Sunday, October 24, 2021

Markets remain calm as central banks take steps to unwind stimulus with a backdrop of rising inflation

TradeTheNews.com 

 Weekly Market Update: Markets remain calm as central banks take steps to unwind stimulus with a backdrop of rising inflation

2021-10-22T16:14:52.097

US stock markets rode winning streaks this week to new all-time highs for both the Dow and S&P. Boosted in part by strong Q3 earnings reports, while shaking off concerns about inflation and supply-chain problems that have threatened the post-pandemic economic recovery. Volatility edged lower as investors looked to add risk while continuing to migrate away from US Treasuries. The CBOE Volatility Index closed at 15.01 Thursday, its lowest close since February 2020. Bitcoin surged above $66K for the first time ever before backing off late in the week, marking the launch of the first Bitcoin futures ETF. Crude prices continued to march higher hitting fresh 7-year highs fanning inflation worries.

Inflation remained the key theme in both earnings conference call discussions and for Central bankers globally. Implied market inflation expectations rose noticeably. The US 10-year TIPS break-even rate moved above 2.6%, its highest level since 2011, and well above the Federal Reserve’s long-run inflation target. The five-year break-even tested 3.0% for the first time ever, prompting one Fed official to opine they preferred survey based inflation expectation indicators over market based ones. Meanwhile, central bankers continue to take steps toward unwinding their massive stimulus programs. The Russian Central Bank raised rates 75bps and debated going by 100bps, which was more than expected to fight what they referred to as potentially “dangerous” inflation situation. Market watchers are looking for the UK central bank to raise rates next month as the BOE’s chief economist said that November is a “live” meeting and forecasted inflation to rise to 5% or even slightly higher. Stocks dipped midway through Friday’s session after Fed Chairmen Powell all but confirmed tapering would start next month while acknowledging they will react if they see serious risks of higher inflation expectations. The US curve continued to flatten as traders brought forward rate liftoff expectations for next year. For the week, the S&P gained 1.6%, the DJIA added 1.1%, and the Nasdaq rose 1.3%.

In corporate news this week, earnings season shifted into high gear and results have been largely positive, with JPMorgan noting almost 9 out of 10 companies have beaten expectations so far. Netflix profits came in higher than anticipated, adding more users than predicted amid the global appetite for drama series ‘Squid Game.’ Tesla successfully navigated rough supply chain waters to notch another record quarterly profit amid an uptick in EV sales in China. American Express stock was boosted after the credit card company reported stronger than expected profit as more of its customers dine out.

Notable earnings misses included IBM, which saw shares fall after its 3Q revenues missed consensus as the tech giant struggled with its cloud business and a slowdown in client spending. Intel also moved lower on weaker than expected revenue, blaming supply shortages for its PC division struggles. Snap shares had their biggest ever one-day decline, falling back almost 25% after the social media platform posted disappointing results and guidance, warning that it expects growth to slow because changes to the Apple iOS have crimped its ad business. Twitter and Facebook fell in sympathy ahead of their earnings next week.


SUN 10/17
Z Reportedly paused purchasing US houses as it is now working through a backlog of properties already acquired in its pipeline - press
(UK) BOE Gov Bailey: have already signaled that we will have to act to fight inflation; Action to come in our monetary policy meetings
3333.HK Will officially be in default on Oct 23rd, the end of grace period on first non-payment
(CN) China PBOC Gov Yi Gang: China is able to contain risk from Evergrande; Domestic economy is doing well, but faces challenges such as default risks for certain firms due to mismanagement
(CN) China has tested its first hyper-sonic missile with nuclear capabilities in August - FT

MON 10/18
STLA.IT Forms JV with LG Energy to build 40GW factory in NA, planning to invest €30B through 2025 in electrification and software development
(CN) China Foreign Ministry spokesman Zhao Lijian: recent test was not a missile but a spacecraft test
(UK) UK reported +45,140 new coronavirus cases (biggest daily increase in 3 months)
GAZP.RU Natural gas exports to non-CIS countries at 152.2B CM between Jan and mid-Oct
*(US) OCT NAHB HOUSING MARKET INDEX: 80 V 75E (highest since July)
STLD Reports Q3 $4.96 v $0.51 y/y, Rev $5.09B v $2.33B y/y
(HK) Macau Q3 Casino Rev (MOP) 5.96B, +155% y/y; Mass Market gaming Rev 12.8B, +403% y/y
BHP.AU Reports Q1 Waio Iron Ore Production: 70.6Mt v 74.0Mt y/y; Shipments 70.8Mt v 71.0Mte
(US) FDA reportedly will allow 'mix and match' vaccine booster regimens - NY Times

TUES 10/19
(CN) Zhuhai, China lifts quarantine requirement for people traveling from Macau, effective today - press
(FR) France said to set a two-week deadline for Britain and Jersey to give French fisherman more licences or risk retaliatory measures - financial press
(DE) German day-ahead baseload power price at €61.0/MWH v €152.5/MWh d/d
(RU) Russia govt said to have signaled no extra gas for Europe without Nord Stream 2 approval
JNJ Reports Q3 $2.60 v $2.37e, Rev $23.3B v $23.6Be
HAL Reports Q3 $0.28 v $0.28e, Rev $3.86B v $3.93Be; Says it sees a multi-year upcycle unfolding with increased demand for its services
TRV Reports Q3 $2.60 v $2.04e, Rev $8.81B v $8.52Be
PM Reports Q3 $1.58 v $1.54e, Rev $8.12B v $7.85Be; Sees device constraints could persist into H1 2022, with temporarily lower IQOS user growth rates
AVIR Phase 2 MOONSONG trial evaluating AT-527 in the outpatient setting did not meet the primary endpoint in in reducing virus in mild to moderate COVID-19 in overall study population; Now anticipate Phase 3 MORNINGSKY data in 2H22
PG Reports Q1 $1.61 v $1.59e, Rev $20.3B v $19.8Be
MAN Reports Q3 $1.93 adj v $1.90e, Rev $5.14B v $5.30Be
KSU Suspending previously provided guidance due to lack of visibility on impact of auto plant shutdowns, Lazaro Cardenas service interruptions, and refined fuel product supply chain disruptions - earnings slides
(US) SEC Chair Gensler: Bitcoin futures have been regulated by CFTC for 4 -years now and major reason we felt comfortable allowing an ETF to begin trading - CNBC
(CN) Reportedly China to scale down test of property tax plan after Pres Xi saw largely negative feedback and resistance from within the Party - press
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +2.2% v +0.0% prior
(US) Atlanta Fed GDPNow: cuts Q3 GDP forecast to 0.5% from 1.2%
EAT Reports prelim Q1 $0.34 v $0.69e, Rev $859.6M v $877Me amid COVID surge
*(CN) CHINA SEPT NEW HOMES PRICES M/M: -0.1% V +0.2% PRIOR; Y/Y: 3.8% V 4.2% PRIOR (first decline since 2015)
FB Reportedly to change its name this week to better reflect its focus on building the metaverse - The Verge
NVAX According to internal sources methods used to test the purity of COVID vaccine have fallen short of regulators’ standards and has not been able to prove that it can produce a shot that is consistently correct - Politico
(PR) Puerto Rico House of representatives approves bill to restructure debt, Senate to vote on measure Thursday

WEDS 10/20
2354.TW Chairman Yong Liu: To set up EV plants in Europe, India and South America by 2024
(UK) Road Haulage Association: UK supply chain crisis to last until at least 2023; Truck driver shortages looking to continue for another year - FT
ASML.NL Reports Q3 Net €1.74B v €1.6B y/y, Rev €5.24B v €5.27Be; Raises Quarterly dividend 12.3% to €1.80 from €1.603 (indicated yield 0.9%); Sees chip shortage continuing into 2022
ROG.CH Reports Q3 (CHF) Rev 16.0B v 15.5Be; Raises FY21 outlook
NESN.CH Reports 9M (CHF) Rev 63.3B v 62.9Be; Raises FY21 Organic Rev outlook
*(UK) SEPT CPI M/M: 0.3% V 0.4%E; Y/Y: 3.1% V 3.2%E (2nd month above target)
(DE) German day-ahead baseload power price at €45.0/MWh v €61.0/MWh d/d v €152.5/MWh prior
NESN.CH CEO: sees inflation situation to worsen - post earnings comments
(CN) Chinese property developer Sinic Holdings Group Co's said to have officially defaulted after interest payment missed on Oct 18th - press
*(DE) ECB’S WEIDMANN (HAWK, GERMANY) SUBMITTED RESIGNATION FROM BUNDESBANK CITING PERSONAL REASONS; EFFECTIVE AT END-2021
*(EU) EURO ZONE SEPT FINAL CPI Y/Y: 3.4% V 3.4%E; CPI CORE Y/Y: 1.9% V 1.9%E
MU Announces over $150B in global manufacturing and R&D investments over next 10 years to meet demand; Sees chip shortage could remain until 2023
BIIB Reports Q3 $4.77 v $4.15e, Rev $2.78B v $2.68Be; Raises FY21 outlook assuming minimal ADUHELM Rev in 2021, ramping thereafter
ABT Reports Q3 $1.40 adj v $0.92e, Rev $10.9B v $9.48Be; Raises FY21 guidance
MGA Cuts FY21 Rev $35.4-36.4B (prior $38.0-39.5B) citing declines in anticipated 2021 light vehicle production; Notes a provision on engineering service contracts with Evergrande
RNO.FR Said to produce at least 300K fewer vehicles in 2021 (prior anticipated ~220K fewer) due to chip shortage - press
BPOP Reports Q3 $3.09 v $2.00 y/y, Rev $658.7M v $589.8M y/y
(US) CDC Director Walensky: There is no sign that AY4.2 COVID variant affects the efficacy of vaccine shots; New AY4.2 variant has been found in the US but not in any clusters
KNX Reports Q3 $1.30 v $1.07e, Rev $1.64B v $1.55Be; Raises guidance
*(US) DOE CRUDE: -0.4M V +1ME; GASOLINE: -5.4M V -1ME; DISTILLATE: -3.9M V -1ME
(US) TREASURY $24B 20-YEAR BOND REOPENING DRAWS 2.100%, BID-TO-COVER 2.25 v 2.36 PRIOR
TSLA Reports Q3 $1.86 v $1.35e, Rev $13.8B v $13.2Be; Continues to ramp up Gigafactory Shanghai; Still expect final permit approval for Gigafactory Berlin by end-2021
MRNA Moderna and JNJ Covid vaccine booster shots receive FDA approval; EUA's amended to permit “mix and match”
HPQ Guides initial FY22 $4.07-4.27 v $3.74e, FCF 'at least' $4.5B - investor day
MRNA Confirms FDA authorization of a booster dose of COVID-19 vaccine (mRNA-1273 "Spikevax") in the U.S.

THURS 10/21
SAP.DE Reports final Q3 €1.74 v €1.32 y/y, adj EBIT €1.25B v €1.47B y/y, Rev €6.85B v €6.54B y/y
UNA.NL Reports Q3 Rev €13.5B v €12.9B y/y; Sees cost inflation to continue into 2022
UNA.NL CFO: we think inflation to continue in the rest of 2021 and into 2022; Expect next year '22 inflation to be higher y/y - post earnings comments
(DE) German day-ahead baseload power price at €69.0/MWh v €45.0/MWh d/d
(RU) Moscow confirms lockdown measures from Oct 28th to Nov 7th due to COVID-19 situation - press
(TW) Reportedly automotive IDMs plan 10-20% price increases for their chips starting 2022 - DigiTimes
DOW Reports Q3 $2.75 v $2.59e, Rev $14.8B v $14.4Be; Sees robust end-market demand that is expected to extend into 2022
DWAC Confirms Trump Media to go public through SPAC transaction with Digital World Acquisition Corp valued at EV of $875M
T Reports Q3 adj $0.87 v $0.78e, Rev $39.9B v $40.5Be
DOW Guides Q4 Rev ~$14.0-14.5B v $13.6Be - earnings slides
LUV Reports Q3 -$0.23 v -$0.27e, Rev $4.68B v $4.55Be; In OCT bookings for holiday travel trending in-line with 2019 levels
VLO Reports Q3 $1.22 v $0.87e, Rev $29.5B v $26.0Be
PFE Phase 3 trial data shows high efficacy of a booster dose of their COVID-19 vaccine; 95.6% against disease during a period when Delta was the prevalent strain
SON Reports Q3 $0.91 v $0.90e, Rev $1.42B v $1.39Be; Projects certain raw materials, energy, freight, packaging and other costs pressures will continue well into 2022
*(TR) TURKEY CENTRAL BANK (CBRT) CUTS ONE-WEEK REPO RATE BY 200BPS TO 16.00%; MORE-THAN-EXPECTED
NUE Reports Q3 $7.28 v $7.46e, Rev $10.3B v $10.1Be; Current demand trends expected to continue "well into" 2022
AMZN (US) Consumer Financial Protection Bureau (CFPB) said to probe Facebook, Amazon, Apple, Google and other firms over their consumer data practices - press
*(US) INITIAL JOBLESS CLAIMS: 290K V 297KE (new post-pandemic low); CONTINUING CLAIMS: 2.48M V 2.55ME
WMT CEO: Wage rates are going to keep rising - investor conf comments
AMZN Launches new local selling capabilities to help small businesses grow by reaching more customers in their area
INTC CEO: Semiconductor shortage will continue until 2023
GOOGL Reportedly plans to cut commissions from subscriptions on Play Store to 15% from 30%, beginning Jan 1st - press
(US) Fed to limit active trading and have timelier reporting of trades for Fed officials
INTC Reports Q3 $1.71 v $1.11e, Rev $18.1B v $18.2Be
MRNA (US) CDC Advisory Committee on Immunization Practices (ACIP) votes (15 yes; 0 No), in favor of Moderna COVID-19 Vaccine (mRNA-1273 "Spikevax") for use under EUA as a booster dose
*(AU) RBA OFFERS TO BUY A$1.0B IN GOVT SECURITIES IN UNSCHEDULED OPERATIONS (1st purchase since Feb to defend Yield Curve)
3333.HK *SAID TO HAVE PAID $83.5M IN INTEREST DUE ON SEPT 23RD; GRACE PERIOD WOULD HAVE ENDED ON OCT 23RD - China Securities Times

FRI 10/22
AAPL Reportedly Apple's EV battery talks with CATL and BYD mostly stalled; Now considering to partner with Panasonic - press
*(FR) FRANCE OCT PRELIMINARY PMI MANUFACTURING: 53.5 V 54.0E (11th month of expansion and lowest reading since Jan 2021)
*(DE) GERMANY OCT PRELIMINARY PMI MANUFACTURING: 58.2 V 56.6E (16th month of expansion and lowest reading Jan 2021)
*(EU) EURO ZONE OCT PRELIMINARY PMI MANUFACTURING: 58.5 V 57.1E (16th month of expansion but lowest reading Feb 2021)
*(UK) OCT PRELIMINARY PMI MANUFACTURING: 57.7 V 56.0E (17th straight expansion)
3333.HK Main unit Hengda Exec: no significant progress in Evergrande asset sales, cannot guarantee it will be able to continue to meet financial obligations under contracts
HON Reports Q3 $2.02 adj v $2.01e, Rev $8.47B v $8.72Be; Cuts FY21 Rev outlook for 1st time citing persistent effects of the macro-challenged environment
SON Sonoco-Alcore to increase Tube & Core Prices in the EMEA Region by €50/£50 per ton due to continued inflationary pressure
SLB Reports Q3 $0.36 adj v $0.36e, Rev $5.85B v $5.94Be; Sees Q4 as another quarter of growth; Expect to close 2021 with strong momentum
VFC Reports Q2 $1.11 adj v $1.17e, Rev $3.20B v $3.50Be; Raises Quarterly dividend 2% to $0.50/shr
HCA Reports Q3 $4.57 (adj) v $4.10e, Rev $15.3B v $14.6Be; Raises guidance
(RU) Russia Central Bank (CBR) Gov Nabiullina: We may consider raising rate again by 100bps; Inflation situation potentially dangerous; No signs of easing inflationary pressures in Oct - post rate decision press conference
STX Reports Q1 $2.35 v $2.21e, Rev $3.12B v $3.10Be; Raises Quarterly dividend 4.5% to $0.70 from $0.67 (indicated yield 3.4%)
*(US) OCT PRELIMINARY MARKIT PMI MANUFACTURING: 59.2 V 60.5E (16th consecutive month of expansion)
(US) Fed Chair Powell: Fed on track to begin taper and complete it by mid-2022; Will raise rates if we see serious risks of higher inflation expectations - SARB virtual event
(US) SEPT MONTHLY BUDGET STATEMENT: -$62B V -$60BE