Sunday, February 13, 2022

Surging inflation and imminent threat of Ukraine invasion loom large over markets

TradeTheNews.com 

Weekly Market Update: Surging inflation and imminent threat of Ukraine invasion loom large over markets

2022-02-11T16:05:03.913

Investors went on another wild ride this week, but ultimately US stock indices finished modestly below where they started. Trading remained choppy as traders digested another slew of earnings reports around the release of key US inflation data. Even before the CPI print inflation worries percolated, copper, iron ore, timber and coffee prices surged garnering attention. Quarterly earnings conference calls were rife with commentary about the expectation that companies will continue to raise prices through the remainder 2022 to offset rising supply chain costs. Also, a protest by Canadian truckers over vaccine mandates shut down several key bridges on the US/Canada border resulting in significant down time at multiple US automobile OEM facilities. WTI crude hit a fresh 8-year high on Friday spurred by reports that the US government now believes Russian President Putin has made the decision to invade Ukraine.

Thursday’s January CPI release spooked markets yet again, after coming in substantially hotter than already-goosed market expectations, reaching the highest annual pace since 1982. The upside surprise in the core index was spread across a wide range of categories, including some that have been heavily influenced by bottlenecks and others where price pressures could be viewed as more likely to stick. Stock markets came under pressure and Treasury yields immediately shot up on the news, led by the 2-year yield which surged 25 basis points, the largest daily gain since 2009. The 10-year yield retook 2% for the first time since 2019, but investors were also quick to fret over the narrowing of spreads or the curve flattening and what it might signal about future growth prospects. Futures markets quickly saw the odds of a 50 basis point March rate hike rise above 50%. By Friday, investment houses were aggressively ratcheting up their Federal Reserve tightening expectations after FOMC voter Bullard called for a 50bps hike in March, while also indicating significant quantitative tightening (balance sheet reduction) and perhaps intra-meeting hikes may also be necessary to get inflation under control. For the week, the S&P lost 1.8%, the DJIA was off 1%, and the Nasdaq fell 2.2%

In corporate news this week, Disney shares rose after reporting strong quarterly results, boosted by robust theme park attendance and higher than anticipated streaming service subscriber growth. Pfizer dropped after issuing a weaker 2022 outlook than expected, and late in the week said it would delay its application to the FDA to expand its Covid vaccine to kids under 5 until April. On the supply chain front, Intel’s CEO said the company expects chip wafer supply to remain tight through 2023, while FMC Corp noted they have seen initial signs of packaging costs easing. Republic Services confirmed plans to buy US Ecology for $2.2B in cash, and Republic added it plans to pursue additional tuck-in acquisitions in the environmental solutions sector.


SUN 2/6
(EU) ECB’s Knot (Netherlands, hawk): Sees first interest rate hike early in Q4 2022, second rate hike would likely be during Q1 2023; tightening typically in 25bps increments, don't see a reason to do something different as of now – financial press
USD/CNH China PBOC yuan fix said to lead to some concerns related to devaluation - financial press
*(CN) CHINA JAN CAIXIN PMI SERVICES: 51.4 V 50.5E (lowest since Aug 2021)
(CN) China Industry Ministry (MIIT): China aiming to complete a revamp of >80% of the steel capacity so it complies with ultra low emissions standards by 2025

MON 2/7
(LT) ECB's Kazaks (Latvia, hawk): July hike would imply "extremely" fast tapering
ON Reports Q4 $1.09 v $0.94e, Rev $1.85B v $1.79Be; Guides Q1 strong
(US) NJ Gov Murphy reportedly expected to end mask mandates in schools for students and teachers in 30 days - press
(US) US Dept of Commerce added 33 parties based in China to its unverified list for receiving US exports
(US) US and Japan reportedly reach deal to end Trump administration steel tariffs - press
*(US) DEC CONSUMER CREDIT: $18.9B V $25.0BE
2269.HK Comments on being added to US Unverified List; has no impact on business, in compliance

TUES 2/8
BP.UK Reports Q4 Adj Net $4.07B v $3.87Be, Rev $52.2B v $42.1Be; Announces further $1.5B share buyback
7201.JP Reports 9M Net +¥201.3B v -¥367.7B y/y, Op +¥191.3B v -¥131.6B y/y, Rev ¥6.15T v ¥5.32T y/y
(CN) China state funds said to buy Chinese stocks to slow market decline - press
(RU) Russia govt spokesperson Peskov: Reiterates stance that Russian troops to return to base after Belarus exercise; no precise date set
DD Reports Q4 $1.08 v $1.01e, Rev $4.27B v $3.95Be; Announces $1.0B share buyback; Raises Quarterly dividend 10% to $0.33 from $0.30 (indicated yield 1.75%)
PFE Reports Q4 $1.08 v $0.85e, Rev $23.8B v $23.9Be; Guides FY22 Rev short of expectations
MBUU Reports Q2 $1.50 v $1.36e, Rev $263.9M v $262Me; Demand has shown no sign of waning
FISV Reports Q4 $1.57 v $1.55e, Rev $4.26B v $4.02Be
(CN) China PBOC's official said to have reiterated view that cross-border trading apps remain illegal - press
SYY Reports Q2 $0.57 v $0.69e, Rev $16.3B v $16.0Be
*(US) DEC CPI M/M REVISED TO 0.6% V 0.5% PRIOR - PRESS
GAZP.RU Signs 30-year deal to supply up to 10B cm of additional gas per year to China and will be settled in euros
(US) Atlanta Fed GDPNow: raises Q1 GDP forecast to 0.7% from 0.1% prior
(DE) Germany Fin Min Lindner: European countries should not 'toy' with the 3% deficit and 60% debt limits as part of EU Stability Pact
MNDT Microsoft reportedly pursuing deal for Mandiant but bid is not assured - press
(US) Atlanta Fed's Wu-Xia Shadow Federal Funds Rate at -0.20 v -1.15 in Dec
(US) New York state is expected to announce it is removing its mask mandate Wednesday, unclear if it will apply to schools - press
7203.JP Reports 9M Net ¥2.32T v ¥1.47T y/y, Op ¥2.53T v ¥1.51T y/y, Rev ¥23.27T v ¥19.53T y/y; Cuts FY21/22 Global production outlook

WEDS 2/9
7267.JP Reports 9M Net ¥582.2B v ¥444.1B y/y, Op ¥671.7B v ¥447.0B y/y, Rev ¥10.68T v ¥9.55T y/y
GSK.UK Reports Q4 Core EPS 25.6p v 23.8pe, Rev £9.53B v £9.31Be; On track to demerge Consumer Healthcare unit in mid-2022
MAERSKB.DK Reports Q4 adj Net $6.11B v $6.1Be, EBITDA $7.99B v $8.0B prelim, Rev $18.5B v $18.5B prelim; Assumes ocean normalization early in H2
MAERSKB.DK CEO: our data indicates a very strong Q1 and Q2, supported by high volumes and freight rates - post earnings comments
(DE) German VDA Car Association forecasts domestic car market to grow 7% to 2.8M vehicles; Sees chip shortage to carry into 2023
(DE) German Bundesbank Gov Nagel (hawk): Expects domestic 2022 inflation significantly above 4.0%
CVS Reports Q4 $1.98 v $1.94e, Rev $76.6B v $76.0Be
CCJ Reports Q4 C$0.06 v C$0.12 y/y, Rev C$465M v C$550M y/y; Raises Annual dividend 50% to $0.12 from $0.08 (indicated yield 0.6%)
AVYA Reports Q1 $0.42 v $0.69e, Rev $713M v $737Me
(US) NY Gov Hochul expected to announce that she will let the mask mandate expire this week - financial press
(US) Fed's Bostic (non-voter, hawk): I have three rate hikes penciled in this year but leaning towards 4 potentially - CNBC
ECOL Republic Services confirms to acquire US Ecology at $48/shr in cash for $2.2B total
INTC CEO: Expects chip wafer supply to remain tight through 2023
FMC Exec: Have seen initial signs of packaging costs easing - earnings call comments
(US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report
(US) Association of American Railroads weekly rail traffic report for week ending Feb 5th: 458K total units, -7.6% y/y
(US) White House Press Sec Psaki: Tomorrow's inflation data will show a high y/y increase
(US) Boston Fed names Susan M. Collins to succeed Rosengren as new Bank president - press
DIS Reports Q1 $1.06 v $0.57e, Rev $21.8B v $21.2Be
2282.HK Reports Q4 (HK$) adj EBITDA 89.0M v 367.2M y/y; Rev 2.45B v 2.36B y/y

THURS 2/10
2330.TW Reports Jan (NT$) Rev 172.2B v 126.8B y/y v 155.4B m/m
CSGN.CH Reports Q4 (CHF) Net -2.01B v -353M y/y, Pretax -522M v -88M y/y, Rev 4.58B v 5.2B y/y; 2022 to be a transition year for the company
SIE.DE Reports Q1 €2.05 v €1.57e, Industrial Business Net €2.5B v €2.2B y/y, Rev €16.5B v €15.9Be
TKA.DE Reports Q1 Net €203M v -€93M y/y, adj EBIT €298M v €20M y/y, Rev €9.02B v €7.32B y/y
UNA.NL Reports FY21 EPS €2.62 v €2.48 y/y, adj Op €9.64B v €9.37B y/y, Rev €52.4B v €51B y/y; Announces €3B share buyback
TTE.FR Reports Q4 adj Net $6.83B v $1.30B y/y, Rev $60.4B v $37.9B y/y
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE UNCHANGED AT 3.50%; AS EXPECTED
(RU) Russia said to hold military drills in Black Sea - Russian press
(JP) BOJ to conduct fixed rate purchase operation on Monday, Feb 14th due to rise in recent yield; To purchase unlimited 10-year JGBs - press
PEP Reports Q4 $1.53 v $1.53e, Rev $25.3B v $24.3Be; Authorizes up to $10B share buyback till 2026; Raises annual dividend 7% to $4.60/shr
TWTR Reports Q4 $0.33 v $0.33e, Rev $1.57B v $1.57Be; Authorizes new $4.0B share buyback. including $2B accelerated share repurchase
LCII Reports Q4 $3.22 v $2.79e, Rev $1.21B v $1.13Be; Notes in Jan 2022, production increased significantly to meet elevated RV and marine retail demand
K Reports Q4 $0.83 v $0.79e, Rev $3.42B v $3.40Be
*(US) INITIAL JOBLESS CLAIMS: 223K V 230KE; CONTINUING CLAIMS: 1.621M V 1.62ME
*(US) JAN CPI M/M: 0.6% V 0.4%E; Y/Y: 7.5% V 7.2%E (highest annual pace since early 1982)
(US) 10-year Treasury yield touches 2% for first time since summer of 2019
(US) Fed's Bullard (2022 voter, hawk): Favors 50bps rate increase in March but defers to Powell on that; Should be open to inter-meeting increase; Favors 100bps increases by July 1st (Would be first 50bps rise since 2000)
*(US) JAN MONTHLY BUDGET STATEMENT: $118.7B V $23.0BE
(US) Overnight indexed swaps (OIS) are pricing in the US Fed to increase rates by 125bps by July 2022 [follows the release of US Jan CPI data and Fed speak]
(CN) Said that the China PBOC could ease policy again next week - Press
(US) Goldman Sachs expects seven 25bps rate hikes during 2022 [would bring Fed Funds Rate to 2.0%]; previously saw 5 rate hikes in 2022

FRI 2/11
*(UK) Q4 PRELIMINARY GDP Q/Q: 1.0% V 1.1%E; Y/Y: 6.5% V 6.4%E
(US) HSBC analysts now expect Fed to hike rates by 50bps at March's meeting; See in total 150bps increase in rates in 2022
VOW3.DE Reports Jan vehicle sales 699.5K, -15.2% y/y
(CA) Protesters on Ambassador Bridge in Canada reportedly agree to open one lane of traffic from the US – press
(US) Weekly Baker Hughes Rig Count: 635 v 613 w/w (+3.6% w/w)
PFE FDA and Pfizer postpone review of COVID-19 vaccine for kids under 5 to await three-dose data; FDA postpones advisory committee meeting
(US) PBS News reporter: "The US believes Russian President Vladimir Putin has decided to invade Ukraine, and communicated those plans to the Russian military"
(US) White House National Sec Adviser Sullivan: We are not saying a final decision has been taken by Pres Putin but allies are sending a firm message to Putin; US stance is Putin has not yet made a decision