Weekly Market Update: Markets unperturbed by stagflation signals
Fri, 03 Sep 04:21 PM EST/09:21 PM GMT
US equity indices continued to ride into uncharted territory for much of this week. Despite lingering concerns related to the pandemic and potential Fed tapering, equity markets remained attractive relative to the paltry yields offered by government bonds in many investors’ minds. PMI readings and economic data in general continued to moderate from the recent highs, culminating in a softer than expected August US employment report on Friday. Monthly payroll numbers came in well short of expectations, suggesting the Delta variant has resulted in headwinds for the jobs recovery, causing some to argue that the softer report gave the Fed further cover to remain patient. On the other hand, wages jumped notably and the unemployment rate dipped, causing others to infer that steepening seen along the US treasury yield curve after the jobs data release suggested bond traders were betting that the Fed is in a bind because its policies have opened the door to a stagflation environment. Rates move up globally after the report, the US dollar remained weak, and gold neared the best levels in more than a month. Bitcoin topped 50K and Etherium tested 4K following a week of more eye popping NFT sales. WTI crude prices firmed back towards the $70 level after OPEC+ producers announced they will follow through with plans to bring an additional 400K bpd of supply back onto the market next month. For the week, the S&P rose 0.6%, the DJIA dipped 0.2%, and the Nasdaq rose 1.6%.
In corporate news this week, The Department of Justice was said to be preparing a second antitrust lawsuit against Google, targeting its ad technology business. Daimer’s CEO said Q3 vehicle sales would be below Q2 levels due to the ongoing semiconductor chip shortage. Apple announced as a concession to Japanese regulators that it would now allow developers of ‘reader apps’ to link to their own websites for payment, and the news sent Spotify higher. US regulators threw a wrench into Canadian National’s plans to acquire Kansas City Southern, ruling that CNI cannot complete a deal using a voting trust that had been key to the potential acquisition. Some reports late in the week indicated the KSU board would reopen talks with rival bidder Canadian Pacific and would deem the CP deal as likely to lead to a superior offer. Zoom shares fell after reporting results despite an outlook raise as investors fretted over a deceleration of growth and some signs the videoconference software may be losing ground to Microsoft. Alaska Airlines disclosed that its bookings trends have deteriorated moderately as the COVID Delta variant continues to affect air travel.
SUN 8/29 The C.1.2 variant, first detected in South Africa, is more mutated compared to original virus than any other known variant; Poses concerns it could be more infectious and evade vaccines - The Jerusalem Post PFE New Zealand reports first death of a woman related to getting her COVID vaccine - press
MON 8/30 *(DE) GERMANY AUG CPI NORTH RHINE WESTPHALIA M/M: 0.1% V 0.8% PRIOR; Y/Y: 4.2% V 4.1% PRIOR FUL Implements 11% surcharge to recover significant cost increases in raw materials and related services, effective immediately *(DE) GERMANY AUG PRELIMINARY CPI M/M: 0.0% V 0.1%E; Y/Y: 3.9% V 3.9%E (highest annual pace since 1993) *(US) JULY PENDING HOME SALES M/M: -1.8% V 0.3%E; Y/Y: -9.5% V -8.8%E *(US) AUG DALLAS FED MANUFACTURING ACTIVITY INDEX: 9.0 V 23.0E ZM Reports Q2 $1.36 v $1.16e, Rev $1.02B v $982Me; Raises guidance *(CN) CHINA AUG MANUFACTURING PMI (GOVT OFFICIAL): 50.1 V 50.2E (17th month of expansion and lowest since Feb 2020)
TUES 8/31 (TW) Said that DRAM Spot prices are falling 'rapidly' in August, could set contract prices for Q4 on downward pressure - Digitimes *(FR) FRANCE AUG PRELIMINARY CPI M/M: 0.6% V 0.4%E; Y/Y: 1.9% V 1.7%E *(DE) GERMANY AUG NET UNEMPLOYMENT CHANGE: -53.0K V -40.0KE; UNEMPLOYMENT CLAIMS RATE: 5.5% V 5.6%E (17 month low) *(DE) GERMANY AUG NET UNEMPLOYMENT CHANGE: -53.0K V -40.0KE; UNEMPLOYMENT CLAIMS RATE: 5.5% V 5.6%E (17 month low) *(EU) EURO ZONE AUG ADVANCE CPI ESTIMATE Y/Y: 3.0% V 2.7%E; CPI CORE Y/Y: 1.6% V 1.5%E (highest annual pace since 2011) (KR) South Korean Parliament passes revision of telecom business act aiming to curb Google and Apple's in-app billing policy; Requires alternatives - press (EU) ECB's Holzmann (Austria; hawk): ECB in position to think about reducing pandemic aid - conference comments (US) Colonial Pipeline restarts main gasoline and distillate lines post-Hurricane Ida - press *(US) AUG CHICAGO PURCHASE MANAGERS INDEX (PMI): 66.8 V 68.0E *(US) AUG CONSUMER CONFIDENCE: 113.8 V 123.0E (lowest since Feb) GOOGL Postpones voluntary return to office for workers until Jan 10th vs September prior - press KSU Canada National proposal for a voting trust has been denied by Surface Transportation Board; STB delays ruling on CN Railway trust as part of KSU deal - press AMBA Reports Q2 $0.35 v $0.25e, Rev $79.3M v $75.5Me; Guides Q2 strong PVH Reports Q2 $2.72 v $1.19e, Rev $2.31B v $2.14Be; Raises guidance for 3rd time Spot prices for DRAM recently decline, cites forecast of weaker demand; notes data from DRAMeXchange - Yonhap
WEDS 9/1 (HK) Macau Aug Casino Rev (MOP): 4.44B v 8.4B prior; Y/Y: 234% v 176%e *(EU) EURO ZONE JULY UNEMPLOYMENT RATE: 7.6% V 7.6%E (EU) European Securities and Markets Authority (ESMA): With current high valuations, markets face possibly significant corrections - financial press (CN) China President Xi: China facing significantly more risks and challenges CPB Reports Q4 $0.55 v $0.47e, Rev $1.87B v $1.82Be; Guides init FY22 organic sales ~ flat, EBIT down -8% to -4% BF.B Reports Q1 $0.40 v $0.40e, Rev $906M v $852Me; Cuts FY22 margins outlook citing higher input costs related to agave, transportation costs, and commodity prices *(US) AUG ADP EMPLOYMENT CHANGE: +374K V +638KE (DE) Germany Health Min Spahn: calls on China to cooperate with resolving the Covid pandemic *(US) AUG FINAL MARKIT MANUFACTURING PMI: 61.1 V 61.2E (confirms 14th consecutive month of expansion) *(US) AUG ISM MANUFACTURING: 59.9 V 58.5E; PRICES PAID: 79.4 V 84E *(US) DOE CRUDE: -7.2M V -3ME; GASOLINE: +1.3M V -1.5ME; DISTILLATE: -1.7M V 0ME (Crude stocks fall to lowest since Sept 2019) OPEC+ producers confirm agree to keep production road map of 400K bpd capacity increase in Oct COST Reports Aug total SSS +9.1% (ex-gas and FX) GOOGL DOJ reportedly preparing antitrust lawsuit over ad technology business; Would be a second separate antitrust suit against Google - press AAPL To make update to App Store that will close investigation by the Japan Fair Trade Commission
THURS 9/2 AAPL Said to be in talks with Japan and South Korea suppliers for new Apple Car; Could start mass production of Apple Cars in partnership with Kia Motors by 2024 - press DAI.DE CEO: Q3 vehicle sales to be below Q2 level due to semi-conductor chip shortage (CN) China said to strengthen review of game content, following play time limits last week - press *(US) Q2 FINAL NONFARM PRODUCTIVITY: 2.1% V 2.5%E; UNIT LABOR COSTS: 1.3% V 0.9%E (US) Atlanta Fed GDPNow: Cuts Q3 GDP forecast to 3.7% from 5.3% (US) Sen Manchin (D-WV): Senate should hit 'pause' on the $3.5T spending plan - comments in WV DOCU Reports Q2 $0.47 v $0.39e, Rev $511.8M v $482Me; Raises FY22 outlook AVGO Reports Q3 $6.96 v $6.88e, Rev $6.78B v $6.76Be ALK Discloses bookings trends have deteriorated moderately; Cuts Q3 load factor 79-81% (prior 82-85%) - filing (JP) Japan PM Suga said to not stand for re-election in leadership election and has indicated intent to resign - financial press
FRI 9/3 (JP) Japan PM Suga confirms will not run for LDP Leadership (DE) Germany Health Min Spahn: must make sure the health system is not overloaded (TR) Turkey Aug CPI M/M: 1.1% v 0.7%e; Y/Y: 19.3% v 18.8%e *(FR) FRANCE AUG FINAL PMI SERVICES: 56.3 V 56.4E (confirms 5th straight expansion) *(DE) GERMANY AUG FINAL PMI SERVICES: 60.8 V 61.5E (confirms 4th month of expansion) *(UK) AUG FINAL PMI SERVICES: 55.0 V 55.5E (confirms 6th month of expansion) *(EU) EURO ZONE JULY RETAIL SALES M/M: -2.3% V 0.0%E; Y/Y: 3.1% V 4.5%E *(US) AUG UNEMPLOYMENT RATE: 5.2% V 5.2%E *(US) AUG CHANGE IN NONFARM PAYROLLS: +235K V +725KE (below lower-end of analyst expectations) *(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.6% V 0.3%E; Y/Y: 4.3% V 3.9%E (US) AUG ISM SERVICES INDEX: 61.7 V 61.7E