Weekly Market Update: Markets consolidate as poor data is balanced by hopes that coronavirus effects will ease soon
Coming into the week risk appetite was already on the upswing as investors eagerly awaited key signals from areas in Europe and the US that have begun lifting coronavirus lockdown restriction. The release of promising study results for Gilead’s investigational antiviral Remdesivir in treatment of COVID-19 provided further hope to investors that the economy can safely reopen soon. The positive development on the coronavirus front initially overshadowed a series of disappointing economic data releases as well as most of the uncertain commentary coming out of earnings season, allowing the S&P to run back above 2,950, only about 13% off of all-time highs set in March.
US and most European sovereign bonds rallied and yields noticeably slipped in the second half of the week while stock markets rolled over. The Fed and ECB met and made it clear that emergency measures were not going anywhere anytime soon, as well as acknowledging that they continue to look at expanding programs and will likely take additional measures to support the recovery. The dose of reality from the two key central banks as well as a shift back towards focusing on the corporate commentary appeared to reverse sentiment. Late in the week, President Trump ratcheted up his China rhetoric with new tariff threats, and a report (later denied by the White House) suggested that the administration was considering plans to demand financial compensation from China over its handling of coronavirus. Front month WTI crude futures settled up more than 15% this week after weekly DOE inventory data showed continued declines in US production and OPEC+ members commenced the already agreed upon production cuts. The S&P and DJIA each fell 0.2%, and the Nasdaq dropped 0.3%.
In corporate news this week, Boeing tapped the bond market with a $25B 7-part offering, and as a result of high demand for the bond sale, the aerospace giant said it will not need to seek federal aid. Diamond Offshore confirmed it was beginning voluntary Chapter 11 proceedings for restructuring, as had been speculated. This week also saw earnings season kick off in earnest with a large swath of major tech companies reporting. Google EPS missed expectations due to a predictable but ‘significant’ slowdown in ad revenue. Apple posted flat sales and did not provide its usual outlook, but did note a pickup for business in the second half of April. Amazon sales grew faster than expected but the online shopping giant reported an EPS miss and said it would spend $4B in Q2 profits on Covid-19-related costs. Investors liked what they heard from Facebook, as the social media giant said the ad revenue drop it experienced in March was followed by signs of stabilization in April. Tesla shares jumped on a surprise Q1 profit and revenue beat despite the coronavirus-affected demand in the auto sector, though shares slump on Friday as CEO Musk took to Twitter to express his opinion that the “stock price is too high.” Microsoft topped estimates on both EPS and sales, driven by a strong showing in its cloud business, notably the +61% jump y/y in Azure revenue.
SUN 4/26 DBK.DE Reports prelim Q1 Net €66M v €201M y/y; Pretax €206M v €292M y/y; Rev €6.4B v €6.35B y/y; Provisions for credit losses €500M (44bp of loans) v €140M y/y *(JP) BANK OF JAPAN (BOJ) AMENDS POLICY; strengthens stimulus with unlimited JGB buying and increasing corporate bond and commercial paper purchases MON 4/27 DO Confirms beginning voluntary Chapter 11 proceedings for restructuring, as speculated *(US) APR DALLAS FED MANUFACTURING ACTIVITY INDEX: -73.7 V -75.0E (US) California Gov Newsom: state is 'just weeks, not months' away from changing lockdown orders BA Seattle Times corrects report, Company has not provided job cut estimates to union (had reported to cut workforce by 15-35%)
TUES 4/28 005930.KR Reports final Q1 (KRW) Net 4.9T v 5.1T y/y; Op 6.5T v 6.4T prelim; Rev 55.3T v 55.0T prelim *(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT 0.00%; AS EXPECTED; does not rule out of rate cut later this year 3328.HK Reports Q1 (CNY) Net 21.45B v 21.07B y/y, NII 36.74B v 34.9B y/y CAT Reports Q1 $1.60 v $1.77e, Rev $10.6B v $11.1Be UPS Reports Q1 $1.15 v $1.23e, Rev $18.0B v $17.6Be; Suspends buybacks for 2020 and withdraws FY20 outlook *(US) APR RICHMOND FED MANUFACTURING INDEX: -53 V -42E *(US) APR CONSUMER CONFIDENCE: 86.9 V 87.0E (lowest since 2014) (US) Dallas Fed April Texas Service Sector Outlook Survey: General Business Activity: -81.7 v -78.8 prior BA Reportedly could face criminal or civil inquiries out of the 737 MAX production issue investigation; FAA considering fines or other enforcement actions - press (US) Pres Trump confirms will sign order to keep US meat plants open during coronavirus pandemic - press
WEDS 4/29 AIR.FR Reports Q1 Net -€481M v +€40M y/y, Adj EBIT €281M v €549M y/y, Rev €10.6B v €12.5B y/y DBK.DE Reports Q1 Net -€43M v €66M prelim, Pretax €206M v €206M prelim, Net Rev €6.35B v €6.4B prelim AZN.UK Reports Q1 Core EPS $1.05 v $0.93e, Rev $6.35B v $5.95Be *(EU) EURO ZONE APR ECONOMIC CONFIDENCE: 67.0 V 73.1E GE Reports Q1 $0.05 v $0.06e, Rev $20.5B v $20.7Be; Q2 will be first full Q with COVID-19 pressure 3988.HK Reports Q1 (CNY) Net 52.58B v 51.0B y/y, Op Income 148.5B v 141.0B y/y *(US) Q1 ADVANCE GDP ANNUALIZED Q/Q: -4.8% V -4.0%E; PERSONAL CONSUMPTION: -7.6% V -3.6%E *(DE) GERMANY APR PRELIMINARY CPI M/M: 0.3% V 0.1%E; Y/Y: 0.8% V 0.7%E *(US) Q1 ADVANCE GDP PRICE INDEX: 1.3% V 1.0%E; CORE PCE Q/Q: 1.8% V 1.7%E CAPR New data reports 100% survival in critical COVID-19 patients treated with CAP-1002; U.S. FDA approves company’s expanded access protocol to treat additional patients (US) Nevada reports March casino gaming Rev $618.1M, -39.6% y/y; Las Vegas strip Rev $299.9M, -45.7% y/y *(US) DOE CRUDE: +9.0M V +11ME; GASOLINE: -3.7M V +3ME; DISTILLATE: +5.1M V +4ME DB1.DE Reports Q1 adj €2.11 v €2.08e, adj EBITDA €619.8M v €596.0Me, Rev €914.8M v €800Me *(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25%; TARGET INTEREST RATE WILL REMAIN UNCHANGED UNTIL ECONOMY HAS WEATHERED RECENT EVENTS AND IS ON TRACK TO ACHIEVE ECONOMIC AND INFLATION GOALS; COMMITTED TO USING FULL RANGE OF TOOLS TO SUPPORT ECONOMY MSFT Reports Q3 $1.40 v $1.27e, Rev $35.0B v $33.9Be; COVID-19 had minimal net impact on Rev TSLA Reports Q1 +$1.24 v -$0.22e, Rev $5.99B v $5.37Be BA S&P cuts rating one notch to BBB- from BBB; outlook Stable *(CN) CHINA APR MANUFACTURING PMI (GOVT OFFICIAL): 50.8 V 51.0E
THURS 4/30 NOK Reports Q1 non-IFRS Net +€33M v -€116M y/y, Rev €4.91B v €5.1Be (FR) FRANCE Q1 PRELIMINARY GDP Q/Q: -5.8% V -4.0%E; Y/Y: -5.4% V -3.6%E RDSA.NL Reports Q1 CCS EPS $0.37 v $0.65, Adj CCS Net $2.96B v $5.4B y/y, Rev $60.0B v $83.7B y/y; Cuts interim dividend 66% to $0.16/shr v $0.47/shr y/y, suspends buyback *(EU) EURO ZONE Q1 ADVANCE GDP Q/Q: -3.8% V -3.8%E; Y/Y: -3.3% V -3.4%E *(EU) EURO ZONE APR ADVANCE CPI ESTIMATE Y/Y: 0.3% V 0.1%E; CPI CORE Y/Y: 0.9% V 0.7%E *(EU) EURO ZONE MAR UNEMPLOYMENT RATE: 7.4% V 7.8%E *(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Affirms size of pandemic program at €750B and prepared to increase size of PEPP BA To sell USD-denominated 3-year, 5-year, 7-year, 10-year, 20-year, 30-year and 40-year bonds (7 tranches) *(US) INITIAL JOBLESS CLAIMS: 3.84M V 3.50ME; CONTINUING CLAIMS: 17.99M V 19.48ME (EU) ECB chief Lagarde: Measures to stop virus outbreak has halted economic activity - prepared remarks (EU) ECB chief Lagarde: Prepared to adjust all instruments as needed *(US) FED EXPANDS SCOPE AND ELIGIBILITY FOR MAIN STREET LENDING PROGRAM (US) Atlanta Fed GDPNow forecasts initial Q2 GDP growth at -12.1% (US) House Speaker Pelosi (D-CA): discussing a $1T coronavirus relief package for state and local govts (US) White House officials said to be considering plans to punish or demand financial compensation from China over handling of coronavirus - Wash Post (RU) Russia PM Mishustin tests positive for coronavirus; First Dep PM Belousov named acting PM - press AMZN Reports Q1 $5.01 v $6.36e, Rev $75.5B v $74.4Be V Reports Q2 $1.39 v $1.35e, Rev $5.85B v $5.75Be (US) Pres Trump: I have seen evidence that the coronavirus originated in the Wuhan Institute of Virology in China; could use tariffs to respond to China
FRI 5/1 (US) Trump Administration considering order to block Government investment funds from investing into China companies that are considered a national security risk - US financial press (US ) APR FINAL MARKIT MANUFACTURING PMI: 36.1 V 36.7E (US) Atlanta Fed cuts Q2 GDP growth to -16.6% from -12.1% (US) Pres Trump: I have a plan to address the national debt GILD Pres Trump: Gilead has emergency use authorization from the FDA for remdesivir; working with FEMA to make sure drug