2/24/2023 4:15:17 PM
US investors returned to a holiday shortened trading week with geopolitics back in focus. President’s Biden’s surprise trip to Kyiv ushered in a string of headlines from both sides in the lead up to the one-year anniversary of Russia’s invasion of Ukraine. Ultimately, new rounds of sanctions, tariffs, and aid were introduced by the West, even as high-level Chinese officials visited Moscow, sparking speculation about Beijing’s designs on acting as either a peace broker or arms broker in the conflict.
Stock markets continued to encounter resistance in the form of rising interest rates. The economic data and central bankers’ signaling remained supportive of the higher-for-longer narrative that has gained traction as investors have had to adjust to the stronger than expected January data. That theme culminated on Friday when the S&P fell to roughly a 1-month low after hotter than expected January PCE data spooked the market. The month over month core PCE reading of 0.6% was the largest monthly rise since August. Moreover, it got a boost from the category that Chair Powell has highlighted recently: core non-housing service prices. That sub-index also rose by nearly 0.6%, which was its largest gain since November 2021, illustrating this very large component of core inflation is not yet showing any real signs of deceleration. After that data, the US 2-year yield climbed above 4.8% and futures markets began to price in the terminal fed funds rate to exceed 5.4% later this year. The Dollar firmed up to the best levels in roughly two months while commodities and risk assets in general weakened into the end of the week. For the week, the S&P lost 2.7%, the DJIA was off 3%, and the Nasdaq fell 3.3%.
Growth and inflation tensions played out in corporate news this week. Discount retailer Dollar General, which usually flourishes during recession, announced it is cutting quarterly guidance, citing bad winter weather. Walmart beat analyst expectations handily, noting that the big box retailer is managing to contain capex costs and attracting more higher-end customers looking for bargains. Home Depot’s numbers were shakier, reporting a 6% decline in customer transactions and guiding a decline in earnings for the year, perhaps signaling more weakness in the housing market. Contrary to that, homebuilder Toll Brothers reported strong quarterly results and affirmed guidance, noting that it is seeing an uptick in demand continuing as recently as last weekend. In the tech world, Cybersecurity firm Palo Alto reported strong quarterly results and gave solid guidance, sending share higher. Intel continued to flounder, cutting its dividend by two thirds, though affirming its guidance. Adobe shares fell to their lowest levels of 2023 after reports emerged that the DOJ is preparing a suit to block its $20B acquisition of Figma.
MON 2/20
(TW) Taiwan Jan Export Orders Y/Y: -19.3% v -24.0%e; Sees Feb orders down between -10.8% and -6.9% y/y
(HK) Macau Jan tourist arrivals at 1.4M, +101.3% y/y
(US) US Pres Biden: Ukraine will get new military aid package worth $500M to be announced on Feb 21st; Will include HIMARS ammunition - statement from Kyiv
(NL) Dutch intelligence agency official: Russia tried to gain intelligence to sabotage critical infrastructure in the Dutch part of the North Sea; Russia may target Netherlands' offshore infrastructure - press
(TR) Magnitude 6.4 earthquake strikes Turkey-Syria border region
TUES 2/21
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 47.9 V 51.0E (moves back into contraction); Composite PMI highest since July 2022
TSM Reportedly considers to delay its Europe fab by two years to 2025 amid automotive chip shortage is no longer as severe as it was – press
(JP) Japan Cabinet Office (Govt) Feb Monthly Report: Maintains overall economic assessment
(RU) Russia Pres Putin: We are in difficult times, prior to historical events; We will decide tasks of special military operation step by step; Vows to continue military operation in Ukraine - Federal Council address
(UK) FEB PRELIMINARY MANUFACTURING PMI: 49.2 V 47.5E (7th straight contraction); Composite PMI highest since June 2022
(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: -45.1 V -50.5E; EXPECTATIONS SURVEY: 28.1 V 23.0E
(RU) Russia Pres Putin: Russia suspends participation in START nuclear arms treaty [**Note: inspections had been halted since 2020]; We suspend participation, not withdrawing from this; Will not allow NATO to inspect our nuclear objects - Federal Council address
HUN Reports Q4 $0.04 v $0.11e, Rev $1.65B v $1.56Be; Optimistic that destocking will end in H1 2023; Notes seeing some green shoots in areas like China, automotive, and aerospace, but construction demand globally is still under pressure
GIS Raises FY23 outlook; Continues to expect to deliver top-tier shareholder returns
HD Reports Q4 $3.30 v $3.27e, Rev $35.8B v $35.9Be; Raises Quarterly dividend 10% to $2.09 from $1.90 (indicated yield 2.63%); Announces $1B investment in associates
WMT Reports Q4 $1.71 v $1.52e, Rev $164.1B v $159.7Be; Guides FY24 EPS short of consensus; Raises Quarterly dividend 1.8% to $0.57 from $0.56 (indicated yield 1.56%)
(US) Feb Philadelphia Fed Non-Manufacturing Regional Index: +3.2 v -6.5 prior
(US) FEB PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 47.8 V 47.4E (5th month of contraction); Services moves into expansion territory
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.5% v +3.2% prior
(RU) Reportedly China's Xi to travel to Moscow in the spring; Xi expected to push Putin for peace talks with Ukraine – press
(EU) ECB chief Lagarde: Seeing no EU country in recession in 2023
(US) FERC grants Freeport LNG request to commission including cooldown of liquefaction Train 2 – filing
PANW Reports Q2 $1.05 v $0.78e, Rev $1.66B v $1.65Be
WED 2/22
RIO.AU Reports FY22 underlying Net $13.3B v14.0Be, underlying EBITDA $26.3B v $37.7B y/y, Rev $55.6B v $63.5B y/y
BN.FR Reports FY22 Net €959M v €1.92B y/y, Recurring Op €3.38B v €3.35Be, Rev €27.7B v €27.4Be
(JP) Semiconductor Equipment Association of Japan (SEAJ) Jan Chip-making Equipment Y/Y: -2.1% v +1.1% prior
STLA Reports FY22 adj Op €23.3B v €21.5Be, Rev €179.6B v €176.1Be; Plans up to €1.5B share buyback through 2023; Notes slow but steady improvement in chip supplies
(CN) China said to urge the State-run companies to drop the big four international auditors and use local ones citing data risk – press
7267.JP Said to raise wages by 5% (biggest increase in 30 years) - press
BIDU Reports Q4 (CNY) 16.87 v 13.90e, Rev 33.1B v 32.1Be; Announces $5B share buyback (10% of market cap) through Dec 2025; Plans to integrate Ernie bot into a number of Baidu's businesses
(US) Fed’s Bullard (Non-Voter): I think markets have overpriced a recession in 2023; US economy is stronger than what we previously thought which adds up to markets needing to price in tougher road for inflation and rates – CNBC
INTC Cuts Quarterly dividend 65.8% to $0.125 from $0.365 (indicated yield 1.92%); Affirms Q1 -$0.15 v -$0.15e, Adj Rev $10.5-11.5B v $11.1Be
(RU) Russia Foreign Ministry: We appreciate China's balanced position on Ukraine issue; "Vision" very much the same between us
TOL Exec: Uptick in demand continued through last weekend - post earnings comments
(RU) Russia said to cut crude exports from western ports by 25% in March versus Feb – pres
(US) FEB FOMC FEB MINUTES: ALL PARTICIPANTS AGREED MORE RATE HIKES NEEDED TO ACHIEVE JOB AND INFLATION OBJECTIVES; A FEW CALLED FOR A 50 BPS HIKE
(US) US said to consider releasing intelligence related to China potentially transferring arms to Russia - US financial press
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.50%; AS EXPECTED
THRS 2/23
ENI.IT Reports Q4 adj Net €2.5B v €2.1B y/y, adj Op €3.59B v €3.81B y/y, Rev €31.3B v €26.8B y/y
(RU) Reportedly Russia Pres Putin has already gamed out the possibility of using a nuclear weapon in Ukraine; Putin’s calculation implies that Russia is more committed to the Ukraine war than the West - FT
(EU) NATO Sec Gen Stoltenberg: See signs China is considering giving arms to Russia; Closely monitoring Russia on their nuclear weapons
TSM Reportedly TSMC's 5nm demand has suddenly increased recently as urgent orders came from NVIDIA, AMD and Apple, mainly for AI and server chips - DigiTimes
(EU) EURO ZONE JAN FINAL CPI Y/Y: 8.6% V 8.6%E; CPI CORE Y/Y: 5.3% V 5.2%E (record high)
(CN) Reportedly Citic Group Chairman Zhu Hexin is is the leading candidate for PBOC Gov post; China said to be preparing to shake up leadership of its financial system - US financial press
BABA Reports Q3 $2.79 v $2.29e, Rev $35.9B v $35.5Be; Expects continued recovery in consumer sentiment, economic activity
BRE Reports Q4 $1.33 v $1.19e, Rev $8.19B v $8.13Be
DG Cuts Q4 $2.91-2.96 (prior $3.15-3.30) citing lower-than-anticipated sales and higher-than-anticipated inventory damages; Notes Nov and Jan SSS were as expected, Dec SSS lower than expected as a result of the storm Elliott
HUM Raises FY23 individual Medicare Advantage products at least 775K (prior at least 625K) citing continued higher than anticipated sales volumes and favorable member retention early in 2023; Affirms FY23 >$28.00 v $28.02e
(US) INITIAL JOBLESS CLAIMS: 192K V 200KE; CONTINUING CLAIMS: 1.65M V 1.70ME
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 2.7% V 2.9%E; PERSONAL CONSUMPTION: 1.4% V 2.0%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 3.9% V 3.5%E; CORE PCE Q/Q: 4.3% V 3.9%E
(US) DOE CRUDE: +7.7M V +2ME; GASOLINE: -1.9M V +0.5ME; DISTILLATE: +2.7M V -0.5ME
(CN) Reportedly China and Russia negotiating the purchase of 100 strike drones, which could be delivered as soon as Apr 2023 - German press
INTU Reports Q2 $2.20 v $1.43e, Rev $3.0B v $2.90Be
SQ Reports Q4 $0.22 v $0.27e, Rev $4.65B v $4.53Be
SQ Jan-Feb 2023 Combined Gross Profit +25% y/y - shareholder letter
(JP) JAPAN JAN NATIONAL CPI Y/Y: 4.3% V 4.3%E; CPI EX-FRESH FOOD (CORE) Y/Y: 4.2% V 4.3%E (highest annual pace in 41 years)
(JP) BOJ GOV NOMINEE UEDA: Reiterates current monetary easing is appropriate; it takes time to achieve sustainable inflation (2% target) - Parliament testimony
(CN) China Ministry of Foreign Affairs (MOFA) releases proposal related to Ukraine; Calls for ceasefire and resuming peace talks; Calls for respecting the sovereignty of all countries; Dialogue and negotiation are the only viable solution to the Ukraine crisis
FRI 2/24
BAS.DE Reports final Q4 €0.09 v €0.30e, adj EBIT €373M v €420.2Me, Rev €19.3B v €20.1Be; Plans to eliminate 2.6K jobs in cost cutting initiative (2% of global workforce); To close one of two ammonia plants in Ludwigshafen
(US) US HIKING TARIFFS ON OVER 100 RUSSIA METALS, MINERALS AND CHEMICALS WORTH $2.8B; CONFIRMS NEW SANCTIONS AGAINST RUSSIA; ALSO TO SANCTION SOME THIRD-COUNTRY FIRMS, INCLUDING IN CHINA AND EUROPE – PRESS
WAF.DE Reports prelim Q1 Rev -15% q/q citing expected inventory adjustments for the next quarters and short-term postponement of delivery volumes of some customers in H1 2023
ERICB.SE Reportedly to cut 8.5K workers globally (~8% of total) – press
GM Spokesperson: Confirms GM to halt production at its Fort Wayne Truck Assembly plant in Indiana from Mar 27th for two weeks, citing DSO inventory bloat (**Note: 2nd time in 1 year) - press
(US) JAN PERSONAL INCOME: 0.6% V 1.0%E; PERSONAL SPENDING: 1.8% V 1.4%E
(US) JAN PCE DEFLATOR M/M: 0.6% V 0.5%E; Y/Y: 5.4% V 5.0%E (1st acceleration in annual pace in 7 months)
(US) FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 67.0 V 66.4E
(US) Fed’s Bullard (Non-Voter): Soft landing is feasible; Expect inflation to come under control in quarters and years ahead
(US) Atlanta Fed GDPNow: Raises Q1 GDP from 2.5% to 2.7%
