After trading flat for much of the overnight session, S&P futures slumped to session lows shortly after JPM reported earnings that disappointed the market (see our full write up here) and were last trading down 30 points or 0.64%, with Dow futures down 0.3% and Nasdaq futures taking on even more water as the "sell tech" trade was back with a bang. Treasury yields rose 3bps to 1.74% and the dollar reversed an overnight loss. The VIX jumped above 20 and was last seen around 21.
The Nasdaq 100 fell to the lowest in almost three months yesterday as tech came under pressure after Fed Governor Lael Brainard said officials could boost rates as early as March. It looks like the selling will continue today.
“Market sentiment has been shaken by concerns over the prospect of imminent Fed tightening along with record global Covid-19 infection rates, but we don’t expect either of these factors to end the equity rally,” said UBS Wealth Management CIO Mark Haefele in a note. “The fourth-quarter U.S. earnings season, which started this week, could turn investor attention back to strong fundamentals.”
JPMorgan shares dropped in premarket trading after revenues and EPS beat thanks to a $1.8 billion reserve release while FICC trading revenue missed expectations even as its dealmakers posted their best quarter ever and Chief Executive Officer Jamie Dimon gave an upbeat assessment of prospects for growth. Wells Fargo advanced after reporting higher-than-estimated revenue. BlackRock Inc. became the first public asset manager to hit $10 trillion in assets, propelled by a surge in fourth-quarter flows into its exchange-traded funds. Here are some of the other notable pre-movers today:
- U.S.-listed casino stocks with operations in Macau rise after the announcement of much-anticipated changes to the local casino law aimed at tightening government oversight on the world’s largest gaming market. Las Vegas Sands (LVS US) +6.6%; Melco Resorts (MLCO US) +5.5%; Wynn Resorts (WYNN US) +5.6%.
- Apple (AAPL US) shares are up in U.S. premarket trading after Piper Sandler raises its target for the stock, saying that Apple’s set-up for 2022 is favorable. Broker adds that the tech giant’s venture into health-care and automotive markets are the next catalysts to drive the stock to a $4 trillion market cap and beyond.
- NextPlay Technologies (NXTP US) shares jump 19% in U.S. premarket trading after giving an update for fiscal 3Q 2022 late yesterday.
- Domino’s Pizza (DPZ US) is cut to equal-weight from overweight at Morgan Stanley, while Chipotle is upgraded to overweight from equal-weight amid a “mixed” view on restaurant stocks into 2022.
- Amicus Therapeutics (FOLD US) advanced in postmarket trading after being upgraded to outperform from market perform at SVB Leerink, which cited the potential of a treatment for Pompe disease, should it be approved.
- Spirit Realty dropped 4% postmarket after launching a share sale via Morgan Stanley and BofA Securities.
European equities traded poorly and followed the drop in Asia, with most sectors trading lower, weighed down once again by a soft tech sector. Euro Stoxx 50 is down 0.8%, most major indexes dropped over 1% before rising off the lows. Oil & gas is the best Stoxx 600 performer with crude trading well. European technology stocks as well as pandemic winners are leading declines after a U.S. selloff in tech shares resumed Thursday as Federal Reserve officials signaled their intention to combat inflation aggressively. European chipmakers are down in early trading Friday: ASM International -3.5% at 9.17 a.m. CET, Infineon -0.9%, ASML -2.9%, STMicroelectronics -2.3%. Meanwhile, energy and automakers outperformed. Utilities were also in focus as French nuclear energy producer Electricite de France SA (EDF) plunged by a record as the French government confirmed plans to force it to sell more power at a steep discount to protect households from surging wholesale electricity prices, a move that could cost the state-controlled utility 7.7 billion euros ($8.8 billion) at Thursday’s market prices.
There was some good news: a majority of strategists still see the rally in European equities continuing this year. The Stoxx Europe 600 Index will rise about 5.2% to 511 index points by the end of 2022 from Wednesday’s close, according to the average of 19 forecasts in a Bloomberg survey. Equity funds once more led inflows among asset classes in the week through Jan. 12, as investors reduced cash holdings, according to BofA and EPFR Global data.
Earlier in the session, Asian stocks slid as investors offloaded technology shares on growing speculation the Federal Reserve will raise interest rates in March. The MSCI Asia Pacific Index fell as much as 1.3% before paring losses to 0.7% in afternoon trading. Alibaba, Keyence and Sony Group were among the largest contributors to the benchmark’s slide. The Hang Seng Tech Index, which tracks China’s biggest tech firms, closed down 0.5%. Electronics makers also dragged down indexes in Japan and South Korea, with benchmarks in both nations leading the region’s drop. China’s CSI 300 Index closed at its lowest since November 2020. Asian stocks have been whipsawed this year by remarks from Fed officials as investors try to gauge the timing and scope of the anticipated interest rate hikes. The renewed weakness on Friday was triggered by comments from Fed Governor Lael Brainard, who said officials could boost rates as early as March to ensure that price pressures are brought under control. “This kind of hawkishness and a rush for rate hikes is, of course, a minus for share prices,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank in Tokyo. If the Fed were to increase rates in March, “investors will want to make sure the economy remains strong despite the monetary tightening before making their move,” Sera added. With Friday’s moves, Asia’s benchmark is set to pare its weekly gain to about 1.6%, which would still be its best weekly performance since October. In Japan, sentiment worsened as Tokyo raised its Covid alert to the second-highest of four levels as virus cases surged. South Korea’s Kospi was also weighed down as the central bank increased its policy rate for the third time in just five months
In rates, Treasuries pared declines with stock index futures under pressure as U.S. day begins. Yields beyond the 2-year reached session highs inside Thursday’s ranges amid a global government bond selloff. Treasury yields are cheaper by 3bp to 4bp across the curve with 10- year yields around 1.7274%, fading a bigger loss earlier and slightly underperforming bunds and gilts. Asia session featured speculation about tighter global monetary policy. IG dollar issuance slate empty so far and expected to remain light ahead of U.S. holiday weekend with markets closed Monday; four names priced $3.8b Thursday.
In FX, the Bloomberg dollar spot is little changed around worst levels for the week, while NOK, JPY and CAD top the G-10 scoreboard. The yen advanced, and is set for its largest weekly advance in more than a year as speculation about a shift in the Bank of Japan’s policy spurred a further unwinding of dollar longs. The five-year Japanese government bond yield climbed to a six-year high. The volatility term structure in dollar-yen shifted higher Friday and inverted. The euro was little changed around $1.1460 and European sovereign bond yields rose, with the core underperforming the periphery. Norway’s krone and the Canadian dollar advanced as oil prices rose, with Brent trading above $85 per barrel, while the Australian and New Zealand dollars were the worst performers. The pound extended its longest winning streak in nearly two months as the U.K. economy surpassed its pre-pandemic size in November for the first time. Sweden’s krona inched down, shrugging off data showing that the nation’s inflation rate rose to the highest level in 28 years
In commodities, crude futures rally with WTI recovering to Wednesday’s best levels near $83 and Brent putting in fresh highs near $85.40. Spot gold is little changed a brief retest of the week’s highs, trading near $1,823/oz. Base metals are mixed: LME nickel adds about 2% extending its recent surge; copper holds a narrow range in the red
Looking at the day ahead now, data releases include US retail sales, industrial production and capacity utilisation for December, along with the University of Michigan’s preliminary consumer sentiment index for January and the UK’s GDP for November. Central bank speakers include ECB President Lagarde and New York Fed President Williams. Lastly, earnings releases include Citigroup, JPMorgan Chase, Wells Fargo and BlackRock.
- S&P 500 futures up 0.3% to 4,667.00
- STOXX Europe 600 down 0.5% to 483.71
- MXAP down 0.8% to 195.28
- MXAPJ down 0.5% to 639.13
- Nikkei down 1.3% to 28,124.28
- Topix down 1.4% to 1,977.66
- Hang Seng Index down 0.2% to 24,383.32
- Shanghai Composite down 1.0% to 3,521.26
- Sensex up 0.1% to 61,320.31
- Australia S&P/ASX 200 down 1.1% to 7,393.86
- Kospi down 1.4% to 2,921.92
- German 10Y yield little changed at -0.08%
- Euro up 0.1% to $1.1467
- Brent Futures up 0.8% to $85.16/bbl
- Gold spot up 0.1% to $1,823.97
- U.S. Dollar Index little changed at 94.73
Top Overnight News from Bloomberg
- Federal Reserve Governor Christopher Waller said that three interest-rate increases this year was a “good baseline” but there may be fewer or even as many as five moves, depending on inflation
- The U.K. and the European Union agreed to intensify post-Brexit negotiations over Northern Ireland, as Foreign Secretary Liz Truss led the British side for the first time in a meeting at her official country residence
- Germany’s economy contracted by as much as 1% in the final quarter of 2021 as the emergence of the coronavirus’s omicron strain added to drags on output from supply snarls and the fastest inflation in three decades
- Japan’s Government Pension Investment Fund, the world’s largest, may mull investing in Chinese government bonds if the market situation improves, GPIF President Masataka Miyazono says at a press conference in Tokyo
- Ukraine said a cyberattack brought down the websites of several government agencies for hours. Authorities didn’t immediately comment on the source of the outage, which comes as tensions with Russia surge over its troop buildup near the border
- Russia won’t wait “endlessly” for a security deal with NATO and progress depends on the U.S., Foreign Minister Sergei Lavrov said Friday, keeping up pressure after a week of high-level talks with the West failed to yield noticeable progress
- Turkey’s newly appointed finance chief said the country’s inflation will peak months earlier and at a level far lower than predicted by top Wall Street banks
- The global pressures driving inflation higher represent a “major change in trends” and will keep price growth high for the foreseeable future, Bank of Russia Governor Elvira Nabiullina said
- North Korea appears to have fired two ballistic missiles into waters off its east coast-- in what could be its third rocket-volley test in less than 10 days -- hours after issuing a fresh warning to the Biden administration
A more detailed look at global markets courtesy of Newsquawk
Asian equity markets weakened amid headwinds from the US where all major indices declined led by losses in tech and consumer discretionary amid a slew of hawkish Fed speak, while mixed Chinese trade data added to the cautiousness in the region. ASX 200 (-1.1%) traded lower as tech and consumer stocks mirrored the underperformance of stateside peers and with nearly all industries on the back foot aside from utilities and gold miners. Nikkei 225 (-1.3%) briefly gave up the 28k level amid a firmer currency and source reports that BoJ policy makers are said to debate how soon they can begin signalling a rate hike. In terms of the notable movers, Fast Retailing was the biggest gainer after it reported a record Q1 net, followed by Seven & I Holdings which also benefitted post-earnings, while Hitachi Construction was at the other end of the spectrum after news that parent Hitachi will offload half its majority stake. KOSPI (-1.4%) eventually underperformed after the Bank of Korea hiked rates by 25bps for a third time in the current tightening cycle to 1.25%, as expected. BoK also noted that CPI is to stay in the 3% range for a while and BoK Governor Lee made it clear that rates will continue to be adjusted which has fuelled speculation of similar action at next month’s meeting. Hang Seng (-0.2%) and Shanghai Comp. (-1.0%) were also pressured with participants digesting the latest trade figures which showed weaker than expected Imports although Exports topped estimates. Nonetheless, the downside was somewhat limited amid ongoing expectations for PBoC easing to support the economy as the Fed moves closer towards a rate lift off and with some encouragement after Evergrande averted its first onshore debt default whereby bondholders approved a six-month postponement of bond redemption and coupon payments. Finally, 10yr JGBs retreated beneath the 151.00 level following the source report that suggested debate within the BoJ on how soon a rate increase can be signalled which could occur ahead of the 2% price target, while this coincided with an increase in the 5yr yield to a 6-year high and a weaker than previous 20yr JGB auction.
Top Asian News
- Chinese Developer R&F Downgraded to Restricted Default by Fitch
- Macau Cuts Casino License Tenure, Caps Float as Controls Tighten
- Inflation Irks Asia as Japan Yields Hit Six-Year High, BOK Hikes
- China Builders’ Dollar Bonds Slump Further; Logan, KWG Lead
The major cash equity indices in Europe remain subdued but off worst levels (Euro Stoxx 50 -0.7%; Stoxx 600 -0.6%) as the downbeat APAC mood reverberated into the region amid a slew of hawkish Fed speak, while the mixed Chinese trade data added to the concerns of a slowdown ahead of next week’s GDP metrics. Newsflow had overall been quiet during the European session ahead of the start of US earnings season, but geopolitical tensions remain hot on the radar after North Korea fired its third missile of the year (albeit landing outside Japan’s EEZ), whilst Russia closed all communication channels with the EU and exerted some time-pressure on Washington with regards to Moscow’s security demands. Back to trade, a divergence is seen between Europe and the US as the former catches up to the late accelerated sell-off on Wall Street yesterday; US equity futures have been consolidating with mild broad-based gains seen across the ES (+0.2%), YM (+0.2%), NQ (+0.2%) whilst the RTY (Unch) narrowly lags. Delving into Europe, the UK’s FTSE 100 (-0.1%) is cushioned by gains across its Oil & Gas and Financial sectors as crude oil prices and yields clamber off intraday lows, whilst the SMI (-0.3%) sees some losses countered by its heavyweight healthcare sector. Sectors in Europe are mostly in the red with a slight defensive tilt, although Oil & Gas stands as the top gainer and the only sector in the green. The downside meanwhile sees Tech following a similar sectorial underperformance seen on Wall Street and APAC overnight. In terms of individual movers, DAX-heavyweight SAP (-0.3%) conforms to the losses across tech after initially rising as a result of upgraded guidance and the announcement of a share buyback programme of up to EUR 1bln. The most notable mover of the day has been EDF (-17.5%) as the Co. withdrew guidance after noting the impact of new French price cap measures is forecast to be around EUR 8.4bln on FY22 EBITDA.
Top European News
- EDF Slumps by Most on Record on Hit From Price Cap
- U.K. Economy Surpasses Pre-Pandemic Size With November Surge
- German Recovery Lags Rest of Europe on Supply Snarls, Inflation
- HSBC Markets Chief Georges Elhedery To Take Six-Month Sabbatical
In FX, another lower low off a lower high does not bode well for the index and Buck more broadly, but some technicians will be encouraged by the fact that chart supports in the form of a Fib retracement and 100 DMA have only been breached briefly. Meanwhile, Friday may provide the Greenback with a prop via pre-weekend position squaring and US data could lend a hand if upbeat or better than expected at the very least. For now, the DXY is restrained between 94.887-626 confines, with the upside capped by a major trendline that falls just below 95.000 around 94.980, and the Dollar also hampered by pressure emanating outside the basket from the likes of the Yuan, crude oil and other commodities.
- CAD/JPY/GBP - The Loonie has reclaimed 1.2500+ status in line with a rebound in WTI towards Usd 83/brl, but still faces stiff trendline resistance vs its US counterpart at 1.2451 and probably conscious that several multi-billion option expiries roll off either side of the 1.2500 level today. Conversely, the Yen has cleared the psychological 114.00 hurdle with some fundamental impetus coming from hawkish BoJ source reports contending that policy-setters are contemplating how soon the Bank can telegraph a rate hike that is likely to be delivered prior to inflation reaching its 2% target. Elsewhere, Sterling remains elevated above 1.3700, though unable to scale 1.3750 even with tailwinds from stronger than forecast UK GDP and IP or a narrower than feared trade gap amidst ongoing political uncertainty.
- CHF/EUR/NZD/AUD - All narrowly divergent and contained against their US rival, with the Franc straddling 0.9100 and Euro holding within a 1.1483-51 range and immersed in hefty option expiry interest spanning 1.1395 to 1.1485 (see 7.01GMT post on the Headline Feed for details). On the flip-side, the Aussie and Kiwi have both lost a bit more momentum after probing 0.7300 and approaching 0.6900 respectively yesterday, and Aud/Usd appears to have shrugged off robust housing finance data in the run up to China’s trade balance revealing sub-consensus imports.
- SCANDI/EM - Firmer than anticipated Swedish CPI and CPIF metrics have not offered the Sek much support, as the stripped down core ex-energy print was in line and bang on the Riksbank’s own projection. However, the Huf has been underpinned by hot Hungarian inflation and the Cnh/Cny in wake of the aforementioned Chinese trade data showing a record surplus for December and 2021 overall. In Turkey, the Try is flattish following the latest CBRT survey that predicts a weaker year-end Lira from current levels, but above record lows and still well above target CPI, while in Russia the Rub is benefiting from Brent’s rise above Usd 85.50/brl (in keeping with the Nok) against the backdrop of geopolitical and diplomatic strains as the country’s Foreign Minister declares that all lines of communication with the EU have ended.
In commodities, WTI and Brent front-month futures have been on an upward trajectory since the Wall Street close, with the former now above USD 83/bbl (vs 81.58/bbl low) and the latter north of USD 85.50/bbl (vs 83.99/bbl low) in European hours. Overall market sentiment has been a non-committal one amid a lack of fresh macro catalysts, however, geopolitical updates have been abundant: namely with Russia’s punchy rhetoric surrounding its security demand from NATO and Washington, whilst North Korea fired what is said to be ballistic missiles which landed just outside Japan’s Exclusive Economic Zone (EEZ). On the demand side of the equation, eyes remain on China’s economic and COVID situations, with the import figures indicating China's annual crude oil imports drop for the first time in 20 years, whilst the nation grounded further flights between the US due to its zero-COVID policy. On the supply side, reports suggested that China will release oil stockpiles in the run-up to the Lunar New Year (dubbed as the largest human migration). The release is part of a coordinated plan with the US and other major consumers, according to the reports, which cited sources suggesting China will likely ramp up its releases if prices top USD 85/bbl. Turning to metals, spot gold is trading sideways and prices waned after again hitting the resistance zone around USD 1,830/oz flagged earlier this week. LME copper meanwhile remains under USD 10,000/t – subdued by the sharp slowdown in Chinese imports suggesting weaker demand, albeit annual imports of copper concentrate hit a historic high in 2021. The trade data also indicated a fall in iron ore imports as a factor of the steel production curbs imposed last year to tackle pollution and high iron ore prices.
US Event Calendar
- 8:30am: Dec. Import Price Index YoY, est. 10.8%, prior 11.7%; MoM, est. 0.2%, prior 0.7%
- Export Price Index YoY, est. 16.0%, prior 18.2%; MoM, est. 0.3%, prior 1.0%
- 8:30am: Dec. Retail Sales Advance MoM, est. -0.1%, prior 0.3%
- Dec. Retail Sales Ex Auto MoM, est. 0.1%, prior 0.3%
- Dec. Retail Sales Ex Auto and Gas, est. -0.2%, prior 0.2%
- Dec. Retail Sales Control Group, est. 0%, prior -0.1%
- 9:15am: Dec. Industrial Production MoM, est. 0.2%, prior 0.5%
- Capacity Utilization, est. 77.0%, prior 76.8%
- Manufacturing (SIC) Production, est. 0.3%, prior 0.7%
- 10am: Nov. Business Inventories, est. 1.3%, prior 1.2%
- 10am: Jan. U. of Mich. Sentiment, est. 70.0, prior 70.6; Expectations, est. 67.0, prior 68.3; Current Conditions, est. 73.8, prior 74.2
- U. of Mich. 1 Yr Inflation, est. 4.8%, prior 4.8%; 5-10 Yr Inflation, prior 2.9%
DB's Jim Reid concludes the overnight wrap
There was no rest for markets either yesterday as the tech sell-off resumed in earnest, which came as fed funds futures moved to price in a 93% chance of a March rate hike, the highest closing probability to date. At the same time, however, the US dollar continued to weaken and has now put in its worst 3-day performance in over a year, having shed -1.25% in that time. And all this is coming just as earnings season is about to ramp up, with a number of US financials scheduled to report today ahead of an array of companies over the next few weeks.
Starting with sovereign bonds, yields on 10yr Treasuries fell a further -3.9bps yesterday, their biggest decline since mid-December, to their lowest closing level in a week, at 1.704%, with most of the price action again happening during the New York afternoon. Lower inflation breakevens helped drive the decline, with the 10yr breakeven down -3.4bps after the producer price inflation data for December came in softer than expected. Indeed, the monthly gain of +0.2% (vs. +0.4% expected) was the slowest since November 2020, and in turn that left the year-on-year measure at +9.7% (vs. +9.8% expected), which is actually a modest decline from the upwardly revised +9.8% in November. As with the previous day’s CPI reading though, there was a more inflationary interpretation for those after one, as the core PPI measure came in at a monthly +0.5% as expected, leaving the year-on-year change at an above-expected +8.3% (vs. +8.0% expected). So something for everyone but no massive surprises either way.
The latest inflation data came as numerous Fed speakers continued to match the recent hawkish tone, which helped strengthen investor conviction in the odds of a March hike as mentioned at the top. Philadelphia Fed President Harker said at an event that “My forecast is that we would have a 25 basis-point increase in March, barring any changes in the data”, and that he had 3 hikes pencilled in but “could be convinced of a fourth if inflation is not getting under control.” Separately, we heard from Governor Brainard, who appeared before the Senate Banking Committee as part of her nomination hearing to become Fed Vice Chair. She signalled that she would be open to a March hike as well, saying that they would be in a position to hike “as soon as asset purchases are terminated”, which they’re currently on course to do in March. Even President Evans, one of the most dovish members of Fed leadership, said a March rate hike and multiple hikes this year were a possibility. As it happens, today is the last we’ll hear from various Fed speakers for a while, as tomorrow they’ll be entering their blackout period ahead of the next FOMC announcement later in the month.
Staying on the Fed, Bloomberg reported overnight that President Biden has picked three nominees for the vacant slots. They include Sarah Bloom Raskin, previously Deputy Secretary of the Treasury, who’s reportedly going to be nominated to become the Vice Chair of supervision, as well as Lisa Cook and Philip Jefferson, who’d become governors. Cook is an economics professor at Michigan State University, and Jefferson is an economics professor at Davidson College in North Carolina. All 3 would require Senate confirmation, and bear in mind those choices haven’t been officially confirmed as of yet.
Over on the equity side, the main story was a further tech sell-off that sent both the NASDAQ (-2.51%) and the FANG+ index (-3.72%) lower for the first time this week, and taking the former to a 3-month low. That weakness dragged the S&P 500 (-1.5%) lower, though despite the stark headline numbers, it was only just over half of the shares in the index that were in the red on the day. Meanwhile in Europe, the STOXX 600 (-0.03%) also saw a modest decline, though the STOXX Banks (+1.10%) hit a fresh 3-year high after advancing for the 8th time in the last 9 sessions. Sovereign bond yields echoed the declines in the US too, with those on 10yr bunds (-3.1bps), OATs (-3.3bps) and BTPs (-4.6bps) all moving lower.
Following that tech-driven fall overnight on Wall Street on the back of those hawkish comments, Asian stock markets are trading lower this morning. Japan's Nikkei (-1.42%) extended the previous session’s losses while briefly falling over -2%, as the Japanese Yen found a renewed bid amid the risk-off mood. Additionally, the Kospi (-1.37%) widened its losses, after the BOK lifted borrowing costs by 25bps to 1.25% amidst rising concerns about inflationary pressure. That takes the benchmark rate back to pre-pandemic levels after the central bank's 25bps rate increase in August and November last year. Meanwhile, the Korean government unveiled a supplementary budget worth 14 trillion won in size to continue providing support to the economy. Elsewhere, the Hang Seng index (-0.86%), CSI (-0.60%) and Shanghai Composite (-0.53%) have all moved lower as well. Data released in China showed that exports went up +20.9% y/y in December (vs +20.0% market expectations) albeit imports in December rose +19.5% y/y less than +28.5% as anticipated. That meant that they posted a trade surplus of $94.46bn last month, above the consensus forecast for a $74.50bn surplus. Looking ahead, futures on both the S&P 500 (-0.19%) and DAX (-0.79%) are pointing to further losses later on.
Elsewhere in markets, yesterday saw another surge in European natural gas futures (+13.71%), albeit still at levels which are less than half of the peaks seen in mid-December. The latest moves came as Russia’s deputy foreign minister Sergei Ryabkov said that talks with the US had reached a “dead end”, amidst strong tensions between the two sides with Russia rejecting any further expansion of NATO as well as calls to pull back its forces from near Ukraine’s border. In response, the Russian ruble weakened -2.31% against the US dollar yesterday, whilst the MOEX stock index (-4.05%) suffered its worst daily performance since April 2020.
Turning to the Covid-19 pandemic, the decline in UK cases continued to accelerate yesterday, with the number of cases over the past week now down -24% relative to the previous 7-day period. Looking at England specifically, the total number of Covid-19 patients in hospital is now down for a 3rd day running, and in London the total number in hospital is down to its lowest level since New Year’s Eve.
To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for December, along with the University of Michigan’s preliminary consumer sentiment index for January and the UK’s GDP for November. Central bank speakers include ECB President Lagarde and New York Fed President Williams. Lastly, earnings releases include Citigroup, JPMorgan Chase, Wells Fargo and BlackRock.
AMC CEO Looks To Refinance Debt Amid Dip In Stock Price
A skittish stock market and a struggling box office are complicating the theater chain’s attempts to turn around its debt situation.
A skittish stock market and a struggling box office are complicating the theater chain’s attempts to turn around its debt situation.
Let’s give credit where it’s due. Most people don’t follow through with their New Year’s Resolutions, but at least AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report CEO Adam Aron is trying.
Following a Tweet earlier this month in which the head of the beleaguered movie theater chain announced plans to “refinance some of our debt to reduce our interest expense, push out some debt maturities by several years and loosen covenants,” he’s now making moves to try to get the job done.
Aron has reportedly been “in advanced talks with multiple parties” about refinancing, according to The Wall Street Journal. But the ongoing volatility of the stock market, amongst other factors, is complicating matters.
Rough Years For AMC
To make it through the pandemic, AMC ended up having to take on a great deal of debt. It reportedly owed $5.5 billion as of last September and also owed $376 million worth of lease payments, which were deferred for a while during the pandemic.
But as we’ve previously mentioned, the past few years have been tough for theater chains such as AMC. Even before the pandemic put a pause on theater-going in 2020, leading to an absolutely brutal total box office gross drop of 81.4%, general audiences were increasingly only heading out to movie theaters for blockbuster films and franchise installments, often from the Marvel Cinematic Universe or the “Fast & Furious.”
AMC had a reported net loss of $13.5 million in 2019, even as total revenue was up 2.4% to $1.44 billion from the year before. Things improved for the company last year once people felt safe returning to the theaters, as access to vaccines helped unlock some pent-up demand, and the box office rose by 112.5% to $4,468,850,254.
A big chunk of that rebound is due to the jaw-dropping success of “Spider-Man: No Way Home,” which recently returned to the top of the box office, on its way to making $1.69 billion worldwide. (Will Peter Parker eventually conquer the blue aliens from “Avatar” to become the highest-grossing film of all time? Stay tuned.)
But you can’t turn around a struggling industry based on the success of one film, and even Marvel and Disney (DIS) - Get Walt Disney Company Report can’t put out a general-audience pleasing blockbuster every week.
Even with a new “Scream” film out, last weekend’s box office total barely totaled more than $43 million, a far cry from five years ago. “That's down from a pre-pandemic $105 million in 2020, $73 million in 2019, $102 million in 2018, and $111 million in 2017, according to data from Box Office Mojo.”
Memes Saved AMC (For A Little While)
Last year AMC received an unexpected lifeline when it became the subject of an internet-driven rush that turned it into a short-lived meme stock.
After a Reddit-incubated army of internet investors, who dubbed themselves “apes,” began buying shares in AMC through trading applications such as Robinhood, shares of the company temporarily rose to a robust $62.55 a share. Prices would eventually return to earth, hitting $35 a share after the hype dropped down. But the boost allowed Aron to buy the company some time.
AMC used the cash infusion to repurchase $35 million worth of debt that carried a minimum interest rate of 15%, according to Yahoo! Finance. The deal cost $41.3 million, but it is expected to reduce the overall annual interest on its debt by about $5.3 million.
This year Aron is stepping up his efforts to refinance AMC’s debt, but it’s rough out there at the moment.
Amid Wall Street’s current market contraction, AMC’s stock has dropped by 41% this year, erasing the meme stock gains, and AMC’s $1.5 billion in secured 10% bonds “traded as low as 92 cents on the dollar, down from 99.5 cents at the start of the year,” according to The Wall Street Journal.
AMC isn’t looking to refinance all of its debt. Instead, it is targeting some of the bonds with especially high interest, as a way to cut expenses even as bond prices continue to drop.
But it seems like the meme stock rush has turned out to be a double-edged sword.
AMC was able to stay in business by “selling new shares, taking on new debt, and getting landlords to agree to delay collecting rent payments.” But meme investors have objected to Aron’s plans to allow more AMC shares to be sold, out of fear that it would dilute what they’ve already purchased.
Aron and AMC have a skittish-at-best stock market and an industry that is struggling to get people into theaters for all but event films. On the other hand, it has a loyal group of investors that are nonetheless limiting the company’s options.bonds pandemic army
About 35% of People Who Received Placebo in Vaccine Trials Report Side Effects and More COVID-19 News
According to a recent study conducted by researchers at Harvard Medical School and Beth Israel Deaconess Medical Center, 76 percent of the adverse side effects (such as fatigue or headache) that people experienced after receiving their first COVID-19…
About 35% of People Who Received Placebo in Vaccine Trials Report Side Effects and More COVID-19 News
The placebo effect is where a person who received a placebo instead of a drug or vaccine shows clinical signs, positive or negative, associated with the actual treatment. Much has been made about the side effects of the COVID-19 vaccines, but a new study found a startlingly high number of adverse events associated with people who received placebos in clinical trials. For that and more COVID-19 news, continue reading.
COVID-19 Vaccine Side Effects: Real or Placebo Effect?
A recent study out of Harvard Medical School and Beth Israel Deaconess Medical Center evaluated 12 COVID-19 vaccine trials with a total of 45,380 participants. The study found that 76% of the adverse side effects reported, such as fatigue or headache, after the first shot were also reported by participants who received a placebo. Mild side effects were more common in people receiving the vaccine, but a third of those given the placebo reported at least one adverse side effect. The statistics from the study showing that 35% of placebo recipients reported adverse side effects is considered unusually high. Several experts suspect that there’s such a high report of adverse events because of the amount of misinformation found on social media about the dangers of the vaccines and the amount of media coverage.
This is not to say that the adverse side effects felt by people who received the vaccines are all in their heads. People do have side effects to vaccines, but this study reports on an unusually high level of the placebo effect. Nocebo is used to describe a negative outcome associated with the placebo.
“Negative information in the media may increase negative expectations towards the vaccines and may therefore enhance nocebo effects,” said Dr. Julia W. Haas, an investigator in the Program in Placebo Studies at Beth Israel Deaconess and the study’s lead author. “Anxiety and negative expectation can worsen the experience of side effects.”
Four Factors for Long COVID
A study published in Nature Communications identified specific antibodies in the blood of people who developed long COVID. Long COVID is not well understood and has a range of up to 50 different symptoms, and it is difficult to diagnose because there is no one test for it. The study, conducted by Dr. Onur Boyman, a researcher in the Department of Immunology at University Hospital Zurich, compared more than 500 COVID-19 patients and found several key differences in patients who went on to present with long COVID. The most obvious was a significant decrease in two immunoglobulins, IgM and IgG3. The study found that a decrease in these two immunoglobulins, which generally rise to fight infections, combined with other factors, such as middle age and a history of asthma, was 75% effective in predicting long COVID.
75% of COVID-19 ICU Survivors Show Symptoms a Year Later
A study out of the Netherlands found that a year after being released from an intensive care unit (ICU) for severe COVID-19, 75% of patients reported lingering physical symptoms, 26% reported mental symptoms, and up to 16% noted cognitive symptoms. The research was published in JAMA. The research evaluated 246 COVID-19 survivors treated in one of 11 ICUs in the Netherlands. The mental symptoms included anxiety (17.9%), depression (18.3%), PTSD (9.8%). The most common new physical symptoms were weakness (38.9%), stiff joints (26.3%), joint pain (25.5%), muscle weakness (24.8%), muscle pain (21.3%) and shortness of breath (20.8%).
Pennsylvania Averaging Most COVID-19 Deaths Per Day in a Year
In general, COVID-19 deaths are dropping across the country. However, in two states, Pennsylvania and New Jersey, the numbers are increasing. Pennsylvania is averaging 156 COVID-19 deaths per day over the past seven days, which is a 17% uptick compared to two weeks ago. The number of deaths per day in Pennsylvania is below what was hit in January 2021, largely due to the availability of vaccines. New Jersey averages 111 deaths from COVID-19 per day, an increase of 61% over the last two weeks and the highest since May 2020. Similarly, New Jersey cases and hospitalizations are declining.
Omicron Surge: Shattering Cases and Hospitalizations, but Less Severe
According to the CDC, although the current Omicron surge is setting records for positive infections and hospitalizations, it’s less severe than other waves by other metrics. Omicron has resulted in more than 1 million cases per day in the U.S. on several occasions, and reported deaths are presently higher than 15,000 per week. However, the ratio of emergency department visits and hospitalizations to case numbers is lower compared to COVID-19 waves for Delta and during the winter of 2020–21. ICU admissions, length of stay, and in-hospital deaths were all lower with Omicron. They cite vaccinations and booster shots as the likely cause. Although the overall result is that Omicron appears less severe, it’s not completely clear if that’s because the viral variant doesn’t infect the lower lung as easily as other variants, or because so much of the population has either been vaccinated or exposed to the virus already. It is clearly far more infectious than other strains, which is placing a real burden on healthcare systems. The number of emergency department visits is 86% higher than during the Delta surge.
J&J Expects Up to $3.5 Billion in COVID-19 Vaccine Sales This Year
Johnson & Johnson projected annual sales of its COVID-19 vaccine for 2022 to range from $3 billion to $3.5 billion. This was noted during the company’s fourth-quarter 2021 report. In December 2021, the U.S. Centers for Disease Control and Prevention recommended the Pfizer–BioNTech or Moderna shots over J&J’s due to a rare blood condition observed with the J&J shot. By comparison, Pfizer and BioNTech project their vaccine will bring in $29 billion in 2022, after having raked in almost $36 billion in 2021. Moderna expects approximately $18.5 billion this year, with about $3.5 billion from possible additional purchases. Although final figures for Moderna aren’t in yet, they projected 2021 sales between $15 and $18 billion.
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COVID-19 cases at highest ever in Americas – regional health agency
New cases of COVID-19 in the Americas in the past week were the highest since the pandemic began and the very contagious Omicron variant has clearly become the predominant strain, the Pan American Health Organization said on January 26.
COVID-19 cases at highest ever in Americas – regional health agency
January 26, 2022; 11:49 AM EST
BRASILIA, Jan 26 (Reuters) – New cases of COVID-19 in the Americas in the past week have been the highest since the pandemic began in 2020 and the very contagious Omicron variant has clearly become the predominant strain, the Pan American Health Organization said on Wednesday.
There were more than 8 million new cases, 32% higher than the previous week, while fatalities throughout the region also increased by 37%, with 18,000 new deaths caused by COVID-19.
The United States continues to have the highest number of new infections, although cases decreased by nearly 1 million over the last week, the regional health agency said.
Mexico’s southern states have seen new infections triple and Brazil has seen new cases surge 193% over the last seven days, PAHO said in weekly briefing.
Children in the Americas are facing the worst educational crisis ever seen in the region, with millions of children yet to return to classes, according to PAHO, which recommended that countries try to get them safely back to school to protect their social, mental and physical wellbeing.
It urged parents to get their children vaccinated.
Many countries have already authorized and are safely administering COVID vaccines to adolescents, PAHO said.
Last week, the WHO’s expert group on immunization authorized the COVID vaccine developed by Pfizer Inc (PFE.N) for children aged 5 to 12 years, offering a roadmap for countries to roll out vaccines for them, the regional agency said.
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