6/24/2022 4:08:41 PM
US stocks came into the week extremely oversold after experiencing the worst back to back weekly performance since the financial crisis. After the long holiday weekend in the US, buyers stepped in aggressively on Tuesday, but little in the way of obvious catalysts had many opining it was likely nothing more than the beginnings of a bear market rally. As the week progressed though, sentiment showed clear signs of shifting as a significant drop in both global treasury yields and commodity prices breathed some renewed confidence into financial markets. Softening economic data suggested the global economy is clearly slowing, providing some hope that central banks won’t have to go as far with their verbal guidance and rate tightening to tame inflation and to hopefully avoid recession.
The prices of corn, wheat, copper, oil, and US natural gas have fallen in recent weeks, in some cases substantially. The US 10-year yield fell some 40 basis points from last week’s high. Friday’s final University of Michigan reading revised down the 5- to 10-year inflation expectations to 3.1% from 3.3% after Chairman Powell flagged that jump in surveyed expectations as a key determinate in raising rates 75 bps last week. The 2-year yield briefly dropped below 3% following the revision. Futures markets saw Federal Reserve tightening expectations recede. During the week, Chairman Powell testified on Capitol Hill underscoring the Fed has no alternative to being successful in getting inflation back to the 2% target, essentially stating that all options will be on the table when the FOMC raises rates again next month. On Friday, the leading Fed hawk, Bullard, reiterated rates remain far from neutral and they need to get to 3.5% quickly, but also noted he does expect to see a disinflation dynamic emerge in the business world first, and that once it starts to take hold the Fed could consider shifting course. For the week, the S&P gained 6.5%, the DJIA climbed 5.4%, and the Nasdaq rebounded 7.5%.
In corporate news this holiday-shortened week, FedEx reported a beat on Q4 revenue as higher rates and surcharges helped to offset a drop in package volume, and the shipping giant guided profits for the new fiscal year to be ahead of consensus. Kellogg announced plans to split into three separate companies, spinning off its cereal and plant-based divisions, in a move to bolster its snack business. Sanofi and GSK were the first to report a successful efficacy study against the Omicron variant with a COVID-19 Beta-containing vaccine, and they aim to make the shot available to the public later this year. Reports indicated that Franchise Group is considering lowering its bid for Kohl’s to be closer to $50/shr from the $60/shr level bandied about earlier this month. Zendesk entered a $10.2B go-private deal with a PE firm-led investor group after being the target of activist pressure and rejecting a higher $17B acquisition offer in February.
SUN 6/19
(US) Fed's Waller (hawk, voter): Future forward guidance on timing of lift off from zero-level interest rates should include rate hike path guidance; If the data comes in as I expect, I will support a similar-sized move at our July meeting - Society for Computational Economics conf
(FR) France President Macron loses absolute majority in parliament (keeps largest bloc); Le Pen far right, National Rally raises seats to 89 v 8 prior
(HK) Macau reported 21 positive covid cases Sunday (1st time in 8 months)
*(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: MAINTAINS 1-YEAR AND 5-YEAR RATE
(HK) Macau reports 34 positive COVID cases of Mon morning v 21 late Sunday
MON 6/20
(DE) Germany Econ Min Habeck: Unveils new measures to cut usage of natural gas; Will store as much natural gas as possible with a new set of measures, including an increased use of coal power plants
(TW) Taiwan May Export Orders Y/Y: 6.0% v 3.0%e
(FR) French left-wing NUPES alliance leadership to put forward a no-confidence vote against current French govt on July 5th - press
(RU) Russia Foreign Ministry: If cargo transit to Kaliningrad region is not restored by Lithuania in the near future, Russia reserves the right to take action to protect its national interests
(RU) Russia State Duma deputy Sheremet: The attack on platforms of Chernomorneftegaz untied Russia's hands; In the near future, retaliatory strikes will be carried out on Ukrainian decision-making centers
(EU) ECB chief Lagarde: Reiterates stance that ECB intends to raise the key interest rates by 25bps at the July and again at the Sept policy meeting; Will look at balance sheet size issue at a later stage
(UK) BOE's Mann (hawkish dissenter): 50bps move reduces the risk of domestic inflation being boosted by a weaker GBP currency (sterling); Bigger hikes by Fed and ECB could lift UK inflation
3333.HK Discloses received resumption guidance from HKEX on June 15th; The Company is actively pushing forward with its restructuring work; The audit work of the Group is being carried out in an orderly manner
(US) Pres Biden: Decision on pause on federal gas tax could be end of the week; Reiterates US recession is not inevitable
(IL) Israel PM Bennett and Foreign Min Lapid agree to dissolve Israel's parliament Knesset and go for new early elections; If the vote passes, Foreign Min Lapid will become interim PM - press
(FR) ECB's Villeroy (neutral, France): New ECB anti-fragmentation tool must backstop commitment to euro and send clear no-limits message; It should be available as much as necessary
(HK) Macau May Visitor Arrivals 601K v 605K prior
TUES 6/21
(US) Nomura analysts see US mild recession starting in Q4 2022 is now more likely than not; Forecast it will be followed by six more quarters of negative growth; Now expect rate cuts in H2 2023
(RU) Russia govt spokesperson Peskov: Ukraine crisis will be long; Russia will never trust the West anymore - MSNBC interview
(HK) Macau to conduct COVID antigen testing for all residents on June 22nd - press
(RU) Russia Security Council Secretary Patrushev: Russia retaliatory measures against Lithuania will have a serious negative impact on Lithuanian population
April Trucking Conditions Index (TCI) +3.21 v -7.38 (first negative reading since May 2020) - FTRintel.com
K To split into three companies; spinning off its U.S., Canadian, and Caribbean cereal and plant-based businesses
LUV Affirms Q2 Op Rev +12-15% v Q2'19, Capacity -7%, CASM-X +14-18%; Raises load factor 85-87% (prior 85%); Continues to expect solid profits ex items in Q2 and remaining of 2022 - filing
*(US) MAY EXISTING HOME SALES: 5.41M V 5.40ME
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.3% v +1.5% prior
TGT CEO: Sees tremendous amount of uncertainty in consumers; Supply chains are not getting better
WEDS 6/22
(HK) Macau reports total 65 coronavirus cases during last outbreak during city wide testing
BAS.DE CEO: H2 2022 will probably be much more difficult that H1 as BASF will no longer be able to benefit from previously strained supply chains of competitors, high energy costs
*(UK) MAY CPI M/M: 0.7% V 0.7%E; Y/Y: 9.1% V 9.1%E (10th month above target and highest annual pace since Nov 1981)
(ES) ECB's De Guindos (Spain, neutral): Inflation to stay near current levels above 8% over coming months then ease after the summer
BA CEO: Global supply chain constraints will probably continue until at least the end of 2023; Industry will face further issues - Qatar Economic Forum
7203.JP Expects July production volume at 800K units; Guides initial July-Sept average volume at 850K/month; Affirms FY22 global volume at 9.7M units
DTG.DE Affirms FY22 Rev €48.0-50.0B, Adj EBIT 'significant increase y/y', Unit Sales 500-520K units; Notes easing of supply bottlenecks and that it can cushion a moderate economic downturn
(RU) Russia Foreign Ministry spokesperson Zakharova: Russia's response to Lithuania's actions will not be solely diplomatic; They will be in the practical field
(JP) Traders circulating unverified press piece that Bank of Japan (BOJ) could adjust its easy monetary policy around the autumn if Japanese yen (JPY) stabilises at a lower level around 140 against US dollar, sending inflation to temporary peaks near 3% and driving wage hikes into 2023
6688.HK Ant Group said to apply for key license as soon as by end-June - press
(CN) China Auto Industry Body CPCA: China car retail sales +55% m/m in the week of June 13th
(US) President Biden said to call on Congress on Wed, June 22nd to pass a 3-month suspension of the federal gasoline tax (gasoline $0.183/gal, diesel $0.243/gal) to help combat pump prices - press (as speculated)
(IL) Israel's parliament Knesset votes to disband itself with 110 votes out of 120 (others were absent) in initial step toward snap election - press
(CN) China President Xi: Call for enhancement of regulations for major payment platform companies - BRICS summit remarks
6502.JP Reportedly KKR, Blackstone and Brookfield are among other submitted initial bids for Toshiba; Offers said to be near ¥7,000/shr, valuing Toshiba at up to ~$22B - press
*(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 125BPS TO 7.00%; MORE-THAN-EXPECTED
*(US) FED CHAIR POWELL: PACE OF RATE HIKES WILL CONTINUE TO DEPEND ON INCOMING DATA AND EVOLVING ECONOMIC OUTLOOK; WE WILL MAKE OUR DECISIONS MEETING BY MEETING - TESTIMONY TO CONGRESS
(US) FDA said to be preparing to order Juul e-cigarettes off the US market following two-year review - press
(US) Association of American Railroads weekly rail traffic report for week ending June 18th: 501K total units, -2.5% y/y
*(US) TREASURY $14B 20-YEAR BOND REOPENING DRAWS 3.488% V 3.095% PRIOR, BID-TO-COVER 2.60 V 2.80 PRIOR AND 2.49 OVER LAST 8 REOPENINGS
KSS Franchise Group reportedly considering lowering bid closer to $50/shr from $60/shr - CNBC
CENX To shutter Kentucky aluminum mill for 9-12 months due to energy costs; No current plans to idle additional facilities
THURS 6/23
(HK) Macau said to be closing Cinemas, Gyms, and bars due to coronavirus outbreak - press
*(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 25BPS TO 2.50%; AS EXPECTED
*(FR) FRANCE JUN PRELIMINARY MANUFACTURING PMI: 51.0 V 54.0E (19th month of expansion but lowest reading since Nov 2020)
*(DE) GERMANY JUN PRELIMINARY MANUFACTURING PMI: 52.0 V 54.0E (confirms 24th month of expansion but lowest reading since July 2020); Notes German economy lost virtually all the momentum gained from the easing of virus related restrictions
*(EU) EURO ZONE JUN PRELIMINARY MANUFACTURING PMI: 52.0 V 53.8E (24th month of expansion)
*(DE) GERMANY ECON MIN HABECK STATEMENT ON ENERGY SECURITY; Confirms to trigger move to stage two** of German emergency gas plan (as speculated); Will not yet deploy price adjustment mechanism
*(NO) NORWAY CENTRAL BANK (NORGES) RAISES DEPOSIT RATE BY 50BPS TO 1.25%; MORE-THAN-EXPECTED; Notes rate will most likely be raised further by 25bps in Aug 2022
*(UK) JUN PRELIMINARY MANUFACTURING PMI: 53.4 V 53.6E (25th month of expansion but lowest print since July 2020); Notes business confidence slumped to a level which has in the past typically signalled an imminent recession
2408.TW President Lee: FY22 Rev may fall slightly y/y citing demand slowdown in consumer electronics spreads to cloud computing and data centers; DRAM demand from server manufacturers is set to weaken in H2 2022 - press interview
300750.CN Unveils EV battery with one-charge range of 1,000 kms (620 miles); To start production in 2023
(CN) China President Xi: Want high quality BRICS cooperation; We must abandon Cold War mentality - BRICS summit remarks
*(US) INITIAL JOBLESS CLAIMS: 229K V 226KE (matches 5-month high); CONTINUING CLAIMS: 1.32M V 1.32ME
RDUS Agrees to be acquired by Gurnet Point Capital and Patient Square Capital at $10/shr per share in cash plus a CVR of $1/shr payable upon TYMLOS contingencies
*(US) JUN PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 52.4 V 56.0E (lowest since July 2020)
(US) Supreme Court voids New York law limiting gun possession, establishes Right to Carry in the state - press
(US) Fed's Bowman (voter): Fed must pay close attention to signs of rising long term inflation expectations; An additional 0.75% rate rise will be appropriate in July
ZAL.DE Guides Q2 GMV, Rev growth and Adj EBIT to be significantly below estimates due to deteriating macroeconomic conditions
WMT Reportedly developing new tools to switch and use multiple cloud providers; Aims to cut its reliance on big tech firms - press
OPEC+ reportedly set to reconfirm plans for Aug oil output hike of 648K bpd at meeting next week (prior 648K in July) - press
*(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 75BPS TO 7.75%; AS EXPECTED
FDX Reports Q4 $6.87 v $6.91e, Rev $24.4B v $24.3Be; Expect further momentum in fiscal 2023
TREE Cuts Q2 Rev $259-264M v $287Me, adj EBITDA $26-29M (prior Rev $283-293M, adj EBITDA $35-40M) as difficult economic forces 'have persisted and in many cases worsened'
(US) Fed bank stress test results: All banks passed this year's stress tests
(UK) Jun GfK Consumer Confidence: -41 v -40e (record low)
FRI 6/24
SAN.FR Sanofi-GSK first to report a successful efficacy study against Omicron with COVID-19 Beta-containing vaccine; Primary vaccination delivers 64.7% efficacy and 75.1% for previously infected with COVID-19
(RU) Pro-Ukrainian head of Luhansk region: Ukrainian forces will have to leave destroyed Severodonetsk city (**Note: the biggest city not yet occupied in Luhansk region)
*(UK) MAY RETAIL SALES (EX-AUTO/FUEL) M/M: -0.7% V -0.9%E; Y/Y: -5.7% V -5.0%E
*(DE) GERMANY JUN IFO BUSINESS CLIMATE SURVEY: 92.3 V 92.8E
(DE) German Economy Ministry reportedly considers plan to transform suspended Nord Stream 2 pipeline into connection for LNG terminal in Baltic Sea - German press
MMK.UK Exec: company is working at 55% of capacity
(UR) Ukraine Foreign Min Kuleba: Ukrainian side is ready to discuss with Russia the return to the state borders as of Feb 24th before invasion
(AU) Reserve Bank of Australia (RBA) Gov Lowe: Still receiving price pressures from supply chain issues; Not expecting there to be any kind of recession
(US) Fed’s Bullard (voter, hawk): Rates are still far from neutral; Want to move up rates to 3.50% by end-2022
(ES) ECB's De Guindos (Spain, neutral): Size of Sept hike is data dependent; Uncertainty in EU is huge; Starting to see wage demands on the rise; Monitoring second-round effects closely
ZEN To be acquired by investor group led by Hellman & Friedman and Permira at $77.50/shr in cash for $10.2B
USAK To be acquired by DB Schenker for $31.72/shr in cash to create premier North American transportation solutions provider
*(US) JUNE FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 50.0 V 50.2E (Record low); 5-10 year inflation expectations revised lower
*(US) MAY NEW HOME SALES: 696K V 590KE; Months supply: 7.7 v 9.0 prior
*SUPREME COURT OVERTURNS ROE V. WADE; UPHOLDS 15-WEEK ABORTION BAN IN MISSISSIPPI BY 6-3 VOTE
Airline group: Important FAA air traffic center has been understaffed for much of last month which has 'crippled' East Coast traffic flows
(US) Weekly Baker Hughes Rig Count: 753 v 740 w/w (+1.8% w/w)
