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[Markets] Futures Slide As Recesson Fears Trump Tariff Optimism Futures Slide As Recesson Fears Trump Tariff Optimism

The rally that pushed stocks well above 3,800 during Monday's illiquid session when US cash stocks were closed for July 4 amid speculation that Biden was about to rollback many Chinese tariffs (unclear how this would help ease inflation but a move that the market clearly read as risk positive), fizzled as soon as Europe opened this morning and alongside the tumbling euro which plunged to a 20-year-low and approached parity with the USD on growing recession fears, also dragged US equity US futures lower as investors turned their focus back to the looming recession, which outweighed optimism around an improvement in Washington’s ties with Beijing. Contracts on the Nasdaq 100 were down 0.7% by 730 a.m. in New York, while S&P 500 futures slipped 0.6%. The cash market was closed for a holiday on Monday.  10Y TSY yields swung from gains to losses before trading 2bps higher around 2.90% while bitcoin rose, and traded around $20K after dropping below $19K over the weekend.

US markets are set to reopen Tuesday after capping 11 declines in the past 13 weeks as an unprecedented first-quarter contraction boosted the prospects of a recession to near certainty. At the same time, consumer prices are far from peaking with inflation surging to 8.6% in May that left little room for the Federal Reserve to slow monetary tightening.  

Sentiment was lifted on Monday as senior US and Chinese officials discussed US economic sanctions and tariffs amid reports the Biden administration is close to rolling back some of the trade levies imposed by President Donald Trump. While that came as a relief, investors continued to fret over a potential US recession, stubborn inflation and monetary tightening. Economic reports in Europe, including French purchasing managers’ indexes, came in below estimates.

“The Fed will likely remain aggressive in its fight against inflation for now,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “At the same time, European growth is slowing down fast. This just puts additional fire on the growth concerns about the US.”

“The government is very conscious that they need to act on the supply side of the inflation issue because the Fed has been slamming the brakes on the demand side whereas the real issue is on the supply side,” said Deepak Mehra, the head of investments at the Commercial Bank of Dubai. “Trying to fix that issue is giving the market a bit of an ease and comfort that we are finally addressing the problem where it is and not giving the wrong medicine,” he said in an interview with Bloomberg TV.

Among notable moves in premarket trading, cryptocurrency-exposed stocks edged higher as Bitcoin briefly traded above the closely watched $20,000 level.  Recession fears echoed in US premarket trading, where Carnival Corp. and ASML Holding NV dropped more than 4% each. Meanwhile, Morgan Stanley strategists led by Michael Wilson said the US economy is firmly in the middle of a slowdown that’s turning out to be worse than expected amid the war in Ukraine and China’s Covid Zero policy. “Any fall in rates should be interpreted as more of a growth concern rather than as potential relief from the Fed,” they wrote in a note. Here are some other notable premarket movers:

  • Cowen (COWN US) shares jump as much as 14% in US premarket trading, following a report late Friday that Canadian bank Toronto-Dominion was said to be exploring a takeover of the brokerage. Piper Sandler says that a possible combination would be “reasonable” for Cowen at the right price.
  • Antero Resources (AR US) shares rise 2.8% in premarket trading after the stock was upgraded to buy from hold at Truist Securities, with the broker saying that a recent selloff in the oil company is an opportune entry point given gas and natural gas liquids are likely to remain strong.
  • Cryptocurrency-exposed stocks are gaining in US premarket trading on Tuesday as Bitcoin trades above the closely watched $20,000 level. Coinbase (COIN US) +1.4%, Riot Blockchain (RIOT US) +1.9%, Marathon Digital (MARA US) +2.4%, MicroStrategy (MSTR US) +2.8%, Ebang (EBON US) +5.9%
  • Tesla (TSLA US) shares fall 0.8% in premarket trading, though analysts note that the electric vehicle company’s record production in June is a silver lining in an otherwise disappointing quarter of deliveries.
  • Netflix (NFLX US) shares decline 0.8% in premarket trading as Piper Sandler cuts PT to $210 from $293, reiterating neutral recommendations, while estimating that the company’s ad-supported tier, which is expected to launch by year-end, represents a quarterly revenue opportunity of about $1.4 billion.

Most European equity indexes slumped over 1% with miners, autos and insurance names among the worst-performing Stoxx 600 sectors. CAC 40 and FTSE 100 lag, dropping as much as 1.4%. Miners underperformed the broader European market on Tuesday amid concerns over the risks of a global recession and the blow it would deliver to demand for raw materials. Copper fell to the lowest level in 17 months and traded solidly below $8,000 a ton, as sentiment remains sour toward the industrial material used in everything from construction to new energy vehicles. Stoxx 600 Basic Resources sub-index declines 1.6% as of 9:42am in London, led lower by miners like Antofagasta, KGHM and Anglo American, even as iron ore rises after a four-day slide. Broader European benchmark is down 0.4%. The Stoxx 600 energy sub-index slides 1.3% after rising most since May on Monday. TotalEnergies drops 1.6%, BP -1.1%, Shell -1.3%. Shares in renewable fuel producer Neste outperform, rising 1.3%. The Stoxx 600 Automobiles & Parts Index dropped 1.5%, the third-worst performing subgroup in the broader European equity market. Automakers had their worst June sales in decades in the UK, while German new-car registrations also plunged. Here are some of the biggest European movers today:

  • Miners and energy shares underperform the broader European market on Tuesday amid concerns over the risks of a global recession and the blow it would deliver to demand for raw materials.
  • KGHM shares decline as much as 6.7%, Anglo American -4.5%, TotalEnergies -2.5%, Shell -2.2%
  • Rheinmetall shares fall as much as 6.1%; Deutsche Bank expects 2Q at the lower end of the guidance range for the quarter while most-in-focus unit Defence will likely trend above.
  • SAS falls as much as 15% after the company announced it was filing for chapter 11 bankruptcy protection in the US.
  • European media stocks slide after Goldman Sachs slashed earnings forecasts across its media and internet coverage to factor in a more cautious macro outlook. Prosieben drops as much as 9.5%, Publicis -4.5%
  • Uniper shares edged lower, paring earlier gains of as much as 11%, as analysts speculated on what a possible government bailout might look like.
  • Dechra Pharmaceuticals advances as much as 4.5% on Tuesday after RBC upgrades to outperform in note in which it describes the stock as the “pick of the litter.”
  • Cellnex Telecom shares rise as much as 5% following a Bloomberg News report that a KKR-led consortium is emerging as the frontrunner to buy a stake in Deutsche Telekom’s tower unit, beating out a rival bid from Cellnex and Brookfield Asset Management that had been viewed negatively by analysts.
  • Lonza Group climbs as much as 3.8% after it got upgraded to buy from neutral at Citi, citing the market’s under-appreciation of demand for biologics manufacturing.
  • PGS shares soar as much as 20% as Pareto Securities upgrades the oilfield services firm to buy following a period under review, with the broker saying that “the future is looking brighter” for the company.

The euro extended its losses, tumbling to the lowest level since 2002 against the dollar. It also slid to the weakest since January 2015 against the Swiss franc.

Earlier in the session, Asian equities were modestly higher Tuesday as China’s stocks gave back early gains after initial enthusiasm about the country’s improving ties with the US waned.  The MSCI Asia Pacific Index rose as much as 0.8% before narrowing the advance to 0.2% as of 6:14 p.m. in Singapore. Energy and health care shares were among the gainers.  Chinese shares fell, after the province of Anhui reported more than 200 Covid cases for Monday and market participants assessed whether the potential scrapping of US tariffs on Chinese goods would help address global inflation concerns. The US 10-year Treasury yield trimmed an intraday advance over recession worries, giving tech shares a slight boost.

Australia’s main index edged higher as the domestic central bank met market expectations by raising interest rates a half-percentage point and suggesting that inflation may peak this year. Benchmarks in the Philippines and South Korea led gains in Asia, with each rising at least 1.8%.  “The easing of tariffs -- if confirmed -- comes at the dream timing to save its economy from the endless virus battle,” said Hebe Chen, an analyst at IG Markets, referring to the China. “Even though it may not stop the downtrend, it could at least slow the pace and restore the world’s confidence in the second-largest economy.” Meanwhile, Thailand’s gauge was the latest to enter a technical correction. Asian stocks have been stuck in range-bound trading since the end of April as markets digest higher interest rates, the possibility of a recession in advanced economies and continued virus flareups in China. The MSCI regional gauge is down more than 18% this year

In Australia, the central bank raised its key interest rate as expected to 1.35%. It’s among more than 80 central banks to have raised rates this year. The nation’s dollar weakened after the decision.

Key equity gauges in India pared early advances to close lower as worries over an economic recession weighed on the sentiments.  The S&P BSE Sensex dropped 0.2% to 53,134.35 in Mumbai, while the NSE Nifty 50 Index also dropped by the same magnitude. Stocks rose earlier in the day, tracking advances in Asian peers on the possibility of US rolling back some levies on China. A fast progress of monsoon rainfall, which waters most farmland in India, along with quarterly earnings for top companies that start this week added to the sentiment.   Consumer goods maker ITC was the biggest drag on the Sensex, falling 1.7%. Seven of BSE Ltd.’s 19 sectoral sub-gauges declined, led by information technology companies.    Asia’s biggest software exporter Tata Consultancy Services, will kickoff the April-June earnings season for companies on Friday

In FX, the Bloomberg Dollar Spot Index advanced for a third day as the greenback gained against all of its Group-of-10 peers. Treasuries were mixed. The single currency fell as much as 0.9% to 1.0331, its weakest level since December 2002, with losses compounded by poor liquidity and selling in euro-Swiss franc. German bond curve bull steepened and money markets trimmed ECB tightening bets to less than 140 basis points this year after French services PMI was revised lower. That’s down from more than 190 basis points almost three weeks ago, widening the interest-rate differential with the Federal Reserve. Scandinavian currencies were also dragged down by the euro sell-off and were leading G-10 losses against the greenback. Cable fell amid broad- based dollar strength. Bank of England rate-setter Silvana Tenreyro speaks later Tuesday and the BOE will issue its financial stability report. The Australian dollar extended a slump on the back of the broad-based US dollar strength. The Aussie had already given up gains after the RBA increased its cash rate to 1.35% as expected. It had risen earlier amid reports the US will roll back tariffs on some Chinese goods. The yen pared an Asia session loss as risk sentiment worsened.

In rates, Treasuries were off session lows reached during Asia session, remain under pressure as US markets reopen after Monday’s holiday, giving back a portion of Friday’s steep gains. Five- and 10-year yields remain below 50-DMA levels while 2- and 30-year are back above. Yields higher by as much as 6bp at short end vs ~3bp at long end after rising as much as 13bp and 9bp, respectively. 2s10s curve is slightly positive after briefly inverting for first time since mid-June; 5s30s spread ~22bp after reaching widest level since May 31 on Friday. Short-end Germany richens over 10bps, outperforming gilts. Cash USTs fade Asia’s gains. Peripheral spreads widen to core with short-end Italy underperforming.

In commodities, brent crude swung between gains and losses, last trading Brent down 1.5% near $111.78, while WTI rose after a long holiday weekend in the US with investors weighing still-strong underlying market signals against concerns a recession will eventually sap demand. Most base metals trade in the red; LME aluminum falls 2.8%, underperforming peers. Spot gold falls roughly $5 to trade near $1,803/oz.

Bitcoin resides underneath the USD 20k mark and at session lows of 19.4k amid the broader risk tone. BoE Financial Stability report said falling crypto markets expose vulnerability, but not stability risk overall.

To the day ahead now, and data highlights include the global services and composite PMIs for June, as well as the ISM services index from the US. Otherwise, there’s French industrial production for May and US factory orders for May. From central banks, the BoE will be releasing their Financial Stability Report and we’ll also hear from the BoE’s Tenreyro.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,814.75
  • STOXX Europe 600 down 0.3% to 408.04
  • MXAP up 0.3% to 157.72
  • MXAPJ up 0.2% to 521.38
  • Nikkei up 1.0% to 26,423.47
  • Topix up 0.5% to 1,879.12
  • Hang Seng Index up 0.1% to 21,853.07
  • Shanghai Composite little changed at 3,404.03
  • Sensex up 0.3% to 53,387.68
  • Australia S&P/ASX 200 up 0.3% to 6,629.33
  • Kospi up 1.8% to 2,341.78
  • German 10Y yield little changed at 1.27%
  • Euro down 0.8% to $1.0338
  • Brent Futures up 0.4% to $114.01/bbl
  • Gold spot down 0.3% to $1,803.33
  • U.S. Dollar Index up 0.64% to 105.81

Top Overnight News from Bloomberg

  • Senior US and Chinese officials discussed US economic sanctions and tariffs Tuesday amid reports the Biden administration is close to rolling back some of the trade levies imposed by former President Donald Trump
  • UK automakers had their worst June sales in decades in the UK as ongoing components shortages kept them from meeting demand. New-car registrations declined by 24% to 140,958 vehicles, the lowest for the month since 1996, according to data from the Society of Motor Manufacturers and Traders
  • Italy declared a state of emergency in five northern and central regions devastated by a recent drought, as a severe heat wave takes its toll on agriculture and threatens power supplies

A more detailed summary of global markets courtesy of newsquawk

Asia-Pac stocks traded mostly positive amid a pick-up from the holiday lull although Chinese markets faltered. ASX 200 was led by the tech and commodity-related sectors with further support from a lack of hawkish surprise from the RBA. Nikkei 225 was propelled by a weaker currency but pulled back from early highs after hitting resistance around the 26,500 level and following softer-than-expected wages data. Hang Seng and Shanghai Comp. were both initially lifted following reports US President Biden could make a decision on rolling back some China tariffs as soon as this week and with Vice Premier Liu He said to have had a constructive exchange with US Treasury Secretary Yellen on the economy and supply chains. Furthermore, participants also welcomed the strong Caixin Services and Composite PMI data, although the advances in the mainland were then pared as the central bank continued to drain liquidity and amid lingering COVID concerns.

Top Asian News

  • PBoC injected CNY 3bln via 7-day reverse repos with the rate at 2.10% for a CNY 107bln net drain.
  • China is to set up a CNY 500bln state infrastructure investment fund and will issue 2023 advance local government special bonds quota in Q4, according to Reuters sources.
  • Chinese Premier Liu He spoke with US Treasury Secretary Yellen regarding the economy and supply chains, while the exchange was said to be constructive and both sides believed in the need to strengthen communication and coordination of macro policies between China and the US, according to Reuters.
  • US Treasury Department confirmed Treasury Secretary Yellen held a virtual meeting with China's Vice Premier Liu He as part of efforts to maintain open lines of communication, while they discussed macroeconomic and financial developments in both China and US, as well as the global economic outlook and food security challenge. Furthermore, Yellen raised issues of concern including the impact of Russia's war against Ukraine on the global economy and "unfair, non-market PRC economic practices", according to Reuters.
  • RBA hiked the Cash rate Target by 50bps to 1.35%, as expected, while it reiterated that the board expects to take further steps in the process of normalising monetary conditions with the size and timing of future interest rate increases will be guided by the incoming data and the board's assessment of the outlook for inflation and the labour market. Furthermore, the central bank noted that Australian inflation was high but was not as high as in other countries and it forecast inflation to peak this year before declining back towards the 2-3% range next year.

European bourses are pressured across the board, Euro Stoxx 50 -0.8%, as a broader risk-off move takes hold despite a relatively constructive APAC handover and limited newsflow in European hours. A move that has impaired US futures, ES -0.4%, as we await the lead from stateside participants re-joining after the long-weekend with a quiet schedule ahead. European sectors are predominantly in the red, though the clear defensive bias is keeping the likes of Food and Healthcare afloat.

Top European News

  • UK faces its first national train drivers' strike in 25 years with the head of the UK train drivers' union warning of 'massive' disruption as members vote on their first strike since 1995, according to FT.
  • BoE Financial Stability Report (July): will raise the counter-cyclical capital buffer rate to 2% in July 2023. Click here for more detail.
  • Ukraine Latest: Turkey Renews Threat to Veto NATO Expansion
  • Bunds Bull Steepen, ECB Hike Bets Pared After French PMI Revised
  • UK Train Drivers Would Make Threatened Strikes National: Union

FX

  • DXY sets new 2022 best above 106.000 after taking time out to mark US Independence Day, reaches 106.24 before waning marginally.
  • Euro slumps to fresh multi-year lows as EGBs rebound strongly and risk appetite evaporates; EUR/USD probes 1.0300, EUR/CHF sub-0.9950 and EUR/JPY below 140.00.
  • Aussie underperforms irrespective of 50bp RBA rate hike as accompanying statement sounds less hawkish on inflation; AUD/USD under 0.6800 from close to 0.6900 overnight and AUD/NZD cross retreats through 1.1050.
  • Pound down regardless of upgrades to final UK services and composite PMIs as Buck rallies broadly and BoE’s FSR flags material deterioration in global economic outlook, Cable beneath 1.2050 from circa 1.2125 peak.
  • Yen holds up better than others amidst Greenback strength on risk and rate grounds; USD/JPY eyes support into 135.50 vs 136.00+ at the other extreme.

Fixed Income

  • Bonds on course for a turnaround Tuesday after marked retreat from pre-weekend peaks on Independence Day.
  • Bunds back above 150.00 from 148.72 low and Friday's 151.65 high, Gilts reclaim 115.00+ status within 116.58-114.60 range and 10 year T-note above 119-00 between 119-20+/118-23 parameters.
  • UK 2051 and German 2033 linker supply reasonably well received, but yields considerably higher.

In commodities

  • Crude benchmarks were fairly resilient to the broader risk tone, but have most recently succumbed to the pressure and are at the lower-end of a USD 3-4/bbl range.
  • Reminder, the lack of settlement due to the US market holiday is causing some discrepancy between WTI and Brent, though they are directionally moving in tandem.
  • UAE’s ADNOC set Murban crude OSP for August at USD 117.53/bbl vs prev. USD 109.68/bbl in July, according to Reuters.
  • Norway's Lederne union said the strike in the Norwegian oil sector had begun, according to Reuters.
  • Saudi Aramco has increased all oil prices for customers in August; sets Aug light crude OSP to Asia at +9.30/bbl vs Oman/Dubai average, according to Reuters sources; NW Europe set at +USD 5.30 vs. ICE Brent; US set at +USD 5.65 vs. ASCI.
  • Russian Deputy Chair of the Security Council Medvedev says the Japanese proposal to cap Russian oil prices would lead to higher global prices, oil prices could increase to over USD 300-400/bbl, via Reuters.
  • Chile’s Codelco copper output fell 6.3% Y/Y in May to 142.9k tonnes, while Chile’s Collahuasi mine copper output fell 15.4% to 49k tonnes and Chile’s Escondida copper output rose 26% to 106.9k tonnes, according to Cochilco cited by Reuters.
  • Russian billionaire Potanin says he is ready to discuss a possible merger of Nornickel with Rusal, via Reuters citing RBC TV; UK sanctions on him do not target Nornickel, Co. is still working under pressure.
  • Spot gold is impaired by the rampant USD action, pressure seen in base metals as well on such dynamics and LME copper now below 8k/T.

 

US Event Calendar

  • 10:00: May -Less Transportation, est. 0.7%, prior 0.7%
  • 10:00: May Cap Goods Ship Nondef Ex Air, prior 0.8%
  • 10:00: May Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.5%
  • 10:00: May Factory Orders Ex Trans, prior 0.3%
  • 10:00: May Factory Orders, est. 0.5%, prior 0.3%
  • 10:00: May Durable Goods Orders, est. 0.7%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

I can only apologise in advance for the next few weeks! The Global Institutional Investor Awards will open later this afternoon and not to put it too bluntly we’d like to do well. So if you value our research please vote if you can. More details to follow when the poll opens.

It’s been a quieter 24 hours for markets thanks to the US holiday, but the market remains confused about how to price fixed income in an environment where a recession is coming at some point. We've seen a big yield sell-off to start the week even if equities have stabilised, with a fresh rise in energy prices only adding to concerns about how different economies (particularly in Europe) will fare this winter if Russia cuts off the flow of gas. Overnight the US 2s10s curve has inverted again, the RBA has hiked 50bps as expected and Chinese PMI data has massively beat expectations so a few things going on even in a quieter trading period.

We’ll start with markets in Europe since they were open yesterday. The biggest story there was a sizeable selloff among sovereign bonds as they gave up some of their gains over the last couple of weeks. Yields on 10yr bunds were up +10.1bps, but they were one of the better performers given the risk-off tone and yields on 10yr OATs (+12.7bps) and BTPs (+15.8bps) saw even larger rises, which followed comments from Bundesbank president Nagel who said that it was “virtually impossible to establish for sure whether or not a widened spread is fundamentally justified”. Nevertheless, Nagel did not entirely rule out an anti-fragmentation instrument but said that this “can be justified only in exceptional circumstances and under narrowly-defined conditions.”

This question of how the ECB will deal with a potential widening in spreads is set to come increasingly to the fore as they almost certainly embark on their first hiking cycle in over a decade this month. And yesterday we heard some further comments from ECB officials on that hiking cycle, with Estonia’s Muller pushing back against the calls from others to start with a 50bps hike, saying that it was appropriate to begin with a 25bps move in July, and then 50bps in September as they’ve signalled. In line with the rise in sovereign bond yields, overnight index swaps priced in a slightly more aggressive series of hikes from the ECB, with the rate implied by December up by +7.1 bps on the day.

Whilst the ECB is set to hike rates, their life is being made significantly more difficult by the ongoing energy shock that’s creating increasingly stagflationary conditions. Unfortunately, there was more bad news on that front yesterday, with natural gas futures up by another +10.26% to €163 per megawatt-hour, which is their highest rate since early March and more than double their recent low in early June. Matters haven’t been helped by a planned strike in Norway that puts around 13% of Norway’s daily gas exports at risk, according to the Norwegian Oil and Gas Association, which comes ahead of next week’s scheduled maintenance of the Nord Stream pipeline, which will last from July 11-21.

When it came to equities, the main European indices mostly managed to advance, although as mentioned at the top that was partly a catch-up to the late rally on Friday afternoon in the US, and the STOXX 600 was up +0.54% thanks to a strong performance amongst energy stocks. By contrast, futures on the S&P 500 were lower throughout European trading even if they have flipped higher this morning (futures +0.36%). One similarity between the US and Europe was a slightly more hawkish path for central bank rates being priced, with Fed funds futures taking the Dec-2022 implied rate up by +3.8 bps after last week’s declines. This fits with what Henry mentioned in his latest newsletter yesterday (link here), in which he points out that the recent repricing of the hiking cycle in a more dovish direction is inconsistent with the historic pattern whereby the Fed has always taken rates above inflation as they hike. This morning, yields on US 10yrs (+6.6bps) and 2yrs (+10.8bps) are catching up the global move after the holiday leaving 2s10s very slightly inverted as we go to press.

Speaking of inflation, it was reported by Dow Jones yesterday that President Biden could ease some tariffs on Chinese imports soon, with the article saying that a decision could be announced this week. As discussed in the article and other media reports, this has apparently been a divisive issue inside the administration, since although their removal could help ease inflation, it would also give up leverage in obtaining concessions from China, so there’s geopolitical as well as economic factors at play here.

Asian equity markets are mostly trading higher this morning partly on the tariffs story above and partly on better data overall. Across the region, the Kospi (+1.13%) is leading gains followed by the Nikkei (+0.82%) and the Hang Seng (+0.41%). Bucking the trend are the mainland Chinese markets with the Shanghai Composite (-0.20%) and CSI (-0.95%) both slipping as I type, perhaps on less stimulus hopes after a big beat in the Caixin PMI (see below). Outside of Asia, US and European equities are set to follow the Asian trend with futures on the S&P 500 (+0.36%), NASDAQ 100 (+0.47%) and DAX (+0.60%) moving higher.

Early morning data showed that Japan’s services activity accelerated at the fastest pace since October 2013 as the Jibun Bank services PMI advanced to 54.0 in June from 52.6 in May. Meanwhile, Japan’s real wages (-1.8% y/y) extended its decline in May, notching its biggest contraction in two years compared to an upwardly revised -1.7% decline in April. At the same time, cash earnings rose +1.0% y/y in May (vs +1.5% market consensus, and +1.3% in April), thus adding downside risk to a consumption driven rebound in 2Q22 GDP. Moving to China, growth in the nation’s services sector surprisingly beat as the Caixin services PMI jumped to 54.5 in June, its highest level in nearly a year from 41.4 in May as Covid curbs eased. Elsewhere in the region, South Korea’s CPI rose +0.6% m/m in June (v/s +0.5% expected) and against a +0.7% increase in the prior month.

As widely anticipated, we did see policy tightening by the RBA as the central bank raised its cash rate by 50bps to 1.35% as it moves to tame strengthening inflation. This is the third consecutive increase of the cash rate. The AUD/USD pair was little changed in an immediate reaction.

There wasn’t a massive amount of data yesterday, although we did get German trade figures that showed the country had a monthly trade deficit in goods in May for the first time since 1991. That was thanks to higher import costs as a result of the recent commodity shocks, alongside disruptions to trade from factors including sanctions on Russia, which left the monthly deficit at €1.0bn.

To the day ahead now, and data highlights include the global services and composite PMIs for June, as well as the ISM services index from the US. Otherwise, there’s French industrial production for May and US factory orders for May. From central banks, the BoE will be releasing their Financial Stability Report and we’ll also hear from the BoE’s Tenreyro.

Tyler Durden Tue, 07/05/2022 - 08:03
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[Markets] Chevron, Caterpillar and Merck are top gainers as Dow rises by 65 points Chevron, Caterpillar and Merck are top gainers as Dow rises by 65 points Published:6/27/2022 10:36:57 AM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks soared last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) bounced off their lows to gain roughly 6%. Investors became a bit less pessimistic ahead of the upcoming flood of Q2 earnings reports. Let's look at a few metrics that should stand out in reports on the way from Nike (NYSE: NKE), McCormick (NYSE: MKC), and Constellation Brands (NYSE: STZ). Published:6/26/2022 9:06:52 AM
[Markets] Dow ends up 800 points Friday as stocks notch strong weekly gains Dow ends up 800 points Friday as stocks notch strong weekly gains Published:6/24/2022 3:53:39 PM
[Markets] Dow Jones Futures Rise After Nasdaq Leads Uneven Market Rally Dow Jones futures rose solidly Friday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally attempt made progress Thursday, especially on the Nasdaq, amid some hints that inflation is peaking. Published:6/24/2022 6:52:02 AM
[Markets] The S&P 500 Is Down 24%: These 3 Indicators Suggest It Has Further to Fall There's no beating around the bush: This has been one of the roughest starts to a year in stock market history. Since each of the three respective major U.S. indexes hit their all-time closing highs, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) have plunged by as much as 19%, 24%, and 34%, respectively, through June 20, 2022. With peak-to-trough declines well in excess of 20%, the Nasdaq and S&P 500 are firmly entrenched in a bear market. Published:6/24/2022 4:44:56 AM
[Markets] Dow Jones Futures: Nasdaq Leads Market Rally As Recession Fears Rock This Sector Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally attempt made progress Thursday, especially on the Nasdaq, amid some hints that inflation is peaking. Published:6/23/2022 6:25:08 PM
[Markets] Dow Jones Erases Early Gains; Indexes On Track For Steep Weekly Losses; China Stocks Outperform The indexes were mixed as the Dow Jones reversed lower after opening higher early Friday. But the Nasdaq remained in the green. Published:6/17/2022 11:51:19 AM
[Markets] Federal Reserve Meeting: 4 Key Questions Will Shape Dow Jones Outlook This week's Federal Reserve meeting may shift views about how high rates will go and how low the Dow Jones may go. Published:6/14/2022 6:53:04 AM
[Markets] Dow finishes up over 250 points as stocks book back-to-back gains Dow finishes up over 250 points as stocks book back-to-back gains Published:6/8/2022 5:53:39 AM
[Markets] Dow Jones Futures: Treasury Yields Jump; 7 Top Stocks To Buy And Watch Now Dow Jones futures were little changed after Monday's stock market action. The 10-year Treasury yield jumped back above 3%. Published:6/7/2022 12:53:49 AM
[Markets] Dow ends down 350 points as major stock indexes skid to weekly losses Dow ends down 350 points as major stock indexes skid to weekly losses Published:6/4/2022 2:54:09 PM
[Markets] Dow Jones Lower Despite Better-Than-Expected May Jobs Report The indexes opened lower but remained above key levels of support. The Dow Jones fared the best while the Nasdaq struggled. Published:6/3/2022 9:54:59 AM
[Markets] 3 Dow Stocks That Are Screaming Buys in June Following a big pullback, the Dow Jones Industrial Average is housing three amazing values in plain sight. Published:6/2/2022 4:53:33 AM
[Markets] Why the Dow finally bounced this week — and is this market resilience for real? Why the Dow finally bounced this week — and is this market resilience for real? Published:5/28/2022 8:53:18 AM
[California] Chavez, Maduro, Biden and Newsom (John Hinderaker) In a banana republic, what do you do when your citizens don’t have enough money because of your socialist economic policies? Simple: print more money! There was a time when we thought American politics were above such insanity, but those days are gone. The Biden administration’s multi-trillion dollar money-printing spree has launched the worst inflation since the Carter administration and the longest collapse of the Dow since 1932. Nice going, Published:5/21/2022 2:55:50 AM
[] Dow Posts Biggest Loss Since 2020 In What Analysts Are Calling "Putin's Plunge" Just kidding about that last part. Tryna get hired by the Disinformation Governance Board. I heard their top spot just opened. The Dow Jones Industrial Average posted its biggest loss since 2020 on Wednesday after another major retailer warned of... Published:5/18/2022 4:55:42 PM
[Markets] Dow ends up over 400 points, Nasdaq up 3.8% Friday, but still see weekly decline Dow ends up over 400 points, Nasdaq up 3.8% Friday, but still see weekly decline Published:5/13/2022 8:55:28 PM
[Markets] Dow futures slump more than 400 points Sunday Dow futures slump more than 400 points Sunday Published:5/9/2022 12:54:44 AM
[Markets] Dow ends down over 900 points Friday as Nasdaq suffers worst month since 2008 Dow ends down over 900 points Friday as Nasdaq suffers worst month since 2008 Published:4/30/2022 1:57:33 PM
[Markets] Stocks have jumped in the last hour and the S&P 500 is up 2%, the Dow 500 points Stocks have jumped in the last hour and the S&P 500 is up 2%, the Dow 500 points Published:4/28/2022 1:50:09 PM
[Markets] Dow closes down nearly 1,000 points in worst day since October 2020 Dow closes down nearly 1,000 points in worst day since October 2020 Published:4/23/2022 1:25:20 AM
[Markets] Dow Jones Climbs As Earnings Season Kicks Off; JPMorgan Slides On Earnings Miss The Dow Jones Industrial Average rose Wednesday, as earnings season kicks off. JPMorgan stock slid after missing earnings estimates. Published:4/13/2022 9:04:47 AM
[Markets] Dow Jones Futures Reverse Lower As Earnings Season Kicks Off; JPMorgan Falls On Earnings Miss Dow Jones futures reversed lower Wednesday, as earnings season kicks off. JPMorgan stock dropped after missing earnings estimates. Published:4/13/2022 8:05:01 AM
[Markets] Dow Jones Futures Rise As Earnings Season Kicks Off; JPMorgan Falls, Delta Rallies Dow Jones futures rose Wednesday, as earnings season kicks off. JPMorgan stock dropped after missing earnings estimates. Published:4/13/2022 7:29:33 AM
[Markets] Dow, major indexes on track for biggest blown lead in more than a month Major stock indexes erased gains to turn south in afternoon trade, on track for their biggest downside reversals in more than a month. The Dow Jones Industrial Average was down 53 points, or 0.2%, at 34,256 after rising 362 points, or 1.1%, at its session high. A close in negative territory would mark its biggest blown lead since March 11, according to Dow Jones Market Data. The S&P 500 was down 0.2% after previously rising as much as 1.3%, while the Nasdaq Composite gave up a 2% gain to trade 0 Published:4/12/2022 2:24:01 PM
[Markets] Dow Jones, Nasdaq See Gains Wither; Oil Jumps As This REIT Breaks Out The Dow Jones Industrial Average rebounded in Tuesday's session after trading lower on Monday. But the indexes are still trading near intraday lows. Published:4/12/2022 1:28:36 PM
[Markets] Is the Market Correction Over? All but the Dow Jones Transports, which was the only gainer, closed at or near their intraday lows as selling pressure persisted into the close. All the major equity indexes, except for the Dow Jones Transports, closed lower Monday with negative breadth and up/down volume on the NYSE and Nasdaq. Several negative technical events were registered as the S&P 500 (see above), Nasdaq Composite, Nasdaq 100 and Russell 2000 closed below support as the DJIA and Value Line Arithmetic Index joined them in closing below their 50-day moving averages. Published:4/12/2022 10:54:13 AM
[Markets] Dow Jones Futures Climb After Key Inflation Report As White House Warned Of 'Extraordinarily Elevated' Inflation Dow Jones futures were higher Tuesday morning after a key inflation report following Monday's stock market sell-off. Published:4/12/2022 7:52:35 AM
[Markets] Dow Futures Waver, Bond Yields Rise, Inflation Data Looms—and What Else Is Happening in the Stock Market Today Stocks were under pressure from rising bond yields Tuesday as investors looked ahead to key inflation data later in the day. Stock-index futures were rebounding from earlier in the premarket session when Dow futures down were down nearly 200 points. Overseas, the pan-European declined 0.5% and Tokyo’s — which has shown itself in the past to be correlated with the Nasdaq — lost 1.8%. Published:4/12/2022 4:49:38 AM
[Markets] Dow Jones Futures: What To Do After Today's Stock Market Sell-Off Ahead Of Key Inflation Report Dow Jones futures were little changed late. Here's what to do after today's stock market sell-off ahead of Tuesday's key inflation report. Published:4/11/2022 5:49:40 PM
[Markets] Stocks close near their lows of the day, with the Dow off more than 400 points Stocks close near their lows of the day, with the Dow off more than 400 points Published:4/11/2022 3:14:43 PM
[Markets] Dow Jones, Nasdaq Trade At Intraday Lows; Treasury Yields Climb While Oil Slides Lower The Dow Jones Industrial Average continued trading near session lows as Treasury yields climbed. Tech stocks led the downside. Published:4/11/2022 2:44:46 PM
[Markets] Dow transports bounce despite broader market selloff, led by Avis Budget and Delta stock rallies The Dow Jones Transportation Average bounced 97 points, or 0.7%, with 14 of 20 components gaining ground, to buck the selloff in the broader stock market. The rally comes after the Dow transports closed Friday at a six-month low, following a 13.4% plunge in eight days amid growing fears that rapidly deteriorating market conditions could lead to a freight recession. In comparison, the Dow Jones Industrial Average has slipped just 1.6% over the same eight days. Monday's transport bounce comes whil Published:4/11/2022 1:14:44 PM
[Markets] Stocks Tank Ahead Of 'Early' OpEx, "Market Remains Under-Hedged" Stocks Tank Ahead Of 'Early' OpEx, "Market Remains Under-Hedged"

The major US equity markets have all extended losses this morning, breaking below key technical support levels.

S&P broke below its 200DMA (and is testing towards its 50DMA). Dow failed at its 100DMA and is testing down to its 50DMA. Nasdaq and Russell 2000 broke below their 50DMAs...

...all tumbling as the yield curve steepens dramatically back up to pre-March-FOMC levels (reminder, it is the un-inversion that sets the clock ticking on recession, not the inversion itself)...

And as long-duration (growthy) stocks plunge to one-month lows (or much worse on an idiosyncratic basis), with Nasdaq testing the 14,000 Maginot Line once again...

...which just happens to be exactly where the 'Put Wall' support is...

...the question is what to do tactically (strategically - as we detailed here - rotating from 'slowdown' to 'contraction' suggests investors benefit most from the old-school “Duration Barbell” approach of “Low Risk,” “Size” and “Quality” relative leadership being paired with “Growth” and “LT Momentum”).

SpotGamma notes that due to markets being closed Friday, Thursday is OPEX wherein we show ~20% of the total S&P500 gamma expiring. The decay and expiration of put positions we generally view as supportive of markets, as is the case here. While these put positions are not particularly large, their decay, along with the decline of implied volatility[IV] (i.e. VIX) can offer a light tailwind. Further, the center of attraction for this current market is that 4500-4520 (SPY 450) area due to the high gamma in that area.

Its important to note here that there is a relatively decent amount of gamma expiring, but not delta. Large deltas expiring is what drives major moves into OPEX, as deep in the money options positions are closed. Because its mainly gamma positions expiring, we view this OPEX more as a “pinning” force, rather than a large, directional “March” type move.

Finally, despite giving edge to the scenario above, we continue to flag elevated risks that will likely remain through OPEX. Markets are in a negative gamma position, with elevated IV. We think that the market remains under hedged, and a sharp downside move could set a “trap”.

This trap is the reflexive feedback loop that kicks in wherein traders buy puts which adds to dealers negative gamma position. They hedge by shorting futures, which drives markets lower. This brings more demand for puts, and higher IV, which leads to dealers needing to short incrementally.

Tyler Durden Mon, 04/11/2022 - 11:59
Published:4/11/2022 11:13:43 AM
[Markets] Dow Jones Falls; Twitter Climbs As Elon Musk Reverses Decision To Join Board; Nvidia Slides On Downgrade The Dow Jones Industrial Average fell Monday. Twitter dropped after Tesla CEO Elon Musk reversed his decision to join the Twitter board. Published:4/11/2022 9:13:13 AM
[Markets] Down 6%, Is It Safe to Invest in the Dow Jones Today? Less than a month ago it looked like the stock market was on the mend. After falling by nearly 12% between January's peak and March's trough due to rekindled pandemic worries and Russia's invasion of Ukraine, the Dow Jones Industrial Average's (DJINDICES: ^DJI) 8% rally back from that low was viewed as a ray of hope. Before you consider the answer to that question, it might be useful to first ask: What if the premise of that question itself is flawed? Published:4/11/2022 8:41:57 AM
[Markets] Dow Jones Futures Fall; Twitter Drops As Elon Musk Reverses Decision To Join Board; Nvidia Slides On Downgrade Dow Jones futures fell Monday. Twitter stock dropped after Tesla CEO Elon Musk reversed his decision to join the Twitter board. Published:4/11/2022 7:43:44 AM
[Markets] Global Risk Off As Futures, Bonds And Oil Slide; Yields Surge To 3 Year High Ahead Of CPI Global Risk Off As Futures, Bonds And Oil Slide; Yields Surge To 3 Year High Ahead Of CPI

US futures slumped on Monday amid renewed concerns around surging bond yields, high inflation and rising Covid-19 cases in China. Contracts on the technology-heavy Nasdaq 100 were down 0.8% by 7:15 a.m. in New York, with S&P 500 futures slipping 0.4% and Dow futures fell 0.2% after the French election revealed an outcome largely as expected with Macron facing Le Pen in the second round in two weeks...

... and as 10Y yield soared as high as 2.78% overnight, up almost 10bps on the day and the highest since 2019, with US yields briefly rising above China's 10Y for the first time since 2010, before reversing some of the move.

European stocks dropped and Asian stocks stumbled led by a drop in Chinese stocks which were spooked by the latest Covid outbreak on the mainland, as well as elevated factory-gate prices and regulatory concerns in the technology sector. Oil retreated on risks to demand from China’s lockdowns, as Iran said the 2015 nuclear deal is in the “emergency room.” The Bloomberg dollar index extended its streak of gains to an eighth day, the longest since March 2020, as money markets raised Fed hike wagers, sending Treasuries and U.S. stock futures lower.

“Today, the mantra for many investors is ‘Don’t fight the Fed when it is fighting inflation,’” Ed Yardeni, president of Yardeni Research, wrote in a note. “We agree with that, but it’s not as bearish as it sounds” in part because accumulated excess liquidity and an inflation boost to earnings are props for stocks, he added.

The biggest highlight of the overnight session was Twitter stock, which tumbled as much as 5% in premarket trading after Elon Musk decided not to join the board of the social media platform...

... before erasing most losses on speculation Musk could mount a takeover of the social media platform

Among other notable premarket moves, U.S.-listed Chinese stocks Nio Inc. and Li Auto Inc. declined as the electric vehicle makers halted production and warned of delivery delays amid a rising Covid-19 caseload and stringent lockdowns in China. American depository receipts of other Chinese stocks also fell. Bank stocks are slightly higher in premarket trading Monday as the U.S. 10-year yield extends gains for a seventh straight day to hit about 2.76%. In corporate news, Wall Street’s dealmaking boom likely came to an abrupt halt amid the war in Ukraine and a global shift toward rising interest rates. Here are some other notable premarket movers:

  • Donald Trump-tied social media blank check company Digital World Acquisition (DWAC US) jumps as much as 17% in premarket trading. Stock has been hit by competition concerns around Musk’s association with Twitter.
  • SailPoint (SAIL US) gained 27% premarket as the Financial Times reports that Thoma Bravo will pay $65.25 a share for the firm, citing two people with direct knowledge of the details.
  • Lowe’s (LOW US) CFO Dave Denton’s departure is an “incremental negative” for the home-improvement company, but an overweight view on the shares is still “firmly intact,” according to Wells Fargo.
  • Citi says Wells Fargo’s balance sheet stands out among U.S. banks as it upgrades to buy, in note moving to “sidelines” with downgrades for several firms including BNY Mellon (BK US) and Citizens Financial (CFG US).

Last week, the S&P 500 snapped a three-week winning streak, as signs of slowing economic growth were compounded by hawkish signals from the Federal Reserve. Focus now turns to inflation figures for March due tomorrow morning, with economists expecting consumer prices to have risen 8.4% from a year ago, the fastest annual rate since early 1982, according to a Bloomberg survey.

“While we advise investors to build up portfolio hedges and tilt toward value stocks to manage a rising rate environment, our base case is for stocks to move higher,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We continue to see areas of particular equity value for longer-term investors in 5G, robotics and smart mobility.”

For those who missed it, French President Macron (27.6%) and far-right Le Pen (23.4%) are set for a run-off in the presidential election on April 24th and all major candidates aside from far-right candidate Zemmour have called for a vote against Le Pen. Furthermore, an IFOP poll showed that Macron would win the second round with 51% of the vote, while Ipsos and Opinionway polls showed Macron would win with 54% vs Le Pen at 46% in the second round, according to Reuters. French Election Poll, second round (i.e. run-off): Macron 55% (prev. 54%) vs Le Pen 45% (prev. 46%), Opinionway-Kea partners poll.

Meanwhile, German Foreign Minister Annalena Baerbock said Ukraine needs more military support, including heavy weapons, as Ukraine reported Russian missile attacks and said it expects Russia to widen its offensive in the east this week. Some other notable developments out of Ukraine:

  • Russian President Putin is believed to have set himself four weeks to achieve some sort of a victory in Ukraine before the big Russian “Victory Day” holiday on May 9th, according to The Times on Friday. There were also reports in Axios that the May 9th Russian holiday will be a pivotal and dangerous deadline.
  • Russian Ministry of Defence alleged that Kyiv is preparing a mass murder of civilians in Luhansk with support from the West, according to Sputnik.
  • Russian Republic of Chechnya head Kadyrov said there will be an offensive not only on Mariupol but on other Ukrainian cities including Kyiv, according to Reuters.
  • Ukrainian President Zelensky discussed with German Chancellor Scholz anti-Russian sanctions, as well as defence and financial support for Ukraine. German Chancellor Scholz called for Russia to immediately pull its troops back and said that European borders must remain untouched, while he added that those who committed war crimes must be held responsible and that it is right Germany supplies Ukraine with defence weapons which it will continue doing so, according to Reuters.
  • White House National Security Adviser Sullivan said Russia’s systematic targeting of civilians in Ukraine constitutes war crimes and that Russia’s new commander in charge of the Ukrainian invasion, General Dvornikov, will author crimes and brutality against Ukrainian civilians. Sullivan added that they will get Ukraine the weapons it needs and are in talks with European allies about reducing dependence on Russian oil, according to Reuters.

Most European cash equity indexes are in the red but climb off worst levels. Euro Stoxx 50 drops as much as 1.2% before fading the move. The Stoxx 600 Index was down 0.5% as investors focused on an uncomfortably tight race for the French presidency. Technology and auto stocks underperformed. CAC 40 outperformed, rising as much as 0.9% following the weekend’s election. Tech, consumer-discretionary and auto names are the worst Stoxx 600 performers; banks and insurance outperform. Here are some of the biggest European movers today:

  • Societe Generale shares soar as much as 8.2% after the lender agreed to sell its Russian Rosbank unit, removing a major worry for investors.
  • Rheinmetall AG rises as much as 7.2% after the U.K. exercised an option in a 2019 contract to order another 100 Boxer wheeled armored vehicles.
  • Toll-road operators Vinci gains as much as 3.6% and Eiffage as much as 3.0% amid optimism that the pro-business President Emmanuel Macron will manage to beat nationalist Marine Le Pen in an April 24 run-off of French elections; Le Pen pledged to renationalize the country’s highways if elected
  • French stocks rise more broadly, with BNP Paribas gaining as much 4.1%, Veolia +4.2% and oil giant TotalEnergies +3.5%
  • Wood Group rises as much as 16% after the energy services firm said its sees its FY21 underlying results in line with expectations. Jefferies upgraded the stock to hold.
  • Nokian Renkaat slumps as much as 13% after saying new sanctions imposed on Russia by the European Union will have a significant impact on sales and production.
  • Boliden drops as much as 7.5% after announcing adjustment plans for its Aitik mine totaling SEK5b over the next two years.
  • European luxury and sports-apparel stocks, including Moncler and Puma, fall as China’s largest Covid outbreak in two years continues to spread. LVMH drops as much as -2.3%; Puma -3.8%, Moncler -5.5%

Meanwhile, the credit derivatives market ruled Russian Railways JSC to be in default after missing an interest payment last month. Russia said it would halt bond sales for the rest of the year and take legal action if sanctions force it into a sovereign default.

Asia-Pac stocks fell as Covid-19 cases climbed in Shanghai and a key U.S. Treasury yield rose to a milestone. The MSCI Asia Pacific Index slid as much as 1.5%, with tech shares among the biggest decliners as the 10-year yield touched 2.77% to exceed the equivalent rate on Chinese debt for the first time since 2010. China’s CSI 300 was among the region’s worst-performing indexes as Shanghai reported more than 26,000 daily infections Sunday and official data showed that factory-gate and consumer prices both jumped more than expected last month. China’s tech shares took an additional hit from the country’s new guidelines on removing data monopoly at platform companies, dragging the Hong Kong equity gauge. On a positive note, data released Monday showed the China’s credit expanded faster than expected in March. Still, most benchmarks across the region, excluding Pakistan’s and Australia’s, traded lower.

“It looks like another test of nerves all around, with a confluence of growth concerns, a more aggressive Fed and high inflation from supply disruptions,” said Wai Ho Leong, a strategist at Modular Asset Management. Investors are becoming increasingly uneasy about Asia’s growth prospects as China maintains its Covid-Zero policy and regulatory drive at a time when Russia’s war on Ukraine is a burden on global forecasts and driving up input costs. The MSCI Asia gauge is back to trading at levels seen in mid-March. Nomura strategists cut their end-2022 target for the MSCI Asia ex-Japan index over the weekend by about 11% to 820, citing earnings risks from elevated inflation, a hawkish Federal Reserve and the lockdowns in China. “Overall actual earnings for 2021 full-year/interims have broadly come in below market expectations, with more misses than beats,” Nomura strategists including Chetan Seth wrote in a note.

Japanese equities dropped, dragged by technology shares amid ongoing concern over the impact of the Federal Reserve’s plans to tighten U.S. monetary policy. Electronics makers and telecoms were the biggest drags the Topix, which fell 0.4%. Fast Retailing and SoftBank were the largest contributors to a 0.6% loss in the Nikkei 225. The yen weakened 0.5% to around 125 per dollar.

Indian stocks fell, led by software exporters, ahead of the start of the March-quarter earnings season for companies later in the day.   The S&P BSE Sensex slipped 0.8% to 58.964.57 in Mumbai, while the NSE Nifty 50 Index declined 0.6% to 17,674.95. Software exporter Infosys Ltd. retreated 2.7% to a one-month low. It was the biggest drag on the Sensex, which saw 25 of its 30 stocks trading lower.  Ten of the 19 sectoral sub-indexes compiled by BSE Ltd. declined, led by a gauge of information technology companies.  Earnings for India’s top companies start Monday with Tata Consultancy Services Ltd., Asia’s largest software services provider, scheduled to announce results.  “The 4Q earnings season is quite significant as it comes on backdrop of the scorching inflation conditions,” said Prashanth Tapse, an analyst at Mumbai-based Mehta Equities Ltd. “The theme of the day revolves around TCS results and investors will focus on the management commentary -- primarily on future outlook, attrition rates, and deal momentum.”

In rates, Treasuries extend losses with yields cheaper by up to 6bp across front-end and belly of the curve into early U.S. session. 10-year yields trade around 2.75% after topping at YTD high near 2.78%. Bear-flattening move also seen in EGBs with gilts lagging as BOE policy tightening is further priced into front-end. U.S. auctions are front-loaded this week starting with $46b 3-year note sale at 1pm, followed by $34b 10- and $20b 30-year offerings Tuesday and Wednesday. bunds lag by additional 3bp in the sector, gilts by 2bp; front-end and belly-led losses flatten Treasury 5s30s curve by ~1bp on the day. WI 3-year yield around 2.815% is above auction stops since November 2018 and more than ~100bp cheaper than last month’s result. Bund yields rose, slightly undeperforming Treasuries as central bank tightening wagers surged, while French bonds outperformed bunds with President Macron and his nationalist rival Le Pen set to face off in the final round of the French election. Peripheral spreads tighten with long-end Italy outperforming. Semi-core tightens to Germany with the 30y Bund/OAT spread narrowing below 75bps.

In FX, the Bloomberg dollar index extended its streak of gains to an eighth day, the longest since March 2020, rising 0.1% as the greenback strengthened against most of its Group-of-10 peers; the yen and commodity currencies were the worst performers while the euro was the best. The euro rose above $1.09 after earlier giving up an Asia session advance. The pound hovered while gilts followed Treasuries lower. The U.K. economy grew less than expected in February after industrial production and construction shrank. The 0.1% expansion followed a robust 0.8% gain in January. The Aussie and kiwi edged lower with iron ore and crude oil. Australia’s longer-maturity bonds dropped, sending 10-year yields above 3% for the first time since 2015, as markets priced in a faster pace of global policy tightening. Prime Minister Scott Morrison’s Liberal National coalition is currently trailing the opposition Labor Party in opinion polling after announcing a federal election for May 21 on Sunday. Yen slipped to 125.44 per dollar, its weakest level in almost seven years on the back of higher U.S. yields. Bonds fell amid a lack of support from the Bank of Japan’s purchases.

Bitcoin remains under pressure and in proximity to the overnight sub-USD 42k low. Elon Musk tweeted that the Twitter Blue subscription price should probably be about USD 2/month and suggested "maybe even an option to pay in Doge?".

In commodities, crude futures remain around Asia’s worst levels. WTI drops over $2.5, back on to a $95-handle, Brent trades near $100. Spot gold rallies, snapping through $1,950/oz. Most base metals are under pressure, with LME nickel and aluminum down over 2%. 

There is nothing on today's economic calendar; Bostic, Bowman and Evans are among the Fed speakers scheduled to talk.

Market Snapshot

  • S&P 500 futures down 0.6% to 4,454.75
  • MXAP down 1.4% to 173.61
  • MXAPJ down 1.6% to 574.89
  • Nikkei down 0.6% to 26,821.52
  • Topix down 0.4% to 1,889.64
  • Hang Seng Index down 3.0% to 21,208.30
  • Shanghai Composite down 2.6% to 3,167.13
  • Sensex down 0.4% to 59,183.91
  • Australia S&P/ASX 200 little changed at 7,485.19
  • Kospi down 0.3% to 2,693.10
  • STOXX Europe 600 down 0.7% to 457.91
  • German 10Y yield little changed at 0.77%
  • Euro up 0.3% to $1.0912
  • Brent Futures down 2.3% to $100.40/bbl
  • Gold spot up 0.4% to $1,955.50
  • U.S. Dollar Index little changed at 99.78

Top Overnight News from Bloomberg

  • President Emmanuel Macron’s team painted Marine Le Pen as “an ally of Vladimir Putin” on Monday as they began a campaign offensive that will run over the next two weeks ahead of a final vote.
  • Despite Russia’s invasion jeopardizing the euro zone’s pandemic rebound, policy makers are more worried about the conflict stoking already-lofty energy costs -- as they underlined last month by agreeing to speed up their removal of years of stimulus
  • The Bank of Japan lowered its assessment on the largest number of regional economies since the start of the recovery in a move likely to support continued stimulus even as global peers raise interest rates.
  • Russia will halt bond sales for the rest of the year and take legal action if sanctions force it into a default on its debt, according to the country’s finance minister
  • China’s largest Covid outbreak in two years continues to spread despite an extended lockdown of Shanghai’s 25 million people, weighing on a fragile economy and straining global supply chains
  • Federal Reserve Bank of Cleveland President Loretta Mester said she’s confident that the U.S. will avoid a recession as the Fed tightens policy, though the inflation rate will probably remain at more than 2% into next year.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks were mostly cautious amid the higher yield environment and COVID-19 woes in China. ASX 200 attempted to buck the trend helped by strength in gold-related stocks and the top-weighted financial sector, while M&A newsflow and campaigning ahead of the May 21st election provided mild tailwinds. Nikkei 225 was subdued after failing to retain the 27,000 status despite the recent currency weakening. Hang Seng and Shanghai Comp underperformed with Hong Kong pressured by weakness in tech and with the mainland suffering from COVID-19 concerns after a fresh record number of daily infections in Shanghai.

Top Asian News

  • China Said to Limit Sales by Some Funds as Stocks Slide Again
  • BOJ Lowers View on Biggest Swath of Economy Since Recovery Start
  • China’s Credit Growth Rebounds After Lunar New Year Break
  • China Three Gorges Said to Plan Up to $2b Dollar, Euro Bond Sale

European bourses are mixed, Euro Stoxx 50 -0.1%, with benchmarks well off lows in a choppy and yield-driven morning. The CAC 40 +0.7% is the notable outperformer amid the first round of the French election where incumbent-Macron came out on top; albeit, polls between him and Le Pen for the run-off are tight. Stateside, US futures are subdued and given the rate environment the NQ -0.7% lags its peers, ES -0.3%.

Top European News

  • Russian Railways in Default on Bond Payment, Credit Panel Rules
  • Le Pen Branded Putin Ally as Macron Fights Populist
  • U.K. Economy Slows as Supply Chain Delays Hold Up Car Makers
  • European Stocks Waver on China Covid Spread, French Uncertainty

FX:

  • Buck off best levels ahead of Fed speakers later today and US CPI data on Tuesday, as DXY slips back below 100.000.
  • Yen continues to underperform as BoJ reiterates easy policy stance and only expresses concern about its rate of decline not level, USD/JPY up to fresh 2022 high near 125.50.
  • Euro relieved to see French President Macron emerged ahead of Le Pen after round one, EUR/USD reclaims 1.0900+ status.
  • Aussie undermined by risk aversion and more resilient Kiwi pre-RBNZ, Loonie contains oil related losses ahead of BoC on Wednesday; AUD/USD sub-0.7450, AUD/NZD under 1.0900 and USD/CAD pivoting 1.2600 as 200 DMA caps upside again.
  • Nokkie hit by Brent decline and sub-forecast Norwegian inflation data, EUR/NOK near top of 9.5630-9.4695 range.

Fixed Income

  • Yet another dead cat bounce for bonds as the bear run continues, with T-notes down to 119-17 and the 10 year yield topping 2.75% in advance of more Fed rhetoric.
  • Bunds probe Fib resistance at 76bp to open scope for a higher retracement level at 81bp ahead of the ECB on Thursday.
  • Gilts labour just above 119.00 before UK jobs and earnings tomorrow and inflation on Wednesday.

Commodities

  • WTI and Brent are pressured with focus on the COVID situation in China, specifically Shanghai City
  • Currently, the benchmarks lie near session troughs of USD 95.20/bbl and USD 99.79/bbl respectively, as Brent lost the USD 100/bbl handle after slipping from earlier highs of USD 103.30/bbl.
  • White House Press Secretary said she is unaware of the US considering an easing of oil sanctions on Venezuela, while the White House said it is continuing to consider a gas tax holiday, according to Reuters.
  • Kuwait raised May crude prices to Asia to record levels, according to Reuters citing the pricing document.
  • Spot gold is bid and derived impetus from a break of USD 1950/oz, lifting to session highs of USD 1959.40/oz; though, still around USD 5/oz shy of late-March highs.

US Event Calendar

  • Nothing major scheduled

Central Bank speakers

  • 09:30: Fed’s Bostic Makes Opening Remarks at Fed Listens Event
  • 09:30: Fed’s Bowman, Waller Give Remarks at Fed Listens Event
  • 12:40: Fed’s Evans Discusses Economy and Monetary Policy

DB's Henry Allen concludes the overnight wrap

As we go to press this morning, the main weekend news comes from France’s presidential election, where Sunday’s first round results mean that President Macron is set to face off against Marine Le Pen in two weeks’ time, marking a repeat of the run-off in 2017. Relative to the polls going into the first round, it looks like good news for President Macron, whose score of 27.6% (based on preliminary results from the Interior Ministry) was above the 26% in Politico’s polling average, and also above the 24% he won in the first round 5 years earlier. Marine Le Pen came in second place with 23.4%, but that was roughly in line with her polling rather than above, even if it surpassed the 21% she won in 2017’s first round.

The fact that Macron’s lead was wider than the polls had indicated saw the Euro immediately bounce +0.72% as trading reopened last night, but since then it’s pared back nearly all those gains to be up just +0.03% at $1.088. Those moves follow a -1.50% decline for the Euro last week as the polls narrowed, as well as a noticeable underperformance in French assets. Indeed, by the close on Friday the spread of French 10yr yields over bunds had widened to 55.5bps, which is its widest level in over two years, so that’ll be one to keep an eye on as the race develops over the next two weeks. Furthermore, the CAC 40 has underperformed the broader STOXX 600 for 8 consecutive sessions now, and last week it shed -2.04%, which was well beneath the STOXX 600’s +0.57% gain.

Of course, all attention will now turn to the second round on April 24, and the big question for that will be where the supporters of the defeated first round candidates go. The largest group are the 22% who voted for the far-left Jean-Luc Mélenchon, who came in third place behind Macron and Le Pen. Indeed, he was only 1.4% behind Le Pen and a place in the second round based on preliminary results. He didn’t give an active endorsement to either candidate, but did say that voters shouldn’t cast a single vote for Le Pen. Otherwise, there was the far-right Éric Zemmour in fourth place with 7.1%, who endorsed Le Pen, whilst the centre-right Valérie Pécresse in fifth place with 4.8% endorsed Macron. We did get some further polls for the second round after voting concluded yesterday, which continued to point to a much tighter race than Macron’s 66%-34% victory in 2017. The narrowest from Ifop put Macron ahead by just 51%-49%, but two others from Opinionway and Ipsos both had him ahead by a larger 54%-46% margin. For those after more reading on the election, see Marc de-Muizon’s guide from last week for more information (link here)

Overnight in Asia, Chinese stocks are leading losses across the region, with the Shanghai Composite (-2.06%) and the CSI (-2.85%) both losing significant ground as the nation’s inflation figures surprised on the high side. PPI for March came in at +8.3% y/y (vs. +8.1% expected), whilst CPI was up +1.5% y/y (vs. +1.4% expected). Those inflation numbers come amidst continued Covid outbreaks in China, with state media CCTV reporting yesterday that the southern city of Guangzhou would suspend in-person classes for schools from today due to the virus. And in turn that’s contributed to a further fall in oil prices this morning, with Brent crude down -2.28% to $100.44/bbl, which itself comes on the back of two consecutive weekly declines. Other indices including the Hang Seng (-2.49%), Nikkei (-0.70%) and Kospi (-0.48%) are similarly lower this morning, as are futures including those on the S&P 500 (-0.58%) and the DAX (-0.74%). That comes against the backdrop of a continued bond selloff given concerns about monetary policy tightening, with 10yr Treasury yields gaining +6.9bps this morning to reach 2.769%, its highest levels since early 2019.

Looking forward now, it’s an eventful calendar for markets this week ahead of Easter, with Thursday’s ECB meeting set to be one of the main highlights. At their last meeting in March, the ECB adopted a more hawkish position than had been expected by confirming a faster reduction in their asset purchases. That’s set to see APP purchases fall from €40bn in April to €30bn in May and then €20bn in June, with the possibility of ending purchases altogether in Q3. Since then however, inflation has accelerated by even more than the consensus expected, with the flash CPI estimate for the Euro Area at +7.5% in March, which is the highest since the formation of the single currency, and up from +5.9% in February.

In terms of what to look for this time round, our economists write in their preview (link here) that they’re not expecting much change to the ECB’s message. Instead, they think that when the new staff forecasts are available in June, they’ll announce that APP purchases will end in July, ahead of a liftoff in the policy rate in September, so an underlying direction of travel that’s becoming clear. Their view is that the risks are tiled towards a more hawkish, rather than a less hawkish tone though, and as a reminder, our economists changed their call last week to expect a more aggressive ECB exit given the deteriorating inflation outlook, and now see the terminal rate reaching 2% by end-2023, which is 250bps higher than at present.

Staying on that central bank theme, another big highlight this week will be the release of the US CPI data for March on Tuesday, which is the last one the Fed will get ahead of their meeting in early April. That comes amidst heightened speculation that the Fed could move by 50bps at the next meeting, and futures are pricing in an 88% chance of a 50bps move as we go to press this morning. Our US colleagues have released a preview ahead of the release (link here), and they’re expecting that the monthly gain in headline CPI of +1.3% will push the year-on-year rate up to +8.6%, which hasn’t been seen since 1981. That said, they think that March is likely to be the peak in the year-on-year rates for both headline and core, since the base effects from last year’s surge in used car prices will begin rolling off in the April data.

Elsewhere this week, we’ll start to see the Q1 earnings season get going, with releases from a number of US financials, among others. They include JPMorgan Chase and BlackRock (both on Wednesday), ahead of reports from Citigroup, Morgan Stanley, Goldman Sachs and Wells Fargo (on Thursday). But overall, it’s still a fairly quiet on the earnings front with just 15 companies in the S&P 500 reporting, and it’ll only really ramp up the following week with 68 of the index reporting, and then 181 in the week after that. Our equity strategists published their preview of the Q1 earnings season last week (link here), and they write that a variety of drivers point to continued solid sequential earnings growth in Q1, and they look for slightly above average beats.

To recap last week now, the bond selloff continued apace after minutes from the March Fed and ECB meetings confirmed that both central banks want to tighten policy to deal with inflation running at multi-decade highs. That saw investors price in an increasingly aggressive pace of monetary policy tightening over the rest of the year, which led 10yr treasury and bund yields to move up +31.8bps (+4.2bps Friday) and +15.2bps (+2.6bps Friday) respectively over the week. Real yields did most of the work, with real 10yr treasury yields gaining +25.2bps (+0.1bps Friday) on the back of impending policy tightening. Indeed, the 10yr real yield ended the week at a 2-year high of -0.18%, having gained around +90bps over the last month alone.

European equities were resilient to the jump in rates, with the STOXX 600 picking up +0.57% (+1.31% Friday). But French equities underperformed as the polls narrowed ahead of yesterday’s election, with the CAC falling -2.04% (+1.34% Friday). Meanwhile the S&P 500 posted its first weekly loss in a month, down -1.27% (-0.27% Friday), and tech stocks saw even bigger declines, with the NASDAQ down -3.86% over the week, whilst the FANG+ index shed -5.19%.

Finally, Brent crude futures continued their slide last week, falling -1.54% (+2.19% Friday) to $102.78/bbl. But other commodities put in a stronger performance, with copper (+0.78%), gold (+1.14%), wheat (+6.81%) and corn (+4.59%) all seeing advances over the week.

Tyler Durden Mon, 04/11/2022 - 08:03
Published:4/11/2022 7:11:49 AM
[Markets] 3 Dow Stocks With Up to 95% Upside, According to Wall Street For nearly 126 years, the Dow Jones Industrial Average (DJINDICES: ^DJI) has been a popular benchmark of investing success. Initially a 12-stock index that was (not surprisingly) packed with industrial companies, the Dow Jones is now composed of 30 highly diverse, multinational businesses. The first Dow stock with incredible upside potential over the next year is semiconductor giant Intel (NASDAQ: INTC). Published:4/10/2022 12:00:51 AM
[Markets] US STOCKS-Dow gains, S&P 500 ends lower as market weighs Fed rate hikes The Dow rose and the S&P 500 ended lower in choppy trade on Friday, as beaten-down bank shares gained and investors grappled with how best to deal with an economy that could skid as the Federal Reserve moves to aggressively tackle inflation. The yield on the benchmark 10-year U.S. Treasury note hit a three-year high of 2.73%, helping boost the S&P banking index , which rose 1.18%, after slumping to 13-month lows on Thursday. The big rate-sensitive lenders all rose, with JPMorgan Chase & Co gaining 1.8%, Bank of America Corp 0.7%, Citigroup Inc 1.7% and Goldman Sachs Group Inc 2.3%. Published:4/8/2022 3:49:10 PM
[Markets] Stocks ended the week lower, but the Dow did manage a Friday gain Stocks ended the week lower, but the Dow did manage a Friday gain Published:4/8/2022 3:18:14 PM
[Markets] Bonds & Stocks Battered As Hawkish Fed Flexes, Europe Panics Bonds & Stocks Battered As Hawkish Fed Flexes, Europe Panics

The reality of a looming recession appears to be striking home for stocks this week as 'Defensive' stocks hugely outperformed 'Cyclicals'...

Source: Bloomberg

After an exciting start to the week (when Nasdaq spiked and Small Caps puked on Monday as the 'QE trade' kicked back in with 'growth' bid), its been a one way street lower since as The Fed issued its most hawkish Minutes since Volcker. Small Caps and Nasdaq were the week's biggest losers...

Trucking, airlines and railway stocks were among the worst performers on the S&P 500 Index this week, with the Dow Jones Transportation Average staring at its worst weekly run since June 2020, as fears of an economic slowdown gripped investors.  Since the start of April, Dow Transpoorts are down 11%!! (Dow Industrials are basically unch)

The Majors all trod water around key technical levels...

Bonds were clubbed like a baby seal this week with the long-end drastically underperforming (led by a 33bp rise in 10Y Yields)...

Source: Bloomberg

2s30s and 2s10s uninverted this week (as did 5s30s briefly before closing the week at -1.5bps), which is actually the recession signal (as opposed to the inversion)...

Source: Bloomberg

Meanwhile, European elites are panicing as euro-redenomination rears its ugly head as peripheral sovereign yields started to surge (and The ECB quickly said it 'had tools' up its sleeves to save the world)...

Source: Bloomberg

Despite The Miami Bitcoin Conference (or perhaps because of it), crypto had a rough week

Source: Bloomberg

The dollar took out the FOMC spike highs and is trading back at its highest against its fiat peers since July 2020...

Source: Bloomberg

Gold and Silver rose on the week (despite a strong dollar) but it was Palladium that really soared as the London Platinum & Palladium Market has suspended both Russian refineries from its good delivery list. This effectively cuts off Russian palladium and platinum to the west...

Source: Bloomberg

Oil dropped for a second week in a row, holding above the pre-invasion levels still though, but WTI settled below $100. Both a very hawkish Fed and the increasingly stringent lockdowns in China weighed on demand

Finally, forget the 'r'-word, it's the 's'-word that should really scare you!!!

Source: Bloomberg

The central planner's nemesis is back...

Tyler Durden Fri, 04/08/2022 - 16:01
Published:4/8/2022 3:18:14 PM
[Markets] Dow Jones Gains; Tesla Stock Falls Despite Elon Musk Cyber Rodeo Boast; Oil Play Gushes Past Buy Point The Dow Jones Industrial Average advanced even as the Nasdaq gave up ground. Tesla fell despite CEO Elon Musk boasting about its new factory at the Cyber Rodeo event while Epam Systems soared as it withdrew from Russia. Home Depot and Goldman Sachs were the top blue chips. Published:4/8/2022 2:47:55 PM
[Markets] US STOCKS-Dow gains, S&P 500 slips as market mulls Fed rate hikes The Dow rose and the S&P 500 edged lower in choppy trade on Friday, with bank shares rising as investors grappled with how best to deal with an economy that could skid as the Federal Reserve moves to aggressively tackle inflation. The yield on the benchmark 10-year U.S. Treasury note hit a three-year high of 2.73%, helping boost the S&P banking index , which on Thursday had slumped to 13-month lows. Rate-sensitive lenders JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc and Goldman Sachs Group Inc were up between 1.1% and 2.4% in late afternoon trade. Published:4/8/2022 2:18:52 PM
[Markets] Dow Jones Rises While Nasdaq Trades Negative; Transportation Stocks Dive On Analyst Downgrades The Dow Jones traded higher while tech stocks lagged. Financials also traded higher while LPL Financial staged a breakout. Published:4/8/2022 1:15:26 PM
[Markets] US STOCKS-Dow, S&P 500 rise as banks jump The S&P 500 and the Dow rose in choppy trading on Friday, boosted by a jump in banking stocks at the end of a volatile week marked by concerns around aggressive moves by the U.S. Federal Reserve to tame inflation. Rate-sensitive lenders JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc and Goldman Sachs Group Inc gained between 1.5% and 2.4% in mid-day trading. "It might be the fact that the 10-year bond interest rate is hitting the highest level it's been at since March of 2019," said Randy Frederick, managing director, trading and derivatives at Schwab Center for Financial Research. Published:4/8/2022 12:46:43 PM
[Markets] Dow Jones Higher As Treasury Yields Continue To Rise; Tesla Falls After 'Cyber Rodeo' The Dow Jones Industrial Average rose Friday, as the 10-year Treasury yield extended gains. Tesla fell after its 'Cyber Rodeo' product launch. Published:4/8/2022 8:43:39 AM
[Markets] The Dow opens higher Friday but the Nasdaq and S&P 500 falter early The Dow opens higher Friday but the Nasdaq and S&P 500 falter early Published:4/8/2022 8:43:39 AM
[Markets] Dow Jones Futures Advance As Treasury Yields Continue To Rise; Tesla Climbs After 'Cyber Rodeo' Dow Jones futures climbed Friday, as the 10-year Treasury yield continues to rise. Tesla stock climbed after its 'Cyber Rodeo' product launch. Published:4/8/2022 7:43:16 AM
[Markets] Stocks & Oil Dump-n-Pump As Yield Curve Un-Inverts Stocks & Oil Dump-n-Pump As Yield Curve Un-Inverts

Stocks all bounced off technical levels intraday after an ugly start. Small Caps were unable to join the rest of their peers in the BTFD rebound into the green as a late day puke almost spoiled the party for everyone though...

What is it about 1300ET that the trend in shorts stalls or reverses?

Never gets old sorry...

S&P bounced back above its 200DMA and Dow/Nasdaq bounced off their 50DMAs...

Treasury yields were broadly higher today with the long-end underperforming (3Y unch, 30Y +6bps), leaving 2Y flat on the week and 10Y lagging with a 27bps increase...

Source: Bloomberg

Real rates continues to surge to cycle highs...

Source: Bloomberg

2s10s, 2s30s, 3s10s, and 5s30s all steepened today, uninverting intraday (which as a reminder is the actual trigger for the starting gun timer to recession.... as opposed to the actual inversion)....

Source: Bloomberg

Multiple factors steepened the yield curve today.

  • There have been big profits on selling the short-end and on Treasury curve flatteners. This has forced some short-covering.

  • Wednesday’s FOMC minutes brought forward the May 4 Fed meeting by a month and the discussions on the balance sheet were very detailed - taking almost all the mystery out of the event.

  • The aggressive runoff story is pressing the street to keep some risk premia in 2s10s and 5s30s, traders say.

  • The Fed has the yield curve in mind. Today, St Louis Fed James Bullard, a voter and the most hawkish Fed member said the Fed needs to hike 300 bps but also to watch yield curve inversion.

The short-end appears set on 9 more rate-hikes this year (but the last few days have seen the subsequent rate-cut trajectory actually reduced)...

Source: Bloomberg

The dollar extended its recent gains, hovering at the spike highs from March 16th's FOMC day...

Source: Bloomberg

The Ruble continued to surge higher against the greenback, now at its highest in two months...

Source: Bloomberg

Bitcoin slipped lower today but found support at $43,000...

Source: Bloomberg

Gold rallied on the day...

Oil prices tumbled along with stocks early on, but also like stocks they rebounded hard (though WTI remains below $100)...

Finally, the good news-ish, is that this new lower oil price will bring down gas prices at the pump (if it holds) but only to around the level it was at when Putin invaded Ukraine...

Source: Bloomberg

So what will Biden blame the still-high gas prices on then?

Tyler Durden Thu, 04/07/2022 - 16:00
Published:4/7/2022 3:11:48 PM
[Markets] Dow, S&P 500 and Nasdaq finish higher after late-day turnaround Dow, S&P 500 and Nasdaq finish higher after late-day turnaround Published:4/7/2022 3:11:48 PM
[Markets] Dow ends 87 points higher as stocks bounce after back-to-back declines Stocks ended with small gains Thursday, bouncing modestly after back-to-back declines tied to worries about the Federal Reserve's plans to continue tightening monetary policy. The Dow Jones Industrial Average closed around 87 points higher, up 0.3%, near 34,584, according to preliminary figures, while the S&P 500 rose around 19 points, or 0.4%, to finish near 4,500. The Nasdaq Composite, which bore the brunt of the 2-day pullback, eked out a gain of around 8 points, or 0.1%, to close near 13,897 Published:4/7/2022 3:11:48 PM
[Markets] US STOCKS-Wall Street slips on hawkish Fed; banks, industrials top losers The S&P 500 and the Dow slipped on Thursday, with shares of banks, industrials and airlines leading declines on concerns that the Federal Reserve's aggressive monetary policy might weigh on economic growth. The blue-chip Dow was the biggest loser among the three major indexes and was dragged down by Goldman Sachs , Honeywell International and Boeing. The tech-heavy Nasdaq steadied after shedding nearly 4.5% over the past two sessions. Published:4/7/2022 10:41:09 AM
[Markets] Stocks open with small losses as investors weigh Fed's monetary path Stocks were slightly lower in early trade, under pressure for a third straight session, as investors prepared for the Federal Reserve to aggressively raise interest rates and otherwise tighten monetary policy in its effort to get inflation under control. The Dow Jones Industrial Average fell 179 points, or 0.5%, to 34,316, while the S&P 500 shed 0.2% to 4,474. The Nasdaq Composite , which has led declines the past two sessions, edged up 0.1% to 13,899. Minutes of the Federal Reserve's March meet Published:4/7/2022 9:03:35 AM
[Markets] Dow Jones Drops After Market Sell-Off; HP Soars On Warren Buffett Stake The Dow Jones Industrial Average fell Thursday following two straight days of sharp market sell-offs. HP soared 15% on a Warren Buffett stake. Published:4/7/2022 8:34:19 AM
[Markets] Dow Jones, Nasdaq Pare Losses After Release Of Fed Minutes The Dow Jones fell after the Fed minutes were released, but then pared losses substantially about an hour before the market close. Published:4/6/2022 2:27:28 PM
[Markets] Stocks trade at or near session lows as investors weigh Fed balance-sheet plans Stocks fell back to or near session lows after briefly trimming losses following the release of minutes from the Federal Reserve's March policy meeting Wednesday afternoon. The summary said officials generally settled on shrinking the balance sheet by $95 billion a month after a 3-month phase-in. Officials stressed they made no final decision on winding down the $9 trillion portfolio but said the plan could start in May. The Dow Jones Industrial Average was down 291 points, or 0.8%, at 34,351, w Published:4/6/2022 1:27:02 PM
[Markets] US Majors Plunge Below Critical Support As Dudley Warns Fed Needs To "Shock Market" US Majors Plunge Below Critical Support As Dudley Warns Fed Needs To "Shock Market"

The second half of March came to an end and so did the meltup. Building on yesterday's losses - as we detailed here - this morning's breakdown has snapped all the major US equity markets below critical technical support levels.

The S&P is back below its 200DMA. The Dow and Russell 2000 are back below their 50DMA, and Nasdaq is rapidly accelerating down towards it 50DMA...

This comes as former NYFed President Bill Dudley issues another post-service op-ed warning that "If Stocks Don’t Fall, the Fed Needs to Force Them"...

It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far.

...

Investors should pay closer attention to what Powell has said: Financial conditions need to tighten. If this doesn’t happen on its own (which seems unlikely), the Fed will have to shock markets to achieve the desired response. This would mean hiking the federal funds rate considerably higher than currently anticipated. One way or another, to get inflation under control, the Fed will need to push bond yields higher and stock prices lower.

Sounds familiar?

Tyler Durden Wed, 04/06/2022 - 10:18
Published:4/6/2022 9:24:57 AM
[Markets] Dow Jones Slides After Stock Market Sell-Off As 10-Year Treasury Yield Surges The Dow Jones Industrial Average slid Wednesday, extending losses from Tuesday's stock market sell-off, as the 10-year Treasury yield surged. Published:4/6/2022 8:56:12 AM
[Markets] The Dow slips but the Nasdaq rises as stocks start a new trading week The Dow slips but the Nasdaq rises as stocks start a new trading week Published:4/4/2022 8:39:54 AM
[Markets] Dow Jones Futures Move Up As Tesla Rises Despite 'Exceptionally Difficult Quarter'; Twitter Soars On Musk Stake Dow Jones futures rose Monday, as Tesla advanced after the company reported record vehicle deliveries in an "exceptionally difficult" quarter. Published:4/4/2022 7:36:26 AM
[Markets] Dow Jones Futures Signal Slim Market Rally; Twitter Surges On Elon Musk Stake, Tesla Deliveries Hit High Dow Jones futures signal a small market rally. Tesla is near a buy point amid record deliveries. Twitter spiked as Elon Musk took a 9% stake. Published:4/4/2022 5:35:23 AM
[Markets] Bear Traps: "This Is Not About The 2s10s, There Is Far, Far More Going On... We See 20-30% Near-Term Downside" Bear Traps: "This Is Not About The 2s10s, There Is Far, Far More Going On... We See 20-30% Near-Term Downside"

By Larry McDonald, author of the Bear Traps report

When we think about the hard assets vs. financial assets debate -- clearly, we can see a “first-second inning” shift in play -- but what takes the trade to the next level? We still have not seen even the slightest indication of real financial asset selling. What will give the hard asset value equity thesis real, sustainable legs? It all comes down to the dollar. As we stressed in our March 10th note --“a Secular C change for the Greenback” - for much of the last 20 years the U.S. political leadership has been weaponizing its currency. One could say they have --“gone to this well” too many times, indeed. Keep in mind, today ´s sanctions roulette has a far different gene pool.

BEFORE the war in Ukraine -- inflation in the U.S. was already running near 8%. Now the United States has chosen to bring out its sanction's sword yet again -- but this time up against a country that has regional control -- influence over 10-15% of the global commodity complex.

We are NOT sure the risk-reward has been meticulously thought through here. The risks of a self-inflicted wound are sky high and complacency around these risks is even higher. At the very end of the day, U.S. sanctions and counter attacks from Putin - push inflation's roots much deeper below the surface and make higher price pressures far more sustainable than any time in recent memory. This mess gives “unintended consequences” a whole new meaning.

As we stressed in the summer of 2020 the “Cobra Effect” coming from a fiscal and monetary policy overdose delivers many surprises wrapped in inflationary pressures. But sanction games raise these stakes to a whole new level. "Our currency your problem” becomes “our commodities your problem" (to paraphrase Zoltan Pozsar).

Globally, the lights on the “USD weaponization” stage have NEVER been brighter. Even one of the U.S.'s most trusted allies - The Kingdom of Saudi Arabia - is looking at ways to lay off dollar risks and possibly trade their dark crude in red China yuan (CNH). We are NOT saying the U.S. dollar will lose its world's reserve currency status this decade - that is absurd - but make NO MISTAKE a near term diversification away from the greenback is certain - all coming with HIGH impact on rates, inflation and hard assets.

* * *

There are times when developments pile up so fast late in the week that the street doesn’t have time to process the significance of the data. The Wall Street research community has always been “slow on the draw” - but we believe strategists and analysts will be confronted with a “come to Jesus” moment in the weeks ahead.

What is the state of play you ask? We have a U.S. equity market that has been led by Utilities (XLU up 15% since late November vs. 3% for the S&P 500 over the same period) and Consumer Staples XLP for nearly five months now.

In the U.S., ISM Manufacturing fell in March to 57.1 vs. 59 est. and 58.6 in prior month lowest since September 2020. Above all, new orders light blue above) plunged from 61.7 to 53.8 At the same time, the Dow Jones Transports had one of the sharpest one day declines in years on Friday following a warning from FreightWaves CEO that a freight recession looms. Classic economic bellwethers like Union Pacific UNP dropped 8% day over day at one point; US banks (Citi) and consumer plays (GM and Home Depot) are 30-35% off their highs with the U.S. Treasury curve moving deeper into inversion territory.

CLEARLY this is NOT all about 2s-10s and the rates curve. There is FAR FAR FAR more going on.  AND the divergence between UMichigan and the Conference Board consumer data is screaming "stagflationary recession” as well. We see 20 30% near term downside for the Nasdaq.

 

* * *

The Fed Has to Convince the Market of What?

In essence, the Federal Reserve has convinced the market of two things: 1) rate raises will be higher than formerly believed; 2) such raises will do little to cure inflation, at least over the near term. Breakevens (the yield of an inflation-protected bond minus the yield of a non-inflation-protected bond of the same maturity) were at 3.42% at the start of the Fed’s March meeting. On Friday, that got to 3.57%.

So, traders decided that inflation was actually worse after the Fed meeting than before the Fed meeting. It is now at a record high, in fact.

Furthermore, the bear market rally shows that the stock traders do not believe they are fighting the Fed. Ultimately, stocks believe that for all the clamor around higher rates, net-net monetary policy is and will continue to be loose, just less loose than it was. Loose money means Fed Funds after inflation are negative. Since inflation is running near 8%, no reasonable person thinks Powell will make Fed Funds actually positive after inflation.

This explains the rise in yields on the 10 year: traders are trying to get more vig given ongoing inflation. It also explains the rise in gold, which in addition to its safe have bid is also an inflation hedge. So yes, the markets were surprised by a more hawkish Fed, but no, the markets don’t believe inflation is going away.

We still think that aggressive tightening will lead to recession, assuming one hasn’t already gotten underway. We still believe we are either in or about to enter stagflation (depending on one’s definition of the term). So faster hikes but inflation still rages - in our view - the S&P 500 will be 20 30% lower in this world.

Dollar Ceiling and Cash at the Treasury

Cash Balances at the Treasury are relatively high at the Treasury vs. prior pre Covid years, and well off the lows of a few months ago. Dollar seems to be near a congestion zone of potential supply.

If Treasury cash balances decline, the dollar may soften up a bit … With the HIGHEST conviction we believe we are in the middle of a secular change for the U.S. dollar. U.S. sanctions are FAR more of a dollar threat then most realize and they make sustained inflation FAR FAR FAR more certain.

UMich - Conference Board Consumer Sentiment Spread

Look at this spread and then look at the dates and events around it historically. The UMich survey is more 'inflation-sensitive'. There is a higher weighting towards durable goods, whereas job conditions is more important in the Conference Board survey. The  Conference Board survey (correlated with unemployment rate) tends to stay optimistic for much longer than the U Michigan survey, which is more about affordability and people’s perceptions of job security. So, the U of Mich survey is more of a leading indicator and the Conference Board survey is more of a real time coincident indicator. The UMich survey usually leads the Conference Board survey down into recession.

Tyler Durden Sun, 04/03/2022 - 19:30
Published:4/3/2022 6:32:35 PM
[Markets] Dow Jones Futures Loom Amid Market Rally Pullback; Tesla Deliveries Hit Record Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures. Tesla reported record first-quarter deliveries on Saturday, with the EV giant near possible buy points. China EV giant BYD reported monthly sales topped 100,000 for the first time. Published:4/3/2022 7:27:12 AM
[Markets] Is Now the Time to Go All-In on the Stock Market? The stock market has staged an epic rally in the last week or so. After briefly being down over 20% year to date (YTD), the Nasdaq Composite is now down less than 10% YTD. Similarly, the S&P 500 and the Dow Jones Industrial Average are both down less than 5% YTD and are officially out of correction territory. Published:4/2/2022 6:18:19 AM
[Markets] Yield curve inverts, WTI on track for biggest weekly loss since 2011 Yahoo Finance's Ines Ferre examines yield curve inversions, the price action surrounding crude oil, and the Dow Jones Transportation stocks. Published:4/1/2022 2:42:14 PM
[Markets] Dow Jones Dips 100 Points As Recession Fears Grow; Qualcomm Dives As Bond Yields Spike The Dow Jones and other major stock indexes showed modest losses Friday, but there was plenty of damage below the surface. Published:4/1/2022 1:11:46 PM
[Markets] Dow Jones Futures Trim Gains After March Jobs Report Miss; Treasury Yields Surge Dow Jones futures rallied Friday after the March jobs report miss. Oil prices traded under $100 a barrel. The 10-year Treasury yield surged. Published:4/1/2022 7:47:27 AM
[Markets] Futures Grind Higher To Start New Quarter With All Eyes On Payrolls Futures Grind Higher To Start New Quarter With All Eyes On Payrolls

Following yesterday's furious quarter-end puke, which saw the S&P tumble 50 points in the last hour of trading as a massive $10 billion Market on Close sell imbalance sparked a liquidation frenzy, U.S. index futures started off the new quarter on the right foot, rising as investors weighed a drop in oil prices sparked by Biden's unprecedented pre-midterm election draining of the petroleum reserve, ongoing developments in the Ukraine war and tightening monetary policy ahead of ISM and payrolls data. S&P500 and Nasdaq 100 futures gained around 0.5% before March payrolls figures later on Friday, after U.S. stocks ended their worst quarter since the start of the pandemic. Europe’s Stoxx 600 gained after its worst quarter since the pandemic bear market. Oil reversed an earlier decline as euro-area inflation accelerated to another all-time high and Russia’s Gazprom PJSC started telling clients how to pay for gas in rubles. Treasury yields rose and the dollar was steady as traders await the jobs report, which unless it is a total disaster, will strengthen the case for a 50bps rate hike in May. U.S. data on Friday include nonfarm payroll and ISM data while no major company is expected to report earnings.

U.S.-listed Chinese stocks jumped in premarket trading after Bloomberg News reported that Chinese authorities are preparing to give U.S. regulators full access to auditing reports of the majority of the 200-plus companies listed in New York. Alibaba shares rose 5.8% in premarket trading; E-commerce peers JD.com up 4% and Pinduoduo up 7.9%. Didi Global was among the top gainers, rising more than 18%, following a 15% drop Thursday. Meanwhile, shares of Lulu’s Fashion Lounge Holdings Inc. rose 27% in U.S. premarket after better-than-expected fourth-quarter and full-year guidance. Here are some other notable premarket movers:

  • Chicken Soup For The Soul Entertainment (CSSE US) shares rise 21% in U.S. premarket, rebounding from yesterday’s losses, after Guggenheim’s Michael Morris (buy) said the company posted a “solid” 4Q performance, with sales modestly below his estimates but adjusted Ebitda slightly better.
  • GameStop (GME US) shares rose 15% in premarket trading and were on course to open at the highest level this year after the video-game retailer announced plans for a stock split, fueling a rally in fellow so-called meme stocks.
  • Redwire (RDW US) slumps 22% in U.S. premarket trading after the space infrastructure company reported 2021 results, with Jefferies saying that while the firm’s outlook was encouraging, it was disappointing versus prior expectations.

Meanwhile, the curve between two-year and 10-year Treasuries yields is flipping between positive and negative, signaling that the countdown to the next recession has begun (see "The Yield Curve Inverts: What Happens Next").

“The market, like the Fed, has no idea how much tightening is necessary to stop a wage inflation spiral, but by upping the ante on the market with a series of 50bp rate hikes this year and a higher terminal rate, it can regain the control of the narrative and market expectations,” said Sebastien Galy, senior macro strategist at Nordea.

Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed’s increasingly hawkish turn will engender still more volatility and losses for stocks and bonds. Raw materials are the only key asset class to deliver major gains so far in 2022.

Meanwhile, in Ukraine, talks between Ukraine and Russia resumed Friday via video link, following meetings earlier in the week in Turkey. Russia said two Ukrainian military helicopters made a rare strike across the border, hitting an oil tank facility in the city of Belgorod. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities; Lavrov also said Russia is preparing a response to Ukraine's proposals, says there has been movement forward; he also added that Russia has seen "much more understanding" of the situation in Crimea and Donbass from the Ukrainian side. Lavrov says peace talks with Ukraine need to continue. UK reportedly urged Ukraine not to back down and is concerned US, France and Germany will push Ukraine to “settle” and make significant concessions to Russia, according to The Times citing a government source. Mayor of Ukraine's Mariupol says Russian forces are not allowing humanitarian aid in; City is dangerous to try and exit.

European equities also drifted higher after a slow start. Euro Stoxx 50 rises 0.7%. IBEX outperforms, adding 0.9%, FTSE 100 lags. Retailers, banks and miners are the strongest performing sectors. Euro-zone inflation accelerated to another all-time high as Russia’s invasion roiled global supply chains and provided a fresh driver for already-soaring energy costs. Euro-zone March consumer prices surged 7.5% from a year ago, up from 5.9% in February and far higher than the 6.7% median estimate in a Bloomberg survey.

The Stoxx Europe 600 Index however, was on the rise, led by retail and banking stocks.  Here are some of the biggest European movers today:

  • Santander shares rise as much as 3.2% after reiterating its financial targets for the year and saying its business remained resilient in the first quarter. The statement provides reassurance of recent trends, Barclays writes.
  • Vestas Wind Systems gains as much as 5.4% after announcing orders totaling 2,179 MW in 1Q, with Handelsbanken saying the order intake is “promising” and well-above estimates.
  • Bridgepoint Group jumps as much as 7.8% after the private-equity firm was upgraded to buy from neutral at Citi following a drop in the shares since the broker’s initiation in August 2021.
  • Assicurazioni Generali rises as much as 3.8%, climbing for a third session, amid speculation the Italian insurer may get involved in industry M&A going forward.
  • Greggs gains as much as 2.9% after Berenberg reiterates its buy recommendation, saying there is a “rare opportunity” to invest in the U.K. bakery chain at a “reasonable multiple.”
  • Yara climbs as much as 1.8% after the company said it pre-ordered 15 floating bunkering terminals from Azane Fuel Solutions to establish a carbon-free ammonia fuel bunker network in Scandinavia.
  • Stratec rises as much as 21% after a Bloomberg report that EQT and KKR are among several private equity firms weighing bids for the German health-care technology provider.
  • Energiekontor jumps as much as 6.8%, extending its record high, after Warburg raised its price target to a Street- high, saying there is an “appetite for more” following Thursday’s FY results.
  • Sodexo shares fall as much as 10% after the French caterer said the environment “remains uncertain” due to intermittent local outbreaks of Covid-19 and the war in Ukraine.

Russian stocks gained for a third day, the longest winning streak since trading resumed on March 24. Talks between Ukraine and Russia will resume Friday via video link, following meetings earlier in the week in Turkey. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities.  

The manufacturing resurgence in Europe and Asia softened in March as factories saw worsening supply shortages and soaring costs after Russia’s invasion. Friday’s data follow inflation overshoots this week from Spain and Germany that prompted investors to bring forward bets on when the European Central Bank will end almost eight years of negative interest rates.

Earlier in the session, Asian stock retreated for a second day amid concerns about the extent the war in Ukraine will hurt global growth and as Chinese tech shares extended a selloff.   The MSCI Asia-Pacific Index slid as much as 1.1% before paring about two-thirds of that loss. The benchmark still remained on pace to finish the week up 0.3%, extending its winning streak to a third week.  Tech shares including Taiwan Semiconductor Manufacturing and Alibaba were major drags on Friday as traders assessed economic data and continued to eye possible U.S. delistings of Chinese firms. Equities in Japan underperformed the region while China’s consumer shares boosted the mainland benchmark.  Investors are watching the impact of soaring inflation and higher interest rates on global growth as the war in Europe continues. Asia’s manufacturing resurgence softened in March as factories saw worsening supply shortages and surging costs after Russia’s invasion of Ukraine. Data on Friday showed Japan’s business mood weakened while South Korean imports jumped on rising costs.   Also on investors’ radars are the trading halts of dozens of firms in Hong Kong from today after they missed a deadline to report annual results, increasing uncertainty in the market.  “We are in the middle of a war between two globally vital suppliers of energy and food,” said Justin Tang, the head of Asian research at United First Partners. “The ramifications are plenty and as long as there is no cease fire, we will continue to experience ebbs and flows in volatility.”   Asian stocks finished their worst quarter since early 2020 on Thursday with a drop of nearly 7%. Still, the measure has bounced back from the quarter-low touched in mid-March.  

Sri Lanka’s stock market stopped trading on Friday and the rupee extended its loss after protests against surging living costs and daily power cuts amid dwindling foreign-exchange reserves. Trading in 33 Hong Kong-listed stocks was halted after a number of firms missed a deadline to report annual results

Japanese stocks fell in Tokyo fell for a third day after U.S. peers declined and the Tankan survey showed a gloomier view of business conditions among Japan’s biggest manufacturers. The yen slipped 0.5% against the dollar during the trading day, helping stocks trim earlier losses. Still, both major gauges capped their first weekly losses in three, shedding more than 1.7% each since March 25. Electronics and auto makers were the biggest drags as the Topix fell 0.1% Friday, paring an earlier slide of as much as 1.3%. Tokyo Electron and Fast Retailing were the largest contributors to a 0.6% loss in the Nikkei 225.  The Tankan index of sentiment dropped to 14 from a revised 17 in the previous quarter, the first deterioration since June 2020, according to the central bank’s quarterly report Friday. The business mood among large non-manufacturers slipped to 9 from a revised 10 in the December report

India’s benchmark stocks index completed its third weekly gain in four weeks, as local buying helped steady war-induced volatility in equities. The S&P BSE Sensex rose 1.2% to 59,276.69 in Mumbai, taking it weekly advance to 3.3%. The key gauge completed its best monthly climb since August in the previous session. The NSE Nifty 50 Index rose 1.2% to 17,670.45 on Friday.  HDFC Bank Ltd. surged 2.4% to its highest in more than a month and was the biggest boost to the Sensex, which saw 25 of the 30 shares trading higher. All 19 sectoral sub-indexes compiled by BSE Ltd. rose, led by a measure of utilities. Funds in India bought $5.2 billion worth of shares in March, while foreign investors extended their selling to a sixth consecutive month. The new fiscal year and quarter have started with concerns about the war in Ukraine, a hawkish U.S. Federal Reserve and the impact of higher commodity costs on company earnings.   “We expect FY23 to witness continued volatility in equity markets, especially in the first half of the year with rising interest rates globally and high inflation, which is expected to persist,” Nishit Master, portfolio manager at Axis Securities Ltd., wrote in a note.  The brokerage expects the Nifty index to rise to 20,200 by year-end and is positive on metals, hospitals, oil refining and capital goods.   

In FX, the Bloomberg Dollar index inched up as the greenback traded mixed against its Group-of-10 peers; commodity currencies and the Swedish krona led gains while the yen was the worst performer. The euro fell and European bonds came off lows after euro-zone March consumer prices surged 7.5% from a year ago, up from 5.9% in February and more than the 6.7% median estimate in a Bloomberg survey. The pound consolidated against the euro, after rebounding from its weakest level since December on Thursday; the yen slid for the first time in four days. Japanese government bond yield curve resumed its steepening even as the Bank of Japan raised the amounts it plans to buy through regular market operations this quarter. Australia’s yield curve bear flattened, following a similar move in Treasuries. New Zealand dollar weakened; a gauge of consumer confidence dropped to an all-time low last month, according to ANZ data.

In rates, Treasuries dropped across the curve Friday as investors positioned before U.S. jobs data forecast to show average hourly earnings accelerated in March, backing the case for a faster pace of Federal Reserve interest-rate hikes. Treasury futures traded off session lows in early U.S. trading, although yields remain cheaper by 4bp to 7bp across the curve after Thursday’s late month-end selling was extended in early Asia. Fixed income weakness is Treasuries centric, with both bunds and gilts outperforming on the day. 10-year yields trade around 2.40% after peaking at 2.437% in early European session - bunds and gilts outperform by 4bp and 2bp in the sector. Long-end led losses steepens 5s30s spread by 1.4bp and 2s10s by 2bp on the day; March jobs report is due at 8:30am with headline change in payrolls expected at 490k vs. 678k prior -- whisper number is higher than estimate at 529k. In Europe, the German curve bear steepened, cheapening up 2-3bps across the back end but broadly brushing off a hot Eurozone inflation print . Peripheral spreads mostly widen to core with long end Spain underperforming. Cash USTs maintain Asia’s bear flatten bias ahead of today’s payrolls release; the belly cheaper by ~6bps.

In commodities, crude futures recoup Asia’s weakness. WTI returns to little changed, regaining a $100-handle after a brief dip in late Asia. Base metals are mixed; LME zinc rises 1.4%, outperforming peers. LME copper lags. Spot gold falls roughly $2 to trade near $1,935/oz.

The US will also have the March ISM manufacturing reading, while global manufacturing PMIs are due. Otherwise, central bank speakers include the ECB’s Centeno, De Cos, Makhlouf, Schnabel and Knot, as well as the Fed’s Evans.

Market Snapshot

  • S&P 500 futures up 0.4% to 4,548.50
  • STOXX Europe 600 up 0.3% to 457.37
  • MXAP down 0.4% to 179.71
  • MXAPJ little changed at 590.96
  • Nikkei down 0.6% to 27,665.98
  • Topix down 0.1% to 1,944.27
  • Hang Seng Index up 0.2% to 22,039.55
  • Shanghai Composite up 0.9% to 3,282.72
  • Sensex up 0.7% to 58,980.92
  • Australia S&P/ASX 200 little changed at 7,493.80
  • Kospi down 0.6% to 2,739.85
  • German 10Y yield little changed at 0.58%
  • Euro little changed at $1.1065
  • Brent Futures down 1.0% to $103.69/bbl
  • Gold spot down 0.3% to $1,931.84
  • U.S. Dollar Index up 0.16% to 98.47

Top Overnight News from Bloomberg

  • China’s factory activity fell to its worst level since the pandemic’s onset two years ago and a housing slump showed no sign of easing, darkening the outlook for the world’s second- largest economy
  • Bundesbank President Joachim Nagel urged the European Central Bank to respond to quickly accelerating price pressures.
  • Australia named Michele Bullock as the Reserve Bank’s first female deputy governor, propelling her to the front of the queue to succeed Philip Lowe in the top job
  • At the U.S. Commerce Department, Secretary Gina Raimondo’s teams are working on ways to further undermine Putin’s ability to wage war
  • For all the hardships visited on consumers at home and the financial chokehold put on the government from abroad, Bloomberg Economics expects Russia will earn nearly $321 billion from energy exports this year, an increase of more than a third from 2021.
  • Iron ore futures in Asia gained with investors anticipating a strong recovery following the lifting of virus-related restrictions, even as news of Chinese housing giants missing earnings-report deadlines emerged
  • Prime Minister Fumio Kishida’s government signed off on the reappointment of one of the Bank of Japan’s key policy architects in a move that suggests the central bank is looking for policy continuity after Governor Haruhiko Kuroda steps down next April

A more detailed look at global markets courtesy of Newsquawk:

Asia-Pac stocks were cautious following the uninspiring lead from Wall St, where the major indices closed off their worst quarterly performance in two years and as the region digested weak data releases. ASX 200 traded rangebound as pressure from losses in tech, industrials and financials was counterbalanced by resilience in the commodity-related sectors and upgrade to Australian PMI data. Nikkei 225 was subdued after mixed Tankan data in which the headline Large Manufacturing Index topped estimates, but Large Manufacturers and Non-Manufacturers' sentiment worsened for the first time in 7 quarters. Hang Seng and were mixed with sentiment clouded after the PBoC drained liquidity andShanghai Comp. Chinese Caixin Manufacturing PMI slipped into contraction territory, although the mainland recovered amid the partial lifting of the lockdown in Shanghai and as Chinese press continued to advocate monetary easing

Top Asian News

  • Shanghai Shifts Lockdown; Singapore Border: Virus Update
  • Quarantine Eased for Hong Kong Flight Crew in Boost for Cathay
  • China Chipmaker’s Buyer Said to Miss $9 Billion Payment Deadline
  • Kasikornbank Said to Weigh Sale of $2 Billion Asset Manager Unit

European equities (Stoxx 600 +0.6%) opened marginally firmer before extending on gains after positive commentary from Russian Foreign Minister Lavrov. The Stoxx 600 set to close the week out with marginal gains of around 0.6% in what has been a choppy week for indices. Sectors in Europe are higher across the board with Retail, Banks and Autos top of the leaderboard.

Top European News

  • London IPO Market Hasn’t Been This Bad in More Than a Decade
  • Tiber Crossing Left in Limbo After War Sends Steel Surging
  • Global Manufacturing Rebound Falters as War Takes Its Toll
  • EU to Warn China It Will Hurt Global Role by Helping Russia

In FX, the Yen has relented as yields rebound and repatriation demand dries up - Usd/Jpy bounced further from recent lows beyond near term resistance through to circa 122.75. Greenback has regrouped in advance of NFP with the DXY straddling 98.500. Aussie outperforms as risk appetite picks up and 0.7500 continues to prove pivotal. Euro finds a base after marked month end reversal as hot inflation offset lukewarm manufacturing PMIs - Eur/USD holding around 1.1050 after soaking up stops on a minor and brief half round number break.Yuan weaker after sub-50 Caixin Chinese manufacturing print, softer PBoC Cny midpoint fix and 7-day liquidity drain - USDCNH above 6.3650.

In commodities, WTI (+0.6%) and Brent (+0.8%) kicked the session off on the backfoot following yesterday’s SPR announcement by the Biden administration with WTI breaching it's weekly low printed on Tuesday at USD 98.44 with Brent so far unable to take out its weekly low of USD 102.19. Since then, crude benchmarks have attempted to claw back lost ground and sit in minor positive territory. White House Press Secretary Psaki said a gas tax holiday is not off the table, according to Reuters. US House Majority Leader Hoyer said oil companies should either produce on leases and drill wells or pay a fee for unused leases and idled wells, according to EIN News. Russian oil and gas condensate production slipped to 11.01mln BPD in March vs. 11.08mln BPD in February, according to Reuters sources Gazprom says refilling storage ahead of winter will be a challenge for the EU. Gazprom says it has begun sending requests of gas-for-rouble payment switch to clients today; sats it remains a responsible partner and continues to secure gas supplies

US Event Calendar

  • 08:30: March Change in Nonfarm Payrolls, est. 490,000, prior 678,000
    • Change in Private Payrolls, est. 495,000, prior 654,000
    • Change in Manufact. Payrolls, est. 32,000, prior 36,000
    • March Unemployment Rate, est. 3.7%, prior 3.8%
    • Underemployment Rate, prior 7.2%
    • Labor Force Participation Rate, est. 62.4%, prior 62.3%
    • Average Hourly Earnings YoY, est. 5.5%, prior 5.1%; MoM, est. 0.4%, prior 0%
    • Average Weekly Hours All Emplo, est. 34.7, prior 34.7
  • 09:45: March S&P Global US Manufacturing PM, est. 58.5, prior 58.5
  • 10:00: March ISM Employment, est. 53.1, prior 52.9
    • ISM Prices Paid, est. 80.0, prior 75.6
    • ISM New Orders, est. 58.5, prior 61.7
    • ISM Manufacturing, est. 59.0, prior 58.6
  • 10:00: Feb. Construction Spending MoM, est. 1.0%, prior 1.3%

DB's Jim Reid concludes the overnight wrap

Filling in while Jim is on holiday, my quick scan for sports-related injuries for this introduction yielded nothing. Meanwhile, a scan of quarter end markets showed sovereign bonds again yielding less than nothing, as 2yr bund yields (-7.8bps) fell back below 0 to -0.09% while the 2s10s Treasury curve closed below zero for the first time since 2019. Yields farther out the curve followed oil and transatlantic equity prices lower as well. No rest for the weary, though, as today’s US employment data kickstarts the new quarter.

Before diving into markets, a couple of research plugs.

*** Jim’s latest chartbook, “The yield curve inverts … what happens next?”, is out. We looked at all things inversion, including recession risks, asset price performance, the Fed’s viewpoint, our economists' latest recession models and also how yield curve inversions have been explained away in previous cycles. You can take a look here ***

Staying in advertising mode, with Q2 starting, we will publish our Q1 performance review shortly. Q1 was a dramatic time in financial markets, with Russia’s invasion of Ukraine, accelerating inflation, the Fed hiking rates, and the yield curve closing the quarter inverted. As a result, it was a pretty bad month for most assets, with losses across equities, credit, and sovereign bonds. The big exception were commodities as energy, metals and agricultural goods realized large gains. See the full report out shortly for more.

Turning back to yesterday’s markets, Brent and WTI crude futures fell -4.88% and -6.99%, respectively, following the US’s plan to release 1m barrels per day from its Strategic Petroleum Reserve for the next six months to combat eye-watering energy prices, the largest such SPR release on record. In an address to the nation, President Biden also announced measures to pressure domestic producers to increase their supply to the market along with easing regulations that currently restrict oil transport between American ports to American vessels. The President will also invoke the Defense Production Act to compel manufactures to prioritize the production of minerals used for large capacity batteries.

While the UK is considering whether to join the reserve-releasing effort, OPEC+ production will be steady as she goes, with the cartel ratifying the plan to increase production only gradually by 432k barrels a day, in line with expectations. Even without a material increase in OPEC+ production, reports overnight that the US was strategically aligned with allies on Iran inched us closer to a nuclear deal that would open up Iranian supply. Crude oil futures are down a further -3.23% as we go to press this morning. The debate about Russian natural gas invoicing appeared to reach a denouement yesterday; European importers will be able to pay for Russian supply in euros and dollars as contracts specify, with the conversion to rubles happening internally within Russia. Nevertheless, European natural gas gained +5.83%.

On the war, more reports joined the chorus signalling that Russian troops were indeed retreating from certain theatres, including various cities, airports, and the Chernobyl nuclear facility. While positive, the consensus is the locus of the war is moving to the east, rather than ending. Negotiations between Ukraine and Russia are set to resume today.

Foreshadowed in the lede, European sovereign yields staged a large rally to end the quarter. 10yr bunds, OATs, and BTPs all rallied more than -9bps, led by falling inflation compensation on the drawdown in oil prices; 10yr breakevens across Germany, France, and Italy, narrowed -7.0bps, -8.1bps, and -6.5bps, respectively. The rallies weren’t confined to the long-end, as -6.8bps of expected ECB rate hikes through 2022 were priced out as well.

It was smoother sailing for Treasury yields after a stormy quarter, but 2s10s nevertheless managed to dip below zero to close the quarter after briefly testing the waters earlier this week. 2yr yields climbed +2.8bps while 10yr yields dropped anchor, falling -1.1bps, leaving 2s10s at -0.06bps. As was the case earlier this week, the curve re-steepened after the initial inversion plunge, trading at +1.2bps this morning.

Stocks retreated on both sides of the Atlantic, with the STOXX 600 and S&P 500 falling -0.94% and -1.57%, cementing the first negative quarterly return for both indices since the original Covid onslaught in Q1 2020. STOXX 600 utilities (+0.37%) were the only sector in the green across both indices, with cyclical stocks the largest underperformers. The retreat was likely exacerbated by quarter end, which served to push the VIX (+1.23ppts) back above 20 for the first time this week.

Major Asian bourses are trading on the downbeat with tech stocks among the worst performers. Losses in the region are led by the Hang Seng (-0.72%), extending its previous session losses, with Chinese tech stocks listed in Hong Kong plunging. The Nikkei (-0.42%) is lagging after the BOJ’s quarterly Tankan business sentiment survey revealed that sentiment at Japan’s large manufacturers soured in the first three months of 2022. Chinese Caixin services PMI dropped to 48.1 in March, the steepest rate of contraction since February 2020. The deterioration was mainly triggered by the domestic Covid-19 resurgence. Despite the underwhelming data, Chinese stocks are outperforming the region, with the Shanghai Composite up +0.69%.

Outside of Asia, stock futures in the US are pointing to a positive start, with contracts on the S&P 500 (+0.25%), Nasdaq (+0.26%) and Dow Jones (+0.25%) all trading higher.

In data, US PCE increased 0.4%, month-over-month, in line with expectations, while the year-over-year measure moved to fresh four-decade high of 5.4%. The Chicago PMI printed at 67.9 vs. expectations of 57.0, while weekly initial jobless claims ticked up to a still low 202k vs. expectations of 196k. German unemployment fell by -18k in March (vs. -20k expected), which is the smallest monthly decline since last April. In turn, the unemployment rate remained at 5.0%, in line with expectations.

To the day ahead, Q2 kicks off with the March US employment situation report in the New York morning. Strong January and February data coincided with upside surprises and revisions to payrolls data, lending credence to the Fed’s position that the labor market is ready to withstand much tighter monetary policy, if not beckons it. Our US economists expect nonfarm payrolls to increase by +400k, bringing the unemployment rate to a post-pandemic low of 3.7%.

The Euro Area flash CPI will be the other main data, due at 10 am London, and is expected to show inflation rise to a fresh record since the single currency’s formation. After the massive upside surprises from Germany and Spain’s releases on Wednesday, yesterday brought another above-consensus print from France, where inflation rose to +5.1% on the EU-harmonised measure (vs. +4.9% expected). Meanwhile, Italy was the only one of the 4 biggest Euro Area countries not to see an upside surprise, but the +7.0% print (vs. +7.2% expected) nevertheless marked a gain over February’s +6.2% release.

The US will also have the March ISM manufacturing reading, while global manufacturing PMIs are due. Otherwise, central bank speakers include the ECB’s Centeno, De Cos, Makhlouf, Schnabel and Knot, as well as the Fed’s Evans.

Tyler Durden Fri, 04/01/2022 - 08:06
Published:4/1/2022 7:09:38 AM
[Markets] Dow ends down 550 points as stocks finish quarter in the red Dow ends down 550 points as stocks finish quarter in the red Published:3/31/2022 3:33:59 PM
[Markets] Dow's down nearly 400 points in final minutes of session Dow's down nearly 400 points in final minutes of session Published:3/31/2022 3:03:47 PM
[Markets] Dow Jones Continues To Pull Back After Recent Rally; Investors Await Biden's Release Of Oil Reserves The Dow Jones Industrial Average traded near session lows on Thursday as the major indexes continued to pull back moderately this week. The pause comes after a series of powerful up days established the new market uptrend in the middle of March. Published:3/31/2022 1:33:00 PM
[Markets] Dow Jones Continues To Pullback After Recent Rally; Investors Await Biden's Release Of Oil Reserves The Dow Jones Industrial Average traded near session lows on Thursday, as the major indexes continued to pull back moderately this week. The pause comes after a series of powerful up-days established the new market uptrend in the middle of March. Published:3/31/2022 1:07:10 PM
[Markets] Dow Jones Falls; Oil Prices Dive As U.S. Eyes Reserve Release The Dow Jones Industrial Average fell Thursday. Oil prices dived on news that the Biden administration is planning to tap U.S. oil reserves. Published:3/31/2022 9:01:29 AM
[Markets] Futures Flat On Last Day Of Dismal Quarter, Oil Tumbles As Biden Preps Massive SPR Release Futures Flat On Last Day Of Dismal Quarter, Oil Tumbles As Biden Preps Massive SPR Release

US equity futures were muted and flat on the last trading day of the month and quarter, fading a modest overnight gain as the underlying index headed for its first quarterly decline in two years on worries about surging inflation, hawkish monetary policy and an economic slowdown. Contracts on the S&P 500 were down 0.1% at 730 a.m. ET while Dow futures were little changed and Nasdaq 100 futures rose 0.2%, while European stocks fell, heading for the first quarterly decline since 2020. Asian equities retreated on lackluster Chinese PMI data and regulatory concerns. Treasuries held gains with the 10Y yield dropping to 2.31% (from 2.50% earlier this week when the 2s10s inverted) and the dollar ticked up against almost all G-10 peers. Fed watchers will be focused on the PCE deflator, which may have sped up in February.

The big overnight action was in oil, which plunged following the news late on Wednesday that the White House was (again) mulling a plan to release roughly a million barrels a day from reserves to combat crashing Democrat approval rating ahead of the midterms as a result of soaring gasoline prices coupled with supply shortages in response to US sanctions of Russia. The proposal, which includes 180 million barrels being freed over several months, may help the market rebalance this year but won't solve a structural deficit, Goldman said.

The reserve release news came just hours ahead of an OPEC+ supply meeting, where the cartel is expected to stick with its strategy of a modest output boost in May.

Equities globally are poised for their worst quarter since the early days of the pandemic on concerns about tightening monetary policy, red-hot inflation and a looming recession. While stocks remained resilient to the historic rout in bond markets this month, some strategists see little room for them to rally this year, partly as high costs threaten corporate profits. French inflation accelerated more than expected to reach another record, following unexpectedly high readings on Wednesday from Germany and Spain.

“Our base case now is for only modest upside for stocks,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, adding that he expects the S&P 500 to end the year at 4,700, about 2% higher than current levels. He also trimmed his estimate for global earnings growth to 8% from 10% for 2022.

“Aside from quarter-end considerations, oil is very much the center of attention,” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note to investors. Still, “all the usual suspects are still in play, keeping the market in check, including the specter of the Fed pursuing an aggressive path of monetary policy normalization over the coming months.”

Elsewhere, officials from Ukraine and Russia are set to resume talks via video conference on Friday, according to a Ukrainian negotiator, though there was no immediate confirmation from Moscow. Friday’s video discussions between Ukraine and Russia would follow in-person talks this week in Turkey that didn’t produce a short-term cease-fire or major progress toward a broader peace deal. Ukraine’s negotiator said the hope was to have enough agreed on paper in another week to be able to move toward a meeting between President Vladimir Putin and President Volodymyr Zelenskiy.

Going back to the US market, shares in big U.S. energy companies slumped in premarket trading along with crude prices drop (Exxon Mobil -1.9% and Chevron -1.5% premarket, Occidental Petroleum -2.6%, Gran Tierra Energy -3.1%, Imperial Petroleum -3.8%, Camber Energy -4.3%). Bank stocks are also lower putting them on track to fall for a second straight day as the U.S. 10-year yield falls to 2.31%. Goldman Sachs warned that stagflation could make bank stocks less profitable. U.S.-listed Chinese stocks slipped in premarket trading as Securities and Exchange Commission Chair Gary Gensler dialed down prospects of an imminent deal to allow Chinese firms to keep trading on American exchanges. Russian equities advanced as the nation partly lifted the short-selling ban on local stocks on Thursday, removing one of the measures that helped limit the declines in the market after a record long shutdown. Other notable premarket movers include:

  • Vipshop ADRs (VIPS US) rise 8.4% in premarket trading after the Chinese online retailer announces a $1b share buyback plan.
  • Robinhood Markets (HOOD US) shares rise 1.4% in U.S. premarket trading, set to extend the previous day’s 24% gains after the online brokerage announced plans to expand the trading day by four hours, while Morgan Stanley begins coverage of the stock with an equal-weight rating.
  • Energy companies decline in premarket trading as crude prices drop. The U.S. is considering tapping its reserves again in a potentially massive release aimed at managing inflation and supply shortages. Exxon Mobil (XOM US) -1.9%, Chevron -1.5% (CVX US).
  • U.S.-listed Chinese stocks are heading for a lower open after Securities and Exchange Commission Chair Gary Gensler dialed down prospects of an imminent deal to allow Chinese firms to keep trading on American exchanges. Alibaba (BABA US) fell 1.7% in premarket, while its e-commerce rival JD.com (JD US) lost 2.8%.
  • Advanced Micro Devices (AMD US) shares fall 1.3% in U.S. premarket trading, after the semiconductor maker is downgraded to equal- weight from overweight at Barclays, which says that the growth story “needs a pause.”.
  • IZEA Worldwide (IZEA US) shares surge 27% in U.S. premarket trading after the influencer marketing company reported fourth-quarter earnings and saw total revenue increase 62% to a record of $10.3m.

In Europe, the Stoxx 600 reversed initial gains and dropped 0.3%, the Euro Stoxx 50 fell 0.2%, and other major indexes trade flat to slightly lower with retailers, telecoms and energy the worst performing sectors. Retail and telecom stocks led declines while utilities and insurance sectors outperformed. Some notable premarket movers:

  • Brewin Dolphin shares rise as much as 62% and trade slightly below the agreed bid for the firm from RBC Wealth Management. The transaction, being carried out at a high premium, highlights the attractiveness of the U.K. wealth sector, analysts say.
  • Orpea shares climb to their highest level in almost 2 months after Societe Generale says that allegations of mistreatment at its facilities are likely to have “limited” financial impact.
  • Fresenius SE shares rise as much as 3.3% on news that the company’s Kabi intravenous drug unit has bought a majority stake in mAbxience SL and acquired Ivenix.
  • Pernod Ricard shares rise as much as 2.6% as Citi says 3Q sales are likely to beat expectations, also lifting its which lifts EPS estimates and PT, as well as opening a positive catalyst watch.
  • Tate & Lyle shares gain as much as 3.7% after saying it would buy Quantum Hi-Tech, a prebiotic dietary fiber business in China. The deal enhances Tate & Lyle’s portfolio, Goodbody says.
  • Pearson shares rise as much as 3.5%, rebounding from Wednesday’s losses after private equity firm Apollo Global Management said it won’t make an offer for the education publisher.

Earlier in the session, Chinese data and regulatory concerns weighed on Asia stocks. China's NBS manufacturing PMI declined to 49.5 in March from 50.2 in February, missing estimates, likely due to Covid-related restrictions and geopolitical tensions. The output sub-index in the NBS manufacturing PMI survey fell by 0.9 points in March, and the new orders sub-index fell by 1.9 points. The NBS non-manufacturing PMI fell to 48.4 in March from 51.6 in February, also missing expectations, and entirely driven by the decline of services sector due to recent Covid outbreaks in multiple provinces. Separately, Bloomberg reported that Chinese authorities are considering a plan to raise several hundred billion yuan for a new fund to backstop troubled financial firms.

Asian stocks retreated after a two-day advance, as the U.S. securities regulator’s tough stance on a potential delisting of Chinese firms and weak China manufacturing data worried investors.  The MSCI Asia Pacific Index declined as much as 0.8%, and was poised to finish its worst quarterly performance in two years, with Taiwan Semiconductor Manufacturing and Tencent among the biggest drags. Benchmarks in Hong Kong and China underperformed regional peers. Japanese equities headed for a second day of declines while Australia stocks retreated after seven straight day of gains in response to a stimulatory federal budget.  The U.S. Securities and Exchange Commission’s chief said Chinese firms need to fully comply with audit requirements in order to stay on American exchanges. Meantime, China’s manufacturing contracted in March, underscoring the growing toll of lockdowns. Investors are also watching how a tumble in oil prices can alleviate inflation risks and affect corporate earnings. 

“If you look at the PMIs there’s an obvious explanation for why PMIs are weak, which is China pursuing zero-Covid strategy,” Kieran Calder, head of Asia Equity Research at Union Bancaire Privee, said in an interview with Bloomberg Television. “The reality of Covid-19 versus the response in China, the mismatch is too strong right now and I think that’s the biggest worry for us.”  For the quarter, Asian stocks were poised for nearly a 7% loss, the worst performance since early 2020 when the emergence of the pandemic shocked investors. Investors had to grapple with a U.S. rate hike, a war in Ukraine and continued regulatory risks out of China, which caused huge volatility

Japanese equities fell for a second day following a rally in the yen. Electronics makers and banks were the biggest drags on the Topix, which fell 1.1%. Recruit and SoftBank were the largest contributors to a 0.7% loss in the Nikkei 225. The yen was little changed after gaining 1.6% against the dollar over the previous two sessions. Both key gauges still capped their first monthly gains of the year. The Nikkei 225 rose 4.9% in March, the most since November 2020, while the Topix climbed 3.2% on the month.

India’s benchmark equity index clocked its best monthly advance since August, as buying by local funds amid war-induced volatility supported sentiment. The S&P BSE Sensex fell 0.2% to 58,568.51 in Mumbai, trimming its gain for March to 4.1%. The NSE Nifty 50 Index also slipped 0.2% on Thursday. Stocks swung between gains and losses several times during the day ahead of the expiry of monthly derivative contracts Thursday. Institutional investors in India have bought $5 billion worth of shares this month, while foreign investors are set to extend their selling to a sixth consecutive month. Reliance Industries Ltd. was the biggest drag on the 30-share Sensex, which saw an equal number of shares closing up and down. Twelve of the 19 sectoral indexes compiled by BSE Ltd. gained, led by a gauge of telecom stocks. S&P BSE Healthcare Index was the worst performing sub-index.   “Markets took a breather on a monthly expiry day and ended the last day of the financial year on a flat note,” said Ajit Mishra, vice president of research at Religare Broking Ltd. “We reiterate our positive yet cautious stance citing lingering geopolitical tension between Russia-Ukraine and its impact on the global markets.”

In rates, Treasuries extended this week’s rally with yields richer by up to 5bp across belly of the curve, which continues to outperform vs wings. Wider bull-steepening move grips bunds and gilts, as central-bank rate-hike premium is pared. Oil futures are sharply lower, weighing on energy stocks, following reports that Biden is considering a massive release of crude from U.S. reserves to fight inflation. The 10-year yield was around 2.31%, richer by ~4bp vs Wednesday’s close, underperforming bunds in the sector by ~4bp while keeping pace with gilts. Long-end swap spreads are sharply tighter, with 30- year dropping as low as -19.5bp.

Euro-area, bonds extended their advance as money markets pare central bank tightening wagers. French bonds underperformed bunds as EU-harmonized CPI rose 5.1% from a year ago in March -- the most since the data series began in 1997 -- and above the 4.9% median estimate in a Bloomberg survey of economists.  The belly of the German curve richened 6-7bps, leading gains. Peripheral spreads are mixed: Italy tightens, Portugal and Spain widen to core. Money markets trim rate hike pricing.

Japanese government bonds extended their advance as the central bank’s aggressive bond purchases this week reassured players that an excessive rise in yields won’t be tolerated. Yen was little changed in choppy trade. Bank of Japan’s offer to buy an unlimited amount of 10-year government bonds at fixed yields recorded no takeup, the central bank said.

In FX, Bloomberg dollar spot index snapped two days of losses after rebounding in early European session; the dollar advanced versus all of its Group-of-10 peers and commodity currencies were the worst performers. The euro gave up earlier gains after earlier touching a four-week high versus the greenback. Norway’s krone slumped by as much as 1.6% versus the greenback after the central bank announced a ramp-up of FX purchases on behalf of the government. The pound declined for a third day against the euro, touching its weakest level versus the common currency since Dec. 23. A report from the British Retail Consortium gave another glimpse into the cost-of-living crisis, showing prices in U.K. shops rose in March at the fastest annual pace since September 2011. Japan’s factory output eked out its first gain in three months in February, offering only a tepid sign of resilience amid fears the economy has slipped back into reverse. Production inched up 0.1% from the previous month. The Australian dollar declined against most of its Group-of-10 peers as oil prices tumbled on news that the Biden administration is weighing a massive release of crude from U.S. reserves. Sales of Aussie back into euro have seen option-related Australian dollar bids attached to large option strikes get filled, according to Asia-based currency traders

In commodities, crude futures hold Asia’s losses triggered by reports that the White House may make an announcement on the U.S. oil reserve release as soon as Thursday. WTI drops over $6.50 near $101.10. European natural gas faded an initial drop after Germany signaled Russia is softening its demand for ruble payments. Precious metals and much of the base metals complex traded heavy.

Looking to the day ahead now, data releases include German retail sales for February and unemployment for March, French and Italian CPI for March, and the Euro Area unemployment rate for February. From the US, there’s also February’s personal income and personal spending, the weekly initial jobless claims, and the MNI Chicago PMI for March. Otherwise, central bank speakers include ECB Vice President de Guindos, Chief Economist Lane, and New York Fed President Williams.

Market Snapshot

  • S&P 500 futures up 0.1% to 4,601.75
  • STOXX Europe 600 down 0.2% to 459.49
  • MXAP down 0.7% to 180.37
  • MXAPJ down 0.6% to 591.98
  • Nikkei down 0.7% to 27,821.43
  • Topix down 1.1% to 1,946.40
  • Hang Seng Index down 1.1% to 21,996.85
  • Shanghai Composite down 0.4% to 3,252.20
  • Sensex down 0.2% to 58,590.32
  • Australia S&P/ASX 200 down 0.2% to 7,499.59
  • Kospi up 0.4% to 2,757.65
  • German 10Y yield little changed at 0.62%
  • Euro down 0.3% to $1.1130
  • Brent Futures down 3.6% to $109.40/bbl
  • Gold spot down 0.4% to $1,924.94
  • U.S. Dollar Index up 0.24% to 98.03

Top Overnight News from Bloomberg

  • The Biden administration is weighing a plan to release roughly a million barrels of oil a day from U.S. reserves, for several months, to combat rising gasoline prices and supply shortages following Russia’s invasion of Ukraine, according to people familiar with the matter
  • Bank of Japan Governor Haruhiko Kuroda is determined to stick with targeting long-term bond yields near zero, even as it leaves him increasingly at variance with global peers and propels a depreciating exchange rate
  • The yen has taken a beating in recent weeks but technicals suggest that it may be on the road to a recovery. Japan’s currency may rebound to 116 per dollar in the coming months after sliding as low as 125.09 on Monday, the weakest in almost seven years, an analysis by Bloomberg shows
  • Russian President Vladimir Putin said that European buyers could continue making gas payments in euros, according to a German readout of a call he had with Chancellor Olaf Scholz
  • Russian government bondholders would be left with no viable path to recover their money if the country defaults, according to one of the top global lawyers in sovereign debt litigation
  • Hungary kept its key interest rate unchanged after the forint staged the second-biggest emerging-market currency rally this week, relieving pressure on policy makers to deliver more monetary tightening
  • China’s cabinet vowed to stabilize the economy and called on officials to avoid measures that harm market expectations as the government struggles to control Covid outbreaks across the country including in the financial center of Shanghai
  • For the first time in more than a decade, China’s yield advantage over Treasuries may be erased. The yield spread between the benchmark bonds of the world’s two biggest debt markets has narrowed to around 40 basis points from 150 a year ago, well below the People’s Bank of China’s “comfortable” range
  • Australia will invest more to find new buyers for its exports in an effort to ease trade dependence on China, its treasurer said, in the face of “economic coercion” from Beijing that shows little sign of abating

A more detailed look at global markets courtesy of Newsquawk

Asia=Pac stocks traded cautiously at month-end following the weak lead from the US due to increased Russia-Ukraine scepticism and as the region digested disappointing Chinese PMI data. ASX 200 was kept afloat by outperformance in the mining and materials industries although upside was capped as the tech sector suffered from profit-taking and with energy hit by a drop in oil prices. Nikkei 225 traded indecisively amid a choppy currency and after Industrial Production data missed forecasts. Hang Seng and were subdued following the weak Chinese PMI data and with the mood inShanghai Comp. stocks not helped by the US SEC chief casting doubt regarding an imminent deal to avert a delisting of Chinese stocks.

Top Asian News

  • Thirteen-Hour Power Cuts Get Sri Lanka to Shorten Stock Trading
  • Effissimo Would Tender Toshiba Shares in Event of Bain Bid
  • BOJ Looks Ready for a Victory Lap With Yields on the Retreat
  • BOJ Boosts Bond Buying in April-to-June Quarter

European equities (Eurostoxx 50 -0.3%) kicked the final trading session of the month off on the front foot before drifting towards the unchanged mark. Sectors in Europe exhibit a mostly positive tilt with airline names cheering the declines in the energy space as the Energy sector suffers. The biggest laggard in the region is the retail section following a disappointing Q1 update from H&M (-8%). Futures in the US are modestly firmer as the NQ (+0.5%) marginally outpaces the ES (+0.1%) with inflation set to continue to remain in focus today, with the release of US PCE metrics for March; core PCE is seen rising to 5.5% Y/Y

Top European News

  • Iron Ore Futures Advance as Outlook for Demand Brightens
  • Sorrell’s S4 Capital Audit Delay No Longer Down to Covid
  • EU Commission Confirms Raids in Germany’s Natural Gas Sector
  • Pearson Shares Rebound; Barclays Sees a ‘Resilient Business’

In FX, Dollar finds its feet as month, quarter and fiscal year end approach, albeit with a helping hand from others - DXY back on the 98.000 handle, narrowly. Commodity currencies reverse course alongside underlying prices, with crude crushed on reports of US SPR and IEA opening reserve taps - Usd-Cad rebounds through 1.2500 after sliding to new y-t-d low sub-1.2450 only yesterday. Yen choppy amidst residual repatriation flows and more BoJ action to cap JGB yields - Usd/Jpy circa 122.00 within a 122.45-121.35 range. Euro fades into 1.1200 vs Buck again as option expiries and tech resistance impinge, but Aussie  may derive traction from expiry interest at 0.7500 - EURUSD now eyeing support at 1.1100 after tripping stops.

In commodities, WTI and Brent remain firmly on the backfoot in the wake of reports suggesting that the Biden administration is considering a 'massive' SPR release.

  • The news has sent May’22 WTI and Jun’22 Brent to respective lows of USD 100.53/bbl and USD 107.39/bbl to leave them a few dollars above their weekly lows of USD 98.44/bbl and USD 102.19/bbl respectively.
  • US President Biden's administration is considering a 'massive' release of oil to combat inflation and may release up to 1mln bpd for months from the strategic reserve in which the total release could be 180mln , according to Bloomberg.bbls
  • Goldman Sachs says a potentially large SPR release would ease the situation but wouldn't resolve the structural deficit in the oil market. Says adjustments for SPR release, Iran supply delays would lower H2 22 Brent forecast by USD 15, to USD 120/bbl - still above market forwards.
  • US President Biden will deliver remarks today at 13:30EDT/18:30BST regarding the administration's actions to reduce gas prices in the US, according to the White House. It was also reported that the US mulls permitting, according to Reuters sources.summertime sales of higher ethanol blends of gasoline to ease pump prices
  • IEA called an emergency ministerial meeting for Friday, according to the Australian Energy Minister's office. It was later reported that , according to New Zealand'sIEA countries are to decide on a collective oil release Energy Minister's office
  • OPEC+ JTC replaced IEA reports with Wood Mackenzie and Rystad Energy as secondary sources to assess crude oil output and conformity, according to sources cited by Reuters.

In fixed income, bonds on track to see out extremely bearish month, quarter and end to FY on a firmer note. Curves more even after wild swings between flattening, inversion and steepening.BoJ ramps efforts to maintain YCC via a mostly larger JGB buying remit for Q2.

US Event Calendar

  • 08:30: March Initial Jobless Claims, est. 196,000, prior 187,000
  • 08:30: Feb. Personal Income, est. 0.5%, prior 0%
  • 08:30: Feb. Personal Spending, est. 0.5%, prior 2.1%; Real Personal Spending, est. -0.2%, prior 1.5%
  • 08:30: Feb. PCE Deflator MoM, est. 0.6%, prior 0.6%; PCE Deflator YoY, est. 6.4%, prior 6.1%
  • 08:30: Feb. PCE Core Deflator MoM, est. 0.4%, prior 0.5%; YoY, est. 5.5%, prior 5.2%
  • 09:45: March MNI Chicago PMI, est. 57.0, prior 56.3

DB's Jim Reid concludes the overnight wrap

After a great deal of optimism in markets on Tuesday following the Russia-Ukraine negotiations in Turkey, the last 24 hours have proven to be much more negative as investor hopes for a de-escalation in Ukraine were dampened by more gloomy comments on the war from both sides. From Russia, the Kremlin spokesman Dmitry Peskov said that they hadn’t seen a breakthrough in the talks, whilst Ukrainian President Zelensky said that “Russia is deploying new forces on our terrain to try to continue destroying us”, and NATO leaders continued to strike a sceptical tone. Indeed, it was reported by Dow Jones that the European Commission was considering new sanctions against additional Russian banks, and UK Prime Minister Johnson said that the UK was “looking at going up a gear” in its support to Ukraine. President Biden expressed similar sentiments, pledging $500 million of additional aid to Ukraine in a call with President Zelensky.

Against this backdrop, oil prices rose again for the first time this week, with Brent Crude up +2.92% to $113.45/bbl, but there’s been a sharp turnaround overnight on the back of news that the US are planning a major release from their reserves, with Bloomberg reporting it would be a million barrels a day over several months. Biden is due to speak about efforts to lower prices at 1:30pm Eastern, so all eyes will be on that, and overnight we’ve seen Brent Crude prices come down by -4.54% to $108.30/bbl, more than reversing their gains from the previous session. However, European natural gas (+9.77%) rose for a third consecutive session to €118.97/MWh, which is its highest closing level in nearly 3 weeks. That occurred amidst a continued dispute about Russian gas payments, which President Putin wants paid for in rubles, but which multiple European countries have rejected as a breach of contract. In response, Germany’s economy minister Robert Habeck activated the “early warning phase” of an emergency law, which could eventually lead to gas rationing if supplies fall short.

With Russia’s invasion having lasted for over 5 weeks now, we’re increasingly seeing the impact reflected in the official inflation numbers, and yesterday’s releases out of Europe gave fresh life to the bond selloff. In terms of the numbers, German inflation rose to +7.6% in March on the EU-harmonised measure, which was up from +5.5% back in February and some way above the +6.8% reading expected by the consensus. It was the same story in Spain, where inflation rose to +9.8% (up from +7.6% in February), which will heighten interest in tomorrow’s flash release for the entire Euro Area. In turn, that’s led to growing expectations of ECB rate hikes this year, with a total of 63bps being priced in by the December meeting, which is the most we’ve seen to date. On top of that, more than 30bps are even being priced in by the September meeting, which surpasses their pre-invasion peak.

Given the strong inflation numbers and the prospect of a more aggressive ECB, European bonds sold off across most of the continent, with yields on 10yr bunds (+1.3bps), OATs (+2.3bps) and BTPs (+1.3bps) all hitting fresh multi-year highs. Furthermore, the 2yr German yield (+5.6bps) closed in positive territory for the first time since 2014, having briefly got there on an intraday basis during the previous session. Unsurprisingly, the latest rise in yields was driven by higher inflation breakevens rather than real rates, and the 10yr German breakeven surged another +6.0bps to 2.71%, its highest level in data available back to 2009, whilst the Italian breakeven rose +4.0bps to 2.53%, its highest level since 2008.

Even as European bonds were selling off once again, it was the reverse story in the United States, where Treasuries recovered somewhat yesterday as we come to the end of one of their worst quarterly performances in decades. Yields on 10yr Treasuries fell -4.6bps to 2.35%, whilst yield curves remained incredibly flat; the 2s10s curve steepened marginally by +1.3bps to 3.6bps, avoiding another inversion, and this morning is up another +0.3bps to 3.9bps.

In terms of other developments this morning, Asian equity markets have followed Wall Street’s lead overnight with the Nikkei (-0.18%), Hang Seng (-0.59%), Shanghai Composite (-0.14%), CSI (-0.26%) all losing ground, though the Kospi (+0.54%) is the exception to this pattern. The weakness in Asian gauges has come amidst declines in the PMI data, with China’s manufacturing PMI down to 49.5, and the non-manufacturing PMI down to 48.4. For reference, that’s the first time that both readings have been below the 50-mark that separates expansion from contraction since February 2020, and comes as multiple cities are undergoing further lockdowns in response to the current Covid outbreak. Additionally, a slide in Chinese tech stocks is weighing on sentiment after the US Securities and Exchange Commission added Hong Kong listed Baidu Inc. to its long list of companies potentially facing delisting from US exchanges. Outside of Asia, stock futures in the US and Europe are pointing to a more positive start, with contracts on the S&P 500 (+0.28%), Nasdaq (+0.56%) and DAX (+0.59%) all trading higher.

Those equity declines overnight in Asia follow a broader decline in risk appetite yesterday given the more negative geopolitical developments, and both the S&P 500 (-0.63%) and Europe’s STOXX 600 (-0.41%) unwound some of their gains from the previous day. More cyclical industries underperformed in general, whilst the German DAX (-1.45%) also put in a weaker performance relative to the other main European indices. The VIX Index of volatility (+0.43pts) also ticked up to 19.33pts, after closing at to its lowest level since Russia’s invasion of Ukraine on Tuesday.

In France, we’re now just 10 days away from the first round of the presidential election, and there are continued signs of a narrowing in the polls, albeit with President Macron still in the lead. In terms of yesterday’s polls (from Opinionway, Harris, Ipsos, Ifop and Elabe), all of them pointed to a repeat of the second-round contest from 2017, with the first-round polling putting President Macron in first place followed by Marine Le Pen in second. That said, they’re also implying a noticeably tighter result in the second round than Macron’s 66%-34% victory against Le Pen in 2017. Looking through the numbers, the second round estimates ranged from a 55%-45% Macron victory (from Opinionway and Ipsos), to a 52.5%-47.5% Macron victory (from Elabe).

Finally on yesterday’s other data, the ADP’s report of private payrolls from the US showed growth of +455k in March (vs. +450k expected). That comes ahead of tomorrow’s jobs report, where our US economists are expecting nonfarm payrolls to have grown by +400k, with the unemployment rate ticking down to a post-pandemic low of 3.7%.

To the day ahead now, and data releases include German retail sales for February and unemployment for March, French and Italian CPI for March, and the Euro Area unemployment rate for February. From the US, there’s also February’s personal income and personal spending, the weekly initial jobless claims, and the MNI Chicago PMI for March. Otherwise, central bank speakers include ECB Vice President de Guindos, Chief Economist Lane, and New York Fed President Williams.

Tyler Durden Thu, 03/31/2022 - 07:56
Published:3/31/2022 7:01:23 AM
[Markets] Dow, S&P 500 snap 4-session winning streak; Nasdaq falls over 1% Dow, S&P 500 snap 4-session winning streak; Nasdaq falls over 1% Published:3/30/2022 3:25:32 PM
[Markets] Dow Jones Falls To Session Lows, But Walmart, UNH Stock Show Strength; Micron Reverses Lower After Early Pop The Dow Jones took a step back Wednesday after four straight gains, but UNH stock and WMT stock were bright spots. Published:3/30/2022 2:55:40 PM
[Markets] GLOBAL MARKETS-Stocks rally pauses, bond markets ponder risks for U.S. economy The U.S. and European equities rally paused on Wednesday as investors took stock of economic and geopolitical risks, while oil prices jumped back around $4 on the prospect of more Russian sanctions. The broad Euro STOXX 600 fell 0.6% after three positive sessions that had taken the index back to levels reached before Russia invaded Ukraine. By late morning, the Dow Jones Industrial Average had lost 0.18%, to 35,229.04, the S&P 500 was down 0.25%, and the Nasdaq Composite was little changed. Published:3/30/2022 10:24:16 AM
[Markets] Dow Jones Dips Amid Strong Market Rally; Apple, SolarEdge, Micron In Focus Futures signaled a lower open for the Dow Jones today, but the market rally is strong. Apple and Dutch Bros are in buy zones. Published:3/30/2022 9:53:48 AM
[Markets] Dow Jones Firms Amid Strong Market Rally; Apple, SolarEdge, Micron In Focus Futures signaled a lower open for the Dow Jones today, but the market rally is strong. Apple and Dutch Bros are in buy zones. Published:3/30/2022 9:23:17 AM
[Markets] Dow Jones Today Falls Amid Strong Market Rally; Apple, SolarEdge, Micron In Focus Futures signaled a lower open for the Dow Jones today, but the market rally is strong. Apple and Dutch Bros are in buy zones. Published:3/30/2022 8:53:42 AM
[Markets] Dow Jones Futures Today Fall Amid Strong Market Rally; Apple, SolarEdge, Micron In Focus Futures signaled a lower open for the Dow Jones today, but the market rally is strong. Apple and Dutch Bros are in buy zones. Published:3/30/2022 7:55:05 AM
[Markets] Dow Jones Closes Higher; Nasdaq Rallies While Apple Scores Breakout Dow Jones stock Apple closed 1.9% higher while shares scored a breakout from a base. Meanwhile, the Nasdaq led the upside. Published:3/29/2022 3:57:00 PM
[Markets] Dow up 400 points early Tuesday amid renewed optimism over Ukraine-Russia talks Dow up 400 points early Tuesday amid renewed optimism over Ukraine-Russia talks Published:3/29/2022 8:44:33 AM
[Markets] Stocks open with strong gains on optimism over Russia-Ukraine talks Stocks opened solidly higher Tuesday, finding support after Russian officials made positive remarks following the resumption of negotiations with their Ukraine counterparts in Turkey. The Dow Jones Industrial Average was up 395 points, or 1.1%, near 34,350, while the S&P 500 advanced 1% to 4,622. The Nasdaq Composite was up 1.4% near 14,553. Published:3/29/2022 8:44:33 AM
[Markets] Dow Jones Futures Rally As Russia, Ukraine Hold Cease-Fire Talks; Apple, Tesla Eye Buy Points Dow Jones futures rallied Tuesday as Russia and Ukraine hold cease-fire talks. Tesla stock is nearing a buy point. Published:3/29/2022 6:13:03 AM
[Markets] Shutting Canadian Pipeline Would Cost US Consumers $23.7 Billion More In Fuel Costs: Report Shutting Canadian Pipeline Would Cost US Consumers $23.7 Billion More In Fuel Costs: Report

Authored by John Haughey via The Epoch Times (emphasis ours),

A recently published analysis by a consumer advocacy nonprofit maintains that shutting a 4.5-mile section of a nearly 70-year-old pipeline that spans the Great Lakes from Wisconsin to Ontario would impose $23.7 billion in higher fuel costs on families and businesses in Indiana, Michigan, Ohio, and Pennsylvania.

Damage to anchor support EP-17-1 on the east leg of the Enbridge Line 5 pipeline within the Straits of Mackinac in Michigan is seen in this June 2020 photo.(The Canadian Press/HO - AP, Michigan Department of Environment, Great Lakes, and Energy)

Consumer Energy Alliance’s (CEA) 14-page report estimates that closing Canada-based Enbridge’s Line 5 pipeline in the Straits of Mackinac, which connect Lake Michigan to Lake Huron, would spur regional fuel price spikes of 9.47 to 11.66 percent “independent of any other market conditions, such as the surge in fuel prices observed over the past 12 months that are tied to international oil markets and logistical challenges caused by the pandemic.”

Enbridge and the state of Michigan have been engaged in litigation for more than a year over the pipeline after Michigan Gov. Gretchen Whitmer, a Democrat, in November 2020 revoked the pipeline’s original 1953 lakebed easement and ordered the pipeline to be shut by May 2021, citing the risk of a spill in the ecologically sensitive straits.

Enbridge ignored the order—the pipeline is still funneling 540,000 barrels per day (bpd) of light crude oil, light synthetic crude oil, and natural gas liquids (NGLs) through the straits—and petitioned to have the case heard in federal courts. In October 2021, the government of Canada backed Enbridge in its challenge and invoked a 1977 pipeline treaty with the United States to demand bilateral negotiations at the federal level.

In November 2021, a federal judge transferred Whitmer’s suit out of Michigan’s courts. That suit was subsequently dropped, but a similar lawsuit filed by Michigan Attorney General Dana Nessel remains in state courts, although a ruling is pending regarding its jurisdictional status.

Built in 1953 by Bechtel Corp., the Line 5 pipeline is actually two 20-inch-diameter parallel pipes with an enamel coating that’s three times thicker than a typical pipeline. Enbridge maintains that there has never been a leak in its 69-year operational existence.

The company maintains that it monitors Line 5’s Straits crossing “24/7, using both specially trained staff and sophisticated computer monitoring systems” that include “regular inspections of the line, using inline tools, expert divers, and remote operating vehicles (ROVs), going above and beyond regulatory requirements.”

In April 2020, Enbridge filed an application with the Michigan Public Service Commission (PSC) requesting authority to replace its 4.5-mile Line 5 pipeline under the Straits of Mackinac and encase it inside a tunnel.

The Straits Line 5 Replacement Segment Project would replace the dual 20-inch diameter pipes with one 30-inch diameter pipe and relocate it within a concrete-lined tunnel below the lakebed.

The application didn’t address the tunnel—only the pipeline replacement. The proposed $500 million tunnel project is being reviewed under separate applications filed with state and federal agencies. The last date for public comments on the proposed tunnel was March 11. State regulators and the three-member PSC are currently reviewing the proposal.

Enbridge sought swift approval for its pipeline replacement project based on its original 1953 approval, but the PSC determined that the proposed pipeline replacement project presented significant differences and denied its request for declaratory relief, referring it to the state’s Act 16 process for formal contested case hearings.

Six months later, Whitmer pulled the plug by revoking its easement and ordering the pipeline shuttered by May 2021, effectively pushing the matter into the courts.

Michigan Gov. Gretchen Whitmer speaks during a press conference on Belle Isle in Detroit, Mich., on June 22, 2021. (David Guralnick/Detroit News via AP)

Although there have never been any reported leaks from the pipeline in the straits, Enbridge-owned pipelines have been responsible for oil spills elsewhere in Michigan, including from Line 5 in Crystal Falls in 1999 and in the Kalamazoo River in 2010.

Eight Michigan counties and municipalities have formally called for the “retirement “of Line 5 including Cheboygan, Cheboygan County, Emmet County, Genesee County, Mackinaw City, Mentor Township, Munising Township, and Wayne County.

According to a study published by the University of Michigan and the U.S. National Oceanic and Atmospheric Administration, a leak in Enbridge 5 near the Straits of Mackinac could affect roughly 700 miles of shoreline. A pipeline leak and oil spill could cost as much as $6 billion in cleanup efforts and environmental damage, according to the state, citing a close call in 2018 when a ship’s anchor stuck, but didn’t rupture, the pipeline in the straits.

An August 2020 study by Gary L. Street, former Dow chemical engineer, found a temporary court-ordered shutdown of one of Line 5’s dual pipelines following an incident elsewhere along its traverse didn’t affect gas prices or supply in Michigan or Canada.

But according to CEA’s analysis, shutting down the pipeline permanently would be another matter.

CEA stated that its “independent third-party analysis,” conducted by California-based Weinstein, Clower, and Associates, examined the effects that a Line 5 closure would have on the region and found “shutting down this critical infrastructure would have a devastating impact on the supply of transportation fuels in regional markets, and hurt petrochemical refiners that rely on the pipeline to safely and efficiently deliver feedstock.”

According to the report, Ohio residents and businesses would incur $2.73 billion in higher gasoline and diesel prices through 2027. Michigan residents and businesses would see $2.22 billion in higher costs, those in Indiana $272 million, and those in Pennsylvania for $630 million.

“The jump in transportation fuel prices will not be borne evenly across all consumer groups,” the CEA report reads. “But given current macro-economic trends, most of these higher costs will likely be passed on to households.”

The increase in fuel costs will radiate through local and state economies, according to CEA.

“Based on research into broader energy price inflation, these cost increases will further push up food prices, especially for beef, pork, and corn. We estimate combined grocery and restaurant prices will rise an additional 0.2 percent to 0.3 percent on top of any other inflationary pressures in the economy,” the report reads. “These energy cost increases will lower economic growth rates, especially in Michigan and Ohio, for years to come.”

The March analysis follows a 2021 CEA study that found Indiana, Michigan, Ohio, and Pennsylvania would lose $20.8 billion in “lost economic activity,” an $8.3 billion reduction in Gross State Product, $265.7 million in “lost state tax revenue,” a loss of 33,700 jobs, and $2.36 billion in “forgone labor earnings.”

“In the longer term, rising transportation fuel prices will have negative impacts on regional economic competitiveness, particularly in manufacturing and related logistics services,” the report reads. “These energy cost increases will lower economic growth rates, especially in Michigan and Ohio, for years to come.

“Households are already enduring the highest rate of inflation in 40 years with real wages and earnings declining over the past year. The closure of Line 5 would be the wrong action at the wrong time.”

Tyler Durden Mon, 03/28/2022 - 21:00
Published:3/28/2022 8:09:13 PM
[Markets] Dow Jones Futures: Russia-Ukraine Cease-Fire Talks On Deck; Apple, Tesla Eye New Buy Points Dow Jones futures were little changed Monday ahead of key Russia-Ukraine cease-fire talks Tuesday. Tesla stock is nearing a new buy point. Published:3/28/2022 7:42:37 PM
[Markets] Will Tesla Finally Put an Auto Stock Back in the Dow? The stock market is nothing if not tenacious. After having fallen sharply early in 2022, stock markets have powered back, and the Dow Jones Industrial Average (DJINDICES: ^DJI), Nasdaq Composite (NASDAQINDEX: ^IXIC), and S&P 500 (SNPINDEX: ^GSPC) have reached their best levels in roughly six weeks. The Dow Jones Industrials have traditionally included some of the giants of American industry, and for much of their early history, the average lived up to its name by focusing largely on industrial and manufacturing giants. Published:3/28/2022 5:38:08 PM
[Markets] Oil, Gold, Yen, & Yield-Curve Slapped Lower; Ruble & Crypto 'Rock'et Higher Oil, Gold, Yen, & Yield-Curve Slapped Lower; Ruble & Crypto 'Rock'et Higher

While oil plunged and crypto soared, perhaps the biggest news of the day was that the Ruble continued to charge higher, almost erasing all of the post-invasion losses...

Source: Bloomberg

And gold in rubles has fallen back towards CBR's buying level announced last week...

Source: Bloomberg

Crude crashed on demand anxiety as China begins its lockdown in Shanghai. It was rescued briefly by OPEC+ headlines that they don't care about temporary 'war premium' and will stock to their current supply plan, but that didn't last long as the reports of progress in peace-talks sent WTI legging down further, settling with a $104 handle...

Bitcoin ripped back above $48,000 (and up to its 200DMA)...

Source: Bloomberg

...pushing it back into the green for 2022 and to its highest level of the year (Ethereum also surged up to $3400)...

Source: Bloomberg

'Growth' stocks soared with tech-heavy Nasdaq the clear winner but going into the last hour, reports of possible breakthroughs in Russia-Ukraine peace talks sent all the majors higher. The rally dragged The Dow just into the green along with the S&P with even Small Caps desperately ramped to a tiny gain on the day...

Growth outperformed value (energy and financials suffered today), slamming the Value/Growth ratio back to basically unchanged on the month..

Source: Bloomberg

Treasuries were a mixed bag today with the long-end outperforming amid a massive flattening (2Y +6bps, 30Y -2bps)...

Source: Bloomberg

But what was consistent was the worsening of yield curve inversions across almost the entire curve (5s10s, 5s30s, 7s10s, and 20s30s all inverted now). The rate of collapse in the yield curve is almost unprecedented...

Source: Bloomberg

The forward curve is already flashing red for recession with 1Y Fwd 2s30s now 41bps inverted!!!!!

Source: Bloomberg

The dollar rallied up to 2 week highs, retracing all the post-FOMC losses...

Source: Bloomberg

The dollar is being helped by the carnage in JPY...

Source: Bloomberg

Gold was smashed lower on the peace-talk headlines...

In context, Gold is getting close to the key $1900 level and the pre-invasion lows...

Finally, what is most glaring is that the market is now pricing in 9 more rate-hikes in 2022... which the market sees as guaranteeing a recession... and therefore the market is pricing in almost three rate-cuts in 2023/24....

Source: Bloomberg

With stocks only a few percent off their highs, do you think they are pricing in 9 more hikes this year?

Tyler Durden Mon, 03/28/2022 - 16:01
Published:3/28/2022 3:10:39 PM
[Markets] Dow Jones Dips 200 Points, But Walmart, Microsoft Rise; Apple Stock Probes New Buy Point, Bitcoin Jumps 6% The Dow Jones was under modest selling pressure Monday afternoon, but Walmart and Microsoft bucked the trend. Published:3/28/2022 1:07:26 PM
[Markets] Dow slides 150 points even as Nasdaq runs up a triple-digit gain Dow slides 150 points even as Nasdaq runs up a triple-digit gain Published:3/28/2022 9:05:35 AM
[Markets] Dow Jones Futures Fall As Tesla Surges On Stock Split Plan; Bitcoin Jumps Above $47,000 Dow Jones futures fell Monday, as Tesla stock surged on a stock split plan. The price of Bitcoin jumped over the weekend, topping $47,000. Published:3/28/2022 8:34:54 AM
[Markets] "The Morgan Stanley Fade" - Clients Who Felt Cheated By Bank's Block Trading Business Seize Opportunity For Revenge "The Morgan Stanley Fade" - Clients Who Felt Cheated By Bank's Block Trading Business Seize Opportunity For Revenge

As the SEC sharpens its knives for the slaughter of Morgan Stanley's lucrative block-trading business, the bank is finding - much, we imagine, to its deep chagrin - that many of its colleagues and counterparties are aiding in the investigation, even regaling regulators with a flurry of "I told you so's".

We have already seen several of Morgan Stanley's counterparty/rivals snitch on the company by helping the Feds to build their case. But as it turns out, these acts of vengeance aren't limited to just Credit Suisse, which lost billions of dollars thanks to Morgan's decision to break ranks during the Archegos collapse (we were among the first to highlight those block trades back in March of last year).

Many of the biggest buy-side firms have long kvetched about Morgan Stanley's block-trading business. Many eyed the bank's ability to quickly unload large block's of (heavily discounted) shares, suspicious of what they believed might be the bank's skilled front-running by lining up buyers ahead of time, before an order to sell has even been placed.

Now, according to Bloomberg, as the federal block-trading probe advances with Morgan Stanley as its primary target, bankers are reportedly joking among themselves about the "Morgan Stanley fade" - a practice that results from the bank leaking news of potential sales before they happen, allowing other firms to front-run the trade accordingly, ultimately moving the market to the banker's advantage.

The group of malcontents includes some of the biggest PE firms in the country, including Blackstone, KKR and Carlyle Group.

Yet now, all across Wall Street the knives are out for Morgan Stanley. Since word emerged last month that the equities powerhouse is being examined as part of U.S. probes into whether banks tipped off hedge funds to stock sales big enough to move markets, the industry has been buzzing about the "Morgan Stanley fade."

Competitors, who couldn’t figure out how Morgan Stanley was bidding for block trades at such tight discounts, are now swapping "I told you so’s." Authorities examining Morgan Stanley’s business haven’t accused it of wrongdoing.

But before the investigation was made public, MS and many of its rivals saw nothing wrong with this type of behavior. Senior bankers are constantly pitching deals, and so offering select clients a tasty 'hint' about a potential block sale didn't seem like the illegal sharing of material non-public information, but rather a necessary aspect of marketing potential deals. All of thi

Unfortunately for them, the boundaries of what's deemed acceptable are changing rapidly.

Yet now, all across Wall Street the knives are out for Morgan Stanley. Since word emerged last month that the equities powerhouse is being examined as part of U.S. probes into whether banks tipped off hedge funds to stock sales big enough to move markets, the industry has been buzzing about the "Morgan Stanley fade."

Competitors, who couldn’t figure out how Morgan Stanley was bidding for block trades at such tight discounts, are now swapping “I told you so’s.” Authorities examining Morgan Stanley’s business haven’t accused it of wrongdoing.

Firms like KKR have even adopted strategies to guard against the Morgan "fade" - including working with a single broker to try and minimize the odds of unfavorable leaks allowing rivals to front-run the trade.

One longtime PE executive, speaking with Bloomberg, said he felt helpless to combat a trend, which he noticed over time, of prices moving unfavorably against him just before block trades were executed. However, given Morgan Stanley's massive clout in the market, he worried that the bank would punish him for speaking out.

Another executive pointed to one particularly messy block trade as an example of the bank's uncanny ability to will prices to move in their favor just as trades were about to be executed.

Some market participants point to a particularly messy block trade on Monday Aug. 9, when a group of investors tapped Morgan Stanley to unload shares of ZoomInfo Technologies Inc. The group had selected Morgan Stanley for another ZoomInfo trade days earlier with satisfactory results.

The Friday before the second sale, the stock sank 3.1%, the third-worst performance in the Dow Jones Internet Service Index. Then early on Monday morning, the shares tumbled another 3.2% before the offering was announced.

Banks are supposed to handle block trades discreetly so that prices don’t fall. The reality, according to market participants, is that declines can happen, potentially because of the way banks track interest among prospective buyers.

The SEC initially launched its block-trading probe in 2018, and the DoJ later joined in after the disastrous collapse of Archegos Capital Management, which involved several massive block trades that hammered valuations in the firm's portfolio stocks as a group of Wall Street brokers - led by Goldman and Morgan Stanley - aggressively offloaded the shares. MS and Goldman avoided major losses on their positions in the Archegos portfolio stocks (which Archegos had bet on via what's known as a total return swap, leaving the prime brokers in possession of the shares, and thus on the hook for losses in the event of a blowup) by reportedly breaking an agreement on a half dozen prime brokers to try and manage the sales of Archegos's portfolio. But their decision to break ranks had devastating consequences for their far-slower rivals, as banks like Nomura and Credit Suisse were ultimately saddled with billions in losses.

Like the old saying goes, "revenge is a dish best served cold". Now, after years of biding their time, Morgan's clients and counterparties are seizing the opportunity for some good ol' fashioned payback.

Tyler Durden Sun, 03/27/2022 - 19:10
Published:3/27/2022 6:33:55 PM
[Markets] 3 Dow Stocks That Can Turn $300,000 Into $1 Million by 2030 These well-known, profitable, and time-tested Dow components can make you a millionaire by the turn of the decade. Published:3/27/2022 4:26:37 AM
[Markets] US STOCKS-S&P 500 ends higher with financials as Treasury yields jump The S&P 500 ended higher on Friday as financial shares rose after the benchmark Treasury yield jumped to its highest level in nearly three years. The Nasdaq ended lower, and tech and other big growth names mostly declined, but they finished off session lows following a late-session rally. For the week, the Nasdaq and S&P 500 registered solid gains of 2% and 1.8%, respectively, and the Dow was nominally higher with a 0.3% rise. Published:3/25/2022 4:11:46 PM
[Markets] GLOBAL MARKETS-Wall Street pauses stock comeback, keeps Treasury yields climbing Shares on Wall Street took a breather on Friday after a tech-driven rally and U.S. Treasury yields rose to fresh heights as markets evaluated a world of elevated interest rates and the effects of Russia's war in Ukraine. The Nasdaq fell about 0.16% as technology and healthcare stocks pulled back, while the Dow Jones Industrial Average and S&P 500 edged up about 0.5%, with energy and financial shares rising on oil price gains and bets on interest rate hikes by the Federal Reserve. Share prices have been supported by global flash Purchasing Managers' Index (PMI) data for March this week showing the world economy was broadly resilient, but the longer-term economic outlook is making investors cautious. Published:3/25/2022 3:41:01 PM
[Markets] Stocks, Gold, & Oil Surge On Week As Yield Curve Carnage Screams 'Recession' Stocks, Gold, & Oil Surge On Week As Yield Curve Carnage Screams 'Recession'

The ongoing hawkish push higher in market expectations for 2022's rate-hike trajectory with 9 more rate-hikes now expected by the end of December. But as the chart below shows, as the hawkishness rises, so does the chance of a recession, and the market is expecting more than 2 rate-cuts starting next year...

Source: Bloomberg

Bonds were the story of the week as the bloodbath did not stop, especially at the short-end, with 5Y yields up a stunning 44bps (while 30Y was up 'only' 17bps)...

Source: Bloomberg

The bloodbath in bonds has sent the short-end and belly soaring in yields to the point that 5s30s got very close to inverting (for the first time since May 2006). The flattest 5s30s print today was just 1.3bps...

Source: Bloomberg

This long-spread joins 20s30s, 3s10s, 5s10s, and 7s10s in recession-screaming inversions...

Source: Bloomberg

It's a recession! How do we know? "Because I was inverted..."

And so, amid all the surging rates and hawkish expectations, stocks managed gains on the week with Nasdaq and S&P outperforming while The Dow could not get much done and Small Caps closed lower. A late-daye panic-bid lifted Small Caps almost back to green on the week...

Wondering why the market went vertical into the close? Some algo wanted to hunt down the stops at the 100DMA...

VIX appears to be pricing in 'peace' this weekend as it closes at a 20 handle...

The early week short-squeeze faded on Thursday and Friday as ammo ran out...

Source: Bloomberg

Energy stocks strongly outperformed on the week with Healthcare the laggard. Financials managed modest gains...

Source: Bloomberg

On the week the very recent trend of growth outperforming value stalled - after erasing value's relative outperformance from the start of the month...

Source: Bloomberg

Oil prices ended higher on the week amid an avalanche of Russia/Rubles, Iran nuke deal, pipeline closures, and storage facility attacks. PMs were also up on the week but copper ended lower...

Source: Bloomberg

The dollar ended the week modestly higher, bouncing off unch twice during the week..

Source: Bloomberg

Cryptos rallied on the week with ETH and BTC up around 6%...

Source: Bloomberg

Interestingly, financial conditions in US, Japan, China, and Europe all stopped 'tightening' this week...

Source: Bloomberg

Finally, we note that as mortgage rates have exploded higher - at their fastest pace in decades - they have also decoupled dramatically from 10Y Treasury yields - now over 200bps above 10Y.

Source: Bloomberg

As Mike Shedlock notes, six of the last seven recessions began shortly after the spread exceeded 200bps, warning that "We are now in the danger zone."

And the forward Treasury curve is inverted in 2s10s, another high conviction recession signal...

Source: Bloomberg

Given that we are suffering the worst drawdown in global bond prices on record...

Source: Bloomberg

We could perhaps expect some rebalancing/rotation (buy bonds, sell stocks) early next week.

Tyler Durden Fri, 03/25/2022 - 16:01
Published:3/25/2022 3:10:35 PM
[Markets] Dow Jones Up As Microsoft Stumbles; Tesla Stock Steady As Rival Dives; 3 Stocks Test Buy Points The Dow Jones fought back even as Microsoft stock stumbled amid tech weakness. Tesla stock was holding firm even as Nio plunged. Published:3/25/2022 2:41:00 PM
[Markets] GLOBAL MARKETS-Wall Street stocks pause as Treasury yields hit new highs Shares on Wall Street took a breather on Friday after a tech-driven rally and U.S. Treasury yields rose to fresh heights as markets evaluated a world of elevated interest rates and effects of Russia's war in Ukraine. The Nasdaq fell about 0.35% as a rally in technology stocks lost steam, while the Dow Jones Industrial Average and S&P 500 inched up about 0.25%, with financial shares rising on growing bets of bigger interest rate hikes by the Federal Reserve. Published:3/25/2022 1:42:07 PM
[Markets] US STOCKS-Nasdaq leads Wall St lower as tech stocks lose ground The Nasdaq and the S&P 500 fell on Friday as a rally in technology stocks lost steam, while the Dow held steady, with financial shares rising on growing bets of bigger interest rate hikes by the Federal Reserve. Megacap stocks Apple Inc, Tesla, Microsoft Corp and Nvidia Corp slipped between 0.5% and 1.9% after leading a Wall Street rebound this week. Published:3/25/2022 12:17:08 PM
[Markets] Twenty-seven of 30 components post gains as Dow advances 200-plus points Twenty-seven of 30 components post gains as Dow advances 200-plus points Published:3/25/2022 10:09:58 AM
[Markets] US STOCKS-S&P 500, Dow rise as rate hike bets boost financials Financials led the S&P 500 and the Dow higher on Friday as traders raised their bets on bigger interest rate hikes, while losses in Tesla and Nvidia weighed on the Nasdaq as a rally in technology stocks lost steam. Wells Fargo and Bank of America added more than 1.5% each. Published:3/25/2022 10:09:58 AM
[Markets] GLOBAL MARKETS-Wall Street steadies as market focuses on rate outlook, Ukraine Shares on Wall Street steadied on Friday after a tech-driven rally and U.S. Treasury yields rose as markets evaluated the possibility of bigger U.S. interest rates in store and the impact of Russia’s war in Ukraine. The Dow Jones Industrial Average, S&P 500 were both up around just 0.2% in early trading Friday, while the Nasdaq Composite was virtually flat. Published:3/25/2022 9:39:27 AM
[Markets] Dow Jones Futures Rise As Apple Nears Buy Point; Tesla Rival Nio Skids On Earnings Dow Jones futures rose Friday, as Apple stock neared a buy point. Tesla rival Nio skidded on earnings results. Published:3/25/2022 7:10:48 AM
[Markets] Dow Jones Futures: Market Rally Rebounds As Nvidia, AMD Lead Chip Surge; Nio Earnings Due Dow Jones futures were little changed, along with S&P 500 futures and Nasdaq futures. The stock market rally bounced back Thursday from the prior day's retreat. Nvidia and Advanced Micro Devices were big winners on a strong day for semiconductors. Published:3/24/2022 5:32:54 PM
[Markets] Dow finishes up nearly 350 points as chip stocks rally, oil prices pull back Dow finishes up nearly 350 points as chip stocks rally, oil prices pull back Published:3/24/2022 3:31:44 PM
[Markets] Dow ends nearly 350 points higher as oil prices pull back, jobless claims fall Stocks extended gains into the closing bell Thursday, with the S&P 500 and Nasdaq Composite reclaiming all of the previous day's losses and then some. Equities bounced as oil futures pulled back after ending around two-week highs and data showed the number of first-time jobless claims fell to their lowest since 1969. The Dow closed with a gain of around 349 points, or 1%, near 34,708, according to prelminary figures, while the S&P 500 jumped around 64 points, or 1.4%, to finish near 4,520. The N Published:3/24/2022 3:31:44 PM
[Markets] Dow's up over 300 points in final half-hour of session Dow's up over 300 points in final half-hour of session Published:3/24/2022 3:02:22 PM
[Markets] Dow Jones Futures Rebound From Wednesday's Losses; 5 Top Stocks To Buy And Watch Dow Jones futures rallied Thursday morning, looking to rebound from Wednesday's sharp losses. Treasury yields continued higher. Published:3/24/2022 7:30:20 AM
[Markets] Dow finishes down about 450 points as oil prices climb Dow finishes down about 450 points as oil prices climb Published:3/23/2022 3:23:24 PM
[Markets] Stocks Extend Historic Short-Squeeze Melt-Up As Recession & Rate-Cut Odds Rise Stocks Extend Historic Short-Squeeze Melt-Up As Recession & Rate-Cut Odds Rise

Another quiet macro day (and everyone shrugging off The Fed's Bullard & Daly's hawkish comments) gave the algos the opportunity to run some more stops, pushing the S&P, Dow, and Nasdaq above key technical levels. S&P broke back above its 200DMA today and the rest of the majors held above their 50DMAs...

Nasdaq was the day's big winner, and decoupled from the other majors around the EU close. This was the 5th day of gains in the last 6 days...

The historic short squeeze extended today with 'most shorted' stocks up 20% from pre-rate-hike lows last week (this is the most aggressive short squeeze since Jan 2021 - which actually marked the record high for the 'most shorted' index)...

Source: Bloomberg

And this is happening as rate-hike expectations continue to rise AND rate-cut expectations next year also accelerate (perhaps the horizon the market is focusing on)...

Source: Bloomberg

Simply put, the more aggressive the rate-hikes this year (8 more hikes now priced in including 50bps hikes in May and June), the more guaranteed a recession becomes, and the more aggressive rate-cuts next year are priced in (more than two rate-cuts).

Treasuries were dumped once again with the longer-end underperforming this time (2Y +5bps, 10Y +9bps). The short-end remains the big laggard on the week though (2Y and 5Y up 25bps this week)...

Source: Bloomberg

The 3M2Y curve is at its steepest since Lehman (Sept 2008)...

Source: Bloomberg

...and at the same time 3s10s, 5s10s, and 20s30s are all inverted and flashing recessionary signals...

Source: Bloomberg

And as rates rise, bonds are trading at their cheapest to stocks since Nov 2018 (right before stocks began to crater into Powell's tightening plans and eventual flip-flop)...

Source: Bloomberg

Is TINA dead? Or does this simply mean that when QE restarts, stocks will be super cheap?

The dollar slipped back lower after overnight gains today...

Source: Bloomberg

Cryptos rallied on the day with a big spike overnight lifting Ethereum back above $3000 and Bitcoin above $43000...

Source: Bloomberg

WTI drifted back below $110 ahead of tonight's API-reported inventory data...

Gold also ended the day lower but well off the lows triggered after the US cash equity open...

Finally, investor pessimism has faded materially - the GS Risk Appetite Indicator (RAI) is nearly neutral again

So, forget Putin-Hitler, forget Powell-Volcker... just 'look through' the global geopolitical crises and 'hope' for the next round of QE and rate-cuts to rescue the world again... stagflation fears be damned!

Tyler Durden Tue, 03/22/2022 - 16:01
Published:3/22/2022 3:14:21 PM
[Markets] GLOBAL MARKETS-Wall Street pushes Treasury yields, stocks higher U.S. stocks regained ground on Tuesday, while Treasury yields climbed and oil dipped, as investors adjusted their expectations for rate hikes following hawkish comments from the U.S. Federal Reserve. The Dow Jones Industrial Average rose 219.79 points, or 0.64%, to 34,772.78, the S&P 500 gained 45.91 points, or around 1%, to 4,507.09 and the Nasdaq Composite added 261.90 points, or 1.89%, to 14,100.36. Fed Chair Jerome Powell said on Monday the central bank could move "more aggressively" to raise rates to fight inflation, possibly by more than 25 basis points (bps) at once. Published:3/22/2022 10:46:55 AM
[Markets] GLOBAL MARKETS-Wall Street pushes Treasury yields, stocks higher U.S. stocks regained ground on Tuesday, while Treasury yields climbed higher and oil dipped, as investors adjusted their expectations for rate hikes following hawkish comments from the U.S. Federal Reserve. The Dow Jones Industrial Average rose 281.07 points, or 0.81%, to 34,834.06; the S&P 500 gained 27.59 points, or 0.62%, to 4,488.77; and the Nasdaq Composite added 87.88 points, or 0.64%, to 13,926.34. Fed Chair Jerome Powell said on Monday the central bank could move "more aggressively" to raise rates to fight inflation, possibly by more than 25 basis points (bps) at once. Published:3/22/2022 9:15:23 AM
[Markets] Dow snaps 5-session win streak as Powell opens door to larger rate hikes Dow snaps 5-session win streak as Powell opens door to larger rate hikes Published:3/21/2022 8:39:19 PM
[Markets] Dow Jones Futures: Stock Market Falls On Powell Comments; 6 Top Stocks To Buy And Watch Dow Jones futures were little changed after Monday's stock market fall. Fed Chief Powell said again that inflation is way too high. Published:3/21/2022 8:39:18 PM
[Markets] How Long Do Stock Market Corrections Last? It's been an ugly start to the new year for Wall Street and investors. Following what's effectively been the strongest bounce from a bear market bottom in history, all three major U.S. indexes have entered correction territory. Earlier in the week, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI) and benchmark S&P 500 (SNPINDEX: ^GSPC) were more than 10% below their all-time closing highs. Published:3/20/2022 6:30:36 AM
[Markets] U.S. stocks end higher Friday, with indexes sweeping to best weekly gains since Nov. 2020 U.S. stocks finished higher on Friday, with all three U.S. indexes sweeping to big weekly gains, after the Federal Reserve raised its benchmark rate for the first time since 2018 to help tighten financial conditions and tackle high inflation. The Fed move was widely expected, helping to embolden bullishness on Wall Street. S&P 500 rose about 51 points, or 1.2%, on Friday, booking at 6.2% weekly advance. The Dow Jones Industrial Average rose 0.8% Friday, but 5.5% for the week, while the Nasdaq Co Published:3/18/2022 3:38:08 PM
[Markets] US STOCKS-Wall St set to dip as three-day rally cools Wall Street's main indexes were set to open lower on Friday at the end of a choppy week marked by little progress in peace talks to end the war in Ukraine and the first U.S. interest rate hike since 2018. The broad declines could snap a three-day rally that has put the S&P 500 index and the Dow Jones Industrial Average on track for their best week since November 2020. "The fact that we've had three very strong up days in a row... it's very common to see things moving in you know and pull back just a little bit," Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas. Published:3/18/2022 8:33:38 AM
[0412c358-7afc-53f1-b90a-c4a54220193b] New Mexico GOP gubernatorial candidate Rebecca Dow calls for use of state's oil, gas resources New Mexico Republican gubernatorial candidate Rebecca Dow told Fox News that, if elected, she would promote American energy production, reverse “burdensome regulations” and ensure that the state’s “decades worth” of oil and gas are being used to bring the United States back to energy in Published:3/18/2022 6:03:14 AM
[Markets] 3.5 Trillion Reasons To Brace For Tomorrow's Massive Quad-Witching Expiration 3.5 Trillion Reasons To Brace For Tomorrow's Massive Quad-Witching Expiration

As Goldman's head of FX sales Tony Pasquariello wrote last Friday, "next week is a huge one, featuring the FOMC on Wednesday and a major derivatives expiry on Friday." And indeed, now that the Fed's rate hike is officially a fact and in the rearview mirror, Wall Street traders are bracing for the week's final fireworks.

In the quarterly event known as "quad witching" (technically, it's been "triple" since the close of OneChicago in September 2020, when single stock futures ceased trading, but for veteran traders it will always be quad), over $3.5 trillion of Index Options, Index Futures and Single Stock Options expire, either at the open of trade or at the close.

Adding to the frenzy, at the same time more near-the-money options are maturing than at any time since 2019 meaning that highly caffeinated traders will actively be trading around those positions as they seek to capitalize on any drift away "pins" (we will have a full list of the stocks most likely to see significant volatility tomorrow morning).

Furthermore, according to Goldman's Rocky Fishman, investors will also be watching the ETN market given the substantial size of expiring VXX. As a reminder, the VXX - the single largest volatility-tracking ETN - has been trading at a 12% premium to its NAV since its issuer suspended creations...

... and should the VXX rally strongly from its current level, its in-the-money call options would be large relative to shares outstanding.

Tomorrow's quad witching also coincides with a rebalancing of benchmark indexes including the S&P 500, a two-for-one special that leads to soaring trading volumes that rank among the highest of the year. According to an estimate from Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, the rebalance in the index alone could spur $33 billion of stock trades.

Traditionally, over the past year, "quad witches" have seen poor market returns, however heading into tomorrow's option expiration, the S&P is posting the best 3-day return since the Dec 2020 election.

So is the party about to end? As many contracts expire, Bloomberg notes that the key question is whether investors will rebuild their record holdings of index puts amid growth concerns and the war in Ukraine -- or will they come out of their shells, and chase the market rebound with call contracts, creating a negative gamma meltup at a time when most dealers are still short gamma.

Or will stocks tumble as trading desks such as JPMorgan "sell the rally" to naive investors who listen to the bank's latest call to buy the dip.

But while retail investors are confident they know how to trade tomorrow's chaos, veteran traders are ducking for cover: “I’ve never seen an environment where you’ve had so many potential overhangs in the market that can not be controlled,” said David Wagner, a portfolio manager at Aptus Capital Advisors. “We’ll see if people can see to redeploy their puts.”

If not, we may get an extension of the meltup as an avalanche of put closing sparks a delta cascade: exploding derivatives volume has been a fixture of the post-pandemic market -- whipsawing underlying stocks in both directions, again and again. To strategists including Nomura's Charlie McElligott, this week’s advance in the S&P 500 has again been amplified by the hedging activity of market-makers. And should we get another gamma squeeze, the S&P may soar.

On the other hand, many of the usual catalysts for a melt up are missing: thanks to the recent surge in stocks, dealers are now flat gamma, meaning they no longer have to accentuate market trends..

Meanwhile, thanks to the recent 3-day meltup, the negative delta has also been unwound faster than anticipated. Notably, as SpotGamma explains, yesterday saw a total lack of positive call deltas in the SPY & QQQ. You can see below that SPY traders were fairly heavy call sellers into the AM short-stock cover, and then after 1PM ET and through the FOMC flow was neutral. The QQQ chart was similar.

Commenting on the same phenomenon, Nomura's McElligott writes that the “Short Delta” hedge cover on the murdering of downside Puts led to move short-covering of client dynamic hedges in futures too, where for ES, the bank's imbalance monitor showed what was the second largest day of “buy pressure” over the past month for all lot sizes, led by what looked like straight-up VWAP style buying-to-cover (slicing your order in the machine over “small lots”)

Another reason why stocks could defy prevailing sentiment, which as the latest Fear and Greed index describes simply as "fear"...

... is technicals and positioning. As Marko Kolanovic notes, current risk positioning is very light as a result of high and persistent volatility, and risk aversion caused by global geopolitical developments: "the AAII bull-bear indicator at -27 is near its 2020 lows and 2 standard deviations below average. Equity exposure for volatility sensitive investors – the largest and fastest group of investors (including insurance, risk parity, dynamically hedged portfolios, HF platforms, etc.) – is now in its ~5-10th percentile, and for this reason risks are skewed to the upside." Meanwhile, with market sentiment weak and institutional-fund exposure to equities near mutliyear lows, caution in the derivatives market is everywhere. The 20-day average of the Cboe put-call ratio for equities, for example, hovers near a two-year high, which means that once again many are hedged and with little impetus to sell, stocks may simply melt up instead.

For those asking which strikes matter the most now into Op-Ex / and what % of overall gamma is set to expire along with the current and max Gamma sensitivity, here is the answer courtesy of Nomura.

SPX / SPY currently “pinning” btwn 4400 strike ($4.1B $Gamma), 4350 ($2.5B), 4300 ($2.4B); currently see ~43% of the $Gamma dropping-off for Friday’s expiration; currently at “Zero Gamma” level, “Max Short Gamma” at 4125 and -$17B per 1% move

Source: Nomura

QQQ $350 strike ($640mm $Gamma), $345 ($608mm), $340 ($595mm); currently see 56% of the $Gamma dropping-off for Friday’s expiration; currently at “Zero Gamma” level, “Max Short Gamma” at $314 and ~-$1.7B per 1%

Source: Nomura

IWM $200 strike ($471mm $Gamma), $205 ($274mm), $195 ($199mm); currently see 63% of the $Gamma dropping-off for Friday’s expiration; currently a modest “Short Gamma vs Spot” at -$100mm per 1% currently, “Max Short Gamma” at $192 and ~-$600mm per 1%

Source: Nomura

HYG $82 strike ($973mm $Gamma), $81 ($799mm), $80 ($477mm); currently see 58% of the $Gamma dropping-off for Friday’s expiration; currently still very “Short Gamma vs Spot” at -$1.0B per 1% move, “Max Short Gamma” at $79, -$1.2B per 1% move

That is a lot of gamma to 'unclench'.

In any case, amid this cacophony of bullish and bearish catalysts, it is virtually impossible to come up with a coherent case for either sustained market upside or another sharp burst of selling: “We see a general trend of continued risk aversion among investors, and expectations that the stock market remains volatile,” said Steve Sears, president at Options Solutions. “There are so many major events that could change the market’s tempo that hedging and patient fortitude appears to be the message from the options market.”

Tyler Durden Thu, 03/17/2022 - 21:25
Published:3/17/2022 8:29:00 PM
[Markets] Dow finishes up over 400 points as stocks extend rally Dow finishes up over 400 points as stocks extend rally Published:3/17/2022 3:27:05 PM
[Markets] Dow Jones Futures Drop After Stock Market Surge; 5 Stocks To Buy And Watch Dow Jones futures dropped Thursday following Wednesday's stock market surge. U.S. oil prices jumped back near $100 a barrel. Published:3/17/2022 7:25:49 AM
[Markets] 'Overwhelming' Need To Investigate COVID-19 Vaccine Tinnitus: Researchers 'Overwhelming' Need To Investigate COVID-19 Vaccine Tinnitus: Researchers

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A health worker prepares a dose of a COVID-19 vaccine in Doha, Qatar, in a file image. (Karim Jaafar/AFP via Getty Images)

A group of researchers who evaluated the Vaccine Adverse Event Reporting System (VAERS) found there is a need to carry out more studies on COVID-19 vaccine-related tinnitus.

In an article published for the March edition in the “Annals of Medicine and Surgery,” about 12,247 cases of COVID-19 post-vaccination tinnitus were reported until Sept. 14, 2021. Tinnitus is when one experiences ringing or other noises—that are not external sounds—in one or both ears, affecting between 15 and 20 percent of all people, says the Mayo Clinic.

“To the best of our knowledge, this is the first review evaluating any otologic manifestation following vaccine administration and aims to evaluate the potential pathophysiology, clinical approach, and treatment. Although the incidence is infrequent, there is a need to understand the precise mechanisms and treatment for vaccine-associated-tinnitus,” said the researchers.”

Because of the relatively high number of cases, they argued that “there is an overwhelming need to discern the precise pathophysiology and clinical management” of vaccine-associated-tinnitus because “despite several cases of tinnitus being reported following SARS-CoV-2 vaccination, the precise pathophysiology is still not clear.”

The researchers, led by Syed Hassan Ahmed with the Dow University of Health Sciences, noted that stress and anxiety following COVID-19 vaccination could also play a role. Whether vaccine-related anxiety, they said, plays a role in the cause of tinnitus should be evaluated.

Ahmed and the other researchers asserted that they believe the benefits of COVID-19 vaccines outweigh the side effects.

Dr. Gregory Poland, the head of the Mayo Clinic’s Vaccine Research Group in Minnesota, told Medpage Today that he developed tinnitus soon after receiving his first COVID-19 vaccine shot.

It was like someone suddenly blew a dog whistle in my ear,” Poland told MedPage Today, adding that the tinnitus symptoms have been life-altering. “It has been pretty much unrelenting.”

Poland continued to say that he “can only begin to estimate the number of times I just want to scream because I can’t get rid of the noise or how many hours of sleep I’ve lost.”

The noise that he hears can be “particularly loud at night when there are no masking sounds.”

Despite the tinnitus, Poland—who said he’s received numerous emails about individuals who developed tinnitus after getting the COVID-19 shot—told the outlet that he is still a proponent of the COVID-19 vaccine and received a booster dose.

The tinnitus, he added, occurs in both ears, noting that it is worse in the left than in the right ear.

“What has been heartbreaking about this, as a seasoned physician, are the emails I get from people that, this has affected their life so badly, they have told me they are going to take their own life,” Poland said.

A spokesperson for the Centers for Disease Control and Prevention (CDC), which runs VAERS, noted that “tinnitus is a common condition, heterogenous in nature, and has many causes and risk factors,” adding that “hundreds of millions of people have received mRNA COVID-19 vaccination under the most intensive monitoring in U.S. history.”

The Epoch Times has contacted the CDC for comment.

Tyler Durden Thu, 03/17/2022 - 03:00
Published:3/17/2022 2:23:31 AM
[Markets] Dow ends up over 500 points after Fed's first rate hike in 4 years Dow ends up over 500 points after Fed's first rate hike in 4 years Published:3/16/2022 3:21:24 PM
[Markets] Federal Reserve Meeting: One Rate Hike Down, Six More Coming In 2022; Dow Jones Climbs The Federal Reserve meeting saw the first rate hike since 2018. The Dow Jones regained its footing after the Fed policy news. Published:3/16/2022 3:21:24 PM
[Markets] Dow Jones Holds Gain After Fed Decision To Raise Rates; Nasdaq Leads Upside The Dow Jones Industrial Average briefly reversed lower before turning positive again as the stock market reacted to the Fed's decision to raise interest rates for the first time since 2018. The Nasdaq composite and the S&P 500 also traded off session highs but held onto gains. Published:3/16/2022 2:52:04 PM
[Markets] Dow up 150 points as stocks rise in volatile trading following Fed rate hike Dow up 150 points as stocks rise in volatile trading following Fed rate hike Published:3/16/2022 2:21:41 PM
[Markets] Dow turns negative, Treasury yield curve flattens after Fed delivers quarter-point rate hike Stocks erased or trimmed gains in afternoon trade Wednesday after the Federal Reserve, as expected, delivered a quarter-point rate increase. The Dow Jones Industrial Average was down 27 points, or 0.1%, near 33,519. The blue-chip gauge was up around 200 points just ahead of the announcement. The S&P 500 was up 0.2% at 4,272, while the Nasdaq Composite remained higher by 0.9%. The yield curve flattened significantly, with the 2-year Treasury yield jumping around 13 basis points on the day to 1.98 Published:3/16/2022 1:19:48 PM
[Markets] 5 Dow Jones Stocks To Watch In March 2022: Apple Jumps The Dow Jones Industrial Average ended February 2022 sharply off its record highs. The best Dow Jones stocks to watch in March 2022 are American Express, Apple, Caterpillar, Chevron and Microsoft. There are clear winners — and losers — toward the end of February. Published:3/16/2022 10:18:43 AM
[Markets] Dow Jones Futures Jump On China, And 'More Realistic' Russia-Ukraine Talks Dow Jones futures jumped Wednesday, as Ukrainian President Volodymyr Zelenskyy said peace talks were becoming "more realistic." Published:3/16/2022 8:17:51 AM
[Markets] 3 Worst-Performing Dow Jones Stocks Ready to Bounce Back The Dow Jones Industrial Average now sits about 9.7% below its early January high and remains within easy reach of new multiweek lows. Market veterans know the time to buy quality names is when they're beaten down, even when it's uncomfortable to do so. To this end, three of the Dow Jones' worst performers at the moment should be able to recover the sell-off they've experienced because the markets will soon realize they shouldn't have suffered these drops in the first place. Published:3/16/2022 6:48:02 AM
[Markets] Dow Jones Futures Jump: What To Do After Tuesday's Stock Market Surge; Fed Set To Hike Interest Rates Dow Jones futures were higher after Tuesday's stock market surge. The Federal Reserve's interest-rate decision is due out Wednesday. Published:3/16/2022 6:17:26 AM
[Markets] SentinelOne, Smartsheet Fall After Hours Despite Continued Business Growth A crucial meeting of the Federal Open Market Committee began, but the big news was a nearly $8 plunge in oil prices that brought West Texas Intermediate crude down to $95 per barrel. The Nasdaq Composite (NASDAQINDEX: ^IXIC) posted the biggest gains of the day, but the performances from the Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) weren't too shabby, either. Both SentinelOne (NYSE: S) and Smartsheet (NYSE: SMAR) enjoyed solid growth in revenue, but investors were nevertheless dissatisfied with their future outlooks. Published:3/15/2022 6:15:16 PM
[Markets] Dow Jones Futures: What To Do After Today's Stock Market Surge; Fed Set To Hike Interest Rates Dow Jones futures were in focus after today's stock market surge. The Federal Reserve's interest rate decision is due out Wednesday. Published:3/15/2022 4:44:35 PM
[Markets] Dow finishes up 600 points as oil extends pullback from 14-year highs Dow finishes up 600 points as oil extends pullback from 14-year highs Published:3/15/2022 3:12:50 PM
[Markets] Dow ends nearly 600 points higher as oil retreats below $100 a barrel Stocks ended sharply higher Tuesday as oil prices continued to pull back from 14-year highs. The Dow Jones Industrial Average jumped around 599 points, or 1.8%, to close near 33,544, according to prelminary figures, while the S&P 500 advanced around 89 points, or 2.1%, finishing near 4,262. the Nasdaq Composite rose around 367 points, or 2.9%, to end near 12,948.62. Crude prices, which saw the U.S. benchmark soar to a 14-year high near $130 a barrel last week as investors reacted to Russia's inv Published:3/15/2022 3:12:50 PM
[Markets] Dow Jones Futures Rise Ahead Of Fed Meeting; Tesla Raises Car Prices Dow Jones futures rose Tuesday ahead of the Federal Reserve's two-day meeting. Tesla stock was in focus after the company raised car prices. Published:3/15/2022 7:41:08 AM
[Markets] US Futures Ignore China Implosion, Reverse Overnight Losses as Oil Tumbles US Futures Ignore China Implosion, Reverse Overnight Losses as Oil Tumbles

Welcome to another rollercoaster session where US equity futures first tumbled alongside the second consecutive day of stocks plunging in China, which also dragged Europe lower, only to hit a U-turn around 5am at which point sentiment reversed higher, ahead of tomorrow’s expected Federal Reserve rate hike and amid mounting risks from the war in Ukraine and a Chinese equity rout. Nasdaq 100 contracts trade 0.5% higher at 7:15 a.m. after earlier slumping as much as 0.8% following the first bear-market close for the first time since March 2020. S&P 500 futures also turned 0.3% green, as did Dow futures.

Much of the reversal in sentiment has been attributed to the latest drop in oil which tumbled over $8/bbl or 5.5%, sliding as low as $98 after hitting $139 one week ago. WTI crude oil also fell below $100 a barrel a barrel as traders reassessed the potential impact of disruptions in Russian oil supplies and a decline in demand from China. Iron ore futures fell for a sixth day, the longest streak since September. In other words, commodities are not sliding because of hopes for Russia peace, but because of fears about a global recession, but try explaining it all to algos. Treasuries gained, though the 10-year yield remains near the highest level since 2019. Yields across the euro region also declined. The dollar slipped, while the euro pushed higher and bitcoin dropped again.

Earlier in the session, a selloff across Chinese equities deepened as concerns about ties with Russia, a growing covid crisis, and persistent regulatory pressure sent a key index to its lowest level since 2008. The Hang Seng China Enterprises Index, which tracks Chinese shares listed in Hong Kong, sank 6.6%, following a plunge in the previous session that was the biggest since the global financial crisis.

The Hang Seng index tumbled Tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. led the decline. Hong Kong’s benchmark Hang Seng Index slumped 5.7%, its biggest fall since July 2015.

China’s equities are looking increasingly risky on concerns that Beijing’s ties with Russia could spark new U.S. sanctions. That’s adding to worries from regulatory developments including a possible delisting from the U.S. exchanges. While upbeat economic data was a rare bright spot in the market, growing lockdowns in major Chinese cities are dimming the outlook.

"The selloff is overdone, but so is everything else,” said Andy Maynard, head of equities at China Renaissance Securities. "The market is crazy -- there’s no fundamentals anymore. This might be worse than the 2008 financial crisis."

“Risk-off sentiment stemming from both the Russia-Ukraine war and the current wave of Covid-19 in China has driven equity markets sharply weaker this morning,” Siobhan Redford, an analyst at Rand Merchant Bank in Johannesburg, said in a client note.  “This has been compounded by falling commodity prices as the intersection between limited supply -- given sanctions on Russia and the war in Ukraine -- and a weaker demand trajectory -- given further waves of the pandemic -- create a perfect storm of sorts.”

With zero liquidity, and trigger happy traders looking to sell any rally, swings in S&P 500 and Nasdaq 100 futures signaled another volatile day ahead for U.S. stocks. U.S.-listed Chinese stocks sank again on Tuesday, following a brutal rout in Asia, amid concerns that China’s ties with Russia may bring sanctions to Beijing, while persistent regulatory pressures also weighed. Alibaba (BABA US) fell 6.5% in premarket trading, while rival JD.com (JD US) declined 4.5%. Apple Inc. inched lower, heading toward a bear market -- defined as a 20% drop from recent highs -- on worries that lockdowns in China to contain a surge in Covid-19 cases could worsen supply-chain constraints. Other notable premarket movers:

  • Shares in big U.S. energy companies slide in premarket trading as crude price fall, declining after last week’s rally as worries over growing coronavirus cases in top crude importer China weigh. Exxon Mobil (XOM US) -3.1% and Chevron (CVX US) -3.7%.
  • Coupa Software (COUP US) slides 30% in postmarket trading after the company’s revenue forecast for the first quarter misses the average analyst estimate.
  • Gitlab (GTLB US) shares rose 12% in extended trading on Monday, after the software company reported fourth-quarter revenue that beat expectations and gave a full-year forecast that is stronger than the analyst consensus.

U.S. technology stocks have been particularly hard hit in the past week with the Federal Reserve expected to begin a rate-hike cycle on Wednesday, another negative for growth stocks valued on future profits. Investors are also looking for cues from the central bank about how aggressively it plans to continue tightening monetary policy as Russia’s invasion of Ukraine sent commodity prices soaring when inflation was already running high. A reading on the producer price index is due on Tuesday.

“If we are entering a world of above-target inflation for several years to come, investors should ditch the easy answers,” said Sahil Mahtani, strategist at Ninety One. “Conventional 60-40 type portfolios are likely to struggle. Investors should reflect about what specifically is driving the inflationary process and invest in equities that have pricing power but are not at frothy valuations.”

The Stoxx Europe 600 index fell more than 1.5%, with basic resources, consumer and technology stocks leading a broad-based decline.  All sectors are in the red. Euro Stoxx 50 slumps 2.4%. IBEX outperforms peers but still trades off ~1.5%. Here are some of the biggest European movers today:

  • Ahold Delhaize shares gain as much as 3.2%, the best performer in the Stoxx 600’s personal care, drug and grocery stores subgroup, after being upgraded to buy from neutral at UBS, which says the stock is at an “attractive entry point.”
  • S&T rallied in Frankfurt, climbing as much as 18%, after the Austrian company said a forensic audit by Deloitte found allegations by short seller Viceroy Research were almost completely inaccurate.
  • Sensirion shares spike as much as 13%, the most since June 2020, after the Swiss sensor manufacturer reported full- year sales and gave a revenue forecast that blew past analysts’ estimates. Stifel says the company’s growth is driven by all end markets and the performance of new environmental sensors looks “impressive.”
  • Wacker Chemie shares gain as much as 6.9%, as Baader sees dividend proposal 56% above and midpoint ‘22 Ebitda guidance 3% ahead of consensus.
  • Tecan falls as much as 16% after reporting sales for the full year that missed the average analyst estimate, and as the outlook disappointed.
  • Dr. Martens shares tumble as much as 11% to the lowest since listing in January 2021 after RBC cut its price target to a Street-low, citing the bootmaker’s growth outlook.
  • Swedish Match drops as much as 8.4%, the most intraday since February 2021, after the company suspended the spinoff of its U.S. cigar business. The move highlights regulatory risk, according to JPMorgan.

Meanwhile, Russia has started the payment process of two bond coupons due this week. Investors are waiting to see if the nation defaults after the U.S. and its allies froze Russia’s foreign-currency reserves. The ruble gained in Moscow trading.

Asian stocks plunged, on track for a third-straight daily loss, as the selloff in Chinese technology stocks continued after Monday’s plunge, while traders tried to gauge the impact of an imminent interest-rate hike by the Federal Reserve. The MSCI Asia Pacific Index fell as much as 1.9%, heading for its lowest close since August 2020. Tencent and Alibaba Group were among the biggest drags on the regional index, along with TSMC. The sustained selling pressure came as investors mulled the potential consequences of China’s assistance for Russia’s war in Ukraine and delisting risk for Chinese stocks traded in the U.S. Hong Kong’s benchmark Hang Seng Index tumbled 5.7%, its biggest fall since July 2015, while the Hang Seng Tech Index lost 8.1% following a wild intraday swing. Read: Relentless Selling in China Stocks Evokes Memories of 2008 Crash China’s CSI 300 Index slumped 4.6% as the nation’s strong set of economic data failed to lift sentiment amid market jitters on the rising case numbers of Covid-19. Japanese stocks rose for a second day as a weaker yen boosted the outlook for the nation’s exporters. “There are plenty of storms blowing through China right now,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Fears continue to dog stock markets, that lockdowns could spread, which would severely impact China’s growth.” The risk of tighter monetary policies globally remained on investors’ minds as the Fed this week is expected to announce its first interest rate hike in three years in a bid to curb rising inflation amid surging commodity prices. Markets are now pricing in as many as seven quarter-point hikes for the full year.

Lockdowns in major Chinese cities are dimming the outlook for economic growth and posing risks for energy and raw-materials demand, just as concerns about the country’s relationship with Russia stoke a relentless stock selloff.  The virus is also making a comeback in Europe: Germany on Tuesday set a fresh record for infection rates for the four straight day. Austria has also reached new highs, while cases in the Netherlands have doubled since lifting curbs on Feb. 25.

Japanese equities rose, extending their rebound to a second day, supported by gains in exporters on a weaker yen. Auto and chemical makers were the biggest boosts to the Topix, which climbed 0.8%. KDDI and Recruit were the biggest contributors to a 0.2% rise in the Nikkei 225, while Fast Retailing fell. The Japanese currency extended its loss against the dollar to a seventh-straight session, weakening more than 3% in that span. Despite its “haven” status,” the yen has dropped as Russia’s war in Ukraine has driven up prices of oil and other raw materials which Japan imports. “The market has already factored in a lot of bad news” regarding Russia and Ukraine, said Hajime Sakai, chief fund manager at Mito Securities. “The weakening of the yen is positive for exporting, but looking further on we need to think of the negative effect from import costs.”

In rates, Treasuries unwound a portion of Monday’s sharp selloff with yields richer by up to 4.5bp across front-end of the curve into early U.S. session. U.S. 10-year yield near 2.12% is down ~2bp vs Monday’s close, outperforming bunds and gilts in the sector by ~1bp; 2-year yield drop back to ~1.83% after topping near 1.89% during Asia session. Gilts and bund curves bull-flatten while Treasuries bull-steepen; short-dated USTs outperform bunds and gilts by roughly 2bps.

In FX, the Bloomberg Dollar Spot Index fell 0.1% after rising to its highest level since July 2020 in early Asian trade. Treasury yields fell by up to 4bps led by the front-end after rising in early Asian session, when the 10-year yield climbed to 2.17%, the highest since June 2019. Antipodean currencies as well as the Canadian dollar and Norwegian krone were steady to lower as commodities extended losses. The euro extended an Asia session gain, to touch $1.1020 before paring. European benchmark bond yields also fell, yet underperforming Treasuries. Sweden’s krona advanced after inflation expectations rose considerably for the coming two years. Australia’s dollar pares reased an intraday loss, in part on short covering seen after Chinese economic data beat estimates. Reserve Bank said Russia’s invasion of Ukraine has the potential to prolong a period of elevated consumer-price growth and is clouding the economic outlook, minutes of its March 1 policy meeting showed. The yen whipsawed in the spot market as stocks and oil turned south, but options wagers suggest fresh lows versus the dollar may be in store. Whether the greenback can extend its recent rally and maintain its bullish momentum for long depends on options pricing changing course.

In commodities, crude futures decline. WTI drifts 5.3% lower to trade around $97.50. Brent falls 5.3% but holds above $101. Most base metals trade in the red; LME aluminum falls 2.3%, underperforming peers. LME tin outperforms, adding 0.4%. Spot gold falls roughly $17 to trade near $1,934/oz. Elsewhere, nickel trading will resume on the London Metal Exchange on Wednesday, over a week after being suspended amid a historic short squeeze.

Looking to the day ahead now, markets have PPI for February in the US. In Europe, Germany’s ZEW survey expectations, UK jobless claims change, ILO unemployment rate 3 months, Eurozone ZEW survey expectations and industrial production are all due. Elsewhere, housing starts and manufacturing sales in Canada will be released. Earnings include Volkswagen, RWE and Generali.

Market Snapshot

  • S&P 500 futures down 0.4% to 4,154.75
  • STOXX Europe 600 down 1.7% to 429.03
  • MXAP down 1.7% to 165.53
  • MXAPJ down 2.9% to 531.41
  • Nikkei up 0.2% to 25,346.48
  • Topix up 0.8% to 1,826.63
  • Hang Seng Index down 5.7% to 18,415.08
  • Shanghai Composite down 5.0% to 3,063.97
  • Sensex down 1.4% to 55,702.16
  • Australia S&P/ASX 200 down 0.7% to 7,097.45
  • Kospi down 0.9% to 2,621.53
  • Brent Futures down 5.7% to $100.79/bbl
  • Gold spot down 0.9% to $1,934.19
  • U.S. Dollar Index down 0.21% to 98.79
  • German 10Y yield little changed at 0.33%
  • Euro up 0.5% to $1.0995

Top Overnight News from Bloomberg

  • Germany is preparing to boost the supply of a scarce bond entangled in Russian sanctions, a move that will likely ease pockets of tension in European repo markets. The nation is looking to sell on Tuesday an additional 5.5 billion euros ($6.1 billion) of the notes maturing 2024, which the German government believed became difficult to source after sanctions were imposed against some bondholders
  • Chinese stocks suffered another deep selloff on Tuesday as concerns about the country’s ties with Russia and persistent regulatory pressure sent shares on a downward spiral. The Hang Seng China Enterprises Index, which tracks Chinese shares listed in Hong Kong, sank 6.6%, following a plunge in the previous session that was the biggest since the global financial crisis
  • Fund managers are leery of buying Chinese stocks as the country’s close ties to Russia, extreme Covid-19 curbs and lack of clarity on the end of regulatory crackdowns overwhelm the dip buying opportunity presented by the 75% plunge from their peak
  • China wants to avoid being impacted by U.S. sanctions over Russia’s war, Foreign Minister Wang Yi said, in one of Beijing’s most explicit statements yet on American penalties that are contributing to a historic market selloff
  • The global economy is bracing for greater disruption as China scrambles to contain its worst outbreak of Covid-19 since the pandemic began
  • Russia’s economy is fraying, its currency has collapsed, and its debt is junk. Next up is a potential default that could cost investors billions and shut the country out of most funding markets
  • The dollar has powered ahead of every major currency over the past nine months due to the prospect of Federal Reserve interest-rate hikes but the end of its rally may be in sight, if history is any guide. The U.S. currency has weakened by an average of 4.1% during the Federal Open Market Committee’s four previous tightening cycles
  • Traders are ramping up their bets on the amount of Federal Reserve rate hikes in 2022 but are still toying with the possibility of a rate cut as soon as next year
  • U.K. unemployment dropped below its pre- pandemic level for the first time as companies generated more jobs and granted higher wages than expected. The jobless rate fell to 3.9% in the three months through January, the lowest since the start of 2020

US Event Calendar

  • 8:30am: Feb. PPI Final Demand YoY, est. 10.0%, prior 9.7%; MoM, est. 0.9%, prior 1.0%
  • 8:30am: Feb. PPI Ex Food and Energy YoY, est. 8.7%, prior 8.3%; MoM, est. 0.6%, prior 0.8%
  • 8:30am: March Empire Manufacturing, est. 6.1, prior 3.1
  • 4pm: Jan. Total Net TIC Flows, prior -$52.4b

DB's Jim Reid concludes the overnight wrap

Some hints of positive diplomatic developments in the Ukraine crisis that materialised on Sunday night helped contribute to another major sell-off in bonds and a mild risk on move in European equities yesterday. While in the States, the reality of the impending Fed tightening cycle pushed yields higher and drove equities lower.

Bonds are in a strange situation at the moment as we seem to have reached a point where higher energy prices are deemed to be signalling recessionary risks and encourage flight to quality flows that push nominal yields lower, outweighing the potentially savage inflationary impact. Conversely, the collapse in the likes of oil and gas since early last week has led to a huge rise in yields as it appears policy tightening is back on the central bank menu. Brent is around -25% from its intra-day highs last Tuesday and 10yr bunds are +46.6bps higher since hitting -0.10% last Monday morning. Meanwhile, 1-month futures on Dutch Gas have fallen from a high of 335 last Monday morning to 110.50 at the close last night. Remarkable moves.

On the conflict, Russia and Ukraine finished a fourth day of negotiations yesterday and decided to take a pause to assess outcomes. Still, it seems that negotiations are making some progress. Meanwhile, President Zelensky is set to address the US Congress tomorrow, while there were reports that President Biden was considering a trip to Europe to express the US’s steadfast support for NATO allies.

Overnight in Asia, most equity markets are down with Hong Kong and Chinese stocks leading regional losses. The Hang Seng (-3.56%) opened sharply lower, slipping more than 4% before recovering slightly as a resurgence of Covid-19 in Hong Kong and China and potential delisting of Chinese stocks from US exchanges weighed on sentiment. The Shanghai Composite (-2.18%) and CSI (-1.75%) are also down even if losses were pared following the release of stronger-than-anticipated economic data. A fresh lockdown in China’s Jilin province of 24 million people is offsetting this. Elsewhere, the Nikkei (+0.33%) is advancing while the Kospi (-0.56%) is lagging. Moving forward, equity futures on the S&P 500 (+0.17%) and Nasdaq (+0.47%) are higher while DAX contracts (-0.45%) are weak.

On that China data, industrial output rose a more-than-expected +7.5% y/y in January and February, (vs market estimates of +4.0%) and against a +9.6% gain in December while retail sales grew +6.7% y/y in the same period compared with analyst estimates of a +3.0% increase amid rising demand during the Lunar New Year holidays and the Winter Olympic Games. Meanwhile, fixed asset investment also beat, up by +12.2% y/y YTD in February and well above the forecast for a +5.0% increase. Separately, the People’s Bank of China (PBOC) unexpectedly kept the one-year medium-term lending facility rate (MLF) at 2.85%, resulting in a net injection of 100 billion yuan in fresh funds. The central banks’ action dashed hopes of a rate cut as the policymakers may want to avoid widening policy divergence with the US ahead of their expected hike tomorrow.

Oil prices have extended their recent declines this morning with Brent futures sliding -4.0% to trade at $102.64/bbl and with WTI futures -4.2%, breaking below $100/bbl. It saw a similar fall yesterday after opening the week above $109/bbl. Elsewhere, the yield on the 10-year US Treasury note is roughly flat at 2.138%.

As discussed at the top, the calm in yields overnight followed a rout yesterday. 10yr bunds eventually rose +11.9bps yesterday as risk premium eased, and to the highest level since November 2018. With a modest +2.2bps uptick in breakevens, most of the move was in real yields. Note that page 24 of the “Dislocations” chart book shows that 10yr real bund yields last week hit all-time low levels. Since those lows last week we’ve backed up +48.8bps. The move in other European sovereign yields was remarkably similar to bunds yesterday with BTPs (+11.3bps), Spanish (+11.0bps) and even Greek (+11.8bps) bonds seeing hardly any change in spreads.

US Treasury yields sold even more (10yr +14.1bps) and unlike in Europe, higher yields were met with falling breakevens (-2.3bps) with real yields +16.4bps putting in their biggest daily move since February 2021. No small feat given the considerable sell-off in real rates that marked the beginning of this year. The 2s10s (+2.8bps) curve steepened a little which might be welcomed by the Fed. Yields across the US curve notched fresh cycle highs, with those on 2y (+11.3bps) and 10y reaching the highest levels since summer 2019.

Notably, US futures moved to fully price in 7 Fed hikes in 2022 for the first time this cycle, in line with our US econ team’s view. While there were reports of incoming corporate issuance and hedging flows driving the Treasury rate sell-off, it appears markets are waking up to the magnitude of tightening the Fed is about to embark on, starting this week. If the war wasn’t enough to get the ECB to strike a dovish tone, the Fed will be all the more emboldened given fewer direct linkages to growth shocks from the conflict and the higher starting point for inflation. Indeed, in a new periodical we launched yesterday, Questions for the Chair, link here, DB Research personnel offer the questions they would ask Chair Powell at his FOMC press conference. A common question was wouldn’t policy rates need to be higher than current forecasts given the inflationary outlook. It seems markets are coming around to that view.

That line of thinking passed through to US equities, where the S&P 500 slid -0.74%. The tech-heavy NASDAQ, which is more exposed to rising rates, underperformed, falling -2.04%. Sector-wise, amid plummeting oil prices energy stocks (-2.93%) performed the worst after a sustained run of outperformance, while financials (+1.23%) were the top performers in the S&P 500 amid a steeper yield curve.

European stocks outperformed their American counterparts, with the positive geopolitical noise outweighing a tighter monetary policy path to push major indices into positive territory. The STOXX 600 rallied +1.20%, but gains in country-level benchmarks like the German DAX (+2.21%) and the French CAC 40 (+1.75%) were even more startling amid recent sharp underperformance relative to their US counterparts.

The same positive risk sentiment pushed commodity prices lower. We've already mentioned the slump in Oil but European gas prices also fell, with front month Dutch TTF contracts losing -17.29%. Oil prices fell despite no additional supply via Iran, US, Venezuela, or OPEC appearing likely. Instead, it seems as though Russian supply may make its way to buyers such as China and India with fewer frictions than were previously feared. As a secondary consideration, reports of Covid-19 lockdowns in China may have pushed prices lower due to potential lower demand needs.

Industrial metals lost steam as well, with aluminium and copper falling -4.69% and -2.24%, respectively, while gold lost -1.89% as markets revised geopolitical risks downwards.

One developing story with unclear implications so far is Russia’s request for Chinese support of its invasion. There have been conflicting reports about the veracity of the original claims. We do know that the US National Security Advisor met with his Chinese counterpart yesterday to try and dissuade China from offering any such support. One to keep a very close eye on.

To the day ahead now. In today’s data releases, markets have PPI for February in the US. In Europe, Germany’s ZEW survey expectations, UK jobless claims change, ILO unemployment rate 3 months, Eurozone ZEW survey expectations and industrial production are all due. Elsewhere, housing starts and manufacturing sales in Canada will be released. Earnings include Volkswagen, RWE and Generali.

Tyler Durden Tue, 03/15/2022 - 07:53
Published:3/15/2022 7:11:00 AM
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[Markets] Dow Jones Falls As Biden Bans Russian Oil; Apple Stock Dips After Product Launch; Solar Stocks Shine The Dow Jones fell after President Joe Biden banned imports of Russian oil. Apple stock dipped while solar stocks shone brightest. Published:3/8/2022 3:53:01 PM
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[Markets] Dow Jones, Nasdaq Reverse Higher, Erase Earlier Losses; Steel Stocks Fall While Oil Plays Break Out The Dow Jones reversed higher in afternoon trading while, the Nasdaq composite led the upside and traded over 2% higher. Published:3/8/2022 1:08:35 PM
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[Markets] Futures Rebound On "Massive" EU Bond Stimulus Plan; Nickel Halted After Record Surge, Gold Over $2000 Futures Rebound On "Massive" EU Bond Stimulus Plan; Nickel Halted After Record Surge, Gold Over $2000

Futures rebounded from yesterday huge loss, and after touching a session low of 4,138, S&P futures bounced shortly after the European when Bloomberg reported that the European Union was set to reveal a quasi "Marshall Plan" this week to issue issue "potentially massive” joint bonds to fund energy and defense and help counter the fiscal fallout from Russia’s invasion of Ukraine (how Europe will do that at a time when QE is ending and buyers for global debt are shrinking fast amid surging rates remains unclear). S&P 500 futures gained 0.7% following the benchmark index’s biggest loss since October 2020, while Dow futures rose 0.6%.  Contracts on the Nasdaq 100 were up 0.6% at 7:15 a.m. Bonds and the dollar dropped, and the euro strengthened. The commodity melt up continued: nickel was halted on the LME after soaring 250%, oil traded just shy of $130 and gold was above $2000.

The EU's bond-sale proposal may be presented as soon as next week, according to Bloomberg. The extraordinary move comes just a year after the EU launched a 1.8 trillion-euro ($2 trillion) emergency package backed by joint debt to finance member states’ efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure following Russia’s invasion of Ukraine.

A new round of stimulus would come as welcome relief for a market whipsawed in recent weeks as Russia’s invasion of Ukraine sent crude-oil and gas prices soaring, raising concerns about inflation and economic growth. Still, details remain sketchy and the plan has not yet been nailed down, keeping investors on edge amid the ongoing war in Ukraine and soaring commodity prices.

“Today’s reaction is perhaps short-term; we need something more solid,” said Jane Foley, head of FX strategy at Rabobank, on Bloomberg television. “The reality is that Europe’s energy security has a massive question mark and there’s a fog, therefore, over the economic outlook for the euro zone.”

U.S. stocks have been roiled this year as the war in Ukraine and resulting sanctions on Russia sent oil soaring at a time when investors were already worried about slowing economic growth. The Federal Reserve’s meeting next week is now in focus, with Chair Jerome Powell indicating interest rates could be hiked by 25 basis points to rein in inflation.

“A wait-and-see stance now prevails as investors cautiously monitor the situation,” said Pierre Veyret, technical analyst at ActivTrades. “All eyes are likely to be on the Fed over the coming days as investors watch how central banks move forward with monetary tightening in such an uncertain environment.”

"We believe it is currently hard for investors to attach high confidence in any individual market outcome materializing and we hold a neutral stance on equities,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. "We like commodities, energy equities and the U.S. dollar as portfolio hedges in the short term.”

Tightening monetary policy to contain inflation presents further challenges. The gap between two-year and 10-year Treasury yields is around the narrowest since March 2020, a sign of expectations of slowing economic expansion. Meanwhile, the average price of gasoline in the U.S. rose to a record.

“It’s all about slowing growth and rising inflation,” Alifia Doriwala, Rock Creek co-chief investment officer, said on Bloomberg Television. “With the sanctions on Russia intensifying, it’s hitting all sectors. Then you are going to have some central bank action amidst uncertain economic growth.”

Mandiant declined in premarket trading, with Piper Sandler saying it is fairly valued after closing 16% higher on Monday following a report in The Information that Google is in talks to acquire the cybersecurity company, which had previously been reported to garner interest from Microsoft. Here are some other notable premarket movers:

  • Meta Platforms (FB US) edged lower in premarket trading; it faces multiple short-term risks and may not return to double-digit growth before 2H22, Arete Research analyst Rocco Strauss writes in a note, slashing price target to a joint Street-low. Piper Sandler also lowers its target on Facebook’s parent.
  • Arena Pharmaceuticals Inc. (ARNA US) shares rose more than 3.5% in premarket trading just days before the expiry on March 9 of the current waiting period for its proposed acquisition by Pfizer Inc. under HSR.
  • ThredUp (TDUP US) shares dropped 11% in extended trading after the online consignment company gave a first- quarter revenue outlook that trailed the average of analysts’ estimates. The company also reported a wider-than-expected fourth-quarter loss.
  • Rover Group (ROVR US) fell 13% postmarket after the pet-sitting platform provided sales forecasts that disappointed. The company anticipates “pandemic dynamics will persist well into 2022.”
  • Shares of 908 Devices (MASS US) jumped 7% in postmarket trading after fourth-quarter revenue topped analyst projections. The quarterly loss per share was narrower than expected.
  • Clarus (CLAR US) shares gained 11% in postmarket trading, after the company’s fourth-quarter revenue and 2022 sales view both beat analysts’ estimates.

In the latest geopolitical developments, Ukraine and Russia said they would make their fourth attempt Tuesday to establish a humanitarian corridor for civilians fleeing areas of heavy fighting. Still, with the VIX trading in the mid-30s, a level traditionally seen as presaging market bottoms (or crashes if the VIX extends gains) investors were bracing for more turbulence. Some more overnight developments courtesy of Newsquawk:

  • Russian forces have held fire within Ukraine, as of 07:00GMT, via Reuters citing Ifx/Defence Ministry; subsequently, Ukrainian Presidential Official says the evacuation of civilians from Sumy and Irpin is underway.
  • Note, Ukrainian forces are stopping civilians from leaving Mariupol and Volnovakha through humanitarian corridors, via AJA Breaking citing Donetsk Separatists
  • Russian President Putin said they will only use professional soldiers in its Ukraine operation and will not use conscript soldiers in Ukraine.
  • EU Commission VP Dombrovskis says that Russia President Putin is likely to increase his military ambitions and challenge NATO in Baltic Sea nations, unless Putin is stopped in Ukraine, via Politico;
  • additionally, Dombrovskis was sceptical about diplomatic overtures towards Putin and maintained that nothing should be off the table re. sanctions.
  • EU is reportedly considering a massive joint bond sale to finance defence and energy, according to Bloomberg citing sources; plan could be announced as early as this week. An announcement which sparked risk-on action, details here
  • EU Commission has prepared a new set of sanctions against Russia and Belarus following the invasion of Ukraine, according to Reuters sources; to be discussed today, blacklisting further oligarchs, providing guidance over monitoring crypto-assets, ban export of maritime tech to Russia.
  • EU will unveil a plan on Tuesday to reduce gas imports from Russia by two-thirds within a year, according to FT.

European equities snapped higher after a soggy start, with the Stoxx Europe 600 index rallying more than 1% before trimming the advance to 0.3% after three days of sharp declines, as the possibility of further central-bank stimulus lifted sentiment. Some of the most-battered sectors, including banks, utilities and carmakers, outperformed, while media and personal care stocks underperformed The Euro Stoxx 50, which yesterday entered a bear market, reversed an initial 1.2% drop to rally as much as 2.8%. FTSE MIB and IBEX outperform, rallying over 2%. Here are some of the biggest European movers today:

  • M&G shares bounce as much as 15%, the most since November 2020, after the U.K. asset manager and insurer reported a broad-based FY beat, Citi (neutral) writes in a note.
  • IWG shares jump as much as 15%, also the most since November 2020, after Davy said the office space provider’s full-year results were “slightly better” than the broker’s own estimates.
  • Telecom Italia shares rise as much as 12% after an Italian newspaper report that its independent directors may be open to giving KKR access to its data room.
  • European renewables stocks jump after a Bloomberg report that the EU is considering issuing joint bonds on a massive scale to finance energy and defense spending in the wake of the
  • EDF shares, which have lost almost a quarter of their value this year, is one of the biggest gainers on the news, jumping as much as 10% after the report was published.
  • Lindt shares climb as much as 2.3% after the chocolate maker raised mid-term targets in its FY report, with ZKB analyst noting OSG guidance was raised for both 2022 and the medium term.
  • Banks lead a broader rebound in European stocks after the sector subindex closed at a one-year low on Monday, with Societe Generale +7.4% and ABN AMRO +6.9% leading gains in the sector.
  • Greggs shares drop as much as 11% after the U.K. bakery chain said worse-than- expected cost pressures will likely prevent “material profit progression in the year ahead.”
  • Hermes shares fall as much as 3.6% after Bernstein trims the price target of several luxury stocks due to risks for the sector from Russia’s invasion of Ukraine.
  • Maersk shares fall after being downgraded to neutral from overweight at JPMorgan on a higher freight rate exposure than more defensive names in the shipping sector.
  • Danone shares fall as much as 3.3% before paring losses after the world’s biggest yogurt maker announced new guidance that Bernstein called “modest but sensible.”

Earlier in the session, Asia’s stock benchmark extended declines in a bear market amid growing anxiety over how the sanctions on Russia will impact the global energy market and economy.   The MSCI Asia Pacific Index fell as much as 1.8% on Tuesday, having lost 3.1% the previous day in its biggest drop in about a year. The slump has left the measure down by almost 23% from a February 2021 peak. Materials firms were among the biggest drags amid volatile price swings in base metals, while financial companies also weighed.  “People aren’t able to assess at all, how big of a fallout there is going to be from the sanctions on Russia” as well as its invasion of Ukraine, said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. in Tokyo. “This is something no one’s been prepared for and everyone’s rushing to respond to what’s happening.”  The Asian benchmark is poised for a third day of declines amid investor angst over the fallout from the war in Ukraine and sustained regulatory pressure on China’s technology sector. Benchmarks in China, Taiwan and the Philippines were the day’s worst performers.

Japanese stocks fell as traders assessed inflation risks amid the war in Ukraine and sanctions on Russia. The Topix slid 1.9% to 1,759.86 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 1.7% to 24,790.95. Toyota Motor Corp. contributed the most to the Topix’s decline, decreasing 1.8%. Out of 2,176 shares in the index, 345 rose and 1,786 fell, while 45 were unchanged. “With the strengthening sanctions on Russia’s economy, there is a worry over supply fears and soaring costs for products that will be a huge damage to the economy and to corporate earnings,” said Hideyuki Ishiguro, senior strategist at Nomura Asset Management.

In FX, the Bloomberg Dollar Spot Index was steady after three days of gains and the greenback traded mixed against its Group-of-10 peers; NOK, SEK and EUR are the best G-10 performers; AUD and CHF lag. Scandinavian currencies and the euro led gains as they pared some of the losses induced by the war in Ukraine while currencies that had benefited, such as the Australian dollar and the Swiss Franc, slipped. The euro briefly rose above the $1.09 handle on news that the EU is considering a joint bond sale to finance energy and defense spending. The Australian dollar led losses as recently established long positions were liquidated. Australian business sentiment improved in February as an outbreak of the omicron variant dissipated, easing supply- chain disruptions and reviving demand, a National Australia Bank survey showed. Poland’s zloty and Hungary’s forint led gains among emerging-market currencies versus the euro, after both tumbled to record lows this week; the ruble erased gains after earlier rising as much as 25% versus the dollar in offshore trading amid disagreements between EU governments on a move to ban Russia’s oil imports.

The ruble was indicated as much as 25% higher versus the dollar in offshore trading before paring the gain. That may reflect disagreements between European Union governments on whether to follow the U.S. in seeking a ban on imports of oil from Russia. Russian local markets remain closed through Wednesday.

In rates, the 10-year Treasury yield jumped seven basis points and yields on core European bonds also rose. Treasury yields rose by 4-7bps, led by the belly; German bund yields were 8-9bps higher while Italian yields fell by up to 4bps. The spread between 10-year Italian and German yields -- a key gauge of risk in the euro region -- tightened. Another spread that tightened is the 5s10s curve, because 5Y yields today rose 10bps to 1.804%, meaning that the difference between the 5Y and 10Y is now below 6bps, taking out the March 2020 lows and back to 2007 pre-crash levels.

In Europe, bund futures dropped back onto a 165-handle. 10y BTP futures stage a short-lived 100 tick rally. Bund, Treasury and gilt curves bear flatten, belly of the German curve underperforms by 2-3bps. Peripheral spreads tighten significantly with 10y Bund/BTP narrowing ~13bps near 148bps.

JPMorgan Chase & Co. said it will remove Russian bonds from all of its widely-tracked indexes, further isolating the nation’s assets from global investors.

In commodities, WTI pushed past $122 a barrel on fears of disarray in commodity flows stemming from the war in Ukraine and sanctions on Russia. Brent rose ~3% back on a $127-handle. European gas futures jumped as much as 32% after Russia threatened to cut natural gas supplies to Europe via the existing Nord Stream pipeline. Most base metals trade in the green; LME nickel stages a historic spike, trading above $100,000 a ton before paring gains and being subsequently halted on LME.

Spot gold rallies to highs of $2,021 so far before fading.

Looking at the day ahead, and it’s a pretty quiet day in terms of the events calendar. Data releases include German industrial production and Italian retail sales for January. Central bank speakers include RBA Governor Lowe.

Market Snapshot

  • S&P 500 futures up 0.4% to 4,213.50
  • STOXX Europe 600 up 0.9% to 421.04
  • German 10Y yield little changed at 0.06%
  • Euro up 0.3% to $1.0885
  • MXAP down 1.6% to 170.26
  • MXAPJ down 1.4% to 558.11
  • Nikkei down 1.7% to 24,790.95
  • Topix down 1.9% to 1,759.86
  • Hang Seng Index down 1.4% to 20,765.87
  • Shanghai Composite down 2.4% to 3,293.53
  • Sensex up 1.1% to 53,449.23
  • Australia S&P/ASX 200 down 0.8% to 6,980.33
  • Kospi down 1.1% to 2,622.40
  • Brent Futures up 2.6% to $126.36/bbl
  • Gold spot up 0.5% to $2,008.65
  • U.S. Dollar Index down 0.18% to 99.12

Top Overnight News from Bloomberg

  • Russia’s threat to cut off gas to Europe in retaliation for sanctions sent prices surging more than 30%, as the European Union scrambles to find alternatives
  • Average pump prices in the U.S. are now $4.173 per gallon, the highest level since records going back to 2000, according to auto club AAA. Government data going back to 1990 show prices have never been higher than they are now. In California, the most expensive U.S. state for drivers, prices have surged to $5.444 a gallon
  • Britain is heading for a recession in the second half of the year if energy prices remain at current levels, according to the National Institute of Economic and Social Research
  • U.K. households are facing the biggest fall in living standards for half a century as Russia’s invasion of Ukraine deepens the cost of living crisis, according to the Resolution Foundation
  • Surging oil prices pushed Japan’s current account into the biggest deficit in eight years, highlighting the economy’s vulnerability as it braces for additional fallout from Russia’s invasion of Ukraine
  • Japanese funds bought the largest amount of euro-denominated bonds in more than a year as yields soared amid low currency-hedging costs. Investors acquired a net 1.15 trillion yen ($10 billion) of the securities in January, according to the latest balance- of-payments report released on Tuesday. They sold a net 15.4 billion yen of Russian bonds, the most since March 2014, according to the data

A more detailed look at global markets courtesy of Newsquawk

In Asia-Pacific, stocks declined amid headwinds from global peers as geopolitical and supply concerns remain centre stage. ASX 200 was led lower by weakness in commodity-related sectors including energy after oil prices receded from highs. Nikkei 225 fell below the 25k level for the first time since November 2020. Hang Seng and Shanghai Comp. were subdued but with losses in Hong Kong cushioned by some reprieve for big tech, while the mainland was pressured on developer woes after Yuzhou Property defaulted on an interest payment.

Top Asian News

  • China Stocks Slide as Inflation Risks Complicate Easing Path
  • Hong Kong’s Mass Covid Testing Could Be Postponed to April: SCMP
  • Asia Stocks Drop as Traders Weigh Impact of Russia Sanctions
  • Indonesia’s Coal Miners Are Bracing for New Export Curbs

European bourses are mixed, Euro Stoxx 50 +0.9%, after an initial boost to sentiment on source reports around large-scale EU bond issuance; albeit, this upside has waned. Similar action has been exhibited in US futures, ES +0.4%, though performance there is positive across the board once more after a brief foray back into negative territory. Within European, sectors are equally mixed with Basic Resources subdued as base-metals waned after LME action while Banking names remain at the top of the pile given yield action. UK Chancellor Sunak and City Minster Glen met with some London-listed Cos, demanding that they signal a more robust approach towards their own holdings in Russia, via Sky News; however, some fund managers were concerned it would turn them into forced sellers.

Top European News

  • IWG Soars as Davy Highlights ‘Excellent’ Momentum Into 1Q
  • Fear Grips Global Diesel Markets on Russian Supply Crunch
  • Schaeffler Suspends Earnings Guidance on War in Ukraine
  • How Europe Became So Dependent on Putin for Its Gas: QuickTake

In Fixed Income, debt extending declines as risk sentiment recovers and Russia abides by no fire rules governing evacuation routes from Ukraine. Bunds also undermined by reports suggesting that the EU is ready to embark on huge joint issuance to pay for energy and defence measures. Gilts only briefly appeased by solid 2051 DMO re-opening sale and USTs remain heavy ahead of a 3 year note auction.

In commodities, WTI and Brent remain underpinned and have not attempted to move with any conviction out of the sessions ranges in European hours, that sees a peak of USD 123.38/bbl USD 127.99/bbl, respectively. UK PM Johnson is planning to tap new areas of the North Sea for oil and gas reserves, according to The Times. Venezuelan President Maduro said talks with the US were polite and productive, while negotiations will continue. Libya's NOC lifted the force majeure and resumed output at the Sharara oil field. IEA's Birol says that oil prices can still go above today's prices; could release a substantial amount of oil stocks if required. LME Nickel saw gains in excess of 100% taking it above USD 100k/t, prompting the LME to suspend trade; spot gold/silver are firmer on the session though off highs and seemingly capped by USD 2020/oz and USD 2031/oz for gold. CME suspended approved status for warranting and delivery of six brands of gold and silver until further notice. LME has suspended trading in Nickel; suspension is, at a minimum, for the remainder of today. LME Nickel contract on all venues suspended as of 08:15GMT, inter-office trades should not be booked for Nickel after this point. Goldman Sachs raised its 3-month gold target to USD 2,300/oz from USD 1,950/oz, while it raised its 6-month target to USD 2,500/oz from USD 2,050/oz and raised its 12-month target to USD 2,500/oz from USD 2,150/oz. CCB International Global Markets received an extension on missed nickel margin calls.

US Event Calendar

  • 6am: Feb. SMALL BUSINESS OPTIMISM, 95.7, est. 97.2, prior 97.1
  • 8:30am: Jan. Trade Balance, est. -$87.3b, prior -$80.7b
  • 10am: Jan. Wholesale Trade Sales MoM, est. 1.0%, prior 0.2%
  • 10am: Jan. Wholesale Inventories MoM, est. 0.8%, prior 0.8%

DB's Jim Reid concludes the overnight wrap

Talking of dislocations, it was yet another wild 24 hours for markets, with further crazy swings in commodities driving a major risk-off move in markets with the S&P 500 (-2.95%) relentlessly falling all day to the lowest since last June with the DAX at 16 month lows and in bear market territory 9 weeks after hitting all time highs.

The day was filled with downbeat Ukraine news as political officials close to the latest round of peace negotiations poured water on any hopes that the conflict would be resolved in the near-term through negotiations. Specifically, Russian negotiators reportedly said the talks didn’t meet expectations, Ukrainians saying there were no significant results, while French President Macron, who is liaising between interested parties, said there wouldn’t be a diplomatic solution within the coming weeks. This dragged risk assets lower through the session. It all led to the continued risk selloff and inflationary pressures working their way into a number of assets.

For commodities, we were already coming out of their strongest week in aggregate since at least the 1950s, as I wrote about in yesterday’s chart of the day (link here). They’ve built on these gains so far this week and yesterday saw the Bloomberg’s Commodity Spot Index (+3.02%) advance for the 10th time in the last 11 sessions. Oil prices were at the forefront of this, with Brent Crude (+4.32%) rising to $123.21/bbl, which is the first time it’s closed above $120/bbl since 2012. That advance masked some sizeable intraday swings as well, since it had been trading around $135 and $128/bbl around the time of the Monday and Asian European open, before falling back throughout the day as remarks from Chancellor Scholz seemed to push back on aggressive energy sanctions against Russia, by describing their oil and gas imports as of “essential importance”. It does feel that the pressure is building on extending sanctions to Russian energy exports across European countries. Public opinion will matter here and there was Handelsblatt survey suggesting Germans would back stopping Russian energy imports. Of course Russia could act first on this front, especially if it felt a ban was coming. Indeed, Deputy Prime Minister Alexander Novak reportedly threatened to halt Nord Stream 1 gas supplies on state television yesterday.

Meanwhile, there were some reports that the European Commission would be revising its energy strategy to try and reduce EU dependence on Russian gas by 80% in 2022, which would make some of the Russian import bans more tenable. On the other side of the Atlantic, Congressional leaders in both parties apparently reached a deal to ban Russian energy imports into the US, independent of Europe, though apparently President Biden hadn’t made any decisions on a Russian oil import ban.

European natural gas futures hit another record high of €227/MWh yesterday thanks to another +18.0% increase, and at one point shortly after the European open they hit an intraday peak of €345/MWh (+78.6% at this point early in the session). This is now up more than 20-fold from where it was trading just a year earlier. Food prices also bore the brunt, as wheat futures increased +7.03% to a new all-time high. In addition Nickel rose an extraordinary +66% on the day as a short squeeze materlialised on supply concerns.

Overall it’s fair to say that if commodities stay at these elevated levels, it will make life even more difficult for central banks, who will have to try and thread the needle between preventing inflation becoming entrenched without aggravating the slowdown with higher interest rates.

We’ll have to wait and see how this unfolds, but in the meantime there’s been a massive rise in investors’ expectations of future inflation. In Germany, the 10yr breakeven has soared a further +17.8bps to 2.57%, a record in Bloomberg data going back to 2009. In Italy the equivalent measure is up +16.3bps to 2.38%, the highest since 2008. And it’s not obvious that investors are viewing this as a purely transitory surge, with the Euro Area 5y5y forward inflation swap that looks at inflation in the 5 year period starting 5 years from now, rising +9.9bps to 2.20%, a level not seen since early 2014. In the US, 10yr breakevens increased +14.8bps to 2.85%, the highest level on record and the largest daily increase since March 2020.

Ultimately, that big increase in inflation expectations outweighed the decline in real rates and led to a bad day for sovereign bonds on both sides of the Atlantic. Yields on 10yr bunds (+5.4bps), OATs (+3.9bps) and BTPs (+5.9bps) all moved higher by the close. Those on 10yr Treasuries were up +4.3bps to 1.77%, and we also saw the 2s10s yield curve flatten below 20bps for the first time this cycle intraday, touching 18.9bps before closing -3.0bps lower on the day at 21.9bps. All this before the rate hiking cycle has even started. For rates however, the two big events on the calendar this week are both taking place on Thursday, with the ECB’s decision as well as the US CPI reading for February, and previous occasions have had a sizeable influence on how markets are pricing in the monetary policy outlook.

Against that backdrop it was another bad and volatile day for equities. It started very poorly around the European open when the STOXX 600 hit an intraday low of -3.83% in the first hour of trading. By the close it had turned around to “only” close -1.10% lower, but that still marked the index’s lowest level since exactly a year ago today and now means the index has lost over -15% since its all-time closing high in early January. The Dax (-1.98%) has now lost -21.12% since the peak on January 5 and is at 16-month lows.

US indices saw even larger losses yesterday, with a notable move lower after Europe closed following the aforementioned headlines tempering expectations for a near-term diplomatic solution. The S&P 500 (-2.95%) had its worst daily return since October 2020 and moved back into correction territory thanks to heavy losses among the more cyclical sectors, while the VIX index of volatility (+4.47pts) hit its highest level in over a year, at 36.45pts. In turn, those losses saw the NASDAQ decline by an even larger -3.62%, more than -20% from its all-time high reached in November, and for the first time the FANG+ index (-4.41%) of megacap tech stocks closed more than -25% beneath its all-time high back in November.

Safe havens were one of the few beneficiaries from yesterday’s moves, with the US dollar index (+0.65%) strengthening to a 21-month high. Conversely the Euro (-0.68%) weakened for a 6th consecutive session to close at $1.085. Another haven beneficiary were gold prices, which closed at an 18-month high of their own at $1998.11/oz.

If you’re looking for any hope after a day of gloomy news, reports of the latest Russian demands seemed to be less excessive than over recent days, noting they would stop military action should Ukraine forego claims to enter any blocs and if Ukraine recognised Crimea, Donetsk, and Lugansk as Russian territory or independent. While not palatable for Ukrainian negotiators, the demands are at least traveling in the right direction.

Asian equity markets are trading lower again this morning though with mainland Chinese markets leading losses. The Shanghai Composite (-1.99%), CSI 300 (-1.69%), Nikkei (1.21%), Kospi (-0.80%) and the Hang Seng (-0.45%) are all trading in negative territory as the Russian-Ukraine conflict shows no sign of cooling. Moving ahead, stock index futures in the DMs point towards a negative start as contracts on the S&P 500 (-0.18%), Nasdaq (-0.34%), Dow Jones (-0.27%) and DAX (-0.57%) are weak. Brent crude is +2.0% up at $125.7/bbl with WTI futures gaining +1.4% to trade at $121.03/bbl. Meanwhile, the yield on the 10-yr US Treasury note moved +2.2bps higher at 1.795%.

Early this morning, data showed that Labour cash earnings in Japan rebounded + 0.9% y/y in January (vs Bloomberg consensus: +0.1%) and against December’s revised -0.4% drop, while inflation-adjusted real earnings surprisingly gained +0.4% y/y in January (vs consensus -1.0%), posting the first rise in five months. It followed a revised decline of -2.3% in the preceding month. Separately, Japan’s bank lending (+0.4% y/y) rose at the slowest pace in a decade in February and following a downwardly revised +0.5% increase in January. In central bank news, the BOJ Governor Haruhiko Kuroda this morning stated that the Japanese economy is yet to recover fully from the pandemic impact and also mentioned that the central bank would ramp its purchase of JGBs or conduct fixed-rate operations if the 10-yr JGB yield moves beyond the desired range.

Elsewhere German retail sales grew by +2.0% in January (vs. +1.9% expected) yesterday, and factory orders were up by +1.8% (vs. +1.0% expected). Foreign orders drove the rise with a +9.4% gain, contrary to domestic orders which fell -8.3%.

To the day ahead now, and it’s a pretty quiet day in terms of the events calendar. Data releases include German industrial production and Italian retail sales for January. Central bank speakers include RBA Governor Lowe.

Tyler Durden Tue, 03/08/2022 - 08:09
Published:3/8/2022 7:24:55 AM
[Markets] Dow Jones Futures Extend Losses As Russia-Ukraine War Continues; Oil Prices Climb Again Dow Jones futures climbed Tuesday, looking to rebound from Monday's stock market dive. U.S oil prices continue to rise, topping $123 a barrel. Published:3/8/2022 7:24:55 AM
[Markets] Dow Jones Futures Rally: What To Do After Monday's Stock Market Dive As Russia-Ukraine War Continues Dow Jones futures rallied Tuesday, as the Russia-Ukraine war continues. Here's what to do following Monday's stock market dive. Published:3/8/2022 6:20:15 AM
[Markets] Dow Jones Futures Fall: What To Do After Today's Stock Market Dive As Russia-Ukraine War Continues Dow Jones futures were in focus Monday, as the Russia-Ukraine war continues. Here's what to do following Monday's stock market dive. Published:3/7/2022 10:20:17 PM
[Markets] Stock market news live updates: Stock futures dip after Dow hits correction, Nasdaq enters bear market U.S. equity futures ticked lower in post-market trading Monday after a sell-off in the earlier session that saw the Dow fall into correction territory and the Nasdaq enter a bear market. Investors continued to jettison stocks and stockpile safe-haven assets as concerns over the economic consequences of Russia’s war in Ukraine intensified. Published:3/7/2022 5:49:34 PM
[Markets] Dow Jones Futures: What To Do After Today's Stock Market Dive As Russia-Ukraine War Continues Dow Jones futures were in focus Monday, as the Russia-Ukraine war continues. Here's what to do following Monday's stock market dive. Published:3/7/2022 5:16:42 PM
[Markets] Stocks end near their lows of the day, with the Dow losing 800 points Stocks end near their lows of the day, with the Dow losing 800 points Published:3/7/2022 3:47:16 PM
[Markets] "The Market Is Totally Dysfunctional" - Traders Concerned Russian CDS Won't Pay Out In Event Of Default "The Market Is Totally Dysfunctional" - Traders Concerned Russian CDS Won't Pay Out In Event Of Default

Since the start of Russia's invasion of Ukraine, the financial press has been filled with stories about investors who are on the losing end of the historic selloff in Russian assets. There's the Kentucky pension fund that lost millions on its position in Sberbank (Russia's largest bank, which has decided to pull its European business due to sanctions, but was ironically excluded from the SWIFT "selective" ban), and the Russian trader who toasted to "the death of the stock market" during a Russian TV interview.

All because Russian equities have fallen by an absurd amount: the Dow Jones Russia GDR Index, an index designed to track the top Russian GDRs that trade on the LSE, plunged a mind-numbing 97% in just a few days and wiped out $572 billion.

Moscow's stock market, of course, will remain shuttered at least until the middle of the week ahead, according to Russian authorities. But the market for Russian CDS has been a different story. Investors have seen premiums rise, but not by as much as some might have expected given the move in Russian foreign currency sovereign bonds. 

As they try to account for this, some investors are aying there's another risk to consider. And that is: what if sanctions prevent holders of CDS to collect on their winnings should a default occur?

The FT addressed several reasons why Russian CDS might not pay out even in the event of a default.

Citing a handful of traders, some anonymous, some not, the FT said CDS premiums have moved to incorporate  concerns that CDS holders might not be able to get their money if Russia defaults, which some traders believe could happen as soon as the middle of March, when the next payment by Russia is due. The big fear of course isn't that Moscow doesn't have the money, but that enough of its foreign currency central bank reserves have been frozen to make obtaining the euros and dollars required for settlement extremely difficult.

It's an issue we highlighted a few days ago in a tweet:

One EM debt trader says he has a "high conviction" that Russia won't pay on March 16 (though Moscow made a payment just this past week on its ruble-denominated debt, which isn't covered by the CDS).

"We have a high conviction that [Russia] will not pay," said Marcelo Assalin, head of emerging market debt at William Blair. "But the market is totally dysfunctional. The problem we face is CDS is implying a recovery value that’s not realistic."

Some traders are looking to the past for clues: they see Venezuela (sanctions prevented foreign buyers from purchasing its newly issued debt, just like Russia), as well as CDS "mishaps" like rental car company Europcar, in 2021, and Dutch lender SNS Reaal, in 2013. Three foreign currency bonds are subject to settlement in Russia, making the untradeable. Others have 'fallback' mechanisms allowing Russia to settle in rubles.

Others are worried about the possibility that the International Swaps and Derivatives Association might amend CDS contracts to reference only older bonds unaffected by the sanctions. In a statement, ISDA didn't deny the possibility that it could mandate certain changes to these agreements.

"Members are working to comply with the sanctions, and the impact and required actions will depend on their individual circumstances,” said an ISDA spokesperson. "ISDA is in regular contact with members to identify any common, marketwide issues that may emerge, and to assist in finding mutualised solutions where appropriate."

Most of Russia's foreign currency bonds are still tradeable, which has allowed US megabanks like Goldman Sachs and JP Morgan to scoop up cheap debt on behalf of clients (or even perhaps for their own book, anticipating buyers down the road). But there's always the possibility that future sanctions could freeze trading on the secondary market, creating additional risks that have contributed to the steep drop in prices.

Russian President Vladimir Putin has already taken some steps to try and avoid default on corporate and sovereign debt by issuing a decree mandating the option for payment in rubles, according to Bloomberg.

The decree establishes temporary rules for sovereign and corporate debtors to make payments to creditors from “countries that engage in hostile activities” against Russia, its companies and citizens. The government will prepare a list of such countries within two days.

Russian corporate bonds denominated in foreign currencies have plunged to deeply distressed levels in recent days as investors weighed the impact of sanctions imposed on the country in the wake of its invasion of Ukraine. The Russian government responded to the sanctions by reducing dramatically access to foreign currencies, which could restrict the ability of bondholders to receive interest and principal payments.

While uncertainty keeps CDS premiums elevated, Wall Street has already started to advise clients that certain Russian assets are now deeply undervalued.  For example, we noted earlier that a team of JPMorgan strategists led by Zafar Nazim published a note on Friday titled "Russian Corps: If Ifs-And-Buts-Were-Candy-And-Nuts Recovery Analysis; Move LUKOIL, NLMK, MMK to OW" (available to professional subs).

In the note, they upgrade a trio of Russian corporate bonds - those of Lukoil, Novolipetsk Steel and Magnitogorsk Iron & Steel to "Overweight" - which JPM sees as remaining money good (i.e., not defaulting).

The full Lukoil recovery analysis suggests that total debt coverage via international ops is at least 133% and could be as high as 212%.

There's also the issue of optics, which of course complicates the picture of holding Russian assets in the hopes of a recovery (but probably wouldn't have the same stigma for holders of CDS, since they're betting on a collapse).

After all, Sen. Elizabeth Warren has already lashed out at Wall Street "opportunists".

“Giant Wall Street banks like JPMorgan and Goldman Sachs never miss out on an opportunity to get richer even if it means capitalizing on Russia’s invasion of Ukraine and undermining sanctions placed on Russian businesses,” said Warren.

Which means politicians likely won't have any sympathy for institutional investors who wind up burned on their Russia holdings, even if it is CDS.

Tyler Durden Mon, 03/07/2022 - 15:40
Published:3/7/2022 2:47:13 PM
[] The Morning Rant: Scattered Buck Shots (3/07/2022) Collapse of Small-Cap Stocks Is Twice As Bad As The Dow Jones Correction If you’re watching the value of your 401K, you’ve probably noticed that it’s taken a hit recently. If it’s invested in an index fund tracking the S&P... Published:3/7/2022 10:15:53 AM
[Markets] Stocks open mostly lower as Russia-Ukraine war drives volatile trade in oil Stocks opened lower as investors continued to monitor developments around Russia's invasion of Ukraine, tracking volatile action in crude-oil prices. The Dow Jones Industrial Average fell 132 points, or 0.4%, to 33,483, while the S&P 500 fell 0.2% to 4,321 and the Nasdaq Composite rose 0.3% to 13,349. Stock-index futures had fallen sharply in early activity as oil futures spiked, taking the U.S. benchmark briefly above $130 a barrel. Oil futures have since pulled back, with WTI futures up 0.7% a Published:3/7/2022 8:49:55 AM
[Markets] Dow Jones Futures Drop As Russia-Ukraine War Continues; Oil Prices Briefly Surge Above $130 A Barrel Dow Jones futures pared sharp losses Monday, as the Russia-Ukraine war continues. U.S. oil prices briefly surged above $130 a barrel. Published:3/7/2022 7:14:05 AM
[Markets] Futures Tumble, Europe In Bear Market As Oil, Gold Soar Futures Tumble, Europe In Bear Market As Oil, Gold Soar

Not much has changed since our market update last night which saw all risk assets collapse and in many cases set to open in bear markets, amid a soaring panic that the US will impose a unilateral oil embargo on Russia leading to an energy supply shock and global stagflation, while safe havens such as gold, treasuries, and the dollar are exploding higher not to mention crude which was last trading at $125 after briefly rising above $139 at the start of the session. Commodities from grains, metals have also surged on concerns of chaos in raw-material flows due to the invasion and sanctions on Russia that are turning the resources powerhouse into a global pariah. Commodity-linked currencies strengthened.

S&P 500 e-mini futures were down as much as 2.1% earlier before trading 1% lower 7am in New York after a faint glimmer of hope of de-escalation when the following headlines hit Reuters:

  • KREMLIN SPOKESMAN SAYS UKRAINE MUST AMEND CONSTITUTION AND REJECT CLAIMS TO ENTER ANY BLOC
  • UKRAINE MUST RECOGNISE CRIMEA AS RUSSIAN, AND DONETSK AND LUGANSK AS INDEPENDENT STATES
  • IF THESE CONDITIONS ARE MET, THEN RUSSIAN MILITARY ACTION WILL ‘STOP IN A MOMENT’ - SPOKESMAN

And now we wait for the latest Ukranian refusal of these conditions. Meanwhile Nasdaq futures retreated 1.7%. Brent oil was up as much as 18% today, trading around $125 a barrel as the Biden administration is considering whether to prohibit Russian oil imports into the U.S. without participation of allies in Europe, at least initially, according to a Bloomberg report.


“For the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war,” Ed Yardeni, president of Yardeni Research, wrote in a note. “For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.”

Travel stocks were down in premarket trading, with airlines dropping as a surge in oil prices stokes worries over higher jet fuel costs. American Airlines Group (AAL US) -3.2%, Delta Air Lines (DAL US) -3%. On the other end, U.S. energy shares soared as crude oil prices soar after the U.S. said it was considering curbs on imports of Russian oil. Exxon (XOM US), Chevron (CVX US), Marathon Oil (MRO US) are all up about 3% as WTI crude futures gain 6.4% to $123.02 a barrel.  Cryptocurrency-exposed stocks could be active on Monday as digital currencies including Bitcoin slide alongside risk assets such as stocks. Watch Coinbase (COIN US), Riot Blockchain (RIOT US), Marathon Digital (MARA US). Banks stocks slumped in premarket trading, pushing their recent rout to a third day. In corporate news, banking and credit card technology unicorn Zeta Services has raised $30 million from investors including Mastercard. Meanwhile, American Express says it is suspending its operations in Russia and Belarus. Bed Bath & Beyond (BBBY US) shares exploded as much as 75% after RC Ventures, an investment firm started by GameStop Chairman Ryan Cohen, disclosed a large stake in the retailer, while pushing it to explore a sale of the company.

While the Russian aggression in Ukraine continues the risk of a further escalation keeps investors unsettled. Soaring energy prices are at the heart of economic vulnerabilities,” said Thomas Hempell, head of macro and market research at Generali Investments. “Price pressures are compounded by mounting risk of supply chain disruptions as Russian firms are cut off financially and cargo traffic is curtailed.”

Late on Sunday Bloomberg reported that the Biden administration is considering whether to ban the import of Russian oil and energy products unilaterally, a move that could add to economic pressure as more companies pull out of the country in response to Moscow’s invasion of Ukraine. High energy prices threaten to stall global growth, a risk that is sending tremors across markets.

The commodity supply shock comes as the global economy was already struggling with high inflation due to the pandemic. The Federal Reserve and other key central banks now face the tricky task of tightening monetary policy to contain the cost of living without upending economic expansion or roiling risky assets.

Meanwhile, traders piled into options that oil could surge even further after rising to the highest since 2008, with many adding to calls that Brent futures will rise above $200 before the end of March. For those who missed the key developments over the weekend and overnight, here is a recap of the latest Russian energy/economic updates, courtesy of Newsquawk

  • US Secretary of State Blinken said the US and allies are in active discussions regarding a Russian oil import ban and reports later stated the US is weighing acting without allies on a ban of Russian oil imports, although the timing and scope of any ban is still fluid, according to Bloomberg.
  • US House Speaker Pelosi said the House is exploring legislation to ban the import of Russian oil.
  • Japan is in talks with the US and Europe regarding a Russian oil embargo, according to Kyodo.
  • Russian Kremlin spokesman Peskov said there will be a reaction to the economic banditry they are seeing and that a ban on Russian oil risks the most serious market impact, while Peskov added that NATO is aware it cannot get directly involved in Ukraine. Kremlin also stated that companies will return to Russia and invest one day.
  • Russia said it is to service and pay Russian bonds fully on time but stated that payments on debts to foreign residents will depend on limits imposed by foreign states.
  • American Express (AXP) suspends operations in Russia and Belarus which is due to the Russian attack on the people of Ukraine. Visa (V) and Mastercard (MA) are also to suspend operations in Russia in which Visa noted that all transactions initiated with Visa cards issued in Russia will no longer work outside the country and Mastercard said cards issued by Russian banks will no longer be supported by its network. However, Russia’ s largest lender Sberbank noted that the Visa and Mastercards it issued will continue to work in Russia, according to Tass.
  • Banks in Russia are rapidly trying to move to the Chinese UnionPay's system and its own Mir network after Visa and Mastercard suspended operations in Russia
  • VTB Bank is preparing to pull out of Europe, according to FT.
  • PwC is to separate its Russian firm from the rest of its global network which affects 3,700 partners and staff in the country.
  • TikTok limited services in Russia due to the 'Fake News' law and Netflix (NFLX) also decided to suspend its service in Russia.
  • Moody’s downgraded Russia’s sovereign ratings from B3 to CA; Outlook Negative, while it cut Ukraine’s sovereign rating two notches from B3 to Caa2.
  • Ukraine introduced export licences for key agricultural commodities including wheat, corn and sunflower oil.

And here is the latest in the ongoing discussions and negotiations:

  • Russia-Ukraine discussions to commence at 12:00GMT/07:00EST on Monday, according to Russian State TV citing Belta; Russian delegation has arrived for the discussions; subsequently, Ukraine Presidential Adviser says new talks with Russia will start at 14:00GMT/09:00EST.
  • Russian & Ukraine Foreign Ministers are to meet in Antalya, Turkey, according to the Turkish Foreign Minister; meeting will occur on Thursday.
  • Ukrainian Foreign Minister Kuleba said he doesn’t see progress in peace talks with Russia but have to continue talking, while he talked to US Secretary of State Blinken about providing more weapons to Ukrainian fighters and implementing more sanctions against Russia. Furthermore, US Secretary of State Blinken said unprecedented pressure on Russia will increase until the war with Ukraine is brought to an end, according to Reuters.
  • Russian President Putin warned that they would consider any third-party declaration of a no-fly zone over Ukraine as participation in the armed conflict and said western sanctions are akin to a declaration of war, while he added there is no reason to declare martial law in Russia.
  • Russian President Putin held a call with Turkish President Erdogan in which Putin said Russia is ready for dialogue with Ukraine and foreign partners, while he added that the military operation in Ukraine is going according to plan and any attempt to draw out the negotiation process will fail.
  • Russian President Putin and French President Macron held a call on Sunday in which Putin told Macron that he agreed to talks between the IAEA, Ukraine and Russia to ensure security at nuclear sites.
  • Russian Defence Ministry said the use of airfields of other countries by Ukraine airforce may be considered as participation of those countries in the conflict, according to Interfax.
  • Russian Foreign Ministry said Britain has chosen to move towards open confrontation with Russia and that Russia will respond which will undoubtedly undermine British interests in Russia.

European equities were hit hard at the open with focus turning to the inflationary impact of elevated energy and the subsequent dent to global trade. Cash indexes are deep in the red, Euro Stoxx 50 down as much as 4.75%, DAX and CAC drop 5%; FTSE MIB lags, cratering as much as 6.25%. As BBG's Heather Burke notes, the Euro Stoxx 50 has slid more than 20% from its November high, poised for a technical bear market at the close, with similar moves seen in major European regional benchmarks. Banks, retail, autos and travel are the biggest decliners as investors worry about Russia exposure and the prospects of higher inflation and slower growth. Energy and miners are in the green as commodities soar. Over 90% of Stoxx 600 members are down. U.S. futures’ declines are also picking up. Energy and banks had benefited from gains in value stocks; through mid-February they were the two best Stoxx 600 performers.

Banks, autos and retail names are the hardest hit; energy and mining stocks hold in positive territory with the commodities well bid. European banks declined 8% to lowest level since February 2021 amid a global sell-off spurred by concerns that surging oil prices will slow global growth. The Stoxx 600 Banks Index was the worst-performing sector in Europe, with all 39 members declining. Russia exposed banks were all down double digits: UniCredit -12%, Commerzbank -12%, Societe Generale -11%, Deutsche Bank -10%, while Raiffeisen fell as much as 13% down, to lowest level since June 2016. Energy and miners are now the only two sectors in the green ytd as oil trades near $130 and metals spike. Banks, on the other hand, have been pressured by Russia exposure, falling bond yields and economic uncertainty and how that will affect monetary policy. The ratio between European energy and banks has risen to the highest since April 2020 and can easily surpass the March 2020 pandemic peak.

Here are some of the biggest European movers today:

  • European energy and basic resources stocks surged in the face of a broader equity-market rout as commodity prices extended gains amid concerns that the war in Ukraine may spur a supply shock, with Lundin Energy, Shell, Equinor and Galp Energia all up 6% or more.
  • European defense companies, including BAE Systems and Thales, are also among Monday’s gainers, as Russian President Vladimir Putin reiterated over the weekend that the war will continue.
  • Clarkson shares jump as much as 8.8% after Liberum said the shipping services provider made the most of strong markets in its broking and financial segments.
  • Pearson is the only member of the Stoxx 600 media index, as UBS upgrades to neutral from sell, saying the stock could advance by more than 50% if the company can deliver 2025 targets.
  • The Automobiles & Parts subindex is the worst-performing subindex on the Stoxx 600, dropping 5%. Finland’s Nokian Renkaat, which is heavily exposed to Russia, leads losses.
  • European bank stocks declined to their lowest level since February 2021, led by losses for banks with exposure to eastern Europe, such as Erste Group Bank and PKO Bank, both dropping more than 11%.
  • Luxury stocks slumped as store closures in Russia dented earnings prospects for the group while the oil price surge also added to pessimism over the economic outlook.
  • Airline stocks also took a beating from Brent oil’s climb, signaling a further increase in costs for the aviation sector, with Wizz Air -11% and International Consolidated Air -7.9% leading losses.
  • Inditex shares dropped as Credit Suisse said the clothes retailer may struggle to deliver medium-term growth, cutting its PT for the Spanish retailer to a new street low.
  • Jupiter Fund Management shares hit their lowest since April 2020. Stock is cut to hold from add at Peel Hunt, which now expects net outflows to continue into FY22 for the asset manager.
  • Oxford Instruments shares drop as much as 24

Earlier in the session, APAC stocks declined as geopolitical concerns lingered ahead of the third round of Ukraine-Russia talks and after evacuation attempts over the weekend in Mariupol were halted amid a ceasefire breach, while the US and allies are engaged in a “very active discussion” regarding a Russian oil embargo. ASX 200 weakened as tech led the declines across most industries aside from the commodity-related sectors which were boosted by a spike in oil and supply squeeze concerns across the metals complex. Nikkei 225 suffered a near-1000 point intraday loss with notable weakness in autos and airlines stocks. Hang Seng and Shanghai Comp. conformed to the risk aversion after China set its lowest growth target in 30 years at 'around 5.5%' and with mixed Chinese trade data also failing to inspire a turnaround.

In rates, treasuries have erased their opening gains, when futures gapped higher when Asia session began. Short-dated yields lead the move, higher by nearly ~5bp. Yields were higher across the curve, 10-year by 4.3bp at 1.77%; during Asia session it declined as much as 6.5bp to 1.666%, lowest since Jan. 5 and just above its 100-DMA, which has held since end of last year. TIPS yields little changed, outperforming after oil’s surge to 2008 levels above $130. In Europe, curves were mixed as Germany bull flattens with the short end ~3bps richer. Peripheral spreads widened, short end Spain and Italy snap ~8bps wider.  Core European bonds advanced in the front end while peripherals slumped; Germany’s 10-year breakeven rate jumped to a record high. Euro 5y5y inflation swaps ramp up ~14bps near 2.24%, German 10y breakevens print a record high near 2.4%.

In FX, the Bloomberg Dollar Spot Index rallied 0.6% back above 1,200 as a selloff of European currencies continued; Treasuries were a tad lower. Australian, New Zealand and Canadian dollars rose as they benefited from rallying commodity prices, while Poland’s zloty and Hungary’s forint tumbled to all-time lows against the euro and Sweden’s krona fell below 10 per dollar for the first time since April 2020. The euro slid to 1.0822, its weakest level in almost two years against the greenback and three-month 25 delta risk reversals on EUR/USD showed the biggest bias to puts since the European debt crisis. The common currency slipped below parity with the Swiss franc for the first time since January 2015. It erased the losses on speculation that the SNB was intervening.

The pound slumped to the lowest since December and Gilt yields rose by up to 7bps, led by the front end. Australian and New Zealand dollars gained as much as 1% each, before paring, amid the spike in oil and as iron ore jumped on Chinese stimulus hopes. The yen dropped for the first time in three days on concern higher energy prices will weigh on Japan’s trade balance.

In commodities, Brent and WTI hold roughly half of their gains; Brent trades near $125 having surged on to a $139-handle in early Asia triggered by reports that the U.S. was discussing a ban on Russian crude imports. Base metals skyrocket: LME nickel surges ~30%, palladium hits an all-time high. Spot gold trades near $2,000/oz.

The Indian rupee fell to a record low as crude oil prices surged to the highest since 2008, stoking fears about inflation and finances for the net-energy importer. Bonds also declined.  USD/INR rose 1% on Monday to 76.9662 after climbing to 76.9812 earlier.

Bitcoin remains subdued and sub-USD 40k after losing the handle towards the tail-end of last week.

 

 

Market Snapshot

  • S&P 500 futures down 1.6% to 4,259.25
  • STOXX Europe 600 down 3.0% to 409.12
  • MXAP down 2.8% to 173.52
  • MXAPJ down 2.7% to 567.72
  • Nikkei down 2.9% to 25,221.41
  • Topix down 2.8% to 1,794.03
  • Hang Seng Index down 3.9% to 21,057.63
  • Shanghai Composite down 2.2% to 3,372.86
  • Sensex down 2.9% to 52,756.70
  • Australia S&P/ASX 200 down 1.0% to 7,038.59
  • Kospi down 2.3% to 2,651.31
  • German 10Y yield little changed at -0.06%
  • Euro down 0.6% to $1.0865
  • Brent Futures up 6.4% to $125.64/bbl
  • Gold spot up 1.3% to $1,995.63
  • U.S. Dollar Index up 0.39% to 99.03

Top Overnight News from Bloomberg

  • President Vladimir Putin said again on Sunday the war will continue until Ukraine accepts his demands and halts resistance, dimming hopes for a negotiated settlement. Putin says Ukraine must “demilitarize” and he has made clear his goal is to remove the current government
  • Major stock markets from Europe to Asia are heading for bear markets -- falling more than 20% from highs -- amid fears of an inflation shock as crude oil soared on the prospect of a ban on Russian supplies
  • The SNB’s foreign-exchange holdings slipped as a surging franc weighed on its stockpile. Foreign-currency reserves declined by 8.4 billion francs ($8.7 billion) to 938.3 billion francs in February, according to data published Monday. The central bank said “the franc continues to be highly valued. The SNB takes the overall currency situation into consideration, individual currency pairs don’t play a special role. The central bank is still ready to intervene in the foreign exchange market if necessary.”
  • German factory orders increased for a third month, driven by foreign demand, even as the pandemic probably tipped Europe’s largest economy into another recession. Orders rose 1.8% from the previous month in January after advancing 2.8% in December -- more than the median estimate in a Bloomberg survey
  • With soaring consumer prices showing little signs so far of feeding a pay spiral in the euro zone, the region’s labor market faces an even bigger cost-of- living increase as energy prices soar after Russia’s invasion of Ukraine
  • China declared ties with Russia to be “rock solid” despite President Vladimir Putin’s invasion of Ukraine, while repeating earlier an accusation that the U.S. is trying to build a Pacific version of NATO
  • China’s export growth moderated in the first two months of the year, pointing to more stable global demand as multiple risks cloud the outlook

A more detailed look at global markets from Newsquawk

Asia-Pac stocks declined as geopolitical concerns lingered ahead of the third round of Ukraine-Russia talks and after evacuation attempts over the weekend in Mariupol were halted amid a ceasefire breach, while the US and allies are engaged in a “very active discussion” regarding a Russian oil embargo. ASX 200 weakened as tech led the declines across most industries aside from the commodity-related sectors which were boosted by a spike in oil and supply squeeze concerns across the metals complex. Nikkei 225 suffered a near-1000 point intraday loss with notable weakness in autos and airlines stocks. Hang Seng and Shanghai Comp. conformed to the risk aversion after China set its lowest growth target in 30 years at 'around 5.5%' and with mixed Chinese trade data also failing to inspire a turnaround

Top Asian News

  • Xi Warns Missteps on Ethnic Issues Would ‘Destabilize’ China
  • LSE Reviewing Trades Executed in Polymetal After Brief Spike
  • SMBC Nikko Strips 2 Arrested Employees of Executive Titles
  • China Builder Logan Downgraded Deeper into Junk by Moody’s

European bourses are hampered across the board, Euro Stoxx 50 -2.3%, as geopolitics continue to dominate. US futures are also pressured, ES -1.7%, but faring marginally better than European peers as participants remain cognisant of US CPI this week and the Fed next week. In Europe, the likes of the FTSE 100 are the relative outperformers given exposure to crude names as the associated Oil & Gas sector cheers benchmark pricing while Basis Resources are firmer.

Top European News

  • JPM Strategists Stay Positive for Europe Stocks on Fundamentals
  • Danske Bank Senior ESG Analyst Leaves for Risk Management at DNB
  • Vopak Plummets; Jefferies Cuts on ‘Looming’ Overcapacity
  • Jupiter Sinks as Peel Hunt Cuts Rating on Difficult Outlook

In FX, the dollar remains king, but not quite all conquering as commodity currencies outperform and Gold scales in around the 2k per ounce mark; DXY approaching 99.500 after clearer round number breach. Aussie hovers on 0.7400 handle as iron ore and copper soar. Euro slammed but off worst levels vs Franc after verbal SNB intervention; EUR/CHF back over parity, but EUR /USD dangling above 1.0800. Rouble slides to new record lows ahead of third attempt to strike ceasefire agreement between Russia and Ukraine - Usd/Rub over 135.00 at one stage. Norwegian Crown elevated as Brent remains bid alongside WTI on possible Russian export embargo; EUR /NOK sub-9.8000 vs EUR/SEK around 10.8800 for comparison. SNB says the CHF continues to be "Highly Valued", remains prepared to intervene in FX markets if needed. CHF appreciation reflects the inflation differentials between Switzerland and other nations, inflation abroad is significantly higher than in Switzerland. BoJ could lower its economic assessment at its policy meeting next week, according to Reuters sources.

In commodities, WTI and Brent surge amid multiple bullish-factors re. US possibly banning Russian oil, Iran-nuclear delays and China growth ambitions; thus, benchmarks reached highs of USD 130.50/bbl and USD 139.13/bbl respectively. US officials held meetings in Venezuela amid a search for alternative oil supplies, according to FT. It was later reported that US and Venezuela discussed possible easing of oil sanctions although made little progress towards an agreement, according to sources cited by Reuters. US President Biden's advisers are mulling a Saudi Arabia trip to convince the kingdom to pump more oil, according to Axios. Canada's Alberta Province has some spare pipeline and rail capacity to export additional oil to the US, according to Alberta's Energy Minister. Libya NOC announced an armed group closed pump valves at the Sharara and el-Feel oil fields which reduced its daily production by 330k bbls. Goldman Sachs says a sustained USD 20/bbl increase in oil prices would reduce US GDP by 0.3% and Euroarea by 0.6%. Spot gold/silver are bid though the yellow metal is yet to embark on a substantial move above the USD 2000/oz mark. Copper strengthened to above USD 5/lb for the first time in history amid the broad upside across the commodities complex that saw LME nickel futures gain around 19%.

US Event Calendar

  • 3pm: Jan. Consumer Credit, est. $24.5b, prior $18.9b

DB's Jim Reid concludes the overnight wrap

In normal times this Thursday's US CPI and ECB meeting would be the blockbuster couple of hours of the week. It will still be important but clearly won't be the main event given the Ukrainian situation.

Indeed the week is set to start in somewhat of a fraught manner after a remarkable surge in oil overnight with Brent futures up +9.7% to $129.59/bbl and WTI futures +8.1% to $125.07/bbl, as I type - the highest since 2008. Indeed Brent actually opened nearer $139 in a stunning early move.

This comes following US Secretary of State, Antony Blinken stating that Washington and its allies were in talks about banning Russian oil and natural gas imports to tighten economic sanctions on Russia. Blinken added that the US administration will make sure that there is sufficient oil in the global market, if such measures were imposed. Additionally, Speaker Nancy Pelosi said in a letter to Democratic colleagues that the chamber is exploring strong legislation to ban the imports of Russian oil – a move which would “further isolate Russia from the global economy”.

Equity markets are set to open sharply lower as a result with contracts on the S&P 500 (-1.27%), Nasdaq (-1.72%), Dow Jones (-1.0%) and DAX (-3.11%) all weak. Meanwhile, 10-year US Treasury yields moved -2.9bps lower at 1.70%. Elsewhere, the Nikkei (-3.48%), Hang Seng (-3.41%), Shanghai Composite (-1.48%), CSI (-2.38%) and Kospi (-2.02%) are also weak.

There hasn't been much new news over the weekend that progresses the narrative on the conflict and it's looking more likely that this will be an attritional battle absent a major development. For economies and markets, especially in Europe it then depends on whether the gas (and to a lesser extent oil) continues to flow from Russia to the continent. At the moment it seems the European governments are keen for the gas flow to continue (assuming Russia does) but I suppose a risk to this scenario is that public opinion becomes increasingly against that scenario and politicians have to respond. The news out of the US over the weekend shows the momentum is building for fiercer sanctions on Russia.

The oil move this morning comes after there was some hope on Saturday that Iran have moved closer to a position where sanctions could be reduced and thus allowing their oil to flow onto the global market place as early as the third quarter. However yesterday it seemed that Tehran's links to Russia were increasingly seen as a big stumbling block. So we'll see how this story develops.

Another interesting story over the weekend was the Chinese government’s 5.5% 2022 growth target announced at the National People's Congress. Most analysts believed it would be around 5% or just above and our economists wrote last week that if the target was 5.5% it would imply direct additional government support for the economy. They added that this could come at the expense of long-term growth and financial stability. Our economists' update yesterday on how the target might be achieved here.

Previewing the main scheduled events of the week now. For US CPI our economists expect year-on-year inflation to rise to +7.8% in February, the fastest in 40 years. This is the last reading before next Wednesday's FOMC conclusion with the committee now in a blackout period. Perhaps the drama of both these events has been reduced by a quite explicit reference last week by Powell that he favours a 25bps hike next week. Having said that a strong CPI will certainly keep a 50bps move in subsequent meetings firmly on the radar so it's still clearly important to try to assess where we are in the inflation cycle.

As for the ECB on Thursday, their meeting comes after the Euro Area flash CPI print for February last week came in at +5.8% (vs. +5.6% expected), which is the highest level in the single currency's history. A preview of the meeting from our European economists can be found here. They expect the Ukraine crisis to prevent the central bank from announcing APP tapering at this point. Also, in their view, the ECB's message will reinforce its commitment to price stability and addressing fragmentation. Our FX strategists have made a strong case for how the ECB need to intervene soon to ensure that a falling Euro doesn't magnify the soaring energy costs. See here for more

Elsewhere Wednesday is an interesting day as we have US JOLTS which is a good gauge of labour market tightness, and PPI in both China and Japan. The rest of the day by day week ahead is at the end as usual.

Looking back now, it was a difficult and volatile week for markets with commodities the highlight. Brent crude oil futures increased +20.55% over the week (+6.93% Friday) reaching $118/bbl, the highest level since 2013, and the largest weekly increase in absolute dollar terms in Bloomberg’s data dating back to 1988. European natural gas, however, stole the show, increasing +116.20% (+19.73% Friday) to an all-time high of €204.14. Unsurprisingly it marked the largest weekly increase in percentage and euro terms on record. Clearly a very worrying situation on this side of the continent.

The price pressures extend beyond energy, as agricultural prices also saw marked increases. Russia and Ukraine collectively export just under a third of the world’s wheat, leading wheat futures to increase +40.62% (+6.61% Friday). Metals were not spared, with aluminium, copper, and palladium increasing +14.39% (+3.57% Friday), +9.65% (+3.30% Friday), and +27.14% (+8.19% Friday), respectively. The Bloomberg commodity spot index therefore increased +13.02% (+3.34%) over the week, the highest level and largest weekly gain on record.

Central banks were obviously in focus given the inflationary pressures and change to the growth outlook. STIR markets are pricing +24.1bps of ECB tightening through this year, down from +34.3bps of tightening at the end of the week before. Meanwhile, Chair Powell signalled his preference to lift rates by 25 basis points at the March FOMC meeting. He sounded a hawkish tone on the risks from inflation. He paid heed to the uncertain impacts stemming from the war but downplayed the direct economic impacts to the US. Markets are pricing +141.3bps of tightening from the Fed this year, down slightly from +155.6bps at the end of the week before. Not a big destruction in pricing given the war and sanctions escalation.

Longer term interest rates fell on the flight to quality flows, with 10yr treasury, bund, OAT, and gilt yields tumbling -23.1bps (-11.0bps Friday), -30.0bps (-8.9bps Friday), -27.2bps (-6.1bps Friday), and -24.9bps (-9.1bs Friday), respectively. Notably, 10yr bund yields ended the week back in negative territory at -0.07%. The move was driven by real yields, as breakevens widened in line with increases in commodity prices, with 10yr US, German, French, and UK breakevens increasing +14.1bps (+0.8bps Friday), +34.5bps (+9.6bps Friday), +27.4bps (+5.0bps Friday), and +12.8bps (-1.3bps Friday), respectively.

The continued pricing of central bank tightening combined with global risk off drove the 2s10s treasury yield curve -13.9bps (-5.8bps Friday) flatter, finishing the week at +24.9bps, another low that is only matched by March 2020 levels.

The final piece is global equity indices, which were red across the board but with US stocks holding up impressively well. The S&P 500, STOXX 600, DAX, and CAC fell -1.27% (-0.79% Friday), -7.00% (-3.56% Friday), -10.11% (-4.41% Friday), -10.23% (-4.97% Friday), respectively. European stocks underperformed given the proximity to the conflict and sanctions, with the DAX and CAC entering a -10% correction on the week alone, while the STOXX 600 is now down -13.53% YTD. Financials on both sides of the Atlantic were notable underperformers, with the S&P 500 banks and STOXX banks indices down -8.51% (-3.35% Friday) and -18.69% (-7.92% Friday), respectively.

Finally, the US jobs numbers were one bit of optimistic news in an otherwise dismal week. The economy added +678k jobs in February, sending the unemployment rate down to +3.8%, both better than consensus estimates. Labor force participation ticked up to +62.3% while average hourly earnings were actually flat MoM and below expectations easing some inflationary fears. However there looked like there may have been some compositional issues. So we will have to wait for next month's report to see.

 

 

 

Tyler Durden Mon, 03/07/2022 - 07:38
Published:3/7/2022 6:43:05 AM
[Markets] 3 Dow Stocks That Are Screaming Buys in March For the past two months, Wall Street has been reminded that stocks can push lower just as easily as they can head to new highs. This is especially true for companies in the world's most iconic stock index, the Dow Jones Industrial Average (DJINDICES: ^DJI). The Dow's 30 components are time-tested and usually profitable, making them the perfect candidates to bounce back from this ongoing market correction. Published:3/7/2022 4:43:47 AM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks declined last week as volatility continued to affect investors. Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) shed nearly 2% and are down over 5% for the full year. Ulta Beauty (NASDAQ: ULTA), Casey's General Stores (NASDAQ: CASY), and Campbell Soup (NYSE: CPB) are among the most anticipated earnings reports to watch over the next few trading days. Published:3/6/2022 6:10:36 AM
[Markets] Dow Jones, Nasdaq Trade Lower Despite Strong Jobs Report; Oil Closes Above $115 A Barrel The Dow Jones Industrial Average traded off its lows in the final hour of trading but still closed in the negative. Published:3/4/2022 3:54:53 PM
[Markets] Dow Jones Futures Sell Off Despite Strong Jobs Report; Russia Seizes Ukrainian Nuclear Power Plant Dow Jones futures dropped, bonds rallied Friday, as Russia seized a Ukrainian nuclear power plant. February's jobs report beat estimates. Published:3/4/2022 8:22:45 AM
[Markets] Dow Jones Futures Sell Off As Russia Seizes Ukrainian Nuclear Power Plant; Key Jobs Report Up Next Dow Jones futures dropped, bonds rallied Friday, as Russia seized a Ukrainian nuclear power plant. February's jobs report is up next. Published:3/4/2022 7:23:02 AM
[Markets] Dow Jones Futures Fall On Ukraine Nuclear Power Plant News; Jobs Report Looms Dow Jones futures are down after a fire at a huge Ukraine nuclear power plant facility as it was being seized by Russian troops. Published:3/4/2022 5:51:36 AM
[Markets] Dow Jones Futures: Market Rally Sells Off With 'Worst Yet To Come' In Ukraine; Jobs Report On Tap Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally hit resistance at a key level Thursday, reversing lower with the Nasdaq, small caps and especially aggressive growth leading the slide. Published:3/3/2022 4:49:49 PM
[Markets] Dow Jones, Nasdaq Fall, But These Stocks Score Breakouts Amid Market Volatility The Dow Jones fluctuated between losses and gains in Thursday's market. The Nasdaq composite led on the downside. Published:3/3/2022 2:47:49 PM
[Markets] Dow Jones Up As Fed Official Touts Rate Hikes; Putin Says Invasion Is 'Going To Plan'; Kroger Explodes The Dow Jones rose despite a Fed official saying there is need for more rate hikes, Vladimir Putin insisted the Ukraine war was going well. Published:3/3/2022 1:17:12 PM
[Markets] Dow Jones Futures Rally Ahead Of Cease-Fire Talks; Snowflake Crashes On Earnings Dow Jones futures rose Thursday ahead of a second round of Russia-Ukraine cease-fire talks. Snowflake plunged on earnings. Published:3/3/2022 8:14:42 AM
[Markets] Dow Jones Futures Rise Ahead Of Cease-Fire Talks; Snowflake Crashes On Earnings Dow Jones futures rose Thursday ahead of a second round of Russia-Ukraine cease-fire talks. Snowflake plunged on earnings. Published:3/3/2022 7:45:01 AM
[Markets] Dow Jones, Nasdaq Turn Higher On Powell Testimony; Oil Skyrockets To Above $110 A Barrel The Dow Jones Industrial Average moved higher in today's market while small-cap stocks led the upside. The Nasdaq also turned higher. Published:3/2/2022 2:40:23 PM
[Markets] One component is in negative territory as Dow industrials run up 550-point gain One component is in negative territory as Dow industrials run up 550-point gain Published:3/2/2022 11:09:42 AM
[Markets] Russian Stocks Devastated In London As Moscow Exchange Remains Closed Russian Stocks Devastated In London As Moscow Exchange Remains Closed

Russia has kept domestic stock trading closed for the third session as wealth funds (or the national plunge protection team) prepare to unleash billions of dollars to buy the dip. Even as domestic markets remain close, Russian companies trading abroad continue to collapse in value. 

This is evident in the Dow Jones Russia GDR Index, an index designed to track the top Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The index plunged a mindboggling 98% in just a few days and wiped out $572 billion from the market value of 23 stocks, including Gazprom PJSC, Sberbank of Russia PJSC, and Rosneft PJSC, according to Bloomberg

The three-session closing of the Moscow bourse is its longest closure since the 1998 Russian financial crisis. Trading in Moscow came to an abrupt halt late last week after U.S. and Europe sanctioned Russia over the invasion of Ukraine.

Then over the weekend, Western governments stepped up the pressure on Russia by expelling some Russian banks from SWIFT, a global financial messaging service, and "paralyzed" the Russian central bank reserves held in the U.S. 

"It's very difficult to see any scenario right now where buying Russian assets makes sense," David Coombs, head of multi-asset investments at Rathbones, told CNN.

All bets, he added, would be a "pure gamble."

The pricing of Russian assets abroad suggests finding buyers for stocks and bonds could be an arduous task. On Friday, S&P lowered Russia's credit rating to "junk." 

When markets reopen, Moscow is set to deploy $10 billion from its sovereign wealth fund to buy up battered domestic stocks -- essentially taking a page from Washington (and Beijing's) playbook, and unleashes its own version of the plunge protection team to attempt to backstop stocks and reinstate some confidence.

Investors are also using VanEck's Russia ETF (RSX) as a proxy for when Russian markets reopen. After falling near 30% at the open in the U.S. cash session, RSX has rallied upwards of 45% from the low and has gone slightly into the green as of 1130 ET. 

There's still no timeline on when Russian markets will reopen. During Greece's 2015 financial crisis, stocks remained closed for a month. 

"Even if the [Russian] stock market remains closed for a period of time, we're likely to see the leading ETFs as good proxies for where the market is headed," Todd Rosenbluth, head of ETF and mutual-fund research at CFRA, told WSJ.

"The same thing happened in Greece in 2015."

One can only wonder if the centrally planned efforts (closing local markets and priming the PPT) will be able to control madness when markets reopen or will it backfire (offering trapped longs a better exit)?

Tyler Durden Wed, 03/02/2022 - 12:00
Published:3/2/2022 11:09:42 AM
[Markets] Dow Jones Futures Rise As Powell Set To Raise Rates; Oil Prices Surge Above $112 A Barrel Dow Jones futures pared gains Wednesday after Fed Chief Powell's comments. Oil prices surged above $112 a barrel. Published:3/2/2022 8:38:36 AM
[Markets] Dow Jones Futures Rally Ahead Of Powell Comments; Oil Prices Surge Above $112 A Barrel Dow Jones futures rallied Wednesday morning ahead of Fed Chief Powell's testimony. Oil prices surged above $112 a barrel. Published:3/2/2022 7:38:30 AM
[Markets] Dow Jones Dives, Oil Gushes, Amid Ukraine War; Tesla Rivals Lucid, Rivian Plunge; 3 Energy Stocks Test Buy Points The Dow Jones tumbled and oil gushed higher as fighting raged on between Russia and Ukraine. Tesla stock rivals Lucid and Rivian plunged. Published:3/1/2022 2:34:10 PM
[Markets] Dow Jones Slides As Russia Hammers Ukraine; Oil Prices Surge Above $100 A Barrel The Dow Jones industrials were sharply lower Tuesday, as Russian troops closed in on Kyiv. Lucid Motors plunged on earnings. Published:3/1/2022 9:00:46 AM
[Markets] Dow Jones Futures Slide As Russia Hammers Ukraine; Oil Prices Surge Above $100 A Barrel Dow Jones futures were sharply lower Tuesday, as Russian troops closed in on Kyiv. Lucid Motors plunged on earnings. Published:3/1/2022 7:30:46 AM
[Markets] Dow Jones Futures: Five Stocks Eyeing Buy Points In Market Rally Attempt; Lucid, Zoom Plunge On Earnings Dow Jones futures were in focus Monday, as the stock market rally attempt continues. Lucid and Zoom plunged on earnings after the close. Published:2/28/2022 4:55:48 PM
[Markets] Dow Jones Falls As Ukraine Fighting Continues; 3 Defense Stocks Pass Buy Points; Tesla Surges After This The Dow Jones fell as fighting raged in Ukraine despite peace talks. A trio of defense stocks passed buy points. Tesla stock surged. Published:2/28/2022 3:57:01 PM
[Markets] Dow Jones Futures Signal 'Swift' Market Reversal As Russia Bank Targeted Amid Ukraine Invasion Dow Jones futures signal a market rally reversal as the West ramps up sanctions vs. Russia banks amid the ongoing Ukraine invasion. Published:2/27/2022 6:12:55 PM
[Markets] Dow futures sink about 500 points as Putin orders troops to eastern Ukraine Dow futures sink about 500 points as Putin orders troops to eastern Ukraine Published:2/21/2022 11:59:45 PM
[Markets] Dow ends up over 400 points, Nasdaq jumps 2% as Russia-Ukraine tensions ease Dow ends up over 400 points, Nasdaq jumps 2% as Russia-Ukraine tensions ease Published:2/15/2022 11:03:21 PM
[Markets] Dow Jones Futures: Market Rally At Key Levels As CPI Inflation Report Looms; Disney, Twilio Soar Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures, with Dow giant Walt Disney headlining after-hours earnings. The stock market rally had another strong session Wednesday, but Thursday's CPI inflation report looms large. Published:2/9/2022 9:57:05 PM
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