Sunday, April 3, 2022

Equities churn sideways while yield curve sees more inversions

TradeTheNews.com 

 Weekly Market Update: Equities churn sideways while yield curve sees more inversions

2022-04-01T16:11:25.14

US indices came into the final week of Q1 riding momentum. Investors have looked past concerns about inflation, Ukraine, and increasingly hawkish global central banks by adding to beaten down stock portfolios heading into quarter end. That momentum waned though, as the VIX pushed back above 20 and Treasury yields remained elevated. The US yield curve saw inversions spread and deepen into and after another strong US employment report on Friday. The March jobs report showed labor demand remained strong, and wage growth continued to run above the Fed’s comfort zone. The participation rate ticked up for the second straight month while the unemployment rate fell to a new post-pandemic low. Fed watchers were quick reiterate calls that front loaded rate hikes will be required in the current Fed tightening cycle. Also, hot inflation readings across Europe prompted multiple ECB officials to talk about the increased likelihood of rate hikes later this year putting upward pressure on yields across the EU. By Friday, the closely watched US Treasury 2/10 year spread yield inverted by 7 basis points resulting in a growing number of Wall Street analysts forecasting a possible recession.

Global crude oil prices fell back towards $100/barrel amid continued back and forth reporting on ongoing peace talks between Ukraine and Russia. Russia officials indicated that they would drastically cut military activity near Kyiv and Chernihiv after getting a new security proposal from Ukraine that would keep them from joining NATO. But any good will from those talks dissipated quickly as the week progressed with no direct commentary from President Putin and continued discontent expressed by the West. Also a game of chicken drew on as European officials remained adamant they would not bend to President Putin’s demand that EU countries find a way to pay for Russian gas supplies in rubles. Russia appeared to blink, or at least punt, after spokesman Peskov said any payments on gas deliveries due after Apr 1st won’t be necessary until the second half of April and May. For the week, the S&P edged up 0.1%, the DJIA slipped 0.1%, and the Nasdaq added 0.7%.

In corporate news this week, Micron shares were volatile after reporting a top and bottom line beat of expectations but warning that chip shortages could extend into next year. FedEx shares gained some ground on the announcement that Raj Subramaniam will become CEO, though shares sold off after the initial bump, even though one report said that activists could still get involved after the management change. China tech ADRs gained ground on Friday after reports that China will consider giving US regulators full access to audits of most Chinese firms by mid-year.

In M&A news, ratings expert Nielsen agreed to be bought by private equity for $16B, subject to a 45 day ‘go shop’ period. In-home patient-focused healthcare provider LHC Group was acquired by UnitedHealth in a $5.4B cash deal. Workplace collaboration solutions provider Poly agreed to merge with HP in a $3.3B deal. GM and other auto makers reported double digit y/y declines in March vehicle sales.


SUN 3/27
(US) Biden administration to call for new minimum tax on billionaires including tax on unrealized gains – press
(CN) Shanghai Port [largest port in the world based on cargo throughput] will maintain 24 hour ops during lockdown - Press
MON 3/28
(RU) Russia Pres Putin orders Russian govt, Gazprom and Russian Central Bank to report on the change in the currency of payment for gas supplies to Rubles (RUB) by Mar 31st - Russian press
(JP) YEN BRIEFLY WEAKENED AGAINST USD TO TEST KEY 125 LEVEL (1st test of this level in 7 years)
(UR) Ukrainian and Russian negotiators reportedly discussing pause in hostilities as part of deal along with Ukraine abandoning NATO
Fedex Raj Subramaniam promoted to President and CEO, effective June 1st; Frederick Smith to serve as Exec Chairman
TUES 3/29
(UR) Ukraine negotiators: Ukraine suggested new security guarantee system at today's talks with Russia; Sees Turkey as key security guarantor; Reiterates referendum will be needed, offers Russia to discuss Crimea
(RU) Russia negotiator Medinskiy: To 'drastically, cardinally' cut military activity near Kyiv and Chernihiv; Putin-Zelenskiy meeting is possible after pact approved by Foreign Ministers ready; Talks were constructive and now in practical phase - statement on peace talks with Ukraine
(US) MAR CONSUMER CONFIDENCE: 107.2 V 107.0E
MU Reports Q2 $2.14 v $1.95e, Rev $7.79B v $7.51Be
WED 3/30
(DE) GERMANY MAR CPI NORTH RHINE WESTPHALIA M/M: 2.7% V 1.0% PRIOR; Y/Y: 7.6% V 5.3% PRIOR
TSM Chairman: Will not revise down sales forecast and Capex for 2022; China consumer electronics demand impacted by lockdown; to rearrange production priorities amid new demand profile; affirms still maintains production in Shanghai despite lockdown
(US) White House reportedly considering using Emergency Production Act to develop battery metal supplies – press
(CN) CHINA MAR PMI MANUFACTURING (GOVT OFFICIAL): 49.5 V 49.8E (First contraction in 5 months)
THRS 3/31
(US) INITIAL JOBLESS CLAIMS: 202K V 196KE; CONTINUING CLAIMS: 1.31M V 1.34ME
(RU) Russia President Putin: Signed decree on gas for Rouble trade, payments for gas supplies to start from April 1st
(US) Biden Adminstration confirms largest oil reserve release in US history, to release 1M bbl/day over the next six months

FRI 4/1
(EU) EURO ZONE MAR ADVANCE CPI ESTIMATE Y/Y: 7.5% V 6.7%E; CPI CORE Y/Y: 3.0% V 3.1%E
(CN) China reportedly considers to give US full access to audits of most US-listed Chinese firms in mid-2022 – press
(RU) Russia Foreign Min Lavrov: Russia is preparing a response to Ukraine's proposals, there is a movement forward - speaking in India
(RU) Russia govt spokesman Peskov: Payments on gas deliveries due after Apr 1st come in second half of April and May
(US) MAR CHANGE IN NONFARM PAYROLLS: +431K V +490KE
(US) MAR UNEMPLOYMENT RATE: 3.6% V 3.7%E (post-pandemic low)
(US) MAR AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.4%E; Y/Y: 5.6% V 5.5%E
GM Reports Q1 sales 512.8K vehicles, -14.7% y/y
AMZN