6/3/2022 4:01:52 PM
Stock markets came out of the Memorial Day break riding some momentum, but worries about inflation and growth resurfaced as the week progressed. Eurozone CPI hit another record high, resulting in ECB members ratcheting up rhetoric about the path of rates which are set to starting rising next month. China appeared to be steadily coming out of the lockdown measures in Shanghai and Beijing prescribed by President Xi’s zero tolerance directive. Regardless, Chinese PMI data stayed in contraction territory for the third straight month amid another deluge of stimulative policy measures from Chinese officials. Overall the mood was dampened by noteworthy comments from several US corporate luminaries. JP Morgan CEO Dimon had tongues wagging after his tone changed drastically from where it was just one week ago at the bank’s investor day. He noted that investors had better brace themselves for an economic “hurricane” that could be coming despite things still looking reasonably bright. His dour outlook was reinforced by commentary from BlackRock’s CEO Fink and Tesla’s mercurial leader Elon Musk. Friday’s May jobs report sent Treasury yields to the highs of the week after payrolls topped expectations and April was revised higher. Though, largely in line with expectations the overall report seemed to support what we heard from the Federal Reserve’s recently minted vice-chair Brainard, who on Thursday indicated she really didn’t expect to see the case for a Fed pause to develop, even after they raise rates 100 basis points more over the next two meetings. After another strong employment report on Friday, President Biden said we are moving to a period of more ‘steady’ growth and should not expect to see ‘blockbuster’ jobs data every month going forward.
Oil prices rose despite a bit of an olive branch from OPEC+ producers. At their regularly scheduled meeting delegates agreed to raise production by roughly 650K bpd in July and August, up from the previous agreed upon deal to bring on roughly 430K bpd/month. The news was viewed as a marginal concession to the Biden Administration as speculation swirled that POTUS was set to announce plans to travel to Saudi Arabia and meet with Crown Prince MBS. The US dollar traded mostly sideways, but held within striking distance of recent multi year highs as various corporations, headlined by Microsoft, acknowledge that the surging Greenback remains a steady headwind to their 2022 forecasts. For the week, the S&P slipped 1.2%, the DJIA lost 1%, and the Nasdaq was off 1%.
In other corporate news this week, Salesforce Inc. topped analyst estimates and raised its earnings forecast, noting it so far had not seen any material impacts from the broader economic environment. Hormel beat street consensus but lowered its EPS outlook and said it expects some large Q3 supply gaps in its turkey supply chain caused by flock losses to date.
Capri Holdings saw strong profits and sales this quarter, though the fashion company cut its outlook for the rest of the year. Furniture giant RH gave a similar outlook, posting an excellent quarter but cutting its FY22 guidance after seeing softer demand in the last few months.
Tesla CEO Musk in an email to employees said the EV maker would pause all hiring worldwide and that the company needed to make a 10% reduction in salaried staff. Meta COO Sheryl Sandberg announced she would be stepping down, though she planned to remain on the board. Harley Davidson confirmed it planned to resume production on June 6th after a two-week-long suspension caused by supplier issues. A report said that Boeing was also suffering supply chain constraints, causing a pause in 737 production for 10 days in last month.
SUNDAY 5/29
(CN) Shanghai unveils policies to support domestic economy; More tax cuts and reducing rents; To boost financial support to foreign trade firms; Vows measures to last till end-2022; the measures will ease the burden for cos. by CNY300B or $44.8B [including measures announced in Mar]
- 05/29 (UR) US Biden Administration reportedly approved sending long-range mobile rocket launchers (MLRS) to Ukraine; Likely be announced during upcoming week - NYT
05/29 (EU) EU envoys said to discuss the revised 6th package of Russia sanctions which excludes Druzhba oil pipeline today, May 29th - press
05/29 TSLA Reportedly production of Tesla’s Shanghai gigafactory has now recovered to the pre-lockdown level; Expected to be back to normal levels in June 2022 - press
05/29 (DE) Germany Econ Min Habeck: The unity of EU countries regarding sanctions against Russia is beginning to crumble
05/29 (CN) Beijing reopened parts of its public transportation, along with certain malls; Health official said COVID outbreak is under control, but risk of rebound exists - financial press
MONDAY 5/30
*(DE) GERMANY MAY CPI NORTH RHINE WESTPHALIA M/M: 0.9% V 0.6% PRIOR; Y/Y: 8.1% V 7.7% PRIOR
(DE) Germany's coalition govt and the conservative CDU/CSU alliance agree on €100B boost to the Germany’s military spending
(CN) China's Immigration Administration: Containers ships will be allowed to call on a different port than scheduled in emergency situations
(CN) China Finance Ministry: Affirms current subsidy policy for purchase of new energy vehicles will be terminated on Dec 31, 2022; Will continue to improve subsidy policy for purchase of NEVs
*(DE) GERMANY MAY PRELIMINARY CPI M/M: 0.9% V 0.5%E; Y/Y: 7.9% V 7.6%E (highest annual pace since start of the monthly statistic in 1963)
(UR) Pres Biden: US will not send Ukraine rocket systems that can reach into Russia
(US) Fed's Waller (hawk, voter): Fed should raise interest rates by 50bps each time at more than its next two meetings; Inflation remains alarmingly high
*(EU) EU leaders agree in principle on oil sanctions against Russia; EU agrees to ban 90% of Russia oil imports by the end of 2022
*(CN) CHINA MAY MANUFACTURING PMI (GOVT OFFICIAL): 49.6 V 48.9E [3rd straight month of contraction]
TUESDAY 5/31
(CN) China Cabinet issues various policies to stabilize the economy; to continue pushing actual loan rates to decline - financial press
DSMN.NL DSM and Firmenich to merge in stock-cash deal; DSM's shareholders to own in aggregate 65.5% of DSM-Firmenich
*(EU) EURO ZONE MAY CPI ESTIMATE Y/Y: 8.1% V 7.8%E; CPI CORE Y/Y: 3.8% V 3.6%E (record high)
*(IT) ITALY MAY PRELIMINARY CPI M/M: 0.9% V 0.6%E; Y/Y: 6.9% V 6.3%E
*(US) MAY CONSUMER CONFIDENCE: 106.4 V 103.8E
*(US) MAY DALLAS FED MANUFACTURING ACTIVITY INDEX: -7.3 V +1.5E
CRM Reports Q1 $0.98 v $0.93e, Rev $7.41B v $7.37Be
HPQ Reports Q2 $1.08 v $1.06e, Rev $16.5B v $16.1Be
(US) Supreme Court temporarily blocks Texas social media law that had restricted 'viewpoint discrimination' by Twitter and Facebook
CRM Exec: So far not seeing any material impacts from the broader economic environment, after speaking with 100's of customers - earnings call comments
(US) Treasury Sec Yellen: I was wrong last year on Inflation Path; Inflation #1 concern for President Biden who shares priority with US Fed to slow inflation
WEDNESDAY 6/1
(HK) Macau May Casino Rev (MOP) 3.34B v 2.68B prior; Y/Y -68.0% v -68.1% prior
*(IT) ITALY MAY MANUFACTURING PMI: 51.9 V 53.6E (23rd month of expansion but lowest since Jun 2020)
*(EU) EURO ZONE APR UNEMPLOYMENT RATE: 6.8% V 6.8%E
DASH Raises Q2 Marketplace GOV $12.5-12.7B ($12.8-13.0B inc Wolt) (prior $12.1-12.5B), Affirms Adj EBITDA $0-100M; Completes acquisition of Wolt
CPRI Reports Q4 $1.02 v $0.82e, Rev $1.49B v $1.40Be; Authorizes new $1B repurchase program (14% market cap)
SPGI After cutting 4 wks ago; Suspends FY22 outlook due to extraordinarily weak market conditions for its Ratings Business; Expects to reintroduce with Q2 earnings
*(US) MAY FINAL S&P/MARKIT MANUFACTURING PMI: 57.0 V 57.5E
*(US) MAY ISM MANUFACTURING: 56.1 V 54.5E; PRICES PAID: 82.2 V 80.5E
*(US) APR JOLTS JOB OPENINGS: 11.4M V 11.3ME
JPM CEO Dimon: Best protection against a downturn is a conservative balance sheet; Better brace yourself; Economy is like a hurricane - Bernstein conf comments
(US) Association of American Railroads weekly rail traffic report for week ending May 28th: 514K total units, -3% y/y
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast to 1.3% from 1.9%
FB Sheryl Sandberg stepping down as COO; CEO Zuckerberg says Javier Olivan will become Meta's new COO - press
(CN) China said to have ordered state-owned policy banks to establish CNY800B (~$120B) line of credit for infrastructure projects - press
(CN) China Finance Minister Liu Kun : China will fully utilize its fiscal tools to achieve its goals for carbon emissions peaking and then becoming neutral - Economic Daily Op-Ed
(SA) Saudi Arabia reportedly indicated to its western allies that it is prepared to pump more oil if Russia output falls substantially under sanctions - FT
THURSDAY 6/2
*(CH) SWISS MAY CPI M/M: 0.7% V 0.3%E; Y/Y: 2.9% V 2.6%E (4th month above target and fastest annual pace in 14 years)
DTG.DE Exec: Global semiconductor shortage is easing; Factories working though order backlog
(CN) China National Health Commission (NHC) official Mi Feng Warn against excessive COVID curbs in low-risk areas
(TW) Taiwan bans exporting chips operating higher than 25 MHz and offering performance higher than 5 GFLOPS to Russia and Belarus
V Reports Apr/May volume (ex-Russian operations): +40% v 2019, +2% m/m - filing
HRL Reports Q2 $0.48 v $0.46e, Rev $3.10B v $3.03Be; In Q3 expects large supply gaps in the Jennie-O Turkey Store vertically integrated supply chain, caused by flock losses to date
(CN) Beijing city official: Will resume domestic and international flights to and from the city in an orderly way
*(US) Q1 FINAL NONFARM PRODUCTIVITY: -7.3% V -7.5%E; UNIT LABOR COSTS: 12.6% V 11.6%E
*(US) INITIAL JOBLESS CLAIMS: 200K V 210KE; CONTINUING CLAIMS: 1.31M V 1.34ME
OPEC JMMC recommends 648K bpd increment for both July and Aug (v current 432K)
MSFT Cuts Q4 $2.24-2.32 v $2.34e, Op $20.6-21.3B, Rev $51.9-52.7B v $52.9Be (prior $2.28-2.35, Op $20.90-21.60B, Rev $52.4-53.2B) citing FX headwinds
(US) Fed’s Brainard (vice chair): Right now very hard to see case for a pause, seeing some signals of strength on economy but also some signs of cooling - CNBC
V CEO: Inflation is not having obvious impact on consumer spending
COST Reports May total SSS +11.8% (ex-gas and FX)
(SA) President Biden plans to travel to Saudi Arabia and will meet Saudi Crown Prince MBS; Will add the visit to a previously scheduled trip to Europe and Israel - NYT
(CN) Reportedly Russian officials are frustrated by the level of China's support; China chafes at Russia's requests, leaders in China want to expand assistance for Russia without triggering US sanctions - Washington Post
(US) Pres Biden: Calls for a ban on assault weapons and high-capacity magazines; There is a serious mental health crisis in the country, and we need more mental health services
FRIDAY 6/3
(CN) China May Vehicle Sales 1.77M, -17.1% y/y, +49.6% m/m - CAAM
TSLA *CEO MUSK PAUSES ALL HIRING WORLDWIDE; NEED TO MAKE ABOUT 10% REDUCTION IN STAFF - PRESS CITING EMAIL STATEMENT
(EU) EU council formally adopts 6th package of sanctions against Russia; Confirms phasing out of Russian oil will take from 6 months for crude oil to 8 months for other refined petroleum products
(DE) German Network Regulator: 40% discount agreed for entry points from LNG terminals agreed; effective from 2023
(US) Biden administration reportedly in talks with ally countries on tech completion alightment against China - US financial press
(EU) EU countries reportedly to meet on June 7th to fine tune plan on single mobile charging port; Likely to reach an agreement - financial press
(US) May preliminary Class 8 truck orders 13.3K, -13% m/m, -43% y/y - FTRintel.com (lowest since Nov 2021)
*(US) MAY CHANGE IN NONFARM PAYROLLS: +390K V +318KE
*(US) MAY UNEMPLOYMENT RATE: 3.6% V 3.5%e; Labor Force Participation Rate: 62.3% up 0.1% m/m, inline
*(US) MAY ISM SERVICES INDEX: 55.9 V 56.5E
BA Reportedly paused 737 production for 10 days in May due to supply chain constraints - press
