gov Macklem: Seeing early encouraging signs that underlying inflation is beginning to come down but still far from goals; Still not there yet on ending tightening phase but we are getting closer - post rate decision press conference
MBLY IPO opens for trade at $26.71
(US) Association of American Railroads weekly rail traffic report for week ending Oct 22nd: 505K total units, -1.1% y/y
(US) Atlanta Fed GDPNow: Raises Q3 GDP to 3.1% from 2.9%
VERU (US) FDA provides updated agenda for November 9, 2022 Meeting of the Pulmonary-Allergy Drugs Advisory Committee Meeting Announcement; To review EUA for Sabizabulin for hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome until Nov. 9, 2022
F Reports Q3 $0.30 v $0.31e, Rev $37.2B v $38.3Be; Confirms charge related to wind down of Argo Ai
META Reports Q3 $1.64 v $1.88e, Rev $27.7B v $27.4Be; Expects Reality Labs operating losses in 2023 will grow significantly y/y
(RU) White House is reportedly reworking a plan for a Russia oil price cap; So far only only G7 countries and Australia have agreed to abide by the price cap - press
005930.KR Reports final Q3 (KRW) Net 9.4T v 12.3T y/y; Op 10.9T v 15.8T y/y, Rev 76.8T v 74.0T y/y; Expects demand to recover in 2023, not considering artificial memory production cut; Promotes Jay Y. Lee to Chairman
(CN) China Pres Xi: China is willing to find ways to cooperate with the US; Better exchanges will bolster global peace and development - Chinese press
THURS 10/27
CSGN.CH Reports Q3 (CHF) Net -4.03B v -505Me v -1.59B y/y, Rev 3.80B v 5.44B y/y; Announces CHF4.0B capital raise; Notes during first two weeks of Oct, amid incorrect market rumors, experienced a significant level of deposit and AuM outflows
CSGN.CH Unveils new strategy and transformation plan; Headcount reduction of 2,700 jobs underway in Q4; Radically restructure the Investment Bank to significantly reduce Risk Weighted Assets; To reduce cost base by 15%, or ~CHF2.5B (prior expected by 8%)
SHEL.UK Reports Q3 $1.30 v $0.53 y/y, Adj CCS Net $8.10B v -$988M y/y, Rev $95.7B v $60.0B y/y; Announces $4B share buyback for up to 528.9M shares (2% of market cap); to raise dividend by 15%
UNA.NL Reports Q3 Rev €15.8B v €15.1Be; Raises FY22 Sales outlook; Sees challenges of high inflation to persist in 2023
TTE.FR Reports Q3 Adj Net $9.86B v $4.77B, adj Op $19.4B v $11.2B y/y, Rev $64.9B v $49.1B y/y; raises dividend 5% to €0.69/shr
(RU) Russia Foreign Ministry official: US quasi-civilian satellites may become legitimate targets for a retaliatory strike, if they are involved in armed conflicts
(JP) Japan final draft total size of stimulus package of ¥71.6T (~$488B) - financial press
LIN.DE Reports Q3 $3.10 v $2.94e, Rev $8.80B v $8.27Be
SWK Reports Q3 $0.76 v $0.73e, Rev $4.12B v $4.12Be; Cuts outlook
HON Reports Q3 $2.25 adj v $2.16e, Rev $8.95B v $9.08Be
CAT Reports Q3 $3.95 v $3.19e, Rev $15.0B v $14.3Be
MRK Reports Q3 $1.85 v $1.67e, Rev $15.0B v $14.1Be
CAT Reports Q3 dealer statistics: Total machines +7% v -3% prior
HON Guides Q4 $2.46-2.56 v $2.51e, Rev $9.1-9.4B v $9.35Be; Expect 2023 growth in top-line with margin expansion - earnings slides
CCJ Reports Q3 C$0.03 v -C$0.14 y/y, Rev C$389M v C$361M y/y
CAT Guides Q4 Rev to be highest quarter of the year reflecting typical seasonality; Q4 adj Op margin 'strong' - earnings slides
CBRE Reports Q3 core $1.13 adj v $1.24e, Rev $7.53B v $7.90Be
MCD Reports Q3 $2.68 v $2.57e, Rev $5.87B v $5.71Be
CMCSA Reports Q3 $0.96 adj v $0.89e, Rev $29.85B v $29.7Be
FISV Reports Q3 $1.63 v $1.70e, Rev $4.52B v $4.27Be
(CN) China's Cabinet deploys a package of measures to stabilize domestic economy; Will promote recovery in consumption; Calls for keeping economy within a reasonable range - press
7203.JP Cuts again FY22 global volume 9.5M units +10% y/y (prior <9.7M) - financial press
MA Guides Q4 adj Rev low end of low double digits %, adj Rev (CC) high end of mid teens - slides
*(EU) ECB RAISES KEY RATES BY 75BPS; AS EXPECTED; Expects to raise interest rates further over next several meetings, deciding meeting by meeting
*(EU) ECB DECIDES TO CHANGE TLTRO-III TERMS; From Nov 23rd to maturity or early repayment date, the interest rate on TLTRO III operations will be applicable key ECB interest rate over this period
*(US) Q3 ADVANCE GDP ANNUALIZED: Q/Q: 2.6% V 2.4%E (moves out of technical recession); PERSONAL CONSUMPTION: 1.4% V 1.0%E
*(US) Q3 ADVANCE GDP PRICE INDEX: 4.1% V 5.3%E; CORE PCE Q/Q: 4.5% V 4.5%E
(EU) ECB chief Lagarde: Expect economy to slow down substantially over remainder of year; Growth risks clearly on downside in the short term - Prepared remarks
(EU) ECB chief Lagarde: Not done in normalizing policy; More discussions on increases in the future - Q&A
(US) Nevada reports Sep casino gaming Rev $1.25B, +7.9% y/y; Las Vegas strip Rev $693M, +8.3% y/y
BN.FR Reports Q3 Rev €7.33B v €7.00Be
AMZN Reports Q3 $0.28** v $0.23e, Rev $127.1B v $127.9Be
INTC Reports Q3 $0.59 v $0.34e, Rev $15.3B v $15.5Be; Details significant cost cutting plans; Cuts FY22 outlook
X Reports Q3 $1.95 v $1.92e, Rev $5.2B v $4.91Be
INTC CEO: In near term flexible workforce will be impacted; Will be aggressive in cost cutting including headcount - media interview
AAPL Reports Q4 $1.29 v $1.26e, Rev $90.2B v $88.5Be
AMZN CFO: People's budgets are tight and we are being prudent in hiring; Amazon is preparing for what could be a slower growth period - media interview
FRI 10/28
AIR.FR Reports Q3 adj Net €667M v €404M y/y, Adj EBIT €836M v €666M y/y, Rev €13.3B v €10.5B y/y
*(FR) FRANCE Q3 PRELIMINARY GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.0% V 1.0%E
SAN.FR Reports Q3 Business EPS €2.88 v €1.85 y/y, Op €4.50B v €3.04B y/y, Rev €12.5B v €10.4B y/y
066570.KR Reports final Q3 (KRW) Net 336.5B v 516.5B y/y; Op 746.6B v 596.8B y/y, Rev 21.2T v 21.2T prelim; Expects demand for home-appliances, IT devices to contract in Q4
ENI.IT Reports Q3 adj Net €3.73B v €1.43B y/y, adj Op €5.77B v €2.49B y/y, Rev €37.3B v €19.3B y/y; Prev announced €2.4B buyback to be completed by year-end
(JP) BOJ Gov Kuroda: Reiterates stance that do not expect a rate hike or exit from easing policy any time soon - post rate decision press conference
*(FR) FRANCE OCT PRELIMINARY CPI M/M: 1.0% V 0.6%E; Y/Y: 6.2% V 5.8%E
*(ES) SPAIN Q3 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E; Y/Y:3.8 % V 3.9%E
*(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: +0.3% V -0.2%E; Y/Y: 1.2% V 0.7%E
(CN) China banking regulator (CBIRC) official: Chinese yuan (CNY) market position won't change despite some unstable factors in short term; You will regret it in the future for selling CNY now to buy FX
*(IT) ITALY OCT PRELIMINARY CPI M/M: 3.5% V 1.1%E; Y/Y: 11.9% V 9.5%E (highest annual pace for Italy on record and highest pace now among top 5 EU economies)
CVX Reports Q3 $5.56 v $5.02e, Rev $66.6B v $59.0Be; Repurchased $3.75B of shares during Q3
CVX CFO: Raises FY23 Capex close to $17.0B (prior $15.0-17.0B) v below $15.0B expected for FY22; Expect share buybacks at top end of guidance range of up to $15B - post earnings comments
1211.HK Reports Q3 (CNY) Net 5.72B v 1.27B y/y, Rev 117.1B v 54.3B y/y
BAH Reports Q2 $1.34 v $1.12e, Rev $2.30B v $2.24Be
ABBV Reports Q3 $3.66 v $3.56e, Rev $14.8B v $14.9Be; Raises Quarterly dividend 5% to $1.48 from $1.41 (indicated yield 3.86%)
*(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.9% V 0.6%E; Y/Y: 10.4% V 10.1%E
GWW Reports Q3 $8.27 v $7.19e, Rev $3.94B v $3.88Be
*(US) SEPT PCE DEFLATOR M/M: 0.3% V 0.3%E; Y/Y: 6.2% V 6.3%E
*(US) SEPT PENDING HOME SALES M/M: -10.2% V -4.0%E; Y/Y: -30.4% V -22.5% PRIOR
(US) Atlanta Fed GDPNow: Forecasts initial Q4 GDP at 3.1%
(US) Sep Dallas Fed Trimmed Mean PCE +4.3% v +6.0% m/m

Sunday, October 16, 2022

UK government policy reversal not enough to comfort markets gripped by inflation 

Weekly Market Update: UK government policy reversal not enough to comfort markets gripped by inflation

Fri, 14 Oct 04:15 PM EST/09:15 PM GMT

Stocks remained heavy coming into the week as last Friday’s strong September jobs report kept the door wide open for further Fed tightening. Volatility rose, foreshadowing wild trading to come in the aftermath of Thursday’s CPI release. Worries surrounding the UK Gilt markets festered. On Tuesday, the UK 10-year Gilt hit a fresh 14-year high above 4.5% after the BOE once again affirmed plans to end its emergency bond-buying program on Friday. The BOE was subsequently forced to step in again by widening its emergency bond-buying operations, but Governor Bailey drew the line in the sand when he called on UK pension funds to right-size LDI exposure before the opportunity closes. Speculation also continued to swirl that PM Truss would ultimately be forced to backtrack on some of the key promises of Chancellor Kwerteng’s mini budget. Separately, the Japanese Yen hit fresh 24-year lows against the dollar after the BOJ Governor Kuroda reiterated they will continue easing in Japan despite the starkly divergent monetary policy relative to the US and Europe. By Wednesday, US stock markets were riding a 6 day losing streak after PPI data topped expectations ahead of the CPI numbers on Thursday.

The September CPI report wasn’t pretty, but really shouldn’t have surprised anyone, and the markets more than shrugged it off. Core CPI posted another gain of 0.6% m/m, topping estimates and climbed to the highest annual pace since 1982, notching a 6.6% reading. The composition of the inflation increase offered no immediate reason to hope for a quick reversal. Much of the upside disappointment was due to shelter costs, which continue to accelerate, posting the largest monthly gain since 1990. The hot CPI print cemented expectations that the Fed will hike by 75 bps in November and tipped futures odds in favor of another 75 bps in December, boosting the market’s expectation for the terminal rate to top out north of 4.8% in 2023. Nevertheless, after opening lower with the S&P testing 3500, stocks roared back with an eye popping classic bear market rally on significant volumes. S&P futures had nearly a 200 point swing from the morning’s lows in what mostly attributed to short covering and oversold options positioning.

Friday saw another 100+ point swing in the futures, but this time to the downside. Follow though momentum into the NY open faded alongside another chorus of Fed officials emphatically reiterating financial conditions need to tighten further and stay there in order to bring inflation down. University of Michigan data offered no reprieve on the inflation front after 1-year inflation expectations rose sharply above consensus. UK Gilt markets remained in focus after PM Truss dismissed Chancellor Kwarteng and, as speculated, backtracked on key measures of the unsettling mini budget announcement. The Pound remained under pressure and UK yields rose in the aftermath of her press conference, suggesting the situation is far from resolved with the BOE backstop now gone and QT set to commence at the end of the month. WTI crude prices dropped 3% into week’s end, perhaps helped in part by some marginally softer rhetoric from Putin towards Ukraine. The US dollar remained bid while Treasury yields drifted back towards cycle highs with the 2-year back above 4.5% and the 10-year retesting 4%. For the week, the S&P lost 1.5%, the DJIA gained 1.2%, and the Nasdaq dropped dropped 3.1%.

In corporate news this week, a wide variety of consumer companies touted better than expected quarterly results. PepsiCo shares popped as the company reported strong Q3 numbers and raised fiscal year guidance, saying that global business momentum remains strong. Luxury goods maker LVMH beat quarterly revenue expectations and expressed confidence that current growth will continue. American Airlines lifted off from recent lows after raising its Q3 guidance ahead of next week’s earnings release, though rival Delta reported earnings and revenue a bit below forecast. Financial services firms started the new earnings season off on a positive note, with Wells Fargo and Citigroup beating estimates handily. JP Morgan also reported better than expected results for Q3 even after CEO Dimon warned earlier in the week that the US economy will likely slip into an actual recession within the next nine months. Apple took a deeper step into the fintech market with the launch of a new high-yield savings account for Apple Card from Goldman Sachs. The woes in the chip sector continued to pile up as a report said Intel plans thousands of layoffs, including 20% of sales and marketing staff, amid the slowdown in PC sales. And in M&A news, Kroger proposed creating a grocery giant via a $24.6B merger with Alberstons, a merger that may face significant regulatory scrutiny.

SUN 10/9
(RU) Russian govt spokesperson Peskov: It is wrong to consider the terrorist attack on the Crimean bridge as a reason for the possible use of nuclear weapons according to Russian doctrine
MON 10/10
(UR) Telegram channels circulating reports on 'massive explosions' near centers of Ukraine capital Kyiv and several biggest cities Dnipro, Lviv, Zhytomyr
(RU) Belarus President Lukashenko: Belarus and Russia to form a joint regional grouping of troops; The process of formation of this group has been going on for two days; NATO and a number of European countries are considering options for possible aggression against Belarus
(CN) China's PBOC and ECB said to renew Euro-Chinese yuan swap agreement worth CNY350B - press
(UK) Treasury Select Committee Head: Govt to bring forward medium-term fiscal plan OBR forecast to Oct 31st from Nov 23rd
(CN) Shanghai requires arrivals to take 3 COVID tests within 3 days - press
(UR) During today's Russian massive missile attacks on regional centers in Ukraine, visa office of the German embassy in Kyiv was reportedly hit - German press
(RU) Russia Pres Putin: Reiterates Ukraine is behind Crimea bridge attack; Ukraine conducted 3 attacks on Russian Kursk nuclear plant and also tried to blow up Turkstream gas pipeline
(RU) Russia Dep Chair of Security Council Medvedev (former Pres): Strikes on Ukraine today were the first episode and there will be more; Russia must work to dismantle Ukraine's political regime
DPW.DE Reports prelim Q3 EBIT €2.04B v €2.00Be; B2C volumes has improved in Q3; To raise FY22 outlook on Q3 earnings release on Nov 8th
WHO fears Monkeypox variant, Clade I virus, circulating in the Democratic Republic of the Congo could go global
Adobe forecasts US holiday season online $209.7B, up 2.5% y/y, the slowest growth since 2012; Cyber Monday forecast >$11B
PPG Reports prelim Q3 5-7% below low-end of prior $1.75-2.00 outlook (implies $1.63-1.66) v $1.82e; Sees Q4 segment earnings growth 20% with soft demand conditions in Europe, China expected to continue into Q4
(DE) Germany govt supports joint EU debt to provide loans to address energy crisis - press
(DE) German Government Member reportedly rejects earlier report that Germany backs joint EU debt for loans to ease energy crisis - press
JPM CEO Dimon: ‘This is serious’; Warns US likely to tip into recession in 6 to 9 months - CNBC
QGEN Reportedly Bio-Rad in talks to merge with Qiagen in a potential $10B+ deal - press
(US) Track maintenance workers said to have rejected labor deal with freight railroads backed by the Biden Administration - press
LEG Cuts FY22 outlook due to lower volumes; Saw home furniture demand softened significantly in the last few months
TUES 10/11
(UK) BOE: To widen scope of of daily Gilt purchases; to purchase index-linked GILTS during Oct 11-14th; Will allocate £5B to index-linked bond purchases
(FR) France Fin Min Le Maire: Negotiations need to begin in the refinery strike; otherwise the govt will intervene; Priority remains to restart EDF nuclear reactors as soon as possible
(CN) According to SCMP piece, China gives clearest sign yet it will stick with zero-Covid policy as Communist Party mouthpiece newspaper People’s Daily called for confidence and patience in China with the zero-Covid strategy - press
KLAC Said to stop some sales and services to China, including to China-based customers such as South Korea's SK Hynix and chip plants owned by Intel to comply with US export curbs - press
(JP) Japan 10-year JGB bond fails to trade for the 3rd straight session (1st time since 1999)
(RU) Russia Foreign Min Lavrov: We are willing to listen to any suggestions on possible peace talks; If US proposes Putin-Biden meeting at a forthcoming G20 meeting, we will consider it
BAC (US) BoA institute find Sep total payments +10% y/y, however evidence of housing market slowdown emerges
AAL Raises Q3 Rev +13% (prior +10-12%), TRASM +25% (prior +20-24%), CASM +14% (prior +12-14%) - filing
(SA) White House spokesperson Kirby: Pres Biden is re-evaluating relationship with Saudi Arabia after OPEC+ output cut
NLY Reports book value/shr $19.85-20.05 at Sep v $23.59 in June; Estimates cash and agency MBS liquidity position at $4.1B
(US) Dept of Labor releases proposal to force companies to reclassify independent contractors as employees
(UR) NATO Sec Gen Stoltenberg: NATO will hold planned nuclear deterrence exercises next week; What we saw yesterday is a sign of Russian weakness because Russia is not making advances on the battlefield
(US) NY Fed Survey of Consumer Expectations: Sept one year ahead expected inflation 5.4% v 5.7% m/m (lowest since Sept 2021)
MC.FR Reports Q3 Rev €19.8B v €19.1Be; Confident in continuation of current growth
(US) Fed's Mester (FOMC voter): Reiterates does not expect Fed to lower rates in 2023; Yet to make any progress on inflation
(UK) Bank of England (BOE) Gov Bailey: See serious risk to financial stability in the UK; Reiterates intervention in GILT markets will be temporary, BOE will be out by the end of the week - Washington event
(US) Fed's Mester (FOMC voter): Fed should stick to balance sheet runoff plan; Need to do more, inflation has not slowed; Fed officials aligned on where policy needs to go
INTC Said to plan thousands of jobs cuts due to PC slowdown; To focus on sales and marketing, but cuts said to be company-wide; Layoffs could be announced as early as in Oct - press
WEDS 10/12
PHIA.NL Reports prelim Q3 Rev €4.3B v €4.53Be; Sees prolonged supply chain disruptions and a worsening macro-environment; To record €1.3B goodwill impairment charge
(CN) China's Communist Party mouthpiece newspaper People’s Daily endorses zero-Covid policy for 3rd straight day; Notes it's impossible to win Covid battle by lying flat and China will stick with zero-Covid strategy to avoid huge losses arising from losing control of the epidemic
*(UK) AUG MONTHLY GDP M/M: -0.3% V 0.0%E; GDP 3M/3M: -0.3% V -0.2%E
*(UK) AUG INDUSTRIAL PRODUCTION M/M: -1.8% V -0.1%E; Y/Y: -5.2% V +0.6%E
(PL) Polish energy firm Pern detects a leak and depressurization in one line of the Druzhba oil pipeline (4-8% of total EU capacity) from Russia to Germany; Pumping of oil through the Polish line was immediately halted; Notes cause of the incident is unknown at this time
(UR) IAEA chief Grossi: Zaporizhzhia Nuclear Power Station has lost all of its external power for the second time in five days; Again relying on diesel generators
(UR) According to Ukraine energy firm Energoatom, Russia side does not allow convoy with diesel fuel to access Zaporizhzhia Nuclear Power Station which was again cut from external power for the second time in five days
(JP) Japan 10-year JGB bond fails to trade for the 4th straight session (1st time since 1999)
PEP Reports Q3 $1.97 v $1.85e, Rev $22.0B v $20.9Be; Raises FY22 outlook; Notes global business momentum remains strong
(RU) Russia Pres Putin: Global economy is in acute crisis; Reiterates Ukrainian Special Services behind attack on Crimea bridge; It is possible to repair Nord Stream, but only if it will work - Russia Energy Week comments
(UK) PM Truss: The last thing we need is a general election; NO plans to cut public spending - House of Commons comments
BAS.DE Reports prelim Q3 Net €909M* v €1.11Be, adj EBIT €1.35B v €1.31Be, Rev €21.9B v €21.1Be; Initiates cost savings play through 2024
(JP) Bank of Japan (BOJ) Gov Kuroda: BOJ will continue easing to hit inflation target of 2% in stable and sustainable manner
(EU) ECB’s Knot (Netherlands, hawk): Need at least two more significant ECB rate hikes; Reiterates Council view that rates are way below neutral; must end accommodation phase
*(US) SEPT PPI FINAL DEMAND M/M: 0.4% V 0.2%E; Y/Y: 8.5% V 8.4%E
CABK.ES Reportedly proposes sector-wide freeze in variable mortgage costs - press
(US) Reportedly White House considering ban on Russian aluminum - press
(US) Association of American Railroads weekly rail traffic report for week ending Oct 8th: 494K total units, -2.4% y/y
(EU) ECB policymakers said to near deal to modify TLTRO rules that could reduce potential banking profits by tens of billions; Decision may come at Oct 27th meeting - press
(JP) Japan Sept PPI (CGPI) M/M: 0.7% v 0.3%e; Y/Y: 9.7% v 8.9%e
THURS 10/13
2330.TW Reports Q3 (NT$) Net 280.9B v 156.3B y/y (v 265.6Be); Op 310.3B v 171.0B y/y; Rev 613.1B v 414.7B y/y; Cuts FY22 Capex outlook
*(DE) GERMANY SEPT FINAL CPI M/M: 1.9% V 1.9%E; Y/Y: 10.0% V 10.0%E
GSK.UK GSK's older adult respiratory syncytial virus (RSV) vaccine candidate shows 94.1% reduction in severe RSV disease and overall vaccine efficacy of 82.6% in pivotal trial; Regulatory submissions based on the phase III data are anticipated in H2 2022
2330.TW CEO: Cuts FY22 Capex $36.0B (prior lower-end of $40-44B); Affirms FY22 Rev outlook; Face challenges from rising inflationary costs in 2023; Expects 2023 to be a growth year for TSMC
(CN) China senior health advisor official Liang: Dynamic zero-Covid policy in the past three years has proven to be effective, feasible and scientific; China must continue with zero-Covid policy
(NO) Norway's natural gas processing plant Nyhamna reportedly has been evacuated; Norwegian police responding to 'unclear situation'; Norway gas system operator Gassco notes gas transport and production are not disturbed - Norwegian press
IEA Monthly Oil Report (OMR): EU yet to replace more than half of pre-war Russian oil imports
(UR) EU Foreign Policy Chief Borrell: Nuclear attack against Ukraine will trigger not a retaliatory nuclear, but a powerful military response
(BE) ECB's Wunsch (Belgium, hawk): Rate seen around 2% by end-2022; would not be surprised if rates went above 3.0% - CNBC interview
BLK Reports Q3 $9.55 v $7.93e, Rev $4.31B v $4.41Be
DAL Reports Q3 $1.51 adj v $1.56e, Rev $14.0B v $14.2Be; Working toward full network restoration by summer 2023
(UK) PM Spokesman Blain: UK tax position has not changed; PM Truss has full confidence in the OBR's ability to forecast accurately
FAST Reports Q3 $0.50 v $0.48e, Rev $1.80B v $1.79Be; Did not take any broad pricing actions in Q3
RLMD Reports top-line results from Phase 3 RELIANCE III trial for REL-1017 as a monotherapy for treatment of major depressive disorder; Paradoxical results observed in certain study sites, where placebo dramatically outperformed REL-1017; RELIANCE I and II Adjunctive MDD trials continue to advance
(UK) Sky News reports that some UK govt officials discussing which part of mini budget might be dropped
*(US) SEPT CPI M/M: 0.4% V 0.2%E; Y/Y: 8.2% V 8.1%E (annual pace records 3rd straight decline); Core CPI Y/Y highest since 1982
Redfin: Asking rents rise 9% y/y in Sep, slowest growth since August 2021
(RU) Kremlin spokesperson: The goals of the 'special operation' in Ukraine are unchanged, but they can be achieved through negotiations - Russian press
(LT) ECB's Simkus (Lithuania): Favors 75 basis point hike this month along with discussion around TLTRO requirements; Do not see financial instability
(US) Atlanta Fed Sep Sticky-CPI annualized 8.5% v 7.7% m/m, core 8.3% v 7.5% m/m (40-year high)
*(US) DOE CRUDE: +9.9M V +1ME; GASOLINE: +2.0M V -1ME; DISTILLATE: -4.9M V -1.5ME
AAPL Announces new high-yield savings account for Apple Card from Goldman Sachs
*(US) TREASURY $18B 30-YEAR BOND REOPENING DRAWS 3.930% V 3.511% PRIOR; BID TO COVER 2.39 V 2.42 PRIOR AND 2.35 OVER LAST 8 REOPENINGS (Highest yield since 2011)
*(SG) SINGAPORE Q3 ADVANCED GDP Q/Q: 1.5% V 0.7%E; Y/Y: 4.4% V 3.5%E
*(CN) CHINA SEPT CPI M/M: 0.3% V 0.4%E; Y/Y: 2.8% V 2.9%E [fastest annual pace since Apr 2020]
FRI 10/14
IDS.UK Trading update: prelim H1 adj Op -£219M v +£235M y/y; Could cut up to 6,000 jobs by Aug 2023; Urges CWU to immediately call off planned strike; All options remain open, including separation of the two companies
(RU) Reports circulating that a NOTAM** notice was issued for large parts of Russia's Kara Sea for Oct 17-22nd
(US) Pres Biden to sign an executive order on Oct 14th pushing federal officials to drive prescription drug costs down - press
JPM Reports Q3 $3.12* v $2.97e, Managed Rev $33.5B v $32.3Be; Expects to reach current target CET1 ratio of 13% in Q1 2023; Hopes to resume buybacks early 2023
JPM Raises FY22 NII $61.5B (prior $58B+) v $44.5B y/y; Adj expense $77B (prior $77B) v $71B y/y - earnings slides
ACI Confirms to be acquired by Kroger for $34.10/shr in cash plus special dividend of ~$6.85/shr valued at EV of $24.6B; To establish subsidiary (SpinCo) as standalone company prior to merger closure
(RU) Russia Pres Putin: No need for massive strikes on Ukraine now, No plans for additional mobilization in Russia
C Reports Q3 $1.63 v $1.55e, Rev $18.5B v $18.4Be
(UK) PM Truss: Confirms will keep corporation tax rise to 25% (from 19%), Clear that parts of the mini-budget went too far
(US) OCT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 59.8 V 58.8E; 1 year inflation expectations 5.1% v 4.6%e

(US) Fed's Daly (non-voter): The latest CPI was very disappointing but not surprising, 4.5-5% most likely top FED funds rate, will hold there

Sunday, September 18, 2022

Aug CPI and FedEx Preannouncement Present Challenging Environment for Investors Weekly Market Update: Aug CPI and FedEx Preannouncement Present Challenging Environment for Investors

9/16/2022 4:02:15 PM

- Trade began this week auspiciously enough, with equity markets and most risk assets holding on to momentum that built late last week. Sentiment was being helped in large part by the recent retreat in market-based inflation expectations into a key US inflation report that was expected to show the first m/m decline in headline consumer prices since the onset of the pandemic in 2020. To the markets chagrin, though, Tuesday’s August CPI reading caught investors well offsides with a significantly hotter than expected print. The core index re-accelerated to a gain of 0.6%, driven by shelter costs. The increase in the owners’ equivalent rent index climbed 0.71%, which is its largest monthly gain of the cycle to date. Worryingly, the upside pressures were broad-based as medical care services, car insurance/maintenance, and food service prices all came in well above expectations. Markets reacted swiftly and convincingly to what some were calling a game-changer of an inflation report. The S&P fell back below 4K, the Dow plunged 1,200 points, Treasury yields jumped led by a surge in shorter rates, and futures markets immediately began to price in the prospects of an even more aggressive Federal Reserve, including perhaps a 100 bps hike at next week’s FOMC announcement. Importantly, March 2023 futures markets started to price in small odds that the fed funds rate could reach 5% next year, surpassing even the most hawkish Fed officials' forecasts to this point.
- As the week progressed, the pall cast by the August CPI never really dissipated, but also opened up a growing debate surrounding two competing inflation narratives. High-profile corporate preannouncements headlined by FedEx were married with multiple mixed real-time economic readings that suggested growing forces of deflation have taken hold in parts of the economy. Worries of a hard landing in the US and a deep global recession grew, leading to calls for the Fed to take some pressure off the brake. Some argued the economy had already broke hard and instead of focusing on the CPI the Fed would be better served to listen to corporate signals while also accounting for the lag with which the economy starts to feel the full brunt of changes in monetary policy. Others argued a stubbornly strong US labor market as exhibited by low weekly claims and rising incidences of labor strife like this week's near miss of a national rail strike will only keep pressure on inflation and the Federal Reserve to rein in demand. Regardless, each view resulted in stocks and risk assets suffering. Treasury curves saw spreads move further into inversion territory while the US 2-year yield reached the highest level since Oct 2007. The US dollar continued to gobble up safe haven flows, pushing USD/CNY above the 7 handle for the first time in two years. Gold prices slumped to levels not seen in two years, as well. For the week the S&P fell 4.8%, the Dow lost 4.1% and the NASDAQ gave back 5.5%.
- In corporate news this week, FedEx shares dropped almost 20% after preannouncing Q1 will come in well below estimates amid a downturn in shipping volumes that ‘accelerated into the final weeks of the quarter,’ a surprising announcement that led to a round of analyst downgrades. Major chemical manufacturers also cut their outlooks, with Eastman noting demand has slowed more than expected in Aug and Sep amid higher costs, while Huntsman was impacted by high energy costs in Europe and Dow noted continued logistics constraints. Metals names also gave some preliminary quarterly outlooks, with both Steel Dynamics and Nucor seeing considerably lower steel operations profits.
- Bank CEOs opined on a wide variety of subjects at several investor conferences this week, with American Express saying they feel 'even better' about their multi-year outlook and JPMorgan adding they see this quarter shaping up to be a solid one for their markets business. Bank of America said their data shows consumer spending rose 10% in Aug, though Citi said it has begun to see a slowdown in global growth amid a shift from goods. A slew of diverse business from Uber to Microship to AT&T also spoke positively about the current business environment.

SUN 9/11
(UR) Ukraine army chief Zaluzhniy: In the Kharkiv direction, our forces began to advance not only to the south and east, but also to the north; Ukrainian forces are 50 kilometers away from reaching the state border with Russia
(EU) ECB governors reportedly see rising risk that they will have to raise key interest rate to 2% to curb inflation; Some members prepare for restrictive policy - press
(DE) ECB's Nagel (Germany, hawk): ECB will need to take more clear steps on rates if inflation doesn't ease; Inflation may peak above 10% in Dec 2022 and may stay above 6% in 2023
(US) Expected that the US will expand the restrictions of semiconductor chip sales to China for chips used in AI and Chipmaking
(EU) EU's Sefcovic: EU has offered to reduce border controls on Northern Ireland; Hope new UK PM Truss ready to do a deal on post-Brexit trade arrangements in Northern Ireland - FT

MON 9/12
*(UK) JULY MONTHLY GDP M/M: 0.2% V 0.3%E; GDP 3M/3M: 0.0% V 0.1%E
ELUXB.SE Initiates a cost reduction program on the back of weaker-than-expected market demand and weak earnings in Q3; Market demand for core appliances in Europe and the US so far decreased at a significantly accelerated pace q/q
(UR) Ukraine Presidential Advisor Arestovich: Ukrainian counteroffensive operation continues not only in the East, but also in the Kherson region in the South; The myth of the invincibility of the Russian army is broken
(US) Reportedly US freight railway workers halting shipment of some cargo to gain leverage ahead of this week's deadline to negotiate labor agreements - press
(DE) German IFO Institute raises 2022 CPI forecast from 6.8% range to 8.1% (consecutive raise); Now sees recession in 2023; Assumes that there will be sufficient gas available in winter; Energy prices should start falling again from spring 2023 at the latest
(US) NY Fed Survey of Consumer Expectations: August one year ahead expected inflation 5.7% v 6.2% m/m
(US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report; End 2022/2023 US Stocks Soybeans: 200M bu v 240Me bu
AXP Exec: We feel 'even better' about our multi-year outlook we provided back in January - Barclays conf
NXPI Exec: Since our earnings call we have NOT seen any real change in our overall business trends - GS conf
BAC CEO: Seeing consumer spending up 10% in Aug, continues to spend - Barclays conf comments
ORCL Reports Q1 $1.03 v $1.07e, Rev $11.4B v $11.5Be
(JP) Japan Aug PPI (CGPI) M/M: 0.2% v 0.3%e; Y/Y: 9.0% v 8.6%e

TUES 9/13
(DE) German Chancellor Scholz: By end-2023, Germany will be able to import all the gas that we need using LNG terminals; Power-price cap to be implemented with great speed; Also looking at introducing cap on gas prices
(EU) Daily 3-month Euribor Fixing: 1.000% v 0.988% prior (highest since Feb 2012)
(CN) China July smartphone shipments at 19.1M -31.2% y/y v +9.1% prior; YTD smartphone shipments 152.9M -23% y/y - CAICT
EMN Cuts Q3 Adj ~$2.00 v $2.60e (prior EPS 'solid growth' v $2.46 y/y), as demand has slowed more than expected in Aug and Sep as well as higher than expected costs
CNM Reports Q2 $0.67 v $0.53e, Rev $1.86B v $1.72Be; Raises FY22 outlook
(LT) ECB's Simkus (Lithuania): See at least a 50bps rate increase in Oct; Terminal rate not important at this point
*(US) AUG CPI M/M: +0.1% V -0.1%E; Y/Y: 8.3% V 8.1%E (annual pace matches higher end of analysts' expectations, but records second straight decline)
(US) Atlanta Fed Aug Sticky-CPI annualized 7.7% v 5.4% m/m, core 7.5% v 5.2% m/m
JPM Exec: Q3 shaping up to be a solid quarter for markets business, Expects Q3 trading revenue up 5% - Barclays conf comments
(TW) Reportedly US is in early stage talks on sanctions aimed at deterring China from invading Taiwan; Taiwan is pushing EU to prepare potential sanctions package against China - press
C Exec: Starting to see slowdown in global economic growth; Inflation has caused consumer demand to shift from goods
SBUX Raises targets for FY23-'25 adj EPS growth to +15-20% (prior: +10-12%) - investor day

WEDS 9/14
*(UK) AUG CPI M/M: 0.5% V 0.6%E; Y/Y: 9.9% V 10.0%E (13th month above target but moves off recent 40-year highs)
(EU) EU Commission Von der Leyen: Targets €140B from windfall taxes on energy companies; Energy market is not functioning anymore, have to decouple gas and electricity prices; Having discussions on price caps; Russia sanctions are here to stay - State of the Union address
IEA Monthly Oil Report (OMR); US poised to replace Russia as Europe’s top crude supplier; Trims oil demand forecast amid China lockdowns and slowing growth in OECD countries
JNJ Affirms FY22 outlook; Announces $5B share buyback (1.2% of market cap)
ASH Affirms FY22 outlook; Notes robust demand continues in Q4 as financial result in July and Aug above expectations; SEP order book strong; Targets FY26 Rev >$3.2B, EBITDA $900M - investor slides
NUE Cuts Q3 $6.30-6.40 v $7.97e (prior to decrease q/q), due to considerably lower steel mills earnings q/q
TD Exec: Expect some moderation in loan growth - Barclays investor conf comments
WMT Walmart-backed fintech co to begin offering banking for shoppers and employees - press
*(US) AUG PPI FINAL DEMAND M/M: -0.1% V -0.1%E; Y/Y: 8.7% V 8.8%E (second straight negative M/M print and decline in annual pace)
DOW Cuts Q3 Rev ~$600M lower, implies $13.7-14.2B v $14.2Be (prior $14.3-14.8B) - conf comments
MRNA Moderna open to supplying COVID vaccines to China after holding talks - press citing CEO
(US) FDA and NIH Launch Public-Private Partnership for Rare Neurodegenerative Diseases; Partnership is a key component of FDA's Action Plan announced in June
(CN) Some major China State-run banks said to be cutting personal deposit rates beginning from Thurs, Sept 15th **Note: 1st such cut the since 2015) - Chinese press
(US) Association of American Railroads weekly rail traffic report for week ending Sep 10th: 464K total units, -0.9% y/y
ARNC Cuts FY22 outlook: Rev $9.2-9.5B v $9.74Be (prior $9.6-10B); reflects the impact of operational issues and the combination of demand declines and higher unhedged energy costs in Europe
(CN) Senate Foreign Relations Committee approves Taiwan legislation - press

THURS 9/15
HMB.SE Reports Q3 (SEK) Rev 57.5B v 58.1Be; Notes Q3 got off to a weak start, better start for autumn collections than last year
US consumer watchdog CFPB plans to regulate 'buy-now, pay-later' companies; Notes already seeing deterioration in credit performance on BNPL loans - press
ADBE Reports Q3 $3.40 v $3.33e, Rev $4.43B v $4.43Be
ADBE Confirms to acquire Figma for $20B in nearly half cash-half stock deal; To grant 6M additional restricted stock units to Figma; Cash part to be financed through cash on hand and, if necessary, a term loan
*(US) SEPT EMPIRE MANUFACTURING: -1.5 V -12.9E; New Orders: +3.7 v -29.6 prior; Notes sharp rebound also in shipments
STLD Reports prelim Q3 adj $5.33-5.37* v $4.86e, earnings significantly lower than Q2 due to lower flat rolled steel ops earnings
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 0.5% from 1.3% prior
SMG CEO: Sees more job cuts as business activity slows and cash is dwindling - press
(US) Los Angleles Port Chief Gene Seroka: Port imports fall 12% to ~404K units y/y
(US) FTC announces it plans to target 'unfair competition that harms gig workers'
FDX Cuts Q1 $3.44 v $5.06e, Rev $23.2B v $23.7Be; Withdraws FY earnings outlook, amid 'global volume softness that accelerated in the final weeks of the quarter'
NCR To Separate Into Two Independent, Industry-leading Companies (**Reminder: had been in PE talks with Veritas but financing was said to be an issue)
*(CN) CHINA AUG RETAIL SALES Y/Y: 5.4% V 3.2%E; YTD Y/Y: 0.5% V 0.2%E

FRI 9/16
ROSN.RU (DE) Germany Econ Ministry announces Rosneft's German refinery unit and its owned oil refineries is now under trusteeship of Federal Network Agency
(EU) EU27 Aug New Car Registrations: +4.4% v -10.4% prior (1st increase in 14 months)
*(UK) AUG RETAIL SALES (EX-AUTO/FUEL) M/M: -1.6% V -0.7%E; Y/Y: -5.0% V -3.5%E
(CN) China Foreign Ministry spokesperson Mao: China will impose sanctions on Raytheon's CEO and Chairman Gregory Haye and Boeing Defense, Space & Security President and CEO Ted Colbert; China opposes US arms sales to Taiwan and urges US to stop; It violates 'One China' principle
(DE) ECB's Nagel (Germany, hawk): ECB will continue to raise rates to tame inflation
(IQ) Oil exports from Iraq's Basra port reportedly halted due to spill; Spill reportedly is 'huge' and could take over a week to contain - press

Sunday, September 11, 2022

Risk assets rise as traders anticipate effects from tighter monetary policy Weekly Market Update: Risk assets rise as traders anticipate effects from tighter monetary policy

9/9/2022 4:13:23 PM

US markets came out of the Labor Day holiday break in much the same fashion they finished up the previous week. The S&P dipped below 3,900 for the first time since mid-July as global bond prices continued to move lower. Treasury yields initially tracked higher amid a surge in corporate issuance while also anticipating a significant ECB rate hike announcement on Wednesday. The US dollar tracked to fresh multi-decade highs and remained a key barometer for overall risk appetite. The Greenback’s strength was led by a breakout in USD/JPY through what had been seen as a key technical level of 1.40. Also the Pound fell to levels not seen since the 1980’s as PM Truss took the reins and her new government released details of plans to safeguard Brits and their economy from soaring energy costs, even as the nation mourned the loss of Queen Elizabeth. Overall markets remained extremely jittery amid low trading volumes, hawkish central bank rhetoric, ongoing Covid lockdowns in China, and consternation around Russia’s increasingly aggressive stance on Ukraine and against the West.

Sentiment did seem to shift though after the ECB announced its expected 75 basis point rate hike, while indicating more tightening is to come at the next several meetings. Investors, in general, are becoming more comfortable with blunt central bank signaling. Chairman Powell and others at the Fed continued to emphasize the basic message from last month’s Jackson Hole speech. Namely, the job on inflation was not anywhere near done yet, and they will remain very wary of reversing course too soon. Broad declines in commodity prices, oil in particular, may have buoyed demand for stocks, as did stabilization in both rates and the US dollar. Break even spreads narrowed along with other market based measures of inflation expectations, providing hope that markets were acclimating to central banks’ medicine, and even caused some to talk about brewing disinflationary forces. Fridays’ softer than expected Chinese CPI report provided further legs to that disinflation narrative. Risk assets largely closed out the week on a solid upswing. Commodity and crypto markets saw notable buying interest, headlined by WTI crude back above $86 and bitcoin retaking $20K. For the week, the S&P was up 3.6%, the DJIA gained 2.7%, and the Nasdaq climbed 4.1%.

In corporate news, we saw further M&A moves in the healthcare sector, as CVS announced it would put down $8B to acquire homecare provider Signify Health, beating out Amazon, among other bidders. Investors stocked up on shares of Kroger on Friday after it beat estimates and raised guidance, as it managed to slightly improve margins and said that supply chains were showing signs of improvement. A common theme at investor conferences this week was a stay-the-course attitude, with many companies affirming outlooks while also growing somewhat reluctant to raise prices substantially amid customer pushback, including Apple, who said it would maintain its price point for the new iPhone models. Some airline executives were bullish, with United raising its revenue guidance and Delta noting travel demand remains strong. Altria’s Juul unit reached a multi-state settlement to pay $439M to address marketing practices and underage use of its tobacco products.

SUN 9/4
(UK) PM race front runner Truss: Will act immediately on bills and energy supply; Plans to make an announcement within one week of taking office; Notes she greatly believes in the independence of Bank of England (BOE)
GAZP.RU Notes Siemens can't repair the engine unit for Nord Stream 1 at its Montreal plant, as Canada considers gas turbines as a dual-use facility that is subject to sanctions - Telegram statement
(CN) Shanghai’s major container port of Yangshan has suspended terminal operation as Super Typhoon Hinnamnor (equivalent of a Category 5 hurricane) approaching - press
(DE) German Chancellor Scholz: Germany plans to completely stop importing Russian gas in Dec 2022; Will get through this winter
USD/JPY Tests 140.00 level for the first time since 1998 (Sept 1)
*(CN) CHINA AUG CAIXIN PMI SERVICES: 55.0 V 54.0E (3rd consecutive expansion)
MON 9/5
(US) Biden administration reportedly considering moves that would restrict US investment in Chinese tech firms; US Commerce department may further restrict what can be sold - press
(CN) China State Planner (NDRC) official Yang Yinkai: Q3 is crucial for rolling of China policy measures and recovery from COVID; Will appropriately step up support for domestic economy
*(EU) EURO ZONE AUG FINAL SERVICES PMI: 49.8 V 50.2E (1st contraction in 17 months and lowest print since Mar 2021)
OPEC+ JMMC recommends 100Kbpd oil output cut for Oct (as speculated, first group-wide curb since 2020) - press
(UK) Follow Up: PM-elect Truss gives details on UK Energy bills: Will provide £130B to freeze energy bills below £2.0K; Plans govt guaranteed loans to fund 18-month energy price freeze
GAZP.RU CEO: Reiterates Nord Stream 1 will not be launched until Siemens Energy repairs equipment
TUES 9/6
EQNR Exec: European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5T - press
ADT Confirms partnership with State Farm and Google; State Farm confirms plan to invest $1.2B in ADT (about 15% stake) at $9.00/shr
*(US) AUG ISM SERVICES INDEX: 56.9 V 55.4E; New Orders 61.8 v 59.9 prior
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: 4.9% v -2.9% prior
MO Juul unit reaches $439M multi-state settlement over marketing practices and underage use - press
(EU) Europe's largest aluminum smelter Dunkerque to reduce output next week by 22% due to energy costs - press
(JP) Bank of Japan (BOJ) announcement related to daily bond buying operation: Increases 5-10 year purchase amounts by ¥50B
WEDS 9/7
(UK) New UK PM Truss allies said to say she will not activate the emergency Article 16 override provisions in the Northern Ireland protocol in the coming weeks - FT
*(UK) AUG HALIFAX HOUSE PRICE INDEX M/M: +0.4% V -0.1% PRIOR; Y/Y: 11.5% V 11.8% PRIOR
(RU) Russia Pres Putin: Russia lost nothing, will lose nothing nothing in Ukraine war; Western sanctions are danger for the whole world; Problems with food will intensify - Eastern economic forum speech
MAERSKB.DK Provides Sept market update: Sees signs of improvement in European freight schedules, especially in North Europe; Expect to have exceeded the turning point
(UK) BOE members speaking at annual report conference: BOE Mann states forceful Bank Rate moves opens door for policy hold or reversal later
(US) US reportedly told Israel that Iran nuclear deal is off the table, unlikely to be reached soon - press
UAL Raises Q3 Rev +12% v Q3'19 (prior ~11%), Capacity -11% to -10% v Q3'19 (prior -11%), adj Op margin ~10.5% (prior ~10%), Narrows TRASM ~25% v Q3'19 (prior 24-26%), CASM-ex ~16% (prior 16-17%), Continues to see strong demand environment - filing
(EU) EU Commission President Von der Leyen: Confirms to propose a cap on Russian gas prices; Looking at price cap for LNG; Also to propose a cap on revenues of companies producing electricity with low costs
ASO Reports Q2 $2.30 v $2.10e, Rev $1.69B v $1.71Be
(IR) IAEA's Grossi: Increasingly concerned by Iran's lack of cooperation; There has been no progress towards resolving issue of uranium particles found in Iran at three undeclared sites; Iran now has enough 60% enriched uranium to theoretically produce a nuclear weapon - IAEA quarterly report
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.4% from 2.6% prior
(US) Association of American Railroads weekly rail traffic report for week ending Sep 3rd: 513K total units, +3.7% y/y
MKC Reports prelim Q3 $0.65 v $0.84e, Rev +3% y/y (+6% y/y cc); Cuts FY22 outlook; Broad pressure on consumers' cost of living from inflation has resulted in higher price elasticity
(JP) Japan July BoP Current Account: ¥229.0B v ¥759.0Be (Smallest on record for a July since 1985); Adj Current Account: -¥629.0B v +¥65.3Be [first deficit since Mar 2014]
TSM Reports Aug (NT$) Rev 218.1B, +59.0% y/y, +16.8% m/m; YTD Rev (NT$) 1.43T +44% y/y
(JP) Japan Top Currency Official Kanda: Agreed at MOF, BOJ and FSA meeting to watch markets with strong sense of urgency; Will not rule out any step, ready to take action in FX market; All options on the table, including FX intervention
(CN) Beijing to strengthen control of travelers from other provinces from Sept 10th to Oct 31st ahead of China's upcoming leadership Congress [starts on Oct 16th] - press
(HK) Macau says quarantine-free travel with Hong Kong is not possible now - press
FUN Reports YTD through Labor Day Rev $1.37B, in park per capita spending $61.11 (record high); Notes robust demand for 2023 season pass products
(UK) PM Truss: Confirms to limit typical household energy bills to £2,500/yr; Measure to last two years from Oct 2022; Introducing energy price guarantee which supersedes OFGEM price cap - Energy plan speech
(EU) ECB chief Lagarde: Set to raise interest rates again at next meetings to dampen demand - Prepared remarks
(US) Fed Chair Powell: The longer long run inflation remains above target the higher the cost; History cautions against prematurely loosening policy - Cato Institute conf comments
Aug Manheim Used Vehicle Value Index: -4% M/M; +8.4% Y/Y
(KR) North Korea Leader Kim: Assembly has adopted law to declare country a Nuclear weapons state; North Korea will never relinquish nuclear arms under US threats
*(CN) CHINA AUG CPI M/M: -0.1% V +0.2%E; Y/Y: 2.5% V 2.8%E (fist negative M/M since May)
(JP) Follow Up: Meeting between BOJ Gov Kuroda and PM Kishida was on Domestic and overseas economic and market developments; PM Kishida had no specific requests
FRI 9/9
ASC.UK Issues FY22 Trading Statement: Profit is anticipated to be around the bottom end of company guidance; Notes sales in August were weaker than anticipated, slow start to Autumn/Winter shopping
(EU) ECB's Kazimir (Slovakia, hawk): Fresh outlook sees inflation in Euro Zone above 2% target in 2023 and 2024; Priority is to continue fiercely with normalization of monetary policy
KR Reports Q2 $0.90 v $0.81e, Rev $34.6B v $34.4Be; Raises FY22 outlook; Authorizes $1B in share repurchases
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.3% from 1.4% prior