Friday, November 11, 2022

Downside CPI surprise heartens markets despite FTX collapse wounding the crypto market

TradeTheNews.com 

Weekly Market Update: Downside CPI surprise heartens markets despite FTX collapse wounding the crypto market

Fri, 11 Nov 04:08 PM EST/09:08 PM GMT

Investors waded into another crowded week of corporate earnings, key inflation data, and midterm elections that would likely see Republicans take control of one if not both chambers of Congress. Stocks took a step back after Tuesday’s election results didn’t turn out to be the landslide ‘red wave’ that many polls and pundits predicted. Another high-profile blowup in crypto markets added to the post-election uneasiness. Sam Bankman-Fried’s FTX saw a run on its assets wipe out the once $30B+ crypto-exchange in a matter of days after it was unsuccessful in reaching a bailout agreement with competitor Binance. Bitcoin plunged to new lows below $17K and uncertainty rippled across trading in equities and other risk assets. By Friday, FTX had declared bankruptcy and the now former CEO SBF faced serious legal allegations on a multitude of fronts.

Thursday’s CPI data shocked markets and resulted in one the largest bear market rallies in history. Led by the tech-heavy NASDAQ, stock indices exploded along with volumes. Bond yields and the US dollar reversed sharply lower after October CPI data offered the first signs of real relief for the Federal Reserve. A number of factors contributed to the shortfall in the core CPI but the most significant was a long-awaited deceleration in shelter costs. Healthcare costs unexpectedly slid, apparel prices fell for a second consecutive month rather than rebounding as expected, and the 2.4% decline in used car prices was more than twice as large as expected. The US 10-year yield dropped below 4% and the 2-year neared 4.3% after the inflation data, and the dollar index dropped over 4%, its biggest weekly decline in two and half years. Futures markets immediately took down expectations for the high in the fed funds rate next year back below 5%. Several Fed officials openly welcomed the report while also acknowledging there is still a long way to go on inflation. Positive investor sentiment largely held into Fridays Veteran’s Day trade when US bond markets were closed. Most US stock indices added to gains helped by additional reports out of China that, despite rising Covid numbers, officials there would continue relaxing certain zero-Covid restrictions. Thanks to the CPI report, stocks posted a strong week, with the S&P up 5.9%, the DJIA adding 4.2%, and the Nasdaq surging 8.1%.

Aside from the collapse of FTX and early policy stumbles at Elon Musk’s Twitter, other corporate news centered on big tech and media names this week. Disney shares tested 52-week lows after reporting much worse than expected earnings, driven by losses for its Disney+ streaming service, despite better than expected subscriber numbers on the platform. Meta, which also reported poor results last month, gave some hope to investors by announcing efforts to get costs under control, largely via job cuts. Apple said COVID-19 restrictions in China have temporarily impacted a key assembly facility, leading to lower production and shipments of iPhone 14 Pro handsets. In another sign that an economic slowdown is occurring, FedEx said it can’t provide a FY23 earnings outlook at this point, noting demand for air freight had dropped faster than expected, causing the firm to cut flights and park aircraft.


SUN
BRK.A Reports Q2 EPS (Class B) -$1.22* v $4.59 y/y, Rev $76.9B v $57.8B y/y
AAPL Provides updates on supply of iPhone 14 Pro and iPhone 14 Pro Max, COVID restrictions in China have temporarily impacted assembly, expect lower shipments; Continue to see strong demand

MON
*(CN) CHINA OCT FOREIGN RESERVES: $3.052T V $3.039TE; Notes domestic economic fundamentals continue to support FX reserve stability
(UR) Reportedly EU and US allies in NATO identified a short-term negotiation window for Ukraine war; See Ukraine may need to re-capture Kherson city and then push for a ceasefire from a position of strength - Italian press
(CN) REPORTEDLY CHINA LEADERS CONSIDER STEPS TOWARD REOPENING; NO TIMELINE SET, BUT A RETURN TO PRE-PANDEMIC LEVELS OF ACTIVITY NOT LIKELY BEFORE END-2023 - US FINANCIAL PRESS
Oct Manheim Used Vehicle Value Index: -2.2% M/M; -10.6% Y/Y
(US) SEPT CONSUMER CREDIT: $25.0B V $30.0BE
(JP) Japan Oct FX Reserves: $1.19T v $1.24T prior

TUES
7974.JP President: No plans to raise prices on Switch; Chip supply has been recovering since Sept, have increased Switch production since Oct
(EU) According to EU's Climate Change Service, Europe saw warmest October on record, 2 degrees Celsius above the 1991-2020 reference period - press
BLDR Reports Q3 $5.20 v $3.53e, Rev $5.80B v $5.22Be
(EU) European Commission said to have told countries that there is no way to create gas price cap as requested by EU leaders at Oct 20-21st summit - press
FTX.IPO Binance signs non-binding LOI to fully acquire FTX.com to help cover liquidity crunch
FDX CFO: We have cut flights and parked planes as demand drops; Decline in air demand has been quicker than expected - Baird conf comments
DIS Reports Q4 $0.30 v $0.50e, Rev $20.2B v $21.1Be
(CN) CHINA OCT CPI M/M: 0.1% V 0.3%E; Y/Y: 2.1% V 2.4%E

WED
(US) Fetterman (D) projected to beat Oz (R) in Pennsylvania for Republican-held US Senate seat (1st potentially flipped state for Senate race) - ABC News
EOAN.DE Reports 9M Adj Net €2.13B v €2.19B y/y, Adj EBIT €4.03B v €3.93B y/y, Rev €81.6B v €48.1B y/y; Supports German govt's plans and prepares to implement gas price cap
7267.JP Reports H1 Net ¥338.5B v ¥389.2B y/y, Op ¥453.5B v ¥442.2B y/y, Rev ¥8.09T v ¥6.99T y/y; Raises FY22/23 outlook, but cuts vehicle sales forecast citing chip shortage
ADS.DE Reports Q3 Net €0.34 v €0.47e, Op €564M v €672M y/y, Rev €6.41B v €6.25Be; Cuts again FY22 outlook to reflect Yeezy partnership as its high seasonality geared towards Q4
AD.NL Reports Q3 adj €0.70 adj v €0.59e, Rev €22.4B v €18.5B y/y
7201.JP Reports H1 Net ¥64.5B v ¥168.7B y/y, Op ¥156.6B v ¥139.1B y/y, Rev ¥4.66T v ¥3.95T y/y; Raises FY22/23 Rev outlook. but cuts vehicle sales forecast; Expects chip shortage and higher costs to continue in H2
IBE.ES Presents strategic plans and profit forecasts; Expects EBITDA to reach €16.5-17B by 2025; Plans to invest €47B in its electricity networks
META Affirms Q4 outlook and cuts slightly FY23 Opex; Confirms to cut 11K employees (13% of its workforce) citing lower Rev outlook than anticipated before; Extends hiring freeze into Q1 2023 with some exceptions
PFGC Reports Q1 $1.08 v $0.79e, Rev $14.7B v $14.4Be; Raises outlook
DHI Reports Q4 $4.67 v $5.06e, Rev $9.64B v $10.0Be; Since June and continuing through today, saw a moderation in housing demand
IBM Unveils 400 Qubit-Plus quantum processor and next-generation IBM Quantum System Two; Outlines plan by 2023 end for QT2
FTX.IPO Reportedly Binance is likely to scrap bailout of FTX following initial due diligence - press
(US) Atlanta Fed GDPNow: Raises Q4 GDP forecast to 4.0% from 3.6%
(US) USDA WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES (WASDE) CROP REPORT

THRS
TSM Reports Oct (NT$) Rev 210.3B v 134.5B y/y; Jan-Oct Rev 1.85T v 1.28T y/y
(CN) China Politburo: Urge to stick to zero-COVID policy; to target more precise but look to minimize impact on economy via more targeted control; China top leaders strive to protect normal production and life
TGT Debuts its new store strategy and larger-format store design; Will focus on this larger footprint in the next few years
(US) INITIAL JOBLESS CLAIMS: 225K V 220KE; CONTINUING CLAIMS: 1.49M V 1.49ME
(US) OCT CPI M/M: 0.4% V 0.6%E; Y/Y: 7.7% V 7.9%E (annual pace below lower-end of all analysts' expectations and records its 4th straight decline)
ASML.NL Targets Long term Rev €30-40B, gross margin 54-56%; Initiates up to €12.0B share buyback
(US) Atlanta Fed Oct Sticky-CPI annualized 5.5% v 8.5% m/m, core 5.0% v 8.3% m/m
(US) Fed's Mester (FOMC voter): October CPI shows signs of moderation on inflation; Inflation is still broad-based, with services prices not slowing
(JP) Japan Oct PPI (CGPI) M/M: 0.6% v 0.7%e; Y/Y: 9.1% v 8.8%e

FRI
(CN) China National Health Commission announced measures to minimize number of people under COVID control; Will now identify close contacts only, and no longer identify close contacts of close contacts
(UK) Q3 PRELIMINARY GDP Q/Q: -0.2% V -0.5%E; Y/Y: 2.4% V 2.1%E
(DE) GERMANY OCT FINAL CPI M/M: 0.9% V 0.9%E; Y/Y: 10.4% V 10.4%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: +0.2% V -0.3%E; Y/Y: -3.1% V -4.4%E
(CN) China Foreign Min spokesperson Zhao Lijian: China is not taking 'laid back' approach to COVID; China COVID changes do not mean relaxing containment; China and US should establish right way forward in ties
(RU) Russian Dep Foreign Min: Russia and US to hold nuclear arms treaty in end-Nov to early-Dec - Russian press
(EU) EU Commission Autumn Forecasts: Inflation peak expected at end-2022; Expects economic growth to return to Eurozone in spring 2023
(UK) BOE Gov Bailey: Expects efforts to bring inflation under control to likely take between 18 months and two years; Further increases to interest rates likely in the coming months – press
FTX.IPO Commences Chapter 11 bankruptcy proceedings in the United States; CEO Sam Bankman-Fried resigns – press
(US) NOV PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 54.7 V 59.5E