sset inflation questions arise again as US and EU pour on more stimulus
The S&P 500, Dow and German DAX all reached new high water marks this week which came alongside of continued signs of exorbitant asset appreciation. Bitcoin neared 60K for the first time while another litany NFT auctions saw insatiable investor demand including a digital piece of art from Beeple that fetched nearly $70M. Gamestop surged back to $300 while other meme stocks saw wild swings, once again unaccompanied by any fundamental news. On Monday, Appaloosa’s David Tepper stoked risk appetite and prodded markets higher when he noted he expected the recent rise in rates to take a breather here, and thus was becoming more bullish on stocks.
Reopening economies and fiscal stimulus clearly remained front and center in many investors’ minds as they grappled with how to position ahead of potential knock-on effects, which many worry will generate an inflation surge. Global bond yields did moderate during a good portion of the week, helped by news that the ECB would begin purchasing bonds through its PEPP program at a significantly faster clip over the next quarter, and US Treasury sales that were met with only modest demand. Weak Q4 growth data for Europe illustrated the continent’s struggle to shake off the pandemic impacts, even as most of Italy prepares to go into a new lockdown. Meanwhile, Democrats in Washington pushed through President Biden’s $1.9T stimulus plan with only minor changes, highlighted by $1,400 checks going out to lower and middle income people. By Friday value stocks retained a leadership position while emerging markets and growth oriented sectors lagged. The US 10-year broke to a new 1-year high at 1.63% and the spread to the 2-year approached 150 bps for the first time since 2015. For the week, the DJIA surged 4.1%, the S&P added 2.6%, and the Nasdaq rebounded 3.1%.
In corporate news for this week, Oracle shares dipped following its Q3 earnings, after the software giant posted a beat on top and bottom line but issued softer guidance than anticipated. Disney announced its Disney+ streaming service has reached over 100M global paid subscribers after just 16 months. Private equity firm Apollo announced it would re-merge back with Athene in an $11B all-stock transaction in order to boost investor confidence in the life insurance giant in which it already owns a 35% stake. PayPal announced plans to acquire Curv, a crypto firm which specializes in security infrastructure for digital assets. AerCap confirmed it would combine with GE Capital Aviation Services as GE sheds debts and moves to fold the remainder of its GE Capital unit into its corporate operations. A news report noted that Salesforce is said to be grooming its COO Taylor to eventually take over the CEO role from Marc Benioff, though no precise timeline was given. Netflix is said to be piloting a crackdown on password-sharing among different households in a move that could shake up shared accounts among family and friends throughout the streaming industry.
SUN 3/7 (CN) Summary of China Fourth Session of 13th National People's Congress (NPC) sets 2021 GDP target of more than 6%, CPI ~3%, outlines 14th 5 year plan for 2021-2025
MON 3/8 (US) Appaloosa's David Tepper: Getting bullish on US stocks - CNBC (US) Feb NY Fed Survey of Consumer Expectations: expected changes in gas prices and rents both rise; One year-ahead inflation expectations at 3.1% in Feb vs 3.0% in Jan (highest since Jan 2014)
TUES 3/9 DPW.DE Reports final Q4 Net €1.30B v €858M y/y, EBIT €1.97B v €1.98B prelim, Rev €19.1B v €19.1B prelim CON.DE Reports prelim FY20 Rev €37.7B v €37.6Be; No dividend proposal for 2021 *(EU) EURO ZONE Q4 FINAL GDP Q/Q: -0.7% V -0.6%E; Y/Y: -4.9% V -5.0%E (US) President Biden said to nominate Lina Khan to FTC - Politico IPOE Sofi to acquire national charter bank Golden Pacific Bancorp for $2.55/shr valued at $22.3M COIN Said to price IPO between $350-375/shr during Nasdaq's private auction implying $90-100B valuation - press (EU) EU reportedly seeking to double share of world microchip market by 2030 for digital independence DIS CEO: Disney+ has hit over 100M global paid subscribers after just 16 months - AGM comments V Reports Feb US payments +9% y/y
WEDS 3/10 GE Affirms FY21 $0.15-0.25 v $0.24e, Industrial FCF $2.5-4.5B**; Board will recommend that shareholders approve a reverse stock split at a ratio of 1-for-8, effective May 4th AER Confirms to acquire GE Capital Aviation Services in cash and stock deal valued at >$30B *(US) FEB CPI M/M: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E *(US) DOE CRUDE: +13.8M V +1ME; GASOLINE: -11.9M V -3ME; DISTILLATE: -5.5M V -3.5ME *(US) TREASURY'S $38B 10-YEAR NOTE REOPENING DRAWS 1.523%; BID-TO-COVER RATIO: 2.38 V 2.47 PRIOR AND 2.41 OVER THE LAST 8 REOPENINGS *(US) FEB MONTHLY BUDGET STATEMENT: -$310.9B V -$305.0BE (US) House passes the $1.9T Covid relief bill ORCL Reports Q3 $1.16 v $1.11e, Rev $10.1B v $10.1Be; Increases share buyback by $20B (9.4% of market cap), raises dividend 33% to $0.32 from $0.24 RBLX IPO direct listing opens for trade at $64.50
THURS 3/11 *(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Leaves PEPP envelope's size unchanged, but pace will be significantly faster over next quarter (EU) European Core and peripheral yields lower as ECB pledged to significantly pick up pace of PEPP purchases in next quarter *(US) INITIAL JOBLESS CLAIMS: 712K V 725KE; CONTINUING CLAIMS: 4.14M V 4.20ME (EU) ECB chief Lagarde: Uncertainty remains in near term but economy to improve over course of 2021- Prepared Remarks (UK) Chancellor of the Exchequer Sunak (Fin Min): Public finances much more sensitive to interest rate changes than they used to be VZ Reportedly has received $109B in orders for its spectrum bond sale - press *(US) TREASURY $24B 30-YEAR BOND REOPENING DRAWS 2.295%; BID TO COVER 2.28 V 2.47 PRIOR AND 2.38 OVER LAST 8 REOPENINGS TMUS Sees potential shareholder buybacks of up to $60B in 2023-2025; Raises EBITDA guidance; Targets cumulative FCF ~$65B through 2025 - investor day slides NFLX Reportedly piloting a crackdown on password-sharing - tech blog DOCU Reports Q4 $0.37 v $0.22e, Rev $430.9M v $407Me (CN) US puts new limits on licenses for some suppliers to Huawei; informs suppliers that Huawei licenses are not valid for 5G use - financial press
FRI 3/12 DBK.DE Guides FY21 Rev 'to be marginally lower' y/y 700.HK Reportedly Tencent is facing broad China clampdown on fintech and deals - press AT&T Affirms FY21 Adj EPS stable y/y, Rev +1% range; Raises FY25 120-150M HBO Max/HBO subscribers (prior 75-90M) *(CA) CANADA FEB NET CHANGE IN EMPLOYMENT: +259.2K V +75.0KE; UNEMPLOYMENT RATE: 8.2% V 9.2%E (EU) Reportedly EU Commission is in intensive dialogue with member states over recovery fund plans; most member state recovery fund plans are currently deemed as inadequate – press (US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 83.0 V 78.5E (highest since Mar 2020)