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Futures Flat Ahead Of Another Scorching PPI Print
Morning Markets
Futures Flat Ahead Of Another Scorching PPI Print
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Thursday, Jan 13, 2022 - 08:00 AM
US futures were little changed on Thursday one day after the highest CPI print since 1982 and just minutes before another red hot PPI print is expected (9.8%, up from 9.6%), as investors tried to gauge the timing and pace of monetary tightening. S&P 500, Dow and Nasdaq 100 futures were up 0.1% as investors waited for the next trading signal. 10Y yields were flat around 1.74%, and the dollar edged lower as a growing tide of investors bet the world’s reserve currency has reached a peak with rate hikes largely priced-in to the market with Fed tightening likely to lead to an economic slowdown.
“Markets in 2022 have been volatile as the reality of inflation set in, and this reaction mainly reflects relief that the print did not exceed already lofty expectations,” Geir Lode, head of global equities at the international business of Federated Hermes, said in an email.
Inflation hitting 7% could force a quicker move by the Federal Reserve, with the market now pricing four rate hikes this year starting no later than March, according to technical analyst Pierre Veyret at ActivTrades in London. “Investors still struggle with one crucial question: how will the Fed manage to tackle rising price pressure without derailing the fragile post-pandemic economic recovery?”
In premarket trading, shares in Delta Air Lines rose more than 2% even though the carrier missed revenue and EPS expectations, after the company said the omicron variant won’t derail its expectation to remain profitable for the rest of the year, as it released fourth-quarter financial results. Here are some of the biggest U.S. movers today:
U.S. chip stocks are mixed in premarket trading after sector bellwether TSMC gave a 1Q sales outlook that beat estimates and raised its projected annual capex versus last year. Equipment stock Applied Materials (AMAT US) +2% premarket, while TSMC customers are mixed with Apple (AAPL US) -0.1%, Nvidia (NVDA US) +0.7% and AMD (AMD US) +0.6%.
Puma Biotechnology (PBYI US) shares surge 13% in U.S. premarket trading, after the company said that its Nerlynx treatment was included in the National Comprehensive Cancer Network’s (NCCN) clinical practice guidelines in oncology for the treatment of breast cancer.
KB Home (KBH US) shares rise 6.2% in premarket trading after the homebuilder’s 4Q EPS beat estimates, with Wells Fargo calling the results and guidance “solid.”
Planet Labs (PL US) shares rise 1.6% in U.S. premarket trading, after the satellite data provider said that it plans to launch 44 SuperDove satellites on Thursday on SpaceX’s Falcon 9 rocket.
Adagio Therapeutics (ADGI US) said ADG20 has neutralization activity against omicron and cites recent findings from three publications on ADG20. Shares jumped 30% in post-market trading.
Discussing yesterday's scorching CPI print, DB's Jim Reid writes that "if you did an MRI scan of US inflation yesterday you’d find things to support both sides of the debate which is surprising when it hit 7% YoY and the highest since 1982 when Fed Funds were more than 13% rather than close to zero as they are today. So a slightly different real rate to back then. In fact the real rate is through any level seen in the 1970s and is only comparable to WWII levels. Back to CPI and the YoY number was in line with expectations, but core and MoM figures were all a bit firmer than expected. However, the beats were small enough that the data didn’t significantly change the outlook for monetary policy, with Fed funds futures still pricing in an 89% chance of a March hike, which is roughly around where it’d been over the preceding days."
In Europe, the Stoxx Europe 600 Index paused after a two-day advance, erasing early declines of as much as 0.3% to trade little changed, with technology and automotive shares offsetting losses in consumer products and health care. CAC 40 underperforms, dropping as much as 0.6%. The Stoxx Europe 600 Technology sub-index is up 1.1%, getting a boost from chip stocks which gained after sector bellwether TSMC gave a 1Q sales outlook that beat estimates and raised its projected annual capex versus last year. Geberit dropped as much as 4.5% to a seven-month low after the Swiss producer of sanitary installations reported fourth-quarter sales.
Bloomberg Dollar Spot dips into the red pushing most majors to best levels of the session. NZD, AUD and GBP are the best G-10 performers. Crude futures maintain a relatively narrow range. WTI is flat near $82.70, Brent stalls near $84.84. Spot gold dips before finding support near $1,820/oz. Most base metals are in the red with LME zinc lagging peers.
Asian stocks were little changed after capping their biggest rally in a year, with health-care and software-technology names retreating while financials advanced. The MSCI Asia Pacific Index fluctuated between a drop of 0.3% and a gain of 0.2% on Thursday. Hong Kong’s Hang Seng Tech Index lost 1.8% after rising the most in three months in the previous session. Benchmarks in China and Japan were the day’s worst performers, while the Philippines and Australia outperformed. “The market rose a bit too much yesterday,” said Mamoru Shimode, chief strategist at Resona Asset Management in Tokyo. “Investors keep shifting back and forth from value stocks to growth names and vise versa. It’s because we don’t know yet where U.S. long-term yields will end up settling around.” The Asian stock measure jumped 1.9% Wednesday on views that the Federal Reserve’s anticipated rate hikes will help curb inflation and allow the global recovery to chug along. U.S. inflation readings overnight, at an almost four-decade high, were in line with expectations and helped investors keep previous bets
Japanese stocks fell after Tokyo raised its Covid-19 alert to the second-highest level on a four-tier system. The Topix dropped 0.7% to 2,005.58 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 1% to 28,489.13. Recruit Holdings Co. contributed the most to the Topix’s decline, decreasing 4%. Out of 2,181 shares in the index, 500 rose and 1,604 fell, while 77 were unchanged. HIS, Japan Airlines and other travel shares fell. Tokyo’s daily cases jumped more than fivefold on Wednesday to 2,198 compared with 390 a week earlier.
India’s benchmark equity index eeked out gains to complete its longest string of advances since mid-October, buoyed by the nation’s top two IT firms after their earnings reports. The S&P BSE Sensex rose for a fifth day, adding 0.1% to close at 61,235.30 in Mumbai, while the NSE Nifty 50 Index climbed 0.3%. Infosys and Tata Consultancy Services were among the biggest boosts to both measures. Of the 30 shares in the Sensex index, 19 rose and 11 fell. Thirteen of the 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of metal companies. Infosys’ quarterly earnings beat and bellwether Tata Consultancy Services’s better-than-expected sales offer some hope that the rally in India’s technology sector has further room to run, according to analysts. Still, Wipro sank the most in a year after its profit missed estimates
Fixed income is relatively quiet, with changes across major curves limited to less than a basis point so far. The 10-year yield stalled around 1.75%, slightly cheaper on the day, and broadly in line with bunds and gilts. Eurodollar futures bear steepen a touch after a round of hawkish Fedspeak during Asian hours. Treasuries were steady with yields broadly within a basis point of Wednesday’s close. Eurodollars are slightly lower across green- and blue-pack contracts after Fed’s Daly and Harker sounded hawkish tones during Asia hours. Across front-end, eurodollar strip steepens out to blue-pack contracts (Mar25-Dec25), which are lower by up to 4bp. 30-year bond reopening at 1pm ET concludes this week’s coupon auction cycle.$22b 30-year reopening at 1pm ET follows 0.3bp tail in Wednesday’s 10-year auction, and large tails in last two 30-year sales. The WI 30-year yield at ~2.095% is above auction stops since June and ~20bp cheaper than last month’s, which tailed the WI by 3.2bp.
In FX, the pound advanced to its highest level since Oct. 29 amid calls for U.K. Prime Minister Boris Johnson to resign over a “bring your own bottle” party at the height of a lockdown meant to stem the first wave of coronavirus infections in 2020. The Bloomberg Dollar Spot Index held a two-month low as the greenback weakened against all of its Group-of-10 peers, and the euro rallied a third day as it approached the $1.15 handle. Implied volatility in the major currencies over the two- week tenor, that now captures the next Fed meeting, comes in line with the roll yet investors are choosing sides. The Australian dollar extended its overnight gain as the greenback declined following as-expected U.S. inflation. Iron ore supply concern also supported the currency. The yen hovered near a two-week high as long dollar positions were unwound. Japanese government bonds traded in narrow ranges.
In commodities, cude futures maintain a relatively narrow range. WTI is flat near $82.70, Brent stalls near $84.50. Spot gold dips before finding support near $1,820/oz. Most base metals are in the red with LME zinc lagging peers. Bitcoin traded around $44,000 as the inflation numbers rekindled the debate about whether the cryptocurrency is a hedge against rising consumer prices.
Expected data on Thursday include producer prices, an early indicator of inflationary trends, and unemployment claims.
Market Snapshot
S&P 500 futures little changed at 4,715.50
STOXX Europe 600 down 0.1% to 485.67
MXAP little changed at 196.79
MXAPJ up 0.1% to 643.93
Nikkei down 1.0% to 28,489.13
Topix down 0.7% to 2,005.58
Hang Seng Index up 0.1% to 24,429.77
Shanghai Composite down 1.2% to 3,555.26
Sensex up 0.1% to 61,220.38
Australia S&P/ASX 200 up 0.5% to 7,474.36
Kospi down 0.3% to 2,962.09
German 10Y yield little changed at -0.04%
Euro up 0.2% to $1.1465
Brent Futures down 0.1% to $84.58/bbl
Gold spot down 0.3% to $1,820.68
U.S. Dollar Index little changed at 94.83
Top Overnight News from Bloomberg
Federal Reserve Bank of San Francisco President Mary Daly and her Philadelphia Fed peer Patrick Harker joined the ranks of officials publicly discussing an interest-rate increase as early as March as the central bank seeks to combat the hottest inflation in a generation
Global central banks will diverge on the way they respond to inflation this year, creating risks to economies everywhere, Bank of England policy maker Catherine Mann said
Norway’s race to appoint a new central bank governor is reaching a finale mired in controversy at the prospect of a political ally and friend of Prime Minister Jonas Gahr Store getting the job
Italy’s government is working on a spending package that won’t require revising its budget to expand the deficit, people familiar with the matter said
Several of China’s largest banks have become more selective about funding real estate projects by local government financing vehicles, concerned that some are taking on too much risk after they replaced private developers as key buyers of land, people familiar with the matter said
A more detailed look at global markets courtesy of Newsquawk
Asia-Pac stocks traded mixed following the choppy session in the US where major indices eked mild gains as markets digested CPI data in which headline annual inflation printed at 7.0%. ASX 200 (+0.5%) was underpinned as the energy and mining related sectors continued to benefit from the recent upside in underlying commodity prices, while Crown Resorts shares outperformed after Blackstone raised its cash proposal for Crown Resorts following due diligence inquiries. Nikkei 225 (-1.0%) declined with the index hampered by unfavourable currency flows and with Tokyo raising its COVID-19 alert to the second-highest level. Hang Seng (+0.1%) and Shanghai Comp. (-1.1%) were initially subdued, but did diverge later, after the slight miss on loans and aggregate financing data, while there is a slew of upcoming key releases from China in the days ahead including trade figures tomorrow, as well as GDP and activity data on Monday. In addition, the biggest movers were headline driven including developer Sunac China which dropped by a double-digit percentage after it priced a 452mln-share sale at a 15% discount to repay loans and cruise operator Genting Hong Kong wiped out around half its value on resumption of trade after it warned of defaults due to insolvency of its German shipbuilding business. Finally, 10yr JGBs traded rangebound and were stuck near the 151.00 level following the indecisive mood in T-notes which was not helped by an uninspiring 10yr auction stateside, while the lack of BoJ purchases in the market also added to the humdrum tone.
Top Asian News
Asia Stocks Steady After Best Rally in a Year; Financials Gain
Country Garden Selloff Shows Chinese Developer Worries Spreading
China Banks Curb Property Loans to Local Government Firms
China’s True Unemployment Pain Masked by Official Data
Bourses in Europe now see a mixed picture with the breadth of the price action also narrow (Euro Stoxx 50 Unch; Stoxx 600 -0.10%). The region initially opened with a modest downside bias following on from a mostly negative APAC handover after Wall Street eked mild gains. US equity futures have since been choppy within a tight range and exhibit a relatively broad-based performance with no real standout performers. Back in Europe, sectors are mixed and lack an overarching theme. Tech remains the outperformer since the morning with some follow-through seen from contract-chip manufacturer TSMC (ADR +4.3% pre-market), who beat on net and revenue whilst upping its 2022 Capex to USD 40bln-44bln from around USD 30bln the prior year, whilst the CEO expects capacity to remain tight throughout 2022. Tech is closely followed by Autos and Parts and Travel & Leisure, whilst the other end of the spectrum sees Healthcare, Oil & Gas, Retail and Personal & Household goods among the straddlers – with Tesco (-1.5%) and Marks & Spencer (-5.3%) weighing on the latter two following trading updates. In terms of other individual movers, BT (+0.5%) trades in the green amid reports DAZN is nearing a deal to buy BT Sport for around USD 800mln, a could be reached as soon as this month but has not been finalized. Turning to analyst commentary: Morgan Stanley’s clients have aligned themselves to the view that European equities will likely perform better than US counterparts. 45% of respondents see Financials as the top-performing sector this year, 14% preferred Tech which would be the lowest score in over six years.
Top European News
Johnson Buys Time With Apology But U.K. Tory Rage Simmers
U.K. Retailers Slide as Updates Show Lingering Impact of Virus
Wood Group Plans Sale of Built Environment Unit Next Quarter
Just Eat Advisers Pitching Grubhub Sale or Take-Private: Sources
In FX, the Dollar has weakened further in wake of Wednesday’s US inflation data as ‘buy rumour sell fact’ dynamics are compounded by more position paring and increasingly bearish technical impulses to outweigh fundamental factors that seem supportive, on paper or in theory. Indeed, the index only mustered enough recovery momentum to reach 95.022 on the back of hawkish Fed commentary and some short covering before retreating through the psychological level, then yesterday’s 94.903 low and another trough from late 2021 at 94.824 (November 11 base) to 94.710, thus far and leaving little bar the 100 DMA, at 94.675 today, in terms of support ahead of 94.500. However, the flagging Greenback could get a fillip via PPI and/or IJC, if not the next round of Fed speakers and final leg of this week’s auction remit in the form of Usd 22 bn long bonds.
NZD/AUD - A change in the running order down under where the Kiwi has overtaken the Aussie irrespective of bullish calls on the Aud/Nzd cross from MS, with Nzd/Usd breaching the 50 DMA around 0.6860 on the way to 0.6884 and Aud/Usd scaling the 100 DMA at 0.7288 then 0.7300 before fading at 0.7314.
GBP/EUR/CHF/CAD/JPY - Also extracting more impetus at the expense of the Buck, but to varying degrees as Sterling continues to shrug aside ongoing Tory party turmoil to attain 1.3700+ status and surpass the 200 DMA that stands at 1.3737, while the Euro has overcome Fib resistance around 1.1440, plus any semi-psychological reticence at 1.1450 to reach 1.1478 and the Franc is now closer to 0.9100 than 0.9150. Elsewhere, crude is still providing the Loonie with an incentive to climb and Usd/Cad has recoiled even further from early 2022 peaks beneath 1.2500 as a result, and the Yen is around 114.50 with scope for a stronger retracement to test the 55 DMA, at 114.22.
SCANDI/EM - Some signs of fatigue as the Nok stalls on the edge of 9.9000 against the Eur in tandem with Brent just a few cents over Usd 85/brl, but the Czk has recorded fresh decade-plus highs vs the single currency following remarks from CNB chief Rusnok on the need to keep tightening and acknowledging that this may culminate in Koruna appreciation. The Cnh and Cny are firmer vs the Usd pre-Chinese trade and GDP data either side of the weekend, but the Rub is lagging again as the Kremlin concludes that there was no progress in talks between Russia and the West, but the Try is underperforming again with headwinds from elevated oil prices and regardless of a marked pick up in Turkish ip.
In commodities, WTI and Brent front-month contracts have conformed to the indecisive mood across the markets, although the benchmarks received a mild uplift as the Dollar receded in early European hours. As it stands, the WTI Feb and Brent Mar contract both reside within USD 0.80/bbl ranges near USD 82.50/bbl and USD 84.50/bbl respectively. News flow for the complex has been quiet and participants are on the lookout for the next catalyst, potentially in the form of US jobless claims/PPI amid multiple speakers, although the rise in APAC COVID cases remains a continuous headwind on demand for now – particularly in China. On the geopolitical front, Russian-backed troops have reportedly begun pulling out of the 1.6mln BPD Kazakh territory, but Moscow’s tensions with the West do not seem to abate. Russia's Kremlin suggested talks with the West were "unsuccessful" – which comes after NATO’s Secretary-General yesterday suggested there is a real risk of a new armed conflict in Europe. Elsewhere, spot gold has drifted off best levels as the DXY found a floor, for now – with the closest support yesterday’s USD 1,813/oz low ahead of the 50 and 21 DMAs at USD 1,807/oz and USD 1,806.50/oz respectively. LME copper has also pulled back from yesterday’s best levels to levels under USD 10,000/t as the mood remains cautious, although, copper prices in Shanghai rose to over a two-month high as it played catch-up to LME yesterday.
US Event Calendar
8:30am: Dec. PPI Final Demand YoY, est. 9.8%, prior 9.6%; MoM, est. 0.4%, prior 0.8%
8:30am: Dec. PPI Ex Food and Energy YoY, est. 8.0%, prior 7.7%; MoM, est. 0.5%, prior 0.7%
8:30am: Jan. Continuing Claims, est. 1.73m, prior 1.75m
8:30am: Jan. Initial Jobless Claims, est. 200,000, prior 207,000
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Today on the MMGYS sister board
The REAL Reason Gold Hasn't Gone Up and Why It Ultimately Will
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=167485384
Inflation is now at 7%, the highest in 40 years, and will stay until 2024 - Steve Hanke
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=167485231
Andy Schectman - Silver Inventory Delayed by Mints, Ordering Months In Advance
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=167485172
I Live in Iraq America, Thanks MAGA
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=167486659
Have a Great day
Stay Safe
Dramatic Cupcake Dog - Revelation
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Morning Markets
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Futures Slightly Green Ahead Of Today's "Brutal" CPI Print
Wednesday, Jan 12, 2022 - 08:00 AM
U.S. index futures were little changed, if slightly in the green on Wednesday as investors settled into a wait-and-see mode ahead of today's "brutal" CPI report which is expected to show the highest CPI print in nearly 40 years, a time when the fed funds rate was 11% compared to 0% now...
... and gauge the pace of Federal Reserve tightening. Consensus expects December CPI to show inflation climbing to 7.0%, a result which could see front- end fully price in a March rate hike (currently priced at 85%). Helping the overnight mood in Asia, was a moderation in China’s inflation pressures, with CPI dipping to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy. At 730am ET, S&P futures were up 0.2% of 7.50, and Nasdaq futures rose 22 points or 0.14%, recovering toward Asia’s best levels; Dow futures were up about 0.1%. The dollar was slightly lower, extending on its recent sharp drop, while Treasury yields were steady.
“All we know is that the Fed has waited too long before taking action,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “If today’s inflation print is higher than expected, recent gains in equities will melt like snow in the sun,” she wrote, even though investors seemed to put aside fears that tighter policy will stifle the economic rebound and market rally after soothing words from Federal Reserve Chair Jerome Powell. His testimony Tuesday helped arrest a five-day slide in the S&P 500, just as we predicted it would.
As Deutsche writes, the highlight of the last 24 hours was Chair Powell’s renomination hearing before the Senate Banking Committee. The overall communicated stance of policy wasn’t much changed with the hawkish pivot still on. Nevertheless, there were a few incremental takeaways. Powell did nothing to push back on liftoff being on the table in March, in line with our US econ team’s call and the increasing probability implied by the market, which is currently 85%. He made it clear that QE (yes it’s still happening) would finish in March, despite speculations it may come to an abrupt halt beforehand. In line with growing consensus, he painted a picture that made the start of QT likely in 2022. Finally, on the overall stance of policy, he emphasized the Fed needs to pull back from extreme levels of accommodation, but didn’t need to rush to get to a neutral stance of policy.
“It was a masterful performance really, leaving the bowls neither too full nor too shallow, but just right from the financial market’s perspective,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific, in an email. “The music can still play in equity markets in 2022, it’s just that we’ve likely seen the best of the technology gains.”
With three and possibly four Fed rate increases now priced in, strategists are turning more sanguine about inflation and focusing on positives such as the start of the earnings season. Markets have been buffeted by volatility at the start of the year on the prospect of faster interest-rate increases to subdue price pressures.
“Hawkish Fed repricing is likely largely done for now,” and “resilient earnings should help equities rebound,” Barclays Plc strategists led by Emmanuel Cau wrote in a note to clients on Wednesday.
Looking at the CPI print, DB's Jim Reid notes that repeated upside surprises in the inflation data have sent the year-on-year numbers up to multi-decade highs, putting significant pressure on the Fed. Indeed if you look at the monthly headline CPI reading, 7 of the last 9 releases have come in above the consensus estimate on Bloomberg. In terms of what to expect this time around, economists think that year-on-year CPI will rise to +7.0%, which will be the highest annual CPI number since 1982. And if that figure is realized, it would also mean that the real Fed Funds rate in December was around -7%, which for reference is lower than at any point in the 1970s, when the lowest the fed funds rate got in real terms was around -5%.
In the premarket, Dish Network Corp. rose more than 7% on a New York Post report of merger talks with DirecTV. PayPal shares dropped 1.9% in premarket trading after Jefferies cut its recommendation for the digital payments provider to hold from buy. Here are some of the biggest U.S. movers today:
U.S.-listed Chinese stocks rally in premarket trading, as Asian listings rebound amid bargain hunting and a reassuring tone from Fed Chair Jerome Powell. Alibaba (BABA US) +2.4%, JD.com (JD US) +1.5%, Pinduoduo (PDD US) +3.3%
Biogen (BIIB US) drops 9.1% in premarket trading after the U.S. government limited Medicare coverage of the company’s Aduhelm Alzheimer’s disease treatment and similar drugs to patients enrolled in clinical trials. The highly unusual move will curb access to the controversial treatment approved last year
Wells Fargo (WFC US) advanced in premarket trading as Piper Sandler upgraded its rating to overweight from neutral; cuts Premier Financial to neutral from overweight
Bed Bath & Beyond (BBBY US) shares jump as much as 4.9% in U.S. premarket trading, boosted by disclosures of insider purchases of the retailer’s stock made on Jan. 7
Rocket Lab USA (RKLB US) started at overweight, with $17 target by Morgan Stanley, which says the company offers high-quality exposure to the space race. Stock gains 4.1% in premarket trading
Cogent Communications (CCOI US) faces a “challenging setup” on weak growth and a high multiple, Wells Fargo writes in note as downgrades to underweight from equal-weight
European equities climbed back toward opening highs after a choppy first hour of cash trading. The Euro Stoxx 50 added 0.7%, FTSE 100 outperforms at the margin. Miners, oil & gas and tech are the strongest performing sectors. In Europe, mining and technology companies led the Stoxx 600 Index up 0.5%. Philips slumped 14%, the most in two decades, after the Dutch producer of medical equipment reported lower preliminary revenue than expected. Here are some of the biggest European movers today:
Rexel jumps to an eight-year high after the French maker of electrical products said 2021 organic growth will be higher than forecast with Citi noting positive demand comments from firm.
VAT shares post their steepest gains in more than a month after the Swiss supplier of products for the semiconductor industry reported 4Q order intake that was well above expectations.
DFS Furniture shares gain as much as 6.4%, among the top advancers in the FTSE All-Share Index, after the U.K. retailer kept its FY pretax profit forecast unchanged.
Just Eat Takeaway stock rises after initially falling following an update. Citi analysts say the online food delivery firm’s 4Q results are broadly in line with an expected deceleration.
TeamViewer shares rise as much as 15% in Frankfurt after the company reported 4Q and FY billings that beat market expectations with RBC calling the results “reassuring.”
Sainsbury shares rise as much as 3.9% after the U.K. grocer boosted its outlook for the year. Profit delivery is strong, according to Jefferies.
BHP Group and European mining peers are among the biggest gainers Wednesday with UBS saying in a sector note that shares are cheap -- but valuations are not compelling.
Sweco shares fall as much as 6.8% after Danske Bank downgrades to hold from buy, noting “stalling execution” despite solid market demand for the engineering consultancy’s services.
Taylor Wimpey shares drop as much as 2.2% after a holder sold about 86m shares in the company at 163.75p apiece, representing a 3.7% discount to Tuesday’s close.
Earlier in the session, Asian stocks climbed to their highest level in almost seven weeks as Federal Reserve Chair Jerome Powell’s remarks spurred expectations that anticipated rate hikes won’t derail the global economic recovery. The MSCI Pacific Index added as much as 1.6% to its highest since Nov. 26, bolstered by gains in the consumer-discretionary and information-technology sectors. Alibaba Group and Tencent Holdings were among the biggest contributors to the measure’s rise. Benchmarks in Hong Kong and Japan led gains for the region. Powell pledged to do what’s necessary to contain an inflation surge and prolong the economic expansion at his confirmation hearing for a second term as U.S. central bank chief. Futures on the S&P 500 advanced in Asia trading after halting a five-day slide. A gauge of Chinese technology shares rallied after the Nasdaq 100 outperformed major benchmarks. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy -- that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.” Asia’s equity benchmark is attempting a rebound following last year’s 3.4% slump, when the gauge was hit by concerns over U.S. tightening, Covid-19 and a selloff in Chinese tech shares. Solid gains during Wednesday’s session will likely help spread a sense of relief, according to Fujiwara. “We think there’s more attractiveness here in Asia and EMs overall. And valuations are much more compelling given overall EM/Asia markets have underperformed compared to U.S. and Europe,” Ken Wong, Asian equity fund specialist at Eastspring Investments, told Bloomberg Television. “In 2022, there will be opportunities to be selective.”
Japanese equities posted their first gain in four sessions, following a similar rebound in U.S. peers after soothing comments from Federal Reserve Chair Jerome Powell. Electronics makers and telecoms were the biggest boosts to the Topix, which closed 1.6% higher. Tokyo Electron and SoftBank Group were the largest contributors to a 1.9% rise in the Nikkei 225. Powell pledged to do what’s necessary to contain an inflation surge and prolong the expansion, while steering clear of fresh details on the path of U.S. monetary policy. The S&P 500 rose for the first time in six sessions. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy - that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.”
Indian stocks rose along with Asian peers after Federal Reserve Chair Jerome Powell reassured investors that the U.S. central bank will tackle inflation to extend the economic expansion. The S&P BSE Sensex climbed for a fourth day, up 0.9% to 61,150.04 in Mumbai. The benchmark is 1% away from surpassing its record high touched in October. The NSE Nifty 50 Index advanced by a similar magnitude. Reliance Industries Ltd. rose 2.7% and was among the biggest boosts to the key indexes. Of the 30 shares on the Sensex, 24 gained. All but two of the 19 sector indexes compiled by BSE Ltd. rose, led by a gauge of telecom companies. IT major Wipro Ltd. reported net income for the third quarter that missed the average analyst estimate. Tata Consultancy Services Ltd. and Infosys Ltd. are also scheduled to announce Oct.-Dec. earnings in the day
Australian stocks also rebounded as mining shares hit 5-month highs. The S&P/ASX 200 index rose 0.7% to 7,438.90, with miners and health-care contributing the most to the benchmark’s gain. The materials subgauge led the rebound, hitting the highest since Aug. 17. Afterpay surged after the company said that Block, formerly known as Square, has now received approval from the Bank of Spain in respect of the acquisition by Lanai AU 2 Pty Ltd. Domino’s Pizza Enterprises dropped to its lowest since May. Official data Wednesday showed job vacancies climbed to a record in Australia, up 18.5% to almost 400,000 in the three months through November. In New Zealand, the S&P/NZX 50 index fell 0.2% to 12,804.48
In rates,Treasuries were marginally cheaper across the curve, with the front-end underperforming ahead of December CPI release at 8:30am ET. Treasury 2-year yields higher by 1.8bp vs. Tuesday close while rest of the curve is less than 1bp cheaper on the day; 10-year yields around 1.74% with both bunds and gilts outperforming by over 2bp in the sector. Cash USTs bear flatten, cheapening roughly 2bps across the short end. Session highlight also includes 10-year note auction, a $36b reopening: US auctions resume with a $36BN 10-year reopening at 1pm, followed by $22b 30-year reopening Thursday. The WI 10-year at around 1.745%, above auction stops since January 2020 and ~23bp cheaper than December stop-out which tailed 0.4bp. Elsewhere, bunds and gilts drift higher, with the 10y point outperforming. Bund futures regain 170. Peripheral spreads tighten slightly.
In FX, most G-10 currencies were confined to narrow ranges after the dollar’s drop yesterday and the Bloomberg Dollar Spot Index hovered while the Treasury curve bear-flattened as yields rose by up to 2bps, while commodity currencies outperform but trade off best levels with G-10 FX generally trading narrow ranges.
Demand for long gamma exposure into the next Federal Reserve meeting remains subdued even as realized volatility stays relatively high. The Norwegian krone was the best G-10 performer, followed by the Canadian dollar, as oil steadied above $81 barrel after posting the biggest one-day surge this year as investors embraced risk assets, commodities climbed and industry estimates pointed to another drawdown in U.S. crude stockpiles. The euro moved in a tight $1.1355-1.1378 range and Bund yields inched lower, led by the belly of the curve. The pound treaded water as investors monitored London hospital admissions for any signs of an easing in pandemic pressures and questioned how much further the currency can rise when rate hikes are already priced in.Australian dollar edged up amid iron ore hitting a three-month high as heavy rains disrupted southeastern Brazil’s iron ore industry. Japanese government bonds rallied across maturities after a smooth five-year note auction, driving down benchmark 10-year yields from a 10-month high and the yen steadied. BOJ Governor Haruhiko Kuroda said he expects the country’s underlying inflation to pick up gradually over the long-term after moderate near-term gains led by energy prices.
In commodities, crude futures fade a modest push higher. WTI stalls after a test of $82, Brent trades near $84. Spot gold drifts slightly lower near $1,817/oz. Base metals are in the green with LME nickel up 4%. Bitcoin jumped back over $43K while ether was above $3,300.
Looking at the day ahead now, and the aforementioned US CPI release for December will be the highlight. Other data releases include Euro Area industrial production for November and the US monthly budget statement for December. From central banks, the Fed will be releasing their Beige Book, and speakers include BoE Deputy Governor Cunliffe and the Fed’s Kashkari.
Market Snapshot
S&P 500 futures up 0.1% to 4,710.50
STOXX Europe 600 up 0.5% to 485.30
MXAP up 1.6% to 196.29
MXAPJ up 1.6% to 641.50
Nikkei up 1.9% to 28,765.66
Topix up 1.6% to 2,019.36
Hang Seng Index up 2.8% to 24,402.17
Shanghai Composite up 0.8% to 3,597.43
Sensex up 1.0% to 61,200.72
Australia S&P/ASX 200 up 0.7% to 7,438.90
Kospi up 1.5% to 2,972.48
German 10Y yield little changed at -0.04%
Euro little changed at $1.1370
Brent Futures up 0.5% to $84.17/bbl
Gold spot down 0.3% to $1,815.68
U.S. Dollar Index little changed at 95.59
Top Overnight News from Bloomberg
Bank of France Governor Francois Villeroy de Galhau says the European Central Bank will do what is necessary to get inflation around 2% in the medium term
Natural gas prices are likely to remain high for the next two years, with very few options to boost supplies quickly, according to the chief executive of Britain’s biggest energy supplier
China’s inflation pressures moderated to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy
US Event Calendar
7am: Jan. MBA Mortgage Applications 1.4%, prior -5.6%
8:30am Dec. CPI data:
8:30am: Dec. CPI YoY, est. 7.0%, prior 6.8%; MoM, est. 0.4%, prior 0.8%
8:30am: Dec. CPI Ex Food and Energy YoY, est. 5.4%, prior 4.9%; MoM, est. 0.5%, prior 0.5%
8:30am: Dec. Real Avg Hourly Earning YoY, prior -1.9%, revised -1.7%
8:30am: Dec. Real Avg Weekly Earnings YoY, prior -1.9%
2pm: U.S. Federal Reserve Releases Beige Book
2pm: Dec. Monthly Budget Statement, est. -$5b, prior -$191.3b
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Wishing you a Great Day
Please stay safe
Donkey video bombs the white tiger with awesome smile.
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Morning Markets
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Futures Rebound As Fed-Induced Rout Finally Eases
Tuesday, Jan 11, 2022 - 08:07 AM
After yesterday's miraculous tech recovery which saw gigacaps drop as much as 4% before recovering all losses and closing green, Nasdaq futures led gains among U.S. stock-index futures, hinting at further relief for technology stocks as Treasury yields retreated in early trading but have since steadied around 1.75%, unchanged from Monday. Nasdaq futures rose as much as 0.7%, while S&P 500 and Dow Jones contracts were also higher by about 0.4% ahead of Powell’s Senate confirmation hearing for second term as Fed chair which begins at 10am and where the Fed chair is expected to put on a dovish mask and walk back some of the recent hawkish commentary.
Dip-buyers rescued the Nasdaq from a fifth session of declines on Monday after Marko Kolanovic urged JPM clients to buy the dip, writing that yields aren't too high and the Fed's won't derail the economy’s rebound. “We view the recent equity volatility as an adjustment to the Fed’s incrementally more hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. “We now expect three Fed rate hikes this year, starting as soon as March.”
“We are looking for opportunities to raise our weighting in stocks in 2022,” according to Luca Paolini, chief strategist at Pictet Asset Management, whose firm has a neutral stance on equities. “The global recovery remains resilient, thanks to a strong labor market, pent-up demand for services and healthy corporate balance sheets.”
In his second term confirmation hearing before the Senate Banking Committee at 10am ET today, Fed Chair Jerome Powell will say the central bank will keep inflation from becoming entrenched, but the post-pandemic economy may look different from previous expansions. Meanwhile, swaps indicate the Fed will implement as many as four interest-rate hikes this year, while the momentum is building for the first increase to take place as soon as March, although any economic slowdown will quickly crash these plans.
In U.S. premarket trading, technology stocks including Apple Inc. and Microsoft Corp. rose. Tesla Inc. gained following positive autos sales data from China and a price target hike at Morgan Stanley. Intel Corp. shares jumped after the chipmaker hired Micron Technology Inc.’s David Zinsner as chief financial officer. Here are some of the other big movers today:
Mega-cap U.S. technology stocks edged higher in premarket trading, hinting at a return of dip-buyers after last week’s selloff wiped $1.1 trillion from the value of the Nasdaq Composite Index. Tesla (TSLA US), Apple (AAPL US), Microsoft (MSFT US) are among the companies moving higher.
Tesla (TSLA US) shares gain 2% in U.S. premarket trading, following positive autos sales data from China and a PT hike at Morgan Stanley. Chinese EV peers also rally.
Intel (INTC US) shares gain 2.3% in U.S. premarket trading after the chipmaker hires Micron’s David Zinsner as CFO. Micron shares decline 1%.
TechnipFMC (FTI US) falls 6.6% in U.S. premarket trading after Technip Energies bought back 1.8m of its shares from TechnipFMC. TechnipFMC announced plan to delist from Euronext Paris and move to a single U.S. listing.
Rivian Automotive (RIVN US) dropped in post- market trading Monday after a Dow Jones report that its chief operating officer left the company last month as it ramped up production. Shares tumbled 5.6% in regular trading to close at a record low.
Wynn Resorts (WYNN US) fell in postmarket trading after Citi downgraded the stock to neutral from buy, citing valuation
Inari Medical Inc. jumped 10% in postmarket trading after the medical device company posted preliminary 4Q revenue that topped expectations.
Tech shares also led gains in Europe, where equities mostly reversed Monday’s sell off with the Euro Stoxx 50 rising ~1.25%. Technology, travel, consumer products and health-care stocks are among Europe’s top performing sectors Tuesday as investors rotate into sectors beaten down in recent sessions. BE Semi shares gain 4.3%, best performing tech stocks, while food delivery stocks gain on Delivery Hero’s outlook and HelloFresh introducing a new share buyback. Meanwhile banking and auto stocks -- this year’s top performing sectors - are at the bottom of the leaderboard, with banks falling for the first time this year: Deutsche Bank -1.6% and Commerzbank -2.9%, biggest decliners in Europe as Cerberus cuts stakes. Here are some of the biggest European movers today:
Technology, travel, consumer products and health-care stocks are among Europe’s top performing sectors Tuesday as investors rotate into sectors beaten down in recent sessions.
Delivery Hero +6.2% at noon CET, Sinch +8.6%, BE Semiconductor 7.2%, HelloFresh +4.2%
Pandora shares rise as much as 7.5% after publishing preliminary 4Q sales numbers, which Morgan Stanley says provide relief for investors and suggest “solid underlying momentum.”
Sika shares climb as much as 5.2%, the steepest intraday gain since November, after the Swiss construction- materials maker reported 4Q sales that beat expectations, Vontobel says.
Brunello Cucinelli shares jump as much as 8.4% after the Italian apparel maker reported 4Q sales that showed all channels and geographies accelerating from the previous quarter.
Shop Apotheke rise as much as 2.5% after reporting preliminary 4Q numbers. Citi notes sales are driven by “solid 4Q performance,” adding questions remain on e-prescriptions in Germany.
Darktrace soared the most since its trading debut after the cybersecurity company boosted its outlook, prompting an upgrade from the broker whose bearish note triggered a plunge last year.
JDE Peet’s, Reckitt fall, among the worst performers in Europe’s Stoxx 600 Index, after Exane BNP Paribas downgrades the stocks in a note that says it’s “not too enthused” about the 2022 outlook for consumer staples.
Castellum falls as much as its chief executive officer was ousted after only one month at the helm of one of Sweden’s biggest property companies, while DNB also downgraded the shares.
About You shares drop as much as 7.4% after the company reported 3Q21 sales below market consensus, in addition to higher-than-expected costs related to marketing and expansion.
Meanwhile, earlier in the session, Asian stocks were poised to halt a two-day gain as investors sold high-growth technology shares amid uncertainty over U.S. monetary policy. The MSCI Asia Pacific Index fell 0.1% after dropping as much as 0.7% as information-technology firms slid, while gains in financial shares helped limit the gauge’s loss. China’s CSI 300 and Japan’s Nikkei 225 Stock Average were among the worst performers in the region. Asia’s benchmark is struggling to pull itself from last year’s 3.4% slump amid lingering concerns over U.S. tightening, China’s weak technology shares and the possibility of new restrictions to contain the pandemic.
“It’s a bit difficult to aggressively buy up stocks,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “People are wary over the possibility of a faster-than-expected rate hike cycle.” Still, Pfizer’s remarks suggesting a vaccine for the omicron variant could be available as early as March “will somewhat alleviate concern over the virus,” Ichikawa added. Pfizer is developing a hybrid vaccine that combines its original shot with a formulation that shields against the highly transmissible omicron variant, CEO Albert Bourla said at a conference on Monday.
Japanese equities slid for a third day after the yen strengthened against the dollar and amid continued concerns over virus infections and U.S. monetary tightening. Electronics and chemical makers were the biggest drags on the Topix, which fell 0.4%. Keyence dropped 7.9% as investors sold growth stocks amid uncertainty over the Federal Reserve’s plan, Ichiyoshi Asset Management said. Tokyo Electron and Fast Retailing were the largest contributors to a 0.9% loss in the Nikkei 225. The yen slightly weakened against the dollar after gaining 0.8% in the previous four sessions. Many now expect the Fed will implement four quarter-point interest-rate hikes this year. Meanwhile, Prime Minister Fumio Kishida said Japan will extend its tightened border measures until the end of February as virus cases surge in the country
India’s benchmark equity index ended higher, after swinging between gains and losses during the day, ahead of quarterly earnings for top companies. The S&P BSE Sensex climbed 0.4% to close at 60,616.89 in Mumbai, while the NSE Nifty 50 Index added 0.3% to complete a third session of gains. Housing Development Finance Corp gave the biggest boost to the Sensex, rising 1.9%. Of the 30 shares in the Sensex, 16 rose and 14 fell. Thirteen of the 19 sector indexes compiled by BSE Ltd. gained, led by a gauge of power stocks. The S&P BSE Metal Index fell 2.8%, the most in three weeks, after Jefferies India Pvt. put out a cautious view on the metals sector in 2022. The brokerage downgraded Tata Steel Ltd. to hold and JSW Steel to underperform from buy. Analysts expect a steady growth in sales for the nation’s top software exporters, Tata Consultancy Services, Infosys and Wipro, which are scheduled to release their Oct.-Dec. earnings reports on Wednesday. “All eyes are on the earnings of the three IT majors. We reiterate our positive yet cautious view on markets and suggest focusing more on sector and stock selection,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. India is ramping up its vaccination drive for younger population and booster shots for senior citizens as Covid-19 cases climb.
Australian stocks extended losses as bank, consumer staples weighed. The S&P/ASX 200 index fell 0.8% to close at 7,390.10, down for a second straight day, with banks and consumer staples among sectors weighing most on the benchmark. Ten of the 11 industry sub-gauges closed lower, while materials stocks were little changed. Inghams was among the worst performers, tumbling after the company said the spread of omicron is having a significant impact on its supply chain, operations, logistics and sales performance. Polynovo soared after the company reported U.S. sales were up 58% year on year. In New Zealand, the S&P/NZX 50 index fell 0.5% to 12,831.73.
In rates, Treasuries were cheaper across front-end of the curve while long-end outperforms with 10-year Treasury yields on either side of 1.75% giving the curve a small bull flattening bias as participants set up for first of this week’s auctions, in the form of a 3-year note sale at 1pm ET. Treasury yields are cheaper by 2.4bp in 2-year sector, flattening 2s10s spread as 10s are little changed at 1.76%; long-end yields are ~1bp richer on the day, flattening 5s30s spread by ~3bp toward last year’s low. Gilts outperformed by 1.7bp in 10-year sector, bunds by ~0.5bp. The US coupon auction cycle includes $52b 3-year new issue, $36b 10-year reopening Wednesday and $22b 30-year reopening Thursday; the WI 3-year yield at around 1.240% exceeds auction stops since February 2020; last month’s drew 1%, 0.3bp below the WI yield at the bidding deadline. IG dollar issuance slate includes five deals announced overnight; ten borrowers priced $12.2b Monday. Peripheral spreads widen slightly, books on Spain’s 10y syndication top EU58b.
In FX, Bloomberg Dollar Spot returns to flat on the session after a choppy morning, with the Bloomberg Dollar Index drifting with EUR/USD little changed at around $1.33; the 10-year Treasury yield is steady at 1.75%. Commodity currencies lead in G-10, JPY lags, fading roughly half of Monday’s strength: the Norwegian krone outperforms G-10 peers alongside the Canadian dollar as oil snaps a two-day run of declines. The Japanese yen lags, halting a four-day rally as an easing of concern over the omicron outbreak damped demand for haven assets. Australia’s dollar strengthens after retail sales beat forecasts. “The Aussie has received a bit of a boost from the strong retail-sales data, but also some bargain hunting in equities with S&P 500 futures trading a little higher,” said David Forrester, a senior foreign-exchange strategist at Credit Agricole CIB in Hong Kong.
In commodities, crude futures rise over 1%. WTI regains a $79-handle, pushing through Monday’s highs. Brent rises through $82. Spot gold adds ~$4 but struggles to make headway through $1,810/oz. Base metals are in the green after a prolonged exchange outage, with LME nickel up over 3%.
Looking at the day ahead, the main highlight will be Fed Chair Powell’s nomination hearing for a second term at the Senate Banking Committee. We’ll also hear from the Fed’s Mester, George and Bullard, along with the ECB’s Kazaks. Data releases include Italian retail sales for November, and in the US there’s the NFIB small business optimism index for December.
Market Snapshot
S&P 500 futures up 0.4% to 4,681.75
STOXX Europe 600 up 1.1% to 484.28
MXAP little changed at 193.02
MXAPJ up 0.2% to 630.48
Nikkei down 0.9% to 28,222.48
Topix down 0.4% to 1,986.82
Hang Seng Index little changed at 23,739.06
Shanghai Composite down 0.7% to 3,567.44
Sensex up 0.3% to 60,584.58
Australia S&P/ASX 200 down 0.8% to 7,390.12
Kospi little changed at 2,927.38
Brent Futures up 1.5% to $82.08/bbl
Gold spot up 0.4% to $1,809.09
U.S. Dollar Index down 0.17% to 95.83
German 10Y yield little changed at -0.06%
Euro up 0.1% to $1.1342
Top Overnight News from Bloomberg
Federal Reserve Chair Jerome Powell said the central bank will prevent higher inflation from becoming entrenched while cautioning that the post-pandemic economy might look different than the previous expansion
Asian stocks and U.S. futures fluctuated Tuesday ahead of a key American inflation reading that’s expected to strengthen the case for tighter monetary policy
Boris Johnson is facing opposition calls for his resignation over an alleged drinks party in his Downing Street office while pandemic curbs were in place, renewing a sense of crisis around the U.K. premier
President Kassym-Jomart Tokayev said Russian-led troops that helped him crush an uprising would begin to leave in two days as he denounced “oligarchic groups” that dominate Kazakhstan’s economy
Top Asian News
Asia Stocks Set to Snap 2-Day Gain as Fed Outlook Hits Tech
Japan’s Household Inflation Expectations Jump to Most Since 2008
Mizuho Set to Appoint New CEO as Technical Glitches Persist
Shimao Downgraded to B- by Fitch on Liquidity Concerns
US Event Calendar
6am: Dec. SMALL BUSINESS OPTIMISM, est. 98.7, prior 98.4
Central Banks
9:12am: Fed’s Mester speaks on Bloomberg Television
9:30am: Fed’s George Discusses the Economic and Policy Outlook
10am: Senate Banking Cmte Holds Hearing on Powell Nomination
4pm: POSTPONED - Fed’s Bullard Discusses Economy and Monetary...
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Have a Beautiful Day
stubby kitten running
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Bill Holter: The Fed Must Inflate or Die
Andy Schectman Sees What Others Do Not, the Biggest Risk to the Dollar
George Strait - The Weight Of The Badge
Today is National Law Enforcement Appreciation Day
Message from Secretary Mayorkas on Law Enforcement Appreciation Day
January 9, 2022
12:20 pm
Alejandro Mayorkas
Secretary
Colleagues,
Today is National Law Enforcement Appreciation Day. On this day, we take time to express our gratitude, respect, and admiration for those who selflessly and bravely risk their lives to protect and serve our communities and every one of us.
Our Department is home to the greatest number of law enforcement officers in the federal government. Please join me in thanking our law enforcement colleagues for the noble work they perform in service to our nation. The families and loved ones of our law enforcement colleagues deserve our deep appreciation and respect as well. No one serves alone.
All of you who wear the badge – who give so much of yourselves to keep our communities safe – thank you. You bring honor to our Department and to our country.
Alejandro N. Mayorkas
Secretary of Homeland Security
https://www.dhs.gov/employee-resources/blog/2022/01/09/message-secretary-mayorkas-law-enforcement-appreciation-day?utm_source=hp_slideshow&utm_medium=web&utm_campaign=dhsgov
George Strait - The Weight Of The Badge
Morning Markets
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Futures Rise Ahead Of Jobs Data That Could "Wreak Havoc In Markets"
Friday, Jan 07, 2022 - 08:05 AM
US index futures climbed on Friday, paring this week’s losses fractionally as investors braced for jobs data that should provide clues about the pace of Fed tightening and which is expected to come in strong (whisper number at 502k, above 447k estimate, up from 210K last month; Wednesday’s ADP print was 807k, well above 410k estimate, our full preview is here) but not too strong - remember we now live in a "good news is bad news" world - or else the market will freak out that the Fed will hike even faster than is currently expected. Nasdaq futures also showed signs of recovery after a three-day selloff even as cryptocurrencies crashed again during the Asian session. As of 730am, emini S&P futures were up 4 points or 0.1%, Nasdaq futures were 0.24% higher, or 37 points and Dow futures were unchanged.Treasuries were steady, with the two-year yield heading for the biggest weekly spike since October 2019. Crude oil headed for the longest streak of weekly gains since October on tightening supplies.
U.S. hiring likely more than doubled in December from the previous month to 447,000 new jobs, according to consensus projections for nonfarm payrolls. “A low figure, around 100,000-200,000, wouldn’t change the direction the Fed is preparing to take,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “However, a strong NFP print, and a beat on unemployment rate, have the power of boosting the Fed hawks, on the idea that the jobs market no longer needs the Fed’s support.” That “could wreak havoc in risk markets.”
A surprisingly hawkish stance from the Fed revealed in the latest Minutes roiled financial markets at the start of a new year, with investors reassessing how to price assets in an environment of rising interest rates. The removal of crisis-era accommodation marks a shift not seen in at least three years, a time that also saw a spike in volatility.
“We knew coming into 2022 that the Fed was going to be a creator of volatility within the market and we’re seeing that right out of the gate at the start of the year,” said Lindsey Bell, chief markets and money strategist at Ally. “The good news is that today things seem to be stabilizing a little bit after yesterday’s knee-jerk reaction.”
Comments by regional Fed presidents provided some additional insight Thursday as traders attempted to predict a possible schedule for tightening. St. Louis Fed President James Bullard, a more hawkish policy maker, said in a speech the central bank could raise its target interest rate as soon as March. Meanwhile, San Francisco Fed President Mary Daly said at a virtual event that trimming the Fed balance sheet would come after normalizing the Fed funds rate.
Back to markets, Among meme stocks, GameStop jumped 18% in premarket trading after a report that the gaming retailer plans to launch a marketplace for non-fungible tokens this year. AMC Entertainment gained 6.5%. Discovery Inc. rose in New York premarket trading after BofA Global Research recommended the stock. Cryptocurrency-exposed stocks slip as Bitcoin extended its decline, falling below $42,000, before recovering slightly; the largest token declined as much as 4.9% to $41,008, marking a tumble of about 40% from its record near $69,000 reached Nov. 10. Marathon Digital dropped 1.6% in U.S. premarket, Riot Blockchain -1.3%, MicroStrategy -0.4% In Europe, Safello -4%, Arcane Crypto -5.7%, Northern Data -3.1%. Other notable premarket movers:
GameStop (GME US) shares surge 19% in U.S. premarket trading after the gaming retailer was said to be planning to launch an NFT marketplace.
Kohl’s (KSS US) falls 3.8% in premarket trading after UBS downgrades it to sell and slashes price target to a Wall Street-low on the “challenging” outlook for the stock in 2022 on inflationary pressures.
Cryptocurrency-exposed stocks slip as Bitcoin extends its decline, falling below $42,000, before recovering slightly. Marathon Digital (MARA US) drops 1.6% in U.S. premarket, Riot Blockchain -1.3% (RIOT US), MicroStrategy -0.4% (MSTR US).
Thursday’s court ruling was a “clear win” for Sonos (SONO US), and provides further proof that the firm has industry-leading intellectual property that it can successfully defend, Morgan Stanley (overweight) says. Shares rose 5.7% post-market.
Marin Software (MRIN US) soars 36% in U.S. premarket trading after the marketing software firm announced an integration with Amazon Ads’ demand-side platform. Marin’s market capitalization was about $53m at Thursday’s close.
Duck Creek Technologies’ (DCT US) net new annual recurring revenue is “back to beating,” Barclays (overweight) says. The shares rose 7.7% in postmarket trading after co. boosted its full-year revenue forecast.
Quidel (QDEL US) rose 3% postmarket after the maker of Covid tests reported 4Q preliminary revenue that sailed past expectations.
Armada Hoffler Properties (AHH US) fell 4.7% in premarket after launching a share sale to help pay the cash cost of its previously announced deal for the Exelon Building in Baltimore.
Absci Corp. jumped 48% after announcing a research agreement with Merck & Co.
European equities had a choppy morning, settling flat to small lower as losses for travel and real-estate stocks outweighed gains in the mining industry, pulling the Stoxx Europe 600 Index down 0.3%. The gauge has had a bumpy first week of the year, pulling back from three consecutive record highs. In Milan, STMicroelectronics rose as much as 6.5%, the most since October, after the chipmaker reported higher-than-expected revenue. DAX lagged peers, dropping as much as 0.75%. Most indexes trade around lows for the week. Travel and real estate are the weakest sectors; miners, tech and oil & gas stocks lead to the upside. Here are some of the biggest European movers today:
STMicroelectronics shares rise as much as 6.5% in Milan, the most since Oct. 28, after the chipmaker reported 4Q21 revenue that exceeded projections.
Banca Carige soars as much as 13% amid reports that Cerberus submitted a non-binding offer for the troubled lender.
Lanxess jumps as much as 3.3% to the highest since Nov. 3 after the stock is upgraded to overweight from equal-weight at Barclays, which sees “an attractive set-up” for share outperformance this year.
Aston Martin gains as much as 3.8% after an update from the luxury car-maker that Jefferies (hold) called a “reassuring profit warning.”
Inpost falls as much as 8.6%, reversing early gains, after the firm posted a 4Q and FY operational update. Growth in 4Q parcel volumes was 1% below Jefferies’ estimates, writes analyst David Kerstens (buy).
Evolution drops as much as 6.2% after Berenberg says the market is “overly optimistic” about the Swedish online gambling giant’s top-line growth prospects, initiating with a hold rating on the stock.
M&C Saatchi falls as much as 12%, the most intraday since July 2020, erasing some of the gains since the Jan. 5 announcement that AdvancedAdvT acquired a stake. The drop came after AdvancedAdvT said it’s interested in exploring a share- exchange merger.
C&C falls as much as 5.8% after the Irish cider maker said performance was behind expectations in December due to the latest U.K. and Ireland measures to control the spread of Covid-19.
Consumer prices in the euro area jumped a record 5% from a year earlier in December, adding pressure on the ECB to join a growing legion of central banks from the Fed to the Bank of England in tightening monetary conditions.
Earlier in the session, Asian stocks rose, rebounding after a two-day drop, as financials gained amid the outlook for higher U.S. interest rates while traders remained wary of risks from the end of easy-money policies and coronavirus flare-ups. The MSCI Asia Pacific Index pared gains after rising by as much as 0.7%. South Korean chipmakers and Chinese internet giants were among stocks supporting the advance, helping offset drops in Taiwanese and Japanese tech stocks. The regional stock benchmark was poised for a weekly loss of 0.8%, sparked by a more hawkish than expected tone in the Federal Reserve’s December meeting minutes. The prospects of faster-than-expected monetary tightening spooked global investors, triggering a selloff of growth stocks.
“Value stocks continue to be strong, with higher yields pushing up banking stocks,” said Shogo Maekawa, a strategist at JP Morgan Asset Management in Tokyo. But, “for value and cyclicals to continue to be strong, the reasoning over monetary tightening needs to be backed by robust economic fundamentals and corporate earnings.”
Key gauges in Hong Kong, South Korea and Australia rose more than 1%. Japan’s Topix swung from a gain of as much as 1% to a loss of 0.8% at one point as investors reacted to news of spiking Covid-19 cases in some areas and possible restrictions to counter them. For Japan, the “risk of going into a state of emergency again seems to be weighing on the minds of investors,” said Serdar Armutcu, head of electronic trading at Mita Securities Co. in Tokyo.
Japanese stocks finished a volatile day slightly down amid concerns on interest rates and virus measures. Electronics makers and service providers were the biggest drags on the Topix, which closed 0.1% lower after swinging from a gain of 1% to a loss of 0.8%. Banks outperformed amid a rally in global lenders on an outlook for higher U.S. rates. The Nikkei 225 was little changed, with SoftBank Group gaining while Omron and Daikin dropped. “I guess it’s the continuation of yesterday’s market weakness, concerns over the FOMC,” said Serdar Armutcu, head of electronic trading at Mita Securities Co. in Tokyo. Plus, the “risk of going into a state of emergency again seems to be weighing on the minds of investors.” Okinawa was set to record over 1,400 new Covid cases, FNN reported. Kyodo reported earlier that Japan will delay resumption of its “Go To” travel subsidy program until after February and that Tokyo may tighten guidelines on group dining.
Indian stocks rose on optimism that state governments will opt for specific restrictions, instead of broad-based lockdowns, to curb a surge in coronavirus cases. The S&P BSE Sensex climbed 0.2% to 59,744.65, in Mumbai, taking its advance this week to 2.6%, the biggest five-day advance since early September. The NSE Nifty 50 Index gained 0.4%. Reliance Industries Ltd. climbed 0.8% and was the biggest boost for both gauges. Thirteen of 19 sector indexes compiled by BSE Ltd. advanced, led by a gauge of basic materials companies. Of 30 shares in the Sensex index, 16 rose and 14 fell. Mumbai, India’s financial capital, has no plans to shut down even as daily Covid-19 cases increase, the city’s municipal commissioner said. Separately, India will release its official estimate of the economy’s expansion for the fiscal year ending in March later today
In Australia, the S&P/ASX 200 index rose 1.3% to close at 7,453.30, regaining ground after Thursday’s 2.7% slump. All sectors advanced, led by energy shares and banks. Overall, the benchmark added 0.1% in the shortened first trading week of the year. Medibank was the top performer on Friday, gaining the most since March 2020. Magellan was among the worst performers after reporting net outflows of about A$1.55 billion for the December quarter. In New Zealand, the S&P/NZX 50 index fell 0.1% to 12,970.65
In FX, Bloomberg dollar spot drifts 0.2% lower. The euro was marginally higher against the greenback. Scandies top the G-10, AUD lags although ranges are relatively narrow.
In rates, price action was subdued with cash USTs and eurodollars quiet ahead of today’s payrolls report, with yields marginally cheaper across the curve but within Thursday session range. Treasury yields were cheaper by up to 1bp across long-end of the curve with spreads marginally steeper; 10-year yields around 1.725%, remain near top of weekly range. Long-end bunds and gilts richen ~1.5bps, peripheral spreads widen to core.
In commodities, oil was on course for a third weekly increase amid supply constraints; crude futures tagged on another percentage point of gains. WTI regains a $80-handle, Brent stalls near $83 in early London trade. Gains in commodities and emerging-market stocks further underscored the Friday rebound in risk sentiment. Spot gold drifts either side of $1,790/oz. Base metals are set to end the week strongly with LME nickel leading. Cryptos crashed during the Asian session, as usual.
Looking at the day ahead now, and the main highlight will be the aforementioned US jobs report for December. Otherwise, data releases from the Euro Area include the flash CPI reading for December, the final consumer confidence reading for December, and retail sales for November. Elsewhere, there’s also industrial production in November for France and Germany. Central bank speakers include the Fed’s Daly and Bostic, and the BoE’s Mann.
Top Overnight News from Bloomberg
Federal Reserve policy makers could start to raise their target interest rate as soon as March and shrink the central bank’s balance sheet as a next step in response to surging inflation, Federal Reserve Bank of St. Louis President James Bullard said
China’s delta variant-fueled Covid-19 outbreak isn’t showing signs of easing, with cases now cropping up elsewhere and technology hub Shenzhen on high alert, despite a dropoff in the latest epicenter Xi’an
Local governments in China have started mapping out their economic blueprints for 2022, setting moderate to ambitious growth targets that give a signal of national goals
President Kassym-Jomart Tokayev declared that order had largely been restored in Kazakhstan, after efforts to suppress mass protests that erupted over fuel price increases
Oil was poised for a third weekly gain as the market tightened due to supply constraints across OPEC+ members following civil unrest.
Peru hiked for a sixth straight month as inflationary pressure mounts amid the economy’s strong rebound from the pandemic. Argentina also raised its benchmark interest rate for the first time in over a year as it faces calls from the International Monetary Fund to tighten its monetary policy
Japanese Finance Minister Shunichi Suzuki says he’s closely watching moves in foreign exchange markets and the impact of currencies on the economy
Market Snapshot
S&P 500 futures up 0.18% to 4,696.00
STOXX Europe 600 down 0.3% to 486.86
MXAP up 0.5% to 191.98
MXAPJ up 0.8% to 625.21
Nikkei little changed at 28,478.56
Topix little changed at 1,995.68
Hang Seng Index up 1.8% to 23,493.38
Shanghai Composite down 0.2% to 3,579.54
Sensex up 0.1% to 59,687.14
Australia S&P/ASX 200 up 1.3% to 7,453.35
Kospi up 1.2% to 2,954.89
Brent Futures up 0.9% to $82.71/bbl
Gold spot little changed at $1,790.39
U.S. Dollar Index down 0.21% to 96.12
German 10Y yield little changed at -0.05%
Euro up 0.2% to $1.1316
A more detailed look at global markets, courtesy of Newsquawk
Asia-Pac equities traded mostly higher but off best levels following a choppy Wall Street session – which saw the Russell 2000 close in the green whilst mild losses were seen across the Dow Jones, Nasdaq and S&P 500. US equity futures resumed trade with modest gains but the upside momentum faded, with the ES Mar'22 on either side of 4,700 in the run-up to the US jobs data. European equity futures traded flat with an upside bias for most of the overnight session. In APAC, the ASX 200 (+1.3%) was supported by its Financials, Energy, and Consumer Discretionary sectors. The Nikkei 225 (unch) was choppy but ultimately negative, with the index subdued by reports the Japanese government is seeking approval to declare COVID "quasi-emergencies" in three prefectures. The KOSPI (+1.2%) saw its Tech sector among the top performers after Samsung Electronic rose over 1.5% following its prelim earnings. The Hang Seng (+1.8%) and Shanghai Comp (-0.2%) held onto the mild gains seen at the cash open, although the property sector felt no reprieve as Shimao – thought to be one of the safer property firms – reportedly defaulted on a trust loan, thus triggering freefalls across its stock and bonds. In fixed income, US 10yr cash yield trimmed some of the prior session's gains.
Top Asian News
Hong Kong to Send All Partygoers to Government Quarantine
Hong Kong’s Growth Forecasts at Risk as Omicron Spreads in City
Property Stocks Rally, Shimao Pares Losses: Evergrande Update
China Says It Supports Kazakhstan’s Efforts to End ‘Chaos’
European equities trade mixed/flat (Stoxx 600 -0.1%) with the Stoxx 600 on course to end the week in minor positive territory as markets await the December US NFP report. The handover from Asia was a mixed bag with upside seen for the ASX 200 (+1.3%) and Hang Seng (+1.8%) whilst the Nikkei (unch) was unable to gain much traction to the upside amid reports the Japanese government is seeking approval to declare COVID "quasi-emergencies" in three prefectures. Stateside, after yesterday’s session which saw the Russell 2000 close in the green and modest losses for the Nasdaq and S&P 500, futures are indicative of a relatively flat open with the ES +0.2%. In a recent note, Morgan Stanley suggested that this year’s equity set-up is “is best in Europe and Japan, where estimates look low while valuations are undemanding.” Sectors in Europe are mixed with Basic Resources the clear outperformer amid price action in underlying commodity prices whilst Rio Tinto (+2.0%) has also garnered support from a broker upgrade at Berenberg. Banking names are taking a breather today after gains of 4.4% for the Stoxx 600 Banking Index this week amid the more favourable yield environment seen since the beginning of the year. To the downside, Travel & Leisure names lag peers with no obvious catalyst behind the move whilst Real Estate and Food & Beverage names are also seen lower. In terms of individual movers, STMicroelectronics (+5.5%) is the best performer in the Stoxx 600 after Q4 prelim. revenue exceeded expectations, citing better than anticipated operations in an ongoing dynamic market; gains in the Co. have provided support for the likes of Infineon (+2.8%) and ASML (+2.1%). Shell (+0.2%) has seen marginal, but waning, support after announcing that the remaining USD 5.5bln of proceeds from the Permian divestment are to be distributed in the form of share buybacks at pace. To the downside, Airbus (-1.2%) is a laggard in the CAC after reports that Qatar Airways is seeking compensation regarding surface flaws on the A350.
Top European News
Sanofi Forms Potential $5.2 Billion AI Deal With Exscientia
Aston Martin Assures Valkyrie Is On Track After Ramp-Up Issues
Polish Inflation Hits 21-Year-High With More Rate Hikes Expected
ABG Hires Partners for Equity Sales From Nordea and Arctic
In FX, not much deviation and perhaps inclination for the Dollar to venture too far before the latest BLS report that may be key in terms of determining whether the Fed pulls the rate hike trigger in March and sets the ball rolling for QT at the next or a nearby FOMC meeting. The index remains finely poised between 96.086-299 parameters amidst fractionally softer US Treasury yields and another downturn in broad risk sentiment, albeit relatively mild compared to previous episodes of aversion this week. Moreover, several Greenback/G10 pairings could be preoccupied with option expiries in the run up to the jobs data (and after pending the outcome) given hefty interest rolling off at today’s NY cut.
EUR/GBP - The Euro and Pound are marginally outperforming, with the former reclaiming 1.1300+ status vs the Buck and latter retesting resistance around 1.3550 that includes the 100 DMA. However, Eur/Usd has faded multiple times above the round number and needs to breach 1.1350 convincingly to turn the corner, so 1.5 bn option expiry interest from 1.1290 to 1.1300 may still prove to be an impediment. Conversely, Eur/Gbp continues to hold above the 0.8333 mark that equates to the psychological 1.2000 level in the inverse cross to offer the Euro support and cap Sterling regardless of another encouraging UK PMI (construction this time) or flash Eurozone inflation flash ‘surprising’ to the upside (in line with Germany’s preliminary CPI outcome yesterday).
NZD/CAD - Aud/Nzd dynamics rather than NZ specifics might be propping up the Kiwi as well, while the Loonie is deriving traction from ongoing strength in crude oil (WTI pivoting Usd 80/brl and Brent basically bid within a Usd 82-83 range) before Canada’s LFS. Nzd/Usd is hovering around 0.6750, as the aforementioned Antipodean cross probes 1.0600 and Usd/Cad is inching towards 1.2700.
CHF/AUD/JPY - The Franc is treading water sub-0.9200 against its US counterpart with little reaction to an unexpected dip in Swiss sa unemployment or an acceleration in retail sales, while the Aussie and Yen both look trapped by option expiries very close or not far outside intraday extremes. Note, Aud/Usd has been up to 0.7178 and down to 0.7143 and Usd/Jpy topped and tailed at 116.05 and 115.75, so well within striking distance of 2.6 bn at 0.7160, 2.2 bn at 0.7200, 1.1 bn between 115.45-50 and 2.7 bn at 116.00.
In commodities, crude benchmarks are firmer in European trade with action directionally following, but eclipsing in magnitude, broader equity/risk performance. Currently, posting gains of around USD 1.0/bbl featuring WTI back above USD 80.00/bbl and Brent probing USD 83.00/bbl. Specific newsflow has been limited. Focus remains on geopolitics with increasingly punchy rhetoric emanating from Kazakhstan leaders regarding fuel-protests, though updates to output there remain limited after the sparse developments yesterday, highlighted by the Tengiz facility making a temporary adjustment. Elsewhere, adding to the positive tones from earlier in the week, the French Foreign Minister says there has been progress in Iranian nuclear discussions, but caveated that time is running out. Moving to metals, spot gold and silver are essentially unchanged at present despite some modest gyrations around the APAC/Europe crossover with newsflow sparse and broader sentiment cagey pre-NFP. Note, the weekly BofA Flow Show highlights the first inflow in a five-week period for precious metals, amounting to USD 0.3bln. Elsewhere, particularly for the copper watchers, a magnitude 5.2 earthquake occurred in Ricardo Palma, Peru – does not appear to be in direct proximity to a copper mine though, no commentary/guidance on any potential impacts yet.
US Event Calendar
8:30am: Dec. Change in Nonfarm Payrolls, est. 447,000, prior 210,000
Dec. Change in Private Payrolls, est. 405,000, prior 235,000
Dec. Change in Manufact. Payrolls, est. 35,000, prior 31,000
Dec. Unemployment Rate, est. 4.1%, prior 4.2%
Dec. Underemployment Rate, prior 7.8%
Dec. Labor Force Participation Rate, est. 61.9%, prior 61.8%
Dec. Average Hourly Earnings YoY, est. 4.2%, prior 4.8%
Dec. Average Hourly Earnings MoM, est. 0.4%, prior 0.3%
Dec. Average Weekly Hours All Emplo, est. 34.8, prior 34.8
3pm: Nov. Consumer Credit, est. $20b, prior $16.9b
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Have a wonderful day
Dramatic animals!!!
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Morning Markets. . . .
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Futures Tread Water With Traders Spooked By Spike In Yields
Wednesday, Jan 05, 2022 - 08:07 AM
After futures rose to a new all time high during the Tuesday overnight session, the mood has been decided more muted after yesterday's sharp rates-driven tech selloff, and on Wednesday U.S. futures were mixed and Nasdaq contracts slumped as investors once again contemplated the effect of expected rate hikes on tech stocks with lofty valuations while waiting for the release of Federal Reserve minutes at 2pm today. At 730am, Nasdaq 100 futures traded 0.3% lower amid caution over the impact of higher yields on equity valuations, S&P 500 Index futures were down 0.1%, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened, as did bitcoin, while Brent crude rose back over $80.
“The sharp rise in U.S. yields this week has sparked a move from growth to value,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Wall Street went looking for the winners in an inflationary environment and as a result, loaded up on the Dow Jones at the expense of the Nasdaq.”
Concerns related to the pandemic deepened as Hong Kong restricted dining-in, closed bars and gyms and banned flights from eight countries including the U.S. and the U.K. to slow the spread of the omicron variant. Meanwhile, a selloff in technology stocks extended to Asia, where the Hang Seng Tech Index tumbled as much as 4.2%, sending the gauge toward a six-year low. Traders are now caught in a quandary over deepening fears on global growth combined with a faster tightening by the Federal Reserve.
“Earlier we thought that rate hikes wouldn’t be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later,” Steve Englander, head of global G-10 FX research at Standard Chartered, said in a note. “But we don’t think inflation dynamics will support continued hiking. We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.”
Data on Tuesday showed mixed signs on U.S. inflation. Prices paid by manufacturers in December came in sharply lower than expected. However, figures showing a faster U.S. job quit rate added to concerns over wage inflation. With 4.5 million Americans leaving their jobs in November, compared with 10.6 million available positions, the odds increased the Fed will struggle to influence the employment numbers increasingly dictated by social reasons. The data came before Friday’s monthly report from the Labor Department, currently forecast to show 420,000 job additions in December.
In premarket trading, tech giants Tesla, Nvidia and Advanced Micro Devices were among the worst performers. Pfizer advanced in New York premarket trading after BofA Global Research recommended the stock. Shares of Chinese companies listed in the U.S. extended their decline after Tencent cut its stake in gaming and e-commerce company Sea, triggering concerns of similar actions at other firms amid Beijing’s regulatory crackdown on the technology sector. Alibaba (BABA US) falls 1.2%, Didi (DIDI US) -1.8%. Here are the other notable premarket movers:
Shares in electric vehicle makers fall in U.S. premarket trading, set to extend Tuesday’s losses, amid signs of deepening competition in the sector. Tesla (TSLA US) slips 1.1%, Rivian (RIVN US) -0.6%.
Beyond Meat (BYND US) shares jump 8.9% premarket following a CNBC report that Yum! Brands’ KFC will launch fried chicken made with the company’s meat substitute.
Recent selloff in Pinterest (PINS US) shares presents an attractive risk/reward, with opportunities for the social media company largely unchanged, Piper Sandler writes in note as it upgrades to overweight. Stock gains 2.3% in premarket trading.
Senseonics Holdings (SENS US) shares rise 15% premarket after the medical technology company said it expects a U.S. Food and Drug Administration decision in weeks on an updated diabetes- monitoring system.
MillerKnoll (MLKN US) shares were down 3.1% in postmarket trading Tuesday after reporting fiscal 2Q top and bottom line results that missed analysts’ estimates.
Annexon (ANNX US) was down 23% postmarket Tuesday after results were released from an experimental therapy for a fatal movement disorder called Huntington’s disease. Three patients in the 28- person trial discontinued treatment due to drug-related side- effects.
Wejo Group (WEJO US) shares are up 34% premarket after the company said it’s developing the Wejo Neural Edge platform to enable intelligent handling of data from vehicles at scale.
Smart Global (SGH US) falls 6% postmarket Tuesday after the computing memory maker forecast earnings per share for the second quarter. The low end of that forecast missed the average analyst estimate.
Beyond Meat (BYND) shares surge premarket after CNBC KFC launch report
UBS cut the recommendation on Adobe Inc. (ADBE US) to neutral from buy, citing concerns over the software company’s 2022 growth prospects. Shares down 2% in premarket trading.
Oncternal Therapeutics (ONCT US) shares climb 5.1% premarket after saying it reached consensus with the FDA on the design and major details of the phase 3 superiority study ZILO-301 to treat mantle cell lymphoma.
In Europe, the energy, chemicals and car industries led the Stoxx Europe 600 Index up 0.2% to near an all-time high set on Tuesday. The Euro Stoxx 50 rises as much as 0.6%, DAX outperforms. FTSE 100 lags but rises off the lows to trade up 0.2%. Nestle dropped 2.4%, slipping from a record, after Jefferies cut the Swiss food giant to underperform. Utilities were the worst-performing sector in Europe on Wednesday as cyclical areas of the market are favored over defensives, while Uniper and Fortum fall following news of a loan agreement. Other decliners include RWE (-2.4%), Endesa (2.1%), Verbund (-1.3%), NatGrid (-1.2%), Centrica (-1.2%).
Earlier in the session, technology shares led a decline in Asian equity markets, with investors concerned about the prospects of higher interest rates and Tencent’s continued sale of assets. The MSCI Asia Pacific Index fell as much as 0.6%, the most in two weeks, dragged down by Tencent and Meituan. The rout in U.S. tech spilled over to Asia, where the Hang Seng Tech Index plunged 4.6%, the most since July, following Tencent’s stake cut in Singapore’s Sea. Declines in tech and other sectors in Hong Kong widened after the city tightened rules to curb the spread of the omicron variant. Most Asian indexes fell on Wednesday, with Japan an exception among major markets as automakers offered support. The outlook for tighter monetary policy in the U.S. and higher Treasury yields weighed on the region’s technology shares, prompting a rotation from growth to value stocks. Read: China Tech Selloff Deepens as Tencent Sale Spooks Traders Asian equities have underperformed U.S. and European peers amid slower recoveries and vaccination rates in the past year. With omicron rapidly gaining a foothold in Asia, there is a risk of “any further restriction measures, which could cloud the services sector outlook, along with disruption to supply chains,” said Jun Rong Yeap, a strategist at IG Asia Pte. Philippine stocks gained as trading resumed following a one-day halt due to a systems glitch.
North Korea appeared to have launched its first ballistic missile in about two months, just days after leader Kim Jong Un indicated that returning to stalled nuclear talks with the U.S. was a low priority for him in the coming year.
India’s key equity gauges posted their longest run of advances in more than two moths, driven by a rally in financial stocks on hopes of revival in lending on the back of capex spending in the country. The S&P BSE Sensex rose 0.6% to 60,223.15 in Mumbai, its highest since Nov. 16, while the NSE Nifty 50 Index advanced 0.7%. Both benchmarks stretched their winning run to a fourth day, the longest since Oct. 18. All but six of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of banking firms. “I believe from an uncertain, volatile environment, the Nifty is now headed for a directional move,” Sahaj Agrawal, a head of derivative research at Kotak Securities, writes in a note. The Nifty 50 crossed a significant barrier of the 17,800 level and is now expected to trade at 19,000-19,500 level in the medium term, Agrawal added. HDFC Bank contributed the most to the Sensex’s gain, increasing 2.4%. Out of 30 shares in the Sensex, 18 rose, while 12 fell
In FX, Bloomberg Dollar Spot index slpped 0.2% back toward Tuesday’s lows, falling as the greenback was weaker against most of its Group-of-10 peers, SEK and JPY are the best performers in G-10, CAD underperforms. Scandinavian currencies and the yen led gains, though most G-10 currencies were trading in narrow ranges. Australia’s dollar reversed an Asia-session loss in European trading. The yen rebounded from a five-year low as investors trimmed short positions on the haven currency and amid a decline in Asian stock markets.
Treasuries were generally flat in overnight trading, with the curve flatter into early U.S. session as long-end outperforms, partially unwinding a two-day selloff to start the year with Tuesday witnessing a late block sale in ultra-bond futures. 10-year yields traded as high as 1.650% ahead of the US open after being mostly flat around 1.645%; yields were richer by up to 2bp across long-end of the curve while little change from front-end out to belly, flattening 2s10s, 5s30s spreads by 0.5bp and 1.8bp; gilts outperformed in the sector by half basis point. Focus expected to continue on IG issuance, which has impacted the market in the past couple of days, and in U.S. afternoon session FOMC minutes will be released. IG dollar issuance slate includes EIB $5B 5-year SOFR and Reliance Ind. 10Y/30Y/40Y; thirteen borrowers priced $23.1b across 30 tranches Tuesday, making it the largest single day volume for U.S. high-grade corporate bonds since first week of September. European peripheral spreads widen to core. 30y Italy lags peers, widening ~2bps to Germany with order books above EU43b at the long 30y syndication. Ten-year yields shot up 8bps in New Zealand as its markets reopened following the New Year holiday. Aussie yields advanced 4bps. A 10-year sale in Japan drew a bid-cover ratio of 3.46.
In commodities, crude futures were range-bound with WTI near just below $77, Brent nearer $80 after OPEC+ agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant. Spot gold puts in a small upside move out of Asia’s tight range to trade near $1,820/oz. Base metals are mixed. LME nickel lags, dropping over 2%; LME aluminum and lead are up ~0.8%.
Looking at the day ahead, data releases include the December services and composite PMIs from the Euro Area, Italy, France, Germany and the US. On top of that, there’s the ADP’s December report of private payrolls from the US, the preliminary December CPI report from Italy, and December’s consumer confidence reading from France. Separately from the Federal Reserve, we’ll get the minutes of the December FOMC meeting.
Market Snapshot
S&P 500 futures little changed at 4,783.25
MXAP down 0.4% to 193.71
MXAPJ down 0.9% to 626.67
Nikkei up 0.1% to 29,332.16
Topix up 0.4% to 2,039.27
Hang Seng Index down 1.6% to 22,907.25
Shanghai Composite down 1.0% to 3,595.18
Sensex up 0.7% to 60,300.47
Australia S&P/ASX 200 down 0.3% to 7,565.85
Kospi down 1.2% to 2,953.97
STOXX Europe 600 up 0.1% to 494.52
German 10Y yield little changed at -0.09%
Euro up 0.2% to $1.1304
Brent Futures down 0.4% to $79.72/bbl
Gold spot up 0.3% to $1,819.73
U.S. Dollar Index down 0.13% to 96.13
Top Overnight News from Bloomberg
The U.S. yield curve’s most dramatic steepening in more than three months has little to do with traders turning more optimistic on the economy or betting on a more aggressive timetable for raising interest rates
The surge in euro-area inflation that surprised policy makers in recent months is close to its peak, according to European Central Bank Governing Council member Francois Villeroy de Galhau
Some Bank of Japan officials say it’s likely the central bank will discuss the possible ditching of a long-held view that price risks are mainly on the downward side at a policy meeting this month, according to people familiar with the matter
Turkish authorities are keeping tabs on investors who are buying large amounts of foreign currency and asked banks to deter their clients from using the spot market for hedging-related trades as they struggle to contain the lira’s slide
Italy is trying to lock in historically low financing costs at the start of a year where inflationary and political pressures could spell an end to super easy borrowing conditions
North Korea appears to have launched its first ballistic missile in about two months, after leader Kim Jong Un indicated he was more interested in bolstering his arsenal than returning to stalled nuclear talks with the U.S.
A More detailed breakdown of overnight news from Newsquawk
Asia-Pac equities traded mostly in the red following the mixed handover from Wall Street, where the US majors maintained a cyclical bias and the NDX bore the brunt of another sizeable Treasury curve bear-steepener. Overnight, US equity futures resumed trade with mild losses and have since been subdued, with participants now gearing up for the FOMC minutes (full Newsquawk preview available in the Research Suite) ahead of Friday’s US jobs report and several scheduled Fed speakers. In APAC, the ASX 200 (-0.3%) was pressured by its tech sector, although the upside in financials cushioned some losses. The Nikkei 225 (+0.1%) was kept afloat by the recent JPY weakness, whilst Sony Group rose some 4% after its chairman announced EV ambitions. The KOSPI (-1.2%) was dealt a blow as North Korea fired a projectile that appeared to be a ballistic missile, but this landed outside of Japan’s Exclusive Economic Zone (EEZ). The Hang Seng (-1.6%) saw its losses accelerate with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. China Huarong Asset Management slumped over 50% as it resumed trade following a nine-month halt after its financial failure. The Shanghai Comp. (-1.0%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. In the debt complex, the US T-note futures held a mild upside bias since the resumption of trade, and the US curve was somewhat steady. Participants also highlighted large short-covering heading into yesterday’s US close ahead of the FOMC minutes.
Top Asian News
Asian Stocks Slide as Surging Yields Squeeze Technology Sector
China’s Growth Forecast Cut by CICC Amid Covid Outbreaks
BOJ Is Said to Discuss Changing Long-Held View on Price Risks
Gold Holds Gain With Fed Rate Hikes and Treasury Yields in Focus
European equities (Stoxx 600 +0.1%) trade mixed in what has been a relatively quiet session thus far with the final readings of Eurozone services and composite PMIs providing little in the way of fresh impetus for prices. The handover from the APAC region was predominantly a soft one with Chinese bourses lagging once again with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. Meanwhile, the Shanghai Comp. (-1%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. Stateside, the ES and RTY are flat whilst the NQ lags once again after yesterday bearing the brunt of another sizeable treasury curve bear-steepener. In terms of house views, analysts at Barclays expect “2022 to be a more normal yet positive year for equities, looking for high single-digit upside and a broader leadership”. Barclays adds that it remains “pro-cyclical (Industrials, Autos, Leisure, reopening plays and Energy OW), and prefer Value to Growth”. Elsewhere, analysts at Citi stated that “monetary tightening may push up longer-dated nominal/real bond yields, threatening highly rated sectors such as IT or Luxury Goods. Alternatively, higher yields could help traditional value trades such as UK equities and Pan-European Financials”. Sectors in Europe are mostly higher, with auto names leading as Renault (+3.4%) sits at the top of the CAC, whilst Stellantis (+0.6%) has seen some support following the announcement that it is planning for a full battery-electric portfolio by 2028. Elsewhere, support has also been seen for Chemicals, Oil & Gas and Banking names with the latter continuing to be supported by the current favourable yield environment. To the downside, Food and Beverage is the clear laggard amid losses in Nestle (-2.6%) following a broker downgrade at Jefferies. Ocado (+5.5%) sits at the top of the Stoxx 600 after being upgraded to buy at Berenberg with analysts expecting the Co. to sign further deals with new and existing grocery e-commerce partners this year. Finally, Uniper (-2.4%) sits near the bottom of the Stoxx 600 after securing credit facilities totalling EUR 10bln from Fortum and KfW.
Top European News
U.K. Weighs Dropping Covid Test Mandate for Arriving Travelers
German Energy Giant Uniper Gets $11 Billion for Margin Calls
European Gas Extends Rally as Russian Shipments Remain Curbed
Italian Inflation Hits Highest in More Than a Decade on Energy
In FX, notwithstanding Tuesday’s somewhat mixed US manufacturing ISM survey and relatively hawkish remarks from Fed’s Kashkari, the week (and year) in terms of data and events really begins today with the release of ADP as a guide for NFP and minutes of the December FOMC that confirmed a faster pace of tapering and more hawkish dot plots. As such, it may not be surprising to see the Buck meandering broadly and index settling into a range inside yesterday’s parameters with less impetus from Treasuries that have flipped from a severe if not extreme bear-steepening incline. Looking at DXY price action in more detail, 96.337 marks the top and 96.053 the bottom at present, and from a purely technical perspective, 96.098 remains significant as a key Fib retracement level.
JPY/EUR/AUD/GBP/NZD - All taking advantage of the aforementioned Greenback fade, and with the Yen more eager than others to claw back lost ground given recent underperformance. Hence, Usd/Jpy has retreated further from multi-year highs and through 116.00 to expose more downside potential irrespective of latest reports via newswire sources suggesting the BoJ is expected to slightly revise higher its inflation forecast for the next fiscal year and downgrade the GDP outlook for the year ending in March. Similarly, the Euro is having another look above 1.1300 even though EZ services and composite PMIs were mostly below consensus or preliminary readings and German new car registrations fell sharply, while the Aussie is retesting resistance around 0.7250 and its 50 DMA with some assistance from firm copper prices, Cable remains underpinned near 1.3550 and the 100 DMA and the Kiwi is holding mainly above 0.6800 in the face of stronger Aud/Nzd headwinds. Indeed, the cross is approaching 1.0650 in contrast to Eur/Gbp that is showing signs of changing course following several bounces off circa 0.8333 that equates to 1.2000 as a reciprocal.
CHF/CAD - The Franc and Loonie appear a bit less eager to pounce on their US peer’s retrenchment, as the former pivots 0.9150 and latter straddles 1.2700 amidst a downturn in crude pre-Canadian building permits and new house prices.
SCANDI/EM - Little sign of any fallout from a slowdown in Sweden’s services PMI as overall risk sentiment remains supportive for the Sek either side of 10.2600 vs the Eur, but the Nok is veering back down towards 10.0000 in line with slippage in Brent from Usd 80+/brl peaks reached on Tuesday. Elsewhere, the Zar is shrugging off a sub-50 SA PMI as Gold strengthens its grip on the Usd 1800/oz handle and the Cnh/Cny are still underpinned after another PBoC liquidity drain and firmer than previous midpoint fix on hopes that cash injections might be forthcoming through open market operations into the banking system from the second half of January to meet rising demand for cash, according to China's Securities Journal. Conversely, the Try has not derived any real comfort from comments by Turkey’s Finance Minister underscoring its shift away from orthodox policies, or insistence that budget discipline will not be compromised.
In commodities, crude benchmarks are currently little changed but have been somewhat choppy within a range shy of USD 1/bbl in European hours, in-spite of limited fresh newsflow occurring. For reference, WTI and Brent reside within USD 77.26-76.53/bbl and USD 80.25-79.56/bbl parameters respectively. Updates for the complex so far include Cascade data reporting that gas flows via the Russian Yamal-Europe pipeline in an eastward direction have reduced. As a reminder, the pipeline drew scrutiny in the run up to the holiday period given reverse mode action, an undertaking the Kremlin described as ‘operational’ and due to a lack of requests being placed. Separately, last nights private inventories were a larger than expected draw, however, the internals all printed builds which surpassed expectations. Today’s EIA release is similar expected to show a headline draw and builds amongst the internals. Elsewhere, and more broadly, geopolitics remain in focus with Reuters sources reporting that a rocket attack has hit a military base in proximity to the Baghdad airport which hosts US forces. Moving to metals, spot gold and silver are once again fairly contained though the yellow metal retains the upside it derived around this point yesterday, hovering just below the USD 1820/oz mark.
US Event Calendar
7am: Dec. MBA Mortgage Applications -5.6%, prior -0.6%
8:15am: Dec. ADP Employment Change, est. 410,000, prior 534,000
9:45am: Dec. Markit US Composite PMI, prior 56.9
9:45am: Dec. Markit US Services PMI, est. 57.5, prior 57.5
2pm: Dec. FOMC Meeting Minutes
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Have a Great Day
Keyboard Cat
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Morning Markets
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Futures Surge To A Record Above 4,800 As Euphoria Grips Global Markets
Tuesday, Jan 04, 2022 - 07:59 AM
US stock futures, European bourses and Asian markets all rose, extending the blistering start to 2022 (just as Goldman predicted in its $125 billion January inflow case), with more strategists cementing their bullish projections as investors shrugged off worries Omicron could choke the global economic recovery as data on U.S. manufacturing and job openings due today will further show the world’s largest economy is resilient against the spread of omicron. Nasdaq 100 futures rose 0.4% and contracts on the S&P 500 climbed 0.3% to a new all time high above 4,800 after the underlying gauge closed at a record on Monday. European stocks also gained. Waning demand for haven assets pushed the yen to a five-year low, while oil fluctuated ahead of an OPEC+ meeting. The dollar and U.S. treasury yields extended their surge - with the 10Y last yielding 1.6630% - after Monday’s worst start to a year since 2009.
JPMorgan Chase & Co. strategists advised staying bullish on global stocks, saying positive catalysts are not exhausted, while Credit Suisse reiterated a bullish view on U.S. stocks. In premarket trading, Apple shares rose as much as 0.5%, putting the iPhone maker on track to reclaim $3 trillion in market cap as appetite for risk returns. Meanwhile, Jowell Global plunged 11% after a volatile trading session for the Chinese e-commerce stock on Monday that saw it plunge 59%. Travel stocks rallied for a second day even as the U.S. reported a record of over 1 million Covid cases, amid growing evidence that the omicron variant leads to milder infections. The S&P Supercomposite Airlines Index rose 3.3% Monday to the highest since Nov. 24 and appears set for further gains Tuesday. Most airline companies rose about 1% in premarket trading, while cruise lines were also higher with Carnival +1.8%, Royal Caribbean +1%, Norwegian +1.4%. General Electric rose after the stock was raised to outperform at Credit Suisse and Hewlett Packard Enterprise climbed with an overweight rating from Barclays. Here are some other notable pre-market movers today:
Coca-Cola (KO US) sits in a stronger position following a transition year in 2021, Guggenheim Securities writes in note upgrading to buy after almost exactly a year with a neutral stance. Shares up 1% in premarket.
Stryker (SYK US) and Globus Medical (GMED US) both upgraded to overweight at Piper Sandler, which says in a note that the two stocks have momentum to continue delivering above-average share performance this year. Stryker up 1.4% premarket.
Tiny U.S. biotech stocks gain in high premarket volume amid a broader return of risk appetite and following positive updates on studies. Oragenics (OGEN US) +23%, Indaptus Therapeutics (INDP US) +7%.
Intra-Cellular Therapies (ITCI US) falls 7% in premarket after launching a $400 million share sale.
AFC Gamma (AFCG US) falls 11% premarket after launching a stock offering.
Core & Main (CNM US) dropped 7.6% postmarket after holders offered a stake.
In Europe, the Euro STOXX 600 gained as much as 0.9% in early trading, pushing beyond its all-time high of 489.99 points scaled a day earlier, with the FTSE 100 and CAC 40 up over 1.25%. Travel and leisure stocks jumped 2.7%, with Ryanair adding 8% and British Airways-owner IAG gaining over 9%, reflecting expectations Omicron's impact on the industry would be less severe than initially feared. Euro Stoxx 50 added as much as 1% with travel, autos and banks the best performing sectors so far.
Investors have set aside worries about the highly infectious omicron variant as they continue to trade on the economic recovery from the pandemic which may soon be ending thanks to Omicron which could make covid endemic.
“Globally, there is a lot of news regarding the rising omicron cases, but there is also a lot of news that the cases are not as deadly as the previous variants of Covid,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “And investors prefer focusing on a glass half full rather than a glass half empty at the start of the year.”
"The chief reason behind the return of investor confidence is Omicron," said Jeffrey Halley, an analyst at Oanda. Yes, the virus variant is much more contagious, but it is not leading to a proportionally larger number of hospital admissions... (so) it won't stop the global economic recovery."
This, incidentally, is precisely what we said over a month ago. That said, markets anticipate an uptick in volatility as they navigate through the omicron variant, supply-chain disruptions and more central banks winding back pandemic stimulus. More than one million people in the U.S. were diagnosed with Covid-19 on Monday, a new global daily record, and yet markets barely winced.
Asian stocks gained behind rallies in Japan and Australia on their first trading sessions of 2022, with much of the region tracking the strong performance in the U.S. as investors maintained growth optimism despite a worsening pandemic. The MSCI Asia Pacific Index rose as much as 1%, the most in two weeks, lifted by technology and financial shares. Metals and mining stocks gave the Australian benchmark gauge a boost, while a weaker yen allowed exporters to provide support for Japan’s Topix. Chinese stocks bucked the regional trend to suffer their weakest start to a year since 2019. The CSI 300 Index fell 0.5% as some investors took profit and assessed developments in the property sector while renewable energy and health-care firms paced declines. Also souring the mood, the People Bank of China cut its net injection of short-term cash to the markets, prompting concerns over support for the financial system.
Tuesday’s activities in Asia also showed some traders setting aside their worries over the rapid spread of omicron strain for now to bet on resilience in the global economy. While the omicron variant will be a negative factor in the short term, Chinese equities will likely help drive emerging markets higher in 2022 as monetary and fiscal stimulus spur economic growth, said Kristina Hooper, chief global market strategist at Invesco. The Philippine Stock Exchange had to cancel trading following a system glitch, according to a statement by bourse President Ramon Monzon
Japanese equities rose in their first trading session of the year, helped by the yen’s drop to a five-year low and a tailwind from U.S. peers’ climb to fresh all-time highs. Electronics and auto makers were the biggest boosts to the Topix, which gained 1.9%, the most in four weeks. All industry groups advanced except papermakers and energy explorers. Tokyo Electron and Advantest were the largest contributors to a 1.8% rise in the Nikkei 225. The S&P 500 rose to a record and Treasury yields climbed Monday as traders braced for the start of a potentially volatile year and three expected rate hikes from the Federal Reserve. The White House is likely to nominate economist Philip Jefferson for a seat on the Fed board of governors, according to people familiar with the matter. “It’s gradually coming to light who will be the new members of the FRB and it looks like they will be those with quite a dovish stance, which very supportive factor for stocks,” said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management in Tokyo.
Australian stocks jumped themost in over a year, with fresh records in sight. The S&P/ASX 200 index rose 2% to 7,589.80, marking its best session since October 2020. The benchmark closed about 40 points away from the all-time high it reached in August as all sectors gained. Pilbara Minerals was among the top performers, jumping to a record. St. Barbara was among the worst performers after giving an update on its Simberi mine. In New Zealand, the market was closed for a holiday.
India’s Sensex rallied for a third day as the outlook for lenders improved on the back of a continued recovery in the economy. The S&P BSE Sensex rose 1.1% to 59,855.93 in Mumbai, while the NSE Nifty 50 Index rallied 1%. All but three of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of power companies. The S&P BSE Bankex added 1.3% to stretch its rally to a fourth day, its longest streak of gains since Oct. 26. Financial stocks in India offer an attractive entry point after foreign funds sold more than $3 billion of sector stocks over Nov.-Dec., Jefferies analyst Prakhar Sharma wrote in a note. He expects improved growth, stable asset quality and manageable omicron impact to aid a re-rating of the sector. “Markets are currently following their global counterparts while the domestic factors are showing mixed indications,” Religare Broking analyst Ajit Mishra said in a note. Reliance Industries contributed the most to the Sensex’s gain on Tuesday, increasing 2.2%. Out of 30 shares in the index, 25 rose and five fell.
In FX, Bloomberg Dollar Spot Index trades notably higher for the second day in a row, with AUD and CHF top the G-10 leader board, while the JPY lags pushing through Asia’s worst levels near 116.31/USD. The euro was confined in a narrow range around $1.13 while the greenback weakened versus all of its Group-of-10 peers apart from the yen and risk-sensitive currencies were the best performers. The pound edged higher, continuing its ascent over the holiday period that was based on firmer global risk sentiment and bets the U.K. economy won’t be derailed by omicron. Gilts slumped as traders caught up with Monday’s jump in U.S. and euro-area yields after the U.K. was closed for a holiday. Australia’s government bonds and the nation’s currency both rose amid speculation the global economic recovery will weather the surge in omicron infections. New Zealand’s markets remained shut for New Year holidays. Purchasing managers’ index for the Australia’s manufacturing sector declined for the first time in four months in December, Markit data showed.
The yen dropped to a five-year, with the USDJPY rising above 116 as speculation the global economic recovery will weather omicron saps demand for haven assets. Japanese bonds declined before debt auctions later this week. Options pricing suggests there may be more gains for the dollar in a rally against the yen that’s already taken it to the strongest since 2017.
In rates, 10-year Treasury yield spiked to 1.66% after surging 12 basis points on Monday, the biggest jump to start a year since 2009. The two-year rate was at 0.77%. Treasury yields were cheaper by up to 1.5bp across front- and belly of the curve with long-end yields slightly richer vs. Monday close. IG dollar issuance includes a number of bank names headed by NAB 5-part offering. Three-month dollar Libor +0.69bp at 0.21600%. Bunds richen 1.5bps across the belly with a mixed peripheral complex with expectations for a busy issuance slate ahead. Gilts underperform, playing catch up to Monday’s move in bunds and treasuries, cheapening as much as 10bps across the curve with 10s near 1.07%.
Looking beyond the current risk-on momentum, traders expect Fed tightening to further boost yields and reset equity valuations. This week’s U.S. December payroll data and minutes from the Fed’s meeting last month may throw more light on the pace of such shift.
“We expect 2022 to be far more challenging from an investment perspective,” Heather Wald, vice president at Bel Air Investment Advisors, said in an emailed note. “Rarely has a market delivered three consecutive years of double-digit returns, as we have seen from 2019-2021. With the Federal Reserve set to accelerate tightening and a fairly valued stock market, we anticipate more muted returns for the S&P next year but still expect equities to remain attractive versus other liquid asset classes.”
In commodities, crude futures flip a short-lived dip to rise ~0.7%. WTI trades near best levels of the session close to $76.70, Brent near $79.50 ahead of today’s OPEC+ gathering. Spot gold trades a tight range, holding above $1,800/oz. Base metals are mixed, LME copper underperforms.
U.S. economic data slate includes the December ISM manufacturing survey, which will show the early impact of the variant on supply chains, while the JOLTS data will show the balance between job openings and unemployment numbers; also this week brings ADP employment change, durable goods orders and December jobs report.
Market Snapshot
S&P 500 futures up 0.3% to 4,799
STOXX Europe 600 up 0.5% to 492.53
German 10Y yield little changed at -0.13%
Euro little changed at $1.1307
MXAP up 0.9% to 194.72
MXAPJ up 0.6% to 633.00
Nikkei up 1.8% to 29,301.79
Topix up 1.9% to 2,030.22
Hang Seng Index little changed at 23,289.84
Shanghai Composite down 0.2% to 3,632.33
Sensex up 1.1% to 59,815.19
Australia S&P/ASX 200 up 1.9% to 7,589.76
Kospi little changed at 2,989.24
Brent Futures up 0.4% to $79.26/bbl
Gold spot up 0.3% to $1,806.40
U.S. Dollar Index little changed at 96.18
Top Overnight News from Bloomberg
Treasury traders are betting the rapid spread of omicron will increase inflationary pressures in the U.S. economy, rather than weaken them
Global central banks are set to spend 2022 diverging, as some take on the menace of inflation and others stay focused on boosting economic growth
French inflation stabilized in December, indicating price pressures may be near a peak in the euro area after surging on energy costs in the past few months
OPEC and its allies are poised to revive more halted oil production when they meet on Tuesday after predicting a tighter outlook for global markets
A more detailed breakdown of global markets courtesy of Newsquawk
Asia-Pac stocks eventually traded mixed on the first trading session of the year for most bourses, with the region catching some tailwinds from the positive Eurozone and US sessions on Monday. On Wall Street, the Nasdaq outpaced with gains of 1.2% as Apple became the first-ever public company to reach USD 3tln in market value, whilst Tesla shares were catapulted 13.5% after beating Q4 delivery expectations despite the chip shortage and in spite of last week's mass recall. US equity futures overnight resumed trade with a mild positive bias and thereafter drifted higher - with the US ISM Manufacturing PMI, FOMC Minutes, US labour market report and Fed speakers all on this week’s docket. The ASX 200 (+2.0%) saw gains across its Energy, Mining, Tech and Financial sectors. The Nikkei 225 (+1.8%) briefly dipped under 29k before rising to session highs – with Autos among the top gainers amid a similar performance Stateside, whilst the softer JPY underpinned the index. The KOSPI (U/C) was flat in early trade but thereafter swung between gains and losses. In China, the Shanghai Comp (-0.2%) gave up early gains on its first trading day of 2022 following a CNY 260bln daily liquidity drain by the PBoC, whilst reports also suggested that China is facing USD 708mln cash demand this month, +18% Y/Y according to calculations, amid maturing debt and seasonal demand for cash ahead of the Lunar New Year on 1st February. The Hang Seng (+0.1%) kicked off its second day of trade the year in the green after Monday’s losses. China Evergrande shares resumed trade with gains of 5% after it yesterday suspended its Hong Kong shares in a bid to raise cash and following the order to demolish 39 buildings. Meanwhile, Hong Kong-listed and US-blacklisted AI firm SenseTime shares rose another 20% to almost triple its IPO price. In fixed income, US 10yr Mar'22 futures saw some light buying in early trade, with some suggested regional Asia demand following the heavy cheapening on Monday, albeit this early mild upside faded.
Top Asian News
Amazon Plays Down Reports It’s Pulling Kindle From China
H.K. Finds One Prelim. Local Case With Unknown Source: HK01
China High-Yield Dollar Bonds Fall 1-2 Cents; Developers Lead
China South City USD Bonds Slump; Firm Denies Debt-Swap Report
European equities trade on a firmer footing with the Stoxx 600 (+0.8%) once again at a record high. The FTSE 100 leads the charge within the region; however, this is largely on account of a catch-up play from yesterday’s bank holiday. Initially to the downside resided the SMI (+0.1%) as the only major bourse in the red amid losses in index-heavyweight Roche (-1.4%); however, this has abated modestly throughout the morning. The lead from the APAC region was a mixed one as the Nikkei 225 (+1.8%) benefited from a softer JPY, the ASX 200 (+1.95%) was lifted by gains in Energy, Mining, Tech and Financial sectors, whilst Chinese bourses (Hang Seng +0.1%, Shanghai Comp. -0.2%) were kept subdued by a PBoC liquidity drain and unable to benefit from an unexpected expansion in the December Chinese Caixin Manufacturing PMI. Stateside, futures are modestly firmer across the board (ES +0.4%, NQ +0.4%, RTY +0.5%) after yesterday’s session which was characterised by Nasdaq outperformance, +1.2%, as Apple became the first-ever public company to reach USD 3tln in market value, whilst Tesla shares were catapulted 13.5% after beating Q4 delivery expectations. In a recent note, analysts at JP Morgan stated they are of the view that there is further upside for stocks as the Omicron variant appears to be milder than previous strains and the impact on mobility is more manageable than previous ones. Furthermore, the bank suggests that there are signs that constraints in supply chains are passing their peak and power prices are easing. Sectors in Europe are mostly firmer with Travel & Leisure names clearly top of the pile UK as airline names benefit from ongoing optimism about the Omicron variant’s impact on mobility and a December passenger update from Wizz Air which has sent its shares higher by 10.1%. Of note for the European banks (which are also a notable gainer on the session), Citigroup is “overweight” on the sector for the upcoming year, citing profit growth, interest rate hikes and potential for capital returns. In terms of specific names, BNP Paribas, Lloyds and UBS were flagged as top picks. Elsewhere, other cyclically-led sectors such as Autos, Oil & Gas and Basic Resources are also trading on a firmer footing. To the downside, Healthcare names sit in the red amid aforementioned losses in Roche, whilst Sanofi (-0.7%) are also seen lower after flagging that Q4 2021 vaccine sales are expected to be lower on a Y/Y basis. Finally, Rolls-Royce (+3.6%) is seen higher on the session after concluding the sale of Bergen Engines.
Top European News
Italy Starts Search for New President With Draghi as Contender
U.K. Mortgage Approvals Fall to 66,964 in Nov. Vs. Est. 66,000
Ukraine Says Russia Reinforced Military Units in Occupied Donbas
European Gas Prices Jump a Second Day as Russian Shipments Drop
In FX, the Dollar index looks comfortable enough above 96.000 within a 96.336-146 range after eclipsing yesterday’s best (96.328) marginally, but the technical backdrop remains less constructive given its failure to end last week (and 2021) above a key chart level at 96.098. Nevertheless, the most recent spike in US Treasury yields has given the Greenback sufficient impetus to claw back losses, and in DXY terms fresh incentive to rebound firmly or extend gains against funding currencies in particular ahead of the manufacturing ISM and the remainder of a hectic first week of the new year that culminates in NFP and a trio of scheduled Fed speakers, but also comprises minutes of the December FOMC taper and more hawkishly aligned tightening policy meeting.
JPY/AUD - As noted above, low yielders are underperforming or lagging in the current environment, and the Yen is also succumbing to the increasingly divergent BoJ vs Fed trajectory that is exacerbating technical forces behind the rally in Usd/Jpy to new 5 year highs just shy of 115.90. Stops are said to have been triggered during the latest leg up and there is little of significance in terms of resistance ahead of 116.00, while option expiry interest is relatively light until 1.13 bn at the half round number above. Conversely, the Aussie has been boosted by higher coal prices overnight and an unexpected return to growth from contraction in China’s Caixin manufacturing PMI, with Aud/Usd trying to establish a base around 0.7200 in wake of an upward revision to the final manufacturing PMI.
GBP/NZD/EUR/CHF/CAD - The Pound is next best major, but mainly due to Gilts playing catch-up following Monday’s UK Bank Holiday and only in part on the back of an upgrade to the final manufacturing PMI allied to better than forecast BoE data including consumer credit, mortgage lending and approvals. Cable is probing 1.3500 and Eur/Gbp is edging towards 0.8360 even though the Euro has regained some poise against the Buck to retest 1.1300 with some traction gleaned from stronger than anticipated German retail sales and jobs metrics. Back down under, the Kiwi is trying to keep tabs on 0.6800 in the face of Aud/Nzd headwinds as the cross climbs over 1.0600, while the Franc is holding above 0.9200 post-Swiss CPI that was close to consensus and the Loonie is meandering between 1.2755-23 parameters pre-Canadian PPI and Markit’s manufacturing PMI against the backdrop of firmer crude prices.
In commodities, WTI and Brent are firmer this morning and have been grinding towards fresh highs throughout the European session after slightly choppy APAC trade; currently, the peaks are USD 76.82/bbl and USD 79.67/bbl respectively. Newsflow has been fairly slow throughout the morning with catch-up action occurring for participants. Today’s focal point for the space is very much the OPEC+ gathering; albeit, this is expected to result in a continuation of the existing quota adjustments of 400k BPD/month. Thus far, the JTC has reviewed market fundamentals and other developments determining that the Omicron variant’s impact is expected to be both mild and short-term. For reference, today’s timings are 12:00GMT/07:00EST for the JMMC and 13:00GMT/08:00EST for OPEC+ - though, as always with OPEC, these serve only as guidance. While the main decision is expected to be a straightforward one, there is the possibility that underproduction by certain members could cause some tension. Elsewhere, spot gold and silver are contained with a modest positive-bias but are yet to stray too far from the unchanged mark with spot gold, for instance, in a sub-USD 10/oz range just above USD 1800/oz. Separately, coal futures were notable bid in China following reports that Indonesia, a large supplier to China, has banned exports for the month, given domestic power concerns.
US Event Calendar
10am: Nov. JOLTs Job Openings, est. 11.1m, prior 11m
10am: Dec. ISM Employment, est. 53.6, prior 53.3
ISM New Orders, est. 60.4, prior 61.5
ISM Prices Paid, est. 79.2, prior 82.4
ISM Manufacturing, est. 60.0, prior 61.1
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