Weekly Market Update: Markets remain squarely focused on the light at the end of the tunnel, despite warnings of a dark winter
Positive developments related to coronavirus vaccines and rekindled hopes on the US fiscal stimulus front breathed fresh life into risk assets this week. The Dow and S&P posted fresh all-time highs yet again while US Treasury yields backed up to the highest rates since March. The Dollar remained under notable pressure, highlighted by the Euro which punched through the 1.20 mark, providing a broad tailwind for gold and US multinationals. Crude oil tracked to the highest levels this spring as OPEC+ producers reached a deal to gradually raise output by 500K bpd per month, beginning in early 2021.
Friday’s November employment report underscored how the renewed surge in coronavirus cases and restrictions has weighed on services demand. A drop in the participation rate and a continued rise in long-term unemployment signaled some out of work Americans have given up looking for a job. The news was seen by many to support the need for urgent action on new fiscal stimulus and, along with surprising strong wage growth, kept upward pressure on US Treasury yields. The 2-10 year yield spread topped 80 basis points for the first time since February 2018 as the 10-year yield reached its highest level since March. The Greenback stabilized at two-year lows ahead of the data but its footing remained tenuous. For the week, the S&P gained 1.7%, the DJIA added 1%, and the Nasdaq was up 2.1%.
In corporate news this week, Salesforce confirmed a deal to acquire work communications platform Slack for $27.7B in cash and stock. Nikola signed a memorandum of understanding with GM, but the partnership did not include an equity stake or development of its Badger truck, which sent Nikola shares sharply lower. Zoom reported blow-out numbers and raised its outlook, but the beat was not enough to support its rich share price. Micron raised its guidance amid strong datacenter demand and the chipmaker said it was tracking ahead of schedule on mitigating Huawei matters. Reports said that AT&T plans to make the entire 2021 Warner Bros film slate available on HBO Max streaming service starting on the same day as their theatrical releases, which weighed on movie theater names. Discovery announced its streaming service Discovery+ would launch in January and most Verizon customers would receive the plan free for one year. Chevron cut its long-term capex plan significantly, while Exxon also reduced its five-year spending outlook. Moderna affirmed plans to have 20M COVID vaccine doses available in US by the end of 2020 and also pointed to new data that suggests the vaccine generates durable neutralizing antibodies. S&P Global agreed to buy IHS Market in the year’s largest all-stock deal, valued at $44B, combining two of the biggest providers of data to Wall Street. Pfizer and BioNTech's COVID-19 vaccine received the world's first approval in the UK and will be available there beginning next week.
SUN 11/29
PFE Reportedly UK govt expects to approve Pfizer/BioNTech COVID-19 vaccine 'withing days'; rollout could begin as soon as Dec 7 - FT
*(CN) CHINA NOV MANUFACTURING PMI (GOVT OFFICIAL): 52.1 V 51.5E (9th month of expansion and highest since Sept 2017)
883.HK US President Trump said to be planning to add CNOOC and SMIC to defense blacklist of alleged China military companies - press
MON 11/30
USD/CNY China calls on US to drop claim that the yuan (CNY) is undervalued, said prelim US ruling related to cables/twist ties violated international rules - press
(US) NIH's Fauci: US is heading into a difficult period of COVID-19 pandemic; Christmas and New Year’s restrictions will be necessary
INFO Confirms to be acquired by S&P Global in all-stock deal valued at $44B (including $4.8B net debt); IHS stock to be exchanged for ratio of 0.2838 S&P shares
*(DE) GERMANY NOV PRELIMINARY CPI M/M: -0.8% V -0.7%E; Y/Y: -0.3% V -0.2%E
*(US) OCT PENDING HOME SALES M/M: -1.1% V 1.0%E; Y/Y: 20.2% V 21.9% PRIOR
(EU) EU official: EU will begin no-deal Brexit contingency measures on Weds or Thurs (Dec 2-3rd) if it can't reach trade deal by then with the UK - press
OPEC+ meeting said to be pushed back until Thursday Dec 3rd as more talks are said to be needed (had been planned for Tues (Dec 1st)
XOM Affirms FY21 capex $16-19B; guides $20-25B capex annually through 2025; to prioritize capital investments on high-value assets; cutting global workforce 15% by end of 2021; sees doubling earnings by 2027
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 0.10%, AS EXPECTED; MAINTAINS A$100B BOND BUYING PROGRAM
(HK) Macau Nov Casino Rev (MOP): 6.8B v 7.3B prior; Y/Y: -70.5% v -69.8%e
TUES 12/1
*(IT) ITALY NOV MANUFACTURING PMI: 51.5 V 52.0E (5th month of expansion)
*(DE) GERMANY NOV NET UNEMPLOYMENT CHANGE: -39.0K V +8.0KE
*(EU) EURO ZONE NOV ADVANCE CPI ESTIMATE Y/Y: -0.3% V -0.2%E; CPI CORE Y/Y: 0.2% V 0.2%E
(US) Bipartisan group of senators plans to release $908B outline for coronavirus aid package; would include state/local aid, liability shield, and unemployment insurance boost but no stimulus checks - Wash Post
DRRD.IN Dr. Reddy's and RDIF commence clinical trials for Russian Sputnik V vaccine in India
MU Raises Q1 $0.69-0.73 (prior $0.40-0.54) v $0.47e, Rev $5.70-5.75B (prior $5.2B) v $5.23Be, gross margin 29.5-30.5% (prior 27.5%) - PR ahead of CS Tech conf
*(US) NOV ISM MANUFACTURING: 57.5 V 58.0E; PRICES PAID: 65.4 V 65.0E
(US) Dallas Fed Sep Texas Service Sector Outlook Survey: General Business Activity: -2.6 v +13.2 prior
WORK Confirms to be acquired by Salesforce in cash-stock deal valued at $27.7B (implies ~$45.51/shr)
HPE Reports Q4 $0.37 v $0.34e, Rev $7.21B v $6.88Be; to relocate its HQ from San Jose to Houston, Texas
President-elect Biden calls on Congress to pass a 'robust package' for coronavirus relief; any bill in lame-duck Congress would be 'just a start'
V Reports QTD US payments volume +8% y/y, cross border volume ex Europe -35% y/y, processed transaction +4% y/y - filing
PFE First US shipments of COVID vaccine to be delivered on Dec 15th (in line); Moderna vaccine is expected to be delivered on Dec 22nd - CNN
WEDS 12/2
(HK) Macau Gaming Inspection and Coordination Bureau has made initial inquiries to casinos about using digital yuan to buy chips, no final decision has been made yet - US financial press
PFE Pfizer/BioNTech COVID-19 vaccine candidate receives world first approval in UK; To be available in UK from next week (as speculated)
*(EU) EURO ZONE OCT UNEMPLOYMENT RATE: 8.4% V 8.4%E
(UK) France govt said to push for no-deal Brexit if UK does not change its stance - financial press
*(US) NOV ADP EMPLOYMENT CHANGE: +307K V +430KE
(EU) ECB's Lane (Ireland, chief economist): vaccines make a more severe economic scenario less likely; does not address Euro exchange rate
(US) Democratic leaders Pelosi and Schumer back the $908B bipartisan relief bill as a base for starting new stimulus talks
COST Reports Nov SSS +13.4% v +13.8%e
(CN) US House passes China delisting bill; now goes to Pres Trump to sign
(HK) Macau Gaming Inspection and Coordination Bureau denies report yesterday that casinos were being asked to consider the use of the digital yuan
THURS 12/3
*(IT) ITALY NOV SERVICES PMI: 39.4 V 40.8E (4th month of contraction)
*(DE) GERMANY NOV FINAL PMI SERVICES: 46.0 V 46.2E (confirms 2nd straight contraction)
*(EU) EURO ZONE NOV FINAL PMI SERVICES: 41.7 V 41.3E (confirms 3rd straight contraction)
*(UK) NOV FINAL PMI SERVICES: 47.6 V 45.8E (confirms 1st contraction in 5 months)
*(US) NOV FINAL MARKIT PMI SERVICES: 58.4 V 57.5E
*(US) NOV ISM SERVICES INDEX: 55.9 V 55.8E
(UK) Sky News' Parsons: 'EU sources suggest progress on fishing rights, based around this idea: UK fishermen get notably increased quota of stocks that are sold to UK customers; and EU boats keep similar quotas for fish loved in EU'
T To make all of its 2021 Warner Bros films available in theaters and on the HBO Max streaming service starting on the same day - press
DOCU Reports Q3 $0.22 v $0.12e, Rev $382.9M v $360Me
MRNA Affirms expectation to have 20M COVID vaccine doses available in US by end of 2020; expects to have between 100-125M doses available globally in the Q1; data suggest durable neutralizing antibodies
(CN) US DoJ said to be in talks with Huawei CFO Meng Wanzhou about resolving criminal charges - US financial press
FRI 12/4
FAST Reports Nov net sales $441M +6.8% y/y
(EU) European Parliament said to reach an agreement with EU govts on 2021-27 budget
*(US) NOV CHANGE IN NONFARM PAYROLLS: +245K V +460KE
*(US) NOV UNEMPLOYMENT RATE: 6.7% V 6.7%E
*(US) NOV AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.1%E; Y/Y: 4.4% V 4.2%E; AVERAGE WEEKLY HOURS: 34.8 V 34.8E
(US) House of Representatives passes marijuana decriminalization bill (as expected); measure likely will not be taken up by the Senate and likely will not become law
(UK) EU's Barnier: Brexit talks are paused; after one week of intense negotiations in London, together with UK's Frost we have agreed that conditions for an agreement are not met; Johnson and Von der Leyen to speak tomorrow