Signs of inflation creep in to data and corporate reports as growth momentum around ‘reopening’ continues
Stocks have moved higher this week, led by sharp gains for technology companies after markets greeted last Friday’s US March jobs report overwhelmingly favorably. Bond markets calmed, with yields dropping for four straight days before ticking higher on Friday in the wake of hotter than expected PPI readings in both the US and China. Robust PMI readings globally appeared to encourage investors to double down on bets that economic growth will pick up as Covid-19 vaccines and government support help revitalize social and business activity. Federal Reserve officials gave reassurances that the central bank will continue with policy measures aimed to support the recovery despite the expected near term pick-up in inflation. The US dollar experienced a modest decline induced by a rebound in the Euro around the release of the March ECB minutes. The VIX volatility index plumbed to its lowest levels in more than a year, raising some concerns about market complacency amid a notable decline in US equity volumes. For the week, the S&P gained 2.7%, the DJIA added 2%, and the Nasdaq was up 3.1%.
In corporate news this week, many firms noted inflation pressures in their business. Construction materials manufacturer RPM International noted it was implementing price increases aggressively to offset inflationary and supply pressures. Meanwhile, packaged foods giant ConAgra said it has begun to experience elevated inflation in cost of goods sold and that it expects these pressures to accelerate over the next few quarters.Apple became the latest company to suffer from the global semiconductor shortage, with press reports indicating MacBook and iPad production are being delayed. On the same issue, GM and Ford announced they would idle some more factories temporarily, and Ford said it would cancel planned summer shutdowns to make up the production gap. Boeing’s 737 MAX program suffered another embarrassing setback as the company told over a dozen airlines that they would have to ground about 90 recently delivered planes due to an electrical issue that may take days to fix.The CDC bent to pressure from the cruise industry saying cruises could restart in mid-summer with certain restrictions, rather than wait until November.In M&A related news, Twitter reportedly held discussion about a potential $4B bid for audio-chat app Clubhouse but talks have since broken off.
MON 4/5 (TR) Turkey Mar CPI M/M: 1.1% v 1.1%e; Y/Y: 16.2% v 16.2%e (6th straight month of rising inflation) *(US) MAR ISM SERVICES INDEX: 63.7 V 59.0E (record high) (US) Sen Manchin (D-WV): the corporate tax rate should be at 25%; would not support raising it to 28% - radio interview (US) Senate parliamentarian rules that Democrats can use a third budget reconciliation this year to pass additional legislation - financial press
TUES 4/6 *(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 0.10%; AS EXPECTED *(EU) EURO ZONE FEB UNEMPLOYMENT RATE: 8.3% V 8.1%E (RU) Russia Defense Ministry said to have started military readiness check-ups to inspect the whole of its armed forces - press *IMF UPDATE ITS WORLD ECONOMIC OUTLOOK (WEO): RAISES 2021 GDP GROWTH FORECAST FROM 5.5% TO 6.0% (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +0.3% v -3.8% prior 005930.KR Reports prelim Q1 (KRW) Op 9.30T v 8.9Te; Rev 65.0T v 61.5Te (US) CDC says cruises could restart in mid-summer with restrictions
WEDS 4/7 *(DE) GERMANY MAR FINAL PMI SERVICES: 51.5 V 50.8E (confirmss 1st expansion in 6 months); *(EU) EURO ZONE MAR FINAL PMI SERVICES: 49.6 V 48.8E (confirms 7th straight contraction) (UK) MAR FINAL PMI SERVICES: 56.3 V 56.8E (confirms 1st expansion in 5 months) RPM Reports Q3 $0.38 v $0.34e, Rev $1.27B v $1.20Be; currently implementing appropriate price increases and changes in terms *(US) DOE CRUDE: -3.5M V -1.5ME; GASOLINE: +4.0M V -1ME; DISTILLATE: +1.5M V +0.5ME (US) Feb Consumer Credit: $27.6B v $2.8Be TWTR Reportedly recently discussed a potential $4B takeover of audio-chat app Clubhouse but talks no longer ongoing - press JNJ Mass vaccination site in Denver, Colorado using JNJ Coronavirus vaccines was shut down temporarily due to 18 recipients having unspecified adverse side effects - press
THURS 4/8 AAPL Reportedly MacBook and iPad production are being delayed due to chip shortage - Nikkei CAG Reports Q3 $0.59 v $0.58e, Rev $2.77B v $2.72Be; Has begun to experience elevated inflation in cost of goods sold *(US) INITIAL JOBLESS CLAIMS: 744K V 680KE; CONTINUING CLAIMS: 3.73M V 3.64ME GMTo further cut production at several North American facilities due to semiconductor shortage FFord to idle three additional plants for one week due to semiconductor shortage; will cancel planned summer shutdowns to make up production gap - press
FRI 4/9 BARecommended to 16 customers to address a potential electrical issue in a specific group of 737 MAX airplanes prior to further operations; working closely with US FAA *(US) MAR PPI FINAL DEMAND M/M: 1.0% V 0.5%E; Y/Y: 4.2% V 3.8%E; PPI (ex-food/energy) M/M: 0.7% v 0.2%e; Y/Y: 3.1% v 2.7%e AMZNMajority of Alabama workers have voted against unionization; Union files objection saying the company exerted influence on the vote (US) President Biden releases skinny FY22 budget proposal including $1.52T for discretionary spending, +8.4% y/y; requests $769B in non-defense discretionary spending, +16% y/y