Overview: While the World Health Organization debates about downgrading Covid from a pandemic, the rise China and Hong Kong cases is striking. A lockdown in Shenzhen and restrictions in Shanghai, coupled with a record fine by PBOC officials on Tencent drove local stocks sharply lower. China's CSI 300 fell 3% and a measure of Chinese stocks that trade in HK plunged more than 7%. The Hang Seng itself dropped 5%. Covid in China and Hong Kong adds to the risk of more supply chain disruptions. Europe's Stoxx 600 is up about 1.6%, led by financials and industrials. US futures are 0.5%-0.7% better. Bond markets are sliding. Yields are 8-10 bp higher in European. The US 10-year Treasury yield is near 2.10%. It rose slightly more than 25 bp last week and is up 10 basis points today. The US 5-year yield is pushing above 2% today for the first time since May 2019. It is the sixth consecutive advance. The dollar is sitting at the fulcrum today. The Scandis and Euro are advancing, while the dollar-bloc and yen are softer. The greenback pushed above JPY117 at the end of last week and has approached JPY118 today. Among the emerging market complex, the beleaguered central European currencies are snapping back today. The Hungarian forint, Czech koruna, and Polish zloty are up more than 1% today. The JP Morgan Emerging Market Index has a three-week, roughly 6.5% slide in tow. It is up about 1.1% today. Gold is heavy near $1960 after peaking last week around $2070. Support is seen in the $1950-$1958 band. April WTI is also slipping lower after meeting resistance near $110. Last week's low was slightly above $103. US natgas prices are around 2.3% lower after falling 5.8% last week. Europe's benchmark is off 15% after plummeting more than 34% last week. Iron ore is off 7%, falling for its fifth consecutive session. Copper is trading lower as well. It has fallen in five of the past six sessions. May wheat is softer. It fell 8.5% last week.
US National Security Adviser Sullivan is meeting with his Chinese counterpart Yang today. The last meeting was in October. The ostensible purpose is to exchange views on global and regional issues. The media has played up the diplomatic language of the statement that followed last month's meeting between Putin and Xi claiming a "friendship with no limits." The media wants to take it at face value, yet it knows it to be misconstrued. Consider, for example, that media reports also reveal that Russia sells weapons to India to help it fight China. "No limits?" Sullivan was also clear that thus far there is no evidence that Beijing is trying to circumvent the sanctions. That said, last week the US warned Chinese chip makers against supplying Russia with products that were subject to export controls. Affirmation through negation. Other US officials say that Moscow has reached out to Beijing to secure military equipment, even though part of the logistical problem Russian forces are experiencing appears to be coming from shoddy parts (e.g., tires) made in China. Reports suggest that since doubling the yuan-rouble band to 10%, there has not been an increase in turnover.
There seems to be a debate over how much China knew of Putin's intentions. Some US officials seem to think China may have been aware that Putin was planning something, but may not have known the full extent. Beijing cannot be happy with what is happening, even the European theater was need new resources that could have otherwise been used to check China in the Asia-Pacific region. The challenge posed by higher commodities is not inflation so much in China, where the CPI is less than 1% and PPI has fallen for four consecutive months. The challenge is growth. The 5.5% target will be more difficult to meet. From Beijing's vantage point, the unprecedented swift and broad sanctions on Russia strengthens US-European ties. Xi has been reaching out to European leaders since Russia invaded Ukraine trying to strengthen ties. At the same time, Japan, Singapore, Taiwan, and South Korea (which has a new president whose rhetoric is more confrontational to Beijing) appear on a heightened sensitivity to China's actions in the region. China sees a web of US relationships that are tantamount to a Pacific NATO: 5-4-3-2...Five Eyes (Australia, New Zealand, Canada, UK, and the US), the Quad (Australia, India, Japan, US), AUKUS (Australia, UK, US), several bilateral security pacts including Japan, South Korea, Philippines.
The headwinds to China's growth (domestic challenges include the property market and the crack down on technology, and the social restrictions associated with Covid) have mounted. The front page of China's Securities Journal suggests the PBOC could cut rates to support the economy. There is heightened speculation that a cut could come as early as tomorrow when the 1-year Medium-Term Lending Facility is set. Many now look for a 10 bp cut to 2.75%. Recall it was cut 10 bp in January, which was the first cut since the two reductions in the first four months of 2020 (cumulative 30 bp). China's 10-year yield fell for the third day today and near 2.76%, is the lowest in a month. The Chinese premium over the US has narrowed to about 72 bp from over 105 bp at the start of last week.
The dollar reached almost JPY117.90 earlier today as it extends last week's breakout. The JPY118 area offers the nearby cap, but the charts suggest scope may exist toward JPY118.60. Initial support is seen in the JPY117.40-JPY117.50 band. The key seems to be rising US yields more than the firmer tone in equities. The Australian dollar reversed lower last Monday and with today's low near $0.7235 nearly completed a (61.8%) retracement of the gains scored since the Russian invasion (~$0.7225). The selling pressure may have burnt itself out, the Aussie needs to push above $0.7280-$0.7300 to lift the technical tone. In a rare occurrence, the US dollar gapped higher against the Chinese yuan. The gap appears on the weekly charts, which give it added importance. The dollar's pre-weekend high was just shy of CNY6.34 and today's low was slightly above CNY6.3450. It reached nearly CNY6.3625 before steadying. The PBOC set the dollar's reference rate at CNY6.3506, well above the CNY6.3356 median projection in Bloomberg's survey. Last month's high was a little north of CNY6.37 and the year's high was set in early January slightly below CNY6.3850.
There were some outstanding issues between the US and Iran in resurrecting the 2015 accord, but the talks were suspended. Russia, which plays an important role here (perhaps, as one observer suggested, receiving shipment so enriched uranium from Iran), wants guarantees that US sanctions would not affect Iran's planned economic and commercial ties. The US refuses. Iran's uranium enrichment has gone forward. Iran wants a guarantee too that the US does not leave the pact again. Europe has been nursing the talks which the US does not participate in directly. The failure to return to the 2015 pact would force another issue to the fore: Iran's advancing nuclear program.
Some suggest that Russia would not have attacked Ukraine if Kyiv has retained the nuclear weapons from the Soviet era. Maybe. It is worth thinking about, but nuclear powers have clashed without the resort to weapons of mass destruction (e.g., India-Pakistan, India-China). Russia has not directly attacked a NATO member. Russia claims that convoys carrying western military supplies are legitimate targets. This is one scenario for the broadening of the war. Russia's bombardment of western Ukraine was approaching the Polish border.
Russia is threatening to arrest corporate leaders and seize assets of businesses that a critical of the war or suspending activity. Meanwhile, there is much discussion about the nearly $120 mln in coupon payments due Wednesday. While the indicative pricing in the credit default swaps market is consistent with an imminent default, there is a grace period that should not be forgotten. This means that a formal default is not likely this week.
The euro initially extended its pre-weekend losses and slipped briefly below $1.09, where a 1.8 bln euro option expires today. It has recovered to almost $1.0970. The intraday momentum indicators are stretched, and nearby resistance is seen in the $1.0980-$1.1000 band. The pre-weekend high was close to $1.1045. Sterling's recent losses were extended to almost $1.30 today, but it also stabilized and returned to the $1.3060 area. While a move above there would target $1.3100, it seems too far away given the extended intraday momentum readings. Tomorrow the UK reports employment figures but the highlight is the BOE meeting on Thursday that is widely expected to deliver another 25 bp hike.
The focus is of course on the FOMC meeting that concludes at midweek. However, ahead of it, there are several high-frequency economic reports. These include the March Empire State manufacturing survey and February PPI tomorrow. Producer price inflation accelerated, with the headline expected to reach 10%. The Empire State manufacturing survey is forecast to have improved, but we are concerned that the magnitude of the slowdown in Q1 is still not fully appreciated. February retail sales will be released before the FOMC meeting concludes on Wednesday. A small gain is expected after a 3.8% surge was reported in January.
Canada reported monster jobs data ahead of the weekend. Employment jumped 336.6k, well above the 127.5k median forecast in Bloomberg's survey. Full-time positions alone surged 121.5k. The unemployment rate fell one percentage point to 5.5% and the participation rate jumped to 65.4% from 65.0%. Wages for permanent employees accelerated to 3.3% from 2.4%. The highlight this week is the February CPI report due in midweeks. The headline pace likely picked up to 5.5% from 5.1% and the underlying core measures also probably accelerated.
Brazil's IPCA February IPCA inflation accelerated to 10.54% from 10.38%. This was a little ahead of expectations. It likely solidifies expectations for a 100 bp hike a few hours after the FOMC delivers its first hike in the middle of the week. Mexico has a light economic calendar this week, but Banxico is likely to hike 50-75 bp next week.
The Canadian dollar is trading quietly within the pre-weekend range (~CAD1.2695-CAD1.2795). The macro story seems mostly constructive, but the US two-year premium over Canada is a negative development. The upticks in the US S&P 500, a proxy for risk, do not seem to be offering the Canadian dollar the support that it has in the recent past. Initial support is seen near CAD1.2720. The greenback is testing support near MXN20.85. The MXN20.81 area corresponds to the (50%) retracement of the dollar's gains since the war began. Below there, support is seen in MXN20.63-MXN20.65 band.
Disclaimerunemployment default pandemic sp 500 equities stocks fomc currencies us dollar canadian dollar euro yuan testing lockdown unemployment commodities gold south korea iran singapore india brazil mexico japan hong kong canada european europe uk czech russia ukraine china world health organization
U.S. FDA will decide on redesigned COVID vaccines by early July
U.S. regulators plan to decide by early July on whether to change the design of COVID-19 vaccines this fall in order to combat more recent variants of…
U.S. FDA will decide on redesigned COVID vaccines by early July
June 28, 2022, 9:58 AM EDT
By Michael Erman
“The better the match of the vaccines to the circulating strain we believe may correspond to improve vaccine effectiveness, and potentially to a better durability of protection,” Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, said at a meeting of outside advisers to the regulator.
The committee is scheduled to vote on a recommendation on whether to make the change later on Tuesday.
The updated shots are likely to be redesigned to fight the Omicron variant of the coronavirus, experts say. read more The exact composition of the retooled shots and whether they also will include some of the original vaccine alongside new components will be considered at the meeting.
Pfizer Inc (PFE.N), Moderna Inc (MRNA.O) and Novavax Inc. (NVAX.O) are scheduled to present data at the meeting. All three companies have been testing versions of their vaccines updated to combat the BA.1 Omicron variant that was circulating and led to a massive surge in infections last winter.
Both Moderna and Pfizer with partner BioNTech (22UAy.DE) have said that their respective redesigned vaccines generate a better immune response against BA.1 than their current shots that were designed for the original virus that emerged from China.
They have said that their new vaccines also appear to work against the more recently circulating BA.4 and BA.5 Omicron subvariants, even though that protection is not as strong as against BA.1.
Experts also want to know if the new shots will boost protection against severe disease and death for younger, healthier people or merely offer a few months’ additional safeguard against mild infection.
Scientists who have questioned the value of booster shots for young and healthy people have said a broad campaign is not needed with an updated shot either.
Other experts have championed any additional protection new vaccines may offer.
Our Standards: The Thomson Reuters Trust Principles.
Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock Surges From China Covid Easing
Markets opened in the green today as they rebound from Monday’s losses.
The post Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock…
Stock Market Today Mid-Morning Updates
On Tuesday, the Dow Jones Industrial Average is up by 270 points as it followed modest losses on Wall Street. Investors are still weighing the risks of red-hot inflation as rates continue to rise. Aside from the U.S., European Central Bank Leader Christine Lagarde downplayed recession concerns in the eurozone, already being destabilized by Russia’s war on Ukraine. She also says that her team is ready to raise rates at a faster pace if needed, in order to combat inflation.
Shares of Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and Goldman Sachs (NYSE: GS) raised their dividends after passing their annual stress tests. For instance, Goldman Sachs is boosting its dividend payout by 25% to $2.50 per share. On the other hand, shares of Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are up today after China announced that it will be easing Covid-19 quarantine rules for international arrivals.
Among the Dow Jones leaders, shares of Apple (NASDAQ: AAPL) are up by 0.13% today while Microsoft (NASDAQ: MSFT) is down by 0.79%. Meanwhile, Disney (NYSE: DIS) and Nike (NYSE: NKE) are trading mixed on Tuesday. Among the Dow financial leaders, Visa (NYSE: V) is up by 0.17% while JPMorgan Chase (NYSE: JPM) is also up by 1.67%
Shares of EV leader Tesla (NASDAQ: TSLA) are up by 0.83% on Tuesday. Rival EV companies like Rivian (NASDAQ: RIVN) are down by 0.17%. Lucid Group (NASDAQ: LCID) is down by 1.09% today as well. However, Chinese EV leaders like Nio (NYSE: NIO) and Xpeng Motors (NYSE: XPEV) are trading mixed today.
Dow Jones Today: U.S. Treasury Yields Inches Higher; House Price Increases Slows Down In April
Following the stock market opening on Tuesday, the S&P 500, Dow, and Nasdaq are trading higher at 0.68%, 0.89%, and 0.31% respectively. Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (NASDAQ: QQQ) is up by 0.28% while the SPDR S&P 500 ETF (NYSEARCA: SPY) is also up by 0.67%.
The benchmark 10-year U.S. Treasury yield currently hovers around 3.22% as the market continues to push against a bear market. Oil prices rallied for the third day today as major producers like Saudi Arabia looked unlikely to be able to boost output significantly. This comes as the West agreed to explore ways to cap the price of Russian oil. Brent crude, for instance, currently trades at around $116 per barrel.
Home prices increased slower than before in April and could be a potential sign of a cooling in prices. Diving in, prices rose by 20.4% nationally in April compared with a year earlier. This is according to the S&P CoreLogic Case-Shiller Index. For comparison, home prices increased by 20.6% year-over-year in March. Cities like Tampa, Miami, and Phoenix continue to lead the pack with the strongest price gains. Tampa home prices, for instance, are up by a whopping 35.8% year-over-year.
[Read More] Top Stock Market News For Today June 28, 2022
Trip.com Stock Gains Following Better-Than-Expected Quarterly Performance On Travel Rebound; China Covid Easing
Trip.com Group (NASDAQ: TCOM) seems to be among the top gainers in the stock market now. Evidently, TCOM stock is now up by over 14% at the opening bell today. Overall, this likely stems from the company’s latest financial update. Getting straight into it, Trip.com reported a quarterly loss per share of $0.01. Furthermore, the company’s total quarterly revenue is $649 million. For reference, consensus figures on Wall Street are a loss per share of $0.08 on revenue of $575.04 million. With these commendable results, investors looking to bet on the return of travel would be considering TCOM stock.
According to Trip.com, the company has recovering travel demand in global markets to thank for its latest quarterly performance. In particular, Trip.com highlights a bump in activity from consumers across its Europe and Asia Pacific user bases. This, the company believes, is a result of easing travel restrictions amidst countries in these regions. Moreover, Trip.com also notes that staycation-related travel in China is another notable contributor to growth for the quarter. Accordingly, its local hotel bookings are now up by 20% year-over-year.
On the whole, travel firms like Trip.com continue to thrive as consumers book their vacations. For its latest quarter, the company’s air-ticket bookings on global platforms are now up by a whopping 270% year-over-year. As mentioned earlier, this is mainly led by a rebound in demand from its European and Asian Pacific operations. Looking forward, CEO Jane sun notes that Trip.com will “remain adaptive to embrace the changing environment and be flexible with our strategies to swiftly seize growth opportunities.” With all this in mind, I could understand if TCOM stock is turning some heads in the stock market today.
Occidental Petroleum On The Rise Following Latest Berkshire Hathaway Stake Increase
Meanwhile, the likes of Occidental Petroleum (NYSE: OXY) seem to be gaining attention in the stock market now. For the most part, this is likely a result of the latest regulatory filing from Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A). Namely, Berkshire disclosed a purchase of an additional 794,000 shares of Occidental. This adds up to a $44 million transaction, bringing its total stake to about 16.4%. In total, Berkshire currently holds about 153.5 million shares of OXY stock, worth $9 billion.
All in all, Buffett’s focus on Occidental would likely draw attention to the energy firm’s shares. This is apparent as OXY stock is currently gaining by over 6% in the stock market now. According to Berkshire’s filings since March, the company’s average purchase price per share of OXY stock is $53. Following this investment, Berkshire would be bolstering its position as Occidental’s largest stakeholder. In second place on this front is investment firm Vanguard with an almost 11% stake. As a result of all this, it would not surprise me to see OXY stock making the rounds in the stock market now.
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Royal Caribbean Shares Huge News on Covid Testing, Vaccine Rules
President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise…
President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise line's President's Cruise.
Being on a cruise has largely returned to the same experience it was before the pandemic. Mask requirements have been dropped, capacities have returned to normal, and social distancing requirements have been dropped.
In fact, aside from crew members still having to wear masks and some stray passengers opting to do so in certain indoor situations, there's really no sign of covid rules once you board your cruise.
Before you board, however, the pandemic still has an effect on cruising. Every passenger 12 and older must be vaccinated (and must prove so before getting on board) and all passengers must produce a negative covid test taken no more than two days before getting on the ship.
And, while covid remains a problem, the cruise industry sees some light at the end of the tunnel when it comes to pre-cruise protocols. Executives from the major cruise lines -- Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report -- have said very little about plans to drop pre-cruise testing and vaccination requirements,
Now, however, Royal Caribbean President Michael Bayley has spoken out on both issues and has given cruise fans some real answers.
When Will Covid Tests and Vaccinations Get Dropped?
The major cruise lines have largely stayed quiet about covid protocols because they remain somewhat beholden to the Centers for Disease Control (CDC). The current CDC rules are voluntary, but voluntary is sort of a relative term when it comes to the power the federal agency has over the cruise industry.
It makes sense that the industry has been cautious in commenting on when covid protocols may change, but with the end at least seeming feasible Bayley answered questions about both the end of pre-cruise testing and potentially dropping vaccination requirements during the 2022 Royal Caribbean President's Cruise on Ovation of the Seas, the Royal Caribbean Blog reported.
"I think pre-cruise testing is going to be around for another couple of months," Bayley said. "We obviously want it to go back to normal, but we're incredibly cognizant of our responsibilities to keep our crew, the communities and our guests safe."
Bayley was less hopeful about the end of vaccinations, according to the blog, which has no connection to Royal Caribbean.
"The no vaccine question is is a huge question that none of us know the answer to," he said. "I'm skeptical that's going to change in the in the real short term. Many and most of the destinations that we visit require a high degree of vaccination, and they expect our crew to be vaccinated."
Cruise Lines Covid Protocols Are Working
Covid has not gone anywhere, but the cruise industry has been very successful at controlling the impact of the virus. Bayley noted that the CDC shares some information with him about the "millions" of people who have sailed from U.S. ports over the past 12 months.
"And the number of people who died from COVID who'd sailed on ships over the past year was two," the Royal Caribbean Blog reported. "Two is terrible. But against the context of everything we've seen, that's it's truly been a remarkable success."
Vaccine requirements remain a touchy issue as some people have chosen not to be vaccinated and that means they cannot cruise. That seems unlikely to change anytime soon given the destinations Royal Caribbean visits and the CDC information which shows that the current protocols are working.cdc disease control pandemic vaccine testing social distancing
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