US equity volatility remained elevated coming into this week and it extended across a variety of assets classes. Bitcoin and other cryptocurrencies experienced a significant drop on increasing concerns around potential government intervention. Key commodity prices continued to back away from recent highs supporting those who are arguing the rise in inflation this summer will ultimately prove to be transitory, as many central bankers have forecasted. The outlook for interest rates was further muddied when the latest FOMC minutes that confirmed that some officials want to start discussions about paring asset purchases at some point in the not too distant future. Treasury yields remained subdued though as the taper talk juxtaposed several negative surprises in economic readings. April US housing starts were weaker than expected and the May Philly Fed Index missed forecasts by a wide margin. Citigroup's U.S. economic surprise index, which measures whether such data beats or misses expectations, was on the verge of turning negative for the first time in almost a year. For the week, the S&P fell 0.4%, the DJIA lost 0.5%, while the Nasdaq added 0.3%.
In corporate news this week, big box retailers Walmart, Target, and Home Depot blew out their Q1 earnings expectations, though HD is still not providing forward guidance amid the pandemic. Macy’s also beat expectations, turning in a surprise profit and raising fiscal year guidance. As reopenings continue across the US, United Airlines noted it plans to operate at 80% of its pre-pandemic domestic schedule starting in July, noting summer bookings up 214% y/y. In M&A news this week, Kansas City Southern terminated a deal with Canadian Pacific in favor of a richer but perhaps riskier merger with Canadian National Railway. Elsewhere, AT&T stunned some shareholders, agreeing to merge its WarnerMedia assets with Discovery, reversing the telecom giant’s asset strategy of the last several years.
MON 5/17 SAN.FR Sanofi and GSK COVID-19 Adjuvanted recombinant COVID-19 vaccine candidate demonstrates strong immune responses across all adult age groups in Phase 2 trial; Sees approval in Q4 2021 (EU) EU and US said to agree to chart path to end WTO steel disputes by end of 2021 - press UAL To operate 80% of pre-pandemic U.S. schedule from July 2021; Summer bookings +214% y/y; United to add 400 flights to July's schedule compared to June *(US) MAY EMPIRE MANUFACTURING: 24.3 V 24.0E; Says indexes for future prices paid and future prices received remained elevated T Confirms to merge Media units with Discovery in all-stock Reverse Morris Trust deal; AT&T to receive $43B in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt ML.FR Plans to implement 6% price hikes across passenger brands and 13% hikes across commercial tires in NA effective July 1st
TUES 5/18 VOD.UK Reports FY21 adj €0.08 v €0.08e, adj EBITDA €14.4B v €14.5Be, Rev €43.8B v €44.9B y/y *(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: -0.6% V -0.6%E; Y/Y: -1.8% V -1.8%E BIDU Reports Q1 $1.89 v $1.44e, Rev $4.29B v $4.16Be HD Reports Q1 $3.86 v $2.98e, Rev $37.5B v $34.5Be M Reports Q1 $0.39 v -$0.43e, Rev $4.71B v $4.40Be; Raises guidance WMT Reports Q1 $1.69 v $1.21e, Rev $138.3B v $131.3Be; Raises guidance, Optimism is higher than it was at start of the year (CN) China govt bans financial firms from providing cryptocurrency services and warns Chinese investors to stay away from cryptocurrency trading - press *(US) APR HOUSING STARTS: 1.569M V 1.702ME; BUILDING PERMITS: 1.760M V 1.770ME (US) Atlanta Fed GDPNow cuts Q2 GDP forecast to 10.1% from 10.5% (US) Colonial shippers said to indicate pipeline communications system is down - press (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.2% v -0.7% prior BAC Raising minimum wage to $25/hr to attract talent (from $20/hr) by 2025 (US) White House climate adviser McCarthy: existing nuclear power is going to be absolutely essential in our effort to reach emissions goals (US) Reportedly Biden administration to delay by two weeks revealing any changes to the Trump-era China investment black list - press (CN) European Parliament expected to pass motion on Thursday (May 20th) that will formally freeze progress on EU-China investment deal ratification (as expected) - press
WEDS 5/19 (US) Biden administration said to to waive sanctions on German company in charge of Nord Stream 2 pipeline - Axios *(UK) APR CPI M/M: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E BA.UK Issues Q2 Trading update: good operational performance (EU) ECB FINANCIAL STABILITY REVIEW: Risks are more unevenly distributed amid market exuberance; Potential for banking sector credit risk to worsen *(EU) EURO ZONE APR FINAL CPI Y/Y: 1.6% V 1.6%E; CPI CORE Y/Y: 0.7% V 0.8%E (EU) EU said to agree reopening borders to fully vaccinated travelers - press TGT Reports Q1 $3.69 v $2.20e, Rev $24.2B v $21.9Be LUV Guides May Rev -40% to -35% v May'19, Raises load factor ~85% (prior 75-80%), adjusts ASMs -18% v May'19 - filing *(US) DOE CRUDE: +1.3M V +1.5ME; GASOLINE: -2.0M V -1ME; DISTILLATE: -2.3M V -0.5ME AA CEO: seeing extreme tightness in aluminum and value added metal; aluminum demand is firing on all engines this year *(US) FOMC APR MINUTES: GENERALLY NOTED ECONOMY REMAINED FAR FROM MAXIMUM-EMPLOYMENT AND PRICE-STABILITY GOALS; A NUMBER OF PARTICIPANTS NOTED IT MAY BE APPROPRIATE AT SOME POINT IN UPCOMING MEETINGS TO BEGIN DISCUSSING PLAN TO ADJUST PACE OF ASSET PURCHASES
THURS 5/20 700.HK Reports Q1 (CNY) Net 47.8B v 34.4Be, Op 56.3B v 37.3B y/y, Rev 135.3B v 108.1B y/y BNTX EU confirms signing 3rd contract for extra 1.8B vaccine doses with BioNTech/Pfizer *(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 31.5 V 41.5E KSUReportedly expected to terminate the Canadian Pacific deal and reach deal with Canadian National Railway – press (CN) CASS (govt think tank) Researcher said China could consider selecting Shenzhen and Hainan as the places to conduct trials related to property tax reform - China Sec Journal
FRI 5/21 2330.TWExec: Raised FY21 automotive semiconductors output by 60% y/y amid chip shortage (FR) FRANCE MAY PRELIMINARY MANUFACTURING PMI: 59.2 V 58.5E (6th month of expansion) (EU) EURO ZONE MAY PRELIMINARY MANUFACTURING PMI: 62.8 V 62.5E (11th month of expansion) (UK) MAY PRELIMINARY MANUFACTURING PMI: 66.1 V 60.8E (12th straight expansion and record high) DEReports Q2 $5.68 v $4.44e, Rev (equipment ops) $11.0B v $10.4Be (US) MAY PRELIMINARY MARKIT MANUFACTURING PMI: 61.5 V 60.2E (series all time high); Services PMI: 70.1 v 64.4e (series all time high) (MX) Mexico Pres Lopez Obrador (AMLO): Will not be nominating Banxico Gov Diaz De Leon for a 2nd term (CN) China Vice Premier Liu: China to crackdown on bitcoin mining and trading (US) White House: Biden offered $1.7T counterproposal on infrastructure down from $2.25T originally; full details to be released later today - press Sec Psaki