Weekly Market Update: Volatility persists as market surprises continue to come fast and furious
Global stock markets experienced an exceedingly volatile week of trade as unexpected economic and political developments continued apace. A surprise rate cut by China’s PBOC was overshadowed by President Biden’s Sunday announcement that he was dropping out of the race. Democrats began lining up with endorsements of Kamala Harris, especially from state Governors who essentially threw their hats in the ring for the VP spot. No formidable challengers emerged and by the end of the week Harris appeared to have locked up the nomination, getting the Obamas’ endorsement on Friday. Nevertheless, debate over the ‘Trump-trade’ lingered, with continued outperformance in small cap value relative to mega-cap technology shares. Others pointed back to the cool June CPI and the subsequent string of soft data points which have forced the market to price in Fed rate cuts later this year as the main factor underpinning the rotation.
Steepening of the US yield curve accelerated notably with the 2- 10-year spread popping above -15 bps as the VIX rose sharply through Thursday. A letter from former NY Fed President Dudley may have increased investors’ willingness to position for a Fed rate cut. The Bank of Canada cut rates at the second straight meeting while global PMI readings continued to point to some softening outside of services. Pulte’s home orders came in below analyst consensus before June existing home sales missed expectations, despite supply rising to levels not seen since the beginning of the pandemic. Richmond Fed data was also decidedly weak after several major industrial and chemicals companies cut their outlooks. June PCE data revealed “further progress” for the Fed and echoed what investors have heard on a host of quarterly conference calls, where discretionary spending has come under increased pressure as a softening consumer is clearly pushing back against price hikes after years of inflation.
Bitcoin prices climbed ~5% this week into an appearance by former President Trump at a popular crypto conference. Speculation swirled his campaign would unveil a plan for a national strategic Bitcoin reserve. The dollar was largely steady as investors pondered what a second Trump administration could mean for the longer term trajectory of USD exchange rate. The Yen continued to rise amid speculation the BOJ could hike rates next week. USD/YEN briefly dipped towards the 200-day moving average for the first time since early January. Gold prices and the S&P 500 test below the 50-day moving averages this week before both bounced back on Friday. WTI crude prices fell for the third straight week. Equities indices performance reflected the ongoing rotation, with the DJIA gaining 0.8% and Russell surging 3.3%, while the S&P lost 0.8%, and the NASDAQ dropped 2.1%.
In corporate news this week, earnings news remained at center stage with stocks getting greatly rewarded or punished based on results and guidance. Key earnings reports from Google and Tesla did little to curtail volatility. Risk off trade resurfaced in a major way after Tesla missed estimates and Google's YouTube ad revenues missed the mark. AI enthusiasm clearly waned after Google didn't get as granular and or show as much headway on AI monetization efforts as investors may have hoped. Ford Motor saw shares tumble after a big earnings miss as the company continues to lose tens of thousands of dollars on each EV it produces. 3M shares surged on Friday morning after the firm posted a big earnings beat, despite noting that consumer discretionary demand for hardline goods remains soft and industrial end markets are mixed.
MON 07-22
(CN) CHINA PBOC CUTS STANDING LENDING FACILITY (SLF) RATES BY 10BPS FOR THE OVERNIGHT, 7-DAY AND 1-MONTH MATURITIES (1st cut since Aug 2023)
(CN) China to extend tariff exemptions for imports of some US products until Feb 28th, 2025
(UK) UK Chancellor of the Exchequer (Fin Min) Reeves: Will run UK economy with "iron discipline"; Suggest to give public sector workers an above-inflation pay raise to help end a wave of strikes and strife – press
(US) Democratic National Convention's Rules Committee said to meet on Wed, July 24th in the afternoon to implement a framework to select a new nominee - WSJ
(US) Democratic National Convention Chair Harrison: If only one candidate reaches 300 delegate threshold, virtual voting could happen as early as Aug 1st; Democratic Party will deliver a Presidential Nominee by Aug 7th - US press
(US) VP Harris has enough pledged delegates (verbal commitments) for Democratic Presidential nomination during the first round of voting, expected between Aug 1st and 7th ahead of DNC - press
Reportedly investors could be underestimating the risk that surging shipping costs will push up inflation and slow the pace of interest rate cuts by the ECB and BOE - FT citing economists
LOGI Reports Q1 $1.13 v $0.89e, Rev $1.09B v $1.03Be; Raises FY25 outlook
MAT L Catterton said to have approached Mattel with buyout offer – press
RYA.IE Reports Q1 Net €360M v €512Me (2 est), Rev €3.63B v €3.69Be; Have 'almost zero' Q3 and Q4 visibility; See a bit of push back from consumers on fares; They are a bit more frugal and cautions
TUES 07-23
(FR) French Pres Macron calls for a “political truce” during the summer Olympics in Paris; Reportedly Macron may Not appoint a new head of French govt until after the Olympic games end on Aug 11th - press (update)
(RU) Russia Dep PM Novak: Russia to reinstall gasoline exports ban from Aug 1st; Considering extending the restriction into the autumn
(US) House investigation finds drug middlemen that promise to control costs have instead steered patients toward higher-priced medicines and affiliated pharmacies; PBMs push patients to pricier medicines – WSJ
(US) Tier1 analysts July Spending Survey (conducted July 9-15th): Plans to buy a New Home over the next 12 months remain at 20%+ levels despite the decline from 24.0% in June; More respondents are noticing the most dramatic price increases at Restaurants/bars sequentially and y/y
(US) Redfin: U.S. home prices +0.2% in June, the smallest m/m increase since Jan 2023; Prices in June were still up 6.9% y/y, the lowest annual growth since Jan 2024.
(US) VP Harris confirms she has enough delegates to get Democratic nomination
522.HK Reports Q2 (HK$) Net 135.1M v 208.2Me, Rev 3.34B v 3.24Be; Guides Q3 Rev $370-430M v $503Me; Cuts interim dividend; Announces first orders for hybrid bonding aligned to HBM
7211.JP Reports Q1 Net ¥29.5B v ¥48.0B y/y, Op ¥35.5B v ¥45.2B y/y, Rev ¥627.5B v ¥635.9B y/y
ACI Reports Q1 $0.66 v $0.66e, Rev $24.3B v $24.1Be
AIR.FR CEO Faury: Clients are vocal that they need planes; No slowdown in demand for commercial aircraft; Not aware of any shortage on aluminum - comments from Farnborough International Airshow
AKZA.NL Reports Q2 adj EBITDA €400M v €397M y/y, Rev €2.78B v €2.74Be; Adjusts outlook towards lower end
ALO.FR Reports Q1 Rev €4.4B v €4.4Be; Affirms FY24 outlook
BA Spokesperson: Confirms Boeing has resumed deliveries of 737 Max planes to China - Aviation Week
GE Reports Q2 $1.20 v $0.97e, Rev $8.22B v $8.38Be; Raises FY eps and cuts rev outook
GM Reports Q2 $3.06 v $2.64e, Rev $48.0B v $44.9Be; Raises outlook
GOOGL Reports Q2 $1.89 v $1.85e, Rev $71.4B v $70.6Be; "Innovating at every layer of the AI stack"
GOOGL *TTN Earnings Call Summary: Our AI infrastructure and generative AI solutions for cloud customers have already generated billions in Rev; Some of AI models' use cases are seeing traction; Expects quarterly Capex to remain at or above Q1 of $12B (v $13B in Q2); Seeing tremendous momentum from our AI investments; Decided to commit to a new multiyear investment of $5B in Waymo
JCI To sell Residential and Light Commercial HVAC businesses with Hitachi to Bosch Group for $6.7B; Reports prelim Q3 adj EPS slightly ahead of its previously issued guidance range v $1.08e (prior $1.05-1.10); Has begun working on a comprehensive restructuring plan to minimize dilution post-close
KO Reports Q2 $0.84 v $0.80e, Rev $12.4B v $11.9Be; Organic Rev +15%, Raises guidance
LMT Reports Q2 $6.85 v $6.45e, Rev $18.1B v $17.1Be; Raises outlook
MC.FR Reports H1 Net €7.3B v €8.4B y/y, Rev €41.7B v €42.5Be; Q2 Organic Rev +1% y/y v 2.9%e
RR.UK CEO: Supply chain environment is worst possible; Making good progress on mid-term targets as they are front-end loaded - comments from Farnborough Air Show
TSLA Reports Q2 $0.52 v $0.62e, Rev $25.5B v $25.1Be; Notes overall consumer sentiment improved; Plans for new vehicles remain on track for production in H1 2025; Timing of Robotaxi deployment depends on technological advancement and regulatory approval
TSLA Exec & CEO Musk: Confirms Robotaxi unveiling to be October 10th (prior: Aug); Does not make sense to invest in Mexico if Trump puts heavy tariffs on vehicles produced in Mexico - earnings call comments
TXN Reports Q2 $1.22 v $1.16e, Rev $3.82B v $3.80Be
TXN TTN Earnings Call Summary: Would say industrial, some of the sectors are forming a bottom; In auto, this is our third quarter of decline; We are a very unique supplier in the sense of we can provide the capacity at scale, meaning the amount of wafers and the size of our - the capacity that we are building is very high; It is a mistake to assume China is only doing simple chips
UPS Guides H2 domestic Rev growth 5.0% - earnings's slides
UPS Reports Q2 $1.79 v $1.98e, Rev $21.8B v $22.3Be; Restarts share buyback with around $500M for 2024 and $1B annual target; Expect to return to profitable growth
UPS CEO: Shippers chose ground over air services and SurePost over ground; 'Growth rate will not be as high as we projected in the beginning of the year' - earnings call comments
V TTN Earnings Call Summary: Saw a slight moderation in lower consumer segment, little bit correlated to some of the volume numbers that we are seeing in the quarter related to credit versus debit; Growth in the high-spend consumer segment remained stable compared to prior quarters
V Recent July 1-21st U.S. Payments Volume Growth was around +4% y/y v +6% y/y during June - earnings supplement
WED 07-24
(CA) BANK OF CANADA (BOC) CUTS INTEREST RATES BY 25BPS TO 4.50%; AS EXPECTED
(FR) French leftist alliance proposes anti-money laundering specialist Lucie Castets as candidate for new PM - press (update)
(FR) FRANCE JULY PRELIMINARY MANUFACTURING PMI: 44.1 V 45.9E (below all estimates, lowest since Jan 2024, 18th consecutive contraction); Notes the fastest increase in selling prices over the last three months
(JP) Further speculation Bank of Japan (BOJ) to consider rate hike next week; Reportedly 'long way to go' before rates are neutral; BOJ also set to unveil a plan to roughly halve bond purchases in coming years when it meets next week - press
(NZ) New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029 and 2035 bonds
(UK) JULY PRELIMINARY MANUFACTURING PMI: 51.8 V 51.0E (3rd consecutive expansion and highest since July 2022)
(UR) Ukraine Foreign Min Kuleba signaled readiness to resume negotiations with Russia during China visit and said Ukraine is prepared to negotiate in good faith, though it has seen no sign of that from Russia side - SCMP
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast from 2.7% to 2.6%
(US) JUN NEW HOME SALES: 617K V 640KE
(US) JUN PRELIMINARY WHOLESALE INVENTORIES M/M: 0.2% V 0.5%E
(US) Redfin: Nearly two-thirds (64.7%) of homes that were on the market in June had been listed for at least 30 days without going under contract v 59.6% y/y (highest share for any June month since 2020)
(US) Philadelphia Fed: In Q1, share of credit card balances 30 days and 90 days past due climbed to the highest levels in data back to 2012 (update)
(US) Former NY Fed Pres Dudley: Fed should cut, preferably at next week’s policy-making meeting; Although it might already be too late to fend off a recession; I’ve long been in the 'higher for longer' camp; The facts have changed, so I’ve changed my mind
(US) JULY PRELIMINARY S&P MANUFACTURING PMI: 49.5 V 51.7E (1st contraction since Dec 2023); Business confidence in the outlook falling for a second month, fueled in part by rising political uncertainty ahead of US Presidential Election
000660.KR Reports Q2 (KRW) Net 4.12T v 3.79Te; Op 5.47T v 5.24Te; Rev 16.4T v 16.1Te; PC memory chip demand recovery may be relatively weaker than initial expectations in H2; Expects to mass produce 12-layer HBM3E in Q3 and ship during H2
AKZA.NL CEO: European and US tariffs on Chinese chemicals imports could drive up prices for Western consumers; Tariffs are dangerous when used as economic warfare
CA.FR Reports H1 Adj €0.46 v €0.42 y/y, Recurring Op €743M v €700M y/y, Rev €40.6B v €45.5B y/y
COF Reports June net charge-offs 5.93% v 6.13% m/m; Domestic Card delinquencies: 4.14% v 4.13% m/m (update)
EZJ.UK CEO: Not seeing any signs of softening in demand - post earnings call
F Reports Q2 $0.47 v $0.64e, Rev $47.8B v $47.8Be; Raises FCF outlook
FI Reports Q2 $2.13 v $2.09e, Rev $5.11B v $4.81Be
GILD Full efficacy and safety results for Gilead Investigational Twice-Yearly Lenacapavir for HIV Prevention presented at AIDS 2024; PURPOSE 1 data showed zero infections and 100% Efficacy and Superiority of Lenacapavir to background HIV Incidence and Daily Truvada® for PrEP; PURPOSE 2 results expected late 2024/early 2025
IBM Reports Q2 $2.43 v $2.16e, Rev $15.8B v $15.6Be; Affirms FY24 Rev; Raises FCF
IBM Exec: Raises FY24 software segment outlook; Continued discretionary spending constraints impacted backlog realization during Q2 - earnings call comments
KER.FR Reports H1 Net €878M v €1.8B y/y, Recurring Op €1.6B v €2.7B y/y, Rev €9.02B v €10.1B y/y
LW Reports Q4 $0.78 v $1.24e, Rev $1.61B v $1.71Be; Guides initial FY25 EPS well below ests; Notes market share losses and a slowdown in restaurant traffic in US and many of its key international markets were greater than we expected
RCO.FR CEO: No sign of recovery in sales to end-costumers in Americas yet; July started better in the US, but unclear if this will continue - post earnings comments
RHM.DE Confirms ammunition factory to be built in Ukraine, receives low three-digit million euro range order to deliver a production line; To be completed within a few years; Intends to start ammunition production in Ukraine within 24 months; Rheinmetall will also be responsible for operating the plant
TSEM Reports Q2 $0.53 v $0.52 y/y, Rev $351M v $327M y/y; Experiencing a robust, rapidly expanding demand from both existing and new customers within the optical space
VRT Reports Q2 $0.67 v $0.59e, Rev $1.95B v $1.94Be; Raises outlook again
THRS 07-25
(CN) China reportedly to allocate CNY300B (~$40B) of special bonds in trade-in program; Discloses for the first time amount of funds targeted for an initiative to give a makeover to China's stock of industrial and household equipment - press
(JP) JAPAN JULY TOKYO CPI Y/Y: 2.2% V 2.3%E; CPI (EX-FRESH FOOD) Y/Y: 2.2% V 2.2%E
(US) JUN PRELIMINARY DURABLE GOODS ORDERS: -6.6% V +0.3%E (below all estimates); DURABLES (EX-TRANSPORTATION): 0.5% V 0.2%E
(US) INITIAL JOBLESS CLAIMS: 235K V 238KE (moves off 1-year high last week); CONTINUING CLAIMS: 1.851M V 1.868ME
(US) Q2 ADVANCE GDP ANNUALIZED Q/Q: 2.8% V 2.0%E; PERSONAL CONSUMPTION: 2.3% V 2.0%E
(US) Q2 ADVANCE GDP PRICE INDEX: 2.3% V 2.6%E; CORE PCE Q/Q: 2.9% V 2.7%E
(US) BOFA INSTITUTE: WEEK-TO-JULY 20TH TOTAL CARD SPENDING -0.3% Y/Y V -0.5% AVERAGE IN JUNE; Online retail spending around Prime Day (including other retail promotions) appears to be tracking slightly ahead of 2023
(US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.162% V 4.276% PRIOR, BID-TO-COVER RATIO: 2.64 V 2.58 PRIOR AND 2.56 OVER THE LAST 12
(UK) UK Chancellor of the Exchequer (Fin Min) Reeves reportedly urged by UK Treasury to impose flat 30% rate of tax relief, raising levy for higher rate payers - UK press
005380.KR Reports Q2 (KRW) Net 3.97T v 3.40Te (3.24T y/y); Op 4.28T v 4.20Te (4.24T y/y); Rev 45.0T v 44.2Te (42.3T y/y);
ABBV Reports Q2 $2.65 v $2.67e, Rev $14.5B v $14.0Be; Raises EPS outlook
BT.A.UK Q1 Trading Update: Adj EBITDA £2.06B v £2.03B y/y, Adj Rev £5.05B v £5.16B y/y
DECK Reports Q1 GAAP $4.52 v $3.59e, Rev $825.3M v $805Me; Raises FY EPS guidance
DOW Guides Q3 Rev $11.1B v $11.0Be; Regional demand remains resilient in the U.S; Global industrial growth remains largely unchanged, hampered by weaker building & construction and durable goods end-markets - earnings slides
EMN Reports Q2 $2.15 v $1.99e, Rev $2.36B v $2.37Be; Continue to see little evidence for end-market demand improvement in H2 2024, but benefiting from the end of destocking
GOOGL OpenAI plans to launch an experimental search product as it takes aim at Google - press
META Reportedly to be hit with first EU antitrust for linking marketplace and Facebook – press
NESN.CH Reports H1 (CHF) Net 5.6B v 5.6B y/y, Underlying Trading Op 7.8B -0.8% y/y, Rev 45.0B v 46.2B y/y; Cuts EPS outlook citing pricing come down faster than expected
NOC Reports Q2 $6.36 v $5.95e, Rev $10.2B v $10.1Be; Raises guidance
NYCB Reports Q2 -$1.05 v -$0.38e, Rev $671M v $701Me
ROG.CH Reports H1 (CHF) Core EPS 10.23 v 10.10 y/y, Core Op 11.3B v 10.9B y/y, Rev 29.8B v 29.8B y/y; Raises EPS outlook
RTX Reports Q2 $1.41 v $1.29e, Rev $19.7B v $19.3Be; Raises Rev, EPS, but cuts FCF outlook
SAN.FR Reports Q2 Business EPS €1.73 v €1.66e, Rev €10.7B v €10.87Be; Raises guidance
STLA Reports H1 Net €5.6B v €10.9B y/y, Rev €85.0B v €98.4B y/y; Notes price adjustments were possible in order to unload excess supply
TRU Reports Q2 $0.99 v $0.98e, Rev $1.04B v $1.02Be; Raises guidance
UNA.NL Reports H1 Rev €31.1B v €31.0Be; Productivity programme underway and separation of Ice Cream unit on track to be completed by end-2025
VOD.UK Q1 Trading Update: EBITDAaL £2.68B v £2.63B, Rev €9.04B v €8.79B y/y
FRI 07-26
(EU) ECB Jun Consumer Expectation Survey: 1-year CPI Expectations: 2.8% v 2.8% prior
(US) Atlanta Fed GDPNow: Initial Q3 GDP forecast at 2.8%
(EU) EU reportedly transfers €1.5B in profits from Russian assets to Ukraine – press
(US) US State Dept spokesperson: US does not believe that the Russian and Chinese bombers intercepted by US and Canadian fighter jets near Alaska posed a security threat (update)
(US) Tier1 week-to-July 25th US Truckload Demand Indicator for shippers' 0- to 3-month freight demand outlook increased to 53.2 v 50.0 prior; Some consumer Products Shipper feels a market bottom has been reached
(US) Tier1 analysts still expect the first Fed rate cut to begin in Dec 2024, do not think it is willing to signal Sept is a done deal; Think markets are back to being overly optimistic about the upcoming cutting cycle
(US) JUN PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 2.5% V 2.4%E (lowest annual pace since Feb 2024, but Core PCI Y/Y remains sticky)
(US) JUN PERSONAL INCOME: 0.2% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.3%E
AMS.CH Reports Q2 -€0.04 v -€5.14 y/y, adj EBIT €56M v €50M y/y, Rev €819M v €823Me; Sees weakening demand for its automotive semiconductor products in view of the recently reduced global light vehicle production forecast for H2 2024
BAS.DE Reports Q2 adj EBIT €969M v €1.03Be , Rev €16.1B v €17.3B y/y; Highlights weakness in its agricultural segment; Expects slight increase in demand in Asia and North America in H2, but there are risks from a stronger price reduction and lower volume growth than expected
CRI Reports Q2 $0.76 v $0.45e, Rev $564.4M v $567Me; Cuts again outlook citing market conditions were unexpectedly weaker in Q2; U.S. Retail segment were lower due to fewer visits and lower conversion rates; Notes cash flow through June trended better than planned
JPM Said to 'pitch' in-house AI Chatbot called LLM Suite as research analyst; JPM executives told staff LLM Suite can help them with writing, idea generation and summarising documents – FT
MBG.DE Reports Q2 Net €3.06B v €3.64B y/y, adj EBIT €4.05B v €5.21B y/y, Rev €36.7B v €38.2B y/y; Notes in China, it has a cautious view on the macroeconomic sentiment and fierce competition; Seeks to hold and defend pricing at current levels
MMM Reports Q2 $1.93 v $1.66e, Rev $6.26B v $5.89Be
MMM Consumer discretionary demand for hardline goods remains soft; Industrial end markets mixed; end customers remain cautious; Saw strength in electronics - earning slides
WCH.DE Reports Q2 EBITDA €160.1M v €156.7Me, Rev €1.47B v €1.50Be; Seeing first signs that economy is recovering and a gradual increase in demand again in some areas