Sunday, May 24, 2020

Hopes surrounding vaccine progress outweigh renewed US/China tensions 

Weekly Market Update: Hopes surrounding vaccine progress outweigh renewed US/China tensions

Stock markets rose further this week climbing a wall of worry surrounding rising US/China tensions. May economic data remained extremely soft, but the sequential improvement from last month’s nadirs supported the advancing narrative that April will likely be seen as the trough. Commentary from a host of major retailers pointed to signs of pent-up demand from US consumers as they emerge from stay-at-home directives. Larger swaths of the US economy continued to reopen without much handwringing while Covid-19 vaccine hopes received a boost from early positive Interim Phase 1 Data out of Moderna.

Heading into the long Memorial Day weekend deteriorating ties between Beijing and Washington began to exert a greater effect on sentiment. Wednesday, the Senate passed legislation that could have the effect of banning Chinese companies from listing on US exchanges resulting in speculation that major US listed Chinese companies were already preparing to move their listings to Hong Kong. Separately, US lawmakers also approved a bill aimed at censuring China's move to impose new national-security laws on Hong Kong. By Friday, President Trump warned that Washington would react "very strongly" if China follows through on its HK plans. Treasury yields moved up early in the week alongside stocks. Wednesday saw the first US 20-year bond auction since the mid 1980’s go off with solid demand. The upward momentum in oil largely continued until global growth concerns induced by the decision of Chinese officials to omit an annual GDP target resulted in some profit taking on Friday. The Russell 2000 and Dow Jones transports easily outpaced the overall market’s gains signaling to some increased bets on American reopening. For the week, the S&P gained 3.2%, the DJIA added 3.3%, and the Nasdaq rose 3.4%.

In corporate news this week, Target earnings and revenue were lifted by a 141% increase in its e-commerce sales, and the company saw ‘rapid increase in traffic and sales in stores, resulting in some of strongest comp sales growth in company history in mid-April. Walmart earnings jumped, also driven by both a boost in traffic and e-commerce. Lowe’s handily beat earnings forecasts as its same store sales surged, with May SSS running above +20%, as home improvement spending saw a pickup amid coronavirus shut-downs. Best Buy shares moved lower despite beats on both top and bottom line, though the tech retailer said it retained 81% of last year’s sales during the last six weeks of the quarter despite switching to curbside pickup. Home Depot missed its earnings target as coronavirus costs weighed on the retailer. Nvidia topped earnings estimates and shares hit all-time highs as the supply challenges it experienced were counterbalanced by a surge in e-commerce revenue amid work-from-home spending and gaming demand. Reports said GrubHub remains in discussions with Uber about a potential buyout, with CNBC’s Faber noting the two are fairly close to a deal.

SUN 5/17
005930.KR Reports Q1 semiconductor production 277.4B units, +57.4% y/y - Yonhap citing report

MON 5/18
(EU) EU said to borrow considerably more €320B for its recovery fund - FT
MRNA Announces early positive Interim Phase 1 Data for mRNA Vaccine (mRNA-1273) against Novel Coronavirus in first four of eight study participants; expects Phase 3 trial to start in July
BIDU Reports Q1 $1.25 v $0.64e, Rev $3.18B v $3.13Be
FNMA To Issue Request for Proposals to Hire Financial Advisor
(US) NASDAQ said to be tightening/restricting IPO and listing rules for companies from China - US financial press

TUES 5/19
HD Reports Q1 $2.08** v $2.27e, Rev $28.3B v $27.5Be; Suspends FY20 outlook
WMT Reports Q1 $1.18 v $1.12e, Rev $134.6B v $130.9Be; Withdrawing FY21 outlook; To discontinue
(US) Atlanta Fed raises Q2 GDP growth to -41.9% from -42.8%
MRNA Vaccine experts say Moderna didn’t produce data critical to assessing Covid-19 vaccine - StatNews
992.HK Reports Q4 Net $43M v $118M y/y, Rev $10.6B v $11.7B y/y
(TW) Taiwan President Tsai: Reiterates will not accept China one country, two systems model; Coronavirus has changed world political and economic order, new opportunity for Taiwan - Inauguration speech

WEDS 5/20
(TW) China Taiwan Affair Office: Current situation with Taiwan, is complex and severe; China will never tolerate any act of separating the country - Xinhua
*(UK) APR CPI M/M: -0.2% v -0.1%e; Y/Y: 0.8% v 0.9%e (slowest annual pace since 2016)
*(EU) EURO ZONE APR FINAL CPI Y/Y: 0.3% V 0.4%E; CPI CORE Y/Y: 0.9% V 0.9%E
LOW Reports Q1 $1.77 v $1.29e, Rev $19.7B v $18.2Be; Withdraws FY20 outlook
INO COVID-19 DNA Vaccine INO-4800 Demonstrates Robust Neutralizing Antibody and T Cell Immune Responses in Preclinical Models
SHOP Announces strategic partnership with the World's Leading Crypto Payments Processor CoinPayments
*(US) DOE CRUDE: -5.0M V +1.5ME; GASOLINE: +2.8M V -2.5ME; DISTILLATE: +3.8M V +2.5ME
(US) Senate passes by unanimous consent Holding Foreign Companies Accountable Act that could delist Chinese companies from US stock exchanges - press
EKSO Announces CFIUS Determination Regarding China Joint Venture; prior national security concerns regarding the JV could not be mitigated, termination of the JV not have material impact on our operations during the remainder of 2020
(CN) China Customs administration revises iron ore import inspection rules, will examine iron ore imports only based on applications (prior selected quality checks for all imports); effective June 1st

THURS 5/21
(CN) China releases a new bill on Hong Kong National Security; Will strengthen Hong Kong enforcement capacity - Xinhua
(CN) China 13th National People's Congress (NPC): Affirms Monetary Policy stance [prudent monetary policy stance to be more flexible and appropriate]; Guiding money supply significantly higher y/y; Expanding 5G applications in 2020
NVDA Reports Q1 $1.80 v $1.69e, Rev $3.08B v $3.00Be
BBY Reports Q1 $0.67 v $0.41e, Rev $8.56B v $8.15Be; Retained ~81% of y/y sales with curbside pickup model from mid-Q1 onward
(CN) Diplomatic backchannels between the US and China have dried up, some say the behind-the-scenes meetings and messages between gov't officials have 'ground to a halt' - SCMP
*(FR) FRANCE MAY PRELIMINARY PMI MANUFACTURING: 40.3 V 36.0E (4th straight contraction)
*(DE) GERMANY MAY PRELIMINARY PMI MANUFACTURING: 36.8 V 39.4E (17th month of contraction)
*(EU) EURO ZONE MAY PRELIMINARY PMI MANUFACTURING: 39.5 V 38.0E (16th straight contraction)
*(UK) MAY PRELIMINARY PMI MANUFACTURING: 40.6 V 37.2E (3rd straight contraction)

FRI 5/22
*(UK) APR RETAIL SALES (EX-AUTO/FUEL) M/M: -15.2% V -15.0%E; Y/Y: -18.4% V -18.6%E (record declines)
(HK) Hong Kong Chief Exec Lam: Will fully cooperate with China to enact National Security Law ASAP; Safeguarding national security is constitutional responsibility
(US) New York Fed Nowcast: raises Q2 forecast to -30.5% from -31.1%