4/14/2023 4:12:36 PM
Stock markets rose this week helped in large part by signs disinflationary forces have continued to take hold in the US economy. Equity action remained decidedly resilient despite the data being unsuccessful in swaying the bond markets into believing the Fed will finally look to pause rate hikes at the May meeting. Core CPI prices continued to be somewhat stickier while the headline y/y prices dropped an encouraging, yet somewhat expected,100 bps relative to February. Weakness in housing and rental data was offset by upside surprises in airfares, hotels, and rental cars. March PPI rose at the slowest annual pace since Jan 2021, and advanced retail sales figures also suggested significant slowing in March. Fed officials made it clear they welcomed the recent data, nevertheless most indicated it was largely coming in line with their expectations and most believed there was still more work to do on rates.
By Friday, investors were clearly looking past the data and focusing on large bank earnings reports which suggested banks have continued to flourish despite the recent regional bank failures. Importantly managements stressed, at least for now, they do not expect to pull back lending meaningfully due the recent turmoil. To that point, FOMC voters continued to emphasize they were clearly zeroed in on credit conditions leading into their May decision. Stocks retreated and Treasury yields rose on Friday after the April University of Michigan 1-year inflation outlook jumped more than 100 bps to 4.6%. The Greenback finished the week at the lowest levels in roughly a year as FX exchange markets, like bond markets, implied that even if the Fed raises rates next month they will be forced to pivot in the second half. For the week, the S&P gained 0.8%, the DJIA was up 1.2%, and the Nasdaq added 0.3%, with notably heavy volume in the tech index.
Earnings season unofficially kicked off with JP Morgan, Citibank and Wells Fargo all beating analyst estimates, and suggesting that they are more concerned about the slowing economy than any fleeting contagion from the regional bank failures of last month. Airline stocks including America and Delta provided updates that indicated travel demand remains solid but margins may be a bit challenged this year. Boeing disclosed fresh problems with its troubled 737 MAX program, halting deliveries of some aircraft due to quality issues in the tail section fittings, coming just days after reports that aircraft manufacturer wants to significantly boost 737 production. CarMax demonstrated that the used car market hasn’t completely cooled off, reporting solid Q4 numbers and affirming longer term targets. In M&A news, intermodal container leasing firm Triton International agreed to be acquired by Brookfield Infrastructure for $13.3B.
SUN 4/09
(EU) French Pres Macron: Europe must reduce its dependency on the US; EU must resist pressure to become ‘America’s followers’ and avoid getting dragged into a confrontation between China and the US over Taiwan
(US) Pentagon: Inter-agency effort with DoJ assessing impact of intelligence leak [**Note: related to analysis by US intelligence agencies about Ukraine, Russia and several other countries]
(KR) North Korea remains unresponsive to calls from South Korea via military hotline - Yonhap
(TW) Taiwan Defense Ministry: Current China drills on par with response to Pelosi visit in 2022; Spotted 70 China aircraft around Taiwan in the past 24 hrs; Also spotted 11 China ships around Taiwan
MON 4/10
Q1 global PC shipments 56.9M v 80.2M y/y; Apple's Q1 PC shipments -40.5% y/y - IDC
(JP) New BOJ Gov Ueda: Agreed with PM of no immediate need to change the 2013 joint statement as it helped create a non-deflationary state - comments after meeting PM Kishida
(JP) New BOJ Gov Ueda: It is appropriate to continue with negative rates and monetary easing under framework of YCC (yield curve control); Current monetary easing is very powerful, intense - inaugural press conference
(TW) Taiwan Defense Ministry: Spotted 91 Chinese aircraft, 12 ships around Taiwan as of 10:00 GMT Monday
(US) New York Nov Fed March Survey of Consumer Expectations: 1-year ahead inflation expectations at 4.7% v 4.2% in February (first increase since Oct)
(US) Atlanta Fed GDPNow: Raises Q1 GDP estimate from 1.5% to 2.2%
(UK) Reportedly PM Sunak plans to call for general elections in autumn of 2024 in order to improve chances of winning - Telegraph
(US) President Biden signs bill terminating national emergency for Covid-19
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.50%; AS EXPECTED
(CN) CHINA MAR CPI M/M: -0.3% V -0.5% PRIOR; Y/Y: 0.7% V 1.0%E [slowest annualized pace since Sept 2021]
TUES 4/11
(US) Biden administration considers rules for AI tools such as ChatGPT - US financial press
(JP) Japan Trade Union Confederation (Rengo) chief: Do not believe that one-off wage hikes for 2023 are adequate; Will seek further wage increase in 2024 and in 2025
(TW) Taiwan Mar Trade Balance: $4.2B v $2.9Be; Sees Apr exports falling 18-20% y/y
(CN) CHINA MAR AGGREGATE FINANCING (CNY): 5.38T V 4.50TE
(US) Mar NFIB Small Business Optimism Index: 90.1 v 89.8e; Availability of loans index -9 v -5 prior (biggest drop since 2002 and 2nd biggest drop on record)
KMX Reports Q4 $0.44 v $0.22e, Rev $5.72B v $5.83Be
CLF Reports prelim Q1 Rev $5.2B v $5.1Be; Adj EBITDA ~$200M vs "above $123M guidance" noting "almost entirely driven by the unit cost reductions"; Guides Q2 EBITDA 'multiple times higher' q/q
ACI Reports Q4 $0.79 v $0.69e, Rev $18.3B v $18.2Be
(US) USDA WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES (WASDE): End 2022/2023 US Stocks (M bu): Soybeans: 210 v 201e; Corn: 1,342 v 1,320e; Wheat: 598 v 581e
WED 4/12
(TW) Taiwan Defense Ministry: Checking on China's no-fly zone plan; China said no-fly zone is mainly for aerospace activities from 09:30AM local time for 27 minutes on Apr 16th
(TW) Taiwan’s ruling DPP party presidential candidate Lai: Taiwan already independent, no need to declare independence; China must realize a war would be a global disaster
TRTN To be acquired by Brookfield Infrastructure at $85.00/shr in ~$13.3B cash-stock take-private deal; Triton shareholders will be able to elect to receive the mixed cash/stock consideration or all-cash or all-stock consideration
(US) BofA Institute: March credit & debit card spending per household +0.1% y/y, -1.5% m/m (slowest Y/Y growth since Feb 2021); Notes no clear evidence of the impact of regional bank stress but weakness was broad-based across retail and services
AAL Reports prelim Q1 $0.01-0.05 v $0.04e (prior guided around breakeven), ASMs +9.2% y/y (prior guided 8-10%), TRASM +25.5% y/y (prior guided +24-27%) - filing
(US) MAR CPI M/M: 0.1% V 0.2%E; Y/Y: 5.0% V 5.1%E (lowest M/M since July 2022 and slowest annual pace since May 2021); Core CPI Y/Y records 1st acceleration in 7 months
(EU) ECB's Holzmann (Austria):Reiterates ECB should hike rates by 50bps in May
BAS.DE Reports prelim Q1 adj EBIT €1.93B v €1.78Be, Rev €20.0B v €21.7Be; Lower y/y sales largely driven by lower volumes
- Sales were considerably lower than average analyst estimates for the first quarter of 2023
(US) DOE CRUDE: +0.6M V -0.5ME; GASOLINE: -0.3M V -1.5ME; DISTILLATE: -0.6M V -0.5ME
(US) Atlanta Mar Sticky-CPI annualized 4.7% v 6.8% m/m, core 4.5% v 6.6% m/m
MC.FR Reports Q1 Rev €21.0B v €19.7Be
WBD Plans launch of rebranded 'Max' streaming service in the US on May 23rd
(US) FOMC MAR MINUTES: CONSIDERED WHETHER TO PAUSE AT MARCH MEETING; Some officials would have considered half point hike absent of bank problems
(AU) AUSTRALIA MAR EMPLOYMENT CHANGE: +53.0K V +20.0KE ; UNEMPLOYMENT RATE: 3.5% V 3.6%E
(CN) CHINA MAR TRADE BALANCE: $88.2B V $39.2BE
THRS 4/13
(UK) FEB MONTHLY GDP M/M: 0.0% V 0.1%E
9983.JP Reports H1 Net ¥153.4B v ¥146.8B y/y, Op ¥220.3B v ¥189.3B y/y, Rev ¥1.47T v ¥1.22T y/y; Raises Outlook and provides 5 year sales target of ¥5T
(EU) REPORTEDLY DEBATE AMONG ECB MEMBERS FOR MAY RATE MOVE CONVERGING FOR 25BPS HIKE; DEBATE NOT OVER AS ONE SMALL GROUP PREFER 50BPS WHILE ANOTHER SMALL GROUP PREFER NO CHANGE - PRESS
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €9.75B VS. €8.0-9.75B INDICATED RANGE IN 3-YEAR, 7-YEAR AND 30-YEAR BTP BONDS
AMZN CEO Jassy: Companies are being more cautious in spending which is headwind for AWS; Over the last several months, we took a deep look across the company, business by business; AWS has an $85B annualized revenue run rate, still early in its adoption curve; Investing heavily is Large Language Models and Generative AI - shareholder letter
FAST Reports Mar net sales $675.8M +6.8% y/y
FAST March daily sales growth was relatively softer and finished soft, likely due to manufacturers tightening spending and adjusting production to reflect more streamlined supply chains - slides
NVO Reports prelim Q1 Rev +25% y/y; Raises FY23 Rev +24-30% y/y (prior +13-19% y/y), Op profit +28-34% y/y (prior +13-19% y/y)
(US) INITIAL JOBLESS CLAIMS: 239K V 235KE; CONTINUING CLAIMS: 1.81M V 1.84ME
(US) TREASURY $18B 30-YEAR BOND REOPENING DRAWS 3.661% V 3.877% PRIOR; BID TO COVER 2.36 V 2.35 PRIOR AND 2.37 OVER LAST 8 REOPENINGS
(EU) ECB's Holzmann (Austria):Reiterates half-point hike in ballpark for May
(US) Fed releases factors affecting reserve balances (H.4.1): Discount window borrowing decline to $67.6B v $69.7B w/w; Banks have borrowed $71.8 v $79B w/w from new BTFP facility
(KR) North Korea tested a new type of ICBM that uses solid fuel technology on April 13th - North Korea press
BA Stops delivery of some 737 MAX aircraft due to "quality issue" with fittings on vertical tail section raised by supplier Spirit AeroSystems on Apr 12th; Currently active 737s can continue flying, there is no "immediate" safety risk - press
(US) Reportedly Republicans and House Speaker McCarthy (R-CA) are preparing a proposal to suspend the debt limit by one year to May 2024 - Roll Call
(SG) SINGAPORE Q1 ADVANCE GDP Q/Q: -0.7% V -0.1%E; Y/Y: 0.1% V 0.6%E
FRI 4/14
RMS.FR Reports Q1 Rev €3.38B v €3.20Be; Notes April trends continue to be favorable in US, store traffic continues to rise
IEA Monthly Oil Report (OMR); Notes Russia oil flows returned to levels last seen before Ukraine war
UNH Reports Q1 adj $6.26 v $6.24e, Rev $91.9B v $89.3Be
(US) Fed's Bostic (non-voter): After one more rate hike, Fed can pause and assess the impact of rate hikes on the economy; Fed can 'hit hard and hold'
BLK Reports Q1 $7.93 v $7.73e, Rev $4.24B v $4.23Be
PNC Cuts FY23 outlook; Guides Q2 average loans stable q/q, NII -4% to -2% q/q, Rev -3% q/q, Net charge-offs $200-250M v $195M q/q - earnings slides
JPM Reports Q1 $4.10 v $3.41e, Managed Rev $38.3B v $35.2Be
JPM Raises FY23 NII $81B (prior $74.0B), market dependent; Affirms Adj expense $81B (prior $81B) - earnings slides
WFC CFO: We have NOT changed our credit risk appetite; Consumers continue to spend even as economy softens - media call
C Reports Q1 $1.86 adj v $1.66e, Rev $21.4B v $19.9Be; Notes banking activity picked up from the end-2022; Continues to wind down Russia ops
JPM CFO: Do NOT see ourselves particularly tightening underwriting; Reserve build largely driven by worsening outlook - media call
(US) MAR ADVANCE RETAIL SALES M/M: -1.0% V -0.4%E; RETAIL SALES (EX-AUTO) M/M: -0.8% V -0.4%E
(EU) Reportedly ECB officials pushing for complete halt in reinvestments in asset purchase program in H2 2023 as they focus squarely on taming inflation - press
(US) APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 63.5 V 62.1E; 1 year inflation expectations 4.6% v 3.7%e
(US) Atlanta Fed GDPNow: raises Q1 GDP estimate from 2.2% to 2.5%
