12/16/2022 4:04:34 PM
Trading opened this week on an opportunistic note. Several decent sized M&A announcements kindled modest animal spirits for stocks initially. Momentum carried over into Tuesday’s CPI release. Nov headline and core CPI both came in below market expectations. The deceleration seen was broad with a wide variety of categories coming in below expectations, while there were only a few offsetting surprises on the high side. Hopes were on the rise that the report potentially reduced the risk that the Fed might have to push the funds rate above 5% next year. Those hopes were squashed though, on Wednesday when the Fed hiked by 50 basis points as expected, but more importantly offered decidedly more hawkish SEP projections than markets had been expecting. The median forecast for the 2023 fed funds rate climbed above 5.1%. Indices quickly moved into the red and rates backed up, but only marginally. During his press conference Chairman Powell acknowledged that the last two CPI reports showed "a welcome reduction in the monthly pace of price increases," but also added "it will take substantially more evidence to have confidence that inflation is on a sustained downward path." Markets tried to take solace in Powell noting that policy is getting close to sufficiently restrictive, but ultimately couldn't overcome the Chairman's hawkish tone. Worries about a potential policy error swelled as a debate raged whether the Fed was once again behind the inflation (deflation) curve. Longer dated US yields unexpectedly fell, further inverting the curve while the 2-year yield stayed below the current Fed funds rate.
The post Fed stock slump picked up significant momentum Thursday after the ECB doubled down on its own hawkish commentary and US economic data revealed a worsening landscape. ECB Chief Lagarde signaled that markets should expect multiple 50 basis point hikes in the months ahead in what was reported to be an olive branch to a majority of ECB officials who wanted to hike by 75 basis points. Hopes for a soft landing took a hard hit after Nov retail sales and manufacturing data missed estimates and included deterioration in many of the key components like new orders, while weekly jobless claims stubbornly fell. The selling pressure got worse after the S&P was unable to hold key support around 3900. Equity markets stayed heavy heading into Friday’s quadruple witching options expiration. S&P Global PMI readings were below expectations confirming the softness seen across much of the US economic data earlier in the week. Concerns swirled about what is potentially setting up to be a difficult environment in 2023, whether it is outright recession or maybe even worse, extended stagflation. Multiple ECB officials hammered home Lagarde’s message, that is to say rates are going up more than markets had been anticipating. European bond yields continued to back up pulling UST yields higher while oil prices slumped. For the week the S&P fell 2%, Dow lost 1.7% and NASDAQ declined 2.7%.
SUN 12/11
(UR) Pentagon reportedly has given a 'tacit endorsement' of Ukraine’s long-range attacks on military targets inside Russia after massive missile strikes against Ukraine's critical infrastructure - UK press
(JP) Japan Nov PPI (CGPI) M/M: 0.6% v 0.5%e; Y/Y: 9.3% v 8.9%e
MON 12/12
(CN) China to remove its official movement-tracking app, "Travel Card", used to help limit spread of COVID, from Dec 13th - Chinese press
(UK) OCT MONTHLY GDP M/M: 0.5% V 0.4%E
(UK) OCT INDUSTRIAL PRODUCTION M/M: 0.0% V 0.0%E; Y/Y: -2.4% V -2.5%E
(CN) Beijing official: To distribute more COVID antigen tests and medicine; To open more fever clinics; Drug supplies under strainUS Dept of Energy said to announce Dec 13th that California scientists have been able for the 1st time to produce a fusion reaction that creates a net energy gain; Scientists reportedly were able to create abundant limitless, zero-carbon power through nuclear fusion - WaPo
HZNP Confirms to be acquired by Amgen for $116.50/shr in cash valued at $27.8B
BINANCE.IPO (US) US prosecutors reportedly consider charging Binance and executives for possible money laundering and sanctions violations; Discussed possible plea deals - press
ORCL Reports Q2 $1.21 v $1.17e, Rev $12.3B v $12.0Be
TUES 12/13
(CN) China reportedly to be rolling out >CNY1.0T (~$143B) in support for domestic semiconductor industry during Q1 2023 - press
(DE) GERMANY NOV FINAL CPI M/M: -0.5% V -0.5%E; Y/Y: 10.0% V 10.0%E
(CN) China NHC official: The number of fever outpatient visits and flu-like cases rose significantly, and the number of 120 emergency hotline calls increased sharply
(EU) EU said to have reached a political deal to impose a carbon dioxide emissions tariff on imports of polluting goods such as iron, steel, cement, fertilizers, aluminum and electricity - press
(RU) RUSSIA SAID TO HAVE AGREED THE DRAFT DECREE FOR RESPONSE TO WEST'S PRICE CAP; TO BAN OIL SUPPLIES TO COUNTRIES WHICH JOINED RUSSIAN OIL PRICE CAP MECHANISM (AS EXPECTED) - RUSSIAN PRESS
(CN) China said to delay major economic policy meeting due to COVID cases surge in Beijing - press
(DE) GERMANY DEC ZEW CURRENT SITUATION SURVEY: -61.4 V -57.0E; EXPECTATIONS SURVEY: -23.3 V -26.4E
UAL Confirms order for 100 Boeing 787 Dreamliners with options to purchase 100 more (largest widebody order by a US carrier in commercial aviation history)
MRNA Moderna and Merck announce mRNA-4157/V940, an investigational personalized mRNA cancer vaccine, in combination with KEYTRUDA (pembrolizumab), met primary efficacy endpoint in Phase 2b KEYNOTE-942 trial;
(US) NOV CPI M/M: 0.1% V 0.3%E; Y/Y: 7.1% V 7.3%E (annual pace below lower-end of all analysts' expectations and records its 5th straight decline)
(US) TREASURY $18B 30-YEAR BOND REOPENING DRAWS 3.513% V 3.930% PRIOR; BID TO COVER 2.25 V 2.39 PRIOR AND 2.37 OVER LAST 8 REOPENINGS
(US) Atlanta Fed Nov Sticky-CPI annualized 5.5% v 5.5% m/m, core 5.4% v 6.5% m/m
(US) Congress negotiators said to have reached a “framework” to fund Govt through Sept 2023; House chamber expected to vote on one-week short-term extension as soon as today, Dec 14th - press
WED 12/14
(UK) NOV CPI M/M: 0.4% V 0.6%E; Y/Y: 10.7% V 10.9%E (annual pace moves off 40-year highs)
(CN) CHINA SAID TO DECIDE AGAINST POSTPONING ECONOMIC WORK CONFERENCE DESPITE COVID - PRESS
IEA Monthly Oil Report (OMR); Notes oil price may rally in 2023 as Russian exports sink and market heads to tighter Q2 2023 balance
(JP) BOJ said to be considering a policy review in 2023, but said to unlikely happen before BOJ Gov Kuroda steps down in Apr 2023 after his decade-long term - financial press
DAL Raises Q4 $1.35-1.40 (prior $1.00-1.25), Narrows Total Rev +7-8% (prior +5-9%) - pr ahead of Investor Day
(US) DOE CRUDE: +10.2M V -3.5ME; GASOLINE: +4.5M V +2.5ME; DISTILLATE: +3.7M V +3ME (largest weekly crude build since March 2021)
THRS 12/15
-(US) DEC EMPIRE MANUFACTURING: -11.2 V -1.0E (4th negative print in 5 months); New Orders: -3.6 v -3.3 prior
-(US) NOV ADVANCE RETAIL SALES M/M: -0.6% V -0.2%E; RETAIL SALES (EX-AUTO) M/M: -0.2% V +0.1%E; Retail Sales (control group): -0.2% v +0.1%e; prior revised lower
-(US) DEC PHILADELPHIA FED BUSINESS OUTLOOK: -13.8 V -10.0E; New Orders: -25.8 v -16.2 prior ; Prices Paid: 26.4 v 35.3 prior
(UK) BANK OF ENGLAND (BOE) RAISES BANK RATE BY 50BPS TO 3.50%; AS EXPECTED; Drops guidance on market path for interest rates; Sees inflation falling sharply from middle of 2023
(UK) BOE VOTED 6-1-2 TO RAISE INTEREST RATES; 2 FOR NO CHANGE; 1 FOR 75BPS; 6 FOR 50BPS
(EU) ECB RAISES KEY RATES BY 50BPS; AS EXPECTED; Expects to raise rates further, rates still have to rise significantly at steady pace; To be data dependent, keep meeting-by-meeting approach
(EU) ECB STAFF PROJECTIONS: Raises inflation outlook; Set 2025 Inflation at 2.3% (**Note: above target level in forecast horizon)
(EU) ECB chief Lagarde: Obvious to expect further 50bps hikes for a 'period of time'; ECB needs to do more on rates than markets' price - Q&A
ADBE reports Q4 $3.60 v $3.50e, Rev $4.53B v $4.52Be; affirms FY outlook
X guides Q4 $0.58-0.63 v $0.47e, adj EBITDA $375M; Sees Dec commercial demand better in US, scrap prices increasing
FRI 12/16
(US) DEC PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 46.2 V 47.8E
(NL) ECB's Knot (Netherlands): Reiterates Council view that Fed is closer to end of rate hikes than
(US) Fed’s Williams (voter): Well on our way to where we need to be; Real rates need to become restrictive and stay there - TV interview ECB
(US) Fed's Daly (non-voter): We are far away from price stability goals; will need to get unemployment to mid-4% or even higher
(US) Reportedly US government to purchase 3M bbl of crude for SPR delivery in February - press
(CO) Colombia Central Bank raises Overnight Lending Rate by 100bps to 12.00%; as expected
