Sterling highest vs euro since Feb ’20, UK inflation spikes

Chances the Bank of England raising interest rates next month increased as UK inflation surged to a 10-year high last month. October’s CPI inflation hit 4.2%, above the 3.9% estimated and well north of the Bank’s 2% target. It marked a steep acceleration from the 3.1% reading in September and underlines that inflation is becoming more of a problem, not less. Core inflation also surged to 3.4%. The good news is that pay is up 5.8%. Will the Bank raise rates next month? The MPC noted in November that the decision not to raise rates was largely because they wanted to get more information about the health of the labour market. So, coupled with the strong employment data yesterday, the case for the Bank of England to act now is compelling. That does not, however, mean a hike next month is a done deal – unreliableness breeds uncertainty even when it seems obvious.  And we must stress that there are reasons to doubt the BoE will act: 1) there are still plenty on the MPC who are wedded to the transitory narrative – the Hawks v. Doves balance favours the latter camp still as the 7-2 vote indicated, 2) does the Bank think that hiking now would amount to a policy mistake a la Trichet? If so then even if they do feel that inflation is becoming unanchored and problematic, they may chicken out of hiking due to fears of killing off the recovery, and 3) do other risks to the economic outlook like Brexit mean hiking is simply not appropriate at this time? Whatever they think, the problem for the market is in not being able to trust statements about ‘acting on inflation’.   


GBPUSD rose after the CPI was released but has pared a lot of those initial gains vs the dollar, but cable still trades mildly higher this morning. But the dollar is something of a brick wall right now so maybe not the best gauge – the pound is doing much better against the euro, hitting its best level since Feb 2020. Euro weakness is the main theme here so this is likely a much better play on sterling strength and monetary policy divergence than cable is given where Fed and ECB are right now.


European stock markets were flat/mixed at the start of the session after Wall Street rose on Tuesday following some strong retail sales numbers. We also had strong earnings from Walmart and Home Depot, which topped the Dow. Better-than-expected retail sales figures helped lift bond yields, with US 10s touching 1.65%, its highest in three weeks. Gold pulled back as a result, whilst the dollar is at its highest since July 2020. 


The FTSE 100 trades lower by around 0.1-0.2% in early trade, whilst the DAX, CAC and Euro Stoxx 50 up by a similar kind of margin. Shares in Marks and Spencer traded –2% on a downbeat note from Jefferies, which downgraded the stock to hold from buy after the recent rally. They say the ‘easy lever of outsized earnings surprises on depressed multiples has been pulled’. This goes to what we talked about on the earnings update recently – easy wins behind, but much harder yards ahead in getting the stock back to 2015-18 levels. 


Bullish note from Goldman Sachs on US equities, who forecast that the S&P 500 will climb by 9% to 5100 by the end of 2022. Kostin and co write: “The S&P 500 P/E multiple will remain roughly flat, ending 2022 at 21.6x. After two years of near-zero interest rates, the Fed will likely begin hiking in July. 10-year Treasury yields will rise to 2% by the end of next year, but be offset by a declining Equity Risk Premium as policy uncertainty declines and consumer confidence rises. Strong corporate and household demand for equities will help support valuation.” 


GS’s top tips are: “(1) Own virus- and inflation-sensitive cyclicals; (2) Avoid high labor cost firms; (3) Buy growth stocks with high margins vs. low margin or unprofitable growth stocks.” 


Tesla things … new filings showed Elon Musk sold almost $1bn more in stock as shares in Tesla rose 4%. Meanwhile, Tesla is being sued by JPMorgan for $162m over Musk’s ‘funding secured’ tweet and losses that ensued for the bank as a result of the stock price movement.


Chart: EURUSD tests key 61.8% retracement level of the move higher from March 2020 to January 2021 at around 1.1290, though the euro has pared earlier losses that saw it touch 1.1265. Nevertheless, any breaks below 1.13 keeps sellers in charge.

Why are investors not bothered about inflation?

Inflation, inflation everywhere – CPI in the US the highest in 30 years, in Japan the most in 40 years. Producer price inflation is also soaring across the board – last week’s Chinese PPI shot up to a 26-year high. Friday saw yet more evidence as German wholesale prices also jumped. In October German wholesale selling prices rose by 15.2% year-over-year. This was the highest annual rate of change since March 1974 after the first oil crisis. It also marks a steep acceleration in recent months as in September and in August the annual rates of change had been +13.2% and +12.3%, respectively. University of Michigan one year ahead consumer inflation expectations rose again to 4.9% from 4.8%. Meanwhile, the consumer sentiment figure dropped to a 10-year low – worse even than at the peak of the market panic a year and a half ago. On Friday the US 10 year break-even inflation rate rose to 2.76%, its highest since 2006. Real yields meanwhile sank to record lows.


Yet investors don’t seem that bothered, as a combination of weak consumer sentiment and higher inflation is somehow not weighing on stocks: US and European equities keep making new records. Ultimately, the market remains fairly comfortable with fundamentals as earnings growth has been better than expected, as companies seem broadly able to maintain margins by passing on their higher costs to consumers. 


Monetary policy remains incredibly accommodative and although inflation is high the market thinks a) the Fed and others won’t crack and raise rates early or more importantly, aggressively (a couple of hikes next year would still leave policy very loose) and b) inflation probably is transitory – markets are largely buying the central bank line for now as evidenced by the lack of movement in the bond market. TINA – there is no alternative – is still at work since you can’t get any real return on govt bonds – real rates are so low (negative) that you have to stick your money into equities to avoid the erosion of inflation. Inflation coupled with benign central bank policy so far seems good for stocks since the real risk-free rate is so low. The crux of it is that nominal rates should be a lot higher to compensate for inflation, but central banks are keeping them artificially low, which is suppressing everything and letting equities go higher. And longer-end yields are not marching higher since there is no great confidence in the ‘roaring twenties’ steepener trade that was talked about a lot at the start of the year but has since become overshadowed by the slower growth, stagflation narrative. 


When a pullback? The S&P 500 closed up 0.7% on Friday but did end the week slightly lower, breaking a 5-week win streak. And while lower on the week, it closed on Friday well off its lows and is just 0.8% off its all-time high. It’s a pretty mild pullback if it only lasts a couple of days. Bank of America is not so optimistic for Europe: “We expect the anti-goldilocks combination of weakening growth momentum and rising real bond yields to weigh on European equities, with a projected 10%+ downside by early next year, leaving us negative.” European stock markets are mixed at the start of trading on Monday – mild gains in Paris; London and Frankfurt flat. Rising cases and new lockdowns in Europe are something to watch, though as I said earlier consumer sentiment does not equal stock market sentiment. Nevertheless, the BofA analysis is to be considered. 


This week the focus around the inflation narrative switches to the UK with the release on Wednesday of the latest CPI data. The Bank of England could use a hot reading to finally act, but there is yet a lot of uncertainty about where the MPC is on raising rates. As I have discussed several times, it’s got a communication problem. Inflation fell to 3.1% in September from 3.2% in August but the drop was a blip – expect prices to continue to rise. Economists and the BoE think 5% is possible in the coming months. There seems be no excuse for the Bank not to pull the trigger, but the MPC remains divided. Supply chain problems can’t be solved by central banks, but I find it hard to reconcile ZIRP with inflation persistently so high. 

Wochenausblick: wie heiß läuft die Inflation in Großbritannien diesen Monat?

Wir bekommen diese Woche mit zwei wichtigen Berichten einen guten Eindruck zum Stand der Inflation in den USA. Diese Woche liegt der Fokus wiedereinmal auf der Inflation. VPI-Zahlen für Großbritannien im Fokus – wird ein heißer Wert die Bank of England dazu zwingen, die Zinsen im Dezember anzuheben? Wir können außerdem einen Blick auf die VPI-Zahlen von Kanada und die jüngsten Einzelhandelsabsätze für die USA vor der Weihnachtszeit werfen.

Inflation in Großbritannien im Flutlicht mit jüngsten VPI-Zahlen

Inflation. Der Hund der beißt. Für so ziemlich alle große Volkswirtschaften wurde die wirtschaftliche Erholung nach der Pandemie von höheren Preisen in allen Bereichen der Gesellschaft begleitet.

Hier konzentrieren wir uns auf den Preis von Konsumgütern. Mittwoch morgen erwartet uns der Verbraucherpreisindex für Oktober für Großbritannien.

Was erwartet also Großbritannien? Wenn man die Zahlen für September betrachtet, ist eine hohe Verbraucherpreis-Inflation sehr wahrscheinlich. Wir liegen weit über dem Ziel der Bank of England von 2%. Die Daten für September, die im Oktober veröffentlicht wurde, zeigten einen zweiten Monat in Folge einen jährlichen Anstieg des VPI, diesmal von 3,1%.

Es könnte aber einige Gründe zum Jubeln geben oder zumindest dafür, nicht ganz pessimistisch zu sein. Auf monatlicher Basis lag der Zuwachs beim VPI bei 0,3%. Das ist ein Rückgang von den 0,7% vom August.

Ein Schritt in die richtige Richtung, oder? Nicht wenn man die britische Handelskammer fragt. Die Einzelhandelsgruppe sagt, dass dies „vorübergehende Verzerrungen“ seien, die nicht die Realität widerspiegeln.

Und tatsächlich. Treibstoffpreise etwa schießen in die Höhe, in Teilen getrieben von eine mediengemachten Panik im frühen Herbst, aber auch von hohen Rohöl-Preisen. Die Kosten für Treibstoff in Großbritannien stiegen Zahlen des Office of National Statistics zufolge im Oktober um 12%.

Wird ein weiterer hoher VPI-Wert die Tauben der Bank of England zu Falken machen? Unser Chief Market Analyst Neil Wilson hat sich in der Vergangenheit bereits eingehend mit den Überlegungen des BoE Monetary Policy Council (MPC) zu seinen Absichten die Zinsen zu erhöhen befasst.

Sicher ist, dass Gouverneur Andrew Bailey gemischte Signale gegeben hat. Die Märkte hatten wegen der Bailey-Kommentare zum Einsatz der Werkzeuge im Kampf gegen die Inflation zum MPC-Treffen im November einen Zinsanstieg mit eingepreist. Jetzt hatten wir die November-Pressekonferenz der BoE – und was war? Kein Anstieg. Danke, Andrew.

Die Wirklichkeit ist, dass Lebenserhaltungskosten und Preise für Konsumgüter in Großbritannien schnell steigen. Da wird sich bald etwas tun müssen.

Die Daten werden als wichtiger Treiber für das Pfund Sterling angesehen, da sie wahrscheinlich ein wichtiger Faktor bei der Sitzung der BoE im Dezember sein werden, wenn viele erwarten, dass die politischen Entscheidungsträger die Zinsen erhöhen werden.

Die kanadischen VPI-Zahlen setzen die Zentralbank ebenfalls unter Druck

Über dem Atlantik haben heiße Inflationszahlen die Bank of Canada wach gerüttelt.

Den Daten des letzten Monats zufolge drückten steigende VPI-Zahlen die Inflation im September auf ein 18-Jahres-Hoch. Wir warten jetzt auf die Reaktion auf die Zahlen für Oktober, die am Mittwoch kommen.

Die jährliche Inflation, gemessen im VPI, erreichte im September 4,4% und damit über den von Analysten vorhergesagten 4,3%. Statistics Canada zufolge ist das der schnellste Anstieg seit Februar 2003. Nicht nur das, es ist auch der sechste Monat in Folge, in dem die Inflation über dem Kontrollbereich der BoC von 1-3% liegt.

Wie Großbritannien wird dies überwiegend durch steigende Kosten für Treibstoff, Energie und Lebensmittel getrieben. Anders als Großbritannien scheint die Bank of Canada tatsächlich tätig zu werden.

Die Bank of Canada fährt bereits ihr QE-Programm zurück. Aber vor dem Hintergrund höherer Inflation scheinen Gouverneur Macklem und Co möglicherweise bereits für April 2022 einen Zinsanstieg vorzubereiten.

Wird dies der Katalysator, der die Preise wieder runter bringt? Vielleicht. Vielleicht auch nicht. Macklem zufolge könnte uns die hohe Inflation für den Rest des Jahres 2022 begleiten. Hohe Energiepreise und Lieferengpässe, die gleichen Dämonen, mit denen die Welt insgesamt kämpft, werden vermutlich bestehen bleiben.

Steht uns ein weiterer Rekord der US-Einzelhandelsabsätze bevor?

Die US-Einzelhandelsabsätze befinden sich derzeit in einer heißen Phase – obwohl die Wertsteigerung möglicherweise auf die steigenden Kosten von Konsumgütern zurückzuführen ist.

Der Blick auf die Rohdaten zeigt, dass es im September zu einem monatlichen Anstieg von 0,7% kam, 0,2% waren erwartet. Das folgt einem Anstieg von 0,9% im August, als Märkte eine Abnahme von 0,7% erwartet hatten.

Es scheint als ob COVID-19 das Geldausgeben nicht verhindern könnte. Das sind gute Neuigkeiten. Höhere Preise oder nicht (die VPI-Zahlen vom Oktober zeigten einen steilen Anstieg von 6,2%), die Statistiken zeigen, dass amerikanische Käufer bereit sind, ihr hart verdientes Geld auszugeben. Das kann helfen, die USA für das vierte Quartal gut aufzustellen.

Die Aussichten sind auch für die Feiertage gut. Wir gehen auf die Ausgabenreiche Zeit zwischen Thanksgiving und Weihnachtszeit zu. Den Prognosen der National Retail Foundation zufolge, werden die Ausgaben in diesen beiden starken Einkaufsperioden zwischen 8,5% und 10,5% über dem Niveau von 2020 liegen – das entspricht etwa 843,4 Milliarden USD bis 859 Milliarden USD.

Nicht schlecht, wenn die jährlichen Absätze das BIP der meisten Länder übertrifft.

Um bei der National Retail Foundation zu bleiben, die Gruppe glaubt, dass die USA 2021 auf dem Weg zu Rekordimporten an Konsumgütern ist. Das ist trotz der Liefer- und Logistikengpässe, die die weltweite Pandemie verursacht hat.

Die Einzelhandelsorganisation sagt, dass die Containerimporte im Vergleich zum Vorjahr zwar gesunken sind, aber weiterhin stark und auf dem Weg zu einem prognostizierten Gesamtanstieg von 18% im Jahr 2021 sind.

Aber soweit sind wird noch nicht. Wir werden zuerst die Zahlen für Oktober sehen müssen.

Earnings-Season neigt sich dem Ende zu

Eine weitere Earnings-Season ist fast vorbei.

Die letzten paar Wochen gab es Zahlreiche Geschäftsberichte für das dritte Quartal. Nur wenige Mega-Caps habe ihre Berichte noch nicht veröffentlicht. Bisher haben wir Wall-Street-schlagende Berichte von Apple, Tesla und Google-Mutter Alphabet gesehen.

Wal-Mart, Nvidia, und Cisco sind einige der Großen, die diese Woche ihre Geschäftsberichte veröffentlichen.

Top Wirtschafts-Daten

Date  Time (GMT)  Asset  Event 
Mon 15-Nov  2:00am  CNY  Retail Sales y/y 
  1:30pm  USD  Empire State Manufacturing Index 
Tue 16-Nov  12:30am  AUD  Monetary Policy Meeting Minutes 
  2:30am  AUD  RBA Gov Lowe Speaks 
  1:30pm  USD  Core Retail Sales m/m 
  1:30pm  USD  Retail Sales m/m 
  2:15pm  USD  Industrial Production m/m 
  5:00pm  USD  FOMC Member Barkin Speaks 
Wed 17-Nov  7:00am  GBP  CPI y/y 
  1:30pm  CAD  CPI m/m 
  1:30pm  CAD  Common CPI y/y 
  1:30pm  CAD  Median CPI y/y 
  1:30pm  CAD  Trimmed CPI y/y 
  3:30pm  OIL  Crude Oil Inventories 
  9:05pm  USD  FOMC Member Evans Speaks 
Thu 18-Nov  2:00am  NZD  Inflation Expectations q/q 
  1:30pm  USD  Philly Fed Manufacturing Index 
  1:30pm  USD  Unemployment Claims 
  3.30pm  GAS  US Natural Gas Inventories 
Fri 19-Nov  7:00am  GBP  Retail Sales m/m 
  1:30pm  CAD  Core Retail Sales m/m 
  1:30pm  CAD  Retail Sales m/m 


Top Geschäftsberichte

Tue 16 Nov  Wed 17 Nov  Thu 18 Nov 
  Cisco Systems (CSCO) AMC   
Walmart (WMT) PMO    Alibaba (BABA) PMO 


What’s going on with EV stocks?

A few EV stocks have been grabbing headlines for different reasons this week. From Rivian to Xpeng, here’s what you might have missed.

EV stocks

Rivian soars

Rivian only made its stock market debut two days ago but it’s quickly becoming the darling of electric vehicle investors.

Not content with being 2021’s biggest IPO, opening 30% higher than its projected debut share price, Rivian continues to hit the accelerator. Pre-US market open, the stock is up a further 23%.

Why Rivian? The company isn’t expected to hit profitability any time soon. It’s yet to deliver any meaningful volume of vehicles. It’s not really generating any revenue either.

Rivian’s a good case study of the market betting on a sector. It’s already made big wins with Tesla, so now it’s looking for the next big thing. That could be Rivian. The carmaker offers two models at present, the R1T pickup and R1S SUV, and will soon be entering the commercial vehicle game following an Amazon order for 100,000 delivery vehicles.

Amazon owns a 20% stake in the start-up. Funnily enough, potential rivals Ford owns a 12% stake in Rivian. With the new launch boost Rivian is enjoying, Ford has made about $10bn so far. That’s more than the Detroit old guard carmaker made selling vehicles last year.

The challenge for Rivian now is turning this momentum into revenue generation and vehicle deliveries. The R1T has started to roll off forecourts across the US. Rivian’s R1S will begin deliveries in 2022. After investing $1bn in a factory in Normal, Idaho, the Californian mark says it has the capacity to deliver 150,000 vehicles a year.

With roughly $11bn in capital to play with thanks to the largest US float since Facebook, Rivian is expected to pour that cash into building new factories and delivering trucks and SUVs. It’s one to watch.

Tesla dips

Elon Musk has been up to his old tricks again.

He has sold $5bn worth of his Tesla shares after polling his legion of Musk Rat Twitter followers. An unusual move from an unusual CEO but fair play to Musk. He did actually follow through. Since then, however, the Tesla share price as been on a bit of a wild ride.

Upon making his Tweet, the stock hit the skids.  It is now down about 10% across the week, wiping off around $157bn of Tesla’s market cap. Until we see another uptick, which is likely given the world is in the grips of electric vehicle fever, Tesla has lost its $1 trillion valuation.

A $1 trillion valuation for a car company seems excessive on the face of it, but investors just seem to love Tesla. Some brokers, such as Fidelity, have reported that Tesla remains one of the most traded and bought stocks, with buy orders completely outstripping sells.

Even with this week’s blip, there’s no way Tesla is anywhere close to skidding off the road. As it stands, the stock is still up 51% in 2021 as a whole. Compared with 2020’s lows, Tesla is 1,300% higher.

Tesla reported another exceptionally strong quarter in its latest earnings report. A record-breaking 241,300 vehicles were delivered in Q3 2021, helping the EV pioneers reach Wall Street-beating revenues and earnings per share.

It is interesting to see that, despite these incredible stats, that the Tesla share price is so susceptible to the actions of its CEO. It goes without saying that executive-level actions can move shares up or down, but very few companies have a head honcho so woven into the world of social media like Tesla.

What’s next? Expansion is the name of the game. More factories are under construction. More cars are rolling off production lines. There’s still more to come from Tesla – probably more Elon Musk shenanigans too.

Xpeng rises

China has its own number of electric automobile makers, such as NIO and Li Auto, but we’d like to turn our attention to their rival Xpeng.

Xpeng made a strong start in Asian trading today, jumping 10% after the marque teased a new SUV model. It’s likely to replace Xpeng’s G3 and G3i models when fully revealed at the Shanghai Motor Show event on November 19th.

Xpeng deliveries are behind those of Tesla, but it really only operates in one market. Certainly, it’s delivered more vehicles than the $100bn Rivian – but bizarrely you don’t see valuations anywhere near that high for Chinese electric carmakers.

In October, Xpeng delivered 10,138 cars, of which 3,657 units were its G3 and G3i SUV, reaching a monthly record since the vehicle’s launch in December 2018.

The company said its cumulative deliveries have exceeded 100,000 as of the end of October.

China is the largest auto market in the world and is quickly emerging as THE go-to place for electric motors. Bearing in mind the industry is still in its infancy, but over two million electric passenger vehicles have been sold in China in 2021 so far.

While the marketplace is fairly crowded, there is still substantial room for growth – especially with the Chinese government pledging to up its eco-game in the wake of the COP26 summit.

Keep an eye on Xpeng, as well as other Chinese EV stocks like Li and NIO. There could be something big building in the Far East.

FTSE eases back from post-pandemic high

Mixed start for stocks following a solid performance in the prior session and a mixed one in the US. After a slow start European stock markets – the Stoxx 600 and DAX – eked out fresh records Thursday and the FTSE 100 managed to hit its highest level in 20 months. In the US, the Nasdaq and S&P 500 rose but the Dow was dragged into the red by Disney. This morning, the FTSE 100 is down 0,3% and the rest of the major bourses are trading a little firmer. No sign yet of any major drawdown or volatility, but it seems too quiet.


Inflation is front of mind for investors this week after the US CPI report, which has driven a sharp rally in gold and the US dollar. Today’s University of Michigan inflation expectations will be closely watched, although it is unlikely to drive any material shift in the post-CPI momentum. Expectations are forecast to rise to 5% from 4.8% last month. We’re also watching the UoM consumer sentiment data and JOLTS job openings – a marker for the health of the US labour market, although these days, not such a great signal due to the massive mismatches and dislocation in the market post-pandemic.


Gold has pulled back from a 5-month high hit in the wake of the inflation data, holding around $1,855 in early trade. USD is solid to start the session with DXY consolidating above 95. Oil fell with spot WTI at $80 amid a resurgent US dollar and uncertainty over the path of US policy in terms of addressing higher gasoline prices. Higher case rates in Europe and Asia may also weigh – Austria heading to full medical apartheid with a lockdown for the unvaccinated. 


AstraZeneca shares fell 3% after earnings missed expectations, though it said it would start making a profit from its Covid vaccine from the fourth quarter onwards. ‘The Company is now expecting to progressively transition the vaccine to modest profitability as new orders are received. COVID‑19 vaccine sales in Q4 2021 are expected to be a blend of the original pandemic agreements and new orders, with the large majority coming from pandemic agreements,” the firm said in today’s Q3 trading update. Earnings per share of $1.08 was short of expectations but management stuck to its full-year guidance. Shares are up 24% YTD and it remains in a good place to tap growing demand. 


Shares in EV darling Rivian soared by another 22% to $123. Tesla ticked lower by just 0.4% after it filings showed founder Elon Musk had offloaded $5bn in stock. At the incredible valuation for Rivian, Musk tweetedI hope they’re able to achieve high production & breakeven cash flow. That is the true test. There have been hundreds of automotive startups, both electric & combustion, but Tesla is only American carmaker to reach high volume production & positive cash flow in past 100 years.” 

Earnings season: The magic wears off as Disney records miss

The sparkle falls off the House of Mouse as Disney posts a fourth quarter earnings miss in its latest financial report.

Disney earnings

Disney’s headline stats

Disney latest earnings failed to meet Wall Street expectations when they were published after the closing bell yesterday.

Fourth quarter revenues and earnings-per-share both came in below forecast levels. Disney joins Apple as one of the megacaps missing earnings this reporting season.

The key takeaways from the House of Mouse’s latest financials are:

  • Earnings per share – $0.37 (adjusted) vs $0.51 forecast
  • Revenue – $18.53 billion vs $18.79bn forecast

A slowdown in streaming subscribers for the entertainment conglomerate’s Disney+ service is on the cards, despite numbers falling in line with Disney estimates. During the last quarter, Disney added 2.1m subscribers bringing the total up to 118.1m.

Comparatively, Netflix added 4.4m subscribers according to its last earnings report.

Average monthly per-subscriber revenues are also down about 9% year-on-year. As of Disney’s last reported figures, the company earns $4.12 per month from Disney+ subscription fees. Total sub numbers across all of the streaming services owned by Disney, including ESPN+ and Hulu, reached 175m.

Direct-to-consumer revenues rose 38% to $4.6bn in Disney’s fiscal fourth quarter. Content licensing and sales revenues also increased by a healthy 9% to $2bn. However, due to higher marketing and operational costs, content licensing and sales said it was operating at a $65m loss for the quarter.

Cinemas have only recently started to reopen around the world. Only a few Disney properties made it to theatres but still offered decent returns. Fall Guy, Black Widow, and Shang-Chi and the Legend of the Five Rings were the main Disney releases of the quarter. Two of these fall under the Marvel umbrella. Marvel films tend to be something of a cash cow for Disney.

Disney parks reopen

Attendance at Disney’s theme parks across the world picked up as vaccinations took hold globally in H2 2021.

Revenues across Disney’s parks and cruises segment showed a 26% increase to $5.45bn – despite $1bn in costs accrued by bringing the business’ leisure facilities up to COVID-safe standards. As it stands, all Disney parks, resorts, and cruise liners are operational again.

Pandemic-incurred travel restrictions have been lifted by the United States. Disney is anticipating the return of international visitors to its parks, especially those in California and Florida.

“We’re seeing really great demand. Very thrilled with our demand. Not only internationally but especially domestically, but particularly, again, because of our guest experience improvements at numbers that are very, very strong and very, very healthy,” Disney CEO Bob Chapek told CNBC. “So not only do a lot of people want to come but when they come, they want to really engage in Disney.”

Content, slowing subscribers, and metaverses: a look into Disney’s crystal ball

Disney appears to be the next brand to be exploring the metaverse after Facebook’s parent changed its name to Meta last week.

In a post-earnings call to analysts, Chapek touched on Disney’s plans to blend all of its properties and content into a seamless multi-channel customer experience.

“Suffice it to say our efforts to date are merely a prologue to a time when we’ll be able to connect the physical and digital worlds even more closely, allowing for storytelling without boundaries in our own Disney metaverse,” the Disney CEO said. “And we look forward to creating unparalleled opportunities for consumers to experience everything Disney has to offer across our products and platforms wherever the consumer may be.”

In the near future, however, the focus appears to be ramping up the content offer across Disney’s various streaming platforms. Most of this won’t land until the fourth quarter of 2022.

“Q4 will be the first time in Disney+ history that we plan to release original content throughout the quarter from Disney, Marvel, Star Wars, Pixar, and Nat Geo, all in one quarter. This includes highly anticipated titles such as Ms. Marvel, and Pinocchio,” Disney Chief Financial Officer Christine McCarthy said on the company’s earnings call.

However, subscriber growth could be limited to “low single-digit millions” according to Disney estimates.

This could affect Disney’s share price. The stock is already down nearly 8%. Atlantic Equities has downgraded Disney in light of slowing subscriber numbers. The investment bank has slashed Disney’s guide price from $219 per share to $172.

Despite this underperformance, Disney still holds a strong buy status according to the Analyst Consensus tool. This is based on 22 analysts offering recommendations on the stock over the past three months:

Disney Analyst Consensus rating

Unsurprisingly, given this quarter’s earnings miss, news sentiment on Disney is bearish:

FTSE leads as European shares stumble

  • FTSE 100 new post-pandemic high, Auto Trader leads, miners gain
  • Wall Street logs first back-to-back decline in a month
  • Musk sells $5bn in Tesla stock, Disney misses

Stocks fell on Wall Street after yesterday’s blowout inflation print, which showed prices rising in the US at the fastest pace in 30 years. Not only the pace but the breadth – the reading showed a broadening out in inflationary pressures and pointed to even racier readings over the coming months. Core inflation year-over-year could be heading to 6.5%, according to Pantheon Macroeconomics. Does it make the Fed hike earlier? Futures prices indicate the market pulled forward the bet on lift-off for rates from September to July, so there was some response in expectation the Fed might actually respond to the soaring inflation. That print was so hot markets are going to have to think more seriously about inflation and a possible Fed reaction.

Rates moved, slowly then all of a sudden, on the back of inflation hitting 6.2% in October. Benchmark 10yr Treasury yields enjoyed their biggest one-day rise in a year and across the curve we saw movement higher. But not fast enough – real rates plunged to hit record lows, sending gold to $1,868, its highest since June. A US holiday means no major data later in the session, but stock markets remain open. UK GDP figures today showed the economy grew by 1.3% in the third quarter – anaemic at best and in real terms not growing.

The dollar has rallied aggressively in the wake of the inflation report. The dollar index blew through a heap of horizontal resistance to take a 95 handle and we have fresh yearly lows for the euro and sterling. The mood seems to be that the Fed will move first – do not discount the Bank of England just yet. December remains ‘live’, even if we cannot believe anything Bailey says now. Another factor in the mix – there is a level of Brexit headline risk premium attached to the pound right now that we maybe haven’t really contended with for some time. Threats are flying around but so far, no action to destabilise the pound. The ECB keeps pushing back against any kind of rate hike talk for 2022.

European stocks were broadly weaker this morning after the first back-to-back declines on Wall Street for a month. Paris eked a small gain as ArcelorMittal posted its best quarterly profit in 13 years. We’d been suggesting a pullback was likely for the major US markets; so far it’s only mild but if inflation fears lead to expectations the Fed will tighten policy then stocks could have further to decline. As far as European markets go, watch cases on the continent and the political appetite to reimpose restrictions.

But UK stocks are outperforming. The FTSE 100 made a fresh post-pandemic high at 7,368 this morning, albeit supported chiefly by the weaker pound. Miners rose, but Autotrader stole the show with a pop of 11% after posting record half-year revenues and profits. Burberry was at the back of the class with Johnson Matthey; the former declining 9% despite revenues recovering, profits beating expectations and the board reinstating the dividend and starting a buyback programme. For the latter, a decision to offload its capital intensive battery operation dealt a blow to hopes it could be a major player in the EV growth space in the coming years – shares declined more than 17%.

More Musk things: the mercurial Tesla chief has sold about $5bn worth of his stock this week, according to regulatory filings published last night. About a fifth of the sale was part of a pre-arranged stock trading plan adopted in September. The rest at the behest of his followers on Twitter. He’d have to sell more than twice than again to meet his 10% target offered to followers on Twitter. Shares rallied 4% on Wednesday to reduce the weekly losses somewhat, and after hours trading places them about 2-3% higher this morning. Meanwhile, rival Rivian got off to a racing start to life on the Nasdaq as shares jumped by a third from the offer price to $100, at one point reaching $119 in a frenzied market debut.

And finally, Disney shares are 5% lower in the pre-market after it missed on revenues and profits. EPS of $0.37 vs $0.51 expected, while revenues of $18.53bn were a little light of forecast. Disney+ added 2.1m subscribers – slowdown to be expected as economies emerge from lockdowns. CEO Chapek reiterated the goal to hit 230-260m subs by 2024. More Hotstar subs in the Disney+ mix meant average revenues per user were 9% down on last year.

Gold jumps on hot CPI

Well, this is a mess, an inflation report so bad even the Fed might actually do something about it? Hohoho, I joke of course…

Inflation way ahead of forecast and exceeding 6% on the headline number, highest in 30 years, core month-on-month accelerated to +0.6%. Yet Fed still sticks to its ‘transitory’ narrative.

Gold has blown past resistance and the path to $1,875 is clear. Stocks offered and the dollar is bid. Bonds sold off with US 10year yields jumping above 1.480%. 30 year real yields (TIPS) touched a record low -0.595%, whilst 10yr TIPS fell to I think a record low of -1.224%. Stocks are paring losses as of send time and the USD is paring gains – so far only really gold holding onto the spike with real rates the biggest loser from all of this. Well, after the Fed’s credibility.

Gold Chart 10.11.2021

Tesla sinks, MKS and ITV deliver

Musk things 


About those unrealised gains being tax avoidance? What about unrealised losses? I mean, Elon musk is now worth about $50bn less than he was before Twitter poll. Surely that should count for something, too…?! Tesla shares skidded lower by another 12% on Tuesday, taking the two-day losses from Friday’s closing price to approximately 16%. 


Clearly, the poll has affected the stock price. But attributing a reason for conducting the Twitter poll is probably a pointless and fruitless exercise, since as we have noted before Musk is regularly doing dumb stuff on Twitter. There are theories – boy, are there theories. Big Short trader Michael Burry flagged personal debts for the reason – „Regarding what @elonmusk NEEDS to sell because of the proposed unrealized gains tax, or to #solveworldhunger, or … well, there is the matter of the tax-free cash he took out in the form of personal loans backed by 88.3 million of his shares at June 30th,“ he tweeted. I’ve even heard chatter about Musk seeking to lower the strike price on a bunch of fresh options coming his way… 


Whatever… what we know is that several insiders have been selling stock lately, capitalising on the $1tn valuation; Musk probably must sell soon – has said as much – to cover tax liabilities. Among the insiders, Musk’s brother Kimbal sold $109m the day before the tweet. Not an ideal setup – supply is likely exceeding demand, plus ‘optics’ – Musk is very much Tesla personified. He’s previously said he’d be the last money out – selling for whatever reason is problematic, partly because of his cult like status among investors.  When insiders sell, or say they will sell, stock after a huge run up in the shares it’s usually a sign they are not comfortable with the valuation. That is something to bear in mind. Even allowing for the stock’s drop over the last two days, it’s still commanding an absurd valuation – should the stock be worth what it is? Jefferies says more, raising its price target on the stock this week to a Street high $1,400.  


Whether it should or shouldn’t, a more pertinent question is can Tesla sustain a valuation that makes it worth more than every other carmaker combined? It seems unlikely. Competition for one. Rivian is an Amazon and Ford-back electric carmaker about to go public today on the Nasdaq with a stonking $66.5bn valuation after pricing shares at $78, well north of expectations. Revenues so far zero, losses high. But it’s got an order from Amazon for 100,000 trucks by 2025 – an actual order with a contract and everything (cf Tesla-Hertz). It’s an ‘exciting’ time for EV investors, for sure.


After announcing an order of 100,000 Teslas – well, sort of announcing – Hertz is back on the Nasdaq having been traded over the counter since it went bust last year. As part of the marketing push around this re-IPO it’s enlisted Tom Brady, who is very good a throwing an oval bowl forwards a long distance.  Yesterday Brady tweeted “To the moooooon… @Hertz #IPO #LETSGO.” (the tweet has been deleted, it seems). A fleet of Teslas on order, what could go wrong? Hertz has traded OTC under HTZZ since Oct 2020 following its Chapter 11 filing in May of that year. It’s now back under HTZ on the Nasdaq – shares closed Monday at $32.62 and closed Tuesday down about 9% on relisting. Presumably, Brady will be on CNBC or whatever soon with his take on the 2s10s curve flattening and who should be Fed president. It’s not that celebrities shouldn’t endorse brands, but it’s unclear to me why a celebrity endorsement is required for a stock market thing.  


The Metaverse 


An ETF called META has doubled its net asset value from $130m to $260m since Facebook changed its name two weeks ago. Volumes have also soared – right place, right time? Sometimes stocks with similar tickers to really buzzy or big names can find investors piling in by mistake. The SEC had to halt trading in Zoom last March because people were buying the wrong Zoom. Sometimes this gets front run by clever hedge fund types in expectation of mistaken identity. In the case of META, I’m not so sure it’s just some punters getting confused – META is designed to give investors exposure to the ‘metaverse’, whatever that is. So, if you think FB is doubling, trebling down on this area then META could be a vehicle for investors to tap the growth in the sector.  


Bitcoin eased off its all-time high made early Monday. Apple boss Tim Cook said he owns cryptocurrency and has been interested in it for some time. He said he believes it’s reasonable to own Bitcoin and Ethereum as a part of a diversified portfolio. However, he stressed that Apple would not invest in crypto since that is not why people own the stock. 


Shares in Coinbase sank 13% in after-hours trading after the company reported weaker-than-expected revenue for the third quarter. Turns out less volatile crypto markets (isn’t that what everyone wants?) is not so good for the exchange that is touted as the mainstream ticket to the crypto uni(meta?)verse. Monthly users fell from to 7.4m from 8.8m in the second quarter, though was still up from 6.1m a year earlier. Trading volume fell to $327bn from $462bn in the prior quarter.


Finally, Naked Brand Group, which makes swimwear and lingerie is merging with Cenntro Automotive Group, which works in the field of autonomous driving. Make sense? Nope, but this is 2021. Shares jumped 30% before trimming gains to end the day up 6%.




European stock markets are tad higher this morning having closed mildly in the red on Tuesday – the DAX and CAC off by 0.1% and the FTSE 100 lagging at -0.3% for the session to sit underneath 7,300. All three are in the green in early trade today with the FTSE 100  recovering 7,300 but looks tentative – possible bearish MACD crossover to consider. Real yields on 30-year U.S. bonds sunk to a record low, of negative 0.57%, but gold pulled back in the face of key resistance levels. Oil prices firmed on tighter supply, strong demand signal from Vitol and JPM. US stock markets finally eased back after a run of gains that was one of the best for several years.


Wall Street closed lower, ending one of its best win streaks in years. The decline in Tesla was a factor, but ultimately such a straight charge up will just run out of gas sooner or later. The look-ahead to inflation is maybe a factor so this needs to be assessed with today’s CPI print.


Inflation is the order of the day – Chinese PPI – a big leading indicator for global consumer inflation- surged to 13.5% in Oct, hitting a 26-year high. US PPI stands at 8.6%, which was flat on Sep. Today’s US CPI inflation report could show a nudge beyond the 5.4% reported for the last 4 months – consumer prices are seen rising 5.8% on an annual basis in Oct, which would be the highest in 30 years. Core is seen at +0.4% mom and 4.3% yoy. German CPI inflation rose to 4.5% in Oct, +0.5% from the previous month – the highest level in 18 years – driven by an 18.6% rise in energy prices and doubling in heating oil prices. The split between the services inflation (+2.4%) and the inflation in goods (+7%) tells you all you need to know about the dislocation in the post-pandemic global economy. 


ITV update: slogging away – reopening of production and revival of ad revenues continues apace, but the longer-term doubts remain about the position of linear broadcasters in an on-demand world and its reliance on cyclical ad revenues. Still the numbers are v. good – ad revenues are forecast to rise 24% and hit the highest in its history. Total ad revenues (TAR) are growing but seeing sequential decline in growth rates that mirror the year-ago impacts. TAR hit 30% for the 9 months top the end of Sep, with July up 68%, August up 24% and September up 16% compared to the same period in 2020. That compared with growth of 115% in June and 87% in May. These numbers should settle down in due course as the effect of last year wash out. Total revenues were up 8% from 2019. Notable that ITV reports profit to cash conversion is expected to be around 60% in 2021, up from the previous guidance of 30%, due to the stronger than expected TAR performance. Shares rallied 6%.  


Marks & Spencer has smashed expectations as it raised its full-year profit outlook handsomely. Management is guiding profits to be around £500m – which is up from the £300-£350m guided back in May. There clearly must have been a big improvement only in the last few weeks for such a strong upgrade to the profit forecast – as recently as August the guidance was for the upper end of that range only. This upgrade came despite the requisite warning on the ‘supply chain’ – “well publicised cost pressures will become progressively steeper increasing the importance of our productivity plans, store rotation and technology investment in the coming year”. Profit before tax & adjusting items of £269.4m was up more than 50%, with food sales up 10% and ex-hospitality +17%. Ocado partnership is paying off. Shares soared 20% on the profit update before paring gains to trade +15%. Getting back to where it was before the pandemic knocked the stock for six is one thing, but by then it was already nursing years of pain – the recovery from the pandemic is complete, but can it recover 2015-2018-type levels? The restructuring is paying off – the pandemic allowed Marks to accelerate a process that had been taking far too long, and in many ways could have been a blessing. Looking for further progress in the coming quarters to drive positive price action.

Muted start for equities, inflation in focus

Mixed, flattish start to trading for European stock markets after a record again on Wall Street as the S&P 500 closed above 4,700 for the first time. Gains of about 0.1% for the DAX and FTSE 100 keeping risk just in the green but the Stoxx 50 is flat. For US stocks it’s been a straight line up since the middle of October and whilst there is always this sense that ‘it must pull back soon’, that is sometimes when it’s finding the path of least resistance to the upside. Talking of which, Bitcoin has made a fresh all-time high and now could generate further upside now that resistance has been cleared. Read across to Coinbase, Microstrategy and other crypto stocks. Infrastructure stocks performed well as the market reacted to the passing of the $1tn infrastructure spending bill.


Risks are starting to take shape around rising covid cases in mainland Europe and the possibility of new lockdowns – something to watch in the coming days as it could play out with weakness for European equities. German infection rate at the highest since the pandemic started. Meanwhile the inflation threat looms as large as ever – tomorrow’s CPI numbers for the US will be closely assessed. Today we get the PPI numbers which are going to show ongoing supply chain pressure and pass through of costs to consumers, with the consensus at +0.6% for the headline number and +0.5% for the core PPI. Recent PMI surveys point in one direction for prices and that’s up.


On the whole inflation/rate hike theory…Yesterday, Fed mouthpiece Richard Clarida said conditions for rate rise likely to be met by end of 2022. Markets currently pricing for one by the middle of next year, so the Fed remains ‘behind the curve’. An alternative way to put this – as last week showed – is to say the market is ahead of itself.  


He also pointed out there is about $2tn in unspent free money accumulated during the pandemic that is yet to wash through the economy. Does that make inflation likely to be more or less transitory…? 


Yet more sticky signs: In August, Jay Powell noted that “if wage increases were to move materially and persistently above the levels of productivity gains and inflation, businesses would likely pass those increases on to customers, a process that could become the sort of ‘wage–price spiral’ seen at times in the past”. 


“Today we see little evidence of wage increases that might threaten excessive inflation,” he added. 


Well, the latest NY Fed median projected year ahead household income growth jumped to 3.3% in Oct from 3% in September. That’s just as productivity in the US plunged 5% in the third quarter to its lowest level in 40 years. Ok, so some of it is supply chain-related, but the picture is not the one that the Fed has been describing. Meanwhile, median one-year ahead inflation expectations rose 0.4% to 5.7% in October, reaching a new high for the survey launched in 2013. Clarida noted that the Fed had not anticipated the depth and breadth of the global supply shock. I guessed that but the question is – are you going to try to contain inflation expectations or not?


Charts: Sterling has found some near-term support and trying to now hold the 61.8/38.2% levels where there is clear near-term resistance to the bounce – eyes on the speeches of Bailey and Broadbent today.

GBPUSD Chart 09.11.2021

Gold: real rates under pressure again with 10yr TIPS out to –1.11%, testing the first area of resistance at the 38.2% retracement around $1,827, with further resistance at $1,833, the Jul and Sep peaks. Breach to the upside here may call for $1,875. Persistently high inflation and a dovish/patient Fed is a good setup for the metal – the sharp fall real yields since last week’s meeting tells you that. Weaker dollar also a factor with DXY down under 94 again to test its 20-day SMA after once again failing to break out above 94.60 area last week, just as it failed in Sep and Oct.

Gold Chart 09.11.2021

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