Equity Markets Whipsaw Around Growth Risks and Central Bank Commentary
Global growth worries resurfaced this week weighing on interest rates initially while causing rising volatility in stock markets. Germany followed a host of EU countries by re-introducing pandemic lockdown measures while issues surrounding vaccine distribution in both Europe and Asia lingered. Adding to the consternation, tensions between China and the West ratcheted higher amid a new round of human rights sanctions on Chinese individuals, and global supply chains were threatened by the grounding of a large tanker in the Suez Canal halting all traffic there indefinitely.
Equity markets stabilized mid-week amid another significant chorus of Central Bank speakers that emphasized they would not be pre-emptively pulling away the punch bowl anytime soon. Also reassuring macro-economic and corporate data suggesting the broader reopening has momentum buoyed risk appetite. Value, namely cyclical and reflation trade sectors, continued modestly outperform growth and more speculative asset classes. Small caps and the Russell 2K lagged the Dow and S&P. Crude prices dipped early in the week before recovering and the US dollar index stayed at the highest levels since Thanksgiving and the Euro dipped below 1.18. Bitcoin slumped back towards 50K before recovering into week's end. For the week the S&P gained 1.6%, the Dow added 1.4% while the NASDAQ lost 0.6%.
In corporate news this week, AstraZeneca adjusted its COVID efficacy statistics downward to 76% from 79% after a rebuke from the NIH who had been overseeing the study. Intel announced a change of course for its core strategy, shifting to production of other companies’ chips, as well as planning for a new research collaboration with IBM and a $20B investment to build two new fabs in Arizona. Adobe shares lifted after blowing away Q1 expectations and raising its outlook, pointing to strong growth in its digital subscriptions revenue. Darden posted a Q3 beat, raising its dividend and authorizing a new stock buyback, along with announcing a raise in hourly pay for its restaurant workers. Semiconductor manufacturer MagnaChip entered into an all-cash go-private transaction with Wise Road Capital at $29/shr. Kansas City Southern agreed to be acquired by Canadian Pacific for ~$275/shr, which would create the first U.S.-Mexico-Canada rail network. Microsoft is reportedly in talks to purchase communications company Discord for $10B, though the potential deal is not said to be imminent.
SUN 3/21 KSU To be acquired by Canadian Pacific for ~$275/shr to create first U.S.-Mexico-Canada rail network in $29B cash-stock deal 6723.JP CEO Shibata: Expect the fire at Aoki plant to have a big impact on supply of auto chips
MON 3/22 (TW) Said that the auto industry chip shortages will become worse in H1 2021 - Press AZN.UK AZD1222 US Phase III trial met primary efficacy endpoint in preventing COVID-19 at interim analysis; 79% vaccine efficacy at preventing symptomatic COVID-19 and 100% efficacy against severe or critical disease and hospitalisation (CN) EU imposes sanctions against Chinese individuals responsible for the alleged mistreatment of the country’s minority Uyghur population - press (US) Fed Chair Powell: FED Not in decision mode on Central Bank Digital Currency (CBDC) project *(US) FEB EXISTING HOME SALES: 6.22M V 6.50ME (US) Fed Chair Powell: Recovery seems to be strengthening, coming faster than expected; labor market conditions have recently improved; reiterates committed to suing full range of tools to support the economy - testimony for tomorrow (DE) German Chancellor Merkel: Confirms tighter lockdown from April 1-5th, supermarkets only to be open April 3rd; Case numbers are rising exponentially due to UK variant, in a race to get vaccinated, in a very serious situation now
TUES 3/23 *(US) MAR RICHMOND FED MANUFACTURING INDEX: 17 V 16E *(US) FEB NEW HOME SALES: 775K V 870KE (US) Fed’s Brainard: Fed will form a new committee to monitor climate risks; climate change is already imposing substantial economic costs; mandatory disclosures on climate is likely important ADBE Reports Q1 $3.14 v $2.79e, Rev $3.91B v $3.77Be INTC Issues strategy for manufacturing, innovation and product; Plans for new research collaboration with IBM; targets $20B investment to build two new fabs in Arizona (EG) Suez Canal reportedly has been blocked for several hours as a large container ship is stuck - press
WEDS 3/24 *(UK) FEB CPI M/M: 0.1% V 0.5%E; Y/Y: 0.4% V 0.8%E TSLA CEO Musk tweets: customers can now buy a Tesla with bitcoin; BTC paid will not be converted to fiat money 700.HK Reports Q4 (CNY) Net 59.3B v 21.6B y/y, Op 63.7B v 28.6B y/y, Rev 133.7B v 105.8B y/y; Raises annual dividend 33% to HK$1.60/shr *(UK) MAR PRELIMINARY MANUFACTURING PMI: 57.9 V 55.0E (10th straight expansion and highest reading since Nov 2017) *(US) FEB PRELIMINARY DURABLE GOODS ORDERS: -1.1% V +0.5%E; DURABLE GOODS (EX-TRANSPORTATION: -0.9% V +0.5%E GM Spokesperson: announces more production cuts related to semiconductor chip shortage - press *(US) MAR MARKIT PRELIMINARY MANUFACTURING PMI: 59.0 V 59.5E *(US) DOE CRUDE: +1.9M V 0ME; GASOLINE: +0.2M V +0.5ME; DISTILLATE: +3.8M V 0ME (US) Over 70 House Democrats and 10 senators call on Pres Biden to ensure 60% of vehicles on the road by 2030 are zero-emission models - press (US) CDC order limiting cruising will stay in effect until Nov 1st; phased approach will continue - press RAD Cuts FY21 Rev $24.0B v $24.2Be (prior $23.9-24.2B), adj EBITDA $425-435M (prior $490-520M), SSS +3.5% y/y (prior +3.5-4.5%) KBH Reports Q1 $1.02 v $0.87e, Rev $1.14B v $1.21Be
THURS 3/25 (EG) Suez Canal stuck ship clearance reportedly could now take days to weeks - FT DRI Reports Q3 $0.98 v $0.71e, Rev $1.73B v $1.62Be; Authorizes new $500M share buyback; Raises Quarterly dividend 137.8% to $0.88 from $0.37 (indicated yield 2.63%) *(US) INITIAL JOBLESS CLAIMS: 684K V 730KE; CONTINUING CLAIMS: 3.87M V 4.00ME *(US) Q4 FINAL GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.3% V 1.4%E (US) Nevada reports Feb casino gaming Rev $772.4M, -25.9% y/y; Las Vegas strip Rev $348.5M, -41.6% y/y (US) White House: Tracking Suez Canal Situation closely
FRI 3/26 (EG) Suez Canal stuck ship clearance said to take now 'at least' a week - press NIO Cuts Q1 deliveries ~19.5K vehicles (prior 20-25K); To temporarily suspend vehicle production in Hefei facility citing semiconductor chip shortage 3328.HK Reports FY20 (CNY) Net 78.3B v 77.3B y/y, NII 153.3B v 144.1B y/y *(DE) GERMANY MAR IFO BUSINESS CLIMATE: 96.6 V 93.2E (DE) Germany Public Health RKI Institute chief Wieler: COVID situation to get worse in coming weeks MX Enters into $29/shr definitive agreement with Wise Road Capital in an all-cash take private transaction valued at $1.4B *(US) FEB PERSONAL INCOME: -7.1% V -7.2%E; PERSONAL SPENDING: -1.0% V -0.8% *(US) FEB PCE DEFLATOR M/M: 0.2% V 0.3%E; Y/Y: 1.6% V 1.6%E