9/9/2022 4:13:23 PM
US markets came out of the Labor Day holiday break in much the same fashion they finished up the previous week. The S&P dipped below 3,900 for the first time since mid-July as global bond prices continued to move lower. Treasury yields initially tracked higher amid a surge in corporate issuance while also anticipating a significant ECB rate hike announcement on Wednesday. The US dollar tracked to fresh multi-decade highs and remained a key barometer for overall risk appetite. The Greenback’s strength was led by a breakout in USD/JPY through what had been seen as a key technical level of 1.40. Also the Pound fell to levels not seen since the 1980’s as PM Truss took the reins and her new government released details of plans to safeguard Brits and their economy from soaring energy costs, even as the nation mourned the loss of Queen Elizabeth. Overall markets remained extremely jittery amid low trading volumes, hawkish central bank rhetoric, ongoing Covid lockdowns in China, and consternation around Russia’s increasingly aggressive stance on Ukraine and against the West.
Sentiment did seem to shift though after the ECB announced its expected 75 basis point rate hike, while indicating more tightening is to come at the next several meetings. Investors, in general, are becoming more comfortable with blunt central bank signaling. Chairman Powell and others at the Fed continued to emphasize the basic message from last month’s Jackson Hole speech. Namely, the job on inflation was not anywhere near done yet, and they will remain very wary of reversing course too soon. Broad declines in commodity prices, oil in particular, may have buoyed demand for stocks, as did stabilization in both rates and the US dollar. Break even spreads narrowed along with other market based measures of inflation expectations, providing hope that markets were acclimating to central banks’ medicine, and even caused some to talk about brewing disinflationary forces. Fridays’ softer than expected Chinese CPI report provided further legs to that disinflation narrative. Risk assets largely closed out the week on a solid upswing. Commodity and crypto markets saw notable buying interest, headlined by WTI crude back above $86 and bitcoin retaking $20K. For the week, the S&P was up 3.6%, the DJIA gained 2.7%, and the Nasdaq climbed 4.1%.
In corporate news, we saw further M&A moves in the healthcare sector, as CVS announced it would put down $8B to acquire homecare provider Signify Health, beating out Amazon, among other bidders. Investors stocked up on shares of Kroger on Friday after it beat estimates and raised guidance, as it managed to slightly improve margins and said that supply chains were showing signs of improvement. A common theme at investor conferences this week was a stay-the-course attitude, with many companies affirming outlooks while also growing somewhat reluctant to raise prices substantially amid customer pushback, including Apple, who said it would maintain its price point for the new iPhone models. Some airline executives were bullish, with United raising its revenue guidance and Delta noting travel demand remains strong. Altria’s Juul unit reached a multi-state settlement to pay $439M to address marketing practices and underage use of its tobacco products.
SUN 9/4
(UK) PM race front runner Truss: Will act immediately on bills and energy supply; Plans to make an announcement within one week of taking office; Notes she greatly believes in the independence of Bank of England (BOE)
GAZP.RU Notes Siemens can't repair the engine unit for Nord Stream 1 at its Montreal plant, as Canada considers gas turbines as a dual-use facility that is subject to sanctions - Telegram statement
(CN) Shanghai’s major container port of Yangshan has suspended terminal operation as Super Typhoon Hinnamnor (equivalent of a Category 5 hurricane) approaching - press
*OPEC+ SAID TO LIKELY LEAVE OUTPUT UNCHANGED AT TOMORROW'S SEPT 5TH MEETING (AS SPECULATED); RUSSIA SIGNALS OPPOSITION TO OPEC+ PRODUCTION CUT - US FINANCIAL PRESS
(DE) German Chancellor Scholz: Germany plans to completely stop importing Russian gas in Dec 2022; Will get through this winter
USD/JPY Tests 140.00 level for the first time since 1998 (Sept 1)
*(CN) CHINA AUG CAIXIN PMI SERVICES: 55.0 V 54.0E (3rd consecutive expansion)
MON 9/5
(US) Biden administration reportedly considering moves that would restrict US investment in Chinese tech firms; US Commerce department may further restrict what can be sold - press
(CN) China State Planner (NDRC) official Yang Yinkai: Q3 is crucial for rolling of China policy measures and recovery from COVID; Will appropriately step up support for domestic economy
*(EU) EURO ZONE AUG FINAL SERVICES PMI: 49.8 V 50.2E (1st contraction in 17 months and lowest print since Mar 2021)
*(CN) CHINA PBOC CUTS FX RRR FOR FINANCIAL INSTITUTIONS BY 200BPS TO 6.0%; Effective Sept 15th
*(UK) RESULT OF CONSERVATIVE PARTY LEADERSHIP VOTE: LIZ TRUSS ELECTED AS PARTY LEADER (AS EXPECTED); TO BECOME PRIME MINISTER AFTER JOHNSON FORMALLY STEPS DOWN ON TUES, SEPT 6TH
OPEC+ JMMC recommends 100Kbpd oil output cut for Oct (as speculated, first group-wide curb since 2020) - press
(UK) Follow Up: PM-elect Truss gives details on UK Energy bills: Will provide £130B to freeze energy bills below £2.0K; Plans govt guaranteed loans to fund 18-month energy price freeze
GAZP.RU CEO: Reiterates Nord Stream 1 will not be launched until Siemens Energy repairs equipment
TUES 9/6
EQNR Exec: European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5T - press
ADT Confirms partnership with State Farm and Google; State Farm confirms plan to invest $1.2B in ADT (about 15% stake) at $9.00/shr
*(US) AUG ISM SERVICES INDEX: 56.9 V 55.4E; New Orders 61.8 v 59.9 prior
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: 4.9% v -2.9% prior
MO Juul unit reaches $439M multi-state settlement over marketing practices and underage use - press
(EU) Europe's largest aluminum smelter Dunkerque to reduce output next week by 22% due to energy costs - press
(JP) Bank of Japan (BOJ) announcement related to daily bond buying operation: Increases 5-10 year purchase amounts by ¥50B
*(CN) CHINA AUG TRADE BALANCE: $79.4B V $92.7BE
WEDS 9/7
(UK) New UK PM Truss allies said to say she will not activate the emergency Article 16 override provisions in the Northern Ireland protocol in the coming weeks - FT
*(UK) AUG HALIFAX HOUSE PRICE INDEX M/M: +0.4% V -0.1% PRIOR; Y/Y: 11.5% V 11.8% PRIOR
(RU) Russia Pres Putin: Russia lost nothing, will lose nothing nothing in Ukraine war; Western sanctions are danger for the whole world; Problems with food will intensify - Eastern economic forum speech
*(RU) RUSSIA PRES PUTIN: NORD STREAM 1 IS PRACTICALLY SHUT DOWN; PROPOSED CAP ON RUSSIA GAS PRICES ARE STUPID; WILL LEAD TO PRICE INCREASES
MAERSKB.DK Provides Sept market update: Sees signs of improvement in European freight schedules, especially in North Europe; Expect to have exceeded the turning point
*(RU) RUSSIA PRES PUTIN: WILL NOT SUPPLY OIL, FUEL, GAS IF PRICE CAPS ARE INTRODUCED; WILL NOT STICK TO OIL AND GAS CONTRACTS IF PRICES ARE CAPPED
(UK) BOE members speaking at annual report conference: BOE Mann states forceful Bank Rate moves opens door for policy hold or reversal later
(US) US reportedly told Israel that Iran nuclear deal is off the table, unlikely to be reached soon - press
UAL Raises Q3 Rev +12% v Q3'19 (prior ~11%), Capacity -11% to -10% v Q3'19 (prior -11%), adj Op margin ~10.5% (prior ~10%), Narrows TRASM ~25% v Q3'19 (prior 24-26%), CASM-ex ~16% (prior 16-17%), Continues to see strong demand environment - filing
(EU) EU Commission President Von der Leyen: Confirms to propose a cap on Russian gas prices; Looking at price cap for LNG; Also to propose a cap on revenues of companies producing electricity with low costs
ASO Reports Q2 $2.30 v $2.10e, Rev $1.69B v $1.71Be
(IR) IAEA's Grossi: Increasingly concerned by Iran's lack of cooperation; There has been no progress towards resolving issue of uranium particles found in Iran at three undeclared sites; Iran now has enough 60% enriched uranium to theoretically produce a nuclear weapon - IAEA quarterly report
*(CA) BANK OF CANADA (BOC) RAISES INTEREST RATE BY 75BPS TO 3.25%; AS-EXPECTED; COUNCIL STILL JUDGES POLICY RATE WILL NEED TO RISE FURTHER GIVEN INFLATION OUTLOOK
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.4% from 2.6% prior
(US) Association of American Railroads weekly rail traffic report for week ending Sep 3rd: 513K total units, +3.7% y/y
MKC Reports prelim Q3 $0.65 v $0.84e, Rev +3% y/y (+6% y/y cc); Cuts FY22 outlook; Broad pressure on consumers' cost of living from inflation has resulted in higher price elasticity
(JP) Japan July BoP Current Account: ¥229.0B v ¥759.0Be (Smallest on record for a July since 1985); Adj Current Account: -¥629.0B v +¥65.3Be [first deficit since Mar 2014]
THURS 9/8
TSM Reports Aug (NT$) Rev 218.1B, +59.0% y/y, +16.8% m/m; YTD Rev (NT$) 1.43T +44% y/y
(JP) Japan Top Currency Official Kanda: Agreed at MOF, BOJ and FSA meeting to watch markets with strong sense of urgency; Will not rule out any step, ready to take action in FX market; All options on the table, including FX intervention
(CN) Beijing to strengthen control of travelers from other provinces from Sept 10th to Oct 31st ahead of China's upcoming leadership Congress [starts on Oct 16th] - press
(HK) Macau says quarantine-free travel with Hong Kong is not possible now - press
FUN Reports YTD through Labor Day Rev $1.37B, in park per capita spending $61.11 (record high); Notes robust demand for 2023 season pass products
(UK) PM Truss: Confirms to limit typical household energy bills to £2,500/yr; Measure to last two years from Oct 2022; Introducing energy price guarantee which supersedes OFGEM price cap - Energy plan speech
*(US) INITIAL JOBLESS CLAIMS: 222K V 235KE; CONTINUING CLAIMS: 1.473M V 1.438ME
(EU) ECB chief Lagarde: Set to raise interest rates again at next meetings to dampen demand - Prepared remarks
(US) Fed Chair Powell: The longer long run inflation remains above target the higher the cost; History cautions against prematurely loosening policy - Cato Institute conf comments
Aug Manheim Used Vehicle Value Index: -4% M/M; +8.4% Y/Y
*(US) JULY CONSUMER CREDIT: $23.8B V $32.0BE
(KR) North Korea Leader Kim: Assembly has adopted law to declare country a Nuclear weapons state; North Korea will never relinquish nuclear arms under US threats
*(CN) CHINA AUG CPI M/M: -0.1% V +0.2%E; Y/Y: 2.5% V 2.8%E (fist negative M/M since May)
(JP) Follow Up: Meeting between BOJ Gov Kuroda and PM Kishida was on Domestic and overseas economic and market developments; PM Kishida had no specific requests
FRI 9/9
ASC.UK Issues FY22 Trading Statement: Profit is anticipated to be around the bottom end of company guidance; Notes sales in August were weaker than anticipated, slow start to Autumn/Winter shopping
(EU) ECB's Kazimir (Slovakia, hawk): Fresh outlook sees inflation in Euro Zone above 2% target in 2023 and 2024; Priority is to continue fiercely with normalization of monetary policy
*(UK) BANK OF ENGLAND (BOE) POSTPONES INTEREST RATE DECISION BY 1 WEEK FROM SEPT 15TH TO SEPT 22ND FOLLOWING QUEEN'S PASSING AWAY
KR Reports Q2 $0.90 v $0.81e, Rev $34.6B v $34.4Be; Raises FY22 outlook; Authorizes $1B in share repurchases
*(CA) CANADA AUG NET CHANGE IN EMPLOYMENT: -39.7K V +15.0KE; UNEMPLOYMENT RATE: 5.4% V 5.0%E
(US) Q2 FINANCIAL ACCOUNT HOUSEHOLD CHANGE IN NET WORTH: -$6.1T V -$0.544T PRIOR
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.3% from 1.4% prior
