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Optimism and more stimulus plans drives markets higher

Thu, 09 Apr 04:29 PM EST/09:29 PM GMT

Animal spirits were reanimated this week leading to the largest weekly percentage gains for US stocks since the 1970s. Underlying sentiment was buoyed by the fact that coronavirus infection curves continued to signal that stringent government lockdown measures have started to gain traction in slowing the spread. Investors were further heartened by a resurgence in corporate bond markets. A series of high yield corporate bond offerings for some of the firms hardest hit by the Covid-19 crisis were successfully tapped by investors, albeit at significantly elevated rates. Crude prices attempted to stabilize off the recent lows on hopes OPEC+ producers could reach an agreement to cut production, paving the way for broader coordinated production cuts at Friday’s G20 energy meeting.

Thursday saw the Fed’s latest ‘shock and awe’ announcement overshadow another historically dismal weekly initial jobless claims reading of more than 6M. The US Federal Reserve and Treasury announced details of a new Main Street lending facility that could unlock more than $2T in loans. The new program includes an extraordinarily broadened range of assets that are now eligible as collateral, including CMBSs, CLOs, ETFs, and corporate debt, including high-yield. Chairman Powell emphasized yet again that there's really no limit to the Fed’s ability to lend and that the Fed will not be in a hurry to withdraw the new relief programs as the economy rebounds. Coming into the session, US stock markets were already higher by nearly 10% on the week and continued to move higher as the Fed announced the long-anticipated Main Street measure. The S&P tested the 50% retracement of the decline off February’s all-time high to the March 23rd low. The HYG high yield ETF surged 7% while sectors like mortgage servicers, retailers, and travel saw another influx of buying. Gold prices broke out to a fresh 7-year high. For the week, the S&P surged 12.1%, the DJIA rose 12.7%, and the Nasdaq climbed 10.6%.

In corporate news this week, ExxonMobil announced it would reduce its capex by 30% to $23B in order to address low oil prices and weaker demand. McDonald’s saw its SSS drop 22% in March amid the COVID-19 pandemic and also announced a cut to its capex. The return of Boeing’s 737 MAX ran into new hurdles as regulator test flights were postponed to May and two new software issues were discovered, though unrelated to its anti-stall MCAS system. The Saudi Arabia Public Investment Fund disclosed a stake in Carnival Corp., boosting shares of the cruise line. Gilead announced it is ramping up production of its experimental coronavirus drug Remdesivir, while Novavax accelerated the initiation of its first-in-human coronavirus vaccine trial to mid-May. Despite Zoom Video’s booming popularity during the global lockdown, shares came under pressure recently amid privacy concerns and potential congressional scrutiny. Disney+ global paid subscriber count passed 50M members, nearly doubling since early February. Nintendo suspended its shipments of the Switch game console in Japan amid supply chain disruptions and demand surge caused by COVID-19.


SUN 4/5
(RU) Russia and Saudi Arabia with other large producers said to be in talks for a deal that will stop the price of oil from declining, despite remaining negative in the press - financial press

MON 4/6
(US) US agencies announce changes to the community bank leverage ratio; community bank leverage ratio requirement won't be re-established at greater than 9 percent until 2022
(US) New York state reports 130,689 confirmed coronavirus cases, +7% (prior 122,031, +7.3% d/d); deaths rise to 4,758, +14.4% d/d (up from 4,159, +14.4% prior)
(UK) UK PM Boris Johnson taken to intensive care as COVID-19 condition worsens; asks Foreign Sec Dominic Raab to be deputized for him where necessary - press
005930.KR Reports prelim Q1 (KRW) Op 6.4T v 6.2Te (+2.7% y/y); Rev 55.0T v 55.4Te (+5% y/y)

TUES 4/7
066570.KR Reports Q1 prelim (KRW) Op 1.09T v 876Be, Rev 14.7T v 15.3Te
NIO Reports Mar deliveries 1.5K units, +116.8% m/m
XOM Cuts FY20 Capex by 30% to $23B, cash Opex by 15%; Maintains long-term outlook and dividend
*(US) FEB JOLTS JOB OPENINGS: 6.882M V 6.500ME
(US) Sen Maj Leader McConnell: calls for immediate funding increase for PPP for small business loans, wants it as soon as Thurs
*(US) FEB CONSUMER CREDIT: $22.3B V $14.0BE

WEDS 4/8
HEIA.NL Withdraws all guidance for FY20 due to Covid-19; Guides Q1 total consolidated volume -4% organically with beer volume around -2%; Impact to worsen in Q2
NVAX Identifies Coronavirus Vaccine Candidate; Accelerates initiation of first-in-Human Trial to Mid-May
MCD COVID-19 update: Q1 SSS -3.4%, SSS declined significantly in March; withdraws FY20 outlook, reducing capex
(US) NIH's Fauci: beyond this week, should see beginning of a turnaround; expected coronavirus deaths now look less than thought earlier, no doubt due to social distancing
*(US) DOE CRUDE: +15.2M V +9.5ME; GASOLINE: +10.5M V +5ME; DISTILLATE: +0.5M V +1ME
(US) Bernie Sanders reportedly dropping out of presidential race - press

THURS 4/9
UBSG.CH Guides Q1 Net ~$1.5B v $1.14B y/y; To pay 2019 dividend in 2 installments following request from Switzerland regulator FINMA; to pay dividend of $0.365/share and special dividend of $0.365/share [the total equals the previously announced 2019 dividend of $0.73/share]
(UK) Treasury and BOE temporarily extend a Ways and Means Facility to provide a short-term source of additional liquidity
(US) NIH's Fauci: fatalities looking more like 60K than 100-200K; think we are at beginning of NY turning virus corner and flattening of virus curve
*(US) MAR PPI FINAL DEMAND M/M: -0.2% V -0.4%E; Y/Y: 1.3% V 0.5%E
*(US) INITIAL JOBLESS CLAIMS: 6.61M V 5.50ME; CONTINUING CLAIMS: 7.46M V 8.24ME
*(US) FED TAKES ADDITIONAL STEPS TO PROVIDE $2.3T IN LOANS TO SUPPORT ECONOMY; TO OFFER $600B IN LOANS THROUGH 'MAIN STREET LENDING PROGRAM'; TO INCREASE PRIMARY AND SECONDARY MARKET CORPORATE CREDIT FACILITIES; TO SUPPORT STATE AND CITY FINANCES WITH $500B FACILITY
(US) Fed Chair Powell: Fed will act forcefully, proactively, and aggressively until recovery is at hand - prepared remarks
(US) Fed Chair Powell: economy's performance will be dictated by how virus evolves; there's really no limit to Fed lending as long as it's agreed upon with Treasury and supported by the law - Q&A
OPEC+delegate: members agreed to cut production by 23% during May and June; Saudi and Russia will apply the 23% cut from an 11M bpd base (implies cutting to about 8.5M bpd)
(EU) Reportedly EU Fin Mins agree to a €500B economic support package - press

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March-April 2020 Outlook: Outbreak

Mon, 02 Mar 06:42 PM EST/11:42 PM GMT

Real concerns about a global pandemic have finally gripped the markets after headlines emerged about the serious virus several weeks ago. Markets didn’t come to grips with the potential human and economic toll of the outbreak until it became clear that the coronavirus would not be restrained by borders. Now the question has become whether this is the ‘black swan’ event that market bears are always girding against or just a short term bump in the road as many economists were predicting just a week or two ago.

In matters of health it is generally better to listen to medical experts than economists, and global health officials are deeply concerned though not panicked. The WHO in its daily briefings has stated that there is still time to thwart a ‘pandemic’, but it will not hesitate to give the outbreak that label if it becomes accurate. Meanwhile drug makers are racing to produce an effective vaccine, though realistically there won’t be a vaccination available until late 2020 at the earliest.

Until a few days ago, tame inflation, good corporate results, and continued central bank stimulus appeared to have investors convinced that the good times could keep rolling. That may hold true as monetary and fiscal policy officials put their heads together in efforts to curtail the impact of coronavirus on consumer confidence and financial markets. Unless the Coronavirus takes the shape of a truly serious pandemic, on the order of the 1918 Spanish flu outbreak that took 50 million lives, the market should shake off the damage to confidence within a quarter or two. But there could be some wreckage left behind if financial markets start to seize up or if supply chains are disrupted for too long.

March 3: Extraordinary G7 finance ministers and central bankers teleconference

An emergency meeting of senior G7 economic officials has been hastily set up for March 3, creating expectations of new stimulus measures from the group. There have already been some noises out of member nations about possible fiscal measures to allow more deficit spending to support local economies, and central banks may also be ready to act in concert after this meeting. Goldman Sachs analysts are now predicting that central banks will react this month, possibly in a coordinated manner, including 50 basis points by the Fed, and even a token 10 basis point cut by the ECB.

Unfortunately, more monetary policy stimulus might not be very effective at easing the outbreak concerns that are slowing travel and commerce. Going back to the monetary stimulus well could also backfire with rates still very low among most central banks. Mohamed El-Erian, chief economic advisor at Allianz, has warned that the Federal Reserve will not be able to stop the financial markets from freezing amid economic fallout from the coronavirus outbreak, and that the biggest risk now might be that we will get to the point where central bank stimulus is shown to be ineffective.

Fiscal stimulus seems to be the more appropriate response and government officials are to be coming around to this idea. The White House is contemplating a tax cut, though it’s not clear if that would fly with the Democrats in Congress (though it’s still sure to be another political football for the election season). Even countries that have tighter controls over the purse strings are looking at more fiscal stimulus. For example, Germany, which the IMF and other international economic bodies have urged to provide more largesse, has finally decided to be more open handed in the face of coronavirus, just recently deciding to loosen budgetary strictures.

The risk now is that if G7 minsters and global central banks don’t come up with some significant new stimulus markets could lose confidence and spiral lower. Some officials may still be on the fence about whether the virus will have much economic impact past mid-year and may advocate waiting to see if things get worse before taking any coordinated action.

March 3: Super Tuesday

The race for the Democratic nomination has narrowed after Joe Biden scored a resounding ‘comeback’ by garnering nearly half of the votes in the South Carolina primary. That result drove Tom Steyer, Pete Buttigieg, and Amy Klobuchar out of the race, essentially setting up Super Tuesday as a contest between the emerging leaders of the moderate and progressive wings of the party. Unless Mike Bloomberg’s barrage of ad spending creates a surprise result or Elizabeth Warren manages to convert some ‘Bernie-bros’ to her camp, it appears the race will essentially be down to Joe Biden and Bernie Sanders.

Most market watchers will favor Biden in the head-to-head Democratic race, as the former VP represents the status quo for the party. Any signs that Mr. Sanders is maintaining his front runner status could be a thorn in the side of stock market participants worried about radical changes in policy, but if Biden consolidates the moderates and minority voters into a solid majority then some of the political risk to the markets will be eased. The two wings of the party appear closely balanced, so a brokered convention still remains a very real possibility, which would likely benefit the incumbent candidate as the general election approaches.

March 5-6: Extraordinary OPEC meeting

Energy markets have seen even more swings than the Democratic polls as coronavirus has wreaked havoc on demand for oil. Demand in the China market is estimated to be down about 1 million bpd, and the slowdown in international travel is also seen crimping fuel usage. In late February, WTI crude broke the key support level of $50/bbl followed quickly by Brent crude, sending OPEC members scrambling to firm up prices.

Even though Russia has continued to be reluctant to cut production further during preliminary meetings with other producer nations, it appears very likely that a pledge to cut additional barrels of production will be on the table in early March. Saudi Arabia had hoped that the wider OPEC+ club would lead to more burden sharing, but Saudi remains the swing producer and may have to act almost unilaterally this time (along with a couple of close Gulf allies that could make nominal cuts). The talk is that Saudi Arabia, Kuwait and UAE could muster another 300K bpd cut, though there is still a chance they could persuade OPEC+ to take that figure to 600K altogether.

Either amount should provide a temporary boost to oil prices, especially if it is accompanied by a short term rally in the equity market – bear markets can produce some of the sharpest rallies. But any reversal may be short-lived unless there is better news about containment of the coronavirus. If the news is not positive, WTI crude could head to the low $40’s and may even start sliding toward the 2016 lows below $30/bbl.

March 18: FOMC policy decision

Slumping energy prices could put a fresh curb on inflation, which might in turn make it easier for central banks like the Fed to pull the trigger on more stimulus. Indeed the Fed outlook on additional stimulus appears to be rapidly evolving, at an even faster pace than the directional change seen in 2019. Until recently the whole spectrum of FOMC doves to hawks proclaimed they want to let 2019’s three rate cuts feed into the economy before making any further policy course corrections, but coronavirus may be changing that calculus.

Fed Chair Powell has set the standard for altering monetary policy at a “material change in the outlook.” It’s not clear if the Chairman now sees that threshold as being met, but he did say in recent days that coronavirus poses an “evolving risk to economic activity” and that the Fed will act as appropriate to sustain the economy. That may well mean the Fed is ready to act as soon as March, and the Fed fund futures are predicting as much with a full 50 basis point cut priced in for the next meeting.

For fear of being cast as political, the Fed is usually loathe to shift policy much during an election year, so the central bank would probably want to engage in any new stimulative activity sooner rather than later. Some analysts are thinking that the Fed could use the timing of a rate cut to add some ‘shock and awe’ to the move. That might manifest as a 25 basis point cut in early March, followed up by more if necessary at the March 18th FOMC meeting.

Early March: China National People’s Congress (postponed)
March 30: China manufacturing PMI

Emblematic of China’s extraordinary efforts to contain the coronavirus outbreak, the nation’s biggest annual political gathering has already been postponed. China has by far been hit the hardest by the outbreak, but the measure that temporarily turned many of its cities into veritable ghost towns seem to have paid off. The numbers of new infections in China’s hot zone have been steadily declining for about two weeks, so assuming that the government is not suppressing the numbers, their efforts appear to have been effective.

People in China are getting back to work and supplies chains have not been irrevocably harmed, but manufacturing has definitely suffered a downturn. The February manufacturing PMI not only slid into contraction for the first time in six months, it did so in spectacular fashion by hitting a record low for the series. Economists are still waiting for the March numbers to get a clean reading of the virus’ economic impact without the distortions of the Lunar New Year. Evidence of the true extent of the impact may indicate how long it might take to get the manufacturing index out of contraction. It could also add to forecasts of whether the government might look at more stimulus efforts to get the economic engine back in good form.

April 29: US Q1 Advance GDP

Global growth data from Q1 will start to be tallied in late April including GDP for the US, which has been the bright spot for the developed world over the last few years. The coronavirus scare is expected to shave a few tenths off of GDP readings, but the magnitude of the hit won’t be known until the final, more complete data is out in May. The US data will also feel a continued drag from Boeing’s 737 MAX fiasco, which like the virus outbreak, could extend its impact into the second quarter.

Still, most economic experts are forecasting that the lost growth will be made up later in the year as supply chains are reestablished and consumers continue to put in orders for new goods. That may give companies reporting their Q1 earnings results in April a “pass”, allowing for some more conservative guidance on the understanding that some revenues will be deferred to later in the year (earnings start the week of April 13).

Late April: Olympic decisions

The ultimate signifier of the impact of coronavirus on travel, health and commerce may be the disposition of the summer Olympics set for late July and early August in Japan. Cautious governments in many nations have already begun to prohibit large indoor gatherings like concerts and sporting events to stem the spread of the virus, and private organizers have also been calling off conventions and other business gatherings, even in countries that aren’t seeing significant numbers of infections.

These preventative measures have raised questions about the 2020 Tokyo games (July 24-August 9), similar to the 2016 games in Rio de Janeiro, which were threatened by the Zika virus epidemic. With the exception of the two world wars, the Olympics have never been canceled since they were revived in 1896, so cancellation would be an extraordinary move. Currently London bookmakers see the odds of the Olympics being called off at around even money, and if the virus has reached ‘pandemic’ levels by the late spring, the games may indeed never happen.

Because of the logistical challenges surrounding the event, the IOC will need to come to a decision in the next few months. A cancelation would be demonstrative how seriously global officials are taking this viral outbreak. Either way, hopefully by the summertime the coronavirus will be in decline in the northern hemisphere, assuming it follows a flu-like pattern. And if the Games do go on as scheduled it could signal that things are normalizing again and that life goes on even in the face of a new disease emerging.


MARCH
1: China Caixin Manufacturing PMI
2: UK Manufacturing PMI; ISM Manufacturing PMI
3: China Caixin Services PMI; Extraordinary G7 Fin Min meeting; US Super Tuesday Primaries
4: UK Services PMI; ISM Non-manufacturing PMI
5: Extraordinary OPEC meeting (March 5-6)
6: US Payrolls & Unemployment

8: China Trade Balance
9: China CPI
10:
11: UK Manufacturing Production; US CPI; UK annual budget (tentative)
12: ECB Policy decision & press conference; US PPI
13: Preliminary University of Michigan Consumer Sentiment

15: China Industrial Production
16:
17: German ZEW Economic Sentiment; US Retail Sales
18: US Housing Starts & Building Permits; FOMC policy statement & press conference; BOJ policy statement & press conference
19: Philadelphia Fed Manufacturing Index
20:

23:
24: Euro Zone Flash Manufacturing and Services PMIs; Richmond Fed Manufacturing Index
25: German Ifo Business Climate; UK CPI & PPI; US Durable Good Orders
26: UK Retail Sales; BOE policy statement
27: US Personal Spending; US Core PCE Price Index

30: German CPI; UK Current Account; UK Final GDP; China Manufacturing and Non-manufacturing PMIs
31: Euro Zone Flash CPI; Chicago PMI; US Consumer Confidence; China Caixin Manufacturing PMI

APRIL
1: UK Final Manufacturing PMI; ISM Manufacturing PMI
2: China Caixin Services PMI
3: UK Final Services PMI; US Payrolls and Unemployment; US ISM Non-manufacturing PMI

6:
7:
8: FOMC Minutes
9: UK Prelim Q1 GDP; UK Manufacturing Production; ECB Minutes; US PPI
10: Good Friday market holiday; US CPI

13:
14: China Trade Balance
15: US Retail Sales
16: BOE Credit Conditions Survey; US Building Permits; Philadelphia Fed; China Q1 GDP; China Industrial Production
17:

20:
21: German ZEW Economic Sentiment
22: Euro Zone Flash Manufacturing and Services PMIs; UK CPI & PPI; US Flash Manufacturing PMI
23: German Ifo Business Climate; UK Retail Sales
24: US Durable Goods Orders

27: BOJ policy statement & outlook report
28: German Preliminary CPI; US Consumer Confidence; Richmond Fed Manufacturing
29: US Q1 Advance GDP; FOMC policy statement & press conference; China Manufacturing and Non- manufacturing PMIs
30: Euro Zone Flash CPI Estimate; ECB policy statement & press conference; US Personal Spending; US Employment Cost Index; Chicago PMI

MAY
1: UK Final Manufacturing PMI; US Payrolls and Unemployment; US ISM Manufacturing PMI

More stimulus bazookas are fired off as conronavirus lockdowns expand

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Weekly Market Update: More stimulus bazookas are fired off as conronavirus lockdowns expand

Fri, 27 Mar 04:14 PM EST/09:14 PM GMT

The coronavirus pandemic continued to intensify this week as the hotspots spread to new locations, most notably NYC. By Friday, the number of infections in both Italy and the US had surpassed that of China with only marginal signs that the stringent mitigation measures being implemented in western economies were beginning to bend infection rate curves. The US Federal reserve unleashed one of the largest weapons in its arsenal on Monday when it stated categorically that the central bank could buy “unlimited” amounts of US treasuries and mortgage backed securities. Worries of growing global financial contagion were somewhat assuaged by the audacious move and similar subsequent announcements by the ECB and central banks. Fiscal stimulus plans were also advanced by various governments, most notably the $2.2T package passed by the US Congress on Friday.

Helped by the firehouse of both fiscal and monetary policy stimulus, stock markets mounted an historic bear market rally that started on Tuesday. US indices surged some 20% in a three day rally, the likes of which had not been seen since 1929. The S&P 500 first three day rally in more than a month resulted in a litany of market followers opining that the bottom may very well be in. Treasury yields moved lower amid signs of better functioning in some lending markets which had been viewed as hotspots of dysfunction. The US dollar rolled over too, providing further comfort that dollar funding pressures were subsiding. On the other hand, oil prices remained a flashing waring signal. Anecdotal reports suggesting global storage has been maxed out, supporting a narrative that the supply and demand imbalance is on the verge of pushing crude prices even lower. Amid the historic volatility, the S&P surged 10.2% in its biggest weekly gain since 2009, while the DJIA gained 12.8% and the Nasdaq added 9%.

In corporate news this week, a further flood of companies withdrew full-year outlooks and cut dividends or stock buybacks as the coronavirus obscures any visibility for businesses around the globe. Some companies did release earnings, however. Nike revenue came in higher than anticipated while its gross margins took a hit, though it said 80% of its stores in China have reopened post-coronavirus. Micron beat on its top and bottom line, noting strong demand in its cloud data and personal computing units. Target withdrew its guidance, though said its March month to date comp sales were up over 20% y/y (likely attributable to hoarding of home staples). Yum China said its restaurant traffic is recovering slowly but is still heavily impacted as people continue to implement social distancing measures. Facebook reported seeing some weakening in its ad business due to coronavirus, though it is also posting new usage records almost every day. Chevron cut its capex outlook by 20% along with some other actions to protect its dividend. GE announced it would cut 10% of the workforce in its aviation unit. US Steel cut production, drew down its credit lines, and reduced its FY20 capex by $125M. Caterpillar also withdrew its FY20 outlook, but noted its financial position remains strong, and it plans to continue to run the majority of its U.S. domestic operations. Boeing’s stock had perhaps the most dramatic move of the week, nearly doubling off a 7-year low as the US stimulus package was confirmed to include grants to rescue airlines, though Boeing said it won’t take any direct government aid.


SUN 3/22
*(NZ) RESERVE BANK OF NEW ZEALAND (RBNZ) ANNOUNCES NZ$30B ASSET PURCHASE PROGRAM TARGETED AT GOVT BONDS, across all range of maturities

MON 3/23
(DE) German Cabinet said to have adopted package of €750B in measures to to cushion the fallout from COVID-19 outbreak in an emergency meeting - press
*(US) FED TO BUY UNLIMITED AMOUNTS OF TREASURYS AND MORTGAGE SECURITIES - Statement
AA Asset-backed 30-Day Commercial Paper rates ticked LOWER to 1.84% v 1.98% yesterday; 90-day HIGHER 2.36 v n.a yesterday (1.67% prior) - NY Fed
BA To temporarily suspend Puget Sound production operations for 14-days in response to escalating COVID-19 pandemic

TUES 3/24
*(EU) EURO ZONE MAR PRELIMINARY PMI MANUFACTURING: 44.8 V 39.0E (14th straight month and lowest since Jul 2012)
*(UK) MAR PRELIMINARY PMI MANUFACTURING: 48.0 V 45.0E (1st contraction in 3 months)
F To collaborate with 3M, GE, UAW to speed production of respirators for healthcare workers, ventilators for Coronavirus patients
*(JP) JAPAN PM ABE CONFIRMS THAT TOKYO OLYMPIC GAMES TO BE POSTPONED FOR ONE YEAR
(US) CNBC's Javers: agreement said to be reached on oversight of Treasury Sec fund as part of potential stimulus pact - CNBC
*(US) MAR PRELIMINARY MARKIT PMI MANUFACTURING: 49.2 V 43.5E (lowest since 2009)
AA Asset-backed 30-Day Commercial Paper rates ticked higher to 2.37% v 1.84% prior; 90-day n/a v 2.36% prior - NY Fed
(US) MAR RICHMOND FED MANUFACTURING INDEX: +2 V -15E
*(US) FEB NEW HOME SALES: 765K V 750KE
NKE Reports Q3 $0.53 v $0.55e, Rev $10.1B v $9.87Be
FB Seeing some weakening in ad business due to coronavirus; seeing new usage records almost every day
WWE CEO McMahon entered into a variable prepaid forward contract with an unaffiliated bank covering approximately 3.5 million shares of the Company’s Class B common stock - filing
(US) Federal Reserve to temporarily reduce bank exam activities, with the greatest reduction in activities occurring at the smallest banks; large banks should still submit CCAR capital plans by April 6th
CME To Launch New Gold Futures Contract with Expanded, Flexible Delivery in 100-ounce, 400-ounce or 1-kilo Bars; notes growing demand for broader range of delivery needs for clients; the new contract will provide customers with maximum flexibility in managing physical delivery

WEDS 3/25
BLK To execute bond buying for Federal Reserve - US financial press
*(US) SENATE SAID TO HAVE REACHED A BIPARTISAN AGREEMENT ON VIRUS STIMULUS PLAN - financial press
*(US) FEB PRELIMINARY DURABLE GOODS ORDERS: +1.2% V -0.9%E; DURABLES (EX-TRANSPORTATION): -0.6% V -0.4%E
AA Asset-backed 30-Day Commercial Paper rates ticked lower to 1.71% v 2.37% prior; 90-day 2.50% v n/a prior - NY Fed
MU Reports Q2 $0.45 v $0.38e, Rev $4.80B v $4.66Be
F S&P cuts rating to junk status; cuts one notch to BB+ from BBB-; outlook to Watch Negative from Stable
*(US) SENATE UNANIMOUSLY VOTES TO PASS $2.0T CORONAVIRUS STIMULUS BILL; AS EXPECTED

THURS 3/26
(EU) ECB clarifies that self-imposed issuer 33% limit used in QE will not apply to pandemic emergency purchase program
*(DE) GERMANY APR GFK CONSUMER CONFIDENCE: 2.7 V 7.5E (lowest since May 2009)
*(UK) FEB RETAIL SALES (EX-AUTO/FUEL) M/M: -0.5% V -0.2%E; Y/Y: 0.6% V 1.1%E
*(EU) ECB ECONOMIC BULLETIN: Council decided on a comprehensive package of monetary policy measures
*(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATE UNCHANGED AT 0.10%; AS EXPECTED; vote was unanimous (9-0)
*(US) WEEKLY INITIAL JOBLESS CLAIMS: 3.28M (record level) V 1.64ME; CONTINUING CLAIMS: 1.803M V 1.791ME
*(US) Q4 FINAL GDP PRICE INDEX: 1.3% V 1.3%E; CORE PCE Q/Q: 1.3% V 1.2%E
(US) Nevada reports Feb casino gaming Rev $1.04B, +3.1% y/y; Las Vegas strip Rev $596.2M, +0.8% y/y
AA Asset-backed 30-Day Commercial Paper rates remained at 1.71% v 1.71% prior; 90-day 1.52% v 2.50% prior - NY Fed

FRI 3/27
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY BY 75BPS TO 4.40%; widens rate corridor (intra-policy move)
3328.HK Reports FY19 (CNY) Net 77.28B v 73.6B y/y, NII 144.08B v 130.9B y/y
(UK) PM Johnson has tested positive for COVID-19; to isolate himself at 10 Downing Street - BBC
*(CA) BANK OF CANADA (BOC) CUTS INTEREST RATES BY 50BPS TO 0.25%; Third cut this month

Coronavirus spread swats stocks into bear market and drives G7 government officials into action

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Weekly Market Update: Coronavirus spread swats stocks into bear market and drives G7 government officials into action

Fri, 13 Mar 04:06 PM EST/09:06 PM GMT

It was a historic week for markets as volatility exploded in the midst of the global coronavirus pandemic. The epicenter of the crisis moved to Europe while cases in the US continued to rise rapidly along with expanded testing. Italy went into complete lock down to fight the spread of the virus while dramatic measures were taken in other EU nations and the US as well. Many European nations restricted their borders, and many schools and universities shut down along with nearly all professional sports leagues. The VIX jumped above 70 and Thursday saw double digit percentage declines for stock markets in Europe and the US for the first time since 1987’s Black Monday. The correlation between lower Treasury yields and stocks seemed to erode as US rates started to firm up despite multiple down 1,000 point days in the Dow. Treasury market functionality was bolstered when the NY Fed injected $1.5T into overnight lending markets on Thursday. Friday’s trade saw some modicum of stabilization after Germany and the European Commission announced significant fiscal measures and promised even further support if necessary. US Treasury Sec Mnuchin and House Speaker Pelosi remained in close contact in an effort to hash out an agreement for a major stimulus package announcement before the weekend. Friday also saw President Trump invoke the Stafford Act to declare a national emergency and loosen up tens of billions in funds to fight the coronavirus outbreak. Gold prices slumped and the US dollar firmed broadly. Emerging markets were hit particularly hard as Central Banks were forced step in on multiple occasions to proper up their currencies. For the week, the S&P fell 8.9%, the DJIA dropped 10.4%, and the Nasdaq lost 8.2%.

In corporate news this week, as the coronavirus spread ravaged the travel industry, major US airlines such as American, Southwest, Spirit, JetBlue, and Delta withdrew guidance and took capacity reductions, grounding hundreds of planes. Lufthansa said it will speak with the German government about potential state aid. Boeing instituted a hiring freeze for most of its divisions and reportedly plans a full drawdown of its $13.8B loan to bolster cash on hand amid declining jet demand. Carnival decided to issue a temporary pause of its global ship operations for 60 days on its Princess Cruises line, and Norwegian Cruise Lines and Royal Caribbean each announced a one month suspension of voyages. Royal Caribbean also withdrew its guidance and cut its expected FY21 capex spend. On the earnings front, Oracle shares rose after beating expectations on its top and bottom line. Broadcom stock slumped to a 52-week low after withdrawing its guidance, noting intensifying demand uncertainty. Slack investors fled after the company posted slower growth and weaker guidance than anticipated, though the messaging platform saw a significant spike in new free users due to the coronavirus outbreak. Stitch Fix missed on revenue estimates and guided below consensus, pointing to lower order values due to new clients that spend less per quarter on average. Pepsi reportedly neared a deal to acquire Rockstar Energy Beverages for $3.85B, as the beverage giant further broadens its portfolio. Twitter announced a cooperation agreement with Elliott Management and said Silver Lake would invest $1B into the company, staving off activist efforts to oust CEO Jack Dorsey.


SUNDAY 3/8
(IT) Italy government confirmed imposing 17M person quarantine in the North to fight spread of coronavirus - press
BA FAA may request Boeing make electrical wiring fixes before 737 Max flies again - financial press

MONDAY 3/9
US equity markets halted for 15 minutes on S&P hitting 7% circuit breaker
(IT) Italy PM Conte: Confirms movement will be restricted throughout the country in effort to combat the spread of the coronavirus
(US) President Trump: Will discuss possible payroll tax cut with Congress and support for hourly wage earners so they dont miss paychecks; New conference tomorrow on "major" economic measures

TUESDAY 3/10
DPW.DE Reports Q4 Net €858M v €813M y/y, EBIT €1.26B v €1.29Be, Rev €17.0B v €16.9B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.1% V 0.1% PRELIM; Y/Y: 1.0% V 0.9% PRELIM
(DE) Germany reportedly weighing Bank capital relief to counter COVID-19 effect

WEDNESDAY 3/11
PEP Reportedly nears deal to acquire Rockstar Energy Beverages; said to pay $3.85B - US financial press
*(US) FEB CPI M/M: 0.1% V 0.0%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.2%E; CPI NSA: 258.678 V 258.455E
(UK) Chancellor of the Exchequer (Fin Min) Sunak: Total fiscal stimulus of £30B; doing everything to keep the country healthy; will get through the virus outbreak together - Budget Speech
*(UK) OFFICE OF BUDGET RESPONSIBILITY (OBR) UPDATES FORECASTS
DD Affirms FY20 $3.70-3.90 v $3.75e, cuts FY20 Rev $21.3-21.8B v $21.4Be (prior Rev $21.5-22.0B) updated to reflect $0.04 Q1 headwind from COVID-19
BA Reportedly planning full drawdown of $13.8B loan as a precaution, plan to bolster cash-on-hand on declining jet demand due to COVID-19 - press
(US) Institute for Supply Management coronavirus study: 75% of companies report supply chain disruptions
(US) Association of American Railroads weekly rail traffic report for week ending March 7th: 462.3K, -9.1% y/y
(RU) Russia Dep Energy Min Sorokin: OPEC had asked Russia to cut by 300K bpd but doubling exisiting cuts is technically difficult, OPEC+ could not cut oil output indefinitely
(US) Fed increases size of overnight repo operations through Apr 13
(IT) Italy PM Conte: orders closure of "all" shops except for groceries and pharmacies for the entire country, bars and restaurants must close unless they can keep 1 meter distance between customers; factories can continue to work with precautions
(AU) Australia Treasurer Frydenberg: Stimulus package could add 1.5% to GDP in Q2; too early to judge full impact of coronavirus on economy
*(US) PRESIDENT TRUMP ANNOUNCES TRAVEL BAN FROM EUROPE TO US FOR THE NEXT 30 DAYS; effective at midnight Friday, Mar 13th - NATIONWIDE SPEECH

THURSDAY 3/12
(DE) GERMANY REPORTEDLY READY TO ABANDONED ITS BALANCED BUDGET TO COMBAT COVID-19 - financial press
*(US) FEB PPI FINAL DEMAND M/M: -0.6% V -0.1%E; Y/Y: 1.3% V 1.8%E
CCL Princess Cruises announces a voluntary and temporary pause of its global ship operations for 60 days; Affects 18 ships
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(NO) Norway Central Bank (Norges): to offer extraordinary loans to banks
(EU) ECB chief Lagarde COVID-19 is a major shock to growth prospects - Prepared Remarks
(CA) Toronto Stock Exchange halted after 9.2% decline
(EU) ECB chief Lagarde: General Council was unanimous on the package announced today - Q&A
*(US) FED REPORTS Q4 FINANCIAL ACCOUNTS: HOUSEHOLD CHANGE IN NET WORTH: $3.15T V $0.8T PRIOR
*(US) New York Fed announces new $1.5T in Treasury reserve management purchases and repurchase operations to address "highly unusual disruptions" in Treasury financing markets associated with the coronavirus outbreak; to offer $500B in 3-mo repo today, and two $500B repos tomorrow; will continue $1T in repos each week for the rest of the monthly schedule; expands repo purchases beyond bills to a 'range of maturities'
(US) NY Gov Cuomo: orders Broadway closed immediately in NYC; bans gatherings of more than 500 people, effective Friday
ORCL Reports Q3 $0.97 v $0.96e, Rev $9.80B v $9.77Be
GPS Reports Q4 $0.58 v $0.41e, Rev $4.67B v $4.52Be; Katrina O’Connell named CFO; intends to suspend share repurchases in FY20
AVGO Reports Q1 $5.25 v $5.22e, Rev $5.86B v $5.93Be; withdraws FY20 oultook due to coronavirus

FRIDAY 3/13
*(CN) CHINA PBOC CUTS RESERVES RATIO REQUIREMENT (RRR) BETWEEN 50-100BPS IN A TARGETED RESPONSE; effective Monday, Mar 16th
(DE) German Fin Min Scholz: To use all means possible to address coronavirus effects including NO LIMIT on credit program to help companies; plan to set up safety net form companies impacted by outbreak
(EU) EU Commission President Von der Leyen: Virus is a major shock to region and look to address strategies to avoid any permanent damage
(US) Fed updates current monthly schedule of Treasury purchase operations to address temporary disruptions in the market for Treasury securities; conducting $33B of purchases today
(US) Pres Trump confirms he will invoke Stafford Act and declare national emergency over coronavirus

Markets strain under Coronavirus fears, plunge in Treasury yields, and OPEC+ collapse

TradeTheNews.com 

Weekly Market Update: Markets strain under Coronavirus fears, plunge in Treasury yields, and OPEC+ collapse

Fri, 06 Mar 04:04 PM EST/09:04 PM GMT

Global markets were unable to escape the grasp of the spreading coronavirus which appeared headed towards pandemic proportions. Covid-19 cases reached ~100K globally with big daily jumps continuing to be seen in hotspots outside of Asia, though the news coming out of China appeared to improve. The US saw its first significant cluster outbreaks in New York and Seattle further unsettling investors. On Tuesday, G7 finance ministers and central bankers met and pledged a coordinated response, and shortly thereafter the Federal Reserve announced an emergency 50 basis point rate cut. The rate cut failed to have its intended effect as panicky markets tumbled, and futures markets continued to price in another 50 bps cut at the FOMC’s regularly scheduled meeting just two weeks from now. On Wednesday, stocks surged after former VP Biden had big wins in many of the Super Tuesday Democratic primaries which prodded Mike Bloomberg and Elizabeth Warren to drop out of the race.

The volatility seen in both bond and stock markets was breathtaking. The Dow had multiple 1,000 points days for the second straight week. The S&P posted a streak of the largest percentage swings on daily basis seen since the days before 1987’s Black Monday. As the week progressed cascading US Treasury yields held the markets by the throat as investors confronted the ever increasing possibility of recession and expected central back action. On Friday, the US 10-year yield plunged below 70 basis points, while the VIX hit 50 and gold traded at $1,690 despite an outstanding Fed employment report for February. Adding to the overall consternation, crude prices plunged 10% after Russia refused to join an OPEC proposal to further cut production to address global demand destruction caused by the coronavirus outbreak. Markets were shaken by the potential for crumbling commodity prices to cause dislocations in the high-yield bond market that could hit debt-laden energy companies.

In corporate news this week, several major firms warned of trouble ahead amid the spread of coronavirus, with the pain particularly acute in the travel sector. Southwest Airlines cut its Q1 guidance, seeing a ‘significant decline’ in recent days in demand and an increase in cancellations. Lufthansa announced it would reduce capacity by up to 50% in coming weeks, more than previously planned, due to a slump in demand. United said its cuts to domestic and international flights would likely extend into May. Semiconductor names such as Skyworks, Qorvo, and Microchip Technologies all trimmed their outlooks on reduced demand and greater supply chain obstacles. Visa lowered its Q2 revenue growth guidance, citing a slowdown in travel and cross-border spending. Starbucks announced an adverse impact on China results, though noted it was seeing robust performance outside of the countries affected most by coronavirus. Hyatt withdrew its full year guidance as booking decreases extended beyond greater China and group cancellations picked up. Costco reported exceptionally strong February same store sales as customers stocked up on supplies, while Target’s quarter came in largely in line. AMD shares jumped after it affirmed Q1 and provided bullish long-term financial targets. Elliott Management reportedly took an activist stake in Twitter and is pushing to oust long-time CEO Jack Dorsey. Through an extremely volatile week, the S&P ended higher by 0.6%, the DJIA gained 1.7%, and the Nasdaq edged up 0.1%.


MON 3/2
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH TARGET RATE BY 25BPS TO 0.50% (record low), AS EXPECTED**; in response to coronavirus outbreak
H Withdraws FY20 outlook due to evolving coronavirus impact; seeing decrease beyond greater China in near-term transient bookings and an increase in near-term group cancellations over past week
PFE Exec: we have identified compounds that have a high probability to be effective against coronavirus - comments at White House
(IL) Israel news organizations release election exit polls: Likud Party 36 seats, Blue and White Party 33; Netanyahu one seat short of governing majority - KAN Exit Poll
(US) NBC's Engel: Just finished interview with Dr. Fauci, US director of infectious diseases. He said: We're dealing with clearly an emerging infectious disease that has “now reached outbreak proportions and likely pandemic proportions"
(US) Treasury yields continue to fall on speculation the Fed will ease policy to prop up financial markets pummeled by the spread of the coronavirus.

TUES 3/3
*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 1.2% V 1.2%E; CPI CORE Y/Y: 1.2% V 1.2%E
TGT Reports Q4 $1.69 v $1.66e, Rev $23.4B v $23.5Be
(US) G7 Statement of G7 Finance Ministers and Central Bank Governors; Reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks
*(US) FED CUTS TARGET RANGE BY 50BPS; SAYS VIRUS POSES EVOLVING RISKS TO ECONOMIC ACTIVITY; DECISION IS UNANIMOUS; FOMC CLOSELY MONITORING DEVELOPMENTS AND WILL USE TOOLS AND ACT AS APPROPRIATE TO SUPPORT THE ECONOMY (largest cut and 1st intra-meeting move since 2008)
(US) US Treasury 10-year yield moves below 1.00% for the first time
(US) Pres Trump: would approve a payroll tax cut for middle income earners this year if Democrats support it; the market is in good shape - press

WEDS 3/4
*(US) FEB ADP EMPLOYMENT CHANGE: +183K V +170KE
*(CA) BANK OF CANADA (BOC) CUTS INTEREST RATES BY 50BPS TO 1.25%; MORE-THAN-EXPECTED; Sees Covid-19 virus as 'material negative shock' to Canadian and Global outlooks
(US) Michael Bloomberg to suspend Democratic presidential campaign; announces support for VP Biden
(US) Association of American Railroads weekly rail traffic report for week ending Feb 29th: 477.6K, -9.6% y/y
(IT) Italy Education Min: confirms schools and universities to close from Thurs until March 15th due to coronavirus
*(US) FEDERAL RESERVE BEIGE BOOK: SIGNS OF CORONAVIRUS ARE NEGATIVELY IMPACTING TRAVEL AND TOURISM STARTING TO EMERGE
CDC Dep Director Redd: CDC estimates coronavirus fatality rate is 0.5-1.0% - press

THURS 3/5
HPQ Rejects Unsolicited Exchange Offer from Xerox
LUV Cuts Q1 RASM -2% to +1% (prior +3.5-5.5%); CASM +5-7% (prior +6-8%); sees "significant decline" in recent days in demand over coronavirus and increase in cancellations
(US) Q4 Final Nonfarm Productivity: 1.2% v 1.3%e; Unit Labor Costs: 0.9% v 1.4%e
(US) Elizabeth Warren said to suspend her Presidential campaign - NYT
(UK) BoE Carney: BoE will take all necessary steps to support UK economy and financial system through coronavirus outbreak
(US) California trade association: Coronavirus is causing a backlog of exports to Asia at US ports; some China-bound meat shipments are being temporarily diverted to other countries - press
COST Reports Q2 $2.10 v $2.07e, Rev $38.3B v $38.4Be; Feb SSS benefited by 3% from coronavirus concerns
AMD Provides long-term financial targets; Rev ~20% CAGR, gross margin >50%, operating margin mid-20%s, FCF margin >15% - investor day

FRI 3/6
(RU) Russia said to only agree to an extension of current OPEC+ production cuts and NOT to proposed deepening of 1.5M bpd; position on issue will not change - press
*(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 3.0% V 3.0%E; AVERAGE WEEKLY HOURS: 34.4 V 34.3E
*(US) FEB CHANGE IN NONFARM PAYROLLS: +273K V +175KE (highest since May 2018)
OPEC delegate: OPEC+ talks have ended without a deal - press
LHA.DE To cut capacity by up to 50% in coming weeks (more than previously planned) due to slump in demand
US govt reportedly considering ways to discourage some travelers from going on cruises in order to limit spread of coronavirus - press
(US) Fed’s Rosengren (hawk, nonvoter in 2020): Fed should be allowed to broaden what assets it can buy (which would require a change in the Federal Reserve Act); runs real risk of limits on QE power with Treasuries; negative rates won't do much for the economy in a downturn

TradeTheNews.com 

Coronavirus panic selling grips markets

Fri, 28 Feb 04:14 PM EST/09:14 PM GMT

- Global stock markets fell into full-blown crisis this week amid panic selling related to the global spread of coronavirus. The S&P plunged through the 200-day moving average and into correction territory at the fastest rate in history. Investors saw three sessions in a row with the Dow down 1000+ points and the VIX surged towards 50 on Friday. New Covid-19 transmissions outside of China overtook the number within China for the first time, spreading to more than 50 countries. Hotspots in Italy and South Korea continued to provide worrying signals surrounding the rate of spread, while the first US community-spread transmission was confirmed in California. By Friday, global cumulative cases topped 83K and cumulative deaths approached 2,900. US officials even acknowledged that school closures here are a real possibility and testing capacity needs to be dramatically ratcheted up. US Treasury yields careened lower alongside stock indices in just as eye-popping a manner. Futures markets are now pricing in 75 bps of cuts by the FOMC this year beginning at the March meeting. Fed officials remained much more circumspect, saying they want to see more data and how the virus situation unfolds before deciding to take action. A debate raged on whether central banks even can or should play a role in the response, but late on Friday Chairman Powell released a statement emphasizing the Fed will “act as appropriate to support the economy,” suggesting to some the door was opened for Fed action as soon as next month.
- At President Trump’s directive, VP Pence was tapped to lead a new US coronavirus task force. The President, clearly frustrated with the vaporizing stock market gains, suggested the declines were likely being exacerbated by embellished media coverage, as well as potential positioning by investors after Bernie Sanders seemed to solidify his lead to head the Democratic ticket following his Nevada primary win. Separately, speculation grew surrounding potential fiscal stimulus packages that could offset what appears to be a throwaway Q1 in terms of economic growth. Germany signaled they were exploring a plan to temporarily suspend the constitutional balanced-budget rule to reduce the debt burden of some local municipalities while the US Congress is set to vote next week on a supplemental funding bill that could unlock up to $8B to fight the outbreak. The US 10-year yield dropped more than 30 bps on the week, below 1.15% for the first time ever. Gold rallied early on and sold off late in the week amid what appeared to be indiscriminate portfolio deleveraging. Oil prices dropped significantly back to levels not seen since the lows of 2017. With Brent testing $50 and the dramatic move in yields, potential distress in the high-yield markets re-surfaced on many investors’ radars. OPEC meets next week and Russia indicated they remain reluctant to support further coordinated production cuts being pushed by the Saudis. For the week the S&P plunged 11.5%, the Dow lost 12.4% and the NASDAQ dropped 10.5%.
- In corporate news this week, United Airlines withdrew its FY20 guidance on coronavirus disruption, though it said it still expects Q1 Adj EPS to remain within its prior outlook range and targets earnings growth in 2021. Mastercard announced a CEO transition and cut its outlook amid coronavirus concerns but noted there still are many unknowns about the duration and severity of the situation. Home Depot reported better-than-expected Q4 earnings and same-store sales, citing broad-based growth across all geographies and merchandising departments. Microsoft acknowledged Q3 personal computing segment revenue will not meet their prior guidance but affirmed the outlook for the rest of the company. Macy's earnings topped estimates, sending shares higher, boosted by a solid amount of last-minute holiday buying. Best Buy profit for the quarter beat consensus as the electronic retailer saw its own strong holiday sales. Longtime Disney CEO Bob Iger announced he would step down as CEO, though he plans to stay on as executive chairman through 2021 while Bob Chapek takes the reins of the entertainment giant.

MONDAY 2/24
*(DE) GERMANY FEB IFO BUSINESS CLIMATE: 96.1 V 95.3E; CURRENT ASSESSMENT: 98.9 V 98.6E
UAL Withdraws FY20 guidance on coronavirus disruption; expects Q1 Adj EPS to remain within prior guidance range of $0.75-1.25 v $$0.95e - filing
MA Cuts Q1 net rev growth to +9-10% if coronavirus trends continue (prior 'low double-digits'); cuts FY20 net rev growth to 'low end of the low-teens range' if virus effects are limited to Q1 only (prior 'growth low double-digits')

TUESDAY 2/25
HD Reports Q4 $2.28 v $2.10e, Rev $25.8B v $25.7Be; Raises Quarterly dividend 10.3% to $1.50 from $1.36 (indicated yield 2.5%)
M Reports Q4 $2.12 v $1.95e, Rev $8.34B v $8.32Be
*(US) FEB RICHMOND FED MANUFACTURING INDEX: -2 V +10E
(US) CDC spokesperson: coronavirus epidemic is 'rapidly evolving and expanding' - call comments
DIS Bob Chapek named CEO, effective immediately; Bob Iger assumes role of Executive Chairman through 2021

WEDNESDAY 2/26
LOW Reports Q4 $0.94 v $0.91e, Rev $16.0B v $16.1Be
(DE) German Fin Min Scholz said to plan a temporary Debt Brake suspension to aid the local govt - German press
NVAX Advances development of Novel COVID-19 Vaccine; Phase 1 clinical trial planned for May or June
*(US) JAN NEW HOME SALES: 764K V 718KE
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; NOT EXPECTED
- Decision to keep policy steady was NOT unanimous (2 dissenters again called for 25bps cut (Cho Dong-Chul and Shin In-Seok)
-MSFT Cuts Q3 'more personal computing' segment Rev to not meet prior guidance of $10.75-11.15B due to coronavirus; other guidance unchanged

THURSDAY 2/27
(JP) Japan PM Abe reportedly asks schools to shut from Monday, Mar 2nd until spring break citing virus concerns - press
*(EU) EURO ZONE FEB ECONOMIC CONFIDENCE: 103.5 V 102.8E
*(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €6.5B VS. €5.5-6.5B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
BBY Reports Q4 $2.90 v $2.76e, Rev $15.2B v $15.1Be; Raises quarterly dividend 10% to $0.55/shr
*(US) Q4 PRELIMINARY GDP PRICE INDEX: 1.3% V 1.4%E; CORE PCE Q/Q: 1.2% V 1.3%E
*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -0.2% V -1.5%E; DURABLES (EX-TRANSPORTATION): -0.1% V +0.2%E
(DE) Germany Econ Min Altmaier: Germany considering bringing some measures forward in response to coronavirus, but reaction won't be a classic stimulus program
BIDU Reports Q4 $3.81 v $3.71e, Rev $4.15B v $4.06Be
*(US) JAN PENDING HOME SALE M/M: 5.2% V 3.0%E; Y/Y: 6.7% V 2.1%E

FRIDAY 2/28
UBSG.CH Reports final FY19 Net $4.30B v $4.52B y/y, Rev $28.9B v $30.2B y/y
Brent oil trades below $50/barrel (1st time since Dec 2018) - traders
(CN) Former China govt official: China will 'definitely' honor its agricultural purchase commitments as part of its 'Phase 1' trade deal but may invoke a force majeure - SCMP
*(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.4% V 0.3%E; Y/Y: 1.7% V 1.7%E
(US) Nevada reports Jan casino gaming Rev $1.04B, +5.5% y/y; Las Vegas strip Rev $572M, +7.5% y/y
*(US) FED CHAIR POWELL: CORONAVIRUS POSES 'EVOLVING RISKS TO ECONOMIC ACTIVITY'; FED WILL ACT AS APPROPRIATE TO SUSTAIN THE ECONOMY

Coronavirus concerns persist but investors climb wall of worry

TradeTheNews.com 

Weekly Market Update: Coronavirus concerns persist but investors climb wall of worry

Fri, 14 Feb 04:03 PM EST/09:03 PM GMT

- US stock markets managed to notch new all-time highs this week despite continued hand-wringing around the coronavirus. Data coming out of China remained sketchy at best. Wednesday saw Hubei disclose a spike in new cases of more than 14K after the Province changed the methodology by which they clinically diagnosed cases. The very next day, Chinese officials attempted to walk those numbers back, but with outside officials still not being let into the country to do their own investigations, uneasiness persisted. Investors for the most part continued to look past the headlines as well as cautious corporate commentary related to the virus. Aiding sentiment was continued speculation that the Chinese government, as well as the PBOC, continue to stand ready to provide ample stimulus.
- US treasury yields moved lower and the curve flattened as the week progressed. US supply was well received as the lower yields had little effect on investor demand in all three coupon auctions. Undercurrents of risk-off flows related to the coronavirus likely buoyed demand along with softer economic data. European growth readings remained very subdued. Tuesday’s US JOLTS report was the weakest since early 2017 and Friday saw the US retail sales input to GDP miss expectations by a fairly wide margin. WTI crude attempted what appeared as a modest technical bounce after holding the $50 level for the largest weekly rally since early December. Gold prices drifted up, particularly late in the week, as rates came down and traders looked to hedge risk positions heading into the long holiday weekend. For the week, the S&P gained 1.6%, the Dow added 1% and the NASDAQ closed at another all-time high up 2.2%.
- In corporate news this week, Nvidia rallied after posting a strong quarter and guiding well above consensus amid strength in the gaming sector. Akamai stock lifted after topping estimates on revenue and profit and guiding ahead of consensus, noting rapid growth in its cloud security business and robust seasonal traffic on its network. Under Armour guided FY20 sales down mid-single-digits as it sees coronavirus headwinds and said it would take further restructuring charges. QSR beat on its top and bottom line, helped by a surge in Popeye’s sales, though it noted Burger King has closed about half of its 1,300 China stores due to the coronavirus outbreak. Sprint shares surged after a judge rejected state AGs' arguments and signed off on its T-Mobile deal. Simon Property Group announced it would buy Taubman Centers for $52.50/shr in a $3.6B cash deal designed to boost Simon’s funds from operations as mall operators remain under pressure. A judge granted Amazon’s request to temporarily halt Microsoft's $10B JEDI cloud contract with DOD. Tesla surprised the market by announcing it would raise $2.6B in a discounted stock offering to bolster its balance sheet.

MONDAY 2/10
TCO To be acquired by Simon Property Group for $52.50/shr in cash valued at ~$3.6B
(US) Reportedly the White House is considering drug price indexing as a way to reduce drug prices - press

TUESDAY 2/11
S Judge concludes T-Mobile/Sprint merger is not reasonably likely to substantially lessen competition; rejects state AGs' arguments
*(US) DEC JOLTS JOB OPENINGS: 6.423M V 6.925ME (lowest since Dec 2017)

WEDNESDAY 2/12
HEIA.NL Reports FY19 Net €2.56B v €2.05B y/y Op €3.63B v €3.12B y/y, Rev €28.4B v €22.5B y/y
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT 0.00%; AS EXPECTED; maintains forward guidance
(US) Association of American Railroads weekly rail traffic report for week ending Feb 8th: 485.3K, -6.6% y/y
AMAT Reports Q1 $0.98 v $0.92e, Rev $4.16B v $4.12Be
(CN) China Hubei Coronavirus update Feb 12th: 14,840 additional cases (under revised standards) v 1,638 prior; Daily death toll 242 v 94 prior; notes it has adopted a revised methodology under which additional confirmed cases now include cases that are 'clinically diagnosed'

THURSDAY 2/13
AIR.FR Reports Q4 Net -€3.5B v +€1.6B y/y, Adj EBIT €2.81B v €2.7Be, Rev €24.3B v €23.3Be
TKA.DE Reports Q1 Net -€372M v -€85Me, Adj EBIT €48.8M v €59Me, Rev €9.67B v €9.67Be
CSGN.CH Reports Q4 (CHF) Net 852M v 934Me, Pretax 1.21B v 1.38Be, Rev 6.19B v 5.56Be
(DE) Germany Jan Final CPI M/M: -0.6% v -0.6%e; Y/Y: 1.7% v 1.7%e
(EU) EU Commission Winter Forecasts: Economy is well placed to navigate external risks but economic malaise is set to continue this year
*(UK) CHANCELLOR OF THE EXCHEQUER JAVID (Fin Min) RESIGNS in protest of PM demand to fire all 5 of his aides - financial press
HSBA.UK Said to be considering creation of a bad bank as part of its strategic review - financial press
KHC Reports Q4 $0.72 v $0.68e, Rev $6.54B v $6.58Be; Turnaround will take time; Expect significant progress in 2020
*(US) JAN CPI M/M: 0.1% V 0.2%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.2%E; CPI NSA: 257.971 V 257.863E
*(US) TREASURY $19B 30-YEAR BOND AUCTION DRAWS 2.061%; BID TO COVER 2.43 V 2.23 PRIOR AND 2.24 OVER LAST 4 AUCTIONS (RECORD LOW AUCTION YIELD)
(US) Fed reduces size of overnight repo operations and plans smaller term operations
(US) Senators reportedly expect Fed nominee Shelton to withdraw from consideration - The Hill
NVDA Reports Q4 $1.89 v $1.66e, Rev $3.11B v $2.96Be

FRIDAY 2/14
AZN.UK Reports Q4 Core EPS $0.89 v $0.98e, Rev $6.66B v $6.73Be
*(DE) GERMANY Q4 PRELIMINARY GDP Q/Q: 0.0% V 0.1%E; Y/Y: 0.4% V 0.3%E
*(US) JAN RETAIL SALES ADVANCE M/M: 0.3% V 0.3%E; RETAIL SALES (EX-AUTO) M/M: 0.3% V 0.3%E
*(US) JAN INDUSTRIAL PRODUCTION M/M: -0.3% V -0.2%E; CAPACITY UTILIZATION: 76.8% V 76.8%E
*(EU) EURO ZONE Q4 PRELIMINARY GDP Q/Q: 0.1% V 0.1%E; Y/Y: 0.9% V 1.0%E
(US) U.S. states reportedly reject opioid settlement agreement from wholesalers - WSJ

Coronavirus fears infect markets

TradeTheNews.com 

Weekly Market Update: Coronavirus fears infect markets

Fri, 31 Jan 04:06 PM EST/09:06 PM GMT

Global markets landed in turmoil this week as the rapidly spreading coronavirus stoked fears over global growth and overshadowed a heavy slate of corporate earnings reports. Government officials in China and elsewhere emphasized they were tracking the virus and taking extra precautions to slow its spread, trying to calm nerves and prevent a full blown hysteria. By Friday though, global confirmed cases approached 10,000, surpassing the 2003 SARS outbreak, and the first confirmation of an asymptomatic transmission of the virus sent investors scurrying to the exit. Weak US manufacturing data only added to the concerns that global growth could be entering a precarious stage, as the effects of what the WHO declared a ‘public health emergency of international concern’, are yet to be felt. Several major airlines announced the cancelation of all flights servicing the Chinese mainland through early April. And late Friday afternoon, the Trump Administration announced more aggressive measures including limiting entry to foreign nationals who have recently traveled to China.

Stock markets came under significant pressure and risk aversion flows were prevalent across a variety of asset classes for much of the week. US Treasury yields slumped back towards the lows of last September and curve flattening resulted in portions of the curve re-inverting. Oil prices slid, sending WTI crude into the low $50’s and high yield corporate spreads continued to widen. Copper and other base metals slumped and the USD/CNY exchange rate moved back above the key psychological 7.00 level. Gold prices lifted along with the VIX which popped back above 19 for the first time since October. For the week, the S&P lost 2.1%, the DJIA dropped 2.5%, and the Nasdaq fell 1.8%.

In corporate news this week, Apple revenue and earnings handily beat estimates, with strength seen particularly in services and wearables. Microsoft crushed profit expectations and offered robust guidance as its cloud business gained traction. Boeing missed on its top and bottom line and noted $4B in abnormal production costs to be expensed as incurred, primarily in 2020, amid its ongoing 737 MAX woes. McDonald's reported a profit and revenue beat but saw US Q4 customer traffic decline. Tesla shares surged after a second straight blowout quarter, and the carmaker set a goal to sell over half a million vehicles this year. On Friday, Amazon gained $75B in market cap, joining the trillion-dollar valuation club, after smashing earnings expectations and announcing it has surpassed 150M Prime members. Facebook posted a modest beat, but investors saw warning signs on the horizon as costs and expenses continue to rise. Altria missed revenue estimates and took a charge on its disappointing investment in e-cigarette maker Juul. Auto parts supplier BorgWarner announced it would acquire Delphi Technologies for $3.3B to help shore up its power electronics product offerings. L Brands reportedly is exploring strategic options for its Victoria’s Secret division as founder Lex Wexner was said to be in talks to step down as CEO.


SUNDAY 1/26
*(CN) China National Health Commissioner Ma says appears that the coronavirus' ability to spread is getting stronger, virus is mutating and can be transmitted through human contact; total confirmed cases of infection in China is over 2,000 as of Sunday afternoon, with 56 deaths
(CN) China has confirmed 2,744 cases of the coronavirus as of the end of Jan 26th (Sunday) and 80 deaths [vs 830 cases and 25 deaths as of Jan 23rd], China officials have extended the Lunar Year holiday to Feb 2nd from Jan 30th due to the impact of the virus

MONDAY 1/27
*(DE) GERMANY JAN IFO BUSINESS CLIMATE SURVEY: 95.9 V 97.0E; CURRENT ASSESSMENT SURVEY: 99.1 V 99.1E
ARNC Reports Q4 $0.53 v $0.33 y/y, Rev $3.40B v $3.47B y/y
LHA.DE Exec: seeing 'slightly subdued' situation regarding bookings to and from China due to coronavirus
*(US) DEC NEW HOME SALES: 694K V 730KE
(US) CDC Director Messonnier: still only 5 confirmed US cases of coronavirus, and 110 people under investigation; CDC is working on a plan for distribution of more test kits - conronavirus briefing
WHR Reports Q4 $4.75 v $4.30e, Rev $5.38B v $5.53Be; Guides initial FY20 $16.00-17.00 v $16.19e
(CN) China Updates on Coronavirus: Total cases in China at 4,515 v 2,744 at the end of Jan 26th; Death toll 106 v 80 yesterday - China press

TUESDAY 1/28
SAP.DE Reports Q4 EPS €1.82 v €1.51 y/y; Op €2.84B v €2.85Be; Rev €8.05B v €8.1Be
MMM Reports Q4 $1.95 v $2.10e, Rev $8.11B v $8.13Be; Implements new global operating model and streamlined structure; To cut 1,500 jobs
DLPH To be acquired in all-stock deal by Borgwarner; deal valued at $3.3B; Borgwarner announces $1B share repurchase program
HUAWEI.CN To have limited role in 5G rollout in the UK as speculated; to have 35% cap in periphery of 5G network
*(US) DEC PRELIMINARY DURABLE GOODS ORDERS: 2.4% V 0.3%E; DURABLES (EX-TRANSPORTATION): -0.1% V +0.3%E
*(US) JAN RICHMOND FED MANUFACTURING INDEX: +20 V -3E (16-month high)
UAL To suspend some flights to China beginning Feb 1st through Feb 8th; to cut some service to Beijing, Hong Kong, and Shanghai; suspensions to last for about a week
(US) Congressional Budget Office (CBO) issues 10-year budget and economic outlook: sees US budget deficit at $1.015T in FY20; sees federal deficits at $1T per year for at least 11 years
(US) Sen Maj Leader McConnell reportedly told GOP in closed door meeting that he does not have the votes to block impeachment witnesses - press

WEDNESDAY 1/29
066570.KR Reports FY19 (KRW) Net 180.0B v 1.47T y/y, Op 2.44T v 2.70T y/y, Rev 62.3T v 61.3T y/y
GE Reports Q4 $0.21 v $0.18e, Rev $26.2B v $26.2Be; says on positive trajectory heading into 2020, despite areas of uncertainty
BA Reports Q4 -$2.33 v +$1.73e, Rev $17.9B v $21.7Be; Confirms to cut 787 production to 12 jets/month
CP Reports Q4 C$4.82 v C$4.69e, Rev C$2.07B v C$2.04Be
*(US) DEC PENDING HOME SALES M/M: -4.9% V 0.5%E; Y/Y: 6.8% V 10.3%E
(US) Association of American Railroads weekly rail traffic report for week ending Jan 25th: 485.3K, -7.1% y/y
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 1.50-1.75%; AS EXPECTED; EXTENDS REPO OPERATIONS AT LEAST THROUGH APRIL
MSFT Reports Q2 $1.51 v $1.32e, Rev $36.9B v $35.7Be
TSLA Reports Q4 $2.14 v $1.62e, Rev $7.38B v $7.05Be
(EU) EU aims to create a single European data market in order to counteract US tech giants' dominance; large online platforms may see new rules implemented to ensure open and fair competition - EU document

THURSDAY 1/30
ROG.CH Reports FY19 (CHF) Core EPS 20.16 v 19.96e, Core Op 22.48B v 22.65Be, Rev 61.5B v 61.95Be; Proposes to increase dividend to CHF9.00/share from CHF8.70
DBK.DE Reports Q4 Net -€1.48B v -€409M y/y, Pretax -€1.29B v -€319M y/y, Net Rev €5.35B v €5.30Be
RDSA.NL Reports Q4 CCS EPS $0.37 v $0.40e, Adj CCS Net $2.93B v $3.2Be, Rev $85.07B v $80.99Be; intends to complete $25B share buyback program
DGE.UK Reports H1 Net £1.87B v £1.98B y/y, Adj Op £2.5B v £2.43B y/y, Rev £7.2B v £6.91B y/y
UNA.NL Reports FY19 Net €5.63B v €5.84Be, adj Op €9.95B v €9.94Be, Rev €52.0B v €51.0B y/y; initiates strategic review of global tea business
*(DE) GERMANY JAN NET UNEMPLOYMENT CHANGE: -2.0K V +5.0KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
RDSA.NL CFO: 2020 looks to be challenging - post earnings comments
*(EU) EURO ZONE JAN BUSINESS CLIMATE INDICATOR: -0.23 V -0.20E
KO Reports Q4 $0.44 v $0.43e, Rev $9.10B v $8.91Be
*(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATE UNCHANGED AT 0.75%; AS EXPECTED
*(UK) BOE JAN MINUTES: VOTED 7-2 TO KEEP POLICY STEADY (Saunders and Haskel remain as doves)
VZ Reports Q4 $1.13 v $1.15e, Rev $34.8B v $34.5Be
UPS Reports Q4 $2.11 v $2.10e, Rev $20.6B v $20.6Be
*(DE) GERMANY JAN PRELIMINARY CPI M/M: -0.6% V -0.6%E; Y/Y: 1.7% V 1.7%E
*(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 2.1% V 2.0%E; PERSONAL CONSUMPTION: 1.8% V 2.0%E
*(US) Q4 ADVANCE GDP PRICE INDEX: 1.4% V 1.8%E; CORE PCE Q/Q: 1.3% V 1.6%E
(US) Nevada reports Dec casino gaming Rev $1.06B, +5.8% y/y; Las Vegas strip Rev $591.8M, +4.5% y/y
AMZN Reports Q4 $6.47 v $3.98e, Rev $87.4B v $86.0Be; Prime membership is over 150M worldwide (*Note: crossed 100M about 21 months ago)
V Reports Q1 $1.46 v $1.46e, Rev $6.05B v $6.06Be; Authorized $9.5B share buyback program (2% market cap)
*(CN) CHINA JAN MANUFACTURING PMI (OFFICIAL GOVT): 50.0 V 50.0E (6th month without a contraction)

FRIDAY 1/31
*Study documents first case of coronavirus spread by a person showing no symptoms - STAT News
*(IT) ITALY Q4 PRELIMINARY GDP Q/Q: -0.3% V +0.1%E; Y/Y: 0.0% V 0.3%E
CAT Reports Q4 $2.63 v $2.37e, Rev $13.1B v $13.6Be
(BR) Brazil Dec Primary Budget Balance (BRL): -13.5B v -21.0Be; Nominal Budget Balance: -38.4B v -48.5Be
(US) Atlanta Fed forecasts initial Q1 GDP growth at 2.7%
(RU) Russia Energy Min Novak: Russia is prepared to meet with OPEC+ members in Feb (pushing meeting up from March); date is currently being discussed; Russia is ready to act if needed to rebalance oil market
(US) HHS Sec Azar: Declares coronavirus presents a "public health emergency" in the US; under temporary measuers, travelers from China may be subject to screening, potential quarantine, or denied entry - White House press conf