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Thursday, March 28, 2024

Futures Ramp Above 4,700 On Growing Omicron Optimism

Courtesy of ZeroHedge View original post here.

If you had gone to bed on Thanksgiving after eating a little too much tryptophan and only woken up today, roughly one month later, you would have completely avoided a rollercoaster move in global markets, and much of the omicron panic, with the S&P now trading precisely where it was the night before scattered reports of Omicron in South Africa sparked a global selloff. As of 730am, e-mini S&P futures were trading at exactly 4,700, up 14 points or 0.3% – and once again less than 1% from all time highs – on rising hopes the omicron variant won’t impact global growth even as officials remain cautious about its spread, after studies showed it’s less severe than other strains; Dow Jones futures also rose 0.3% while Nasdaq 100 futures were 0.2% higher. US Treasury yields rose, the 10Y trading at 1.475%, while the USD index traded flat. The  pound rose as traders stepped up bets on a Bank of England rate hike. Soaraing European natural gas prices plunged more than 20% as this year’s rally attracted a flotilla of U.S. cargoes, helping offset lower flows from Russia.

U.S. stocks reversed a sharp drop earlier in the week, advancing over the past two days amid signs the omicron variant won’t thwart growth, with consumer confidence rising by more than expected in December. Pfizer Inc.’s Covid-19 pill gained clearance for emergency use in the U.S. on Wednesday and three studies showed omicron appears less likely to land patients in the hospital than the delta strain, fueling optimism.  Adding to the positive newsflow on omicron, lab results indicated a third dose of AstraZeneca Plc’s vaccine significantly boosted antibodies against the strain, and Pfizer Inc.’s Covid-19 pill gained clearance for emergency use in the U.S.

“Markets hate uncertainty and not knowing, and when omicron hit the markets, we didn’t know,” Carol Schleif, BMO Family Office deputy chief investment officer, said on Bloomberg Television. “But it seems like it’s edging toward something more positive.”

A gauge of global stocks is up more than 2% so far this month, leaving the index 15% higher for the year and on course to surpass 2020’s gain.

In U.S. premarket trading, Tesla Inc. shares rose after Chief Executive Officer Elon Musk sold down more of his stake. Nikola gained after the electric-vehicle startup said that more deliveries were to come. Here are some other notable premarket movers today:

  • Novavax (NVAX US) shares jump 5% in U.S. premarket after the biotech firm said that both a vaccine booster dose as well as an omicron-specific shot may be beneficial in helping to protect against the Covid-19 variant.
  • Nikola (NKLA US) rises 3.5% in U.S. premarket trading after the electric-vehicle startup said on Twitter that more deliveries were to come, posting photos of a previous event.
  • Tesla (TSLA US) shares gain 1.1% in U.S. premarket trading after CEO Elon Musk sells down more of his stake, drawing nearer to his pledge of cutting his stake in the EV maker by 10%.
  • JD.com’s (JD US) ADRs slump 9.2% in U.S. premarket trading after Tencent said it plans to hand out more than $16 billion of JD.com shares to its investors as a one-time dividend.
  • SciPlay (SCPL US) the maker of mobile and web games such as Jackpot Party Casino, falls 17% in premarket after ending talks to sell out to majority owner Scientific Games.
  • Shares in tiny biotech stocks soar in U.S. premarket trading in strong volume, amid broad risk-on appetite thanks to positive omicron variant studies, ahead of the holiday period.

“Our outlook for the global economy remains positive, but we have preference on developed markets,” Janet Mui, director of investment at Brewin Dolphin Limited, said in an interview with Bloomberg TV. “The economic recovery will continue in the major economies like the U.S., U.K. and the Euro area, thanks to the very high vaccination rates and ongoing rollout of the booster jabs.”

Elsewhere, European shares advanced for a third day, with travel shares leading gains. The Euro Stoxx 50 rose 0.6%; travel is the strongest sector with recent studies showing omicron appears less likely to land patients in the hospital than the delta strain. IBEX leads with a 1% gain. Travel and leisure was the top-performing sector in Europe on Thursday amid optimism of fewer hospitalizations linked to the omicron variant of Covid-19. Airlines shruged off a profit warning from Ryanair (+1.1%) that was first reported late in the trading session on Wednesday. British Airways-owner IAG adds 3.7%, Wizz +3.3%, hotelier Whitbread +2.6%, Deutsche Lufthansa +2%, caterer Sodexo +0.8%. Stoxx travel and leisure index also helped by Flutter (+3%) which gains following M&A news

Earlier in the session, Asian stocks were on track to gain for a third straight day, bolstered by signs the omicron strain is less severe than previous variants. Tech and communication services sectors led the advance. The MSCI Asia Pacific Index climbed as much as 0.9%, with Tencent as the biggest contributor to gains after a 4.2% rally in Hong Kong. The Chinese internet giant declared a one-time dividend in the form of JD.com’s shares worth more than $16 billion, causing the latter’s stock to plunge intraday by the most on record. Sentiment in Asia improved as a trio of studies found that the omicron variant led to lower hospitalization risk than the delta strain, and Pfizer Inc.’s Covid-19 pill gained clearance for emergency use in the U.S. Separately, lab results indicated a third dose of AstraZeneca’s vaccine significantly boosted antibodies against the strain though another study released late in the Asia day found that three doses of Sinovac’s vaccine weren’t enough to protect against it. “We expect Asian equities to improve their relative performance in 2022 given less demanding valuations and prospects for solid earnings growth,” said Tai Hui, Asia chief market strategist at JPMorgan Asset Management. “Reflation and economic reopening could help to boost earnings expectations for cyclical sectors, especially those focusing on domestic demand.” The MSCI Asia Pacific Index is down almost 4% for the year compared with a 25% gain in the S&P 500 Index, which is trading close to a record high.  Equity benchmarks in the Philippines, Malaysia and Thailand were among the top gainers amid a broad advance in the region Thursday even as trading volumes were thin ahead of the Christmas holidays. Japan stocks also rose as the country looks set to unveil another record annual budget this week. Shares in China also rose even as the country locked down the western city of Xi’an to stamp out a persistent virus outbreak. Equities slumped in Vietnam as Covid-19 cases continued to rise.

In rates, fixed income is thin with only ~100k bund futures contracts trading as of 10:50am London. Cash space is under small pressure: bunds and USTs bear steepen, gilts bear flatten with short dates ~5bps cheaper. 10-year TSY yields were around 1.47%, with gilts notably underperforming and are cheaper by around 3bp in the sector vs. Treasuries; curves are steady with U.S. cash spreads broadly within a basis point of Wednesday close. Treasuries drifted lower into early U.S. session as S&P futures grind higher. 10-year futures remained inside Wednesday session lows with yields cheaper by up to 2bp across long-end of the curve. Thursday’s highlights include a packed data slate, and cash markets are due for an early 2pm ET close ahead of Friday’s full closure.

In FX, tge Bloomberg dollar index chopped either side of flat. The pound was the stand out mover in London hours, topping the G-10 leaderboard with cable regaining a 1.34 handle. USD/JPY was little changed as it holds above 114. Aussie dollar drifts back towards 0.72 against the greenback. Bloomberg Dollar Spot Index is steady after falling for three days.

In commodities, crude futures are little changed; WTI trades near $72.70. Spot gold is rangebound, holding just above $1,800/oz. Most base metals are in the green, drifting higher in quiet trade. LME copper and tin lag. European natural gas prices plunged more than 20% as this year’s rally attracted a flotilla of U.S. cargoes, helping offset lower flows from Russia.

Looking at today's calendar, we get personal spending and income as well as a new look at inflation data, including the Fed’s preferred price measure — the change in the core personal consumption expenditures price index — and jobless claims. We also get the latest Durable goods orders, UMichigan sentiment and new home sales prints.

Market Snapshot

  • S&P 500 futures up 0.1% to 4,692.00
  • STOXX Europe 600 up 0.4% to 480.16
  • German 10Y yield little changed at -0.28%
  • Euro little changed at $1.1317
  • MXAP up 0.9% to 192.23
  • MXAPJ up 0.8% to 623.33
  • Nikkei up 0.8% to 28,798.37
  • Topix up 0.9% to 1,989.43
  • Hang Seng Index up 0.4% to 23,193.64
  • Shanghai Composite up 0.6% to 3,643.34
  • Sensex up 0.7% to 57,350.50
  • Australia S&P/ASX 200 up 0.3% to 7,387.57
  • Kospi up 0.5% to 2,998.17
  • Brent Futures down 0.4% to $74.99/bbl
  • Gold spot up 0.2% to $1,807.61
  • U.S. Dollar Index little changed at 96.16

Top Overnight News from Bloomberg

  • The highly-mutated omicron variant appears less likely to land patients in the hospital with Covid-19 than the delta strain, according to preliminary data from a trio of studies
  • France reported a jump in Covid-19 infections as the fast-spreading omicron variant tightens its grip on Europe
  • The Chinese yuan is having a greater impact on its emerging-market counterparts than ever before and may play a crucial role in determining their performance in the coming year
  • New Prime Minister Fumio Kishida’s rhetoric of distributing wealth more equally appears to signal a change of priorities for post-pandemic Japan that may run counter to plans to improve the country’s presence as an international financial hub
  • Oil settled at the highest level in nearly a month after U.S. crude stockpiles decreased and economic data pushed equities higher

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac equities traded modestly higher amid some tailwinds from Wall Street in holiday-thinned trade and the absence of fresh catalysts. The US majors closed in the green across the board, with the S&P 500 and Nasdaq propelled higher by Tesla shares which jumped 7.5% to regain USD 1tln market cap. US equity futures resumed trade relatively flat with an upside bias. In APAC, the ASX 200 (+0.3%) was supported by its gold miners following the recent gains in the yellow metal. Japan’s Nikkei 225 (+0.6%) was underpinned by its mining names, while South Korea’s KOSPI (+0.2%) saw gains in Tech mostly offset by losses in Autos. The Hang Seng (+0.3%) and Shanghai Comp (+0.2%) quickly dipped at the open into modest negative territory but later recovered. The overnight focus was on Tencent declaring an interim dividend payable in JD.com shares – which would reduce Tencent's holding of JD to about 2.3% vs prev. nearly 17% reported earlier this month. JD.com shares extended downside in early trade to losses of over 10%, whilst Tencent rose over 3%. US 10yr Treasury futures traded with no firm direction overnight despite the mild positivity seen across APAC stocks, with the debt now looking ahead to the November PCE report.

Top Asian News

  • Asian Stocks Head for Third Day of Gains as Tencent Shares Rally
  • Alibaba-Backed RoboSense Said to Pick JPMorgan for Hong Kong IPO
  • Foreigners Haven’t Finished Selling India Stocks: Street Wrap
  • Asia Traders Are Most Bullish Stocks, Europe Least: Markets Live

European bourses are firmer in very thin trading conditions, with a distinct holiday-feel setting in. News flow has been minimal, and remains focused on the familiar themes of Omicron and geopolitics. The Euro Stoxx 50 trades around +0.5%, after a constructive handover from Asia, although there are some very modest regional discrepancies. Sectors are predominantly in the green, with the likes of Travel & Leisure, Oil & Gas, and Autos benefitting from the generally constructive tone of news flow around Omicron. US futures are firmer, though the magnitude is limited, and benchmarks have essentially been in a holding pattern since the US cash close on Wednesday.

Top European News

  • Spain Revises GDP Growth Sharply Higher After Data Doubts
  • Traders Ramp Up BOE Bets to See Key Rate at 1.25% Next Year
  • U.K. PM Not Expected to Announce Post-Xmas Curbs This Week: Sky
  • Pound Reaches One-Month High After BOE Rate Hike Bets Increase

In FX, in stark contrast to this time yesterday, the Dollar index is trying to grind higher from a fractionally firmer base between 96.018-199 parameters, though well below Tuesday’s range amidst an ongoing improvement in overall risk sentiment based on the latest Omicron analysis. In short, studies continue to find lower hospital admissions and generally less acute symptoms even though the mutation is more virulent, while the current batch of vaccines provide varying degrees of protection and new drugs designed specifically for the new strain are in the pipeline. On the fundamental front, the final full trading day before the Xmas break contains some potential market-moving US data, including the Fed’s preferred inflation measure, core PCE, plus jobless claims, new home sales and the often volatile durable goods.

  • NZD/GBP/AUD – The Kiwi, Pound and Aussie have all picked up where they left off on Wednesday, with impetus from the aforementioned positive market tone allied to increasingly bullish technical impulses. Indeed, Nzd/Usd didn’t encounter much in the way of psychological resistance at 0.6800, while Sterling has breached 1.3350 more emphatically to expose/probe 1.3400 and Aud/Usd overcame any sentimentality that might have hampered its progress beyond 0.7200. Cable has also advanced with the aid of Eur/Gbp tailwinds as the cross approaches 0.8450 following sell orders above, and an element of relief after reports suggesting that UK PM Johnson is now likely to hold off from making any further decisions on pandemic measures until after Xmas. Back down under, some good news for the Aussie via a pickup in private sector credit and loans for housing.
  • CAD/EUR – Both narrowly mixed vs their US counterpart, but the Loonie has extended its rebound towards 1.2800 in advance of Canadian monthly GDP and average weekly earnings, while the Euro is forming a firmer base on the 1.1300 handle as EGBs continue to underperform/outperform in futures and cash terms respectively. However, Eur/Usd topped out around 1.1341/2 again and may be wary of decent option expiry interest between 1.1330-40 in 1.3 bn as much as 1.6 bn rolling off at 1.1300-05.
  • CHF/JPY – The Franc and Yen are still lagging on risk factors and their carry characteristics, with the former unable to sustain advances through 0.9200 against the Buck and the latter failing to overcome offers/resistance into 114.00. Hence, Usd/Jpy remains poised for more attempts to scale the next Fib retracement at 114.38 in the run up to Japanese inflation data and post-remarks from BoJ Kuroda who adhered to pretty standard lines on currency matters. To recap, he repeated that FX rates must move in a stable fashion and reflect economic fundamentals, while the negative impact of a weak Jpy on Japanese household income may be increasing, though the benefits outweigh the demerits.

In commodities, crude benchmarks continue to see modest pressure that crept in during APAC trade; Brent is pivoting USD 75.00/bbl, with losses of circa USD 0.30/bbl. News flow has been minimal. Russia’s President Putin is making some geopolitical noises, although he is largely reiterating familiar themes. Elsewhere, Exxon’s (XOM) Baytown complex (560k BPD capacity) in Texas reported a fire at a gasoline component processing unit; reports thus far indicate no facility impact from this incident. Moving to metals, spot gold and silver remain contained as the yellow metal holds onto the USD 1800/oz mark it reclaimed amid USD weakness in APAC hours. While base metals are firmer but again within familiar ranges.

Russian President Putin says Russia meets gas supply obligations under long-term deals, prior to providing gas to spot markets; adds that Gazprom has not booked gas via the Yamal-Europe line due to a lack of requests, pipeline in reverse mode. Europe has created its own gas problems, should resolve this themselves; are prepared to assist.Germany is selling Russian gas to Poland, think it ends up in Ukraine.

Exxon (XOM) Baytown complex (560k BPD capacity) in Texas has reported a fire at the facility, according to the community alert system; Some injuries have been reported following a 'major industrial accident' at the Exxon (XOM) Baytown complex (560k BPD capacity) in Texas, via the Harris County Sheriff – No reports to evacuate/shelter in place after the fire. Based on current information, no adverse impact.

US Event Calendar

  • 8:30am: Dec. Initial Jobless Claims, est. 205,000, prior 206,000; Continuing Claims, est. 1.84m, prior 1.85m
  • 8:30am: Nov. Personal Income, est. 0.4%, prior 0.5%

    • Personal Spending, est. 0.6%, prior 1.3%
  • 8:30am: Nov. PCE Deflator MoM, est. 0.6%, prior 0.6%; YoY, est. 5.7%, prior 5.0%

    • PCE Core Deflator MoM, est. 0.4%, prior 0.4%; YoY, est. 4.5%, prior 4.1%
  • 8:30am: Nov. Durable Goods Orders, est. 1.8%, prior -0.4%

    • Durables-Less Transportation, est. 0.6%, prior 0.5%
    • Cap Goods Orders Nondef Ex Air, est. 0.7%, prior 0.7%
    • Cap Goods Ship Nondef Ex Air, est. 0.6%, prior 0.4%
  • 10am: Nov. New Home Sales MoM, est. 3.3%, prior 0.4%
  • 10am: Dec. U. of Mich. Sentiment, est. 70.4, prior 70.4

    • Current Conditions, prior 74.6
    • Expectations, prior 67.8
    • 1 Yr Inflation, est. 4.9%, prior 4.9%; 5-10 Yr Inflation, prior 3.0%;
  • 10am: Nov. New Home Sales, est. 770,000, prior 745,000
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