Weekly Market Update: Fed Formally Opens Door to H1 2022 Liftoff Amid Resurgent Covid-19
2021-12-17T16:12:07.433
Equity markets began the week under pressure, in particular, a significant rotation away from tech/growth and the NASDAQ. A plethora of upcoming central bank decisions as well as surging Covid-19 infections had investors on edge. US Treasury yields moved lower and the curve resumed its recent significant flattening trend. Headline PPI was hot with larger-than-expected gains in food and energy, while the core index saw larger-than-expected increases in numerous components, including passenger air fares, core goods, and miscellaneous services. The data only reinforced expectations that a hawkish Fed would speed up taper when the FOMC announced its rate decision on Wednesday.
Chair Powell and the Fed did not disappoint. The FOMC statement doubled the pace of taper to $30B, as expected. Updated SEP projections showed the majority Fed members now expect three rate hikes in 2022 bringing their forecasts in line with futures markets. Powell emphasized the Fed would not raise rates until taper is complete and they also do not expect to stop taper sooner to make room for an earlier liftoff. Markets took the formal hawkish pivot in stride and welcomed the news. Stocks and commodities rose while Treasury yields remained well behaved, within recent ranges. A surprised rate hike by the BOE on Thursday and a decidedly more dovish ECB statement did little to rock the overall boat though equity prices continued to trend lower into options expiration on Friday. For the week the S&P fell 1.9%, the Dow lost 1.7% and the NASDAQ slumped ~3%.
In corporate news this week, FedEx reported solid Q2 earnings and guided higher amid strong demand and an improving labor situation. Oracle was said to be in advanced talks to acquire electronic medical records provider Cerner in a potential $30B deal. Pfizer agreed to acquire Arena Pharmaceuticals for almost $7B, and it plans to accelerate the clinical development of Etrasimod for patients with immuno-inflammatory diseases. Apple reportedly plans to open a new office in California to bring wireless chip production in-house, which could replace certain parts from suppliers Skyworks and Broadcom.
SUN 12/12
PFE Israeli study said to confirm significant protection of Pfizer/BioNTech booster dose against Omicron variant, but lower than the neutralization ability against Delta variant
(FR) France govt said to have drop threat of trade war with UK, after Channel Islands and UK Govt agree to more fishing licenses - press
MON 12/13
ARNA To be acquired by Pfizer for $100/shr valued at $6.7B - filing
(DE) German year-ahead baseload power price rise above €200.00/MWh (1st time ever) following comments from Foreign Min Baerbock on Nord Stream 2
(UK) Health Sec Javid: Expects hospitalizations and deaths to rise dramatically
(HK) Hong Kong Chief Exec Lam: China and Hong Kong officials are currently meeting in Shenzhen about quarantine-free travel plan
1777.HK Denies media report on creditor takeover
TUES 12/14
7203.JP Investing ¥4.0T into battery EVs by 2030 and additional ¥4.0T into new energy vehicles; Targets 3.5M unit sales of EV and Fuel Cell vehicles
(DE) Germany IFO Institute update economic outlook: Forecasts Q4 domestic GDP at -0.5%
PFE According to South African 3-week study based on >211K samples, 2 doses of Pfizer/BioNTech vaccine provide 70% protection against hospitalization, 33% protection against infection during current Omicron wave [prior speculated 22.5% efficacy in another SA study] - press
IBM IBM and Samsung unveil new VTFET semiconductor design utilizing a new vertical transistor architecture that demonstrates a path to scaling beyond nanosheet
PFE Reveals additional Phase 2/3 study results confirming robust efficacy of novel COVID-19 oral antiviral treatment candidate in reducing risk of hospitalization or death
PLUG Partners with Certarus on Green Hydrogen supply and expansion of distribution infrastructure; Plug Power to provide Certarus with 10t/day of green hydrogen with deliveries expected to start in Q1 2022
*(US) NOV PPI FINAL DEMAND M/M: 0.8% V 0.5%E; Y/Y: 9.6% V 9.2%E (highest annual pace on record)
WHO's Ryan: We have a number of weeks before we expect peak of Omicron wave to hit
VIE.FR EU Commission approves acquisition of Suez by Veolia subject to conditions - press
(UK) MPs vote 441 to 41 in favor to expand use of face coverings; 369 to 126 in favor of covid passes for some venues and large events (as expected)
*(CN) CHINA NOV NEW HOMES PRICES M/M: -0.3% V -0.3% PRIOR (3rd straight decline, largest m/m decline since early 2015); Y/Y: 3.0% V 3.4% PRIOR
WEDS 12/15
*(UK) NOV CPI M/M: 0.7% V 0.4%E; Y/Y: 5.1% V 4.8%E (4th month above target and matches highest annual pace since Sept 2011)
7203.JP Planning 800K vehicle production in Jan 2022 v ~800K m/m; Affirms FY21/22 production plan of 9.0M units
SVA According to Hong Kong study, Sinovac vaccine said to provide 'inadequate' protection against Omicron variant - FT (update)
NUE Guides Q4 $7.65-7.75 v $7.63e; Demand in nonresidential construction markets remains strong
LOW Guides initial FY22 $12.25-13.00 v $12.82e, Rev $94-97B v $97.0Be, SSS -3% to flat; Authorizes a new $13B share buyback (7.6% of market cap) to $20B in total - PR ahead of financial outlook call
*(US) DEC EMPIRE MANUFACTURING INDEX: 31.9 V 25.0E
(US) NOV ADVANCE RETAIL SALES M/M: 0.3% V 0.8%E; RETAIL SALES (EX-AUTO) M/M: 0.3% V 0.9%E
*(US) DEC NAHB HOUSING MARKET INDEX: 84 V 84E
(US) Association of American Railroads weekly rail traffic report for week ending Dec 11th: 513.4K total units, -6% y/y
(US) Atlanta Fed GDPNow: cuts Q4 GDP forecast to 7.0% from 8.7%
(US) NY Fed takes $1.62T in RRP program at 0.05%; 85 participating and accepted counterparties (Record high)
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% RANGE; AS EXPECTED; DOUBLES PACE OF TAPER TO $30B PER MONTH; OFFICIALS SEE THREE RATE HIKES IN 2022
*(US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (SEP) FOR DEC
(US) Fed Chair Powell: We will not raise rates until taper is complete; Does not expect to stop taper sooner for earlier liftoff - post-rate decision Q&A
LEN Reports Q4 $4.36 v $4.14e, Rev $8.43B v $8.53Be
THURS 12/16
*(FR) FRANCE DEC PRELIMINARY PMI MANUFACTURING: 54.9 V 55.4E (13th month of expansion)
*(DE) GERMANY DEC PRELIMINARY PMI MANUFACTURING: 57.9 V 57.0E (18th month of expansion)
*(CH) SWISS NATIONAL BANK (SNB) LEAVES KEY RATES UNCHANGED AT -0.75%; AS EXPECTED; Reiterates forward statement
*(EU) EURO ZONE DEC PRELIMINARY PMI MANUFACTURING: 58.0 V 57.8E (17th month of expansion)
*(NO) NORWAY CENTRAL BANK (NORGES) RAISES DEPOSIT RATES BY 25BPS TO 0.50%; AS EXPECTED; Says most likely to raise rates again in Mar 2022
*(UK) DEC PRELIMINARY PMI MANUFACTURING: 57.6 V 57.6E (19th straight expansion)
*(UK) BANK OF ENGLAND (BOE) RAISES BANK RATE BY 15BPS TO 0.25%; NOT EXPECTED (1st hike in 3 years); Reiterates modest tightening in monetary policy is likely
*(UK) BANK OF ENGLAND (BOE) DEC MINUTES: VOTED 8-1 TO RAISE BANK RATE (Tenreyro dissented to keep policy steady)
(RU) Reportedly Russian Central Bank (CBR) seeks to ban investments in cryptocurrencies in Russia - press
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
ADBE Reports Q4 $3.20 v $3.18e, Rev $4.11B v $4.08Be
*(US) NOV HOUSING STARTS: 1.679M V 1.567ME; BUILDING PERMITS: 1.712M V 1.661ME
*(US) DEC PHILADELPHIA FED BUSINESS OUTLOOK SURVEY: 15.4 V 29.6E
*(US) INITIAL JOBLESS CLAIMS: 206K V 200KE; CONTINUING CLAIMS: 1.85M V 1.94ME
(EU) ECB chief Lagarde: Economic momentum has moderated but expected to pick up again - Prepared remarks
*(US) NOV INDUSTRIAL PRODUCTION M/M: 0.5% V 0.6%E; CAPACITY UTILIZATION: 76.8% V 76.8%E
*(US) DEC PRELIMINARY MARKIT PMI MANUFACTURING: 57.8 V 58.5E
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 7.2% from 7.0%
AAPL Reportedly plans new office in California to bring wireless chips in-house; Could replace parts from Skyworks and Broadcom - press
(US) NY Fed takes $1.66T in RRP program at 0.05%; 85 participating and accepted counterparties (Record high)
(UK) Four more Premier League soccer matches postponed in the UK due to COVID outbreak at various clubs - press
FDX Reports Q2 $4.83 v $4.23e, Rev $23.5B v $22.5Be; Adds $5B to buyback plan (8% of market cap)
X Guides Q4 adj EBITDA $1.65B v $2.1Be; Reflects a temporary slowdown in order entry activity
FRI 12/17
*(EU) EURO ZONE NOV FINAL CPI Y/Y: 4.9% V 4.9%E; CPI CORE Y/Y: 2.6% V 2.6%E (confirms 4th month above target and highest annual pace since Euro's launch back in 1999)
- CPI M/M: 0.4% v 0.5%e
*(DE) GERMANY DEC IFO BUSINESS CLIMATE SURVEY: 94.7 V 95.3E (6th straight monthly decline)
(US) Fed's Williams (FOMC voter): Expect really good progress on maximum employment; Very focused on too high inflation levels and real interest rates - CNBC
*(RU) RUSSIA CENTRAL BANK (CBR) RAISES KEY 1-WEEK AUCTION RATE BY 100BPS TO 8.50%; AS EXPECTED
(US) Fed's Waller (hawk, voter): Fed has flexibility to adjust policy as early as the spring; Wants to put March on the table for liftoff if needed
(US) NY Fed takes $1.70T in RRP program at 0.05%; 77 participating and accepted counterparties (Record high)
(TR) Turkey reportedly considering plan to ease capital strains on bank, including capital injection - press
