Weekly Market Update: Hopes for vaccines and government deals fend off concerns about new global pandemic wave
Fri, 16 Oct 04:17 PM EST/09:17 PM GMT
Stocks rose out of the gate this week looking past rising coronavirus infection rates globally. Stay-at-home stocks continued to outperform the broader market, helped in part by fresh lockdown measures in several European nations intended to mitigate the spread of COVID-19 hotspots. Earnings season kicked off, with most of the mega banks topping earnings estimates, albeit largely on lower provisions for loan losses rather than an improving lending landscape. The US dollar moved up against the Chinese Yuan after officials in China took note of the recent strength when the PBOC cut the its FX risk reserve ratio, effectively making it easier to short the Yuan.
By midweek investors risk appetite receded. Worries surrounding forced closures in Europe alongside continued stalemates on both the Brexit and US fiscal stimulus fronts weighed on sentiment. The German 10-year government yield fell to its lowest level since March amid a chorus of ECB officials highlighting their growing concerns about too-low inflation. US inflation data largely met expectations, but CPI last month was clearly buoyed by rising used car prices and not much else. Stocks rebounded into the tail end of the week helped in part by hopes that a US coronavirus vaccine approval was getting closer. US economic data was also positive, headlined by a strong September retail sales report. For the week, the S&P gained 0.2%, the DJIA edged up 0.1%, and the Nasdaq rose 0.8%.
In corporate news this week, as earnings season kicked off, United Airlines reported a wider than anticipated Q3 profit loss, though it was able to reduce its cash burn to $25M/day from $40M/day in Q2. Delta reiterated it expects to reach breakeven by spring 2021, and noted it’s seeing ‘good bookings’ for Thanksgiving and Christmas. Fastly cut its outlook, citing regulatory pressure on its biggest customer, TikTok, as a headwind. Hewlett Packard Enterprises shares jumped after providing upbeat guidance at its analyst day. Both J&J and Lilly halted key coronavirus studies this week due to trial safety concerns. Traton reached an agreement in principle to acquire the remaining shares of Navistar at $44.50/share, though the deal is still subject to finalization of due diligence. Disney announced a major strategic reorganization of its media and entertainment businesses with the aim of bolstering its streaming platforms, Disney+, ESPN+, and Hulu. The FCC said it will 'move forward' on Section 230 rulemaking changes and Republicans in Congress called for big tech CEOs to testify after Twitter blocked recirculation of a New York Post article regarding Hunter Biden's Ukraine connections.
SUN 10/11 (CN) China PBOC to cut the FX risk reserve ratio to 0% [from 20%], effective from Monday (Oct 12th); The move relates to certain FX forwards trading by financial firms - financial press (CN) China President Xi to visit Shenzhen this week [on Oct 14th]; Shenzhen to ease foreign investment entry limit related to high technology; China to support digital yuan trial in Shenzhen - SCMP
MON 10/12 (UK) Strict national lockdown may be the next step taken by UK Government - press (US) Reportedly White House seeks Congressional approval for three separate arms packages to Taiwan DIS Announces strategic reorganization of media and entertainment businesses JNJ Coronavirus vaccine study has been halted due to unexplained illness in one of its participants - press
TUES 10/13 MAERSKB.DK Issues Q3 trading update: prelim Adj EBITDA $2.4B v $1.66B y/y, Rev $9.9B v $10.1B y/y; Raises FY20 outlook *(DE) GERMANY OCT ZEW CURRENT SITUATION SURVEY: -59.5 V -60.0E; EXPECTATIONS SURVEY: 56.1 V 72.0E JPM Reports Q3 $2.92 v $2.35e, Managed Rev $29.9B v $28.6Be; Extends buyback suspension at least through Q4 FAST Reports Sep net sales $478.6M +7.3% y/y *IMF UPDATES ITS WORLD ECONOMIC OUTLOOK (WEO) *(US) SEPT CPI M/M: 0.2% V 0.2%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.2%E; CPI NSA: 260.280 V 260.285E DAL Reports Q3 -$3.30 v -$3.10e, Rev $2.65B v $3.09Be LLY Lilly monoclonal antibody trial has been paused due to safety concerns - press VZ CEO appears at the Apple 5G event; Verizon to double its fastest 5G wideband network launch across 1,800 US cities effective today
WEDS 10/14 BAC Reports Q3 $0.51 adj v $0.53e, Rev $20.3B v $20.6Be (AT) ECB's Holzmann: More extensive containment measures likely to require more monetary and fiscal accommodation in the short run - financial press *(US) SEPT PPI FINAL DEMAND M/M: 0.4% V 0.2%E; Y/Y: 0.4% V 0.2%E (US) Association of American Railroads weekly rail traffic report for week ending Oct 10th: 520.5K, +1.9% y/y (FR) France govt declares public health state of emergency beginning Saturday - Sky News FSLY Cuts Q3 Rev $70.0-71M v $75Me (prior $73.5-75.5M), cites lower usage by TikTok AA Reports Q3 -$1.17 v -$1.51e, Rev $2.37B v $2.22Be UAL Reports Q3 -$8.16 v -$7.63e, Rev $2.49B v $2.57Be Twitter and Facebook have limited user access to posts that linked to NY Post report that alleged Biden met with Ukrainian energy execs
THURS 10/15 ROG.CH Reports Q3 (CHF) Rev 14.7B v 15.4Be; Expects further dividend increase in 2020 2330.TW Reports Q3 (NT$) Net 137.3B v 124.9Be; Op 150B v 107.9B y/y; Rev 356.4B v 293.0B y/y Guides Q4 Rev $12.4-12.7B; Gross Margin 51.5-53.5%; Forecasts based on NT$28.75/USD (DE) Germany 10-year govt yield at -0.61% (lowest level since March) *(US) OCT EMPIRE MANUFACTURING: 10.5 V 14.0E *(US) INITIAL JOBLESS CLAIMS: 898K V 825KE; CONTINUING CLAIMS: 10.02M V 10.55ME; highest level of initial claims since Aug; California jobless claims remain frozen at prior level *(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK INDEX: 32.3 V 14.8E *(US) DOE CRUDE: -3.8M V -2ME; GASOLINE: -1.6M V -1.5ME; DISTILLATE: -7.2M V -2ME (US) FCC Chair Pai: FCC will 'move forward' on Section 230 with rulemaking to clarify its meaning; FCC general counsel has said agency has legal authority to interpret Section 230 DAI.DE Reports prelim Q3 adj EBIT €3.48B v €2.50Be; Expects a positive impact for the remainder of the year HPE Guides initial FY21 $1.56-1.76 v $1.49e, FCF to grow at a 3-year CAGR of over 50% between FY20 and FY23 RIO.AU Reports Q3 Pilbara iron ore production 86.4Mt v 87.3Mt y/y; iron ore shipments 82.1Mt v 86.1Mt y/y TWTR Twitter Lawyer Vijaya Gadde Tweets: Twitter will no longer remove hacked content unless directly shared by hackers or those acting in concert with hackers (US) Pres Trump confirms he owes debts to 'normal banks' related to mortgages - debate comments
FRI 10/16 *(US) SEPT ADVANCE RETAIL SALES M/M: 1.9% V 0.8%E; RETAIL SALES (EX-AUTO) M/M: 1.5% V 0.4%E (UK) PM Johnson: Prepared for no-deal exit and move to an Australia style deal; Still willing to discuss practicalities with EU - financial press *(EU) EURO ZONE SEPT FINAL CPI Y/Y: -0.3% V -0.3%E; CPI CORE Y/Y: 0.2% V 0.2%E BA EU regulator EASA: Boeing 737 Max is safe, may return in 2020 PFE CEO: Could apply for emergency use of COVID-19 vaccine in late Nov (prior early Oct) - open letter (US) Weekly Baker Hughes Rig Count: 282 v 269 w/w (+5% w/w)