Weekly Market Update: Q1 ends on an optimistic note
Q1 drew to close this week with US stock markets once again testing new all-time highs. Heading into the Easter break the S&P topped 4,000 for the first time while the NASDAQ surged amid renewed interest in growth sectors, namely technology shares. President Biden outlined his vision for over $2T in infrastructure spending the Democrats are widely expected to push through Congress along with a package of high income and corporate tax increases, but the measures are clearly going to receive stiff oppositions from Republicans. The “Ever Given” was finally refloated allowing traffic to resume in the Suez Canal. Economic data stayed markedly upbeat despite the institution of additional lock down measures across much of Europe. US vaccine numbers continued to climb and on Friday Pfizer released a new batch of data showing its vaccine was 100% effective in preventing COVID-19 cases in South Africa (among 800 subjects), where the worrisome B.1.351 variant remains prevalent.
A calmer tenor in the global rates markets likely kept the door open for improving stock sentiment as well. The US 10-year yield appears to have encountered some resistance around 1.75% ahead of a quirky release for the March jobs report on Friday when most major financial markets including in the US are closed. Global central bank officials continued to stress the need to keep policy loose coming out of the pandemic and don’t intend to move proactively even if inflation begins to rise. WTI crude prices hovered around $60/bbl after OPEC+ producers agreed to roll over production cuts this month, and the Saudis indicated they would gradually start taking back their unilateral 1M bpd output cut in May while the cartel eased production cuts by similar amount. The US Dollar stayed strong largely on the back of a softer Euro as Europe continued to lag the US in terms of vaccination numbers. For the week, the S&P gained 1.1%, the DJIA added 0.3%, and the Nasdaq was up 2.6%.
In corporate news this week, Micron shares jumped after posting beats and forecasting a strong sales and earnings outlook. Reports also circulated that Western Digital and Micron were individually considering a potential $30B deal for Kioxia Holdings Corp, the memory manufacturer spun off from Toshiba in 2018. American Airlines improved its business outlook, raising Q1 capacity guidance and noting its seven-day average of net bookings has hit ~90% of 2019 levels. Delta announced it would lift its block on selling the middle seat on flights beginning May 1st, the last of the major carriers to end the COVID-era restriction. Lululemon reported a beat on its top and bottom line in Q4, while its outlook disappointed the Street as post-pandemic reopening questions remain. Visa confirmed it would be the first major payments network to settle transactions using USD Coin, a stablecoin powered by the Ethereum blockchain. PayPal launched "Checkout with Crypto,” a service for customers to use crypto holdings to pay at online merchants globally.
SUN 3/28 386.HK Reports FY20 (CNY) Net 32.9B v 57.5B y/y; Rev 2.1T v 2.97T y/y 8604.JP Guides to potentially has a loss as much as $2.0B at US unit, related to transactons with a US client; Cancelling issuance of USD denominated bonds (EG) Stuck Suez Canal ship "Ever Given" has been successfully refloated
MON 3/29 CSGN.CH Exiting positions after US hedge fund default (failed to meet margin requirements), premature to quantify exact size of loss, could be "highly significant" to Q1 results CSGN.CH Reportedly expected loss due to US hedge fund default estimated to be between $3-4B - FT V Confirms first major payments network to settle transactions in USD Coin (USDC) with Visa over Ethereum AAL Raises Q1 Capacity -45% to -40% (prior -45%); As of Mar 26th 7-day avg of net bookings ~90% of 2019 levels (EG) Suez Canal authority official: traffic in the Suez Canal has resumed after the stranded ship was refloated *(US) MAR DALLAS FED MANUFACTURING ACTIVITY INDEX: 28.9 V 16.8E (US) CDC director Walensky: new US COVID cases have risen 10% in last week; deaths are now rising along with cases and hospitalizations
TUES 3/30 6723.JP Damaged Chip plant is likely to restart 'on schedule' (within 1-month), ~75% of work in process was undamaged by fire *(EU) EURO ZONE MAR ECONOMIC CONFIDENCE: 101.0 V 96.0E *(US) MAR CONSUMER CONFIDENCE: 109.7 V 96.9E (highest reading since March 2020) LULU Reports Q4 $2.58 v $2.49e, Rev $1.73B v $1.66Be *(CN) CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 51.9 V 51.2E (13th month of expansion)
WEDS 3/31 *(UK) Q4 FINAL GDP Q/Q: 1.3% V 1.0%E; Y/Y: -7.3% V -7.8%E *(DE) GERMANY MAR UNEMPLOYMENT CHANGE: -8.0K V -3.0KE; UNEMPLOYMENT CLAIMS RATE: % V 6.0%E *(EU) EURO ZONE MAR ADVANCE CPI ESTIMATE Y/Y: 1.3% V 1.4%E; CPI CORE Y/Y: 0.9% V 1.1%E *(US) MAR ADP EMPLOYMENT CHANGE: +517K V +550KE *(US) MAR CHICAGO PURCHASE MANAGERS INDEX (PMI): 66.3 V 61.0E (highest March reading since 2011) *(US) FEB PENDING HOME SALES M/M: -10.6% V -3.0%E; Y/Y: -2.7% V +6.5%E *(US) DOE CRUDE: -0.9M V -0.5ME; GASOLINE: -1.7M V +1ME; DISTILLATE: +2.5M V +0.5ME MSFT Awarded U.S. Army contract for AR headsets, worth up to $22B over 10 years - press MU Reports Q2 $0.98 v $0.95e, Rev $6.24B v $6.18Be 2330.TW To invest $100B over 3-years to increase chip fabrication capacity - Company Statement 2330.TW Said to be requesting that clients accept higher prices - Nikkei
THRS 4/1 (HK) Macau Mar Casino Rev (MOP): 8.3B v 7.3B prior; Y/Y: 58.0% v +135.6% prior *(IT) ITALY MAR MANUFACTURING PMI: 59.8 V 59.8E ((9th month of expansion and highest since Mar 2000) *(DE) GERMANY MAR FINAL MANUFACTURING PMI: 66.6 V 66.6E (confirms 9th month of expansion and record high) *(EU) EURO ZONE MAR FINAL MANUFACTURING PMI: 62.5 V 62.4E (confirms 9th month of expansion and record high) *(US) INITIAL JOBLESS CLAIMS: 719K V 675KE; CONTINUING CLAIMS: 3.79M V 3.75ME *(US) MAR FINAL MARKIT MANUFACTURING PMI: 59.1 V 59.1E *(US) MAR ISM MANUFACTURING: 64.7 V 61.5E; PRICES PAID: 85.6 V 85E (highest ISM Manufacturing reading since 1983) OPEC+ members support a 1-month roll over of production cuts; agree to gradual production increases from May through July