Sunday, November 7, 2021

Animal spirits continue to outweigh fears of stagflation

TradeTheNews.com 

Weekly Market Update: Animal spirits continue to outweigh fears of stagflation

2021-11-05T16:10:09.183

Stock markets were already riding a wave of momentum and this week’s developments only added to investors’ willingness to take on risk. On Wednesday, the Fed delivered on the long promised tapering announcement, but investors clearly still favored the belief that the bond-buying program and low interest rates will continue to provide accommodation. The next day the Bank of England surprised some analysts by deciding to hold rates steady, though three hawkish members of the MPC Board dissented. Both Fed Chairman Powell and BOE Governor Bailey emphasized they were sensitive to the burden that rising prices put on segments of society least equipped to deal with it, but again played down the prospect of an imminent turn to raising interest rates. Each reiterated their stance still holds that much of the inflation coming through the pipe will ultimately be viewed as transitory, but also acknowledged it remains unclear when supply shocks will subside, allowing prices to move back down. Rates moved lower globally. The US 10-year yield dipped to its lowest level in more than a month, back below 1.50%. Market-implied 2022 central bank rate hike expectations came in only marginally despite the rally in sovereign bond markets. Central bankers in Poland and the Czech Republic showed more concern about inflation and took aggressive action, each raising rates by more than analysts expected.

Friday’s news that Pfizer’s oral antiviral candidate reduced risk of hospitalization or death from COVID by 89% further invigorated animal spirits. Also, October payroll data was a pleasant surprise, with strength seen across a broad number of industries. Nonfarm payrolls rose by 531K in the latest month and saw a 235K upward revision to August and September job gains. Payrolls have now reversed 85% of their initial pandemic losses. The S&P surged above 4,700 and the NASDAQ composite topped 16K for the first time ever. The VIX spent much of the week hovering near 15, just above multi-year lows. WTI crude lost ground heading into another OPEC+ meeting where producers agreed to stay on course by easing their coordinated cuts by another 400K bpd in December. Crude oil prices moved up after the announcement amid jawboning by the Biden Administration, which clearly remains frustrated by the elevated levels. Meanwhile Congressional Democrats continued to wrangle over the infrastructure and reconciliation bills. For the week, the S&P gained 2%, the DJIA added 1.4%, and the Nasdaq was up 3.1%.

In corporate news this week, Google said it would invest $1B into CME Group as part of a 10-year partnership to improve the global derivatives markets through cloud adoption. Moderna shares were battered by an FDA delay to its vaccine EUA request, a poor earnings report, and news of the Pfizer COVID oral antiviral treatment. Bed Bath and Beyond was buoyed after launching a shift in its business model including a collaboration with Kroger. Peloton slashed its outlook and profitability forecast, though it said it still expects to have positive adjusted EBITDA in 2023. Uber posted its first ever quarter of positive adjusted EBITDA and the CEO gave an upbeat outlook, though the ride-share giant reported a larger than expected net losses due to its investment in Didi.

DuPont said it plans to acquire engineered materials and components manufacturer Rogers Corp for $5B, a move to bolster DuPont's existing electronics and industrial business. Coca-Cola confirmed it would acquire the remaining 85% stake in sports drink maker BodyArmor for $5.6B in cash. Tesla CEO Musk rebuffed earlier reports of a deal with Hertz, saying they have yet to reach agreement with the rental car company over the timing of potential vehicle deliveries. On the supply chain front, the CEO of global logistics company Expeditors said he didn’t foresee a meaningful reduction in cargo and port backlogs for at least the rest of the year and that he expects current conditions likely to last well into 2022.


SUN 10/31
MRNA Confirms US FDA requires additional time to complete assessment of EUA request for use of COVID-19 vaccine ("Spikevax", mRNA-1273) at 100 µg dose level in adolescents 12 to 17 years of age due to risk of myocarditis and indicates review may not be completed before Jan 2022
GFS CEO: company's semiconductor chip capacity sold out through end-2023
(US) Goldman Sachs analysts now see Fed to hike interest rates in July 2022 (prior saw in Q3 2023) due to inflation concerns
*(CN) CHINA OCT MANUFACTURING PMI (GOVT OFFICIAL): 49.2 V 49.7E (2nd consecutive contraction)
(CN) China President Xi campaign to reduce the burden of homework and after school tuition for Chinese kids is creating a boom for sports and arts clubs, with 33.0K new arts and sports schools being created

MON 11/1
(HK) Macau Sept Casino Rev (MOP) 4.37B v 5.88B prior; Y/Y +57.3% v 165.9% prior
RYA.UK CEO O'Leary: Raises FY22 passengers 102-103M (prior 90-100M); Sees load factors rising up towards 90% this winter - post earnings comments
(DE) German day-ahead baseload power price at €210.0/MWh +158% d/d
(CN) Global Times' Hu Xijin: Reunification of Taiwan island is inevitable, the most important thing is not the timetable, but at which point and in which specific way the reunification will be most beneficial to China's overall national strategy.
*(US) OCT MARKIT FINAL MANUFACTURING PMI: 58.4 V 59.2E
*(US) OCT ISM MANUFACTURING: 60.8 V 60.5E; PRICES PAID: 85.7 V 82.0E
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 8.2% from 6.6%
(US) Treasury quarterly financing estimates: to borrow $1.02T in Oct-Dec quarter v $830Be (prior estimate to borrow $703B)

TUES 11/2
BP.UK Reports Q3 adj Net $3.32B v $3.0Be, Rev $37.9B v $26.3B y/y; Further $1.25B share buyback planned
MAERSKB.DK CEO: high rates will continue through Q1 2022 - post earnings comments
ROG Confirms to be acquired by DuPont for $277/shr in ~$5.2B deal; DuPont announces intent to divest a substantial portion of its Mobility & Materials segment
PFE Reports Q3 $1.34 v $1.08e, Rev $24.1B v $22.4Be
GPN Reports Q3 $2.18 v $2.14e, Rev $2.20B v $1.99Be
EXPD Reports Q3 $2.12 v $1.67e, Rev $4.32B v $3.45Be; CEO - Doesn't foresee a meaningful reduction in cargo, port backlogs
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +4.3% v +2.2% prior
(US) Sen Maj Leader Schumer: An agreement has been reached on lowering prescription drug costs
TMUS Reports Q3 $0.55 v $0.54e, Rev $19.6B v $20.1Be
Z Reports Q3 GAAP Net -$328M v +$39.6M y/y, Rev $1.74B v $2.01Be; Confirms plan to wind down Zillow Offers operations; will take several quarters and cut workforce by approximately 25%
MDLZ Reports Q3 $0.71 v $0.70e, Rev $7.18B v $7.04Be
BBBY Kroger collaborates with Bed Bath & Beyond Inc. on a national e-commerce experience and in-store pilot to expand Kroger's Home and Baby Offering
(CN) China increases development of subsidized rental housing - Chinese press
(US) Republican Glenn Youngkin projected to win in the Virginia Governor's race
DE Striking workers Rejected tentative 6-year labor agreement; 55% of workers voted against the agreement - US financial press

WEDS 11/3
(TR) Turkey Oct CPI M/M: 2.4% v 2.8%e; Y/Y: 19.9% v 20.4%e
FUN Reports Q3 $2.60 v $2.19e, Rev $753.4M v $643Me; Demand remains strong through October Halloween events
BMW.DE CFO: sees more disruption from chip shortage in Q4; Does not expect short-term magnesium shortage to affect production - post earnings comments
*(UK) OCT FINAL PMI SERVICES: 59.1 V 58.0E (confirms 8th month of expansion)
*(EU) EURO ZONE SEPT UNEMPLOYMENT RATE: 7.4% V 7.4%E
CVS Reports Q3 $1.97 v $1.79e, Rev $73.8B v $70.2Be; Raises guidance
(RU) Moscow mayor confirms lockdown measures to be ended on Sunday, Nov 7th due to stabilization in COVID-19 situation - press
WBA To provide Pfizer COVID-19 Vaccines to Children Ages 5 to 11 at Select Stores Nationwide Beginning Saturday, Nov 6th
*(US) OCT ADP EMPLOYMENT CHANGE: +571K V +400KE; Job gains are accelerating across all industries
RFL European Medicines Agency grants Orphan Drug Designation to Unit Rafael Pharmaceuticals’ CPI-613 (Devimistat) for treatment of patients with relapsed or refractory Burkitt's lymphoma
*(US) OCT ISM SERVICES INDEX: 66.7 V 62.0E (record high since 1997)
*(US) DOE CRUDE: +3.3M V +1.5ME; GASOLINE: -1.5M V -1.5ME; DISTILLATE: +2.2M V -1ME
(US) DOD report warns China's nuclear stockpile is outpacing forecasts; China may have least 1K warheads by 2030 - press
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); TAPER TO START IN NOVEMBER WITH MONTHLY REDUCTIONS OF $15B
COST Reports Oct total SSS +11.8% (ex-gas and FX) y/y
(US) New Jersey re-elects Murphy (D) as Gov (1st time a Democratic Gov has been re-elected since 1977)
2282.HK Reports Q3 (HK$) adj EBITDA 100.5M v -730.6M y/y; Rev 2.25B v 363.2M y/y
386.HK Signs 20-year agreement for 4.0Mt/year purchase from US Venture Global LNG valued at $30B

THURS 11/4
7203.JP Reports H1 Net ¥1.52T v ¥629.4B y/y; Op ¥1.75T v ¥520.0B y/y; Rev ¥15.5T v ¥11.4B y/y; Announces share buyback for ¥150B (0.86% of shares)
CSGN.CH Reports Q3 (CHF) Net 434M v 546M y/y, Rev 5.44B v 5.20B y/y; Investment Bank unit plans to exit prime services
NOVN.CH To divest 53.3M Roche bearer shares (~33% stake) at CHF356.93/shr for ~$20.7B; Roche affirms FY21 outlook and aiming at increasing the dividend in CHF for 2021
*(FR) FRANCE OCT FINAL PMI SERVICES: 56.6 V 56.6E (confirms 7th straight expansion)
*(DE) GERMANY OCT FINAL PMI SERVICES: 52.4 V 52.4E (confirms 6th month of expansion)
880.HK Reports Q3 (HKD) Net -1.25B v -1.03B y/y, Rev 2.41B v 879M y/y
CI Reports Q3 $5.73 v $5.23e, Rev $44.3B v $43.0Be; Raises FY21 outlook
ABC Reports Q4 $2.39 v $2.36e, Rev $58.9B v $56.7Be; Raises Quarterly dividend 4.5% to $0.46 from $0.44 (indicated yield 1.43%)
MRNA Reports Q3 $7.70 v $8.96e, Rev $5.0B v $6.05Be; Announces share buyback of up to $1B over 2 years; Sees some international shipments and exports may shift vaccine deliveries to early 2022
FAST Reports Oct net sales $531.6M +8.9% y/y
*(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED
K Reports Q3 $1.09 v $0.94e, Rev $3.62B v $3.53Be
*(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: -5.0% V -3.1%E; UNIT LABOR COSTS: 8.3% V 7.0%E
*(US) INITIAL JOBLESS CLAIMS: 269K V 275KE (new post-pandemic low); CONTINUING CLAIMS: 2.11M V 2.15ME
(UK) BOE Gov Bailey: Cautions on the scale of rate rises seen in market; Inflation peak is materially higher than estimated in Aug - post rate decision press conference
CME Signs 10-year partnership with Google Cloud to transform global derivatives markets through cloud adoption
OPEC+ JMMC reportedly supports no change to OPEC policy - Energy Intel's Bakr
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 8.5% from 8.2%

FRI 11/5
PFE Novel COVID-19 oral (pill) antiviral treatment candidate (PAXLOVID) reduced risk of hospitalization or death by 89% in interim analysis of Phase 2/3 EPIC-HR study; First oral antiviral of its kind
(UK) RTE Connelly tweets: growing expectation that the UK will trigger Article 16; Much more intense discussion in the European Commission about how the EU should respond
*(EU) EURO ZONE SEPT RETAIL SALES M/M: -0.3% V 0.2%E; Y/Y: 2.5% V 1.5%E
DKNG Reports Q3 -$0.82 v -$1.11e, Rev $213M v $225Me
*(US) OCT CHANGE IN NONFARM PAYROLLS: +531K V +450KE
*(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.4%E; Y/Y: 4.9% V 4.9%E
(JP) The economic stimulus plan being considered by Japan govt is reportedly around ¥35T ($308B) - Nikkei
(US) SEPT CONSUMER CREDIT: $29.9B V $16.0BE