Trading opened this week amid lingering concerns about the spreading Delta variant and its potential impacts on global growth. US government officials and corporate executives introduced new safety requirements and stepped up incentives to convince more people to get vaccinated and return to wearing masks. Also, certain pandemic-sensitive businesses indicated the Delta variant has begun to have a negative impact on their most recent booking trends. Those Covid concerns initially weighed on Treasury yields while stock indices held near all-time highs. Wednesday’s weak ADP employment number helped push the US 10-year back towards the Feb lows around 1.12% before a strong ISM services print reversed that course later in the session.
Wednesday, the Bank of England laid out parameters that will need to be met in order to commence tapering. Most notably MPC members wanted to see the Bank Rate rise to 0.5% before acting. The announcement was sandwiched between comments from several US Federal Reserve hawks. Vice Chairman Clarida headlined several FOMC members who stepped up their calls to commence tapering sooner, while expressing continued concerns about the potential stickiness of rising inflation. Those views were subsequently bolstered by Friday’s very robust July jobs report which surpassed expectations by a wide margin. Treasury yields pushed higher along with the dollar and metals prices slipped. Growth stocks lagged, holding back the NASDAQ, while banks and cyclical groups responded positively to higher interest rates. For the week, the S&P gained 0.9%, the DJIA added 0.8%, and the Nasdaq rose 1.1%.
In corporate news this week, Uber saw a bigger than expected EBITDA loss as driver incentive costs weighed on profits despite increased ridership. Rival Lyft posted its first quarterly profit on increased ridership and steadier costs. Clorox shares touched their lowest level since the pandemic started after missing on sales and guiding below consensus. Cigna beat on the top and bottom line but its cost concerns dragged healthcare names lower mid-week. Expedia’s earnings pointed to impacts in July from the Delta variant, amid growing uncertainty in the travel industry. Royal Caribbean and Norwegian Cruises also noted they have seen some recent impact from the renewed COVID spread. Square acquired Australia-based firm Afterpay for $29B as the payments company pushed into the lucrative 'buy now, pay later' space.
SUN 8/1 (HK) Macau July Casino Rev (MOP): 8.4B v 6.5B prior; Y/Y: 528.1% v 540.5%e (35% of pre-COVID levels) APT.AU Australia-based 'buy now, pay later' firm Afterpay to be acquired by Square in all-stock deal, implied value of A$39B, A$126.21/shr SQ Reports Q2 $0.66 adj v $0.32e, Rev $4.68B v $5.02Be MON 8/2 5.HK Reports Q2 Net $3.39B v $192M y/y, adj Pretax $5.56B v $2.6B y/y, Rev $12.52B v $13.2B y/y; to reduce office space this year HEIA.NL Reports H1 Net €896M v -€297M y/y, Op €1.63B v 85M y/y, Rev €9.97B v €9.87Be GPN Reports Q2 $2.04 v $1.89e, Adj Rev $1.94B v $1.85Be; Raises Quarterly dividend 28.2% to $0.25 from $0.195 (indicated yield 0.52%); Enters new collaboration with AWS through Netspend *(US) JULY FINAL MARKIT MANUFACTURING PMI: 63.4 V 63.1E (13th consecutive month of expansion) (DE) Germany to begin offering vaccine booster shots beginning in Sept - NY Times *(US) JULY ISM MANUFACTURING: 59.5 V 60.9E; PRICES PAID: 85.7 V 88.0E (US) Atlanta Fed GDPNow: raises Q3 GDP forecast to 6.3% from 6.1% ML.FR Michelin North America raises prices by up to 8% on certain replacement tyres, effective Sep 1st MAERSKB.DK Reports prelim Q2 EBITDA $5.1B v $4.7Be, Rev $14.2B v $13.8Be; Raises guidance (US) Treasury quarterly financing estimates: to borrow $673B in Jul-Sep quarter v $600Be (prior estimate to borrow $821B) (US) Fed's Waller (hawk, voter): Personal opinion is that Fed could make an announcement on taper in Sept; If we get 800K to 1M new jobs in next two jobs reports we will have regained 85% of jobs lost, which is 'significant further progress' - CNBC COLM Reports Q2 +$0.61 v -$0.12e, Rev $566.4M v $500Me; Raises guidance NXPI Reports Q2 $1.46 v $2.32e, Rev $2.60B v $2.58Be; Guides Q3 Rev well above ests SPG Reports FFO Q2 $3.24 v $2.37e, Rev $1.25B v $1.18Be; Raises dividend 7.7% EMN Reports Q2 $2.46 v $2.32e, Rev $2.65B v $2.40Be; Raises guidance TUES 8/3 BP.UK Reports Q2 adj Net $2.80B v $2.63Be, Rev $37.6B v $20.8B y/y; Launches $1.4B share buyback and raises dividend 4% (TR) Turkey July CPI M/M: 1.8% v 1.6%e; Y/Y: 19.0% v 18.6%e (HK) Macau govt said to have required negative COVID tests for all departures - press 880.HK Reports H1 (HK$) Net -1.47B v -1.41B y/y, Rev 5.22B v 4.37B y/y IT Reports Q2 $2.24 adj v $1.74e, Rev $1.17B v $1.12Be; Increased the share repurchase authorization by $800M; Raises guidance 2nd time - Adj EBITDA $355M v $192M y/y DD Reports Q2 $1.13 v $0.94e, Rev $4.1B v $4.00Be; Raises guidance materially (US) Fed’s Bullard (non-voter, hawk): More volatile economic regime emerging in US; Monetary policy needs to be more nimble ETN Reports Q2 $1.72 v $1.55e, Rev $5.22B v $4.97Be; Raises guidance BABA Reports Q2 $2.57 v $2.25e, Rev $31.9B v $32.7Be; Increases share buyback program by $5B to $15B (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.0% v -2.9% prior CZR Reports Q2 $0.34 v -$0.26e, Rev $2.5B v $2.29Be; Adj EBITDA $1.0B (US) Weekly API Crude Oil Inventories: -0.9M v -4.7M prior LUMN To sell assets of local incumbent carrier operations in 20 states to Apollo Funds for $7.5B (vs ~$5B speculated) WEDS 8/4 7203.JP Reports Q1 Net ¥897.8B v ¥158.8B y/y, Op ¥997.5B v ¥13.9B y/y; Rev ¥7.94T v ¥4.60T y/y 6758.JP Reports Q1 Net ¥211.8B v ¥193.6B y/y, Op ¥280.1B v ¥221.7B y/y, Rev ¥2.26T v ¥1.96T y/y *(FR) FRANCE JULY FINAL SERVICES PMI: 56.8 V 57.0E (confirms 4th straight expansion) *(DE) GERMANY JULY FINAL SERVICES PMI: 61.8 V 62.2E (confirms 3rd month of expansion and record high) *(UK) JULY FINAL SERVICES PMI: 59.6 V 57.8E (confirms 5th month of expansion) *(EU) EURO ZONE JUN RETAIL SALES M/M: 1.5% V 1.7%E; Y/Y: 5.0% V 4.4%E TT Reports Q2 $1.92 v $1.90e, Rev $3.83B v $3.73Be; Raises FY21 Guidance CVS Reports Q2 $2.42 v $2.07e, Rev $72.6B v $70.1Be; Raises guidance EMR Reports Q3 $1.09 adj v $0.98e, Rev $4.70B v $4.60Be; Raises guidance HZNP Reports Q2 $1.62 v $0.91e, Rev $832.5M v $707Me; Raises guidance (US) SEC Chair Gensler: Repeats cryptos are speculative asset class and we need to provide regulation to avoid broad manipulation - CNBC *(US) JULY ADP EMPLOYMENT CHANGE: +330K V +683KE (lowest reading since Feb) (US) Fed’s Bullard (non-voter, hawk): There have been pretty good macroeconomic outcomes despite the pandemic *(US) JULY ISM SERVICES INDEX: 64.1 V 60.5E (US) Fed Vice Chair Clarida: If core inflation hits 3% this year, expects would consider it much more than a moderate overshoot of Fed's goal, conditions for raising interest rates could be met by end of 2022 *(US) DOE CRUDE: +3.6M V -2.5ME; GASOLINE: -5.3M V -1.5ME; DISTILLATE: +0.8M V -0.5ME WDC Reports Q4 $2.16 v $1.46e, Rev $4.92B v $4.51Be; Guides Q1 strong MELI Reports Q2 $1.37 v $0.09e, Rev $1.70B v $1.50Be RCII Reports Q2 $1.63 v $1.37e, Rev $1.19B v $1.13Be; Raises guidance materially COST Reports July total SSS +13.8% (ex-gas) (US) White House Official: Biden Admin developing plan to require nearly all foreign nationals traveling to the US to be fully vaccinated - press 2282.HK Reports H1 (HK$) Adj EBITDA +116.0M v -885.7M y/y; Rev 2.4B v 257M y/y THURS 8/5 SIE.DE Reports Q3 Net €1.5B v €535M y/y, Industrial Business EBITA €2.32B v €2.06Be, Rev €16.1B v €14.87Be (US) Goldman Sachs raises end-2021 S&P 500 target from 4,300 to 4,700 (IL) Israel Defense Min Gantz: Israel is prepared to attack in Iran (US) Biden Administration said to unveil goal and new car emissions standards later today, on Aug 5th - press MRNA Reports Q2 $6.46 v $6.01e, Rev $4.35B v $4.29Be; Authorizes share buyback of up to $1B over 2 years *(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATE UNCHANGED AT 0.10%; AS EXPECTED CHH Reports Q2 $1.22 v $0.91e, Rev $278.3M v $289Me; JULY RevPAR +15% vs 2019 *(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 0.75%; AS EXPECTED *(US) INITIAL JOBLESS CLAIMS: 385K V 383KE; CONTINUING CLAIMS: 2.93M V 3.255ME (US) Atlanta Fed GDPNow: cuts Q3 GDP forecast to 6.1% from 6.3% NVAX Reports Q2 -$4.75 v -$3.76e, Rev $298.0M v $371Me; Delays US submission for COVID-19 vaccine clearance and targets lower and middle-income countries instead this year FRI 8/6 MAERSKB.DK CEO: container industry is still not able to lift demand - post earnings comments *(US) JULY UNEMPLOYMENT RATE: 5.4% V 5.7%E *(US) JULY CHANGE IN NONFARM PAYROLLS: +943K V +858KE (highest print since Aug 2020 numbers) *(US) JULY AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 4.0% V 3.9%E EU reportedly plans to discuss reimposing travel restrictions on the US amid Delta variant spread – press (US) JUN CONSUMER CREDIT: $37.7B V $23.0BE