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Futures, Global Stocks Hover At All Time High As Q1 Earnings Begin

Futures, Global Stocks Hover At All Time High As Q1 Earnings Begin

Global stock markets and US equity index futures dipped modestly with shares in Europe and Asia as traders weighed inflation risks, an uneven global recovery and the latest…



Futures, Global Stocks Hover At All Time High As Q1 Earnings Begin

Global stock markets and US equity index futures dipped modestly with shares in Europe and Asia as traders weighed inflation risks, an uneven global recovery and the latest upbeat economic outlook from Washington. After sprinting to close at an all time high on optimism that vaccination programs and the easing of lockdowns to combat COVID-19 would bode well for an economic rebound, S&P 500 futures were cautious to start the new week as investors waited to see whether U.S. earnings would justify sky-high valuations, while a rally in bonds could be tested by what should be strong readings for U.S. inflation and another round of blockbuster retail sales this week.

MSCI’s All Country World Index was down 0.25% after the start of European trading, off Friday’s record high. The gauge’s price-to-earnings ratio is at its highest level since early 2010. At 07:30 a.m. ET, Dow E-minis were down 43 points, or 0.13%, S&P 500 E-minis were down 5 points, or 0.13% and Nasdaq 100 E-minis were down 38 points, or 0.27%.

Some notable premarket movers:

  • Tesla rose about 2% in premarket trading after Canaccord Genuity upgraded the electric-car maker’s shares to “buy” and said the company could become “the brand” in energy storage.
  • Uber’s delivery business set an all-time record, crossing a $52BN annualized Gross Bookings run-rate in March, growing more than 150% year-over-year.
  • Alibaba jumped 6.3% after the ecommerce company said it does not expect any material impact from the antitrust crackdown in China which cost it $2.8 billion, one which will push it to overhaul how it deals with merchants. Over a third of the stock is held by U.S. investors, and it makes up more than 8% of the MSCI EM index.
  • Shares of Nuance Communications Inc surged about 23% as a source said Microsoft Corp is in advanced talks to buy the artificial intelligence and speech technology company at about $16 billion.

In Sunday's 60 Minutes episode, Fed Chair Jerome Powell on Sunday said the U.S. economy is at an “inflection point” with expectations that growth will pick up speed in the months ahead, but also risks if a hasty reopening leads to a continued increase in coronavirus cases.

This week Q1 earnings season begins with the big banks reporting, and S&P 500 earnings are expected to have jumped a massive 25% in the quarter from a year ago, the biggest quarterly gain since 2018, when tax cuts under former President Donald Trump drove a surge in profit growth. Results from big U.S. banks Goldman Sachs, JPMorgan and Wells Fargo will pour in on Wednesday, kicking off the first-quarter earnings season where investors will look for reasons to support a stock market at all-time highs.

And while some like JPM said the rally had still room to run, others like Morgan Stanley noted that despite the S&P 500 making new all-time highs, small cap stocks represented by the Russell 2000 small cap index have underperformed the S&P 500 by 8% since peaking on March 12.

“In my view, the breakdown of small caps and cyclicals is a potential early warning sign that the actual reopening of the economy will be more difficult than dreaming about it,” said Michael Wilson, the bank’s chief U.S. equity strategist and chief investment officer. “Small caps and cyclicals have been stellar outperformers over the past year. In essence, they were discounting the recovery and reopening that we are about to experience. However, now we must actually do it and with that comes execution risk and potential surprises that aren’t priced.”

The VIX index ticked slightly higher to 17.48, having hit its lowest level since March 2020 on Friday. “Renewed bouts of elevated volatility are likely over the coming months, in our view,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Investors can take advantage of this backdrop, however. Low volatility at present reduces the cost of locking in downside protection.”

U.S. growth and tech stocks saw something of a revival last week as U.S. 10-year Treasury yields retreated to 1.65%, from a 14-month top of 1.776%. “Low inflation and dovish central banks should limit the rise in bond yields during the recovery,” said Andrew Pease, global head of investment strategy at Russell Investments.

In Europe, retailers and travel companies led declines on the Stoxx Europe 600 Index. European shares eased off record highs as investors held off from making big bets before earnings season. The pan-European STOXX 600 index was down 0.2% with the Stoxx Europe 600 Basic Resources Index dropping as much as 1.4% after surging inflation in China and the U.S. triggered possible measures to cool prices and boosted the dollar. Britain’s domestically focused FTSE mid 250 index held 0.2% below a record high as shops, pubs, gyms and hairdressers re-opened after three months of lockdown. The UK’s more export-oriented FTSE 100 fell 0.3%, Germany’s DAX and France’s CAC 40 both traded flat. Italy’s FTSE MIB gained nearly half a percent. Here are some of the biggest European movers today:

  • Suez shares rise as much as 8.5% after the company agreed to sell itself to Veolia, which jumped as much as 9.4%. Barclays said the deal was a significant positive for both companies.
  • DiaSorin shares jump as much as 11%, the biggest gain in the Stoxx 600, after the Italian company agreed to acquire Luminex Corp. for about $1.8b. Earlier, Berenberg said the agreement, while “no huge surprise,” is a “good deal.”
  • Teleperformance shares gain as much as 4.2%, extending a record high, after reporting 1Q growth that analysts said was stronger than expected. The beat was in part due to support services associated with governmental Covid vaccination programs, Citi wrote in a note.
  • HeidelbergCement shares jump as much as 1.7% after Barclays said it expected to see positive comments on pricing from cement companies in 1Q updates. The broker said HeidelbergCement was likely to see robust growth against easy comparables.
  • HelloFresh shares fall as much as 5.1% as the stock took a step back after rising to a seven-week high on Friday. Citi said trends for both HelloFresh’s U.S. and international businesses softened into the month-end of March.

Earlier in the session, Asian stocks fell for a second day, with India and China leading a broad decline in regional equities. India’s key stock gauges slumped more than 3% as the nation battled with a record surge in coronavirus cases. China's CSI 300 Index fell more than 1.5%, with materials stocks tumbling after the Chinese government vowed to tighten controls on commodities. While Alibaba rallied in Hong Kong as a record penalty on the group was seen lifting a regulatory overhang on its stock, shares of peers including Tencent and Meituan slid, weighing on the Hang Seng. Japanese stocks dropped as the slow pace of domestic vaccinations weighed on investor sentiment, while Australian stocks declined as the nation abandoned its vaccine timeline amid delays. Technology and consumer discretionary sectors were the biggest drags on the MSCI Asia Pacific Index. The gauge ended flat last week, with intraday swings dropping to the lowest since the start of the year, as traders awaited more clarity on the region’s economic recovery and vaccine rollout.

Looking at just China, local stocks fell by the most in three weeks amid weak turnover on Monday, as the material sector tumbled after the government vowed to tighten controls on commodities. The CSI 300 Index dropped 1.7%, closing below the 5,000 key support level for the first time since March 25.

Hong Kong’s Hang Seng Index declined 0.9% as of 3:40 p.m. local time, as Alibaba’s gain failed to offset losses of its tech peers, which are expected to face scrutiny by Beijing following a record penalty for the e-commerce giant. Material stocks led the retreat in A shares as the government plans to step up controls on the raw material market to help limit costs for companies pressured by surging commodities prices. Wanhua Chemical, Zijin Mining and Ganfeng Lithium are among the top 10 drags on the CSI 300 gauge. Investors are awaiting clues on where China’s monetary policy is heading after soaring commodity costs sent China’s producer prices to jump by the most in more than two years last month. The government is scheduled to report its money supply and March new yuan loans by Thursday, which are important proxies for liquidity conditions in the country. “If inflation picks up too quickly, it’s possible that the central bank will do something to counter that, which could be bad for the market,” said Zhang Gang, a Central China Securities Co. strategist, by phone. Turnover of the CSI 300 Index was 8.4% lower than its 30-day average while trading volume in Hong Kong was 34% less than its average, according to Bloomberg-compiled data

In Japan, stocks also dropped as the slow pace of domestic vaccinations weighed on investor sentiment despite gains on Wall Street last week. Electronics and chemicals makers were the heaviest drags on the Topix, which fell for the past three weeks. Shin-Etsu Chemical and Fast Retailing weighed on the Nikkei 225 Stock Average. Yaskawa Electric slid the most in 13 months on weaker-than-expected earnings and analyst downgrades. “The delay in vaccinations is a drag on Japan’s business sentiment as well as the service sector,” said Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “Because of this, local equities aren’t quite able to mirror moves in U.S. equities.”

Australia's S&P/ASX 200 index fell 0.3% to close at 6,974.00 after Australia abandoned its vaccine timeline amid delays. Prime Minister Scott Morrison said he won’t set a new target date for all Australians to receive their first Covid-19 vaccine dose, as health concerns about the AstraZeneca Plc shot and European export restrictions delay the rollout.

In FX, the Bloomberg Dollar Spot Index dipped after paring earlier gains; The euro hovered around $1.19 while European government bonds advanced, led by Italy. The pound led gains among Group-of-10 peers following its worst week versus both the dollar and euro this year as non-essential retailers as well as pubs and restaurants with outdoor space reopen across England after almost 100 days of lockdown; a survey showed U.K. business leaders were the most optimistic on record last quarter. The yen advanced as a decline in regional shares underpinned demand for haven assets.

In rates, Treasuries were little changed into early U.S. session with long-end outperforming. Treasury 10-year yield around 1.664% outperforms gilts by ~1bp while cheapening by ~1.5bp vs bunds, which were supported after ECB President Lagarde said it’s ready to extend and expand PEPP if necessary.  Treasuries traded heavy during Asia session with supply pressure weighing, while Aussie bonds underperformed ahead of 2032 syndicated bond issue set to price Tuesday. The U.S. auction cycle starts with $58b 3-year note sale at 11:30am ET, followed by $38b 10-year reopening at 1pm ET; it concludes with $24b 30-year reopening Tuesday.

A pullback in the benchmark 10-year bond yield from 14-month highs in April eased worries about higher borrowing costs, helping richly valued high-growth technology stocks gain ground and drive the S&P 500 and the Dow to record levels. U.S. consumer price data for March and $271 billion of U.S. Treasury auction this week could end a recent lull in the bond market, reigniting a rise in yields that worried investors in the first quarter.

In commodities, gold prices were idling at $1,737 an ounce, having failed to sustain a top of $1,758 last week.Oil prices edged higher in rangebound trade on Monday on optimism over a rebound in the U.S. economy as coronavirus vaccinations accelerate, though rising COVID-19 cases in other parts of the world kept a lid on prices. Brent rose 1% to $63.61 a barrel. U.S. crude rose 0.9% to $59.86.

Bitcoin briefly rose above $61,000 before fading gains.

Data out this week is expected to show U.S. inflation jumped in March. Retail sales are seen surging, perhaps even with a double-digit gain. The U.S. Treasury is also set to test demand with offers of $100 billion in debt this week: U.S. supply is front-loaded, kicking off with 3- and 10-year note sales Monday. There is a packed calendar of appearances by Fed officials.

Market Snapshot

  • S&P 500 futures down 0.2% to 4,111.00
  • STOXX Europe 600 down 0.3% to 435.95
  • MXAP down 0.8% to 204.84
  • MXAPJ down 1.1% to 680.25
  • Nikkei down 0.8% to 29,538.73
  • Topix down 0.2% to 1,954.59
  • Hang Seng Index down 0.9% to 28,453.28
  • Shanghai Composite down 1.1% to 3,412.95
  • Sensex down 3.5% to 47,854.80
  • Australia S&P/ASX 200 down 0.3% to 6,973.96
  • Kospi up 0.1% to 3,135.59
  • Brent Futures up 0.5% to $63.25/bbl
  • Gold spot down 0.3% to $1,738.84
  • U.S. Dollar Index up 0.02% to 92.182
  • German 10Y yield fell 1.6 bps to -0.319%
  • Euro down 0.02% to $1.1897

Top Overnight News from Bloomberg

  • Federal Reserve Chair Jerome Powell said the U.S. economy is at an “inflection point” with stronger growth and hiring ahead thanks to rising vaccinations and powerful policy support, but Covid-19 remains a threat
  • Angela Merkel’s conservative bloc is poised to pick the winner in a two-man showdown over its candidate to succeed her as German chancellor. The Christian Democratic Union and its smaller Bavarian sister-party, the Christian Social Union, are holding separate leadership meetings Monday.
  • A lasting surge in prices would likely convince policy makers that it’s time to tap the brakes on expansionary measures adopted in the pandemic, like high public spending or low borrowing costs. That’s why Tuesday’s consumer-price data in the U.S. will be so closely watched -- though it’ll take more than a single month’s numbers to change minds

A quick look at global markets courtesy of Newsquawk

Asian equity markets began the week subdued and US equity futures marginally pulled back from record levels with participants tentative ahead of the start of US earnings season and this week’s key data releases including Chinese trade tomorrow, as well as GDP, Industrial Production and Retail Sales data on Friday. ASX 200 (-0.3%) was pressured with gold miners and real estate the underperformers of the broad subdued picture across Australia's sectors amid vaccine-related pessimism after the government abandoned its vaccination target of inoculating the entire population by year-end with PM Morrison refraining from setting a new target. Nikkei 225 (-0.8%) swung between gains and losses with price action at the whim of a firmer currency and after restrictions were reimposed for Tokyo, Kyoto and Okinawa. KOSPI (+0.1%) was relatively flat with downside cushioned following a continued surge in exports during the first 10 days in April and with SK Innovation and LG Chem lifted after they agreed to settle a trade secret dispute whereby SK Innovation will pay USD 1.8bln to LG Chem’s unit which boosted SK Innovation shares by double digits as it paves the way for the Co. to complete building an EV lithium-ion battery plant in Georgia that will supply batteries to Ford and Volkswagen. Hang Seng (-0.9%) and Shanghai Comp. (-1.1%) weakened ahead of key Chinese data releases and amid lingering tensions in the region as US Secretary of State Blinken noted the US is concerned about China's aggressive actions against Taiwan and warned it could be a "serious mistake" for anyone to try to change the status quo by force. Focus was also on Alibaba shares after Chinese regulators imposed a USD 2.8bln fine for the Co. for abusing market dominance which weighed on other tech giants including Tencent and Meituan Dianping on concerns they could be next to face tighter scrutiny, although Alibaba shares actually rallied despite the record penalty as it was said to just account for 4% of the Co.’s domestic revenue in 2019 and with the Co. not expecting any material impact on its business from the change of exclusivity arrangements imposed by regulators. Indian markets suffered with the Nifty (-3.3%) heavily pressured from COVID-19 concerns amid another record daily increase in infections which pushed India back above Brazil to the 2nd spot of countries worst impacted by the pandemic. Finally, 10yr JGBs were flat despite the lacklustre picture across stocks, with price action dejected after Friday’s retreat and amid the absence of the BoJ purchases in the market today, while operations from the RBA and RBNZ who were in the market for AUD 2bln and NZD 170mln of government bonds had little effect on their respective yields.

Top Asian News

  • Six New Unicorns in Four Days Marks Historic Boom for India Tech
  • Low Efficacy of China’s Vaccines Sparks a Stir on Social Media
  • Korean ‘Webtoons‘ Firm Eyes $18 Billion Value from IPO
  • Japan’s Slow Vaccine Rollout Pushes Back Recovery Time Frame

European equities (Euro Stoxx 50 Unch) have kicked the week off with little in the way of firm direction. Macro drivers remain very much the same in Europe as pessimism from current lockdowns is expected to subside at some stage to a more upbeat outlook as the European vaccination effort picks up steam. In the US, strong data continues to accompany a successful vaccine rollout, which could see the nation reach herd immunity by around May. All of which comes amidst a highly support monetary and fiscal backdrop, whilst market participants also hope that some of the more aggressive elements of the Democratic Party tax plans can be curbed. This week sees US earnings season kick-off in earnest with some of the large-cap banks due to report. Goldman Sachs highlights that consensus currently forecasts aggregate sales growth of 5% and EPS growth of 19%. From a sectoral standpoint, GS notes that “consumer Discretionary is anticipated to pace the market with 97% year/year EPS growth powered by an 11% rise in sales”. Back to Europe, sectors are currently broadly lower across the board with the exception of Autos & Parts, which have been supported by the likes of Continental (+1.7%), Daimler (+1.8%) and BMW (+1.3%). To the downside, some of the other more cyclically-exposed stocks lag, with losses seen in Basic Resources, Retail, Oil & Gas and Banks. In terms of stock specifics, Diasorin (+7.9%) sit at the top of the Stoxx 600 after agreeing to purchase Luminex (+10% pre-market) for USD 37/shr in a USD 1.8bln deal. Suez (+8%) and Veoilia (+9) shares have been supported by news that they have come to an agreement, allowing for the merger of the two companies. Finally, another deal to watch out for is the potential acquisition of Nuance Communications (+21% pre-market) by Microsoft (+0.3% pre-market) for circa USD 16bln, with sources suggesting that an announcement could be made this week.

Top European News

  • Ardian Raises $8.9 Billion for European Private Equity Buyouts
  • Euronav Drops Most in a Year as ING Downgrades on Spot Rates
  • Hammerson in Talks to Sell U.K. Retail Parks to Brookfield
  • Merkel Bloc Heads for Risky Decision on Chancellor Candidate

In FX, it was a somewhat choppy start to the week for the broader Dollar and Index, albeit in a relatively contained range with the upside conviction seen in early European trade abating - the intraday band currently stands at 92.331-091. The weekend saw remarks from Fed Chair Powell, who stuck to his guns with emphasis on the labour market, whilst noting the economy is recovering better than he had expected, but virus flare-ups remain a significant risk. On that note, it is worth keeping on the radar the White House semiconductor summit slated for today (time TBC), as around 20 heavy-cap companies convene to discuss the chip shortage and its knock-on effect on auto production and subsequently jobs. From a fiscal standpoint, reports suggest US President Biden aims to complete the infrastructure program by the summer and is open to cooperate on the structure of the spending plan – although the proposal drew for Republicans last week. Key risk events for the European session remain on the lighter side, although the state-side Note auctions (3s, 10s) may garner attention. Looking ahead, the week is abundant with risk events, including US inflation, Fed speaks, and the official start of US earnings season, which could induce some sentiment-driven Dollar flows.

  • GBP, EUR: Mixed fortunes for the core European currencies with Sterling outpacing the Single Currency amidst some technical influence alongside reports that the UK and EU are reportedly nearing an agreement regarding implementation of post-Brexit trading laws for Northern Ireland, whilst ECB speakers offered little in terms of the impetus for the EUR. The divergence also comes against the backdrop of the UK easing its COVID-related restrictions as the Eurozone observes more stringent rules. As such, EUR/GBP has been on a steady downward trajectory since the European open as the pair eyes its 50 DMA at 0.8635 vs 0.8695 at best. Cable as such has been bolstered from its 1.3667 base, back above its 100 DMA (1.3689) to a high just shy of 1.3750 ahead of the 8 April high (1.3782) and the 1.3800 psychological mark. EUR/USD meanwhile relinquished its 1.1900-status in early hours and dipped below its 200 DMA (1.1898) as it inched closer to 1.1850 and its 21 DMA (1.1846), before the waning Dollar took the pair back to 1.1900, whilst above-expected but outdated February retail sales data unsurprisingly failed to spur any action.
  • AUD, NZD, CAD: All now narrowly firmer against the Buck to varying degrees, with the Loonie the laggard amid early losses across the crude complex, with the Aussie and Kiwi initially succumbing to the modestly firmer Buck and softer risk tone alongside negative omens emanating from the downbeat Chinese performance. AUD/USD has picked up pace north of 0.7600, having had earlier dipped below the figure, whilst upside levels see the 100 and 21 DMA both converging at 0.7657. NZD/USD holds a 0.70+ status with the round the nearest point of support and the 21 DMA (0.7061) the closest point of resistance above 0.7050.
  • CHF, JPY: Elsewhere, the CHF and JPY are narrowly mixed with USD/JPY reacting to the soured risk tone as it dips below 109.50 (vs 109.76) to a current low around 109.30, whilst the Swissie remains flat in a tight range vs the USD and EUR whilst weekly sight deposits only portrayed incremental changes W/W.

In commodities, WTI and Brent front month futures have been subject to yet another choppy European morning as the complex attempts to tackle the COVID-related demand headwinds alongside supply-side risks emanating from several geopolitical standoffs. Kicking off with the latter, the most notable development has been reports that Yemeni Houthis have bombarded areas in Saudi Arabia with drones and ballistic missiles, with 10 drones reportedly targeting Aramco facilities and some military sites - markets are still awaiting confirmation from the Saudi side. Elsewhere, Iran experienced an accident at its Natanz nuclear operation with Tehran pointing the finger at its adversary Israel - although uranium enrichment has not been impacted and more sophisticated centrifuges will soon be introduced. On this note, Iranian nuclear negotiation will once again commence this week as the US mulls removing some tariffs to salvage the deal. Meanwhile, heightened tensions between Ukraine and Russia have seeped into the west after US sent two warships to express its presence in the Black Sea in a bid to deter Russia. Ukraine's Foreign Ministry also stated that Russia has boycotted attempts to commence dialogue over the increased military presence on the Ukraine border as over 40k troops have been amassed by Moscow is both Crimea and Ukraine's eastern border. It's also worth keeping China tensions on the radar as US Secretary of State Blinken said the US is concerned about China's aggressive actions against Taiwan. On the demand side, COVID continues to be the overarching theme as India overtook Brazil as the worst-hit country by the pandemic, while over in Europe, Germany reportedly sees six to eight weeks of heightened infections and could see longer restrictions than initially expected. On the flip side, Britain has eased its respective COVID-related restrictions with most of the services sector seeing a controlled re-opening. WTI May resides around USD 59.85/bbl (vs low USD 58.73/bbl) while Brent Jun sees itself near USD 63.50/bbl (vs low USD 62.41/bbl). Elsewhere, spot gold and silver have been uneventful, contained within recent ranges and mirroring Dollar action as the metals await fresh catalysts. In terms of base metals, LME copper eases further from the USD 9,000/t mark as it mimics similar action seen in the Shanghai contract overnight as Chinese markets succumbed to softness. Chinese steel futures also saw losses on concerns over disruption as Premier Li pledged to tighten control of iron ore. That being said, participants expected the April-June period to see a notable increase in Chinese construction activity. Note, the China Iron & Steel Association will hold a meeting on April 13.

US Event Calendar

  • 2pm: March Monthly Budget Statement, est. -$658b, prior -$310.9b

Central Banks

  • 1pm: Fed’s Rosengren Discusses Economic Outlookd

DB's Henry Allen concludes the overnight wrap

Good morning and hope you all had a great weekend. At our end, its been a slightly more stressful than normal start as our remote access suffered from global issues this morning and none of us could log on. As a result, we haven’t included our usual tables so as to get this out as soon as we could, though we’re hoping they’ll be back tomorrow. I’m just hoping by the time you see this we haven’t become the Late Morning Reid...

IT issues aside, after another bumper week for risk assets that saw equity markets reach new highs, markets in Asia have lost ground this morning with the Nikkei (-0.52%), the Shanghai Comp (-0.81%) and the Hang Seng (-0.98%) all moving lower, as have S&P 500 futures (-0.27%). The moves follow an interview by Fed Chair Powell with CBS’ 60 Minutes that was released last night but conducted on Wednesday, in which he described the US economy as at an “inflection point”. Powell said that “We feel like we're at a place where the economy's about to start growing much more quickly and job creation coming in much more quickly”, in a tone that contrasted with his some of his more downbeat messaging where he’s emphasised how far the labour market still has to travel to get back to its pre-Covid state. He did still say that “there are something like 8.5, 9 million people, maybe even more than that depending on how you count it, who were working in February of last year before the pandemic and have lost their jobs”, but also said that “The good news is that we’re starting to make progress now.”

Another important story over the weekend came from Germany, where the Bavarian premier, Markus Soeder of the CSU, said publicly for the first time yesterday that he was willing to be the CDU/CSU chancellor candidate in September’s federal election, if the CDU were to support him. Normally the joint chancellor candidate would come from the larger CDU, whose leader Armin Laschet is also seeking the post. However, Soeder has strong approval ratings whereas the CDU/CSU bloc have seen a sharp polling decline over the last couple of months, with Bloomberg’s average last week putting them at 26.9%, which is down 6 percentage points from the last election back in 2017. In turn, this has raised the possibility that they might not be part of the federal government after September’s election, which would be the first time the party isn’t in government since Merkel became Chancellor back in 2005. Alternative coalition options have been in focus, though the Greens are the potential kingmakers in any scenario, since the party is now polling at 21.5% in the Bloomberg average (up from 8.9% in 2017). Speaking of Germany, our research colleagues in Frankfurt have published a note looking at what to do about sovereign risk on bank balance sheets. In their report, they say how the issue has still not been tackled, in contrast to other risk mitigation measures introduced by the Banking Union and that it remains the elephant in the room. You can see the full report here.

Turning to the week ahead now, the pandemic will remain in focus as the new case count is still moving higher at the global level. In the week ending last Friday April 9, the numbers recorded by John Hopkins University showed a 4.45m increase in cases globally, which compares with increases of 4.11m, 3.78m and 3.29m in the 3 weeks before that, so we’ve definitely seen an acceleration in the past month, although the rate of increase is still shy of the peaks in December and January. Some countries have been hit particularly badly by the latest wave, with India seeing another record 152,879 cases on Saturday. Japan is another that’s seen some sharp rises lately, and the governor of Osaka prefecture said over the weekend that he could request a state of emergency be declared if the latest measures weren’t enough to stem the virus.

Over in Europe, there’s been slightly more positive news in recent days, since the latest numbers from the biggest countries (Germany, France and Italy) indicate that cases have now begun to fall from their peak, albeit still at elevated levels. Furthermore, there are signs of the market narrative turning as the pace of vaccinations are continuing to pick up in the region, with the Euro strengthening +1.19% against the US dollar last week, in its best of 2021 so far, while 5y5y forward inflation swaps for the Euro Area closed at 1.57% on Friday, a level not seen since the very start of 2019. On top of that, the UK reported fewer than 2,000 cases yesterday for the first time since early September, which comes as today marks a notable easing of restrictions in England, with the reopening of non-essential retail and outdoor hospitality venues. Finally in other vaccine news, Pfizer and BioNTech said on Friday that they’d requested their Emergency Use Authorization for their vaccine in the US be extended to 12-15 year olds, following trial results that showed the vaccine was 100% effective among this group.

It’s a big week on the data side too, with a number of important releases out of the US set to offer more details on the strength of the recovery there. This comes against the backdrop of a very strong jobs report for March and an ISM services reading that was the highest since the series began back in 1997. This week’s highlight will be the CPI report on Tuesday, as market participants have focused on the potential for a sharp rise in the reading over the months ahead. Our US economists are expecting a +0.48% month-on-month increase in the headline CPI, along with some strong releases elsewhere as well, with a projected +8.9% increase in retail sales for March thanks to the latest round of stimulus checks and payback from bad weather in February. The other big data release this week will come from China, where they’re releasing their Q1 GDP number on Friday. Our economists are expecting a surge in growth to +21.3% year-on-year, up from +6.5% in Q4, as the comparison will now be against the quarter when the pandemic first impacted the Chinese economy.

On the central bank side, we’ll have to wait until next week before the latest round of policy decisions, with the ECB announcing a week on Thursday, before the Fed and the Bank of Japan follow the week after that. Nevertheless, this week is the last chance various Fed speakers will have to offer their thoughts before their blackout period begins on Saturday, and markets will be looking out for Fed Chair Powell on Wednesday, who’s giving an interview at the Economic Club of Washington, as well as from Vice Chair Clarida later that day, who’s giving a speech on the Fed’s new framework and outcome-based forward guidance. In terms of what to expect, our US economists are expecting them to reiterate their familiar inflation mantra, in that they’ll look through the upcoming sharp rise in the year-on-year growth rate of consumer price measures, along with the “transitory” spikes caused by temporary supply-demand imbalances as the economy reopens.

Elsewhere, the latest earnings season will kick into gear over the week ahead, with the highlights including a number of US financials. In their preview of the Q1 season (link here), our asset allocation team write that they see S&P 500 earnings coming in 7.5% above consensus, which although lower than the last 3 quarters, would still be well above the historical average (+4%). Looking at the biggest names releasing this week, they include JPMorgan Chase, Wells Fargo, Goldman Sachs and Tesco on Wednesday. Then on Thursday we’ll hear from UnitedHealth Group, Bank of America, PepsiCo, Citigroup, Charles Schwab, BlackRock and Delta Air Lines. And on Friday, releases will include Morgan Stanley and BNY Mellon.

Looking back at last week now, risk assets in Europe and the US finished at record highs as global bond yields took a breather from their steep climb in the first quarter. The MSCI World index rose every day, advancing +2.40% on its way to all-time highs, with its run of gains now extending to 8 successive sessions. The S&P 500 added +2.71% on the week, finishing at yet another record high following a +0.77% gain on Friday, and marking its largest weekly gain since the first week of February. The move was driven by a strong rebound in technology stocks as the NASDAQ rose +3.12% on the week, while the highly concentrated megacap NYFANG index rose +4.75% over the course of the week. The latter index has now risen for ten straight sessions through Friday’s close in a run that has seen it rise just over 10%. Market volatility has also calmed over recent weeks and this the VIX volatility index fell -0.64pts to 16.69, which is its lowest level since the pandemic started. European stocks similarly rose to their own record highs as the STOXX 600 gained +1.16% over the shortened week, with the FTSE 100 (+2.65%) outperforming other bourses against the backdrop of sterling’s biggest weekly decline so far this year (-0.90% vs USD).

Over in rates, US 10yr yields finished the week -6.3bps lower (+3.9bps Friday) at 1.659% - the second weekly drop in yields over the last three weeks. The global benchmark has traded between 1.60 and 1.75% over the last month, and last week’s move was driven by the drop in inflation expectations (-4.6bps), which was larger than the decline in real yields (-1.9bps). European rates were more mixed however, with 10yr bund yields gaining +2.5bps last week and UK gilts falling -2.1bps. There was also a notable widening of peripheral spreads in Southern Europe relative to bunds, with the spread of Italian BTPs (+7.1bps), Spanish bonds (+4.4bps), and Portuguese bonds (+4.4bps) all widening over the week.

Tyler Durden Mon, 04/12/2021 - 07:50

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Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.



Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

DON'T MISS: Why You May Not Want to Fly Southwest Airlines

That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.


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Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after…



Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after Mayor Eric Adams on Friday signed off on a ban that will affect not only employment, but also housing and access to public accommodations -- a term that encompasses most businesses. 

We're in safe company using the word "fat," as champions of the cause refer to themselves as "fat activists." With the mayor's signature, two more categories -- both weight and height -- are added to New York City's list of protected personal attributes, which already included race, gender, age, religion and sexual orientation. 

As Mayor Adams signs the law, self-described (and everyone else-described) fat activist Tigress Osborn consumes more than her share of the backdrop (James Messerschmidt for NY Post)

Embracing one of 2023's innumerable strains of Orwellian brainwashing, Adams declared, "Science has shown that body type is not a connection to if you’re healthy or unhealthy. I think that’s a misnomer that we’re really dispelling.”

Even the Centers for Disease Control and Prevention say obesity is an invitation to a host of maladies, including to high blood pressure Type 2 diabetes, coronary heart disease, stroke, gall bladder disease, many types of cancer, mental illness and difficulty with physical functioning. 

“Size discrimination is a social justice issue and a public health threat," said Councilmember Shaun Abreu, who introduced the measure. "People with different body types are denied access to job opportunities and equal wages — and they have had no legal recourse to contest it," said Abreu. "Worse yet, millions are taught to hate their bodies." 

A full 69% of American adults are overweight or obese, but our woke overlords would have us believe the real "public health threat" is a nice restaurant that doesn't want Two-Ton Tessie working the reception desk, or a landlord who's leary of a 400-pound man breaking a toilet seat or collapsing a porch.  

The enticingly-named Tigress Osborn, who chairs the National Association to Advance Fat Acceptance, said New York's ban "will ripple across the globe" -- perhaps something like what would happen if the hefty Smith College Africana Studies graduate were dropped into a swimming pool.  

Councilmember Shaun Abreu said he gained 40 pounds during the pandemic lockdowns and noticed people treated him differently

The New York Times reports that witnesses who testified as the measure was under consideration included "a student at New York University said that desks in classrooms were too small for her [and] a soprano at the Metropolitan Opera [who] said she had faced body shaming and pressure to develop an eating disorder." 

Some have dared to speak out against the measure. “This is another mandate where enforcement will be primarily through litigation, which imposes a burden on employers, regulators and the courts,” said Kathryn S. Wylde, president of the Partnership for New York City, speaking in April. 

Implicitly putting the weight ordinance in the same category as Brown vs Board of Education, Abrue said, “Today is a monumental advancement for civil rights, size freedom and body positivity and while our laws are only now catching up to our culture, it is a victory that I hope will cause more cities, states and one day the federal government to follow suit.” 

Taking effect in six months, the law has an exemption for employers "needing to consider height or weight in employment decisions" -- but "only where required by federal, state, or local laws or regulations or where the Commission on Human Rights permits such considerations because height or weight may prevent a person from performing essential requirements of a job." 

We pray there's a federal exemption for employers of strippers and lap dancers. 

Think we're joking? We remind you that the chair of the National Association to Advance Fat Acceptance is named "Tigress" -- and this is her Twitter profile banner photo:

via Tigress @iofthetigress
Tyler Durden Sun, 05/28/2023 - 15:30

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…



"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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