Weekly Market Update: Fed to Discuss Speedier Taper Despite Omicron Worries
2021-12-03T16:03:04.463
The market was caught firmly in a grip of speculation about a new Covid variant this week even as central bank officials continued to discuss pushing the pace of unwinding stimulus efforts. It won’t be clear for several weeks whether the new Omicron variant is a bigger health threat than Delta or if it will become the dominant strain, but vaccine makers like Moderna said they are already working to develop an Omicron-specific vaccine for distribution in 2022. Meanwhile, many European leaders announced they would renew some social restrictions to combat a rising wave of Covid cases on the continent. With these developments, the Treasury yield curve saw notable flattening with longer duration yields coming under significant pressure, while equity markets experienced a surge in volatility, mostly to the downside. The VIX rocketed nearly 60% trough to peak this week to finish at levels not seen since January. The Dow tested below its 200-day moving average while the S&P and NASDAQ fell below their 50-day moving averages. For the week, the S&P fell 1.22%, the DJIA lost 0.92%, and the Nasdaq tumbled 2.6%,
Despite some new concerns, Fed officials continued to consolidate around the idea of accelerating the taper of QE, which Chair Powell said he would bring up at next FOMC meeting later this month. Powell also perturbed markets with his decision to retire the term ‘transitory’ in the description of the current state of inflation, creating more speculation that the timetable for rate liftoff could be moved up further. Friday’s jobs data added fuel to that speculation as unemployment hit its lowest level since February 2020, though nonfarm payrolls gains were weaker than expected.
In corporate news this week, Salesforce shares tumbled after its Q4 outlook disappointed investors. HPE hit an intraday record after reporting a beat on the top line and affirming guidance. Kroger posted stronger than expected results and again raised its full year EPS outlook. Dollar General however fell after reporting a drop in profit and cutting SSS guidance. DocuSign shares plunged after posting disappointing revenue and billings numbers amid COVID reopening headwinds. Major European names Michelin and BASF announced significant price increases in some specific categories as inflation worries continued to weigh on markets. Twitter founder Jack Dorsey stepped down from his role as CEO, but said he will remain in charge of his other venture, Square.
SUN 11/28
Former FDA Commissioner Dr. Scott Gottlieb: US travel ban on African countries over Omicron variant (B.1.1.529) is “counterproductive”
(IL) Israel bans entry of all foreigners for 2 weeks to contain Omicron variant spread - press
(EU) ECB chief Lagarde: Eurozone is now better equipped for potential new wave of COVID-19 infections of Omicron variant; Reiterates ECB council stance that inflation spike is tied to temporary factors
World Health Organization's (WHO) issues statement on Omicron variant: not yet clear whether infection with Omicron causes more severe disease compared to infections with other variants, including Delta, but preliminary evidence suggests there may be an increased risk of reinfection with Omicron
MRNA Chief Medical Officer: think Omicron may elude current vaccines; new vaccine for Omicron variant may be ready in early 2022
*(ZA) CHAIRWOMAN OF SOUTH AFRICAN MEDICAL ASSOCIATION COETZEE: New Omicron variant of COVID-19 results in mild disease, without prominent symptoms
7201.JP CEO: Planning to introduce solid state battery by 2028, build factory in 2024; To invest >¥2.0T into electrification of vehicles over next 5 years (over the 1.0T speculated through 2030); To introduce 23 new EVs by 2030 - Ambition 2030
(JP) Japan PM Kishida: Will ban entry of all foreign visitors till further notice; Effective Nov 30th - Comments on Border
MON 11/29
EO.FR Cuts again FY21 Rev to €15.0-15.5B (prior €15.5B); Op margin at 5.5% (prior 6.0-6.2%) to reflect new downward revision of automotive production in Europe
VACN.CH CEO: cannot deliver many new products this year due to supply chain issues which could last until 2023 or 2024 - press interview
(ZA) South Africa Health Min Karim: based on what we know, we expect vaccines to protect from severe Omicron disease, hospitalizations
World Health Organization's (WHO): new COVID-19 Omicron variant poses a "very high" risk globally - technical briefing document for its members
(FR) France European Affairs Min Beaune said to see Dec 10th deadline for resolution on Brexit fishing licence talks - financial press
*(DE) GERMANY NOV PRELIMINARY CPI M/M: -0.2% V -0.4%E; Y/Y: 5.2% V 5.0%E (highest annual pace since 1993 reunification)
(FR) France Fin Min Le Maire: Our top priorities will be to see digital Euro put in practice: Nuclear must find a place in energy transition
*(US) OCT PENDING HOME SALES M/M: 7.5% V 0.8%E; Y/Y: -4.7% V -7.2% PRIOR
*(US) NOV DALLAS FED MANUFACTURING ACTIVITY INDEX: 11.8 V 17.0E
WMT CEO: Port and transit delays are 'improving'; Has seen 26% rise in containers going through US ports over last four weeks - press
AMZN NLRB allows Amazon workers at Bessemer, AL facility a new unionization vote - press
(US) Fed Chair Powell: Greater virus concerns could slow job market progress and intensify supply chain woes; Omicron variant adds to economic risks and inflation uncertainty - testimony to Senate
*(CN) CHINA NOV MANUFACTURING PMI (GOVT OFFICIAL): 50.1 V 49.8E (1st expansion in 3 months)
(US) Adobe: US customers have spent $7.1B on Cyber Monday as of 9PM ET (does not include 3 hours left) v $10.2-11.3B prior guided for full day v $10.8B y/y
TUES 11/30
MRNA CEO Bancel reiterates that he believes that the current coronavirus vaccines will not be as effective against Omicron; think it's going to be a material drop, just not how much yet, need more data, but all the scientists I've talked to say 'this is not going to be good"
EZJ.UK Reports final FY21 Pretax -£1.04B [reported basis] v -£1.27B y/y, Rev £1.46B v £1.46Be; Current FY'22 H2 revenue booked is ahead of FY'19 level; Notes dropoff in demand from Omicron is less from previous variants
(CN) China Researcher: New Omicron variant could make coronavirus more infectious (**Note: in line with WHO's statement)
(EU) EU Drug Regulator chief Cooke: Do not know if new vaccines against Omicron variant are needed but preparing for that - EU Parliament testimony
*(DE) GERMANY NOV NET UNEMPLOYMENT CHANGE: -34.0K V -25.0KE; UNEMPLOYMENT CLAIMS RATE: 5.3% V 5.4%E (new post-pandemic low)
*(EU) EURO ZONE NOV ADVANCE CPI ESTIMATE Y/Y: 4.9% V 4.5%E; CORE CPI Y/Y: 2.6% V 2.3%E (5th month above target and record high since EUR currency launch)
REGN Reportedly preliminary tests indicate COVID-19 antibody drug cocktails from Regeneron and Eli Lilly & Co. lose effectiveness against Omicron, while Vir/GSK drug sotrovimab maintained its efficacy - US financial press
(UK) Oxford University scientists: No evidence so far that vaccines will not provide high levels of protection against severe disease from Omicron variant
(US) Nevada reports Oct casino gaming Rev $1.22B, +48.5% y/y; Las Vegas strip Rev $702.2M, +86.9% y/y
*(US) NOV CHICAGO PURCHASE MANAGERS INDEX (PMI): 61.8 V 67.0E
*(US) NOV CONSUMER CONFIDENCE: 109.5 V 110.9E (lowest since Feb)
(US) Fed Chair Powell: Appropriate to consider wrapping up taper a few months sooner, Will talk about speeding up taper at next FOMC meeting
CRM Reports Q3 $1.27 v $0.92e, Rev $6.86B v $6.79Be; Guides Q4 eps below consensus
AMBA Reports Q3 $0.57 v $0.49e, Rev $92.2M v $90.5Me
(HK) Macau Nov Casino Rev (MOP) 6.75B v 4.37B prior; Y/Y 0.0% v 2.0%e
WEDS 12/1
(JP) Follow Up: Japan to halt all incoming international flights for 1 month [relates to new international flight bookings] - Japanese media
(IL) Israel Health Min Horowitz: There are first indications that individuals fully vaccinated against COVID-19 within 6 months or with the booster are protected against the Omicron variant - Jerusalem Post
*(IT) ITALY NOV MANUFACTURING PMI: 62.8 V 61.1E (17th month of expansion and record high)
JBLU CEO: Business travel 45-50% off from normal levels; Sees it back to around 75% in 2022 - event comments
SABR Reports Nov Gross air bookings -51% v Nov'19, Net air boking -51% v Nov'19 (prior to Omicron)
SAN.FR CEO: Early booster shot for COVID results encouraging; Expects Phase 3 results before year-end
*(US) NOV ADP EMPLOYMENT CHANGE: +534K V +525KE; Notes it is too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months
*(US) NOV FINAL MARKIT MANUFACTURING PMI: 58.3 V 59.1E (confirms 17th consecutive month of expansion)
*(US) NOV ISM MANUFACTURING: 61.1 V 61.2E; PRICES PAID: 82.4 V 85.5E
BAS.DE Raises prices for additives for paint and coatings industry up to 35%; Effective immediately
(SA) South Africa NICD: Omicron variant able to get around some immune protection, but protection against severe disease and death from vaccines should be less affected
(DE) German Chancellor Merkel: Proposes mandatory Covid vaccinations begin Feb 2022
(US) CDC identifies first case of Omicron variant in the US in San Francisco, California; Individual was fully vaccinated and had mild symptoms; Patient is self-quarantining
COST Reports Nov total SSS +9.2% (ex-gas and FX) y/y
AAPL iPhone component suppliers were said to have been told that demand has slowed down [comments relate to the iPhone 13] - press
THURS 12/2
K Says has reached tentative agreement with union, relates to 5-year labor contract that covers 1,400 workers [terms not initially disclosed] - press
GSK.UK Preclinical data demonstrate that GSK/Vir COVID-19 antibody treatment sotrovimab retains activity against key Omicron mutations, new SARS-CoV-2 variant; Data to be confirmed by further in vitro pseudo-virus testing
OPEC+ said to likely to discuss pausing oil production increase or lowering it to 200K bpd in January as among its options - press
*(EU) EURO ZONE OCT UNEMPLOYMENT RATE: 7.3% V 7.3%E
RYA.UK Exec: back above 100% of pre-COVID capacity - press
BA China aviation authority issues airworthiness directive on Boeing 737 MAX - press
KR Reports Q3 $0.78 v $0.67e, Rev $31.9B v $31.1Be; Raises FY21 outlook
*(US) INITIAL JOBLESS CLAIMS: 222K V 240KE; CONTINUING CLAIMS: 1.96M V 2.00ME (new post-pandemic low)
All OPEC+ ministers appear to be in agreement with an increment of 400k for Jan (ie a rollover of the current policy) - Energy Intel's Bakr sources:
(US) Fed's Daly (non-voter, dove): Thinks more older workers and those with children will be able to return to labor market eventually
(US) SEC adopts rule that would require US-listed foreign firms to disclose whether they're owned or controlled by a govt entity
(RU) Belarus Pres Lukashenko: Russia and Belarusian soldiers will hold joint maneauvers in Belarus on Ukraine border in two stages over next few months - German press
MRVL Reports Q3 $0.43 v $0.38e, Rev $1.21B v $1.15Be
DOCU Reports Q3 $0.58 v $0.46e, Rev $545M v $529Me; Misses billings estimates
Z Raises Q4 Homes segment Rev $2.3-2.9B (prior $1.7-2.1B); Authorizes $750M share repurchase program (5.4% of market cap)
KSU Achieved record daily average grain carloads in Nov
(US) New York Gov Hochul: 5 coronavirus omicron variant cases identified in New York [Suffolk County, Queens and Brooklyn]; encourages the use of indoor masks
DIDI Confirms begins prep for Hong Kong listing and working on delisting in the US [said to target filing for Hong Kong listing near Mar 2022]
*(CN) CHINA NOV CAIXIN PMI SERVICES: 52.1 V 53.0E [3rd month of expansion]
TSLA CEO Musk files form 4: Sells ~$1.0B in additional shares after exercising options [relates to transactions conducted on Dec 2nd]
FRI 12/3
(TR) Turkey Nov CPI M/M: 3.5% v 3.0%e; Y/Y: 21.3% v 20.7%e (inflation accelerated for a sixth straight month)
(RU) Ukraine Defense Min Reznikov: reiterates Russia may be ready to escalate situation near Ukraine border by end-Jan 2022
(EU) ECB chief Lagarde: Omicron variant shows vaccinations must be stepped up; economic impact will depend on measures; ECB attentive to currency movements
*(EU) EURO ZONE OCT RETAIL SALES M/M: 0.2% V 0.3%E; Y/Y: 1.4% V 1.4%E
(UK) BOE's Saunders (dissenter): Will need to raise rates soon if economy develops as forecasted; Must weigh costs of waiting for data on Omicron variant
(US) US FDA aims to fast review Omicron vaccines and drugs - press
3333.HK Received a demand to perform its obligations under a guarantee of ~$260M; No guarantee that the Group will have sufficient funds to continue to perform its financial obligations
*(US) NOV UNEMPLOYMENT RATE: 4.2% V 4.5%E (lowest since Feb 2020); Participation Rate: 61.8%
*(US) NOV CHANGE IN NONFARM PAYROLLS: +210K V +550KE (below lower-end of ALL analyst expectations)
*(US) NOV AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.4%E; Y/Y: 4.8% V 5.0%E
IMF Chief Economist Gopinath: It is appropriate for the US Fed to accelerate tapering and bring forward the path for rate hikes; Other nations may also need to tighten monetary policy earlier than expected if inflationary pressures become broad based
*(US) NOV ISM SERVICES INDEX: 69.1 V 65.0E (another all time high)
