7/21/2023 4:41:35 PM
Trading opened this week with the disinflation narrative well entrenched, keeping hopes alive that the Fed will be able to successfully engineer the illusive soft landing with just one more rate hike. On Monday, Ford announced significant price cuts to the F-150 Lightning lineup, while July Empire manufacturing data saw its prices paid component fall to the lowest level since August of 2020. A significant number of earnings reports started to roll in, and for the most part bested expectations. Importantly, regional banks found a bid as managements described a challenging environment, but perhaps not as dire as many had expected coming out of the turmoil in late Q1. US retails sales data was mixed but offered little to suggest the US economy is heading towards a recession, echoing what was said on many earnings conference calls. Chinese data overall remained disappointing, keeping the specter of government stimulus front-and-center in many investors’ minds. UK inflation data came in well below expectations, sparking a bid for both the FTSE and GILTS, while terminal BOE rates expectations slipped lower.
Thursday saw US equity markets experiencing the first real turbulence in weeks. Much of it was laid at the feet of earnings from key global technology companies. Taiwan Semi’s numbers disappointed and the chip manufacturer was forced to lower expectations for the second time this year, citing the macroeconomic landscape, particularly in China. Shares of Netflix and Tesla sent the NASDAQ spiraling lower after what were generally viewed as strong quarterly results, but perhaps unable to surpass unreasonably high bars. US Treasury yields moved up after surprisingly large drop in weekly initial jobless claims and the US dollar continued a bounce off the recent lows. The Yen weakened on a BOJ report that said it will not tweak Yield Curve Control (YCC) at next week's policy meeting. Wheat futures trended higher as Russia declined to renew the Black Sea grain deal and ratcheted up tensions by suggesting that commercial vessels in the region could become valid military targets. For the week, the S&P gained 0.7%, the DJIA rose 2%, and the Nasdaq slipped 0.6%.
Corporate news remained focused on bank and high tech quarterly reports. Bank earnings maintained the trend of the larger institutions mostly doing well, while the regionals had a tougher time making their numbers in the post ‘turmoil’ quarter. Among the bigger firms, Goldman Sachs was a notable exception, missing its EPS line as investment banking deals dried up. Tesla beat earnings expectations on the back of its better than expected unit sales, but shares fell as the EV maker’s aggressive price cuts put a big dent in margins. Taiwan Semi cut its fiscal year guidance, citing weaker than expected demand for traditional servers (non-AI) as big tech firms focus on building their AI capacity. Taking advantage of the current AI hype, Microsoft announces a price increase for AI products, while Apple is said to be stepping up development of its large language model program ‘Ajax’. In a fresh sign that wage inflation is still a significant factor, the United Airlines pilots union reached an agreement that will see wages go up around 40% over the next few years. The deal was so rich that pilots at American Airlines demanded a renegotiation of their contract so that it would be competitive. In M&A news, the Microsoft/Activision deal inched closer to the goal line as the firms agreed to extend the closing date of the merger to give them time to woo US and UK regulators with new remedy proposals.
SAT 7/15
UAL Pilots union reaches agreement in principal, will receive up to 34.5-40.2% pay increases over next years; New labor contract deal estimated at ~$10B - press
SUN 7/16
(CN) CHINA CONDUCTS CNY103B IN 1-YEAR MEDIUM-TERM LENDING FACILITY (MLF) AT 2.65% V 2.65% PRIOR [CNY100B IN 1-YEAR MLF FUNDS ARE MATURING]
(CN) CHINA JUN RETAIL SALES Y/Y: 3.1% V 3.3%E
MON 7/17
TSM Reportedly may cut its FY23 Rev guidance to -10% y/y (prior low-to-mid-single digit decline y/y), citing weaker-than-expected demand for traditional servers (non-AI), high chip inventories and slow demand for non-Apple smartphones - Taiwanese press
(RU) RUSSIA GOVT SPOKESPERSON PESKOV: FOR NOW BLACK SEA GRAIN DEAL IS HALTED; TO RETURN IMMEDIATELY TO GRAIN DEAL ONCE RUSSIAN CONDITIONS ARE MET
(SA) SAUDI ENERGY MINISTRY: REITERATES TO EXTEND VOLUNTARY OIL PRODUCTION CUTS UNTIL END 2024 (in line with June 4th's announcement and Russia's pledge)
(TW) Taiwan’s ruling DPP party presidential candidate Lai plans to visit US as a part of his trip to Paraguay in Aug; China firmly opposes the visit - press
(US) JULY EMPIRE MANUFACTURING: +1.1 V -3.5E
3333.HK Reports delayed H1 FY22 (CNY) Net -48.8B* v +14.4B y/y, Rev 89.3B v 154.1B y/y (1st reported results since early 2021); shares to remain halted until further notice
(CN) US aims to propose China investments rules by end-August; Confirms the outbound investment curbs to be narrowly focused on AI, chips and quantum sectors - financial press
TUES 7/18
NOVN.CH Reports Q2 Core EPS $1.83 v $1.67e, Rev $13.6B v $13.2Be; Raises outlook; Initiates up to $15B share buyback to be completed by end-2025; Sandoz spinoff expected to occur in early Q4 2023
(UK) Kantar announces 12 week grocery market share and sales: UK grocery price inflation rose by 14.9% y/y in the four weeks to July 9th v 16.5% prior (4th consecutive fall)
EUR/USD Euro rises against US dollar for the 9th straight session (longest such streak since 2004)
(KR) South Korea Official Kim: Agreed with US to deploy nuclear-based assets in South Korea more regularly, including nuclear-armed submarine 'USS Kentucky' (first time since 1980s)
(EU) ECB’s Knot (hawk, Netherlands, FSB Chief): Reiterates need to hike in July; Hikes beyond July are possible but not guaranteed; Lot of data between now and Sept
BK Reports Q2 $1.38 adj v $1.22e, Rev $4.45B v $4.38Be
PNC Cuts FY23 outlook; Guides Q3 average loans 'down 1%' q/q, NII -4% to -3% q/q, Rev +1% q/q, Net charge-offs $200-250M v $194M q/q - earnings slides
BAC Reports Q2 $0.88 v $0.84e, Rev $25.2B v $25.0Be; Continue to see a healthy US economy that is growing at a slower pace; Notes highest H1 sales and trading revenue in over a decade
LMT Reports Q2 $6.73 v $6.43e, Rev $16.7B v $15.9Be; Raises FY23 guidance
SCHW Reports Q2 $0.75 v $0.72e, Rev $4.66B v $4.64Be; During June it observed a 'continued and substantial deceleration' in the daily pace of cash outflows v prior months
PLD Reports Q2 Core FFO $1.83 v $1.67e, Rev $2.45B v $1.66Be
(CA) CANADA JUN CPI M/M: 0.1% V 0.3%E; Y/Y: 2.8% V 3.0%E (annual pace back within BoC target range for 1st time in 26 months)
(US) JUN ADVANCE RETAIL SALES M/M: 0.2% V 0.5%E; RETAIL SALES (EX-AUTO) M/M: 0.2% V 0.3%E (3rd straight M/M increase)
(JP) Japan BOJ Gov Ueda: Reiterates stance that still some distance to sustainably achieve the 2% inflation target in Japan
(US) JULY NAHB HOUSING MARKET INDEX: 56 V 56E
MSFT Announces price increase for AI products, to charge businesses $30 per user per month for copilot
WCH.DE Cuts FY23 Rev €6.5-6.8B (prior: €7-7.5B), EBITDA €0.8-1.0B (prior: €1.1-1.4B); Expects weak demand to continue in H2 2023
WAL Reports Q2 $1.96 v $1.98e, Net Rev $669.3M v $659Me
AAL American Airlines pilots union says that the new United pilots' contract has put the American labor deal in jeopardy - press
RIO.AU Reports Q2 Pilbara iron ore shipments: 79.1Mt v 79.9Mt y/y; Pilbara iron ore production: 81.3Mt v 78.6Mt y/y
EL Provides information on cybersecurity incident; The incident has caused, and expected to continue to cause, disruption to parts of the Company’s business operations
WED 7/19
ASML.NL Reports Q2 Net €1.94B v €1.41B y/y, Rev €6.90B v €6.73Be; Raises FY23 outlook, guides Q3 Rev strong, but says customers are currently more cautious and shape of recovery still unclear
ASML.NL CEO: Upcoming US measures against China will Not have major impact on previous guidance - post earnings comments
(UK) JUN CPI M/M: 0.1% V 0.4%E; Y/Y: 7.9% V 8.2%E (slowest annual pace since Mar 2022 and smallest M/M rise since Jan 2023)
- CPI Core Y/Y: 6.9% v 7.1%e (moves off 31-yrs highs)
(EU) EURO ZONE JUN FINAL CPI Y/Y: 5.5% V 5.5%E; CPI CORE Y/Y: 5.5% V 5.4%E (confirms 1st acceleration in Core CPI pace in 3 months)
(US) Reportedly two US antitrust agencies DoJ and Federal Trade Commission proposed merger guidelines to signal a tougher stance against private equity and the technology sector, although no particular sector has been singled out - FT
USB Cuts FY23 Rev $28.0-29.0B v $28.7Be, Total Noninterest expense $17.0B (prior $28.5-30.5B, Total Noninterest expense $17.0-17.5B) - earnings slides
BKR Market softness in North America is expected to be more than offset by strength in international and offshore markets, particularly in the Middle East and Latin America - prepared remarks
GS Reports Q2 $3.08 v $3.25e, Rev $10.9B v $10.8Be
(US) JUN HOUSING STARTS: 1.434M V 1.480ME; BUILDING PERMITS: 1.440M V 1.500ME
ATVI *DISCLOSES UPDATE ON MICROSOFT DEAL; EXTEND DEADLINE TO CLOSE DEAL BY 3 MONTHS TO OCT 18TH; TERMINATION FEE TO INCREASE BY $500M ON AUG 29TH AND BY $1B ON SEPT 15TH TO $4.5B - FILING
ELV CFO: Expect commercial membership growth to re-accelerate in back-half of 2023 and into 2024; affirms FY23 MLR costs - earnings call
GS CEO: Equity capital markets and M&A dialog are picking up; Citing meaningful headwinds to business, we are going into a period of lower results - earnings call comments
(US) DOE CRUDE: -0.7M V -2ME; GASOLINE: -1.1M V -1ME; DISTILLATE: +0.1M V +0.5ME
(RU) Russia Defense Ministry: Will consider all ships traveling to Ukrainian ports on the Black Sea as potential carriers of military cargo, effective July 20th - Russian press
AAL Union Memo: CEO acknowledged that significant improvements must be made to the tentative contract agreement
(US) TREASURY $12B 20-YEAR BOND REOPENING DRAWS 4.036% v 4.010% prior, BID-TO-COVER 2.68 v 2.87 PRIOR AND 2.64 OVER LAST 8 REOPENINGS
TSLA Reports Q2 $0.91 v $0.83e, Rev $24.9B v $24.9Be; Affirms FY23 guidance; Margins decline y/y
ZION Reports Q2 $1.11 v $1.13e, Rev $790M v $757Me; Guides FY24 NII "stable to up slighly"
AA Reports Q2 adj -$0.35 v -$0.59e, Rev $2.68B v $2.63Be
DFS Reports Q2 $3.54 v $3.69e, Rev $3.75B v $3.87Be; Pauses share repurchases do to internal review of card product misclassification from mid-2007
TSLA CEO: Q3 production will decrease slightly; Plan to increase spending on AI; We are taking Nvidia hardware as fast as they can deliver it - earnings call comments
BHP.AU Reports Q4 Waio Iron Ore Production: 72.7Mt v 71.7Mt y/y, Attributable Iron Ore Production: 65.3Mt v 64.2Mt y/y
(CN) CHINA PBOC MONTHLY 1-YEAR AND 5-YEAR LOAN PRIME RATE (LPR) SETTING; LEAVES RATES UNCHANGED; AS EXPECTED
(CN) CHINA PBOC RAISES PARAMETER FOR CROSS-BORDER FUNDING RATIO FROM 1.25 TO 1.5
(AU) AUSTRALIA JUN EMPLOYMENT CHANGE: +32.6K V +15.0KE; UNEMPLOYMENT RATE: 3.5% V 3.6%E
THRS 7/20
2330.TW *CUTS FY23 REV -10% Y/Y IN USD TERMS (PRIOR TO DECLINE BY MID-SINGLE-DIGITS IN USD TERMS) [as speculated]
ABBN.CH Reports Q2 Net $906M v $873Me, Rev $8.16B v $8.13Be
VOLCARB.SE Reports Q2 (SEK) 1.12 v 3.00 y/y, EBIT 5.0B v 5.86Be, Rev 102.2B v 97.9Be; Sees supply and demand continue to normalise in the wider market
2330.TW Reports Q2 (NT$) Net 181.8B v 173.6Be, Rev 480.8B v 534.1B y/y; Q2 Rev from high-performance computing -5% q/q; Delays US Arizona N4 production by 1yr to 2025; Posts its 1st quarterly Net drop since 2019
AMD CEO: AI will be everywhere in 5 years; AI products market may hit $150B in 3-5 years; AMD prioritizes AI as a top area of its investment - Taiwanese press
ELUXB.SE Reports Q2 (SEK) adj Op -124M v +912Me, Rev 32.7B v 34.1Be; Guides Q3 net rev to turn negative; Expect market demand for FY23 to be negative for all regions, revise outlook for Asia-Pacific to negative from neutral
2330.TW *GUIDES Q3 REV $16.7-17.5B V $19.1BE, GROSS MARGIN 51.5-53.5% V 53.6%E, OP MARGIN 38-40% V 41.3%E
J Selected by Ultra Safe Nuclear Corporation U.K. to support design and development of a new micro modular power reactor (MMR)
(CN) China Commerce Ministry (MOFCOM) holds meeting with Ukraine deputy economy minister; China willing to develop trade and economic cooperation with Ukraine - press
(TW) Taiwan Jun Export Orders Y/Y: -24.9% v -20.3%e (10th straight decline); Sees July orders between -20.7% to -17.1% y/y; Expects orders pick up in H2 on AI demand
(US) "FedNow" transaction network for instant payments, which has been in the works since 2019, set to go live as soon as today, July 20th
JNJ Reports Q2 $2.80 v $2.61e, Rev $25.5B v $24.7Be; Raises FY23 guidance
DHI Reports Q3 $3.90 v $2.81e, Rev $9.73B v $8.33Be; Raises FY23 outlook sharply
FITB Guides Q3 NII down 2-3% q/q; Affirms FY23 NII +3-5% y/y (prior +3-5%) - slides
KEY Guides Q3 NII -6% to -4% q/q; Deposits relatively stable q/q, Loans -3% to -1% q/q, Net charge-offs to average loans 20-25bps - earnings slides
TRV Reports Q2 $0.06** v $2.27e, Rev $10.1B v $10.1Be; Raises Quarterly dividend 7.5%
AAL CEO: We will take care of our pilots; We will match industry wages - CNBC
(US) Redfin: For four weeks ending July 16 home prices posted their biggest increase in over seven months
(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: -13.5 V -10.0E
SZG.DE Reports H1 Net €243M v €971M y/y, Rev €5.8B v €6.6B y/y
(US) JUN EXISTING HOME SALES: 4.16M V 4.21ME
(US) JUN LEADING INDEX: -0.7% V -0.6%E
SAP.DE Reports Q2 €0.62 (cont ops) v €0.54 y/y, Rev €7.55B v €7.46Be
(RU) Russian Ambassador to US: Not preparing to attack civilian ships in Black Sea despite US claims - Russian press
(US) US Central Command: US to deploy a Marine unit following Iran ship seizure attempts
(JP) JAPAN JUN NATIONAL CPI Y/Y: 3.3% V 3.2%E; CPI EX-FRESH FOOD (CORE) Y/Y: 3.3% V 3.3%E
(CN) Reportedly Ambassador Burns, other officials were hacked in China-linked spying operation - press
ISRG Raises FY23 procedure growth +20-22% y/y (prior: 18-21%), Saw a slower US growth rate in bariatric surgery during Q2 amid patient interest in new weight-loss drugs - earnings call
(US) US Central Command: US to deploy a Marine unit following Iran ship seizure attempts
(JP) JAPAN JUN NATIONAL CPI Y/Y: 3.3% V 3.2%E; CPI EX-FRESH FOOD (CORE) Y/Y: 3.3% V 3.3%E
(CN) China State Planner (NDRC): Issues measures to boost consumption of electronic products and automobiles - China press
FRI 7/21
(UK) JUN PUBLIC FINANCES (PSNCR): £12.0B V £3.7B PRIOR; PSNB (EX-BANKING GROUPS): £18.5B V £22.0BE
(US) Note: On Mon, July 24th, for 2nd time in 12 years and 3rd time in its history, NASDAQ 100 index to conduct a special rebalance
(JP) BANK OF JAPAN (BOJ) SAID TO SEE LITTLE NEED TO ACT ON YCC (YIELD CURVE CONTROL) NOW AND PREFERS TO WAIT FOR MORE DATA; LIKELY TO DISCUSS YCC CHANGE EVEN IF NO TWEAK AT JULY 28TH'S RATE DECISION - PRESS
SCHN.CH CEO: I think it is reasonable to say we expect more decline in volume in 2024 in China - post earnings comments
(US) Biden-Harris Administration secures voluntary commitments from leading Artificial Intelligence companies to manage the risks posed by AI; Microsoft, Meta, Amazon, Google, others pledge to watermark AI content for safety - White House
(CN) China Commerce Ministry (MOFCOM): Plans to relax rules for foreign firms to invest in asset management companies (AMCs) after it exchanged views on data flow and export rules at roundtable - press
(JP) JAPAN TOP FX DIPLOMAT KANDA: REITERATES EXCESSIVE FX MOVES ARE UNDESIRABLE; CONSIDERING ALL OPTIONS
(CN) China Pres Xi: Urging China military to strengthen party leadership; Reiterates call to focus on boosting combat readiness and capabilities to fight
CMA Reports Q2 $2.01 v $1.89e, NII $621M v $618Me; Consumer deposits continued to stabilize after March
AXP Affirms targets for FY24+ Rev growth >10%, EPS growth "mid-teens"; Reports Q2 Master Trust: Net Write Off Rate: 1.8% v 1.6% q/q - earnings slides
UPS Teamsters union confirms labor contract talks with UPS to resume July 25th
(US) Weekly Baker Hughes Rig Count: 669 v 675 prior (-0.9% w/w)
DIS Reportedly ESPN has held discussions with the NBA and NFL as potential strategic partners – CNBC
SPOT Reportedly plans price increases for premium plan in the US, as part of effort to be more consistently profitable - press
