Sunday, August 21, 2022

Recent market speculation gets a reality check Weekly Market Update: Recent market speculation gets a reality check

8/19/2022 4:01:52 PM

Markets came into the week riding a wave of momentum spurred by a revival of animal spirits as evident by a gathering, resurgence in both ‘Meme’ stocks and cryptocurrency markets. Treasury yields remained subdued, capped in part by growth worries emanating out of China as well as an ongoing belief that after some recent constructive inflation data the Fed could ultimately be successful in orchestrating a “softish” landing without needing to raise rates as aggressively as once universally thought. By mid-week the S&P tested its key 200-day moving on several occasions, albeit in a very thin late summertime trading environment.

Wednesday saw the S&P 500 top out at 4325 in the moments following the release of what were generally viewed as dovish FOMC minutes, at least relative to expectations. From there the bears gained the upper hand. Valuation began to come under closer scrutiny because many acknowledged there was little to no room for error for an S&P 500 trading at 18x a likely over-generous 2023 earnings forecasts. Also quarterly retail earnings reports were offering a familiar refrain, namely corporate financial outlooks and margins that were coming under pressure due to macro headwinds faced by consumers and rising promotional activity by industry competitors. Persistent inflationary readings coming out of the EU and UK and surging natural gas prices resulted in growing consternation. Those invigorated inflation worries were married with Fed officials whose comments continued to tamp down expectations of any looming Fed pivot.

By Friday, the party in the Meme stocks left a nasty hangover for investors in Bed Bath and Beyond as shares plunged after RC Ventures’ Ryan Cohen confirmed he liquidated his entire 11% position just days after igniting a feeding frenzy through an updated 13D holdings filing at the SEC. As stocks lost favor, Treasury yields moved noticeably higher and by Friday the benchmark US 10-yield was pushing back towards 3% for the first time nearly a month. For the week, the S&P 500 lost 1.2%, the DJIA was off 0.2%, and the Nasdaq dropped 2.6%.

Corporate earnings season wound down early this week with a few last highlights. Kohl’s beat expectations but saw negative same store sales and slashed its guidance as it reported high inflation was dampening consumer spending. Walmart’s earnings report was more impressive, beating top and bottom line estimates as it strove to improve supply chain costs, work down inventories, and noted a solid start to the back-to-school season. Home Depot share built some momentum as it put together record Q2 results reflecting continued strength in demand for home improvement projects. GM heartened investors by reinstating its dividend with a 1% implied yield as well as boosting its buyback program as it affirmed plans to invest over $35B in growth through 2025. Occidental shares flowed higher on Friday as the FERC revealed that Berkshire Hathaway was granted approval to accumulate as much as 50% of the oil major (from its current 18.72% stake).

SUN 8/14
ARAMCO.SA Reports Q2 (SAR) Net 181.6B v 95.5B y/y, Rev 562.1B v 312.4B y/y; To pay $18.8B in dividends during Q3
(CN) Shanghai to reopen all schools including kindergartens, primary and middle schools on Sept 1st - press
(CN) China PLA Eastern Theater Command likely to conduct strong & powerful military operations in the waters & airspaces around the island of Taiwan as countermeasures to latest US lawmakers' visit to the island - Global Times
*(CN) CHINA PBOC CUTS 7-DAY REVERSE REPO RATE TO 2.00% FROM 2.10% [1st cut since Jan]
*(CN) CHINA JULY RETAIL SALES Y/Y: 2.7% V 4.9%E; YTD Y/Y: -0.2% V +0.1%E
MON 8/15
(IR) Iran Foreign Ministry: Nuclear talks progress does not fully meet our expectation, but some of our expectations have been met; Basis exists for signing JCPOA nuclear deal in very near future
(DE) Rhine river level at key German point Kaug (between Frankfurt and Dusseldorf) drops to 30cm v 40cm last week and ~150cm needed to carry fully loaded vessels
*(US) AUG EMPIRE MANUFACTURING: -31.3 V +5.0E (3rd negative reading in 4 months and lowest since May 2020)
CAH Elliott reportedly has taken a 'large position' in Cardinal and nominated five directors to the board in early Aug - press
TUES 8/16
3690.HK Tencent said to plan sell all or bulk of its 17% stake in Meituan as early as this year; The stake said to be valued at ~$24B - press
NYR.BE Said to shut down major Buden zinc smelter in Nethelands amid energy costs from Sept 1st; To place Buden zinc smelter on care and maintenance - press
HD Reports Q2 $5.05 v $4.95e, Rev $43.8B v $43.3Be
(US) US military conducted a 'routine test' of unarmed Minuteman III intercontinental ballistic missile; Test showed readiness of US nuclear forces - Pentagon statement
WMT Reports Q2 $1.77 v $1.60e, Rev $152.9B v $151.4Be; Notes work is ongoing to improve costs in its supply chain
Redfin report: ~63K US home-purchase agreements fell through in July (16.1% of homes that went under contract that month, highest rate in more than two years)
*(CA) CANADA JULY CPI M/M: 0.1% V 0.1%E; Y/Y: 7.6% V 7.6%E (moves off recent cycle highs)
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -2.9% v -5.0% prior
(US) US govt announces 2023 water cuts to states that rely on Colorado River; Lake Mead expected to be projected to shrink to 'dangerously low levels' - press
A Reports Q3 $1.34 v $1.20e, Rev $1.72B v $1.64Be; Raises FY outlook
WEDS 8/17
NHY.NO Slovalco will stop primary aluminium production
*(UK) JULY CPI M/M: 0.6% V 0.4%E; Y/Y: 10.1% V 9.8%E (12th month above target and highest annual pace since Feb 1982)
700.HK Reports Q2 (CNY) adj Net 28.1B v 34.0B y/y, Rev 134.0B v 138.3B y/y (first quarterly revenue drop since 2004 listing)
(EU) Daily 3-month Euribor Fixing: 0.351% v 0.333% prior (highest since 2012)
OPEC Sec Gen al-Ghais: Open for dialogue with US; Spare capacity about 2-3Mbpd is running on thin ice
ADI Reports Q3 $2.52 v $2.43e, Rev $3.11B v $3.06Be; Notes economic uncertainty beginning to impact bookings, demand continues to outpace supply
(US) Association of American Railroads weekly rail traffic report for week ending Aug 13th: 503K total units, -0.3% y/y
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.6% from 1.8% prior
(US) CDC Director Rochelle Walensky announces major modifications to CDC’s structure, including staffing changes and efforts to improve public messaging; CDC currently has a $12B annual budget
*(AU) AUSTRALIA JULY EMPLOYMENT CHANGE: -40.9K V +25.0KE (First decrease since Oct 2021); UNEMPLOYMENT RATE: 3.4% V 3.5%E (Lowest since Aug 1974)
THURS 8/18
(DE) ECB's Schnabel (Germany): Favor another large interest rate increase in Sept even as recession risks harden; Inflation is going to increase further, outlook hasn't improved
(CN) China's banking regulator CBIRC said to be probing property sector loan portfolios of some local and foreign lenders to assess systemic risks - financial press
(DE) Rhine river open one way after barge blocking it after engine failute has been towed away - press
(CN) China Ministry of Commerce (MOFCOM) official: Reiterates stance to take forceful measures to safeguard its legitimate rights when necessary - speaking on US CHIPS act
(UR) Russia reportedly changed its position on potential meeting between Pres Putin and Ukraine Pres Zelenskiy; Putin and Zelenskiy may meet before the negotiators finish a roadmap towards the potential peace deal - CNN Turk
(UK) Bank of England (BOE) sets out final operational details ahead of the start of programme of sales of corporate bonds held in the Asset Purchase Facility in the week beginning Sept 19th
(DE) German Chancellor Scholz: To temporarily cut VAT on gas from 19% to 7%; effective Oct 1st until end of March 2024
TPR Reports Q4 $0.78 v $0.78e, Rev $1.62B v $1.64Be; Raises Quarterly dividend 20% to $0.30 from $0.25 (indicated yield 2.69%)
KSS Reports Q2 $1.11 v $1.08e, Rev $4.09B v $4.07Be; Cuts sharply FY22 outlook, taking actions to reduce inventory; $500M accelerated share buyback and remains firmly committed to current dividend
*(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: +6.2 V -5.0E (1st positive reading in 3 months)
*(US) JULY LEADING INDEX: -0.4% V -0.5%E
OPEC Sec Gen al-Ghais: Policymakers and lawmakers are to blame for high energy prices
(US) Fed’s Bullard (voter, hawk): Leaning towards supporting 75bps hike in Sept; Front-loading rate hikes this year gives Fed options in 2023; Fed can get inflation down over a roughly 18-month period
AMAT Reports Q3 $1.94 v $1.78e, Rev $6.52B v $6.26Be
BBBY RC Ventures (Ryan Cohen) confirms liquidated stake - 13D filing
(UK) Aug GfK Consumer Confidence: -44 v -42e (Record Low)
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8065 v 6.7802 prior (weakest fix since Sept 2020)
FRI 8/19
(UK) JULY RETAIL SALES (EX-AUTO/FUEL) M/M: +0.4% V -0.3%E; Y/Y: -3.0% V -3.1%E
(DE) Germany July PPI M/M: 5.3% v 0.7%e; Y/Y: 37.2% v 31.8%e (highest annual pace in 70-years and biggest monthly increase on record)
(DE) Rhine river water level forecast to hit 148cm at Kaub point on Aug 23rd v 40cm w/w and ~150cm needed to carry fully loaded vessels – press
DE Reports Q3 $6.16 v $6.62e, Rev (Equipment Ops) $13.0B v $12.9Be
(CN) China launches measures to secure house delivery as fund pressure remains; To support construction and delivery of unfinished residential projects through special loans schemes from policy banks - Chinese press
GM Reinstates quarterly dividend at $0.09/shr, 1% implied yield (suspended $0.38/shr in Apr 2020); Increases buybacks by $1.7B to $5.0B (8.8% of market cap); Affirms to invest more than $35B through 2025 to advance its growth plan
OXY FERC document shows Berkshire requested and was approved to accumulate up to 50% stake in OXY (from current 18.72% stake)

Saturday, August 13, 2022

Constructive inflation data bolsters soft-landing scenario Weekly Market Update: Constructive inflation data bolsters soft-landing scenario

8/12/2022 4:03:07 PM

Stock markets continued to rally this week as investors took comfort in US inflation readings that supported the ‘peak inflation’ narrative. US Treasury yields remained largely in check and the curve finally saw some steepening, pulling the 2-10 spread away from its most inverted levels of this cycle. Small cap stocks surged early in the week, while the NASDAQ reached a 20% rebound and the S&P tested its 50% Fibonacci retracement level, both from the June lows. Nevertheless the debate carried on, with skeptics contending this was still nothing more than a bear market rally, the likes of which was seen on multiple occasions coming out of the early 2000 tech boom and the great financial crisis which later resulted in fresh lows as part of a multi-year bottoming process. Bulls on the other hand, drew solace from the fact that a soft landing very well could be in the cards as the turn in inflation could ultimately allow the Fed to back off, while corporate earnings reports have held up surprisingly well, suggesting earnings estimates may not have to come down as much as many have feared. Investors’ increased wiliness to take on risk was on full display. Crypto assets rebounded sharply, and traditional meme stocks saw a notable resurgence with traders bidding up shares amid no discernable news or catalysts. Also several extremely disappointing individual earnings reports and slashed guidance were met with heavy buying, resulting in eye popping reversals in beaten down shares. For the week, the S&P gained 3.3%, the DJIA rose 2.9%, and the Nasdaq lifted 3.1%.

Wednesday’s US July CPI data finally offered some tangible signals that inflation has started heading in the right direction. Headline CPI was 0% m/m for the first time since May of 2020 while the y/y print came in below all analyst estimates for the first time in 17 months. The deceleration was largely driven by the recent pullback in commodity prices, as well as other volatile pandemic-affected categories. But encouragingly, rent of shelter and owners equivalent rent categories slowed too. The Atlanta Fed’s annualized sticky-CPI reading saw an even more dramatic pullback to 5.4% from 8.1% m/m. Thursday’s producer price data also came in well below expectations with the first m/m decline in two years, suggesting further improvement to come. Futures markets basically flip-flopped on the September FOMC meeting and now see better odds of a 50 bps hike, rather than 75 bps. But with more than a month until the next Fed conclave -- and another CPI print, as well as the Jackson Hole Fed meeting in between -- those projections are likely to remain fluid. To that end Fed officials once again were quick to push back against dovish pivot hopes, reiterating they will need to see more evidence inflation is slowing and that forecasts for 2023 rate cuts are premature. Also, Friday’s final passage of the Inflation Reduction Act will be another variable that officials will have to factor into the forecasts.

In corporate news, chipmakers got off to a rough start at the beginning of the week. Nvidia warned that a 44% decline in gaming revenue would negatively affect its Q2 results. Micron cut its outlook again on macro/supply chain factors, forecasting a challenging market environment in Q4 and Q1’23. Apple is said to have told its manufacturing partners that it plans to produce 90M new iPhones, in line with 2021 levels.

Disney earnings impressed investors, as the entertainment giant noted hearty profit growth and strong theme park revenue, despite cutting its long-term forecasts for Disney+ subscriber numbers. AppLovin submitted a non-binding proposal to acquire video game software developer Unity at $58.85/shr in an all-stock $20B deal, which would put a damper on Unity’s plan to acquire app monetization company IronSource.

SUN 8/7
BRK.A Reports Q2 EPS (Class B) -$19.84* v $12.33 y/y, Rev $76.2B v $69B y/y
*(CN) CHINA JULY TRADE BALANCE: $101.3B V $88.1BE (record surplus)
(CN) Chinese military will from now on conduct regular drills on the eastern side of the median line of the Taiwan Strait - Chinese TV
(US) Fed's Bowman (voter): 75bps rate hikes should be on the table until inflation declines meaningfully; Have seen few, if any, concrete indications that inflation had peaked earlier in the year
(US) US Senate passes ~$430B Climate Change, Tax, and Drug bill; the final vote was 51 to 50; Vice President Harris placed the tiebreaking vote
(JP) Japan June BoP Current Account: -¥132.4B v -¥706.2Be; Adj Current Account: +¥838.3B v -¥27.6Be
MON 8/8
AAPL Reportedly informed its suppliers that it raised expectations to produce and ship 95M units of new iPhone 14 rather than 90M prior - Taiwanese press
NVDA Reports prelim Q2 Rev $6.70B v $8.12Be; Shortfall versus outlook primarily driven by weaker Gaming revenue
*(US) Former Pres Trump says FBI agents have made an 'unannounced raid' on his Mar-A-Lago compound in Florida - press
(CN) China prelim July Retail Passenger Vehicle Sales 1.84M, +20.1% y/y - PCA
TUES 8/9
(UK) BOE Ramsden: Believe it's more likely than not that MPC will have to raise Bank Rate further. But I haven't reached a firm decision on that
MU Announces $40B investment by 2030 in memory manufacturing in the US using anticipated grants and credits made possible by the CHIPS and Science Act; To create up to 40K new US jobs
(US) Reportedly US solar industry grapples with import ban on China's Xinjiang region; Shipments from Chinese suppliers either detained or sent back - US financial press
(RU) Russian press reports Ukrainian oil firm Ukrtransnafta stops pumping oil via Southern leg of Druzhba ('Friendship') oil pipeline to Hungary, Czech Republic and Slovakia (**Note: Druzhba accounts for up to 8% of EU’s total crude imports from Russia)
AVYA Reports prelim Q3 -$0.24 v $0.53 y/y, Rev $577M v $716 y/y
(US) Bank of America July total payments +7% y/y; Median rent payments +7.4% y/y; Notes many reasons to remain positive about the steady resilience of US consumers
(US) US House Speaker Pelosi: China Pres Xi is in fragile place and acting like a scared bully; Still support the One China policy
Redfin report: July share of US homes listed for 30 days or longer without going under contract +12.5% y/y (1st Y/Y increase in housing supply since the beginning of the pandemic)
*(US) Q2 PRELIMINARY NONFARM PRODUCTIVITY: -4.6% V -4.7%E V -7.3% PRIOR (**largest ever decline on annual basis); UNIT LABOR COSTS: 10.8% v 9.5%E
U AppLovin submits non-binding proposal to acquire Unity at $58.85/shr in all-stock $20B deal
(UK) UK govt reportedly plans for possible power cuts to industry and homes in Jan under worst-case scenario - press
992.HK Reports Q1 Net $516M v $466M y/y, Rev $17.0B v $16.9B y/y
(JP) Japan July PPI (CGPI) M/M: 0.4% v 0.4%e; Y/Y: 8.6% v 8.4%e
(TW) China reiterates not ruling out the use of force for Taiwan and the use of One country-Two systems for Taiwan; Withdraws promise not to send troops to Taiwan after unification - China State TV
WEDS 8/10
TSM Reports July (NT$) Rev 186.8B +49.9% y/y, +6.2% m/m
AD.NL Reports Q2 €0.59 v €0.54e, Rev €21.5B v €20.8Be; Raises Net profits and FCF outlook; Notes positive momentum going into H2 2022
7267.JP Reports Q1 Net ¥149.2B v ¥222.5B y/y, Op ¥222.2B v ¥243.2B y/y, Rev ¥3.83T v ¥3.58T y/y; To buy back up to ¥100B in shares (1.9% of market cap); Raises outlook for Op profit and Revenues
6502.JP Reports Q1 Net ¥25.9B v ¥18.0B y/y, Op -¥4.81B v +¥14.5B y/y, Rev ¥740.7B v ¥727.9B y/y
2317.TW Reports Q2 (NT$) Net 33.3B v 30.8Be, Op 44.3B v 36.8Be, Rev 1.51T v 1.45Te; Guides FY22 Rev higher y/y
(EU) German Rhine River is said to become effectively impassable at Kaub (key point between Frankfurt and Dusseldorf) on Friday, Aug 12th - press
7203.JP Guides Sept-Nov average volume at 900K units/month (prior guided Aug-Oct at 850K/month); Affirms FY22 global volume at 9.7M units; To suspend production at 3 lines on some days in Sept amid part shortage and COVID restrictions
BABA Softbank stake in Alibaba to fall to 14.6% from 23.7% end-June via early physical settlement; Softbank sees ¥4.6T gain (~$34B) on Alibaba transactions
*(US) JULY CPI M/M: 0.0% V 0.2%E; Y/Y: 8.5% V 8.7%E (annual pace matches lower end of all analysts' estimates)
(US) Freeport LNG reportedly removes its force majeure declaration following the June explosion - press
(US) Atlanta Fed July Sticky-CPI annualized 5.4% v 8.1% m/m, core 5.2% v 7.9% m/m
(US) Association of American Railroads weekly rail traffic report for week ending Aug 6th: 496.5K total units, -2.6% y/y
(US) Atlanta Fed GDPNow: Raises Q3 GDP to 2.5% from 1.4% prior
(US) Fed's Kashkari (dove, non-voter): Happier to see inflation surprise to the downside; Today's CPI data does not change my rate hike path; Idea of rate-cutting early next year is not realistic
DIS Reports Q3 $1.09 v $0.94e, Rev $21.5B v $21.1Be; Surpasses Netflix in number of subscribers
DIS Cuts forecast for 215-245M Disney+ subs by 2024 (prior: 230-260M by 2024) - earnings call comments
(CN) White House has reportedly for now set aside any plans to scrap certain China tariffs or to look into adding more; Biden yet to make any final decision - press
*(SG) SINGAPORE Q2 FINAL GDP Q/Q: -0.2% V +0.2%E; Y/Y: 4.4% V 4.8%E
THURS 8/11
SIE.DE Reports Q3 -€1.85 v -€0.63e, Industrial Business EBITA €2.88B v €2.90Be, Rev €17.9B v €17.5Be
IEA Monthly Oil Report (OMR); European heatwaves boosting demand for oil; Declines in Russian oil supply less than previously expected
CAH Reports Q4 $1.05 v $1.17e, Rev $47.1B v $44.6Be; Introduces medical improvement plan targeting $650M in profit by 2025; Guides initial FY23
BLK Reportedly offering to big institutional clients its first-ever investment product directly in Bitcoin, new private Bitcoin trust - press
*(US) JULY PPI FINAL DEMAND M/M: -0.5% V +0.2%E; Y/Y: 9.8% V 10.4%E (1st negative M/M print since June 2020)
(US) Certain Freeport customers reportedly dispute retraction of force majeure declaration and seek its reinstatement - press
SHEL Shuts Mars, Ursa, and Olympus deep water crude oil platforms in US Gulf due to flange leak at Port Fourchon facility booster station - press
AAPL Reportedly manufacturing partners said to assemble 90M new iPhones, on par with 2021 [**Note: earlier Taiwan press reported Apple plans to produce 95M units of new iPhone 14] - press
FRI 8/12
981.HK CEO: Rising geopolitical tension, high inflation and a cyclical downturn in chip demand have triggered some panic in the chip industry; Notes extreme quick freeze reaction in some parts of the supply chain over threat of conflict - FT
300750.CN Said to plan investing up to €7.3B in Hungarian plant; Will build a power battery system production line in Hungary with an annual capacity of 100GWh - press
PTR PetroChina and Sinopec to voluntarily delist from NYSE
(CN) Reportedly brokers in China looking into Germany as a banking base due to tensions with the US - press
*(US) AUG PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 55.1 V 52.5E; 1 year inflation expectations 5.0% v 5.1%e; 5-10 year inflation expectations 3.0% v 2.8%e
(CN) Preparations said to be under way for President Xi to travel to Southeast Asia to meet with President Biden in November - press
(US) USDA WASDE Crop Report: End 2022/2023 US Stocks (M bu): Soybeans: 245 v 227e; Wheat: 610 v 651e

Sunday, July 24, 2022

Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist Weekly Market Update: Market reversals bolster risk appetite; Monetary policy continues to tighten as inflation and recession risks persist

7/22/2022 4:09:44 PM

US stock markets ended the week solidly in positive territory, indicating investors’ willingness to seek bargains, perhaps feeling that the extremely bearish environment could ultimately be a contrarian buy signal. Though few seem willing to call a bottom to a selloff that has dragged the S&P 500 down 16% this year, the index did see its best weekly performance in nearly a month. Persistently high inflation, the possibility of a recession, and the war in Ukraine remained at the forefront of most investors' minds. Global interest rates moved lower despite a larger than expected rate hike from the ECB which certainly provided some cover for those looking to wade into stocks. Earnings season widened out providing a look into a number of industries outside of the banks. Some reports ushered in relief rallies by providing investors with increased confidence to scoop up beaten-down technology stocks, while other sectors like homebuilders, enterprise storage and telecoms reinforced an environment of clearly rising costs and slowing growth.

Softening economic data assumed the role of the North Star for markets this week, as global interest rates came in significantly despite central banks continued willingness to tighten. US housing data, weekly unemployment claims, and manufacturing surveys all showed decided deterioration before Friday’s European manufacturing PMIs fell into contraction territory, fanning recession fears only a day after the ECB surprised markets with a 50 bps hike and formally introduced its Transition Protection Instrument (TPI). On Friday global treasury yields dropped to the lowest levels in more than a month amid an ongoing slide in market based inflation expectation measures. The US 10-year yield tested 2.75% while the German Bund neared 1% amid resurgent talk about recession, particularly for Europe. Entering the week, futures markets were pricing in a greater likelihood the Fed would raise rates by 100 bps next week, but by Friday market expectations coalesced around a 75 bps hike and further out projected the Fed might begin cutting rates in 2023. On top of all this, the White House announced that President Biden had been infected with Covid, and though he showed only mild symptoms after treatment, it reinvigorated concerns about the health of the nearly 80-year old President. For the week, the S&P gained 2.6%, the DJIA was up 2%, and the Nasdaq added 3.3%.

The cadence of earnings reports picked up this week, starting with more mixed results from the banking sector. Goldman Sachs beat expectations, largely based on strong year on year improvement in FICC, while Bank of America lagged estimates, even though its “consumer clients remained resilient” and credit card delinquencies are near multi-year lows. Shares of AT&T and Verizon tumbled as the telecoms acknowledge cost pressures and cut guidance. Social media platforms Twitter and Snap missed analyst expectations and Snap said it would slow hiring, echoing a trend seen at a number of other firms in the communications services sector. Snap blamed fierce competition for an ad market pie that is growing slower, while Twitter said it is entirely focused on forcing Elon Musk to close the merger deal. Meanwhile Tesla shares zoomed higher after the automaker posted strong production numbers despite China shutdowns and supply issues and said the company could achieve record production in the second half of 2022. Tesla did cause a stir in the cryptocurrency community after noting it had converted 75% of its Bitcoin holdings into fiat currency during the quarter.

SAT 7/16
(HK) Macau govt extends shutdown of non-essential business from July 18th to July 22nd due to Covid outbreak
(SA) Saudi Foreign Min Farhan: We listen to our partners and friends from all over the world especially consumer countries; But at the end of the day, OPEC+ follows the market situation and will supply energy as needed

SUN 7/17
(US) White House Energy advisor Hochstein: Expects gas prices to come down further towards $4/gallon; Confident there will be a few more steps in coming weeks from OPEC in terms of oil supplies
(US) WSJ piece suggests Fed officials signaled they are likely to raise interest rates by 75bps at July 26-27th meeting; Left the door open to a larger 100bps hike at upcoming meeting, but leaning against it
(IR) Iran Senior Adviser to Supreme Leader: Iran is technically capable of producing nuclear bomb – press
BA Cuts 20-year industry-wide outlook for jets deliveries to 41,170 units (prior 43,610)

MON 7/18
(CH) SNB said to be planning to raise rates by 50bps at its Sept meeting with 75bps hike also possible on hot inflation data - financial press
(RU) Canada said to have sent Nord Stream 1 turbine to Germany; Expected to arrive only on July 24th with 3-4 additional days required for commissioning; Gas compressor unit should be ready to pump gas in early August - Russian press
(RU) According to informal discussions with Kremlin insiders, in the end of May Russian officials became confident that they would win the war with Ukraine in the long term; Putin said to now have a clear plan which would end up with building a new world order - NYT
(CN) China said to consider mortgage grace period for unfinished home projects - press
GAZP.RU Exec: Gazprom has not booked gas transit capacity for August for exports via Yamal-Europe pipeline; Does not book extra Ukraine gas transit space
(US) Reportedly several US semiconductor firms are deliberating whether to oppose CHIPS act package if the final language of subsidies legislation disproportionately benefits manufacturers like Intel - financial press
BAC Reports Q2 $0.73 v $0.77e, Rev $22.7B v $23.0Be
GS Reports Q2 $7.73 v $6.99e, Rev $11.9B v $11.0Be
PLD Reports FFO Q2 $1.11 v $1.12e, Rev $1.25B v $1.10Be
GAZP.RU *Gazprom's Export arm said to have sent notice to at least one European customer declaring force majeure on gas deliveries linked to Nord Stream 1 - press
BAC CEO: Guides Q3 NII to rise $900M-$1B q/q and increasing further in Q4; Organic growth engine is back, seen in Q2 - conf call comments
SCHW Reports Q2 $0.97 v $0.91e, Rev $5.09B v $5.04Be
*(US) JULY NAHB HOUSING MARKET INDEX: 55 V 65E (lowest since May 2020)
AAPL Reportedly plans to decelerate hiring and spending for certain teams in 2023; Will not backfill positions or add new staff in some divisions - press
BHP.AU Reports Q4 Waio Iron Ore Production: 71.7Mt v 72.8Mt y/y, Attributable Iron Ore Production: 64.2Mt v 65.2Mt y/y
(US) Reportedly Pres Biden is considering calling a national climate emergency as soon as this week - WaPo
(TW) US House Speaker Pelosi said to plan a visit to Taiwan during Aug - FT

TUES 7/19
NOVN.CH Reports Q2 Core EPS $1.56 v $1.51e, Rev $12.8B v $13.0Be
ALO.FR Reports Q1 Rev €4.00B v €3.70B y/y
EDF.FR French Govt offers to pay €12/shr and €15.64/oceane-bond in EDF re-nationalization plan for total €9.7B
7203.JP Expects Aug global production at 700K units; Guides Aug-Oct average volume at 850K units/month (prior guided July-Sept at 850K/month); Affirms FY22 global volume at 9.7M units
(IR) National Iranian Oil Company (NIOC) and Gazprom sign strategic cooperation MoU covering projects valued at $40B in total - press
*(EU) EURO ZONE JUN FINAL CPI Y/Y: 8.6% V 8.6%E; CPI CORE Y/Y: 3.7% V 3.7%E
(EU) EU Commission Official Hahn: Do not expect gas supplies to Europe from Russia through the Nord Stream 1 pipeline to restart when scheduled maintenance ends this week
DIDIY China regulator said to fine Didi over $1B for data security breaches - US financial press
FER.ES Reportedly Heathrow refuellers to go on strike later in the week after refusing latest pay offer
JNJ Reports Q2 $2.59 v $2.57e, Rev $24.0B v $23.9Be; Strengthening US dollar impacting estimate for reported results*
LMT Reports Q2 $6.32 v $6.39e, Rev $15.4B v $16.1Be; Cuts FY22 Rev outlook; Provides F-35 update
(EU) Nord Stream 1 reportedly has restarted gas flows on time after annual maintenance but at a lower level of throughput - press
(US) Atlanta Fed GDPNow: cuts Q2 GDP forecast from -1.5% to -1.6%
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -5.0% v -4.1% prior
TWTR Delaware court judge rules against Musk, allows Twitter to expedite lawsuit
NVAX US CDC Advisory Panel voted unanimously to recommend NVX-CoV2373, COVID-19 vaccine, Adjuvanted in individuals 18 years of age and older
(EU) EU considering a 15% voluntary reduction in natural gas usage for Aug-Mar due to Russia supply issues - press
(RU) Russia Pres Putin: Gazprom planning to fulfill its obligations, Another gas turbine will have to go for maintenance on July 26th; Attempts to cap Russian oil prices will lead to prices skyrocketing
(AU) Reserve Bank of Australia (RBA) Gov Lowe: Board had extended discussion on neutral real interest rate; Neutral Nominal rate is 'at least' 2.5%, higher than this if mid term inflation expectations shift higher
NVAX (US) CDC Director Rochelle Walensky endorses ACIP recommendation of use of NVX-CoV2373, COVID-19 vaccine, in individuals 18 years of age and older
(CN) China mortgage boycotts spread to 301 projects in 91 cities - press

WED 7/20
ASML.NL Reports Q2 Net €3.54 v €3.51e, Rev €5.43B v €5.27Be; Cuts FY22 Rev outlook; Notes still sees strong demand for its systems; Moves to quarterly dividend policy
*(UK) JUN CPI M/M: 0.8% V 0.7%E; Y/Y: 9.4% V 9.3%E (11th month above target and highest annual pace since Nov 1981)
(HK) Macau to reopen casinos on Saturday if virus conditions favorable; to resume business activities, including casinos, to certain level on July 23-29th; To continue shutting cinemas, bars and dining-in services - press
(CN) China Premier Li: China will not introduce super-large stimulus policies or print excessive money at the expense of sustainable development in the future for exorbitant growth targets
(IT) Italy PM Draghi: A PM who did not stand for election needs as big a parliamentary majority as possible; Governing coalition can be rebuilt - Senate address
(TW) Taiwan Jun Export Orders Y/Y: 9.5% v 6.4%e
CON.DE Reports prelim Q2 Rev €9.4B v €9.2Be
(CN) China June smartphone shipments at 27.5M +9.1% y/y v -9.1% prior - CAICT
(EU) Daily 3-month Euribor Fixing: 0.125% v 0.042% prior (highest level since 2015)
(CN) Shanghai reportedly asks citizens to take COVID test at least once a week until Aug 31st - press
GAZP.RU Exec: Daily gas exports to China are now above contracted volumes; Not received documents from Siemens on Nord Stream 1 turbine
ELV Reports Q2 $8.04 v $7.73e, Rev $38.5B v $38.1Be; Raises FY22 EPS outlook
(RU) Russia Foreign Min Lavrov: If West delivers long-range weapons to Kyiv, geographical objectives of special military operation in Ukraine will be advanced even further to Kherson, Zaporizhia and a number of other territories
BIIB Reports Q2 $5.25 v $4.10e, Rev $2.59B v $2.47Be; Raises outlook
ABT Reports Q2 $1.43 adj v $1.07e, Rev $11.3B v $10.4Be; Raises FY22 EPS and Rev outlook
*(CA) CANADA JUN CPI M/M: 0.7% V 0.9%E; Y/Y: 8.1% V 8.4%E (highest annual pace since Jan 1983)
AAPL EU antitrust regulators said to reinforce App Store investigation with new evidence but will not bring new charges - press
(US) Association of American Railroads weekly rail traffic report for week ending July 16th: 499K total units, -2.8% y/y
(US) Pres Biden: 'That’s why I and so damn many other people I grew up with have cancer' - speech on the environment
CSX Reports Q2 $0.54 v $0.47e, Rev $3.82B v $3.64Be; Automotive Rev +24% y/y
TSLA Reports Q2 $2.27 v $1.82e, Rev $16.9B v $17.1Be; Notes it focused on record-breaking H2 2022; Have converted 75% of Bitcoin holdings into fiat currency
LVS Reports Q2 -$0.34 v -$0.23e, Rev $1.05B v $955Me
AA Reports Q2 $2.67 v $2.60e, Rev $3.64B v $3.49Be; Boosts share buyback program
STLD Reports Q2 $6.73 adj v $3.35 y/y, Rev $6.21B v $4.47B y/y; Customer order entry activity continues to be healthy across All of our businesses; Invests $500M for 2 addl plant lines

THRS 7/21
(RU) Nord Stream 1 pipeline showing gas flows from Russia into Germany of 29,284,591 kwh/h for 0600-0700 CET v 0 prior; flow to resume gradually
005380.KR Reports Q2 (KRW) Net 3.09T v 1.98T y/y; Op 2.98T v 1.89T y/y; Rev 36.0T v 30.3T y/y; Expects supply issues to ease
ABBN.CH Reports Q2 Net $406M v $709M y/y, Rev $7.3B v $7.4B y/y; Confirms to exit Russia market (1-2% of annual Rev) with winding down charge of $57M
NOKIA.FI Reports Q2 €0.10 v €0.10e, Op €714M v €682M, Rev €5.87B v €6.03Be
SAP.DE Reports Q2 €0.28 v €1.14e, Rev €7.52B v €7.61Be; Cuts FY22 Op profit outlook; To buyback up to €500M in shares (0.5% of market cap)
ROG.CH Reports Q2 (CHF) Core EPS 11.76 v 11.05e, Core Op 12.7B v 11.7B y/y, Rev 32.3B v 31B y/y
DIDIY China regulators confirm to fine Didi CNY8.03B (~$1.2B) after concluding probe
(IT) Italian Presidential Office: Confirm PM Draghi again tendered resignation
(HK) Macau to provide limited public services on July 23-29th - press
(UR) Russia said to plan annexation votes in Ukraine regions by Sept 15th - press
(EU) Daily 3-month Euribor Fixing: 0.145% v 0.125% prior (highest since Sept 2014)
(LY) Libya official: Oil production back above 700K bpd; To recover to 1.2M bpd in 7-10 days
DOW Reports Q2 $2.31 v $2.14e, Rev $15.7B v $15.7Be
T Reports Q2 $0.65 adj v $0.59e, Rev $29.6B v $29.3Be; Cuts FY FCF and capex outlook
T CEO: See higher bad debt, slower bill paying in this cycle; Overdue bills started to be a trend six weeks ago - earnings call comments
DHI Reports Q3 $4.67 v $4.51e, Rev $8.79B v $8.98Be; Cuts FY22 guidance amid signs of moderating demand
F Releases new battery capacity plan, On track to ramp to 600K run rate by 2023 and 2M+ by 2026; To invest over $50B in EVs through 2026; Expects compound annual growth rate for EVs to top 90% through 2026
UNP Reports Q2 $2.93 v $2.83e, Rev $6.27B v $6.13Be
(EU) EU formally publishes details on 7th (“maintenance and alignment”) sanctions package against Russia; Confirms to introduce a new prohibition to purchase, import, or transfer, directly or indirectly, gold, if it originates in Russia and it has been exported from Russia
*(US) INITIAL JOBLESS CLAIMS: 251K V 240KE (highest in eight months); CONTINUING CLAIMS: 1.384M V 1.34ME
*(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: -12.3 V +0.8E (lowest reading since May 2020 and second straight negative print); New Orders: -24.8 v -12.4 prior
ONEM Amazon agrees to acquire One Medical at $18/shr in all-cash deal for $3.9B
(EU) ECB chief Lagarde: Taken steps to make sure inflation moves to 2% target in medium term with larger 50bps hike - Prepared remarks
(EU) ECB publishes full details on its Transmission Protection Instrument (TPI); Focus on public sector securities with remaining maturity of 1-10 years, could also consider private sector securities
*(US) JUN LEADING INDEX: -0.8% V -0.6%E (4th consecutive decline); Conference Board now sees recession 'likely' around year end
(DK) Denmark Central Bank (Nationalbanken) raises Certificate of Deposit Rate by 50bps from -0.60% to -0.10%, following ECB rate move
(US) California official: Port of Oakland's largest marine terminal has been 'essentially shut down' for second day amid trucker blockade; Three other terminals have some operations underway – press
FDX Ground Unit to scale back Sunday Delivery Services to 80% of the US population (prior ~95%) from Aug 15th - US financial press
(UK) July GfK Consumer Confidence: -41 v -42e (remains record low)

FRI 7/22
(TR) Turkey announces a deal has been reached to free Ukrainian grain exports blockaded by Russia in the Black Sea; Expected to be signed off today
(UK) JUN RETAIL SALES (EX-AUTO/FUEL) M/M: +0.4% V -0.4%E; Y/Y: -5.9% V -6.2%E
(FR) FRANCE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 20 months)
(DE) GERMANY JULY PRELIMINARY MANUFACTURING PMI: 49.2 V 50.7E (1st contraction in 25 months)
(EU) EURO ZONE JULY PRELIMINARY MANUFACTURING PMI: 49.6 V 51.0E (1st contraction in 25 months)
Honda said to cut Aug production by up to 30% in Japan citing persistent supply chain and logistical issues – press
(UK) JULY PRELIMINARY MANUFACTURING PMI: 52.2 V 52.0E (26th month of expansion but lowest since June 2020)
(EU) Daily 3-month Euribor Fixing: 0.200% v 0.145% prior (highest since 2014)
(EU) ECB's Kazimir (Slovakia, hawk): Sept rate hike may be 25bps or 50bps; ECB move is beginning of a series of 'similar' steps
(EU) EU starts 4 new separate infringement procedures against UK on Northern Ireland Protocol – press
(CN) China cabinet: China to ensure construction of property projects; Necessary housing demand should be insured
SLB Reports Q2 $0.50 v $0.40e, Rev $6.77B v $6.28Be; Raises FY22 Rev outlook
AXP Reports Q2 $2.57 v $2.37e, Rev $13.4B v $12.4Be; Raises FY22 Rev, Affirms EPS
VZ Reports Q2 $1.31 v $1.34e, Rev $33.8B v $33.7Be; Cuts FY22 outlook
TWTR Reports Q2 -$0.08 v +$0.15e, Rev $1.18B v $1.32Be; Will not provide financial guidance or host call today citing pending acquisition by an affiliate of Elon Musk
(UR) Ukraine, Turkey and the UN confirm to have signed an agreement on the export of grain
(US) White House Spokesperson Kirby: Defense department making prelim explorations into feasibility of potentially providing fighter jets to Ukraine; Providing jets to Ukraine is not something that will be executed in the near-term

Saturday, July 9, 2022

Markets show resilience but remain volatile as political turmoil compounds the familiar stagflation concerns Weekly Market Update: Markets show resilience but remain volatile as political turmoil compounds the familiar stagflation concerns

7/8/2022 4:27:35 PM

Markets saw continued volatility as they absorbed a mixed basket of data and some shocking political news this week. The government of British Prime Minister Boris Johnson collapsed as his fellow Tories resigned in droves, unable to tolerate his mounting list of scandals any longer. The GBP/USD plumbed its lowest levels since the early days of the pandemic as Johnson at first resisted resigning, but then rebounded after he agreed to step down after the party selects his replacement in October. The other political shock of the week was the assassination of former Japanese PM Abe at an outdoor campaign rally on Friday, which prompted President Biden to say he did not think the killing will lead to political instability in Japan.

China continued to battle Covid outbreaks, most recently in Macau, but still managed to post the first expansion in the Caixin PMI Services index in four months. Shanghai port data showed throughputs are still down by high single digits versus year ago in June, even as the White House continues to deliberate whether to withdraw some Trump-era tariffs on China trade. Beijing is concerned enough that it is said to be considering a large new stimulus package via a bond offering.

The US jobs market showed no signs of cooling off, as Friday’s employment report printed a better than expected payroll number and the jobless rate remained at a very healthy 3.6% for the fourth month in a row. The June labor force participation rate slipped one tenth to 62.2%, even as the May JOLTS data earlier in the week indicated higher than expected job openings still hovering near record levels. Some welcome inflation relief came from the energy market which saw crude oil prices tumble early in the week, as WTI and Brent crude futures fell below $100/bbl amid some weak growth data, particularly out of Europe. Still a Goldman analyst suggested energy and metals commodities could rebound through the rest of the year and a JP Morgan analyst theorized oil could surge as high as $380/bbl if Russia should dramatically cut production in response to the latest sanction efforts targeting Russian oil. In the Treasury market, some key yield curve pairs inverted, including the 2-/10-year spread, which may have added to recession concerns. Stocks remained constructive for most of the week and the S&P gained 1.9%, the DJIA edged up 0.8%, and the Nasdaq was up 4.6% as largecap tech attracted some bargain hunters.

In corporate news this week, Samsung notched a larger-than-expected jump in revenue for Q2, lifting semiconductor names. Levi’s assured investors by posting a beat on earnings and affirming its FY outlook. Amazon signed a partnership with GrubHub to give its Prime members $0 food delivery fees for a year, and as part of the agreement Amazon has the option to take a 2% stake in the food delivery company. Elon Musk’s plan to buy Twitter reportedly is in “serious jeopardy” amid the dispute over bots on the platform, though Twitter management said it still intends to close the deal at agreed upon terms. GameStop shares were boosted by a stock split announcement, but then dropped a day later after announcing layoffs across the company and a CFO exit.

SUN 7/3
(RU) JP Morgan predicts oil could reach up to $380/bbl if Russia imposes maximum crude oil production cut of 5Mbbs/day

MON 7/4
*(CH) SWISS JUN CPI M/M: 0.5% V 0.3%E; Y/Y: 3.4% V 3.1%E (5th month above target and fastest annual pace in 29 years)
(CN) President Biden could announce decision to cut some Chinese tariffs during week of July 4th
(HK) Macau authorities to test its 600K residents three times this week for Covid, as city is facing its worst outbreak to date
*(CN) CHINA JUN CAIXIN PMI SERVICES: 54.5 V 49.6E [first expansion in 4 months]

TUES 7/5
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -4.1% v -1.3% prior
ASML.NL US govt said to push co to stop selling key chipmaking gear to China - press
(UK) Chancellor of the Exchequer (Fin Min) Sunak tenders his resignation; Notes the public rightly expect government to be conducted 'properly, competently and seriously'
(UK) Nadhim Zahawi named new Chancellor of the Exchequer (Fin Min) following resignation of Sunak
(CN) China prelim June Vehicle Sales Y/Y: +20.9% y/y v -17.1% prior; H1 Vehicle Sales at 12.0M -7.1% y/y - CAAM

WED 7/6
OPEC Sec Gen Barkindo has passed away
TKWY.NL Amazon signs partnership with Just Eat's Grubhub; Amazon has option to take 2% stake in Grubhub, could grow to 15%
UMC Reports Jun (NT$) Rev 24.8B, +43.2% y/y; H1 Rev 135.5B, +38.2% y/y
(CN) Beijing official: To require vaccination for entering public venues from July 11th; Will resume direct international commercial flights in an orderly way
EDF.FR (FR) France Prime Minister Borne: State wants to own 100% of EDF
1810.HK Xiaomi notes it has produced first batch of smartphones in Vietnam; Did not provide details on the production capacity of the new plant
(US) June preliminary Class 8 truck orders 15K, +13% m/m, -36% y/y -
(US) Association of American Railroads weekly rail traffic report for week ending July 2nd: 500.3K total units, -2.5% y/y
005930.KR Reports prelim Q2 (KRW) Op 14.0T [highest Q2 profit since 2018] v 14.5Te (v 12.6T y/y); Rev 77.0T v 76.9Te (v 63.7T y/y)

(CN) Shanghai Port: Processed 3.8M containers during June; June Throughputs -7.4% y/y
066570.KR Reports prelim Q2 (KRW) Op 791.7B v 1.11T y/y; Rev 19.5T v 17.1T y/y
SHEL.UK Q2 update: Q2 Production expected 930-980Kbbl of oil equivalent per day; Sees extra $200M write-off; $8.5B share buyback completed for H1
*(UK) PM JOHNSON SAID TO BE PLANNING TO RESIGN; Official statement expected within hours; Johnson plans to stay on as caretaker PM until new party leader is appointed in Oct 2022
(CN) China said to be considering $220B stimulus via bond sales - press
(RU) Russia Defense Ministry spokesperson: Russian units that carried out combat missions in Ukraine got rest and are taking measures to replenish their combat capabilities
(RU) Russia govt spokesperson Peskov: Pres Putin will decide on the format of participation in the G20 summit in Nov 2022 closer to the date of this event
FUN Reports YTD through July 4th Rev $704M +20% v 2019 levels; Notes early-season trends indicate that consumer demand remains healthy
BKE Reports Jun SSS -1.7% y/y
*(EU) ECB PUBLISHES ACCOUNT OF JUNE POLICY MEETING (MINUTES): Revised medium term inflationary outlook required further steps to be taken in normalizing monetary policy
*(UK) PM JOHNSON CONFIRMS TO RESIGN FROM POSITION; To stay on as caretaker until a new leader is in place
(UK) PM Johnson: Process of choosing a new leader should begin now; Confirms to serve as caretaker PM until new leader in place - resignation speech
(US) Bank of America estimates June US credit and debit card spending +11% y/y; Comments on strength of the underlying consumer momentum
*(US) INITIAL JOBLESS CLAIMS: 235K V 230KE (highest in 6 months); CONTINUING CLAIMS: 1.38M V 1.33ME
(US) Freddie Mac: US mortgage rates drop to 5.3% from 5.7% w/w (largest drop since 2008)
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -2.1% to -1.9%
(US) Fed’s Bullard (voter, hawk): Would make sense to go by 75bps in July; It won't surprise me if we have a cool-off in the housing market; Possible rate cuts could follow once inflation moderates
COST Reports June total SSS +13% (ex-gas and FX)
TWTR Elon Musk’s plan to buy Twitter reportedly is in serious jeopardy; Musk team has 'stopped engaging in certain discussions around funding' for the deal - Wash Post
(JP) Japan May BoP Current Account: ¥128.4B v ¥172.0Be; Adjust Current Account: ¥8.2B v ¥154.9Be
(JP) Former Japan PM Abe shot while giving campaign speech in Nara - Japanese media

FRI 7/8
2330.TW Reports June (NT$) Rev 175.9B +18% y/y, -5.3% m/m; H1 Rev 1.03T +39.6% y/y
EUR/USD Declines over 0.5% below 1.01 as parity approaches
(CN) China prelim June Retail Passenger Vehicle Sales at 1.97M units +22% y/y - PCA
(JP) Former Japan PM Abe pronounced dead following shooting - press
(EU) Daily 3-month Euribor Fixing: -0.087% v -0.141% prior (highest since end-2015)
(HK) Macau authorities said to add more rounds of citywide nucleic acid testing - press
(RU) German govt said to expect Canada to release Nord Stream turbine - press
(CN) Reportedly US actively considering the possibility of banning exports of chipmaking tools to those Chinese factories, including SMIC that make advanced semiconductors at the 14nm node and smaller - press
UN01.DE Applies to German govt for stabilization measures; Proposal provides for additional debt funding through an increase in KfW credit facility and contains equity components for German govt participation in Uniper
*(US) JUN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 5.1% V 5.0%E
*(US) JUN CHANGE IN NONFARM PAYROLLS: +372K V +265KE (matches the top end of all analysts estimates range)
June Manheim Used Vehicle Value Index: -1.3% M/M; +9.7% Y/Y; Saw larger declines over the last two weeks than the prior two weeks
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -1.9% to -1.2%