Sunday, June 13, 2021

Markets buy into transitory inflation hypothesis

TradeTheNews.com 

Markets buy into transitory inflation hypothesis

2021-06-11T16:03:48.837

U.S. stocks edged higher through much of the week, putting the S&P 500 on track to notch a fresh record and its third consecutive week of gains. Equity markets largely held an underlying bid alongside continued volatility in the meme stocks and notable buying in global bond markets. US Treasury yields retreated to the lowest levels in nearly three months while TIPS breakeven spreads narrowed despite a May CPI print that marked the highest annual inflation rate in roughly 13-years at 5%. Inflation worries persisted for many, including those who will now have to pay more for Chipotle burritos and Shake Shack chicken sandwiches. For now, bond traders appear to be on the same page as most central bankers when it comes to their transitory view of the current inflation environment, and that was evident in the solid investor demand seen for another $75B in US coupon supply this week.

The ECB pushed back on inflation worries as new staff projections predicted EU inflation will likely to stay below the ECB target over the coming years. The ECB left rates, as well as, the duration, size, and cadence of PEPP purchases unchanged, but in her press conference ECB chief Lagarde acknowledged there were some who wanted to begin debate on tapering PEPP purchases. WTI crude broke above $70/bbl for the first time in over 2 years as DOE data showed the third week in a row of bigger than expected drawdowns in crude oil stockpiles. Bitcoin prices found a floor after falling towards $30K early in the week. The VIX volatility index plumbed to its lowest levels since before the pandemic amid dwindling equity volumes. For the week, the S&P gained 0.4%, the DJIA fell 0.8%, and the Nasdaq rose 1.9%.

In corporate news this week, Biogen received FDA approval for the first Alzheimer’s drug in 20 years, which some biotech analysts said could be the most lucrative product in pharmaceutical history. Investor sentiment cooled on Campbell Soup after the food giant cut its guidance slightly, noting it is being impacted by a rising inflationary environment. GameStop reported a beat on its top and bottom line in its Q1 results, and the Reddit favorite appointed two former Amazon executives as its new CEO and CFO.

Ford said it plans to enter the small truck market with its Ford Maverick, a new affordable 40-mpg hybrid model with pricing starting under $20,000. A Volkswagen executive predicted that this week will mark the lowest point of the supply crisis, though chip manufacturer Flex said it doesn't expect the underlying global chip shortage to ease until mid-2022. Lordstown Motors shares dropped after disclosing a ‘going concern’ that its current cash levels are not sufficient to begin commercial production of vehicles, though management did note it is in talks for potential new funding. Vulcan Materials announced it would acquire US Concrete, a supplier of aggregates and ready-mixed concrete, as the company expands its geographic footprint in some of the biggest US states. China ride-hailing giant Didi Chuxing filed for its IPO to begin trading in the US in July, where it could be valued above $70B. Taiwan Semi is reportedly considering further expanding its capacity in the US by building a chip packaging plant in the states, which would be its first such facility outside of Taiwan.


MON 6/7
(SG) World’s 3rd largest chip manufacturer, Flex, doesn't expect global chip shortage to ease until mid-2022 - FT
VPCC Dave, a leading Banking app to merge with VPC Impact Acquisition Holding III in deal to become public, in deal valued at ~$4.0B
QTS To be acquired by Blackstone at $78.00/shr for a total transaction value of $10B
USCR To be acquired by Vulcan Materials for $74.00/shr in cash valued at $1.29B
MIC Confirms to sell Atlantic Aviation unit for $4.48B in cash and assumed debt and reorganization obligations
ONEM To acquire Iora Health in all-stock transaction, deal valued at ~$2.1B
*(US) APR CONSUMER CREDIT: $18.6B V $20BE

TUES 6/8
*(EU) EURO ZONE Q1 FINAL GDP Q/Q: -0.3% V -0.6%E; Y/Y: -1.3% V -1.8%E
THO Reports Q3 $3.29 v $2.36e, Rev $3.46B v $3.02Be; Sees no signs of demand slowing backlog up > 5x y/y
ASO Reports Q1 $1.84 v -$0.14 y/y, Rev $1.58B v $1.14B y/y; Raises guidance significantly
F Launches 2022 Ford Maverick hybrid pickup truck starting for less than $20K (update)
(US) Atlanta Fed GDPNow cuts Q2 GDP forecast to 9.4% from 10.3% (though was updated to 9.3% on June 4th)
(US) US and EU are reportedly prepared to agree on a resolution to major trade disputes; will promise to end aircraft and metals disputes in 2021, according to draft summit conclusions - press
CMG Discloses raised prices 3.5-4.0% across the menu last week - press
(CN) US Senate passes $250B bill focused on technology and competing against China economically on a 68-32 vote
(CN) CHINA MAY CPI M/M: -0.2% V -0.1%E; Y/Y: 1.3% V 1.6%E: NDRC comments to keep goods prices linked to livelihoods 'stable'

WEDS 6/9
UPS Targets FY23 Rev $98-102B, adj Op margin 12.7-13.7%; Announces strategic priorities
XPO Raises Q2, FY21 outlook; files form 10 registration statement for previously announced plan spin off of GXO Logistics
MAAC Datavant and Ciox Health Announce $7B Merger, Creating the Largest Neutral and Secure Health Data Ecosystem enabling secure exchange of health data
(EU) EU's Sefcovic: UK has to abide by its legal obligations on border control; Considering "all options" including cross retaliation that includes quotas and tariffs
*(US) DOE CRUDE: -5.2M V -2.5ME; GASOLINE: +7.0M V +0.5ME; DISTILLATE: +4.4M V +1.5ME
(US) Sec Chair Gensler: SEC to undertake broad review of stock market structure, considering changes to exchange and broker pricing rules - press
*(US) TREASURY'S $38B 10-YEAR NOTE REOPENING DRAWS 1.497%; BID-TO-COVER RATIO: 2.58 V 2.36 PRIOR AND 2.40 OVER THE LAST 8 REOPENINGS (highest BTC since last July)
VOW3.DE Exec: believe we have reached the lowest point of the supply crisis - press interview
(TW) US and Taiwan reportedly to hold high-level trade talks as soon as Thursday, Jun 10th - press
(CN) China PBOC Gov Yi Gang: Sees CPI in 2021 <2.0%; China Potential Economic growth has decreased to a certain extent - Comments at Lujizui Forum

THURS 6/10
ASH Affirms FY21 Adj EBITDA guidance; Warns of Q3 supply-chain financial impacts
(EU) EU Commission President Von Der Leyen: Sees fundamental gaps in execution of Northern Ireland Protocol; Need to know source and origin of Covid-19 pandemic
SLB Announce strategic collaboration with Panasonic Energy of NAon new battery-grade lithium production process; Aims to reduce mining effort from ~year to "weeks"
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(EU) ECB maintains Pandemic Bond Buying Program (PEPP) size at €1.85T with program running until at least March 2022 or until crisis ends
*(US) INITIAL JOBLESS CLAIMS: 376K V 370KE (fresh pandemic low); CONTINUING CLAIMS: 3.50M V 3.67ME (lowest level for initial claims since March 2020)
*(US) TREASURY $24B 30-YEAR BOND REOPENING DRAWS 2.172%; BID TO COVER 2.29 V 2.57 PRIOR AND 2.39 OVER LAST 8 REOPENINGS
*(US) MAY MONTHLY BUDGET STATEMENT: -$132B V -$250.0BE
DIDI Reportedly Xiaoju Kuaizhi files for $100M IPO ADS to list on NASDAQ under ticker DIDI - press

FRI 6/11
IEA Monthly Oil Report: Sees demand back at pre-pandemic levels by end 2022
(US) JUN PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 86.4 V 84.4E; 1-year inflation expectations: 4.0% v 4.7%e
(US) New York Fed Nowcast: cuts Q2 forecast to 4.2% from 4.4%; cuts Q3 forecast to 5.3% from 5.4%