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Futures Coiled Ahead Of Data, Earnings Juggernaut

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US equity futures swung between gains and losses (a remarkable achievement considering the collapse in generals such as GOOGL and MSFT and last night’s 25% implosion in META, something which startled even JPMorgan’s top trader) as investors weighed disappointing tech earnings amid growing hopes of a Fed pivot and/or a Treasury buyback (Op Twist) announcement.

Contracts on the S&P 500 were little changed as of 7:30 a.m. in New York, while Nasdaq 100 futures fell 0.4% after both indexes snapped a three-day winning streak on Wednesday, dragged down by negative sentiment toward tech following a string of disappointing earnings.

In premarket trading, Nvidia led chipmakers with exposure to data centers higher after Meta Platforms said it’s planning for even bigger capital expenditures in 2023. As noted last night, Facebook Meta projected capex of $34 billion to $39 billion in 2023, up from $32 billion to $33 billion in 2022. Meanwhile, shares in social-media companies tumbled after Meta gave a lukewarm revenue forecast for the fourth-quarter amid ballooning costs, stoking worries about a slowdown in the advertising market amid a weaker economic backdrop. Meta crashed as much as 20% in US premarket trading – its second biggest drop on record; peer Snap drops as much as 1.7%, Pinterest falls as much as 3.6%. Meanwhile, Twitter traded closer to Elon Musk’s offer price of $54.20, with a court-ordered deadline to complete the $44 billion deal just one day away.  Here are the other notable premarket movers:

  • Ford shares declined as much as 2.6% in US premarket trading after narrowing its profit outlook for the year, though the move was relatively muted given the automaker had already issued a profit warning last month.
  • Wolfspeed shares tumble 24% in premarket trading after the semiconductor device company provided second-quarter revenue guidance that was worse than anticipated. Analysts are confident in the company’s longer-term vision, but see near-term headwinds clouding visibility.
  • Teladoc Health’s shares jumped as much as 11% in US premarket trading on Thursday, with analysts reassured by the telehealth company’s smaller-than-expected tweak to its 2023 guidance, making its fourth-quarter goals easier to achieve.
  • Twitter shares rise 1.2% to $53.98 in US premarket trading hours, moving closer to Elon Musk’s offer price of $54.20, with a court-ordered deadline to complete the $44 billion deal just one day away.
  • Vertiv Holdings stock gains 2.1% in premarket trading on thin volume as Cowen upgraded it to outperform from market perform, saying its confidence in the company’s “compelling” guidance has now been restored.
  • Keep an eye on Sleep Number’s stock after the air mattress manufacturer reported third-quarter results that were ahead of expectations, while issues with chip inventory and weakening consumer demand led the company to scale back earnings per share guidance for the full year.
  • Watch Silicon Laboratories as the stock was cut to hold from buy at Needham following Wednesday’s results, based on concerns regarding slowing consumer demand.

It’s another big day for US tech earnings with Amazon.com, Apple and Intel all reporting after market hours.

As Bloomberg notes, hopes for a Fed pivot rose again after a lower-than-expected rate hike from the Bank of Canada on Wednesday, while investors bet that the central bank will be less aggressive as earnings and economic data point to an economic slowdown. The 10-year US Treasury yield receded to the 4% level before bouncing slightly on Thursday, while the Bloomberg Dollar Index was at this month’s after a contraction in services and manufacturing and fewer new home sales showed the Fed’s efforts to cool the economy seem to be bearing some fruit. Still, economists expect the Fed to hike by 75 basis points for the fourth time in a row when it meets next week. Traders have cut expectations for rates to peak next year to 4.86% from 5% a week ago.

“We will hit peak inflation sometime this calendar year and then we’ll see interest rates peaking sometime early next year” ahead of a slowdown, said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty Ltd. “In that scenario, equity doesn’t look too bad. Actually, equity looks pretty well-positioned, even though we may be staring at a mild recession in the US.”

We also get the first read of US Q3 GDP shortly: while consensus still calls for a 2.4% expansion in US gross domestic product in the third quarter, a few forecasters cut their projections after Wednesday’s trade data were released, with one dropping by nearly a full percentage point. The GDP figures are due out later Thursday, along with data on durable-goods orders and weekly first-time unemployment claims.

In Europe, equities slipped before a European Central Bank rate decision. The Stoxx Europe 600 Index was weighed down by technology and mining stocks. Credit Suisse Group AG plunged as much as 16% as the bank reported its fourth straight loss and announced a huge corporate overhaul, an equity offering and massive layoffs. Oil stocks rose after Shell Plc raised its dividend and TotalEnergies SE posted a record profit. Here are the biggest European movers:

  • Shell shares gain as much as much as 5.8% as it raises its dividend after posting its second-highest profit on record, even as some parts of its business showed signs of slowing.
  • AB InBev rises as much as 6.9% after beating 3Q results estimates and raising the lower end of its growth forecast.
  • Casino shares rise as much as 30% on signs that the company’s debt burden is manageable. Rebound in shares may also be driven in part by bearish speculators reversing their bets on sharp declines in the stock this year, rather than just fresh buying by bulls.
  • Aegon shares rise as much as 9.8% after announcing it will combine its Dutch activities with ASR for a total consideration of €4.9 billion, in a move that analysts think makes strategic sense, given scope for material synergies.
  • Credit Suisse shares slumped as much as 16% after the Swiss lender reported a $4b loss and announced a massive overhaul, including thousands of job cuts, the sale of its structured products group and a capital increase to the tune of 4 billion francs.
  • European chip stocks slide on Thursday, with STMicro the biggest decliner of the group after the chipmaker guided fourth-quarter revenue slightly below consensus estimates, triggering concerns that the slowdown in semiconductor demand is spreading beyond consumer end-markets. Peer ASML drops as much as 3.7%
  • Ipsen shares fall as much as 9.7%, the most since April, after the French pharmaceuticals firm published 3Q sales numbers that beat estimates, even as revenue fell for Somatuline, a long-time key drug that’s facing increased competition from generics.
  • Inspecs shares drop as much as 50% to a record low with Peel Hunt (buy) flagging a deteriorating outlook for the eyewear firm.

In just a few minutes, the ECB is set to look past Europe’s growing recession by lifting its main interest rate by another 75 basis points to the highest in more than a decade as it battles record euro-zone inflation. The pace of increases is likely to slow to 50 basis points in December, according to economists.

“We are oriented with consensus, expecting a big hike of 75 basis points” from the ECB, Monica Defend, head of the Amundi Institute, said on Bloomberg Television. “We think they will continue being hawkish until December and then with the beginning of the new year, they might review or slow down a little bit the pace. Yesterday the Central Bank of Canada surprised the market with their final hike — we think the ECB will remain bold.”

Earlier in the session, Asian stocks were mixed, with most advancing for a third straight day, as Hong Kong shares jumped and a weaker dollar supported regional equities, while Japanese equities led declines. The MSCI Asia Pacific Index rose as much as 1.2%, lifted by technology shares, before paring its gain. Gauges in Hong Kong also trimmed their advance to less than 1%, while investors focused on a slew of earnings and awaited further policy guidance following China’s party congress. Benchmarks in Taiwan and South Korea were also higher as some chip stocks rose, with the measures buoyed by encouraging earnings beats this week including by Samsung SDI and LG Energy. The drop in the US 10-year Treasury yield and dollar this week is giving currencies and equity measures in Asia a boost, with traders looking ahead to US employment data later this week for further clues on the Fed’s rate-hike path. And with China’s historic rout on Monday on the mend and the quarterly earnings season providing some positive surprises, the Asian benchmark is close to erasing losses for the month.

“Any admission of major Western central banks having to pause or give up the inflationary fight entirely would be rather big news, potentially leading to sharp asset price reversals,” Martin W. Hennecke, head of Asia investment advisory at wealth management firm St. James’s Place, wrote in a note. If inflation really is to be addressed more seriously, there should arguably be more focus on budget deficits to be brought under better control, he added.

Japanese equities fell for the first time in four sessions, as investors assessed the latest earnings from domestic and foreign companies.  The Topix dropped 0.7% to close at 1,905.56, while the Nikkei declined 0.3% to 27,345.24. Mitsubishi UFJ Financial Group Inc. contributed the most to the Topix decline, decreasing 2.6%. Out of 2,166 stocks in the index, 576 rose and 1,484 fell, while 106 were unchanged. “There are no big surprises in Japanese earnings results,” said Takeru Ogihara, chief strategist at Asset Management One. “On the other hand, although all the results have not been released yet, US earnings are down quite a bit, so I think they may be having a greater impact.”

In India, key stocks gauges overcame volatility induced by the expiry of monthly derivative contracts and resumed their recent advance, with metals and real estate companies recovering. The gains in local shares were in line with Asian peers, which rose tracking decline in the dollar.  The S&P BSE Sensex jumped 0.4% to 59,756.84 in Mumbai, recovering from a drop of 0.1% during the session. The NSE Nifty 50 Index advanced 0.5%. All but three of the 19 sector sub-gauges compiled by BSE Ltd. ended higher.  Both key indexes have now gained in eight out of nine sessions, a period that includes the one-hour ceremonial Diwali trading on Monday. The benchmarks are now less than 3% short of their respective records set last year. Trading resumed after a holiday on Wednesday.      

 

In rates, the yield on the 10-year Treasury bond rebounded after inching below 4% earlier, with investors positioning for less aggressive rate hikes as earnings and economic data indicate a slowdown. The benchmark US yield has dropped more than 20 basis points over the past two days. A gauge of the dollar gained after two days of steep declines. On Wednesday morning, US yields cheaper by 5bp to 8bp across the curve with losses led by belly, flattening 5s30s by nearly 2bp on the day while 2s5s30s fly cheapens 4bp; 10-year yields around 4.075%, with bunds trading 1bp cheaper in the sector. The US auction cycle concludes with 7-year note sale at 1pm, while first estimate of 3Q GDP leads economic calendar. Money markets pricing around 72bp of rate hikes for ECB policy meeting, and attention will also be centered on possible changes to TLTRO loans. German bonds fell across the curve; the 10-year bund yield climbing 7bps higher to 2.89%.

In Fx, the Bloomberg Dollar Spot Index rose 0.3%, halting two days of steep losses; data due later Thursday may show the US economy rebounded in the third quarter.

  • The yen jumped to a three-week high, before paring gains, as traders geared up for a Bank of Japan policy decision on Friday. The market is abuzz with talk that the BOJ may step in to prop up the yen should the currency weaken if the central bank maintains its super-easy monetary policy as expected.
  • The pound pulled back from early gains against the US dollar to trade 0.6% lower at $1.1560; further gains could be limited given uncertainties about how a revamped UK fiscal plan could impact the economy just as it enters a recession

In commodities, oil fluctuated after touching the highest level in about two weeks after US Secretary of State Anthony Blinken said a deal with Iran would be unlikely to advance in the short term.  Traders placed bets on a soaring price for aluminum as the US considers adding the metal to sanctions against Russia, a major producer. Iron ore futures slumped to the lowest since May 2020 on concern overan economic slowdown in China.

Bitcoin is under modest pressure, downside which has increased amid the recent relative resurgence in the USD.

Looking at the day ahead, today’s big data release will be the advance reading of Q3 GDP in the US. After back-to-back negative readings earlier this year, economists see today’s print at +2.4%, a solid rebound, on the back of strong net exports that could compensate for slowing demand. We will also get the quarterly core PCE, which should provide a clue to tomorrow’s September reading. Other indicators released in the US will include durable goods orders and Kansas City Fed manufacturing activity index. In earnings, we will hear from Apple, Amazon, Mastercard, Samsung, Merck, Shell, McDonald’s, T-Mobile, Linde, TotalEnergies, Comcast, Honeywell, Intel, S&P Global, Caterpillar, AB InBev, American Tower, Gilead Sciences, EDF, Neste, STMicroelectronics, Shopify, PG&E, Repsol, EDP, Pinterest, First Solar, Credit Suisse, Deutsche Lufthansa, Hertz and Ubisoft. So a busy day with the ECB as well.

Market Snapshot

  • S&P 500 futures up 0.4% to 3,855.75
  • STOXX Europe 600 down 0.2% to 409.35
  • MXAP up 0.6% to 138.12
  • MXAPJ up 0.9% to 441.27
  • Nikkei down 0.3% to 27,345.24
  • Topix down 0.7% to 1,905.56
  • Hang Seng Index up 0.7% to 15,427.94
  • Shanghai Composite down 0.6% to 2,982.90
  • Sensex up 0.2% to 59,661.74
  • Australia S&P/ASX 200 up 0.5% to 6,845.13
  • Kospi up 1.7% to 2,288.78
  • German 10Y yield up 3.1% to 2.17%
  • Euro down 0.2% to $1.0058
  • Brent Futures up 0.3% to $95.93/bbl
  • Gold spot up 0.1% to $1,665.68
  • U.S. Dollar Index little changed at 109.74

Top Overnight News from Bloomberg

  • The yen is seeing a respite from recent heavy selling as traders reconsider the pace of US rate hikes and prepare for Friday’s key Bank of Japan policy decision.
  • It’s too soon to write off the dollar’s dominance as the US rate-hike cycle may not be near its peak. That’s the firm conviction of money managers at JPMorgan Asset Management and Fivestar Asset Management even after a gauge of the greenback touched a one-month low on Thursday.
  • Chinese President Xi Jinping said his nation is willing to work with the US to find ways to cooperate, comments that come before a potential meeting with President Joe Biden at a Group of 20 summit next month.
  • Stocks slipped and US futures pared gains as traders digested a flurry of major earnings and prepared for another jumbo European Central Bank rate hike later Thursday.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following a similar lead from Wall Street and amid a lack of fresh fundamental drivers overnight.  ASX 200 was supported by gains across its commodities-related sectors, whilst financials lagged after ANZ Bank shed over 3% post-earnings. Nikkei 225 was in the red as exporters were pressured by the recent firming in the Japanese currency against the Dollar. KOSPI saw gains across its energy, industrial, and IT names, whilst Samsung Electronics saw choppy trade after earnings before stabilising in the green. Hang Seng outperformed and the Hang Seng Tech index also surged following the recent selling – the gains were driven by Alibaba and JD.com. Shanghai Comp was firmer at the open but gains fizzled out, whilst the PBoC injected another CNY +200bln via 7-day reverse repo for a third straight session.

Top Asian News

  • Samsung Electronics (005380 KS) – Q3 2022 (KRW): Revenue 76.8tln (Co. exp. 76tln), Net profit 9.4tln (exp. 7.9tln), expects H2 2023 recovery in memory chips focused on servers and mobile; expect tech and memory chip demand to remain weak in Q4. Q3 Consolidated Net 9.14tln (exp. 9.43tln). Co. expects tech and memory chip demand to remain weak in Q4. Q4 demand for smartphones and wearables is forecast to increase Q/Q; 2023 demand for smartphones and wearables is expected to grow. (Newswires)
  • Japan is eyeing in excess of JPY 29tln in government spending on stimulus, according to NHK.
  • PBoC injected CNY 240bln via 7-day reverse repos at a maintained rate 2.00% for a daily injection of CNY 238bln.
  • China’s MOFCOM sees retail sales keeping a stable recovery, consumption expected to stabilise and recover; Foreign Ministry says China is prepared to make “vast space for peaceful unification”.

European bourses are under modest pressure, Euro Stoxx 50 -0.5%, with the region digesting earnings and largely just awaiting the ECB; FTSE 100 +0.3% outperforms post-Shell +3.5%. Sectors are predominantly in the red though, in-fitting with bourses, Energy outperforms after Shell & Total while Tech names lag following Meta and STMicroelectronics. Stateside, futures are mixed and yet to develop much traction either side of the unchanged mark, NQ -0.3% lags more corporate updates and as yields pick up. Meta Platforms Inc (META) Q3 2022 (USD): EPS 1.64 (exp. 1.88), Revenue 27.71bln (exp. 27.38bln). Facebook DAUs 1.98bln (exp. 1.86bln). Facebook MAUs 2.96bln (exp. 2.97bln). META average price per ad -18% (exp. -15.3%). Co. said it faces near-term challenges on revenue, and sees reality labs op losses in 2023 significantly higher. CFO said revenue from large advertisers remain challenged, while revenue among smaller advertisers remain more resilient. -20% in the pre-market. Ford Motor Co (F) Q3 2022 (USD): EPS -0.21 (exp. 0.27), Revenue 39.4bln (exp. 36.25bln); Raises FY22 FCF outlook to 9.5-10bln (prev. 5.5-6.5bln); sees FY adj. EBIT around USD 11.5bln (prev. 11.5-12.5bln). -2% in the pre-market

Top European News

  • Credit Suisse to Raise $4 Billion to Fund Sweeping Overhaul
  • Campari 3Q Adjusted Ebit Beats Estimates
  • Putin-Linked Celebrity Journalist Sobchak Flees Russia
  • Bankers Grill Erdogan’s Lieutenants Over Risky Build-Up of Bonds
  • Egypt’s Pound Weakens About 10% Versus Dollar After Policy Shift
  • Made.com Abandons Hope for Rescue Buyer as Collapse Looms
  • Is Putin Strangling Russia’s Golden Gas Goose? The IEA Thinks So

FX

  • Buck stops the rot as rival currencies retreat ahead of risk events, including ECB and top tier US data, DXY tops 110.00 vs bottom near 109.500.
  • Euro and Sterling fade just shy of 1.0100 and 1.1650 respectively and in proximity to key technical levels.
  • Aussie undermined by a sharp fall in iron ore and renewed Yuan weakness; AUD/USD down from 0.6500+ peak and eyeing 0.6450, USD/CNH up from circa 7.1640 to 7.2630 or so.

Fixed Income

  • Bonds wane after forging fresh midweek recovery peaks.
  • Bunds reverse around one full point from just over 139.00 pre-ECB.
  • T-note turn tail from 111-05+ to 110-21+ as 4% cash yield holds ahead of US GDP, IJC and Durable Goods.
  • Gilts buck trend and retest 102.000 again amidst reports that UK PM Sunak may hike taxes and cut spending to make budget savings.

Commodities

  • A contained session for the commodity space with markets generally tentative and mixed awaiting the afternoon’s risk events of which the ECB takes centre stage.
  • Crude benchmarks are essentially unchanged on the session and have slipped marginally from best levels of USD 88.50/bbl and USD 96.20/bbl for WTI Dec’22 and Brent Jan’22 respectively.
  • Spot gold spent much of the morning firmer as the DXY waned below 110.00, but as the index reclaims the figure the yellow metal has been tarnished in turn and has slipped back below the 21-DMA though remains above the 10-DMA.
  • Biden admin reportedly reviewing plans for a Russian oil price cap, according to Bloomberg citing sources. Under earlier plans, a price cap in the range of USD 40-60/bbl was mulled, but sources suggested discussions involve a cap at the higher end of that range and above. No decision is expected before the US mid-term elections.

Central Banks

  • RBNZ Governor Orr said New Zealand is relatively well positioned, but inflation is still too high in an absolute sense; has eyes firmly focused on meeting inflation target, via Reuters.
  • Westpac’s Evans is forecasting a 50bp rate hike from the RBA next week (vs market expectations for 25bps hike).
  • Brazilian Selic Interest Rate 13.75% vs. Exp. 13.75% (Prev. 13.75%). BCB will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected; it will stay vigilant, and policy can be adjusted, via Reuters and Bloomberg.
  • CBRT raises its year-end inflation estimate to 65.2% from 60.4%.

Geopolitics

  • US has accelerated the fielding of a more accurate version of its mainstay nuclear bomb to NATO bases in Europe, according to a US diplomatic cable and two people familiar with the issue, via Politico.
  • Ukraine has boosted its forces in the northern region to counter the potential attack from Belarus, according to Ukraine’s general staff, via Reuters.
  • Chinese President Xi said, “the Chinese and American peoples have many things in common, and can become good friends and partners for mutually beneficial cooperation.”, according to CCTV
  • US Air Force is to replace its entire fleet of F-15 jets in Okinawa, Japan with a rotational force, via FT; officials cited are concerned this will send a dangerous signal to China re. deterrence.

US Event Calendar

  • 08:30: 3Q GDP Annualized QoQ, est. 2.4%, prior -0.6%
    • 3Q PCE Core QoQ, est. 4.5%, prior 4.7%
    • 3Q GDP Price Index, est. 5.3%, prior 9.0%
    • 3Q Personal Consumption, est. 1.0%, prior 2.0%
  • 08:30: Sept. Durable Goods Orders, est. 0.6%, prior -0.2%
    • Sept. -Less Transportation, est. 0.2%, prior 0.3%
    • Sept. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.4%
    • Sept. Cap Goods Orders Nondef Ex Air, est. 0.3%, prior 1.4%
  • 08:30: Oct. Initial Jobless Claims, est. 220,000, prior 214,000
    • Oct. Continuing Claims, est. 1.39m, prior 1.39m
  • 11:00: Oct. Kansas City Fed Manf. Activity, est. -2, prior 1

DB’s Jim Reid concludes the overnight wrap

I’ll visit our new offices in NY for the first time today as DB hosts a macro conference at which I’m the keynote speaker. I’ve been told that it’s one of the best offices on the buy- or sell-side in Manhattan, so I have high expectations.

While I’ve been in NY, attempts to price in a Fed pivot have gathered pace and continued yesterday after we had a smaller-than-expected hike from the BoC (+50bps vs +75bps expected, taking the overnight lending rate target to 3.75%). That followed the central bank’s expectations of lower inflation and growth on the back of higher rates and subsiding price pressures. Markets got the read-through to the Fed given that the BoC was the first to hike and go in larger increments this cycle, so we saw another day with 2-7bps declines in Fed pricing for 2023 meetings. However, equities struggled even with the continued pivot discussion (S&P 500 -0.74%, Nasdaq -2.04%) given the previous night’s poor tech earnings. That theme continued after the bell as Meta fell -19.70% in after-hours given a weaker revenue outlook and metaverse-related results. This morning futures tied to the S&P 500 (+0.51%) and the NASDAQ 100 (+0.43%) are moving higher, brushing off Meta’s disappointing results. The focus today (outside the ECB meeting) will be on Apple, the world’s most valuable public company at a c.$2.4tn market cap, and Amazon, ranked 5th globally with a market cap of $1.2tn, with both reporting after hours. My purchase of the new iPad Pro yesterday on its release day in NY won’t yet filter into Apple’s results! Intel will also report after hours today following Samsung’s (+0.17%) profit miss this morning (more below).

Back to the pivot discussion, unsurprisingly US bonds reacted by rallying across the curve, including a -5.6bps decline for the 2y yield and a -9.9bps move lower for the 10y. This morning in Asia, yields on 10yr USTs are slightly rebounding (+1.45 bps), trading at 4.02% as we go to press. Given that the ECB is far behind both the Fed and the BoC in its tightening cycle, the pass-through to European yields was more limited. The front-end yields in key markets were mixed (-2.2bps for Germany, -1.2bps in France and +0.2bps in Italy) in anticipation of today’s meeting, with the global move felt a bit more at the longer end (10y Bund -5.7bps, 10y OATs -5.1bps and 10y BTPs -5.0bps). Given the US pivot discussion, the euro strengthened +1.1% against the dollar to above parity for the first time in around 6 weeks, with the DXY index falling by -1.11%.

Speaking of the ECB, the central bank is due to announce its interest rate decision today. Our European economists expect another +75bps hike, which would take the deposit rate to 1.5%, but in their preview here they also outline that it’s the runoff of ECB’s EUR 8.8tn balance sheet that will be the focal point for markets. The team expect QT to be discussed at this meeting but without a decision being made until December. The process will likely be gradual amid concerns over stability and fragmentation ansd will kick off in April, after rates are at the terminal level. They also see the central bank taking measures to encourage early TLTRO repayments today. Beyond today’s meeting, our European economists see rates moving higher by +75bps in December, +50bps in February and +25bps in March, taking the terminal rate to 3%. This is in line with their expectations of a hawkish tone at today’s meeting that potentially would not exclude a possibility of another +75bps in December. Yesterday they put out a note looking at whether the central bank has the capacity to maintain its hiking pace here.

The US equity sell-off discussed earlier accelerated after Europe went home. Sectors like energy (+1.36%), health care (+1.12%) and materials (+0.67%) were the top performers in the S&P 500 after commodity stocks got a boost from a rally in oil (WTI +3.04% and Brent +2.32%). Understandably, IT (-2.23%) and communications (-4.75%) were the heaviest decliners amidst the largest daily declines since March 2020 for Alphabet (-9.63%) and Microsoft (-7.72%). That heavyweight laggard bias actually left roughly 57% of S&P 500 members in the green by the close. In earnings before the closing bell, non-tech stocks gave some relief to investors after a beat and upside guidance tweaks from Kraft Heinz (-0.4%) and Thermo Fisher Scientific (-2.26%). Earnings beats from Universal Health (+13.1%), Hess (+4.82%) and Visa (+4.60%) put them among the top of S&P 500 firms in terms of daily gains. Meanwhile, Boeing (-8.89%) disappointed by missing on revenue and decreasing deliveries forecast.

European stocks managed to post solid gains before the mood soured a bit in the US. The Stoxx 600 was up by +0.66% amid advances in materials (+1.55%), industrials (+1.53%) and healthcare (+1.00%). On a country level, Germany (DAX +1.09%) and Spain (IBEX35 +0.97%) outperformed but most other major bourses (CAC 40 +0.41%) were in the green as well for the day. There weren’t many economic data catalysts yesterday but consumer confidence for France beat consensus of 77 by rising to 82 from 79 last month. Similar gauges are due from Germany and Italy this morning.

In the UK, we had news of the medium fiscal plan being pushed back to November 17th from October 31st, which didn’t prevent a -13.8bps slide in 2y gilts and a drop of 5-10bps in BoE pricing for the next few meetings, including the one next Thursday. A return to credibility has bought the government time which in turn has allowed them to delay the fiscal plan to take advantage of the lower rates seen in the last couple of weeks which will help reduce the size of the fiscal hole that the OBR will report on. The long end rallied too, with 10y yields falling by -6.1bps. Meanwhile, sterling strengthened by +1.33% against the dollar and the FTSE 100 gained +0.61%.

In US data, the advanced goods trade balance for September came in at -$92.2bn, wider than the median Bloomberg estimate of -$87.5bn and wholesale inventories MoM growth also missed (+0.8% vs +1.0% expected). Both could negatively reflect on today’s first reading of Q3 GDP. New home sales, on the other hand, surprised on the upside by coming in at 603k vs 580k expected but it was still a -10.9% MoM decline.

Asian equity markets are mixed this morning. As I type, the Hang Seng (+2.15%) is leading gains across the region after jumping more than +3% in early trade following a broad rally in the Chinese listed tech stocks. Meanwhile, the KOSPI (+1.29%) is also trading in positive territory despite South Korea’s GDP growth decelerating in 3Q22 (more below). Elsewhere, the Nikkei (-0.26%) and the CSI (-0.12%) are trading lower with the Shanghai Composite (-0.06%) just below flat.

Early morning data showed that South Korea’s 3Q GDP grew +0.3% q/q (v/s +0.3% expected), recording its slowest growth since the third quarter of 2021, as the economy is losing momentum due to elevated inflation and global policy tightening denting demand both at home and abroad. It followed a +0.7% gain in the preceding quarter. Elsewhere, China’s industrial profits for January to September fell -2.3% y/y compared to a -2.1% drop recorded in the preceding month.

In company news, Samsung Electronics registered a 31.39% drop in operating profit for the third quarter to 10.85 trillion won ($7.67 billion) from 15.8 trillion won in the same period a year earlier. Additionally, the company announced that geopolitical uncertainties are likely to dampen demand until late 2023, as the global economic downturn slashed appetite for electronic devices.

Today’s big data release will be the advance reading of Q3 GDP in the US and our economists preview the data drop here with a telling title “More trade tricks than growth treats.” After back-to-back negative readings earlier this year, the team sees today’s print at +3.0%, a solid rebound, on the back of strong net exports that could compensate for slowing demand. We will also get the quarterly core PCE, which should provide a clue to tomorrow’s September reading.

Other indicators released in the US will include durable goods orders and Kansas City Fed manufacturing activity index. In earnings, we will hear from Apple, Amazon, Mastercard, Samsung, Merck, Shell, McDonald’s, T-Mobile, Linde, TotalEnergies, Comcast, Honeywell, Intel, S&P Global, Caterpillar, AB InBev, American Tower, Gilead Sciences, EDF, Neste, STMicroelectronics, Shopify, PG&E, Repsol, EDP, Pinterest, First Solar, Credit Suisse, Deutsche Lufthansa, Hertz and Ubisoft. So a busy day with the ECB as well.

 

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