8/26/2022 4:07:16 PM
Markets opened this week with stocks still under pressure after the S&P 500 failed to hold the 200-day moving average last week. Surging natural gas prices, a backup in bond yields, and a continued rally in the US dollar -- highlighted by the Euro’s move away from parity -- coincided with languishing equity enthusiasm. By mid-week, equity sentiment picked up, helped along by softer US economic readings which helped cap the rise in rates while providing optimism Chairman Powell could offer up something for the bulls in his much anticipated speech from Jackson Hole later in the week. Housing data in particular continued to show significant deceleration while July PCE saw the first m/m decline since April of 2020. Encouraging signals of out China helped turn around equity sentiment too. Chinese officials continued to talk up the idea of stimulating their economy while also providing marginal signs that their zero-Covid policy may be in the early stages of softening. Also US listed Chinese names surged late in the week after US and Chinese officials reached a long-awaited agreement on audit inspections, potentially allowing those securities to keep their dual listings.
Stocks rallied into the Fed Chair’s speech on Friday morning as investors largely looked past a chorus of Fed officials who continued to push back on the notion of a Fed pivot, and instead emphasizing that, if the data supports it, the Fed could pause once rates get into restrictive territory next year. Stocks swooned to new lows after Powell’s speech underscored the Fed is nowhere near done beating back inflation. He echoed his colleges in affirming rates still need to get into restrictive territory quickly and stay there for an extended period to bring inflation back in line, while importantly also acknowledging it will cause some pain for both businesses and households. Fed officials subsequently applauded his message, as well as perhaps tacitly embracing the stock market’s “painful” trading response. ECB hawks also came out in force on Friday to push more aggressive rate policy and QT for the euro zone. The long end of the US curve rallied while short rates ticked up and futures markets once again priced in better odds the Fed will raise by 75 bps at the September meeting. US indices closed out the week near the lows of the month and the US dollar was on the rise. For the week, the S&P lost 4%, the DJIA was off 4.2%, and the Nasdaq tumble 4.4%.
Retail and tech names were prominent in the corporate news this week. Macy’s shares rose after cutting forecasts as investors breathed a sigh of relief that results had not been worse. Gap stock climbed after posting an EPS beat amid improving sales trends, though elevated inventories remain a problem. After issuing an earnings warning two weeks ago, Nvidia posted both a top and bottom line miss as its decline in gaming revenue was larger than anticipated. Snowflake shares popped after reporting a big sales beat as its cloud services remained strong. Salesforce fell midweek despite announcing its “first ever” stock buyback program after trimming its FY outlook.
Twitter saw some weakness after a former security chief disclosed complaints of major security problems at the social media company. Intel signed an agreement with Brookfield to finance semiconductor factories in Arizona. Amazon was said to be among the bidders for healthcare platform Signify Health, amid other reports that the retail giant planned to shutter its own telehealth offerings. Deal talks between Seagen and Merck reportedly hit a snag amid disputes over pricing, following reports of a $200/shr offer back in early July.
SUN 8/21
World Health Organisation (WHO): New COVID cases have jumped by 15% and deaths by 35% globally in the last few weeks; More variants with such intense circulation will be seen in the coming days and doctors are noting increasing numbers of people who have been infected with BA.2 becoming infected again after four weeks by other variants
SGFY Amazon said to be among the bidders for Signify Health; UnitedHealth said to bid >$30/share for the co. [closing price at $21.20/share] - US financial press
(RU) UN permanent representative of Russia Gatilov: Russia believes that it will not work to end the war through negotiations and preparing for a protracted conflict - FT
*(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: CUTS BOTH 1-YEAR AND 5-YEAR RATES (amounts different than expected)
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8198 v 6.8065 prior (weakest since Sept 2020)
MON 8/22
(DE) German Econ Min Habeck: Must expect Russia to further tighten gas supplies this winter, have a good chance to get through the winter without drastic energy measures
F Georgia jury delivers $1.7B verdict against Ford over wrongful death stemming from 2014 rollover crash involving the 2002 Ford Super Duty F-250 pickup - press
(EU) Reportedly senior EU officials see there will likely be a “crunch point” in Ukraine support in the fall or early winter, but EU is unlikely to step back from its commitment to Ukraine - Politico
(TW) Taiwan July Export Orders Y/Y: -1.9% v +6.2%e; M/M: -7.8%; Sees Aug export orders -3.7% to -0.9% Y/Y
EUR/USD Tests parity against US dollar for the first time since July 13th
ENI.IT Announces a significant gas discovery offshore Cyprus; Preliminary estimates indicate about 2.5TCF (trillion cubic feet) of gas in place
(EE) Estonia Foreign Ministry: The 8th package of EU sanctions should include a comprehensive embargo on the supply of energy resources from Russia, as well as finally separate all Russian banks from the SWIFT system
(CN) China reportedly plans CNY200B ($29.3B) in special loans to troubled developers - financial press
*(SA) SAUDI ENERGY MIN: OPEC+ MAY NEED TO TIGHTEN OUTPUT TO STABILIZE THE MARKET; THE OIL FUTURES 'DISCONNECT' MAY FORCE OPEC+ ACTION
PANW Reports Q4 $2.39 v $2.28e, Rev $1.55B v $1.54Be; Announces 3-for-1 stock split
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8523 v 6.8198 prior (weakest setting since late Aug 2020)
TUES 8/23
*(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 49.0 V 49.0E (2nd straight contraction and(lowest print since May 2020)
UNG *US NATURAL GAS FUTURES HIT $10 (1ST TIME SINCE 2008)
*(EU) EURO ZONE AUG PRELIMINARY MANUFACTURING PMI: 49.7 V 49.0E (2nd straight contraction)
*(UK) AUG PRELIMINARY MANUFACTURING: 46.0 V 51.0E (1st contraction in 27 months and lowest since May 2020)
M Reports Q2 $1.00 v $0.85e, Rev $5.60B v $5.48Be; Cuts outlook to incorporate risks related to increased macroeconomic pressures
DKS Reports Q2 $3.68 v $3.52e, Rev $3.11B v $3.07Be; Raises mid-points FY22 outlook
INTC Signs agreement with Brookfield to jointly invest up to $30B in leading-edge chip factories in Arizona; Expected to be accretive to Intel’s EPS during the construction and ramp phase
*(US) AUG PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 51.3 V 51.8E (Lowest since July 2020)
*(US) AUG RICHMOND FED MANUFACTURING INDEX: -8 V -4E
OPEC+ reportedly could lean towards cutting oil output when and if Iran oil production returns to the market, according to OPEC+ sources - press
(US) Freeport LNG spokesperson: Restart is progressing in the right direction; Anticipated that initial production can commence in early to mid-November; To be capable of 100% of capacity by March 2023
INTU Reports Q4 $1.10 v $0.98e, Rev $2.41B v $2.35Be; Approves $2B buyback (2% of market cap); Raises dividend to $0.78/shr (indicated yield 0.69%)
JWN Reports Q2 $0.81 v $0.80e, Rev $3.99B v $3.97Be; Cuts FY22 outlook
(CN) China banks are lowering their mortgage rates [follows the cuts in the 1-year and 5-year loan prime rates on Aug 22nd] - Chinese press
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8388 v 6.8523 prior
(SY) US: US military conducted precision airstrikes in Syria, targeted facilities used by affiliates of Iran Islamic Revolutionary Guard Corps (IRGC)
WEDS 8/24
(UK) UK household energy bill cap to be proposed at £2,000/yr; Rescue plan to protect households from rising bills will need funding of more than £100B over two years - FT
(JP) Japan PM Kishida: Reverses course - Now discussing nuclear plant extensions, plans to look at the construction of new plants; Govt will compile specific green transformation strategy by year end
AVV.UK Schneider reportedly considers a bid for remaining shares of $8B software firm Aveva - press
(CN) China govt said to allow construction of more infrastructure projects (aka 'stimulus')
(CN) China FX regulators reportedly have informally warned some banks against shorting the Yuan - press
*(US) JULY PENDING HOME SALES M/M: -1.0% V -2.6%E; Y/Y: -22.5% V -21.4%E
(US) Association of American Railroads weekly rail traffic report for week ending Aug 20th: 502K total units, +0.1% y/y
CLF Increasing current spot market base prices for all carbon steel hot rolled, cold rolled and coated steel products by a minimum of $75 per ton, effective immediately with new orders in North America
ADSK Reports Q2 $1.65 v $1.56e, Rev $1.24B v $1.22Be
CRM Reports Q2 $1.19 v $1.02e, Rev $7.72B v $7.69Be; Guides Q3 lower; Approves 1st ever $10B share buyback
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8536 v 6.8388 prior (Weakest since Aug 2020)
7267.JP Plant in Chongqing remains closed due to indefinite power cut extensions
THURS 8/25
(RU) Russia Pres Putin hopes to gain control of all of Donbas before winter sets in; Before it, he said not to be ready for peace talks - Russian non-state media
*(DE) GERMANY AUG IFO BUSINESS CLIMATE SURVEY: 88.5 V 86.8E
(US) Fed's Bostic (non-voter, hawk): More strong data could tip Fed toward 75bps rate hike in Sept but personally has not yet chosen between 50bps and 75bps; Too soon to say the inflation surge has peaked
(DE) Rhine river water level forecasted to fall again to ~70cm by Aug 29th v 148cm w/w and ~150cm needed to carry fully loaded vessels - press
(CN) China customs official: No longer required cross-border travellers to report certain COVID-related information, such as tests and previous infections, when clearing customs
*(US) Q2 PRELIMINARY GDP ANNUALIZED (2ND READING) Q/Q: -0.6% V -0.7%E; PERSONAL CONSUMPTION: 1.5% V 1.5%E
*(US) INITIAL JOBLESS CLAIMS: 243K V 252KE; CONTINUING CLAIMS: 1.415M V 1.44ME
*(US) Q2 PRELIMINARY GDP PRICE INDEX: +8.9% V 8.7%E; CORE PCE Q/Q: 4.4% V 4.4%E
(CN) US and China reportedly close to deal for inspections of US-listed Chinese company audit records in Hong Kong; China regulators would allow audit papers to be transferred to Hong Kong where they would be inspected by US officials - press
(US) Fed’s Bullard (voter): 3.75-4.00% is my target for Fed Funds rate this year; I prefer frontloading rates, it shows we are serious about fighting inflation - CNBC
WDAY Reports Q2 $0.83 v $0.79e, Rev $1.54B v $1.52Be
ULTA Reports Q2 $5.70 v $4.96e, Rev $2.3B v $2.21Be; Raises FY22 adj EPS, Rev, and SSS outlook
BX Single-family landlord Home Partners of America subsidiary to pause purchases of new homes in 38 cities - press
SGEN Talks with Merck said to hit 'snag', cites acquisition price - US financial press
FRI 8/26
(IN) India said to likely restrict some rice exports as its domestic rice stocks decline amid no rains - press
MRNA Sues Pfizer and BioNTech for infringing patents central to Moderna's innovative mRNA technology platform
(CN) China Securities Regulatory Commission (CSRC) confirms US PCAOB and China have reached agreement on audit inspections (as speculated)
*(US) JULY PERSONAL INCOME: 0.2% V 0.6%E; PERSONAL SPENDING: 0.1% V 0.5%E
*(US) JULY PCE DEFLATOR M/M: -0.1% V 0.0%E; Y/Y: 6.3% V 6.4%E (first negative M/M print since Apr 2020)
*(US) AUG FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 58.2 V 55.4E
*(US) FED CHAIR POWELL: SEPT RATE ACTION WILL DEPEND ON TOTALITY OF INCOMING DATA; FED WILL KEEP AT IT UNTIL CONFIDENT INFLATION UNDER CONTROL- JACKSON HOLE REMARKS
(US) Atlanta Fed GDPNow: raises Q3 GDP to 1.6% from 1.4% prior
(US) Jul Dallas Fed Trimmed Mean PCE +3.4% v +6.9% m/m
