Sunday, July 24, 2022

Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist Weekly Market Update: Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist

7/22/2022 4:09:44 PM

US stock markets ended the week solidly in positive territory, indicating investors’ willingness to seek bargains, perhaps feeling that the extremely bearish environment could ultimately be a contrarian buy signal. Though few seem willing to call a bottom to a selloff that has dragged the S&P 500 down 16% this year, the index did see its best weekly performance in nearly a month. Persistently high inflation, the possibility of a recession, and the war in Ukraine remained at the forefront of most investors' minds. Global interest rates moved lower despite a larger than expected rate hike from the ECB which certainly provided some cover for those looking to wade into stocks. Earnings season widened out providing a look into a number of industries outside of the banks. Some reports ushered in relief rallies by providing investors with increased confidence to scoop up beaten-down technology stocks, while other sectors like homebuilders, enterprise storage and telecoms reinforced an environment of clearly rising costs and slowing growth.

Softening economic data assumed the role of the North Star for markets this week, as global interest rates came in significantly despite central banks continued willingness to tighten. US housing data, weekly unemployment claims, and manufacturing surveys all showed decided deterioration before Friday’s European manufacturing PMIs fell into contraction territory, fanning recession fears only a day after the ECB surprised markets with a 50 bps hike and formally introduced its Transition Protection Instrument (TPI). On Friday global treasury yields dropped to the lowest levels in more than a month amid an ongoing slide in market based inflation expectation measures. The US 10-year yield tested 2.75% while the German Bund neared 1% amid resurgent talk about recession, particularly for Europe. Entering the week, futures markets were pricing in a greater likelihood the Fed would raise rates by 100 bps next week, but by Friday market expectations coalesced around a 75 bps hike and further out projected the Fed might begin cutting rates in 2023. On top of all this, the White House announced that President Biden had been infected with Covid, and though he showed only mild symptoms after treatment, it reinvigorated concerns about the health of the nearly 80-year old President. For the week, the S&P gained 2.6%, the DJIA was up 2%, and the Nasdaq added 3.3%.

The cadence of earnings reports picked up this week, starting with more mixed results from the banking sector. Goldman Sachs beat expectations, largely based on strong year on year improvement in FICC, while Bank of America lagged estimates, even though its “consumer clients remained resilient” and credit card delinquencies are near multi-year lows. Shares of AT&T and Verizon tumbled as the telecoms acknowledge cost pressures and cut guidance. Social media platforms Twitter and Snap missed analyst expectations and Snap said it would slow hiring, echoing a trend seen at a number of other firms in the communications services sector. Snap blamed fierce competition for an ad market pie that is growing slower, while Twitter said it is entirely focused on forcing Elon Musk to close the merger deal. Meanwhile Tesla shares zoomed higher after the automaker posted strong production numbers despite China shutdowns and supply issues and said the company could achieve record production in the second half of 2022. Tesla did cause a stir in the cryptocurrency community after noting it had converted 75% of its Bitcoin holdings into fiat currency during the quarter.

SAT 7/16
(HK) Macau govt extends shutdown of non-essential business from July 18th to July 22nd due to Covid outbreak
(SA) Saudi Foreign Min Farhan: We listen to our partners and friends from all over the world especially consumer countries; But at the end of the day, OPEC+ follows the market situation and will supply energy as needed

SUN 7/17
(US) White House Energy advisor Hochstein: Expects gas prices to come down further towards $4/gallon; Confident there will be a few more steps in coming weeks from OPEC in terms of oil supplies
(US) WSJ piece suggests Fed officials signaled they are likely to raise interest rates by 75bps at July 26-27th meeting; Left the door open to a larger 100bps hike at upcoming meeting, but leaning against it
(IR) Iran Senior Adviser to Supreme Leader: Iran is technically capable of producing nuclear bomb – press
BA Cuts 20-year industry-wide outlook for jets deliveries to 41,170 units (prior 43,610)

MON 7/18
(CH) SNB said to be planning to raise rates by 50bps at its Sept meeting with 75bps hike also possible on hot inflation data - financial press
(RU) Canada said to have sent Nord Stream 1 turbine to Germany; Expected to arrive only on July 24th with 3-4 additional days required for commissioning; Gas compressor unit should be ready to pump gas in early August - Russian press
(RU) According to informal discussions with Kremlin insiders, in the end of May Russian officials became confident that they would win the war with Ukraine in the long term; Putin said to now have a clear plan which would end up with building a new world order - NYT
(CN) China said to consider mortgage grace period for unfinished home projects - press
GAZP.RU Exec: Gazprom has not booked gas transit capacity for August for exports via Yamal-Europe pipeline; Does not book extra Ukraine gas transit space
(US) Reportedly several US semiconductor firms are deliberating whether to oppose CHIPS act package if the final language of subsidies legislation disproportionately benefits manufacturers like Intel - financial press
BAC Reports Q2 $0.73 v $0.77e, Rev $22.7B v $23.0Be
GS Reports Q2 $7.73 v $6.99e, Rev $11.9B v $11.0Be
PLD Reports FFO Q2 $1.11 v $1.12e, Rev $1.25B v $1.10Be
GAZP.RU *Gazprom's Export arm said to have sent notice to at least one European customer declaring force majeure on gas deliveries linked to Nord Stream 1 - press
BAC CEO: Guides Q3 NII to rise $900M-$1B q/q and increasing further in Q4; Organic growth engine is back, seen in Q2 - conf call comments
SCHW Reports Q2 $0.97 v $0.91e, Rev $5.09B v $5.04Be
*(US) JULY NAHB HOUSING MARKET INDEX: 55 V 65E (lowest since May 2020)
AAPL Reportedly plans to decelerate hiring and spending for certain teams in 2023; Will not backfill positions or add new staff in some divisions - press
BHP.AU Reports Q4 Waio Iron Ore Production: 71.7Mt v 72.8Mt y/y, Attributable Iron Ore Production: 64.2Mt v 65.2Mt y/y
(US) Reportedly Pres Biden is considering calling a national climate emergency as soon as this week - WaPo
(TW) US House Speaker Pelosi said to plan a visit to Taiwan during Aug - FT

TUES 7/19
NOVN.CH Reports Q2 Core EPS $1.56 v $1.51e, Rev $12.8B v $13.0Be
ALO.FR Reports Q1 Rev €4.00B v €3.70B y/y
EDF.FR French Govt offers to pay €12/shr and €15.64/oceane-bond in EDF re-nationalization plan for total €9.7B
7203.JP Expects Aug global production at 700K units; Guides Aug-Oct average volume at 850K units/month (prior guided July-Sept at 850K/month); Affirms FY22 global volume at 9.7M units
(IR) National Iranian Oil Company (NIOC) and Gazprom sign strategic cooperation MoU covering projects valued at $40B in total - press
*(EU) EURO ZONE JUN FINAL CPI Y/Y: 8.6% V 8.6%E; CPI CORE Y/Y: 3.7% V 3.7%E
(EU) EU Commission Official Hahn: Do not expect gas supplies to Europe from Russia through the Nord Stream 1 pipeline to restart when scheduled maintenance ends this week
DIDIY China regulator said to fine Didi over $1B for data security breaches - US financial press
FER.ES Reportedly Heathrow refuellers to go on strike later in the week after refusing latest pay offer
JNJ Reports Q2 $2.59 v $2.57e, Rev $24.0B v $23.9Be; Strengthening US dollar impacting estimate for reported results*
LMT Reports Q2 $6.32 v $6.39e, Rev $15.4B v $16.1Be; Cuts FY22 Rev outlook; Provides F-35 update
(EU) Nord Stream 1 reportedly has restarted gas flows on time after annual maintenance but at a lower level of throughput - press
(US) Atlanta Fed GDPNow: cuts Q2 GDP forecast from -1.5% to -1.6%
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -5.0% v -4.1% prior
TWTR Delaware court judge rules against Musk, allows Twitter to expedite lawsuit
NVAX US CDC Advisory Panel voted unanimously to recommend NVX-CoV2373, COVID-19 vaccine, Adjuvanted in individuals 18 years of age and older
(EU) EU considering a 15% voluntary reduction in natural gas usage for Aug-Mar due to Russia supply issues - press
(RU) Russia Pres Putin: Gazprom planning to fulfill its obligations, Another gas turbine will have to go for maintenance on July 26th; Attempts to cap Russian oil prices will lead to prices skyrocketing
(AU) Reserve Bank of Australia (RBA) Gov Lowe: Board had extended discussion on neutral real interest rate; Neutral Nominal rate is 'at least' 2.5%, higher than this if mid term inflation expectations shift higher
NVAX (US) CDC Director Rochelle Walensky endorses ACIP recommendation of use of NVX-CoV2373, COVID-19 vaccine, in individuals 18 years of age and older
(CN) China mortgage boycotts spread to 301 projects in 91 cities - press

WED 7/20
ASML.NL Reports Q2 Net €3.54 v €3.51e, Rev €5.43B v €5.27Be; Cuts FY22 Rev outlook; Notes still sees strong demand for its systems; Moves to quarterly dividend policy
*(UK) JUN CPI M/M: 0.8% V 0.7%E; Y/Y: 9.4% V 9.3%E (11th month above target and highest annual pace since Nov 1981)
(HK) Macau to reopen casinos on Saturday if virus conditions favorable; to resume business activities, including casinos, to certain level on July 23-29th; To continue shutting cinemas, bars and dining-in services - press
(CN) China Premier Li: China will not introduce super-large stimulus policies or print excessive money at the expense of sustainable development in the future for exorbitant growth targets
(IT) Italy PM Draghi: A PM who did not stand for election needs as big a parliamentary majority as possible; Governing coalition can be rebuilt - Senate address
(TW) Taiwan Jun Export Orders Y/Y: 9.5% v 6.4%e
CON.DE Reports prelim Q2 Rev €9.4B v €9.2Be
(CN) China June smartphone shipments at 27.5M +9.1% y/y v -9.1% prior - CAICT
(EU) Daily 3-month Euribor Fixing: 0.125% v 0.042% prior (highest level since 2015)
(CN) Shanghai reportedly asks citizens to take COVID test at least once a week until Aug 31st - press
GAZP.RU Exec: Daily gas exports to China are now above contracted volumes; Not received documents from Siemens on Nord Stream 1 turbine
ELV Reports Q2 $8.04 v $7.73e, Rev $38.5B v $38.1Be; Raises FY22 EPS outlook
(RU) Russia Foreign Min Lavrov: If West delivers long-range weapons to Kyiv, geographical objectives of special military operation in Ukraine will be advanced even further to Kherson, Zaporizhia and a number of other territories
BIIB Reports Q2 $5.25 v $4.10e, Rev $2.59B v $2.47Be; Raises outlook
ABT Reports Q2 $1.43 adj v $1.07e, Rev $11.3B v $10.4Be; Raises FY22 EPS and Rev outlook
*(CA) CANADA JUN CPI M/M: 0.7% V 0.9%E; Y/Y: 8.1% V 8.4%E (highest annual pace since Jan 1983)
AAPL EU antitrust regulators said to reinforce App Store investigation with new evidence but will not bring new charges - press
(US) Association of American Railroads weekly rail traffic report for week ending July 16th: 499K total units, -2.8% y/y
(US) Pres Biden: 'That’s why I and so damn many other people I grew up with have cancer' - speech on the environment
CSX Reports Q2 $0.54 v $0.47e, Rev $3.82B v $3.64Be; Automotive Rev +24% y/y
TSLA Reports Q2 $2.27 v $1.82e, Rev $16.9B v $17.1Be; Notes it focused on record-breaking H2 2022; Have converted 75% of Bitcoin holdings into fiat currency
LVS Reports Q2 -$0.34 v -$0.23e, Rev $1.05B v $955Me
AA Reports Q2 $2.67 v $2.60e, Rev $3.64B v $3.49Be; Boosts share buyback program
STLD Reports Q2 $6.73 adj v $3.35 y/y, Rev $6.21B v $4.47B y/y; Customer order entry activity continues to be healthy across All of our businesses; Invests $500M for 2 addl plant lines

THRS 7/21
(RU) Nord Stream 1 pipeline showing gas flows from Russia into Germany of 29,284,591 kwh/h for 0600-0700 CET v 0 prior; flow to resume gradually
005380.KR Reports Q2 (KRW) Net 3.09T v 1.98T y/y; Op 2.98T v 1.89T y/y; Rev 36.0T v 30.3T y/y; Expects supply issues to ease
ABBN.CH Reports Q2 Net $406M v $709M y/y, Rev $7.3B v $7.4B y/y; Confirms to exit Russia market (1-2% of annual Rev) with winding down charge of $57M
NOKIA.FI Reports Q2 €0.10 v €0.10e, Op €714M v €682M, Rev €5.87B v €6.03Be
SAP.DE Reports Q2 €0.28 v €1.14e, Rev €7.52B v €7.61Be; Cuts FY22 Op profit outlook; To buyback up to €500M in shares (0.5% of market cap)
ROG.CH Reports Q2 (CHF) Core EPS 11.76 v 11.05e, Core Op 12.7B v 11.7B y/y, Rev 32.3B v 31B y/y
DIDIY China regulators confirm to fine Didi CNY8.03B (~$1.2B) after concluding probe
(IT) Italian Presidential Office: Confirm PM Draghi again tendered resignation
(HK) Macau to provide limited public services on July 23-29th - press
(UR) Russia said to plan annexation votes in Ukraine regions by Sept 15th - press
(EU) Daily 3-month Euribor Fixing: 0.145% v 0.125% prior (highest since Sept 2014)
(LY) Libya official: Oil production back above 700K bpd; To recover to 1.2M bpd in 7-10 days
DOW Reports Q2 $2.31 v $2.14e, Rev $15.7B v $15.7Be
T Reports Q2 $0.65 adj v $0.59e, Rev $29.6B v $29.3Be; Cuts FY FCF and capex outlook
T CEO: See higher bad debt, slower bill paying in this cycle; Overdue bills started to be a trend six weeks ago - earnings call comments
DHI Reports Q3 $4.67 v $4.51e, Rev $8.79B v $8.98Be; Cuts FY22 guidance amid signs of moderating demand
F Releases new battery capacity plan, On track to ramp to 600K run rate by 2023 and 2M+ by 2026; To invest over $50B in EVs through 2026; Expects compound annual growth rate for EVs to top 90% through 2026
UNP Reports Q2 $2.93 v $2.83e, Rev $6.27B v $6.13Be
(EU) EU formally publishes details on 7th (“maintenance and alignment”) sanctions package against Russia; Confirms to introduce a new prohibition to purchase, import, or transfer, directly or indirectly, gold, if it originates in Russia and it has been exported from Russia
*(US) INITIAL JOBLESS CLAIMS: 251K V 240KE (highest in eight months); CONTINUING CLAIMS: 1.384M V 1.34ME
*(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: -12.3 V +0.8E (lowest reading since May 2020 and second straight negative print); New Orders: -24.8 v -12.4 prior
ONEM Amazon agrees to acquire One Medical at $18/shr in all-cash deal for $3.9B
(EU) ECB chief Lagarde: Taken steps to make sure inflation moves to 2% target in medium term with larger 50bps hike - Prepared remarks
(EU) ECB publishes full details on its Transmission Protection Instrument (TPI); Focus on public sector securities with remaining maturity of 1-10 years, could also consider private sector securities
*(US) JUN LEADING INDEX: -0.8% V -0.6%E (4th consecutive decline); Conference Board now sees recession 'likely' around year end
(DK) Denmark Central Bank (Nationalbanken) raises Certificate of Deposit Rate by 50bps from -0.60% to -0.10%, following ECB rate move
(US) California official: Port of Oakland's largest marine terminal has been 'essentially shut down' for second day amid trucker blockade; Three other terminals have some operations underway – press
FDX Ground Unit to scale back Sunday Delivery Services to 80% of the US population (prior ~95%) from Aug 15th - US financial press
(UK) July GfK Consumer Confidence: -41 v -42e (remains record low)

FRI 7/22
(TR) Turkey announces a deal has been reached to free Ukrainian grain exports blockaded by Russia in the Black Sea; Expected to be signed off today
(UK) JUN RETAIL SALES (EX-AUTO/FUEL) M/M: +0.4% V -0.4%E; Y/Y: -5.9% V -6.2%E
(FR) FRANCE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 20 months)
(DE) GERMANY JULY PRELIMINARY MANUFACTURING PMI: 49.2 V 50.7E (1st contraction in 25 months)
(EU) EURO ZONE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 25 months)
Honda said to cut Aug production by up to 30% in Japan citing persistent supply chain and logistical issues – press
(UK) JULY PRELIMINARY MANUFACTURING PMI: 52.2 V 52.0E (26th month of expansion but lowest since June 2020)
(EU) Daily 3-month Euribor Fixing: 0.200% v 0.145% prior (highest since 2014)
(EU) ECB's Kazimir (Slovakia, hawk): Sept rate hike may be 25bps or 50bps; ECB move is beginning of a series of 'similar' steps
(EU) EU starts 4 new separate infringement procedures against UK on Northern Ireland Protocol – press
(CN) China cabinet: China to ensure construction of property projects; Necessary housing demand should be insured
SLB Reports Q2 $0.50 v $0.40e, Rev $6.77B v $6.28Be; Raises FY22 Rev outlook
AXP Reports Q2 $2.57 v $2.37e, Rev $13.4B v $12.4Be; Raises FY22 Rev, Affirms EPS
VZ Reports Q2 $1.31 v $1.34e, Rev $33.8B v $33.7Be; Cuts FY22 outlook
TWTR Reports Q2 -$0.08 v +$0.15e, Rev $1.18B v $1.32Be; Will not provide financial guidance or host call today citing pending acquisition by an affiliate of Elon Musk
(UR) Ukraine, Turkey and the UN confirm to have signed an agreement on the export of grain
(US) White House Spokesperson Kirby: Defense department making prelim explorations into feasibility of potentially providing fighter jets to Ukraine; Providing jets to Ukraine is not something that will be executed in the near-term