War of words over Hong Kong doesn’t dampen optimism about reopening economies

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Weekly Market Update: War of words over Hong Kong doesn’t dampen optimism about reopening economies

2020-05-29T16:06:14.75

Coming out of the holiday break, equity markets roared. US indices reached levels not seen since early March and late February while the S&P pushed up through its 200-day moving average. Positive developments on the coronavirus treatment front combined with incremental headlines surrounding the pullback of various lockdown measures aided risk appetite broadly. Japan raised expected bond issuance to fund a second budget to provide stimulus, while EU officials unveiled details of an ambitious €750B recovery fund that favors grants over loans and would be funded by joint debt. US stock markets experienced a notable rotation away from the perceived pandemic winners into banks and other beaten-down groups including small caps in general, which affirmed a welcomed sense of widening breadth in the stock market’s rebound.

Late in Thursday’s session concerns about the rising tensions over China’s move to crimp Hong Kong’s autonomy seemed to finally put a cap on risk exuberance. After a week of increasingly harsh rhetoric from the White House, on Friday President Trump announced some visa restrictions and a ‘working group’ to examine the differing financial practices of Chinese firms listed in the US. Separately, Trump also signed an executive order aimed at social media companies after one of his tweets criticizing mail-in ballots was ‘fact checked’ by Twitter. The dollar continued to lose ground this week with the very notable exception against the Yuan; The Chinese currency fell to its weakest level against the dollar since early 2008. Meanwhile, crude futures continued to rebound, ending the month of May with a record 80% gain. For the week, the S&P gained 3%, the DJIA rose 3.9%, and the Nasdaq added 1.8% to come within just a few percent of all time highs.

In corporate news this week, Boeing shares rose after it said it would resume 737 MAX production at its Renton, WA facility, and forecast output to gradually ramp up this year. Disney announced plans to start a phased reopening for its Magic Kingdom and Animal Kingdom parks on July 11th, while Six Flags is set to reopen its first park in Oklahoma on June 5th. UPS said it would add a peak surcharge and an oversize package surcharge for ground shipments beginning May 31st amid an influx of e-commerce orders. Tesla reduced prices on certain vehicles by as much as $5,000 in North American markets as well as imported Model S and X vehicles in China. Costco saw a sales bounce early in Q3 on a burst of coronavirus-related spending, but the numbers did not sustain as shopping frequency decreased over the quarter. Toll Brothers Q2 earnings beat street estimates, and while the CEO said net signed contracts in the first four weeks of May were down 37% year-over-year, they remain ‘very encouraged’ by recent deposit activity.


MON 5/25
*(DE) GERMANY Q1 FINAL GDP Q/Q: -2.2% V -2.2%E; Y/Y: -2.3% V -2.3%E (confirms technical recession)
*(DE) GERMANY MAY IFO BUSINESS CLIMATE SURVEY: 79.5 V 78.5E; CURRENT ASSESSMENT SURVEY: 78.9 V 80.0E
REGN Sanofi to sell majority of its 20.6% stake; Regeneron announces $5B stock repurchase (8% of market cap); drug collaborations will not be impacted
NVAX Initiates Phase 1/2 clinical trial of COVID-19 vaccine NVX-CoV2373; result is expected in early July

TUES 5/26
*(DE) GERMANY JUN GFK CONSUMER CONFIDENCE: -18.9 V -18.0E
(DE) German govt said to be prepared to lift travel warnings on almost three dozen countries and replaced by more detailed travel advice - financial press
(UK) EU said to be prepared to drop maximalist approach to fisheries in next round of Brexit negotiations - financial press
(EU) ECB said to be working on a contingency plan if Bundesbank is forced to quit PSPP bond buying scheme - financial press
*(US) APR NEW HOME SALES: 623K V 480KE
*(US) MAY CONSUMER CONFIDENCE: 86.6 V 87.0E
*(US) MAY DALLAS FED MANUFACTURING ACTIVITY INDEX: -49.2 V -62.0E
MRK Merck CEO Frazier casts doubt over 12 to 18 month timeframe for development of a Covid-19 vaccine - FT
TWTR Twitter now includes a 'fact check' of Pres Trump tweets about mail-in ballots on his Twitter page
(US) White House econ adviser Kudlow: Trump is so 'miffed' with China on coronavirus and other matters that the trade deal is not as important to him as it once was; China trade deal is on for now - Fox interview

WED 5/27
(CN) China Foreign Ministry spokesperson Zhao Lijan: Will take countermeasures if others harm China
(EU) ECB chief Lagarde: Will not have a new Euro area debt crisis following the pandemic; not overly concerned about the high level of debt- online event
(EU) EU Commissions recovery fund proposal said to be comprised of €500B in grants and €250B in loans - German press
(EU) EU Commission President Von der Leyen: Dealing with pandemic is Europe's moment; total EU recovery effort stands at €2.4T
*(US) MAY RICHMOND FED MANUFACTURING INDEX: -27 V -40E
(US) Dallas Fed May Texas Service Sector Outlook Survey: General Business Activity: -41.7 v -83.9 prior
(US) Sec of State Pompeo: announces that US can no longer certify Hong Kong autonomy from China; says no reasonable person can assert today that Hong Kong maintains high degree of autonomy from China given facts on the ground
BA Resumes 737 MAX production at its Renton, WA facility; production to gradually ramp up this year - press
MU Raises Q3 $0.75-0.80 v $0.56e (prior $0.40-0.70), Rev $5.2-5.4B v $4.91Be (prior $4.6-5.2B), Gross margin 33-34% (prior 31.5% +/-1.5%) - filing

THRS 5/28
*(EU) EURO ZONE MAY ECONOMIC CONFIDENCE: 67.5 V 70.6E
*(DE) GERMANY MAY PRELIMINARY CPI M/M: -0.1% V -0.1%E; Y/Y: 0.6% V 0.6%E
*(US) APR PRELIMINARY DURABLE GOODS ORDERS: -17.2% V -19.0%E; DURABLES (EX-TRANSPORTATION): -7.4% V -15.0%E
*(US) INITIAL JOBLESS CLAIMS: 2.123M V 2.10ME; CONTINUING CLAIMS: 21.05M V 25.68ME
*(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: -5.0% V -4.8%E; PERSONAL CONSUMPTION: -6.8% V -7.5%E
*(US) Q1 PRELIMINARY GDP PRICE INDEX: 1.4% V 1.3%E; CORE PCE Q/Q: 1.6% V 1.8%E
*(US) DOE CRUDE: +7.9M V -1.5ME; GASOLINE: -0.7M V -0.5ME; DISTILLATE: +5.5M V +2ME
(US) Atlanta Fed raises Q2 GDP growth to -40.4% from -41.9%
UPS To add peak surcharge for ground packages, to add oversize package surcharge beginning May 31st amid jump in e-commerce shipments - press
(US) Pres Trump: will sign executive order to 'uphold free speech'; social media companies will lose their liability shield; they are tantamount to a monopoly
COST Reports Q3 $1.89 v $1.91e, Rev $36.5B v $37.7Be

FRI 5/29
*(EU) EURO ZONE MAY ADVANCE CPI ESTIMATE Y/Y: 0.1% V 0.1%E; CPI CORE Y/Y: 0.9% V 0.8%E
(US) Nevada reports April casino gaming Rev $3.7M, -99.6% y/y; Las Vegas strip Rev $3.4M, -99.3% y/y
(US) Fed Chairman Powell: want to reiterate Fed is strongly committed to using all our tools to get to a robust recovery; acknowledging a lot of pain being felt out there - Princeton webcast
(US) New York Fed Nowcast: cuts Q2 forecast to -35.5% from -30.5%
(US) Atlanta Fed cuts Q2 GDP growth to -51.2% from -40.4%
(US) President Trump reportedly will NOT leave the phase one US/China trade deal over recent tensions - press
(US) Pres Trump: to launch working group to study differing practices of Chinese companies listed on US stock markets; will revoke Hong Kong's preferential treatment; Will take steps to sanction Hong Kong officials involved in eroding Hong Kong's autonomy - remarks at Rose Garden

Hopes surrounding vaccine progress outweigh renewed US/China tensions

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Weekly Market Update: Hopes surrounding vaccine progress outweigh renewed US/China tensions

2020-05-22T16:09:41.773

Stock markets rose further this week climbing a wall of worry surrounding rising US/China tensions. May economic data remained extremely soft, but the sequential improvement from last month’s nadirs supported the advancing narrative that April will likely be seen as the trough. Commentary from a host of major retailers pointed to signs of pent-up demand from US consumers as they emerge from stay-at-home directives. Larger swaths of the US economy continued to reopen without much handwringing while Covid-19 vaccine hopes received a boost from early positive Interim Phase 1 Data out of Moderna.

Heading into the long Memorial Day weekend deteriorating ties between Beijing and Washington began to exert a greater effect on sentiment. Wednesday, the Senate passed legislation that could have the effect of banning Chinese companies from listing on US exchanges resulting in speculation that major US listed Chinese companies were already preparing to move their listings to Hong Kong. Separately, US lawmakers also approved a bill aimed at censuring China's move to impose new national-security laws on Hong Kong. By Friday, President Trump warned that Washington would react "very strongly" if China follows through on its HK plans. Treasury yields moved up early in the week alongside stocks. Wednesday saw the first US 20-year bond auction since the mid 1980’s go off with solid demand. The upward momentum in oil largely continued until global growth concerns induced by the decision of Chinese officials to omit an annual GDP target resulted in some profit taking on Friday. The Russell 2000 and Dow Jones transports easily outpaced the overall market’s gains signaling to some increased bets on American reopening. For the week, the S&P gained 3.2%, the DJIA added 3.3%, and the Nasdaq rose 3.4%.

In corporate news this week, Target earnings and revenue were lifted by a 141% increase in its e-commerce sales, and the company saw ‘rapid increase in traffic and sales in stores, resulting in some of strongest comp sales growth in company history in mid-April. Walmart earnings jumped, also driven by both a boost in traffic and e-commerce. Lowe’s handily beat earnings forecasts as its same store sales surged, with May SSS running above +20%, as home improvement spending saw a pickup amid coronavirus shut-downs. Best Buy shares moved lower despite beats on both top and bottom line, though the tech retailer said it retained 81% of last year’s sales during the last six weeks of the quarter despite switching to curbside pickup. Home Depot missed its earnings target as coronavirus costs weighed on the retailer. Nvidia topped earnings estimates and shares hit all-time highs as the supply challenges it experienced were counterbalanced by a surge in e-commerce revenue amid work-from-home spending and gaming demand. Reports said GrubHub remains in discussions with Uber about a potential buyout, with CNBC’s Faber noting the two are fairly close to a deal.


SUN 5/17
005930.KR Reports Q1 semiconductor production 277.4B units, +57.4% y/y - Yonhap citing report

MON 5/18
(EU) EU said to borrow considerably more €320B for its recovery fund - FT
MRNA Announces early positive Interim Phase 1 Data for mRNA Vaccine (mRNA-1273) against Novel Coronavirus in first four of eight study participants; expects Phase 3 trial to start in July
BIDU Reports Q1 $1.25 v $0.64e, Rev $3.18B v $3.13Be
FNMA To Issue Request for Proposals to Hire Financial Advisor
(US) NASDAQ said to be tightening/restricting IPO and listing rules for companies from China - US financial press

TUES 5/19
*(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: -93.5 V -86.6E; EXPECTATIONS SURVEY: 51.0 V 30.0E
HD Reports Q1 $2.08** v $2.27e, Rev $28.3B v $27.5Be; Suspends FY20 outlook
WMT Reports Q1 $1.18 v $1.12e, Rev $134.6B v $130.9Be; Withdrawing FY21 outlook; To discontinue Jet.com
(US) Atlanta Fed raises Q2 GDP growth to -41.9% from -42.8%
MRNA Vaccine experts say Moderna didn’t produce data critical to assessing Covid-19 vaccine - StatNews
992.HK Reports Q4 Net $43M v $118M y/y, Rev $10.6B v $11.7B y/y
(TW) Taiwan President Tsai: Reiterates will not accept China one country, two systems model; Coronavirus has changed world political and economic order, new opportunity for Taiwan - Inauguration speech

WEDS 5/20
(TW) China Taiwan Affair Office: Current situation with Taiwan, is complex and severe; China will never tolerate any act of separating the country - Xinhua
*(UK) APR CPI M/M: -0.2% v -0.1%e; Y/Y: 0.8% v 0.9%e (slowest annual pace since 2016)
*(EU) EURO ZONE APR FINAL CPI Y/Y: 0.3% V 0.4%E; CPI CORE Y/Y: 0.9% V 0.9%E
LOW Reports Q1 $1.77 v $1.29e, Rev $19.7B v $18.2Be; Withdraws FY20 outlook
INO COVID-19 DNA Vaccine INO-4800 Demonstrates Robust Neutralizing Antibody and T Cell Immune Responses in Preclinical Models
SHOP Announces strategic partnership with the World's Leading Crypto Payments Processor CoinPayments
*(US) DOE CRUDE: -5.0M V +1.5ME; GASOLINE: +2.8M V -2.5ME; DISTILLATE: +3.8M V +2.5ME
(US) Senate passes by unanimous consent Holding Foreign Companies Accountable Act that could delist Chinese companies from US stock exchanges - press
EKSO Announces CFIUS Determination Regarding China Joint Venture; prior national security concerns regarding the JV could not be mitigated, termination of the JV not have material impact on our operations during the remainder of 2020
(CN) China Customs administration revises iron ore import inspection rules, will examine iron ore imports only based on applications (prior selected quality checks for all imports); effective June 1st

THURS 5/21
(CN) China releases a new bill on Hong Kong National Security; Will strengthen Hong Kong enforcement capacity - Xinhua
(CN) China 13th National People's Congress (NPC): Affirms Monetary Policy stance [prudent monetary policy stance to be more flexible and appropriate]; Guiding money supply significantly higher y/y; Expanding 5G applications in 2020
*(CN) CHINA 13TH NATIONAL PEOPLE'S CONGRESS (NPC) OMITS 2020 GROWTH TARGETS - US FINANCIAL PRESS (as speculated)
NVDA Reports Q1 $1.80 v $1.69e, Rev $3.08B v $3.00Be
*(US) MAY MARKIT PRELIMINARY PMI MANUFACTURING: 39.8 V 39.5E
*(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: -43.1 V -40.0E
*(US) INITIAL JOBLESS CLAIMS: 2.44M V 2.40ME; CONTINUING CLAIMS: 25.07M V 24.25ME
BBY Reports Q1 $0.67 v $0.41e, Rev $8.56B v $8.15Be; Retained ~81% of y/y sales with curbside pickup model from mid-Q1 onward
(CN) Diplomatic backchannels between the US and China have dried up, some say the behind-the-scenes meetings and messages between gov't officials have 'ground to a halt' - SCMP
*(FR) FRANCE MAY PRELIMINARY PMI MANUFACTURING: 40.3 V 36.0E (4th straight contraction)
*(DE) GERMANY MAY PRELIMINARY PMI MANUFACTURING: 36.8 V 39.4E (17th month of contraction)
*(EU) EURO ZONE MAY PRELIMINARY PMI MANUFACTURING: 39.5 V 38.0E (16th straight contraction)
*(UK) MAY PRELIMINARY PMI MANUFACTURING: 40.6 V 37.2E (3rd straight contraction)

FRI 5/22
*(UK) APR RETAIL SALES (EX-AUTO/FUEL) M/M: -15.2% V -15.0%E; Y/Y: -18.4% V -18.6%E (record declines)
(HK) Hong Kong Chief Exec Lam: Will fully cooperate with China to enact National Security Law ASAP; Safeguarding national security is constitutional responsibility
(US) New York Fed Nowcast: raises Q2 forecast to -30.5% from -31.1%

Markets face a reality check

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Weekly Market Update: Markets face a reality check

2020-05-15T16:05:50.357

Stock indices rolled over this week as investor sentiment underwent somewhat of reality check. The economic data saw historic declines both in Europe and the US. The brutal numbers, though not unexpected, came alongside circumspect comments from Fed Chairman Powell as well as several legendary investors. The notion of any v-shaped economic recovery seemed to dissipate further after Powell warned of potential lasting economic damage from this crisis could very well mean additional measures will be needed. Treasury yields moved lower and the curve flattened despite a barrage of Fed commentary meant to push back on the notion that US rates could eventually find their way into negative territory. The week came to a close amid renewed concerns surrounding rising China tensions. President Trump and his administration repeatedly emphasized their dissatisfaction and distrust of China’s handling of the coronavirus crisis, going as far as to suggest he could consider cutting ties altogether. Friday the US Commerce Department announced rules aimed at cutting off Huawei's efforts to undermine US export controls, prompting swift reaction by Chinese state media. The VIX moved up and gold prices moved back to the highest levels in weeks. Oil prices continued to rebound to levels not seen since before the wild volatility of mid-April. For the week, the S&P slipped 2.3%, the DJIA fell 2.7%, and the Nasdaq lost 1.2%.

As the major thrust of earnings season winds down, some names still remained to report this week. Applied Materials reported a miss on its top and bottom line, but noted it sees evidence that the supply chain is recovering. Cisco shares rose on an earnings beat despite “manufacturing challenges and component constraints” amid the pandemic. United Natural Foods released preliminary Q3 numbers that smashed expectations, as demand surged for both its natural and conventional products and sales remain elevated. Word that Uber is in talks to acquire GrubHub in an all-stock deal surprised the Street this week, though follow-up reports indicate the companies remain at odds on price. Disney added its name to the list of corporations moving in to capital markets to shore up balance sheets, filing to offer $11B in notes.


MON 5/11
DIS Launches $11B six-tranche note offering
BA CEO: Likely that a US airline will shutdown by Sept, sees US air traffic levels at less than 25% by Sept

TUES 5/12
7203.JP Reports FY19/20 Net ¥2.08T v ¥1.88T y/y; Op ¥2.44T v ¥2.47T y/y; Rev ¥29.93T v ¥30.23T y/y
VOD.UK Reports FY20 adj 5.60p v 6.27p y/y, adj EBITDA €14.9B v €13.9B y/y, Rev €45.0B v €43.7B y/y; affirms FY19 dividend at 9c/shr v 9c/shr y/y
*(US) APR CPI M/M: -0.8% V -0.8%E; CPI (EX-FOOD/ENERGY) M/M: -0.4% V -0.2%E; CPI NSA: 256.389 V 256.489E (CORE INDEX FALLS BY MOST ON RECORD)
(IN) India PM Modi: announces economic package worth INR20T (10% of GDP)
GRUB Uber reportedly approached Grubhub with takeover offer - press
KSU Reports QTD volume -25% y/y, Rev -22% y/y - investor slides
*(US) APR MONTHLY BUDGET STATEMENT: -$737.9B V -$737.2BE
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 0.25%; AS EXPECTED; RAISES LARGE SCALE ASSET PURCHASE (LSAP) PROGRAM FROM NZ$33B TO NZ$60B

WEDS 5/13
*(UK) Q1 PRELIMINARY GDP Q/Q: -2.0% V -2.6%E; Y/Y: -1.6% V -2.2%E ((worst quarterly contraction since Q4 2008)
700.HK Reports Q1 (CNY) Net 28.9B v 27.2B y/y, Op 37.3B v 30.6Be, Rev 108.1B v 101.0Be
TMO Raises Q2 Organic Rev -10% to flat (prior -15% to flat) - filing
*(US) APR PPI FINAL DEMAND M/M: -1.3% V -0.5%E; Y/Y: -1.2% V -0.4%E
(US) Fed Chairman Powell: growing sense that recovery may be slower than we like; expect unemployment to peak in next month or so, but will likely to remain well above levels we saw in 2018 and 2019 - Q&A
(US) Fed Chairman Powell: Negative rates is NOT something we are looking at; our view has NOT changed
*(US) DOE CRUDE: -0.7M V +4.5ME; GASOLINE: -3.5M V -2.5ME; DISTILLATE: +3.5M V +3.5ME
ABT New York University data shows Abbott coronavirus test missed one-third of COVID cases in preliminary test; the 15-min test may yield false negatives - press
*(US) TREASURY $22B 30-YEAR BOND AUCTION DRAWS 1.342%; BID TO COVER 2.30 V 2.43 PRIOR AND 2.28 OVER LAST 4 AUCTIONS

THURS 5/14
*(EU) ECB ECONOMIC BULLETIN: To continue to support the euro area economy in the face of the current economic disruption and heightened uncertainty
LH Confirms launch of "return to work services" for employers with IgG test
MMM CFO: Expects to be producing Respirators at run rate of 2B/yr by end-2020 - investor conf comments
*(US) INITIAL JOBLESS CLAIMS: 2.98M V 2.50ME; CONTINUING CLAIMS: 22.83M V 25.12ME
AMAT Reports Q2 $0.89 v $0.91e, Rev $3.96B v $4.20Be; Supply chain is recovering

FRI 5/15
*(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: -2.2% V -2.2%E ; Y/Y: -2.3% V -2.0%E (confirms technical recession and worst quarterly performance since financial crisis)
(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: -3.8% V -3.8%E; Y/Y: -3.2% V -3.3%E
*(US) MAY EMPIRE MANUFACTURING: -48.5 V -60.0E
*(US) APR ADVANCE RETAIL SALES M/M: -16.4% V -12.0%E; RETAIL SALES (EX-AUTO) M/M: -17.2% V -8.5%E
(US) APR INDUSTRIAL PRODUCTION M/M: -11.2% V -12.0%E; CAPACITY UTILIZATION: 64.9% V 63.8%E
(US) MAR JOLTS JOB OPENINGS: 6.191M V 5.800ME
(US) Atlanta Fed cuts Q2 GDP growth to -42.8% from -34.9%

Markets continue to look past terrible near-term data

TradeTheNews.com Weekly Market Update: Markets continue to look past terrible near-term data

US stock markets continued to rally this week in the face of another series of all time low economic readings. Investors remained willing to look past the pandemic induced seizure and focus on the gradual reopening that is taking hold across portions of Europe and some parts of the US. Q1 earnings reports surged in number, but the underlying story remained largely the same. Significant gains were seen for as basket of well-known tech/consumer companies that revealed numbers that solidified investors’ belief that they are the best positioned to benefit from the changing business landscape amid the coronavirus pandemic. Paced by large cap tech, the Nasdaq composite found its way back into positive territory for the year. The VIX dropped below 30 for the first time in more than 2 months, albeit amid dwindling volumes.

Larger than expected rate cuts by several central banks outside the US served as a reminder that officials remain at the ready to provide stimulus as the crisis plays out. On Thursday Fed fund futures contracts for 2021 began trading above par, suggesting some traders are betting the Fed will allow the policy rate to move into negative territory. Short rates remained subdued into the April employment report on Friday. The jobs numbers were ugly as expected, but perhaps not as dismal as some had thought. The decline in payrolls topped 20M and the unemployment rate jumped to nearly 15%, but that number probably still doesn’t fully reflect the damage inflicted by the pandemic. WTI crude prices rallied alongside stock prices and a host of other commodities further signaling investors’ willingness to look past the current period of uncertainty and position for some level of economic resurgence. For the week, the S&P gained 3%, the DJIA added 2.6%, and the Nasdaq rose 6%.

A deluge of corporate earnings gave a broad sampling of how companies are handling the coronavirus crisis. Disney’s EPS missed expectations as earnings dropped -90% y/y, and the media juggernaut cut capex and said it will not pay a dividend this summer. General Motors earnings beat by a wide margin despite recent halts in production, though the company said it plans to restart US operations on May 18th. CVS came in ahead of consensus on its top and bottom line as the retailer experienced an influx of demand due to the coronavirus, but the company said it saw some signs of moderation in April. Tyson Foods’ Q2 earnings and revenue missed estimates as the meat producer struggles with production slowdowns, though it said it expects to remain profitable in the second half. Uber shares hit the gas despite widening losses as the CEO seemed optimistic that ride volume was rising again after a trough in mid-April and said adjusted EBITDA margins would continue to improve in Q3. Wayfair soared on an EPS beat and cheery Q2 commentary, Pinterest dropped after seeing a sharp deceleration in its ad business, and Shopify shares hit record highs as its subscription revenue rose substantially. Pfizer began its coronavirus vaccine trials in humans this week and estimates that, if the tests are successful, a vaccine could be ready for emergency use as soon as September. Amid a significant hiatus in M&A activity in the pharma space, Alexion announced it would acquire Portola for $18/share in cash in a deal valued at $1.6B.


MON 5/4
(US) April ISM New York: 4.3 v 12.9 prior (all time low)
(US) Treasury quarterly financing estimates: to borrow $3.0T in Apr-June quarter v $2.4Be (prior estimate to pay down $56B) (most since Q4'08)

TUES 5/5
PFE Exec: Expect millions of doses of Covid-19 vaccine by October - CNBC
(US) Atlanta Fed cuts Q2 GDP growth to -17.6% from -16.6%
(US) Fed Vice Chair Clarida (moderate, voter): recovery could begin in H2 of this year; it's important to make sure the rebound is as robust as possible - CNBC interview
DIS Reports Q2 $0.60 v $0.83e, Rev $18.0B v $18.0Be

WEDS 5/6
(EU) EU Commission Spring Forecasts: Cuts 2020 GDP to contraction territory; Raises 2021
GM Reports Q1 $0.62 v $0.18e, Rev $32.7B v $32.6Be
(US) Treasury to sell $20B 20-year bond - quarterly refunding announcement
*(US) DOE CRUDE: +4.6M V +8ME; GASOLINE: -3.2M V +0.5ME; DISTILLATE: +9.5M V +3ME
*(CN) CHINA APR TRADE BALANCE:$45.3B V $8.7BE

THURS 5/7
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED
(US) China and US trade chiefs could hold a phone call as soon as next week regarding progress on implementation of the phase-1 trade deal - press
ARAMCO.SA Raises ARAB light official selling price to Asia by $1.40 to -$6.50
*(US) Q1 PRELIMINARY NONFARM PRODUCTIVITY: -2.5% V -5.5%E; UNIT LABOR COSTS: 4.8% V 4.5%E
*(US) INITIAL JOBLESS CLAIMS: 3.17M V 3.00ME; CONTINUING CLAIMS: 22.6M V 19.80ME
(US) Jan 2021 Fed funds futures trade above par, predicting negative policy rate
Nevada Gaming Commission votes to approve casino virus safety policies ahead of reopening casinos - press
*(US) MAR CONSUMER CREDIT: -$12.1B V +$15.0BE
(US) US Treasury confirms conference call between USTR Lighthizer, Treasury Sec Mnuchin, and China Vice Premier Liu He

FRI 5/8
SIE.DE Reports Q2 Net €652M v €1.81B y/y, Industrial Business EBITA €1.59B v €1.94B y/y, Rev €14.2B v €14.3B y/y; sees stronger COVID-19 impact in Q3; withdraws FY20 EPS guidance
*(US) APR UNEMPLOYMENT RATE: 14.7% V 16.0%E
*(CA) CANADA APR NET CHANGE IN EMPLOYMENT: -1.99M V -4.00ME; UNEMPLOYMENT RATE: 13.0% V 18.1%E
*(US) APR AVERAGE HOURLY EARNINGS M/M: 4.7% V 0.5%E; Y/Y: 7.9% V 3.3%E; AVERAGE WEEKLY HOURS: 34.2 V 33.6E
(US) New York Fed Nowcast: cuts Q2 forecast to -31.2% from -9.3%
(US) Atlanta Fed cuts Q2 GDP growth to -34.9% from -17.6%

Markets consolidate as poor data is balanced by hopes that coronavirus effects will ease soon

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Weekly Market Update: Markets consolidate as poor data is balanced by hopes that coronavirus effects will ease soon

2020-05-01T16:14:57.307

Coming into the week risk appetite was already on the upswing as investors eagerly awaited key signals from areas in Europe and the US that have begun lifting coronavirus lockdown restriction. The release of promising study results for Gilead’s investigational antiviral Remdesivir in treatment of COVID-19 provided further hope to investors that the economy can safely reopen soon. The positive development on the coronavirus front initially overshadowed a series of disappointing economic data releases as well as most of the uncertain commentary coming out of earnings season, allowing the S&P to run back above 2,950, only about 13% off of all-time highs set in March.

US and most European sovereign bonds rallied and yields noticeably slipped in the second half of the week while stock markets rolled over. The Fed and ECB met and made it clear that emergency measures were not going anywhere anytime soon, as well as acknowledging that they continue to look at expanding programs and will likely take additional measures to support the recovery. The dose of reality from the two key central banks as well as a shift back towards focusing on the corporate commentary appeared to reverse sentiment. Late in the week, President Trump ratcheted up his China rhetoric with new tariff threats, and a report (later denied by the White House) suggested that the administration was considering plans to demand financial compensation from China over its handling of coronavirus. Front month WTI crude futures settled up more than 15% this week after weekly DOE inventory data showed continued declines in US production and OPEC+ members commenced the already agreed upon production cuts. The S&P and DJIA each fell 0.2%, and the Nasdaq dropped 0.3%.

In corporate news this week, Boeing tapped the bond market with a $25B 7-part offering, and as a result of high demand for the bond sale, the aerospace giant said it will not need to seek federal aid. Diamond Offshore confirmed it was beginning voluntary Chapter 11 proceedings for restructuring, as had been speculated. This week also saw earnings season kick off in earnest with a large swath of major tech companies reporting. Google EPS missed expectations due to a predictable but ‘significant’ slowdown in ad revenue. Apple posted flat sales and did not provide its usual outlook, but did note a pickup for business in the second half of April. Amazon sales grew faster than expected but the online shopping giant reported an EPS miss and said it would spend $4B in Q2 profits on Covid-19-related costs. Investors liked what they heard from Facebook, as the social media giant said the ad revenue drop it experienced in March was followed by signs of stabilization in April. Tesla shares jumped on a surprise Q1 profit and revenue beat despite the coronavirus-affected demand in the auto sector, though shares slump on Friday as CEO Musk took to Twitter to express his opinion that the “stock price is too high.” Microsoft topped estimates on both EPS and sales, driven by a strong showing in its cloud business, notably the +61% jump y/y in Azure revenue.


SUN 4/26
DBK.DE Reports prelim Q1 Net €66M v €201M y/y; Pretax €206M v €292M y/y; Rev €6.4B v €6.35B y/y; Provisions for credit losses €500M (44bp of loans) v €140M y/y
*(JP) BANK OF JAPAN (BOJ) AMENDS POLICY; strengthens stimulus with unlimited JGB buying and increasing corporate bond and commercial paper purchases
MON 4/27
DO Confirms beginning voluntary Chapter 11 proceedings for restructuring, as speculated
*(US) APR DALLAS FED MANUFACTURING ACTIVITY INDEX: -73.7 V -75.0E
(US) California Gov Newsom: state is 'just weeks, not months' away from changing lockdown orders
BA Seattle Times corrects report, Company has not provided job cut estimates to union (had reported to cut workforce by 15-35%)

TUES 4/28
005930.KR Reports final Q1 (KRW) Net 4.9T v 5.1T y/y; Op 6.5T v 6.4T prelim; Rev 55.3T v 55.0T prelim
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT 0.00%; AS EXPECTED; does not rule out of rate cut later this year
3328.HK Reports Q1 (CNY) Net 21.45B v 21.07B y/y, NII 36.74B v 34.9B y/y
CAT Reports Q1 $1.60 v $1.77e, Rev $10.6B v $11.1Be
UPS Reports Q1 $1.15 v $1.23e, Rev $18.0B v $17.6Be; Suspends buybacks for 2020 and withdraws FY20 outlook
*(US) APR RICHMOND FED MANUFACTURING INDEX: -53 V -42E
*(US) APR CONSUMER CONFIDENCE: 86.9 V 87.0E (lowest since 2014)
(US) Dallas Fed April Texas Service Sector Outlook Survey: General Business Activity: -81.7 v -78.8 prior
BA Reportedly could face criminal or civil inquiries out of the 737 MAX production issue investigation; FAA considering fines or other enforcement actions - press
(US) Pres Trump confirms will sign order to keep US meat plants open during coronavirus pandemic - press

WEDS 4/29
AIR.FR Reports Q1 Net -€481M v +€40M y/y, Adj EBIT €281M v €549M y/y, Rev €10.6B v €12.5B y/y
DBK.DE Reports Q1 Net -€43M v €66M prelim, Pretax €206M v €206M prelim, Net Rev €6.35B v €6.4B prelim
AZN.UK Reports Q1 Core EPS $1.05 v $0.93e, Rev $6.35B v $5.95Be
*(EU) EURO ZONE APR ECONOMIC CONFIDENCE: 67.0 V 73.1E
GE Reports Q1 $0.05 v $0.06e, Rev $20.5B v $20.7Be; Q2 will be first full Q with COVID-19 pressure
3988.HK Reports Q1 (CNY) Net 52.58B v 51.0B y/y, Op Income 148.5B v 141.0B y/y
*(US) Q1 ADVANCE GDP ANNUALIZED Q/Q: -4.8% V -4.0%E; PERSONAL CONSUMPTION: -7.6% V -3.6%E
*(DE) GERMANY APR PRELIMINARY CPI M/M: 0.3% V 0.1%E; Y/Y: 0.8% V 0.7%E
*(US) Q1 ADVANCE GDP PRICE INDEX: 1.3% V 1.0%E; CORE PCE Q/Q: 1.8% V 1.7%E
CAPR New data reports 100% survival in critical COVID-19 patients treated with CAP-1002; U.S. FDA approves company’s expanded access protocol to treat additional patients
(US) Nevada reports March casino gaming Rev $618.1M, -39.6% y/y; Las Vegas strip Rev $299.9M, -45.7% y/y
*(US) DOE CRUDE: +9.0M V +11ME; GASOLINE: -3.7M V +3ME; DISTILLATE: +5.1M V +4ME
DB1.DE Reports Q1 adj €2.11 v €2.08e, adj EBITDA €619.8M v €596.0Me, Rev €914.8M v €800Me
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25%; TARGET INTEREST RATE WILL REMAIN UNCHANGED UNTIL ECONOMY HAS WEATHERED RECENT EVENTS AND IS ON TRACK TO ACHIEVE ECONOMIC AND INFLATION GOALS; COMMITTED TO USING FULL RANGE OF TOOLS TO SUPPORT ECONOMY
MSFT Reports Q3 $1.40 v $1.27e, Rev $35.0B v $33.9Be; COVID-19 had minimal net impact on Rev
TSLA Reports Q1 +$1.24 v -$0.22e, Rev $5.99B v $5.37Be
BA S&P cuts rating one notch to BBB- from BBB; outlook Stable
*(CN) CHINA APR MANUFACTURING PMI (GOVT OFFICIAL): 50.8 V 51.0E

THURS 4/30
NOK Reports Q1 non-IFRS Net +€33M v -€116M y/y, Rev €4.91B v €5.1Be
(FR) FRANCE Q1 PRELIMINARY GDP Q/Q: -5.8% V -4.0%E; Y/Y: -5.4% V -3.6%E
RDSA.NL Reports Q1 CCS EPS $0.37 v $0.65, Adj CCS Net $2.96B v $5.4B y/y, Rev $60.0B v $83.7B y/y; Cuts interim dividend 66% to $0.16/shr v $0.47/shr y/y, suspends buyback
*(EU) EURO ZONE Q1 ADVANCE GDP Q/Q: -3.8% V -3.8%E; Y/Y: -3.3% V -3.4%E
*(EU) EURO ZONE APR ADVANCE CPI ESTIMATE Y/Y: 0.3% V 0.1%E; CPI CORE Y/Y: 0.9% V 0.7%E
*(EU) EURO ZONE MAR UNEMPLOYMENT RATE: 7.4% V 7.8%E
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Affirms size of pandemic program at €750B and prepared to increase size of PEPP
BA To sell USD-denominated 3-year, 5-year, 7-year, 10-year, 20-year, 30-year and 40-year bonds (7 tranches)
*(US) INITIAL JOBLESS CLAIMS: 3.84M V 3.50ME; CONTINUING CLAIMS: 17.99M V 19.48ME
(EU) ECB chief Lagarde: Measures to stop virus outbreak has halted economic activity - prepared remarks
(EU) ECB chief Lagarde: Prepared to adjust all instruments as needed
*(US) FED EXPANDS SCOPE AND ELIGIBILITY FOR MAIN STREET LENDING PROGRAM
(US) Atlanta Fed GDPNow forecasts initial Q2 GDP growth at -12.1%
(US) House Speaker Pelosi (D-CA): discussing a $1T coronavirus relief package for state and local govts
(US) White House officials said to be considering plans to punish or demand financial compensation from China over handling of coronavirus - Wash Post
(RU) Russia PM Mishustin tests positive for coronavirus; First Dep PM Belousov named acting PM - press
AMZN Reports Q1 $5.01 v $6.36e, Rev $75.5B v $74.4Be
V Reports Q2 $1.39 v $1.35e, Rev $5.85B v $5.75Be
(US) Pres Trump: I have seen evidence that the coronavirus originated in the Wuhan Institute of Virology in China; could use tariffs to respond to China

FRI 5/1
(US) Trump Administration considering order to block Government investment funds from investing into China companies that are considered a national security risk - US financial press
(US ) APR FINAL MARKIT MANUFACTURING PMI: 36.1 V 36.7E
(US) Atlanta Fed cuts Q2 GDP growth to -16.6% from -12.1%
(US) Pres Trump: I have a plan to address the national debt
GILD Pres Trump: Gilead has emergency use authorization from the FDA for remdesivir; working with FEMA to make sure drug

‘Animal spirits’ unshaken despite oil trading debacle and terrible economic data

TradeTheNews.com 

Weekly Market Update: ‘Animal spirits’ unshaken despite oil trading debacle and terrible economic data

2020-04-24T16:05:41.507

Markets opened the week amid historic turmoil in the crude markets. Oil prices continued to plummet amid a glut of supply against a backdrop of historic demand destruction related to the pandemic measures. Nowhere was the stress more evident than in the WTI futures market which saw the front month, May, contract trade well into negative territory ahead of expiry. Speculators struggled to find buyers that were willing and available to take delivery forcing them to pay a premium for the first time since the 1970s to offload what was essentially a cash contract. On Tuesday, the declines spread further out across the curve, before the summer contracts experienced a modicum of stabilization following Tuesday’s May contract expiration. June WTI finished the week down over 30%.

Global economic data remained awful. European PMI readings registered data series lifetime lows in both headline and component readings while Germany’s IFO and ZEW readings continue to descend rapidly. US weekly initial jobless claims remained near 4.5M and March new home sales missed expectations. Nevertheless, animal spirits continued to get a tailwind from an active corporate bond market. Both investment-grade and high-yield bond offerings remained plentiful as corporations rushed to raise capital to shore up balance sheets and ensure they can manage through the pandemic environment. EU officials struggled to find or even define ‘solidarity’, but pledged to find a way to provide massive fiscal stimulus for Europe once economies there reopen. The ECB was left holding down the fort yet again, announcing a widening of collateral rules to mitigate impacts of potential sovereign downgrades to economies within the Eurozone. Stocks consolidated recent gains, with the S&P down 1.3% on the week, the DJIA falling 1.9%, and the Nasdaq slipping 0.2%.

In corporate news this week, IBM reported a beat on earnings but a revenue miss and noted it expects customers to postpone projects in the near term. Intel shares took a hit after guiding Q2 EPS below consensus while withdrawing its FY outlook, and the chipmaker pointed to weaker demand in the second half from corporate and government customers. Netflix surprised the street by adding nearly 16M subscribers in the quarter, though the streaming giant offered conservative forward guidance as it expects global lockdown orders to ease. Snap surged after posting a top and bottom line beat, saying that it saw high revenue growth rates in the first two months of the quarter which offset its lower growth in March. Target offered some preliminary numbers, reporting its comparable sales were up +7% quarter to date and that it was experiencing “Cyber Monday volumes” almost every day in April. Tyson temporarily closed three meat processing facilities in Washington, Iowa, and Indiana on COVID-19 concerns, and a food workers union warned that about 10% of US beef processing plants and 25% of pork plants are closed due to coronavirus. Zoom Video shares added to recent gains after the teleconferencing provider announced it would join the Nasdaq 100 index on Apr 30th. AT&T CEO Stephenson confirmed plans to step down, setting his departure date for July 1st when COO John Stankey will assume his role.


SUN 4/19
(US) US Treasury announces 90-day deferral of some tariff payments, does not apply to anti-dumping and countervailing duties

MON 4/20
941.HK Reports Q1 (CNY) Net 23.5B v 23.7B y/y, Rev 181.3B v 185B y/y
May WTI crude futures fall into negative territory
IBM Reports Q1 $1.84 v $1.70e, Rev $17.6B v $18.0Be; Withdraws FY20 outlook
(US) House Speaker Pelosi told Democrats she expects a deal with GOP tonight on billions to replenish a small businesses loan program and provide more hospital funds; Maj Leader Hoyer says vote as soon as Wednesday - NY Times
(US) Treasury: finalized agreement with major airlines, distributed $2.9B in initial payments
(US) US President Trump tweets: "In light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens, I will be signing an Executive Order to temporarily suspend immigration into the United States!"

TUES 4/21
(EU) EU leaders reportedly unlikely to agree post-coronavirus economic plan during teleconference scheduled on Thursday, Apr 23rd - financial press
*(DE) GERMANY APR ZEW CURRENT SITUATION SURVEY: -91.5 V -77.5E; EXPECTATIONS SURVEY: +28.2 v -42.0E
(SG) Singapore PM Lee: To spend additional S$3.8B for virus stimulus
LH COVID-19 At-Home RNA test kit receives FDA Emergency use authorization
(US) Attorney Gen Barr says Dept of Justice may join lawsuits against stay-at-home orders if states repeatedly extend them - radio interview
TXN Reports Q1 $1.24 v $1.01e, Rev $3.33B v $3.18Be
UAL Files to sell 39.3M shares (16% of shares outstanding)
(US) CDC Director Redfield: possibility that the assault of the coronavirus on the US next winter will actually be even more difficult than the one we just went through because it is likely to coincide with the start of flu season
DGX Begins performing coronavirus antibody testing, expects to scale up to 150K tests/day by early May

WEDS 4/22
ROG.CH Reports Q1 (CHF) Rev 15.1B v 14.8Be
*(TR) TURKEY CENTRAL BANK (CBRT) CUTS ONE-WEEK REPO RATE BY 100BPS TO 8.75%; MORE-THAN-EXPECTED
(US) President Trump tweets: I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.
TSN To indefinitely suspend Waterloo operations in Iowa; Co's largest pork plant
*(US) DOE CRUDE: +15.0M V +14ME; GASOLINE: +1.0M V +4.5ME; DISTILLATE: +7.9M V +4ME
LB Court filings show Sycamore partners seeks to terminate Victoria's Secret deal - press
(EU) ECB widens collateral rules to mitigate impact of downgrades; to accept some junk-rated debt as collateral for loans - press
DVAX Collaborates with Valneva to advance vaccine development for COVID-19; Goal is to initiate clinical trials before end of 2020
AA Reports Q1 -$0.23 v -$0.29e, Rev $2.38B v $2.29Be; To cut costs

THURS 4/23
*(DE) GERMANY MAY GFK CONSUMER CONFIDENCE: -23.4 V -1.8E
UNA.NL Issues Q1 trading update: Rev €12.4B v €12.7B y/y;withdraws outlook; affirms dividend
*(FR) FRANCE APR PRELIMINARY PMI MANUFACTURING: 31.5 V 37.0E (3rd straight contraction and record low)
*(DE) GERMANY APR PRELIMINARY PMI MANUFACTURING: 34.4 V 39.0E (16th month of contraction and a record low)
*(EU) EURO ZONE APR PRELIMINARY PMI MANUFACTURING: 33.6 V 38.0E (15th straight month and record low)
*(UK) APR PRELIMINARY PMI MANUFACTURING: 32.9 V 42.0E (2nd straight contraction and record low)
*(US) INITIAL JOBLESS CLAIMS: 4.43M V 4.50ME; CONTINUING CLAIMS: 15.98M V 16.74ME
*(JP) Bank of Japan (BOJ) reportedly to consider unlimited bond buying at next meeting; Bank of Japan to double purchases of corporate bonds and commercial paper - Nikkei
*(US) APR PRELIMINARY MARKIT PMI MANUFACTURING: 36.9 V 35.0E
(US) Fed officials signal that April meeting is not likely to issue new announcements on asset purchases; will consider expansion of Main Street lending program to nonprofits - press
*(US) MAR NEW HOME SALES: 627K V 644KE
GILD Gilead antiviral drug remdesivir reportedly 'flops' in first randomized clinical coronavirus trial - Financial Times
*(EU) EU leaders talks have ended with no agreement on recovery package; European Commission tasked with presenting a formal proposal by May 6th
INTC CFO: Intel feels good about the underlying demand for chips; H1 will be stronger than we thought - press interview post-earnings
(US) Fed takes action to increase availability of intraday credit extended by Federal Reserve Banks
(US) House votes to pass $484B coronavirus package bill to boost small business program and hospitals - press (as expected)

FRI 4/24
SAN.FR Reports Q1 Business EPS €1.63 v €1.43e, Business Net €1.68B v €1.77B y/y, Rev €8.97B v €8.39B y/y
*(UK) MAR RETAIL SALES (EX-AUTO/FUEL) M/M: -3.7% V -4.0%E; Y/Y: -4.1% V -4.8%E
*(DE) GERMANY APR IFO BUSINESS CLIMATE: 74.3 V 79.7E; CURRENT ASSESSMENT SURVEY: 79.5 V 80.5E
*(US) MAR PRELIMINARY DURABLE GOODS ORDERS: -14.4% V -12.0%E; DURABLES (EX-TRANSPORTATION): -0.2% V -6.3%E
T CEO Stephenson to step down July 1st; COO John Stankey to assume role - CNBC
(US) Pres Trump: Postal Service should raise package prices fourfold; USPS doesn't want to hike prices because it doesn't want to insult Amazon
(US) Pres Trump: ticket purchases are one option to aid airlines; US could pre-pay for four to five years of tickets for the airlines

Markets show more stability as governments talk about ‘reopening’ plans and as funding markets peril recedes

TradeTheNews.com 

Weekly Market Update: Markets show more stability as governments talk about ‘reopening’ plans and as funding markets peril recedes

Fri, 17 Apr 04:15 PM EST/09:15 PM GMT

Coming out of the Easter break investors held cautious optimism, rooted in growing evidence that peak Covid-19 infections had likely passed for NYC and other harder hit parts of the Northeast and continental Europe. Confidence in improving functioning of key funding markets was further enhanced by another steady stream of corporate bond offerings for both investment-grade and higher yielding corporate debt. US stocks climbed higher to once again hit the best levels since the full onset of the coronavirus pandemic. The VIX fell back below 40 for the first time since early March and the S&P retook the 2,800 level. Large-cap tech remained the momentum driver, specifically names that appear best positioned to benefit from the pandemic trading landscape. FANG + Microsoft saw their percentage of the S&P 500 rise above 21% for the first time ever as Amazon and Netflix forged new all-time highs. Equities were boosted late in the week after promising early data was leaked on Gilead’s remdesivir antiviral in treatment of COVID-19, and on the White House releasing a broad guideline for states looking to reopen their economies.

Markets were still forced to confront an ever-mounting wall of worry related to the new pandemic reality. Weekly initial jobless claims surged another 5+ million, bringing the 4-week total above a staggering 22M newly unemployed. The Philly Fed survey registered its lowest reading since July 1980 and Empire manufacturing fell to levels never seen before. Monthly housing starts and permits plunged by double digit percentages. CEOs of key financial companies continued to suggest a V-shaped recovery was unlikely when discussing quarterly results while acknowledging despite a shifting focus towards reopening, economic conditions in many areas are still realistically quite some time from normalizing. Credit events emerged in both the retail and energy sectors, as firms were forced to look at restructuring options. The US government’s SBA relief fund maxed out while the Treasury and Congress struggled to reach any agreement to replenish those funds.

WTI crude dropped back below $20 amid continued large builds in inventory readings and mounting forecasts for severe demand destruction that will more than likely offset the recent OPEC+ agreement. US Treasury yields tracked lower once again. The 10-year dropped back below 65 bps and the 2-year slipped below 20 bps for the first time since 2011. For the week, the S&P gained 3% and peaked above its 50-day moving average for the first time since February, while the DJIA added 2.2%, and the Nasdaq surged 6.1%.

In corporate news this week, major US banks kicked off earnings season. Bank of America, Goldman and Citigroup saw their profits take a hit, while JPMorgan among others warned of loan losses and defaults on the horizon as COVID-19 wreaks havoc on the economy. Teladoc issued encouraging preliminary Q1 numbers as the rising adoption of telehealth providers buoyed revenue and adjusted EBITDA. Apple announced its long-awaited second-generation iPhone SE, which featured a faster chip and improved single-camera system, arriving on sale this week at $399. Verizon acquired video conference technology provider BlueJeans Network for around $500M as the work-from-home movement surges amid the coronavirus lockdown. Chinese regulators officially gave conditional approval for Nvidia to purchase Mellanox for $125/share in cash, in line with recent reporting. Boeing said it’s ready to reopen its Puget Sound facility and resume commercial aircraft production by next week, which gave a boost to sentiment after Thursday’s market close. Berkshire Hathaway accepted Occidental shares in lieu of cash dividends (and then immediately sold those extra shares), after Warren Buffett’s holding company bought $10B in preferred shares last year. Diamond Offshore elected not to make a semiannual interest payment due on 2039 notes and said it intends to utilize a 30-day grace period.


MON 4/13
FDA Clears First Saliva Collection for Coronavirus COVID-19 (SARS-CoV-2) for Emergency Use Authorization (EUA)
(US) Former presidential candidate Sen Sanders endorses VP Biden for President
NY Gov Cuomo: any plan for reopening must fit the facts and circumstance; New York, New Jersey, Connecticut, Pennsylvania, Rhode Island and Delaware to set up a working group to draft plan to reopen economy
(US) New York Fed to reduce the frequency of some repo operations during this monthly period in light of more stable repo market conditions
*(CN) CHINA MAR TRADE BALANCE: $19.9B V $20.0BE
TUES 4/14
JPM Reports Q1 $0.78 v $2.49e, Managed Rev $29.1B v $29.0Be
FAST Reports Q1 $0.35 v $0.34e, Rev $1.37B v $1.36Be
(US) Former President Obama to endorse VP Joe Biden in a video to be released this morning - NBC News
BA Reports Mar deliveries 20, Net orders -282; Q1 deliveries 50
(US) Treasury Sec Mnuchin: Most major airlines to participate in PPP, talks continue with other airlines

WEDS 4/15
BAC Reports Q1 $0.40 v $0.65e, Rev $22.8B v $22.5Be; committed to no COVID-19 layoffs in 2020
(DE) German Fin Min Scholz: Europe needs joint EU answers on post crisis economic revival for region
*(US) APR EMPIRE MANUFACTURING: -78.2 V -35.0E (record low)
*(US) MAR ADVANCE RETAIL SALES M/M: -8.7% V -8.0%E (record drop); RETAIL SALES (EX-AUTO) M/M: -4.5% V -5.0%E
OXY Berkshire files to sell 17.3M shares - filing
*(US) MAR INDUSTRIAL PRODUCTION M/M: -5.4% V -4.0%E; CAPACITY UTILIZATION: 72.7% V 74.0%E
*(US) DOE CRUDE: +19.2M V +11ME; GASOLINE: +4.9M V +6.5ME; DISTILLATE: +6.3M V +1.5ME
(US) Small Business Paycheck Protection Program (PPP) expected to run out of initial $350B allocation later today - press

THURS 4/16
(DE) German Fin Min Scholz: Looks to reduce additional debt from 2023 - financial press
CODX COVID-19 test technology validated for use on saliva samples
MLNX China said to give conditional approval of Nvidia's purchase (in-line with recent speculation) - financial press
*(US) APR PHILADELPHIA FED BUSINESS OUTLOOK: -56.6 V -32.0E (lowest since Jul 1980)
VZ Reportedly to acquire cloud video conferencing company BlueJeans Network for $500M - press
(US) New York Gov Cuomo: Extends NY lockdown to May 15th
*(US) US President Trump tells governors that the states can take time before easing measures; sets out 3 Phases of guidelines for reopening state economies
GILD Stat News: early data from remdesivir trials in Covid-19 has been positive (update)
BA To resume commercial aircraft production at Puget Sound in phased approach beginning next week
RIO.AU Reports Q1 Pilbara iron ore shipments 72.9Mt v 69.1Mt y/y; Pilbara iron production 77.8Mt v 76.0Mt y/y
*(CN) CHINA Q1 GDP Q/Q: -9.8% V -12.0%E; Y/Y: -6.8% V -6.0%E (1st contraction since 1976)

FRI 4/17
*(EU) EURO ZONE MAR FINAL CPI Y/Y: 0.7% V 0.7%E; CPI CORE Y/Y: 1.0% V 1.0%E
PG Reports Q3 $1.17 v $1.11e, Rev $17.2B v $17.0Be
STT Reports Q1 $1.62 v $1.35e, Rev $3.07B v $2.91Be

TradeTheNews.com 

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

TradeTheNews.com 

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