Weekly Market Update: Pandemic pressures put markets off balance
Equity markets took a breather this week, digesting recent gains and absorbing fresh commentary about the effects of the Delta Covid wave from various corporate and government leaders. Meanwhile inflation data came in slightly hotter than expected with the August PPI one tenth higher than expected at 8.3% y/y. President Biden announce more big initiatives including expanding vaccine mandates and a goal for vastly increasing solar electricity production over 30 years. China continued its campaign to tighten the screws on domestic companies that operate or trade globally, but a bilateral teleconference between Biden and Xi injected some hope that Sino-American relations can get on a more constructive track. Gulf of Mexico oil operations continue to slowly get back online, though about two-thirds of oil production in the Gulf remained shut as of Friday. Crude oil prices remained in a tight range for the week, holding within striking distance of $70/bbl, while Friday’s WASDE crop report showed higher corn and soybean stocks than expected, creating some marked volatility in soft commodities. As expected, the ECB announced a modest slowdown in its bond purchase program, but ECB chief Lagarde insisted that the move was a recalibration of stimulus and not tapering. The US dollar was modestly higher on the week and gold was more than 2% lower. For the week, the S&P fell 1.7%, the DJIA lost 2.2%, and the Nasdaq slipped 1.6%.
In a series of financial conferences and disclosures this week, executives across many industries noted continued inflationary pressures from pandemic related supply chain shortages and costs linked to Covid mitigation efforts. Notably, Tyson Foods said it plans to boost beef prices amid high demand and labor shortages. Major airlines warned that the Delta variant would temper the industry’s near-term outlook, as travel bookings decelerate and cancellations rise. The news wasn’t much sunnier on the automakers’ side: Daimler estimated that the semiconductor shortage could last throughout next year and into 2023, while Toyota again cut its FY21 production guidance and GM extended the shutdown of one Michigan plant following a Chevy Bolt recall announcement. PPG guided production lower for Q3 due to increasing disruptions in commodity supplies. Apple shares dropped on Friday afternoon after a judge struck down some of its in-app payment rules as part of the ruling in its dispute with Epic Games.
SUN 9/5 (CN) China regulators to tighten supervision on financial services industry and electric vehicles - press
MON 9/6 DAI.DE Exec: Chip shortage could last throughout next year and into 2023 - Munich show comments
TUES 9/7 DTE.DE Tele2 and Deutsche Telekom divest T-Mobile Netherlands to the Apax funds and Warburg Pincus for €5.1B 7203.JP Exec: Sees investment related to development of battery supply system and R&D to be ~¥1.5T by 2030; plans to use solid-state batteries in hybrid EVs *(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: 31.9 V 34.0E; EXPECTATIONS SURVEY: 26.5 V 30.5E *(EU) EURO ZONE Q2 FINAL GDP Q/Q: 2.2% V 2.0%E; Y/Y: 14.3% V 13.6%E MAERSKB.DK CEO: Consumer demand must ease to end supply chain crisis - FT interview FAST Reports Aug net sales $531.1M +14.2% y/y PPG Expects Q3 sales volume lower by $225-275M versus expectations, withdraws guidance; Sales volumes impacted by the increasing disruptions in commodity supplies (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +4.0% v +0.3% prior INTC CEO: planning to make European chip plant investment valued as high as €80B - Munich Car Forum comments COIN CEO tweets: SEC wants to sue company over lending practices; Served with Wells Notice on Sept 1st
WEDS 9/8 (EU) ECB's Holzmann (Austria; hawk): sees potential significant upside inflation risks; could be able to normalize policy sooner than previously thought (US) Pres Biden to announce plan to shift nation's electricity production to 45% solar (from 4% currently) by 2050 - NYT *(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED, maintains QE bond buying at $2.0B/week *(US) TREASURY'S $38B 10-YEAR NOTE REOPENING DRAWS 1.338%; BID-TO-COVER RATIO: 2.59 V 2.39 PRIOR AND 2.41 OVER THE LAST 8 REOPENINGS *(US) JULY CONSUMER CREDIT: $17.0B V $25.0BE CVX Chevron and Caterpillar enter collaboration agreement on hydrogen LULU Reports Q2 $1.65 v $1.21e, Rev $1.45B v $1.33Be; Raises guidance TSN To increase beef prices; Rejects conclusions drawn by Whitehouse
THURS 9/9 (US) Reportedly ~80% of US oil and gas production in the Gulf of Mexico still remains offline because of Hurricane Ida impact - US financial press F Confirms Ford India to cease manufacturing vehicles for sale in India immediately; Sees pretax charge of ~$2.0B in following years; Plans to expand its Business Solutions team in India significantly UAL Cuts Q3 Rev -33% v Q3'19, Capacity -28% v Q3'19 (prior -26%) citing deceleration in customer bookings for travel in last few weeks - filing LUV Cuts again Q3 outlook citing softness in bookings and elevated trip cancellations, especially close-in; Aug and Sept trends make it difficult for company to be profitable in Q3 - filing (JP) Japan PM Suga reportedly will be running in upcoming general election as a member of Parliament - Japan press *(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED ASO Reports Q2 $1.99 v $2.25 y/y, Rev $1.79B v $1.74Be; Raises guidance *(US) INITIAL JOBLESS CLAIMS: 310K V 335KE (post pandemic low); CONTINUING CLAIMS: 2.78M V 2.73ME (EU) ECB chief Lagarde: Today's decision was unanimous; shift in PEPP is recalibrating stimulus and not tapering - Q&A GM Reportedly extending shut down of Michigan facility follow Bolt recall announcement - press NESN.CH Exec: Likely that input cost inflation will be higher next year than this year - Barc conf comments *(US) DOE CRUDE: -1.5M V -2.5ME; GASOLINE: -7.2M V -3ME; DISTILLATE: -3.1M V -2.5ME (US) Fed's Evans (dove, voter): Not out of the woods yet but in a better place than a year ago (US) Fed's Kaplan (non-voter; hawkish): Supply and demand imbalance may last longer *(US) TREASURY $24B 30-YEAR BOND REOPENING DRAWS 1.910%; BID TO COVER 2.49 V 2.19 PRIOR MSFT Said that Microsoft will indefinitely delay return to office for workers - Press (US) White House issues readout of call between President Biden and China President Xi from Sept 9th; US not seeking specific outcomes or agreements from the call [first call between the 2 leaders since Feb]
FRI 9/10 7203.JP Cuts again FY21 Production guidance 3.2% to 9.0M units (prior 9.3M) citing coronavirus impact in Southeast Asia and parts shortages in Sept and Oct; Cuts Sep and Oct production GAZP.RU CEO: fully completes Nord Stream 2 construction (UA) Ukraine President Zelensky: there is a possibility of a war with Russia; Interested in a substantive meeting with Russian Pres Putin (US) Aug PPI Final Demand M/M: 0.7% v 0.6%e; Y/Y: 8.3% v 8.2%e (US) FDA spokesperson: FDA will follow the science on vaccinations for young children; Hope to be able to have pediatric vaccines available in the coming months (CN) Biden administration reportedly considering a China trade probe in an effort to pressure Beijing govt – press US Judge issues ruling in EPIC Games antitrust lawsuit against Apple; Grants EPIC an injunction