Les CFD sont des instruments complexes et sont accompagnés d’un risque élevé de pertes financières rapides en raison de l’effet de levier. 67 % des comptes d’investisseurs particuliers perdent des fonds en tradant des CFD avec ce fournisseur. Vous devez vous demander si vous comprenez comment fonctionnent les CFD et si vous pouvez vous permettre de courir le risque élevé de perdre votre argent.
La semaine à venir : Un nouveau mois apporte un nouveau rapport sur les salaires non agricoles.
Un nouveau mois apporte un nouveau rapport sur les salaires non agricoles. Les marchés espèrent que le gros raté d’août n’était qu’un coup de chance. Les banques centrales d’Australie et du Kiwi préparent également de grandes déclarations tandis que l’OPEP+ se réunit pour ses pourparlers politiques d’octobre.
Diminution ou absence de diminution, le rapport de vendredi sur la masse salariale non agricole est toujours important pour les États-Unis.
Les marchés chercheront à voir s’il y a un renversement de fortune sur le marché du travail Américain après que l’impression d’août soit tombée bien en deçà des attentes. NFP a totalisé 275 000 en Août, manquant aux attentes du marché de 750 000.
Le taux de chômage avait légèrement baissé à 5,2 % tandis que la main-d’œuvre au marché du travail était restée inchangée à 61,7 %. Les gains horaires ont augmenté de 0,6 % en août, dépassant les prévisions du marché d’une hausse de 0,3 %.
Nous savons que Jerome Powell et la Fed aiment un rapport solide sur l’emploi. Mais nous savons également que, indépendamment des données de septembre, la diminution des données est en cours, probablement en novembre. Bien sûr, si le rapport de ce vendredi est vraiment choquant, cela peut causer une ride dans les plans de réduction de la Fed, mais tous les indicateurs suggèrent que nous sommes sur la bonne voie pour une réduction prochaine.
Cependant, le président de la Fed, Powell, pense toujours que les États-Unis sont encore loin de la place confortable où il aimerait l’emploi.
S’exprimant la semaine dernière, Powell a déclaré : « Ce que j’ai dit la semaine dernière, c’est que nous avions pratiquement réussi le critère de réduction. J’ai clairement indiqué que nous sommes, à mon avis, loin de répondre au critère de l’emploi maximal ».
Quand cela viendra-t-il ? Selon une récente enquête menée par l’Association Nationale pour l’Économie d’Entreprise, 67 % des économistes participants pensent que les niveaux d’emploi atteindront les niveaux d’avant la pandémie d’ici la fin de 2022. Un peu moins d’un tiers pensent que la reprise de l’emploi n’aura pas lieu avant 2023.
Il y a encore un long chemin à parcourir vers le rétablissement. Nous avons cependant vu plusieurs cas en 2021 où la masse salariale non agricole bondit après un mois précédent décevant.
Le bond de Janvier à Février, par exemple, a vu un bond de -306 000 NFP à +233 000. La masse salariale non agricole est passée de 269 000 à 614 000 entre avril et mai 2021. Il y a un précédent ici.
Plus de 7,5 millions d’Américains ont également vu leur aide au chômage pandémique coupée. Les paiements complémentaires de 300 $ ont été interrompus début septembre alors que le gouvernement commence à réduire l’aide fiscale. Cela pourrait-il être un catalyseur pour plus d’embauches ? Peut-être verrons-nous dans l’impression de la masse salariale non agricole de vendredi.
En dehors des États-Unis, les deux principales banques centrales des Antipodes devraient faire leurs plus récentes déclarations de taux cette semaine.
En commençant par l’Australie, le gouverneur Phillip Lowe et ses collègues semblaient s’orienter vers une politique plus flexible lors de la réunion de septembre de la Banque de réserve d’Australie. En tant que tel, les marchés n’anticipent pas de changements drastiques en octobre.
Nous avons vu les taux rester aussi bas qu’ils l’ont été l’année dernière en Australie. La RBA reste déterminée à s’engager pleinement à ne pas augmenter le taux de trésorerie « jusqu’à ce que l’inflation réelle se situe durablement dans la fourchette cible de 2 à 3 pour cent ».
La déclaration de Septembre a révélé des changements nuancés.
Le taux de trésorerie et le taux de contrôle à trois ans sont tous restés à 0,1 %, mais le libellé du programme d’achat d’obligations a été modifié. À l’origine, il devait être révisé au plus tard en novembre, après avoir été ramené à 4 milliards de dollars australiens par semaine en juillet. Désormais, il sera au moins maintenu à ce niveau jusqu’en Février 2022.
Fondamentalement, tout cela signifie que le rythme des achats d’actifs RBA ne va pas ralentir avant février prochain. Après la réunion de Juillet, on pensait que la Banque commencerait à examiner les achats d’obligations tous les trois mois avant de les supprimer complètement au cours de l’année. Cela ne ressemble pas encore au cas.
Pourtant, nous ne nous attendons pas vraiment à un feu d’artifice lorsque la RBA publiera son relevé de taux d’octobre mardi matin.
Les marchés ont peut-être plutôt anticipé des mouvements plus bellicistes de la Banque de réserve de Nouvelle-Zélande, mais les récents commentaires du gouverneur adjoint Christian Hawksby suggèrent que toute discussion sur une hausse majeure des taux de trésorerie est prématurée.
« Les banques centrales dans le monde ont tendance à suivre une trajectoire lissée et à maintenir leur taux directeur inchangé ou à évoluer par incréments de 25 points de base », a déclaré Hawksby, mettant fin à toute idée d’une hausse de 50 points de base du taux de trésorerie de 0,25 % de la Nouvelle-Zélande.
Au lieu de cela, il est susceptible de suivre une trajectoire incrémentielle avant de porter les taux à 1,5 % d’ici la fin de 2022.
Mais, comme toujours, une grande ombre du COVID-19 plane sur la politique budgétaire néo-zélandaise. Le pays est récemment revenu au confinement après une augmentation des cas du variant Delta. Bien qu’il recommence à réapparaître, le petit nombre d’incidents a peut-être suffi à donner la frousse à la RBNZ.
Selon Reuters, les marchés tablent sur une probabilité de 60 % d’une hausse des taux mercredi lorsque le gouverneur Orr prendra la parole.
Enfin, l’OPEP et ses alliés se réunissent lundi, une fois de plus, pour leur réunion mensuelle et leur rendez-vous politique.
Avec des prix élevés et une demande avec eux, nous assisterons probablement à l’approbation d’une plus grande production à venir. L’OPEP+ s’est engagée à pomper 400 000 b/j supplémentaires chaque mois jusqu’à la fin de l’année prochaine alors qu’elle cherche à récupérer les pertes induites par la pandémie.
Selon le rapport mensuel de septembre sur le marché pétrolier, l’OPEP+ estime que la demande dépassera les niveaux de 2019 d’ici la fin 2022.
Avec le brut Brent poussant vers 80 $ au moment de la rédaction, les États-Unis tirent la sonnette d’alarme sur le prix de l’essence. Les États-Unis ont historiquement bénéficié du prix du pétrole beaucoup moins chers que certains autres pays développés et de tout ce qui est considéré comme inacceptable par Joe Sixpack et Joe Biden.
Le président a déclaré que les États-Unis étaient actuellement en pourparlers avec l’OPEP pour augmenter davantage les volumes pour couvrir cela – en ignorant peut-être le fait que le schiste américain est prêt à ajouter au moins 800 000 b/j aux approvisionnements mondiaux une fois qu’il sera opérationnel.
L’OPEP+ est de toute façon sa propre créature. Tout ce qu’il fait est dans l’intérêt de ses États membres, de ses alliés et des prix mondiaux du pétrole dans son ensemble. Nous ne savons pas si les plaidoyers de Biden tombent dans l’oreille d’un sourd, mais je ne serais pas surpris de voir l’OPEP-JMMC s’en tenir à son propre programme en octobre et au-delà.
Principales données économiques
|Mon 04-Oct||All Day||OIL||OPEC-JMMC Meetings|
|Tue 05-Oct||4.30am||AUD||RBA Rate Statement|
|3.00pm||USD||ISM Services PMI|
|Wed 06-Oct||2.00am||NZD||Official Cash Rate|
|2.00am||NZD||RBNZ Rate Statement|
|1.15pm||USD||ADP Nonfarm Employment Change|
|3.30pm||OIL||US Crude Oil Inventories|
|Thu 07-Oct||3.30pm||GAS||US Natural Gas Inventories|
|Fri 08-Oct||1.30pm||CAD||Employment Change|
|1.30pm||USD||Average Hourly Earnings m/m|
|1.30pm||USD||Nonfarm Employment Change|
|Tentative||USD||Treasury Currency Report|
Stocks tick higher after weak open, OPEC sticks to the plan
European stock markets showed some signs of wanting to kick on after shrugging off some early weakness at the start of the session. The FTSE 100 is handicapped to the tune of 13pts already due to ex-dividend factors but the overall tone was initially one of caution as yesterday’s ADP jobs miss has investors looking ahead to tomorrow’s nonfarm payrolls. Slightly hawkish chatter around the European Central Bank is also maybe leading to some caution, whilst there is yet further evidence of China’s crackdown on tech firms as it hauls up 11 ride-hailing for ‘illegal behaviour’. After an hour’s trade the main bourses were trading with a bit more confidence, up by around 0.1-0.2%, but still stuck in recent ranges.
Wall Street ended the day largely flat with defensive/bond proxies real estate and utilities leading the gainers, whilst risk-on sectors like energy and financials were the weakest. US 10yr yields at 1.30% in the middle of the week’s range. Note continued rotation into mega cap tech with Apple and Alphabet hitting record highs and lifting the Nasdaq Composite to another all-time peak, though both stocks pared gains to finish off their highs. Reopening did better in Europe yesterday as the Stoxx 600 outperformed.
Zoom rebounded very mildly as Cathie Wood said she’d bought the stock on the 16% dip earlier this week. Wood also added some Robinhood and there is a new transparent ETF being launched, stuffed full of the same stocks the other ETFs are invested in. Suppose it makes it easier to say you’re not overconcentrated – just open a new fund to bid up the stocks in the others. The Transparent ETF will be at least 80% invested in stocks in the Transparency Index published by Solactive. Excluded from the index are stocks in the following industries: (i) alcohol, (ii) banking, (iii) chemicals, (iv) confectionary, (v) fossil fuel transportation, (vi) gambling, (vii) metals, (viii) mineral, (ix) natural gas, (x) oil, and (xi) tobacco. The SEC filing can be found here.
Stagflation: ADP payrolls were a big ol’ miss at just +374k vs the +638k expected. Well over half (+200k) were in leisure and hospitality as reopening continues. Not a great indicator for Friday’s nonfarm payrolls and this would potentially give the Fed more rope to delay the taper. If data keeps getting worse, or less good, rather, then you can see the FOMC start to voice concerns at the Sep meeting and we could be in a position where the US central bank actually doesn’t taper asset purchases this year. I still think they will, but this is a very dovish, somewhat politically-motivated Fed with jobs on its mind and Powell looking to keep his job.
The US ISM PMI showed slowing growth and more inflation, albeit the pace of price growth is cooling. The Prices Index registered 79.4%, down 6.3 percentage points compared to the July figure of 85.7%. This was its first reading below 80% since December 2020. Labour shortage evident with the Employment Index slipping into contraction.
Anything really interesting? Well, that Employment Index reading in the ISM neatly matches the ADP report, so something to consider for anyone expecting a blowout NFP on Friday. Want to hire, can’t hire. Just wait ‘til the stimmy cheques wear off. Federal stimmy cheques end Monday Sep 6th – Labor Day ironically – although about half of states have already stopped them. Companies might find it easier to hire thereafter. US initial claims later today seen at 345k, which will also be watched with some scrutiny ahead of the NFP tomorrow.
FTSE reshuffle: Meggitt and Morrison (Wm) Supermarkets to join FTSE 100, whilst there are seven changes to the FTSE 250. Just Eat Takeaway.com and Weir Group will leave the FTSE 100 index. You have to wonder why on earth the FTSE Russell bods think that it makes sense to promote Morrisons just as it’s about to become a private company – particularly as it’s only due to the bidding war that the share price has risen enough to get in. Joining the FTSE 250 are Baltic Classifieds Group, Blackrock Throgmorton Trust, Bridgepoint Group, Darktrace, Draper Esprit and Endeavour Mining plc. Couple of recent IPOs in there that have been performing well since listing. Out go Wickes, Tullow Oil, Temple Bar Investment Trust, Civitas Social Housing and Avon Protection.
Melrose shares rose to the top of the FTSE as it returned to profit and reported trading ahead of expectations, with better profit margins, better earnings per share and significantly lower net debt. It also said the balance sheet has room for a significant further Capital Return next year. Profits rose to £223m from a loss of £11m last year. Shares rose 5% in early trade.
JD Sports still spitting feathers over the CMA’s continued refusal to allow it to acquire Footasylum. The regulator still seems to be taking a high street market share approach with regards the two must-have brands – Nike and Adidas – whilst seemingly not factoring in the amount of direct to consumer business they do already and plan to do in future. Retail changes all of the time and the pandemic has accelerated trends that mean blocking JD Sports from acquiring Footasylum increasingly makes less sense.
ECB speakers are doing the rounds: It’s an interesting moment for the European Central Bank next week so we’re paying close attention to what some of the ECB speakers are up to. After inflation rose to a decade-high 3% this week, leading hawk Jens Weidmann of the Bundesbank to call for stimulus to be rolled back.
Hawks are gaining confidence albeit the recovery is showing signs of lost momentum. Vice President Luis de Guindos told a Spanish newspaper that “the economy is performing better in 2021 than we expected, and this will be reflected in the projections that will be published in the coming days”.
Next week on Sep 9th the ECB will need to take a decision on the future path of bond purchases. De Guindos hinted that withdrawal of stimulus is on the cards. « If inflation and the economy recover, then there will logically be a gradual normalisation of monetary policy, and of fiscal policy, too, » he said.
But hawks have been in the minority for many years. ECB policymaker Yannis Stournaras was also on the tape, saying the central bank should be prudent, cautious regarding course of inflation, but stressed that wages are not yet following the course of inflation. This kind of follows what ECB chief economist Philip Lane said last week when he reiterated the central bank’s believe in the transience of inflationary pressures.
OPEC+ stuck to its plan, raising output by 400k bpd, and increasing its 2022 demand outlook amid growing confidence within the bloc and the fundamentals for the market. Members noted that while the pandemic has cast a shadow on sentiment, market fundamentals have strengthened and OECD stocks continue to fall as recovery accelerates. A well-telegraphed move but it shows more consensus than was evident last time when talks dragged on for days.
On stocks, US oil inventories shrank sharply last week, according to EIA data. Stocks fell by 7.2m barrels, double the draw that was expected. However, gasoline inventories rose as Tropical Storm Henry shut driving on the US east coast. Nevertheless, total product supplied, the key measure of implied demand, hit an all-time high of more than 22m bpd. The wash-out in July and August on delta fears may have played out enough to allow speculators to come back in as physical markets remain tight and fundamentals still solid.
After touching old support just under $67 WTI trades around $68 this morning as it continues to maintain a slightly bullish medium-term bias hugging the trend line, near-term descending trend is approaching but momentum is already fading a touch before this.
Stocks start September strongly, OPEC+ ahead
European stocks kicked off September with a strong start, with the major bourses back towards the tops of recent ranges. The DAX rose close to 1% in early trade to 15,980 as German bond yields hit a 6-week high, whilst the FTSE rose to 7,177 at the start. Wall Street dipped slightly on Tuesday in quiet trade ahead of Friday’s key jobs report but nevertheless managed to eke out a 7th straight monthly gain like its European and global peers. SPX now up 20% for the year without any sizeable drawdown – the 50-day SMA holding the line every time it’s tested and it’s now breezed through 4,500 without a glance back. The question now is after 7 months of gains, valuations stretched and economic growth struggling to retain the kind of perkiness it had on the initial rebound, can the market continue to glide higher? A combination of ongoing earnings strength, normalisation of the economic situation as reopening proceeds, and ongoing support from a dovish Fed suggest there is more upside, but not without some larger pullbacks along the way.
Stagflation: Manufacturing activity across all seven countries in the ASEAN block contracted for the first time since May 2020. PMIs for the region remained firmly in contraction territory, whilst inflationary pressures also remained high. “Input costs increased markedly again, with firms raising their average charges at an accelerated pace as a result,” IHS said. China’s Caixin PMI also registered a drop, marking the first time it has been in contraction for a year and a half. In Europe, German retail sales plunged by 5% – after yesterday’s 3% inflation print for the EZ. PMIs for the Eurozone already showing declining momentum + deeper supply chain problems + accelerating inflation pressures.
Crude oil remains with a slight bullish bias with WTI (spot) holding $69 after a larger-than-expected draw on US inventories, while traders are also looking towards today’s OPEC+ meeting. The API reported a draw of more than 4m barrels for last week, with EIA figures today expected to show a draw of around 2.5m barrels.
OPEC’s meeting today with allies should be simple – agree to raise output by 400k bpd as they have already set out the schedule through to December. Delta has increased downside risks for oil demand but prices have stabilised around $70 and the physical market remains tight even if speculative sentiment rolled over in July and August. Note WH Smith seeing encouraging signs of much stronger demand in Travel though still some way to go to get back to 2019 levels.
Also looking at the crypto space, particularly COIN, after the SEC boss Gary Gensler said crypto platforms need to be regulated ahead of his testimony before the European Parliament later today.
On the tape today – US ISM manufacturing PMI called at 58.5 but we will be looking for weakness in sentiment and, of course, inflation pressures.
Week ahead: Nonfarm payrolls take the spotlight
It’s all about major economic movers this week. The US jobs report for August is released on Friday, while we kick off the week with the latest Chinese manufacturing PMI numbers. OPEC and allies are due to hold meetings too, making it a busy week for the global economy.
The US jobs market has taken us to abyssal lows and new dizzying growth heights across the past 18 months. The pandemic has certainly taken its toll, but we’ve seen new life flow through the US’ economic veins too with more workers filling job gaps.
Just take last month’s nonfarm payrolls. July’s data saw an expectation-smashing 943,000 new jobs added to the economy.
Friday is when August’s job data is published. Markets of course will be looking at it closely. It’s the big release of the month, after all. But this week’s job’s report takes on a new character given trends we’ve seen in 2021.
For instance, April’s nonfarm payrolls stood at 785,000 new roles, registering a month-on-month increase of over 200,000. But in May, the NFP report shrank by over 500,000 to 269,000.
June and July showed consecutive growth months, but it’s important to not get too carried away. We’ve previously seen a bumper report give way to stunted growth in the following month fairly recently.
The Federal Reserve has explicitly tied policy decisions to labour market health, so this report will be of particular interest in the wake of last week’s Jackson Hole symposium.
As the start of another month brings another US jobs report so too does it bring another set of OPEC+ meetings.
Last week WTI and Brent benchmark dropped to 3-month lows, though they have since staged a bit of a rally with Brent crossing over the $70 threshold and WTI pushing over $67.
Changing demand expectations have weighed on crude prices. Key importers have introduced travel restrictions or new lockdowns. Some Chinese oil ports, for example, have been shuttered as Delta-variant COVID-19 cases rise.
But OPEC+ has so far stuck to its guns. It’s still committed to upping production by some 400,000 bpd per month from August onwards. It also saw no reason to push those numbers high at the urging of President Biden. For now, 400,000 bpd per month is the level.
It’s important to reiterate everything OPEC and its allies have done this year has been to support oil prices. With COVID-19 cases mounting worldwide, the supply/demand tightrope the cartel is walking may have narrowed but OPEC+ is likely banking on vaccine rollout to help pick up the slack.
We all know oil is a key ingredient in economic growth in our current fossil-fuel based worldwide economic system. China is the world’s largest importer of crude, so the nation’s manufacturing output falls under intense scrutiny – especially in the light of potentially lower oil imports in the past couple of months.
We may be able to see the effects of less oil and a surge in Delta-variant cases across the past month in August’s manufacturing PMI reading.
July’s reading of 50.4 was the lowest reading for 15 months. June’s 51.3 was a slight bump on May’s 51.0, but the trend seems to be factory output is slowing in the world’s second-largest economy.
Shutting ports isn’t going to do factory output any favours. Neither will current high commodity prices. Labour shortages and higher input costs have factored into slowdowns in UK and US manufacturing too. This isn’t a localised Chinese phenomenon.
A PMI reading above indicates that there is still growth, but we’re seeing China perilously close to slipping under that. Tuesday’s PMI release will reveal all.
Major economic events
|Mon 30-Aug||3.00pm||USD||US Pending House Sales|
|Tue 31-Aug||2.00am||CNH||Manufacturing PMI|
|3.00pm||USD||CB Consumer Confidence|
|Wed 01-Sep||ALL DAY||OIL||OPEC Meetings|
|ALL DAY||OIL||OPEC-JMMC Meetings|
|8.55am||EUR||German Final Manufacturing PMI|
|1.15pm||USD||ADP Nonfarm Employment Change|
|3.00pm||USD||ISM Manufacturing PMI|
|3.30pm||OIL||US Crude Oil Inventories|
|Thu 02-Sep||3.30pm||GAS||US Natural Gas Inventories|
|Fri 03-Sep||1.30pm||USD||US Nonfarm Payrolls|
|1.30pm||USD||Average Hourly Earnings|
|3.00pm||USD||ISM Services PMI|
|Tentative||GBP||Monetary Policy Report Hearings|
Week ahead: OPEC+ meets as Delta variant puts pressure on oil markets
OPEC-JMMC August meetings, pushed back after July’s tough negotiations, take place this week. Traders will look to the cartel for a response to potential dents to demand recovery caused by rising Delta variant numbers worldwide.
Elsewhere, UK Q2 GDP figures are released on hopes of strong growth while US CPI inflation is in focus too with July’s stats coming this week.
It’s fair to say July was a bit of a tense month for OPEC and its allies. It will be hoping to avoid further conflicts when it meets on Thursday this week.
The Cartel has been doing its best to not go overboard with production tapering. Given the relative strength of prices, despite last week’s wobble, its efforts to curb output to protect prices have been broadly successful.
Come July’s meeting, fractures began to appear in the OPEC façade. It’s always a balancing act when its members and allies get together in order to weigh each individual member state’s interests. Oil production is an integral part of all their economies after all. In this case, the UAE was pushing hard to lighten restrictions and redress base levels – something which Saudi Arabia was resisting.
That’s all spilt milk under the bridge now. A deal was reached, after delayed and reorganise meetings and hectic negotiations on both sides. The stoppers have been loosened. New baselines were awarded to members, including chief agitator the UAE, at the eventual outcome.
An extra 400,000 bpd will be added to OPEC+ production monthly volumes from August onwards. That should bring production up to about 2m bpd by the end of 2022. OPEC also confirmed it had extended its production cut deal until April 2022.
This month’s meeting, however, takes on a different hue as rising Delta variant COVID cases continue to mount worldwide. That could majorly impact demand recovery, and thus instigate some kind of retooling to OPEC+’s plans going forward.
A slowdown in Chinese manufacturing could also affect OPEC’s thinking. China is the world’s largest crude importer, so if less oil is needed to fuel its factories then prices could drop as markets recalibrate to lowered Chinese crude imports.
Whatever happens, OPEC will no doubt be extremely keen to avoid any fortnight-long negotiations as happened in July. Either way, Thursday’s meetings will be an interesting watch.
This week also sees the publishing of the UK’s preliminary Q2 growth figures.
Strong vaccine rollout coupled with dropping COVID cases are expected to have supported growth in Q2, following the UK’s1.6% contraction in Q1. Higher consumer spending is likely to be the main growth engine, however, accounting for roughly 70% of gross domestic product between May-July.
So, what are the forecasts? The British Chamber of Commerce (BCC) believes Q2 growth will clock in at 4.1% in 2021’s second quarter.
“The UK economy is in a temporary sweet spot with the boost from the release of pent-up demand, if restrictions ease as planned, and ongoing government support expected to drive a substantial summer revival in economic activity, underpinned by the rapid vaccine rollout,” the BCC said in a statement.
Looking long term, overall GDP growth predictions float between the 7-8% mark. The Confederation of British Industry’s forecasts sit at the optimistic end of the scale at 8.1% for the year.
As it stands, however, the UK’s domestic output is still some 8.8% lower than before the pandemic. Long term growth will likely cool with the effects of inflation and lower government support as we move into 2022.
Speaking of inflation, the week’s other key data release is the US consumer price index figures for July.
If the pace of inflation continues, then it will really test the Fed’s resolve. Chairman Powell has committed to the historically low cash rate, and seems content to let the economy run hot, but is this really sustainable?
June’s CPI inflation already caused alarm for some economists. By rising 5.4% year-on-year, the index had risen at its fastest pace since August 2008.
So far, the Fed has characterised inflation as “transitionary” and is still sticking to its dovish outlook. Its data modelling calls for 3% headline inflation by the end of 2021, before falling back to 2.1% in 2022.
Given consumer spending is the US economy’s major growth engine, accounting for roughly 68% of GDP, it’s little wonder why some observers are feeling tetchy and calling for more action. Gross domestic product missed growth expectations in Q1, for instance, as high prices limited consumer spending.
July’s CPI reading may thus be doubly important for the Fed.
It’s a subdued week for earnings on Wall Street, but we still have some large caps reporting. Headliners this week include Walt Disney, Palantir, and Airbnb who all report in on Thursday.
Make sure you check out our US earnings season calendar to see which large caps are still due to share quarterly earnings this week and beyond.
Major economic data
|Tue 10-Aug||10.00am||EUR||ZEW Economic Sentiment|
|10.00am||EUR||German ZEW Economic Sentiment|
|Wed 11-Aug||1.30am||AUD||Westpac Consumer Sentiment|
|1.30pm||USD||Core CPI m/m|
|3.30pm||OIL||US Crude Oil Inventories|
|Thu 12-Aug||ALL DAY||OIL||OPEC-JMMC Meetings|
|7.00am||GBP||Prelim UK GDP|
|1.30pm||USD||Core PPI m/m|
Key earnings data
|Mon 9 Aug||Tue 10 Aug||Thu 12 Aug|
|The Trade Desk (TTD) PMO||Coinbase Global (COIN) AMC||Palantir Technologies (PLTR) PMO|
|Viatris (VTRS) PMO||Airbnb (ABNB) AMC|
|Walt Disney (DIS) AMC|
European stocks in broad decline, oil weaker after OPEC deal
Risk is firmly off this morning with European stock markets slipping in early trade, led lower by the travel and energy sectors. US futures are weaker after Friday saw the first down week on Wall Street in four. Bank earnings were strong, but markets have already discounted an exceptionally strong reporting season. Meanwhile concerns about variants, rising cases and declining vaccine efficacy are all conspiring to knock confidence. The FTSE 100 slumped to a 2-month low in early trade as it retreated well south of 7,000. US 10yr Treasury yields hover around 1.28% but are off the low hit earlier close to the 200-day SMA. I think we are already in a high summer lull for stock markets.
Inflation was the big story last week and remains the big question mark hanging over markets. Consumer expectations have shot higher – the University of Michigan released its report on Friday showing consumers think prices will rise 4.8% over the next year. Earlier in the week the CPI print hit 5.4%. As expressed in these columns on many occasions, the risk was always that expressing a tolerance for inflation to run hot via average inflation targeting, the Federal Reserve was letting inflation expectations become unanchored, leading to a period of sustained high inflation.
Ocado shares slipped 3% in early trade as investors assessed the impact that a fire at one its fulfilment centres will have. There is the immediate operational impact at Erith with orders being cancelled following the blaze, which was caused by a three-robot crash. There is reputational risk from cancelling swathes of orders – small I’d say – but nonetheless to be considered. But the main thing investors are concerned about is the safety of the technology – will this be repeated? It is only two years since the Andover facility burned down. Will this impact on future deals with international partners?
Oil prices slipped to their weakest level in a month as OPEC+ finally reached accord over production increases. With Saudi Arabia and the United Arab Emirates making up, it removes the kind of pump-at-will tail risk for the market, but it’s a fragile peace. OPEC+ will now start incrementally raising production by an additional 400k bpd each month through to December, adding 2m bpd to output by the year end. Production will continue to rise next year at a rate of an extra 400k bpd each month through to the end of 2022. Baseline changes make it a bit it bit of a muddy picture in the latter part of next year, but front month pricing chiefly reflect the apparent success for OPEC in showing it will continue to work hard to manage oil markets. The broad risk off tone in the market amid concerns of variants, rising cases and declining vaccine efficacy is also contributing to the soft price action this morning for oil. WTI (Sep) is flirting with the Jun lows around the $70 level, where the 50-day SMA is offering support for now.
Looking ahead to this week we are interested in some speeches from Bank of England rate setters. Inflation in Britain spiked to 2.5% recently, raising the prospect that the Monetary Policy Committee will be forced into an earlier tightening of conditions than it has guided so far. Last week both Ramsden and Saunders sounded the hawkish alarm over inflation – so look to comments today from Haskel and Broadbent on Thursday for more of a steer. Central banks like to communicate policy direction ahead of time, so we would consider these statements likely to signal the MPC is about to tighten.
There is a light economic calendar today – Haskel tops the bill along with the German Buba report, whilst later in the US session we await the NAHB housing market index.
Bitcoin futures: Price action is frankly horrid – expecting another leg lower soon.
European stocks slide in wake of Fed minutes
European stock markets continue to trip the ranges – sliding sharply this morning following yesterday’s jump. The FTSE 100 dropped 1.3% in early trade to the 7,050 level, whilst the Euro Stoxx 50 declined 1.7% to test 4,000. Asian shares were broadly weaker overnight, with a steep fall in South Korea registered as daily Covid cases there surged. Bonds are still bid as weaker hands get washed out with the 10yr Treasury note yielding 1.28%, a new 5-month low in the wake of the Fed meeting minutes – it’s either sending a warning signal or it’s just a flush before the move higher. US stock markets were mildly higher yesterday, with futures pointing to a drop at the open. Apple shares hit a fresh record, whilst meme stock favourites such as GME, WISH and AMC fell sharply. In London, money transfer app Wise got off to a solid start as shares rallied on the first day of trade. Shares in troubled Chinese ride hailing app Didi fell another 5% as it faces a lawsuit from US shareholders.
Minutes from the FOMC’s meeting in June showed pretty much what we knew; policymakers are moving but with a degree of caution. “Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated” but it is “their intention to provide notice in advance of an announcement to reduce the pace”. Meanwhile China is back in the game – the State Council issued a statement saying it would seek “to increase financial support to the real economy” by using “monetary policy tools such as RRR cuts”.
Deliveroo reported a better-than-expected rise in revenues in the second quarter but cautioned it would not lead to better profits. Gross transaction value (GTV) rose 76% year-on-year to £1.7bn. For the full year, the company raised its GTV growth estimate to 50-60% from 30-40%. However, gross margins are seen in the lower range of what was previously communicated, with management citing investment and lower average order spend. Looks to me like it should be making more money if GTV growth is a full 20 percentage points higher than expected. Poses serious questions about the model if it cannot at least deliver margins in the upper range of expectations on such impressive sales growth.
Oil prices slipped as the gulf between OPEC and the UAE showed no signs of closing. The UAE signalled it could open the spigots to pump at will. The fear is the supply deal could unravel, heaping more crude on the market. WTI (Aug) held at $73 the first time but cracked on the second attempt and quickly declined and found support at $71. Another test at this level can be expected.
Finally, it was great to see Wembley almost full last night with tens of thousands of fans. No masks, plenty of singing, social distancing forgotten. So why can’t my kids have a school sports day? The inequities of opening up are legion, almost as much as the inequality of lockdown. We can only pray the mask-wearing Covid Stasi are silenced for good and we can get on with our lives.
OPEC+ meeting breakdown sends oil sky high
Oil reaches some of its highest levels for years as OPEC and allies walk away from July’s meeting.
OPEC+ were on the cusp of making a new deal at its July meetings, but talks have broken down.
What the market was anticipating as being more of a formality than a full-blown tussle has turned into something sour. July’s meeting has been abandoned.
The cartel and allies have been steering the course of oil markets successfully over the pandemic, but now faces a major hurdle in establishing harmony.
The UAE and the rest of the cartel are at loggerheads over OPEC+’s production tapering proposals. A plan to raise output by 400,000 bpd from August to December, and keep cuts in place beyond the April 2022 deadline, are yet to pass muster with the UAE.
The emirate is willing to accept the deal if its quota requirements are upgraded to match Saudi Arabia’s. Obviously, as OPEC top dog, the Saudis aren’t particularly keen on that. As such, meetings have been called off.
What’s bad news for OPEC is good news for oil traders. Prices have shot to highs not seen since November 14. WTI is trading at $76.65.
Brent crude is pushing the $78 level, trading at around $77.70 at the time of writing.
However, the breakup of talks suggests two things. Firstly, that competition amongst OPEC+ is growing in the face of higher global oil demand and higher prices. Second, concerns about global oversupply are still there.
Away from OPEC, US crude inventories are now at some of their lowest levels for years. A combination of slowing domestic production and rocketing fuel demand means stockpiles continue to drop week on week.
According to EIA data, US reserves stood at 452.3m barrels as of week ended June 25th. That is a 15.2% year-on-year increase, and also 3.4% lower than in the same week in 2019.
Stocks at Cushing, Oklahoma, the US’ designated NYMEX crude futures delivery point, have dropped too. Stocks were down 1.5m barrels as of week ended June 25th, totalling 40.1m barrels – a 23.3% decline against 2019’s pre-pandemic levels.
Natural gas trading
Natural gas prices started the week at a bullish $3.738.
However, weather forecasts may cause fluctuations in demand over the coming weeks. According to NaturalGasWeather predictions, national demand is expected to ease this week with heavy showers over the Great Lakes and East.
Next week, national demand will increase next week due to hot conditions over the West and warm conditions over the South and East.
Attention is being paid to Cyclone Elsa brewing in the Gulf. Demand may fall upon the colder, rainy temperatures Elsa could generate. LNG cargoes could also slow.
Overall, the pattern remains just strong enough to be bullish over the coming week and into the next.
Looking at stockpiles, the EIA’s report for week ended June 25th showed natural gas in storage rose 76 bcf during the review period.
The injection boosted stockpiles to 2.558 trillion cubic feet (Tcf), which is still 5.3% below the five-year average of 2.701 Tcf for this time of year.
Oil hits highest since Nov 2014, possible gold breakout
Oil advanced to its highest since Nov 2014 as OPEC+ abandoned its July meeting, after the United Arab Emirates stood its ground over production increases. The failure to agree to increasing production in August and beyond leaves the market even more in deficit than before, so front month WTI spiked to a near 7-year peak this morning close to $77. Saudi Arabia and Russia had agreed to increase production by 400k bpd monthly from August to December, adding an additional 2m bpd from current levels of supply by the year end. However the UAE wanted to recalculate the baseline for its production quota as it has significantly increased capacity in the last 2-3 years. This is an interesting moment for the path of oil prices – does the breakdown signal a push to $100 is on, or will it lead to more uncertainty and more oil on the market longer term? The short-term effect is less oil on the market (bullish), but it exposes the OPEC+ production deal to a risk of breaking down, which could see producers pumping much more (bearish). There is a risk that compliance with current production quotas will lessen, whilst the UAE could yet threaten to leave OPEC and pump what it chooses. Sec gen Barkindo said a new meeting would be called in due course.
Stock markets in Europe edged a tad lower this morning after finishing higher on Monday despite a weak start to the session. Indices continue to tread well-worn ranges. US futures are steady as Wall Street returns to life following the long weekend. The FTSE 250 hit a new record high in early trade as England heads towards the lifting of all Covid restrictions on July 19th. Clearly reopening is good for domestic growth, so it’s been seen as a positive for UK-focused stocks.
Shares in Chinese ride hailing app Didi slumped as much as 28% in pre-mkt trading after the app was removed from the country’s app stores. It’s a complicated picture – there are reports Didi knew of a regulatory crackdown and was even asked to delay its IPO. Didi says it had no knowledge of the actions by the cybersecurity regulator. The stock only started trading on Wednesday and the ban announced Sunday. China is cracking down on big tech, but the decision to remove the app from domestic platforms appears to be timed for maximum impact and embarrassment. China’s Communist Party is bristling at the number of Chinese companies listing in the US this year, but there is a genuine concern at the heart of this – regulators are not impressed at the way Didi and other Chinese tech companies handle data. The SEC will not be impressed either way.
Sainsbury’s reports like-for-like sales rose 1.6% in Q1, with sales across the board higher than expected in the quarter as it benefitted from continued pandemic-related restrictions. On a two-year basis, total retail sales are up more than 10%. Management raised the profit outlook for the year to £660m against £630m anticipated. Sainsbury’s says it will use some additional profit to invest in the customer offer – yesterday it announced £50m on targeted price reductions on ‘everyday essentials’. Supermarkets have done well out of the pandemic, but it’s unclear the extent to which reopening will negatively impact sales against some very tough comparisons. Inflation is also risk in this ultra-competitive sector. If you’re a shareholder, the last thing you want is a supermarket price war right now.
It’s been a tough year for Ocado shareholders as the reopening trade went against them, leaving the stock down ~14% YTD. But shares are up 2% this morning after another solid half-year report. Group revenues rose 21.4% to £1.3bn, with its retail business growing to £1.2bn, up 19.8%. The waiting game continues abroad: International Solutions revenues of £26.6m but management affirmed that Ocado Smart Platform (OSP) fees are building as expected. Group EBITDA more than tripled to £61m, but still the group reported a loss before tax of £23.6m, though this was down from £40m last year. Meanwhile Morrisons is steady at 266p as investors bank on another offer or two before this bidding war ceases.
Australia’s central bank said it will begin tapering asset purchases to maintain the target on the country’s three-year yield. The Reserve Bank of Australia will pare weekly bong buying from A$5bn to A$4bn as it continues to target a yield of 0.1% on its three-year paper, while leaving the benchmark interest rate unchanged at 0.1%. Overall, the message was a little more hawkish than expected, with the tapering and change in language around the forward guidance. AUDUSD advanced to its highest in a week, with 0.76 offering near-term resistance.
Elsewhere, the dollar fell as the European session got underway. GBPUSD continues to break out of the downtrend.
Gold is firmer with a bullish MACD crossover confirmed on the daily chart and push clear of $1,800 now possible.
Stocks firm ahead of jobs report, waiting on OPEC
European stocks rallied again in early trade after yet another record high for Wall Street as investors look ahead to today’s big jobs report from the US. The FTSE 100 rose above 7,150 for its best since Jun 18th and close to the post-pandemic peak set a few days before at 7,189.63. The DAX was up 0.4% in early trade to 15,666. Travel & leisure, basic resources and tech lead the way higher on the Euro Stoxx 600 this morning, whilst banks and retail are down. Earlier saw the S&P 500 notch a 6th straight record close, finishing above 4,300 for the first time at 4,319.94 with all sectors in the green, led by a 1.6% pop for energy stocks on higher oil prices.
All eyes today turn to the US jobs report, the monthly nonfarm payrolls. Initial jobless claims declined to 364,000 last week, data yesterday showed, the lowest level since the pandemic started, but there are still more than 11m Americans receiving pandemic-related benefits. Today’s NFP is expected to print around 700k, but as ever the range of estimates is quite wide. That would imply an improvement from May’s 559,000, while the unemployment rate is expected to decline to 5.6% from 5.8%. Whilst we know the Fed has signalled it’s not ignorant to inflation risks, we also know that the labour market is a key factor in determining the likely timing and pace of tightening when it does happen. Since the Fed’s last meeting, which the market took as a sign of more hawkishness (from a very dovish base), the equation for markets has changed slightly. US 10-year yields trade around 1.46% ahead of the report, whilst US equity index futures are mildly higher.
OPEC failed to agree on an increase in production yesterday, as the UAE emerged as a dissenter against plans to gradually raise production by an additional 400k bpd each month through to December until the baseline for its own output is raised. The agreement in principle would also have led to the production deal being extended through to the end of 2022. The failure of OPEC members to agree to the deal means the planned OPEC+ meeting has been pushed back to today and could go on into the weekend. If OPEC cannot agree a deal, it could mean there is no agreement to gradually raise output, leaving production at current levels and forcing prices higher in what’s already seen as a very tight market.
WTI (continuous) remains well supported above $74.20 after spiking on yesterday’s news before paring gains a touch. The market seems to still expect a deal to be struck – failure could see another leg up.
Elsewhere, the bid for the dollar we have seen all week continues, with GBPUSD trading at the lowest since mid-April at 1,3750, which yet take it back to the double bottom at 1.3660.
EURUSD also dropping to weakest since early April, bear flag playing out still, possible extension to the March low at 1.170. But in both cases the dollar is starting to look a little stretched.
Bitcoin futures around $33k, still trades under 200-day SMA.