Earnings season: Facebook beats earnings but posts revenues miss

Facebook’s Q3 2021 earnings come in ahead of Wall Street forecasts but revenues fall this quarter.

Facebook earnings

Facebook’s headline stats

Facebook reports in the midst of a major whistleblowing case. Despite disgruntled former insiders taking the social media giant to task, Zuckerberg’s Facebook shrugged this off to post an earnings beat.

Facebook is one of the largest tech companies to report so far, alongside Tesla and Netflix.

Investors seem to have chosen to cherry-pick the EPS increase, which is fair enough, rather than focus on Facebook’s quarterly revenue drop.

Facebook’s key Q3 2021 earnings metrics are:

  • Earnings per share – $3.22 vs $3.19 forecast
  • Revenues – $29.01 billion vs $29.57 billion forecast
  • Average revenue per user – $10.00 vs $10.15 forecast

Its EPS beat means Facebook has earned $9bn this quarter.

Ad revenues continue to enjoy sustainable growth. Facebook said advertising-generated revenue in the third quarter rose 35% from a year earlier, while net income rose 17% to $9.2 billion, from $7.8 billion a year prior.

Comparing quarters, EPS is actually down from Facebook’s second quarter earnings. During Q2, Facebook’s earnings per share totalled $3.60. Revenues stayed fairly flat quarter-on-quarter, although it is fair to say Facebook did warn of slowing growth in its second-quarter guidance.

We also need to examine key user metrics when looking at Facebook earnings. This includes users across all of the apps and platforms in the Facebook family. These include Instagram, Messenger, and WhatsApp.

User engagement totals for Q3 came to:

  • Monthly active users (MAUs) – 2.91 billion vs. 2.93 billion forecast
  • Daily active users (DAUs) – 1.93 billion vs. 1.93 billion forecast

These are both comparable to Q2 earnings. Fairly flat across the board once more.

The EPS beat will be good news for investors, but for Zuckerberg and co. it’s going to take a lot of PR massaging to foster more sales going forward.

Where next for Facebook?

In the major bundle of documents Facebook whistle-blower Frances Haugan has leaked to the press, it looks like the social media app is losing ground in the 18-29 segment.

“Over the last decade as the audience that uses our apps has expanded so much and we focus on serving everyone, our services have gotten dialled to be the best for the most people who use them rather than specifically for young adults,” Mark Zuckerberg said in an earnings call.

Facebook is now committed to developing its full-screen Reels feature, already popular on Instagram, to try and claw back some market share from TikTok. However, developing its products to get back this lost ground will not be a simple project. According to Zuckerberg, this is a multi-year endeavour.

There’s even talk of a rebranding for Facebook as a corporate entity as part of Zuckerberg’s “metaverse’ project. The metaverse seeks to create a persistent, online world where you can interact with others as though you were speaking in real life.

Again, this is all long term. In the short term, Facebook will still have to contend with Apple’s privacy updates. The Apple App Transparency Tracking abilities in the iO4 operating system means users can limit how they are tracked. Facebook targets users to grow its advertising offer to clients, which is a cash cow for the platform.

Limiting its tracking efforts could damage its revenue streams – especially on an OS as popular as iOS.

“Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors,” the company said in an earnings call.

In terms of share performance, Facebook gained 2% in after-hours trading, despite a mixed outlook for Q4. It continued to make gains on Tuesday morning.

According to our analyst consensus tool, Facebook holds a strong buy rating:

Facebook Analyst Consensus 26.10.2021

Blogger consensus is also strong:

Facebook Blogger Opinions 26.10.2021

Stocks up as earnings optimism wins, inflation expectations higher

European stock markets rose in early trade Friday, set to finish the week largely flat after a little wobble but not a huge amount of movement. Churn seems to the be order of the day after a decent run up for the FTSE 100, which hit its best level in about 18 months last Friday. It’s not far off that level this morning.  Bit of a double whammy for UK this morning with the Bank of England chief economist warning inflation will exceed 5% and retail sales falling again. Stagflation vibes but sterling holding on ok and 2yr gilts back off their recent highs, though the wires just flashed the UK 10-year breakeven inflation rate has risen to its highest in 25 years. A GfK report showed consumer inflation expectations jumping to a record high. That’s what the Bank of England is expressly trying to avoid. Asian shares were up as Evergrande repaid a missed dollar interest payment. IHG shares off 2% despite a rebound in bookings thanks to Brits doing more holidaying in the UK, Sainsbury’s also lower as it abandons plans to sell its bank.

 

The S&P 500 closed at a record high and made it seven straight days of gains amid a mood of positivity around earnings. It ends a two-month pullback that saw it decline a modest 6% before recovering. Rates are higher – US 10s at their highest since May at 1.7% and 2s at a year high, curve flatter. The 10yr TIPS breakeven inflation rose above 2.61% to hits its highest since 2012. But investors are shrugging off inflation and expected central bank policy moves because of earnings growth being more positive than thought. Tesla shares rose to a record after earnings beat expectations. Energy and financials lagged, megacap tech did the lifting +1% (FANG+TM up 1%). Again slower growth, higher inflation supports growth stocks as real growth is at a premium. A steep drop for IBM prevented the Dow Jones from rallying.

 

Not a huge move in FX this morning – dollar index around the 93.60 area, major pairs stuck to well-worn levels. GBPUSD is trying to regain 1.38 and make a fresh stab at what looks like a near-term top around 1.3830 – the high of each of the last three days.  

 

Donald Trump + social media + SPAC. It feels like a kind of reassuringly volatile mix. Trump is launching his own social media platform called TRUTH Social. It needs capital letters, of course. I’d maybe even suggest ‘TRUTH! SOCIAL!’ might be more appropriate. Banned by Twitter and Facebook, Trump is taking on the Silicon Valley elite and fake news in the way he knows best. Shares in Digital World Acquisition Corp. (NASDAQ: DWAC), the Spac that merged with the platform company, soared as much as 400% and had to be halted at one point amid very heavy volume. Trump still sells. The stock finished up 357% at $45.50.  

 

I can’t see the majority of people ditching their FB and Twitter accounts for this. But you can see a large chunk of disaffected Americans, chiefly Republican/Trump voters, giving it go. I don’t think this ends the dominance of the other platforms, but tells you a lot about what a lot of people think about the platforms they use. “I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech,” says DT. “We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable.” He’s got a point. 

 

If you don’t have a controversial ex-President to back your social media platform, you have to rely on more mundane things like advertising revenues to drive cash flow. So poor Snap shares collapsed overnight as third quarter revenue expectations missed expectations after Apple’s iPhone privacy changes hit the advertising business. Daily active user growth was sluggish and the company warned of the global supply chain problems and labour shortages hitting advertising demand. Shares plunged by more than 21% after hours. Facebook and Twitter both dropped by more than 4% in sympathy.  

 

The Federal Reserve has banned individual stock purchases by top officials and outlined a broader set of restrictions on their investing activities. These will ‘prohibit them from purchasing individual stocks, holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives’.

The move came as it emerged that Fed officials were warned on March 23rd, 2020, to observe a ‘trading blackout’ for a period of ‘several months’ due to recent and likely upcoming actions by the Fed. The same day, the Fed did its ‘everything it takes’ moment by committing to open-end bond purchases “in the amounts needed to support smooth market functioning”. If you, say, knew the Fed was about to provide the ultimate backstop to the stock market, it would be useful, I assume. I figure that if you owned a tonne of stocks you’d find it valuable to know what the Fed was about to do or not do. Which is why it obviously stinks that Fed members have been allowed to trade individual stocks at all. Messrs Kaplan and Rosengren were trading again within weeks, not months, of the memo date. 

 

If you read the memo a certain way it just sounds like the ethics people were actually just trying to offer some good advice – don’t do any unnecessary selling, we got this: “In light of the rapidly developing nature of recent and likely upcoming (Federal Reserve) System actions, please consider observing a trading blackout and avoid making unnecessary securities transactions for at least the next several months, or until FOMC (Federal Open Market Committee) and Board policy actions return to their regularly scheduled timing.”

Earnings season: Tesla drives through Q3 with another earnings beat

Despite supply shortages, Tesla comes out on top with another record-breaking earnings quarter.

Tesla earnings

Tesla’s headline stats

It’s another expectation-beating quarter for Elon Musk’s Tesla.

The electric carmaker was buoyed by record deliveries in Q3. This translated into higher net income and better margins. Tesla appears to have found chipsets no one else can locate, giving it the edge over its rivals as the world experiences a global computer chip shortage.

The key takeaways from Tesla’s Q3 2021 earnings are:

  • Earnings per share – $1.86 vs. $1.59 estimated
  • Revenue – $13.76 billion vs $13.63 billion estimated

In income terms, Tesla reported net income of $1.62bn. This is the second consecutive quarter the auto manufacturer has reached a $1bn income quarter. It only goes to show just how far Tesla has come. Last year, third quarter net income totalled $330m.

It was reported at the start of October that Tesla vehicle deliveries had outstripped Wall Street estimations. According to Tesla, it delivered 20% more vehicles against Q2 for a total of 241,300. Its Model Y and Model 3, more “affordable” cars, were the most popular models. Ultimately, Q3 vehicle deliveries were up 73% year-on-year.

Analysts had forecast that Q3 deliveries would stack up at 229,242 vehicles.

Gross margins improved from 26.6% overall and 30.6% for Tesla’s main automotive business – another record-breaking metric for Elon Musk’s brand.

Tesla also generated $806 million in revenue from its energy business, which combines solar and energy storage products, and $894 million in services and other revenue. Other revenue comprises maintenance, insurance and merchandise.

Tesla insiders show pre-earnings sell off

In a move that may signal something greater (but also maybe not), Tesla insiders began selling shares prior to the company’s third quarter earnings release.

As you can see from the below, Tesla company insiders have been releasing stocks. Over 450m Tesla stocks have been sold over the past 3 months, worth $7.1m. Compare that with buys of just 764,446.

Tesla inside earnings tool results.

Could this be part of a broader trend? Is Musk planning to sell some of his own Tesla holdings? It’s hard to say at this stage, but it’s worth keeping an eye on.

Tesla stock fell 1.5% in after-market trading. As of Thursday morning, the stock was still relatively flat, trading at $866.56. On the whole, Tesla shares are up around 23% across 2021.

According to the Markets.com analyst recommendations tool, Tesla holds a neutral rating.

Tesla analyst recommendations chart.

Contrasting with that is news sentiment which places Tesla in a firmly bullish position.

Tesla news sentiment rating.

Where next for Tesla?

Tesla is in the process of expanding its production capabilities with new factories under construction around the world.

“There’s quite an execution journey ahead of us,” Chief Financial Officer Zachary Kirkhorn said in the brand’s quarterly earnings call.

The centrepiece of its expansion plans is its Berlin “Gigafactory”. The $7 billion project could see cars start rolling off the production line in the next month, but there are still global parts shortages and high commodities prices to contend with.

This didn’t seem to really hold Tesla back in the third quarter. The EV builder seemingly has the ability to pull parts, chipsets, and micro components out of thin air.

“Q4 production will depend heavily on availability of parts, but we are driving for continued growth,” Kirkhorn said.

Also expect to see acceleration of the so called “Full Self-Driving Systems” Tesla is developing. As we reported yesterday, this new tech has its fair share of detractors, not least the National Highway Traffic Safety Administration. The self-driving technology is already under investigation by the NHTSA, and some Tesla fanboys/girls see this as an attack on the brand.

Others just don’t want to see a repeat of several fatal incidents caused by Tesla vehicles on autopilot. It’s imperative Tesla gets this right, otherwise there good be a major clampdown on its autopilot ambitions. But if people are getting hurt, or being killed, by wayward Tesla cars, it’s only right to take a cautious approach.

Let’s mention batteries. Tesla says it is about to make a switch to its standard-range models who currently use a lithium-ion battery with a nickel cathode. Tesla says it will start using a lithium iron phosphate (LFP) mix. Basically, iron is more abundant than nickel. It should make it easier for Tesla to source supplies.

The end goal, says Tesla VP of Powetrain and Energy Engineering Drew Baglino, is to localise battery and car production.

Some supply and critical safety challenges to overcome then for the world’s most valuable car maker.

S Q3 earnings season is in full swing. Stay tuned for more updates. In the meantime, check out our earnings calendar to see which megacaps are reporting and when.

Tesla stuff, Squid Games

Tesla stuff: Haters hate, regulators regulate: don’t confuse the two. Duke University engineering and computer science professor Missy Cummings is set to become a new senior adviser for safety at the National Highway Traffic Safety Administration. Many Tesla fanboys and girls are crying foul. Cummings, a former pilot and robotics expert, is seen as ‘anti-Tesla’. Now that’s kind of interesting in the first place: you’re either definitely for Tesla or definitely a hater. No room for a middle ground. That’s kind of odd for a carmaker. Most people are not anti or pro Ford, or GM. They maybe like/dislike their cars, think they’re doing a good/bad job with the tech and think management are capable/useless. No one would say they’re anti-Ford. They might have an objective, rational view on the cars and/or the stock, but not a creed. But rational objectivity and Tesla seldom go hand in hand. And I’m not sure if you could say she’s anti-Tesla per se, just sceptical about the level of technology that is being touted around by some companies. But, particularly Tesla. 

 

For instance, last year she tweeted“LMAO…there is NO WAY Tesla will have a viable robo-taxi service this year. My lab has been running controlled experiments on Tesla Autopilot & I can say with certainty that they are not even close to being ready. My student on this project should get hazardous duty pay.”  In one 2018 tweet she said “The only killer robot out there is @elonmusk’s Tesla.” There are lots of examples on the feed.

 

It’s fair to say Cummings is a vocal critic of the ability of self-driving systems to cope with bad weather, and authored plenty of research that calls into question some of the main claims that companies like Tesla make when they market their ‘full self-driving’ systems. There are numerous papers, some choice tweets and essentially you can say she doesn’t buy the tech being anything like close enough to be objectively safe for the roads.  

 

After news of her appointment broke Elon Musk tweeted today: “Objectively, her track record is extremely biased against Tesla.”  

 

Tesla’s self-driving technology is already being investigated by the NHTSA. The company must provide the regulator with extensive data about its Autopilot system by Friday. Tesla has been getting away with marketing ‘Full Self Driving’ technology for a while; Cummings could mark time for a much tougher stance. Steven Cliff, deputy administrator since February, has also been nominated by the White House to lead the NHSTA. He’s currently in charge of the Tesla investigation. Another Tesla ‘hater’, according to many. Regulators are maybe finally going to regulate.

 

Meanwhile, in other Tesla ‘stuff’. Get a load of Elon Musk, who told a customer apparently not impressed with the look of the side mirrors on the cyber truck, that it’s OK to remove them. “They’re required by law, but designed to be easy to remove by owners,” he tweeted. I am ‘absolutely sure’ that is not irresponsible or unsafe…

 

Tesla earnings are due out today: the company hit record deliveries in Q3 as it found chips no one else seems to be able to find. EPS is seen around $1.50, on revenues of $13.6bn. Looking for updates on the Berlin Gigafactory, competition in China, internal chip production, Cyber truck and Semi releases, and, of course, the beta FSD progress. Let’s hope for some analyst questions around the NHSTA today.

 

Squid Games: Netflix posted solid subscriber growth in the third quarter of 4.4m, well ahead of the 3.84m expected. A deluge of hit new content that had been delayed by the pandemic is helping to drive interest such that the company anticipates 8.5m net adds next quarter. Earnings per share were a handsome beat at $3.19 vs $2.56 expected. In Q3, revenue grew 16% year over year to $7.5 billion, while operating income rose 33% vs. the prior year quarter to $1.8 billion. Content and subscribers are in good shape, but free cash flow remains elusive as it reported a second consecutive quarter of negative free cash. Still when you have low-cost, high margin content in multiple languages, you think Netflix will be able to drive non-US subscriber growth substantially in the coming years. Shares fell slightly in after-hours trade.

 

Markets: Stocks are flat again this morning in early trade in Europe, with the FTSE 100 hovering around the 7,200, looking like it has decent support.  The S&P 500 rallied three-quarters of one percent yesterday to close within 0.4% of its record high. Megacap tech had a decent day despite rising bond yields. If it’s stagflation then growth is still a premium.  

 

US 10-year rates rose to a 5-month at 1.67% as the Fed’s Waller said tapering should start in November and that if inflation keeps rising “a more aggressive policy response” might be required in 2022. Bitcoin at or around all-time highs post the ProShare ETF launch.

 

Inflation: UK inflation has fallen! But before we rejoice too much, it’s probably a one-off. CPI fell to 3.1% in September from 3.1% in August. The end of the Eat Out to Help Out scheme at the end of August last year, which led to restaurants raising prices in September, is a big factor. The surge in energy prices and ongoing supply chain problems are still expected to drive inflation to 4% this year. Moreover, the RPI rose 4.9%. 

 

As we said in yesterday’s note on Will the Bank of England actually raise rates in November?, the reading of the inflation print is important: the consensus remains firmly on the MPC voting to raise rates in two weeks’ time. But, as stressed in the same commentary, it’s not a slam dunk given the make-up of the MPC right now. 

Meanwhile, German produce price inflation surged – rising 2.3% month-on-month vs the +1% expected. That took the annual rate to 14.2%. Supply chain and capacity problems abound. Underlines that rising cost pressures are not going away. 

 

Sterling just eased back on the inflation miss. GBPUSD retreated to test the support offered at 1.3770, the OCt 15th swing high, where sits the 50hr SMA. Recent price action indicates this is the chief support before resumption of the uptrend, though we are less convinced that GBP can rally with rate expectations now they are baked in. However, I do see further dollar weakness likely to support further gains for cable following the topping pattern on the last 3 weekly candles.

Stocks flat to start the session

European stocks are flat in early trade as risk remains on watch for a range of factors, including earnings, inflation and expectations central banks will tighten the screw. The S&P 500 notched a 4th straight day of gains, but the Dow Jones fell. The Nasdaq rallied with megcap growth performing solidly. Asian shares rallied with tech leading the way. Meanwhile what we might call cyclical/steepener trades are suffering a bit.

US industrial production fell 1.3% in September, manufacturing down 0.7%. Autos and parts fell 7.2% as shortages of semiconductors continued to hurt operations, while the lingering effects of Hurricane Ida hit mining. Supply chains remain the big problem for now – a shortage of semi-conductor supplies could affect the car industry well into 2022, the head of French car sector body PFA said today.

Also worrying markets are central banks – the Bank of England has put the cat among the pigeons with its hawkish talk, nudging markets to price in some hikes in the next year that just weren’t expected a few weeks ago. That’s seen the yield curve flatten with many arguing that CBs shouldn’t be hiking into a supply-side inflation crunch. That may be so, but with inflation at 5% or more, should they really be trying to grease the wheels as much as ZIRP and QE is doing now? UK 2yr gilt yields jumped to a two-and-a-half year high on Monday, as traders bet on the BoE hiking rates as early as next month and following up with more in 2022 so the base rate is seen reaching 1% by next summer. Ten-year rates have not kept pace. It shows the BoE’s boss, Andrew Bailey, is believed when he says the bank will act to curb inflation, but it also shows markets don’t think it’s necessarily the best step for achieving growth in the long run. Both markets and central banks have been wrong in the past.

Some big names reporting earnings today, including Netflix, United Airlines, and Tesla. We know it was a good quarter for deliveries: Tesla made approximately 238,000 vehicles and delivered over 240,000 in the third quarter. But as ever with Tesla there are questions still. Eg, What about the self-driving feature and investigations? What about delays in delivering new products – it has only started delivering latest model X SUV after months of delays? There will be a focus on China – EV sales there are booming but Tesla’s sales in the market have slumped. But if Tesla can show it’s profitable with emissions credits again and show it can find chips where no one else can, it’s maybe going to satisfy the market just enough.

Bitcoin trades at a new high, inching closer to its all-time high, with prices close to $63k overnight. In addition to the launch of the ProShares Bitcoin futures ETF, Interactive Brokers said it will allow Registered Investment Advisors in the US to invest in Bitcoin and other cryptocurrencies. This opens the gates on billions of dollars of potential investment in the sector.

IPO watch: Volvo Cars seeks $23bn valuation on public launch

In one of the largest IPOs of 2021, Volvo Cars is going public. Here’s what you need to know about the Gothenburg carmaker’s stock market debut.

Volvo IPO

Volvo Cars hopes to raise $2.9bn in initial public offering

Chinese-owned Volvo Cars will make its public stock market debut on October 28th, 2021.

The company has set its sights on a $23bn valuation when it debuts on the Nasdaq Stockholm stock exchange in ten days.

In its prospectus, Volvo said it would be offering shares priced between 53-68 krona ($6.12-7.86) per share, initially offering $2.9bn worth to investors. Volvo Cars’ offering is made up of 367,647,058–471,698,113 newly issued common class B shares.

The transaction, including expected converted investments by investors AMF and Folksam, was seen resulting in a free float of about 19.5% to 24.0%, Volvo said.

That would give its owners, Geely Motors, a substantial ROI. The Chinese firm picked up Volvo from the ailing Ford back in 2010 for a cool $1.8bn.

Part of Volvo’s potential valuation is the fact it owns 50% of EV spinoff Polestar. Polestar is preparing its own IPO, which is expected to place a $20bn valuation on the premium electric car brand, due to launch in 2022.

Geely and Volvo also jointly own 8.2% of Volvo Trucks.

Volvo enjoys strong brand recognition and sales in key markets, such as China, mainland Europe, the UK, and the US.

The Swedish carmaker sold 770,000 vehicles last year, spearheaded by the popular XC family of SUVs. If it can pull of that $23bn target, Volvo would sit firmly alongside premium contemporaries like Daimler and BMW in terms of market cap, if not cars sold.

BMW shipped 2.3m cars worldwide in 2020. Mercedes-Benz shipped 2.2m.

Volvo’s electric outlook

Raising capital to develop its EV product offer and production capabilities is one of the key reasons behind this IPO. Volvo is aiming for annual car sales of 1.2m per year – an increase of 56% against 2021’s numbers.

“Volvo Cars believes that its unique structure and focused strategy makes it one of the fastest transformers in the global automotive industry, with mid-decade ambitions dedicated to electrification, sustainability and digitisation.” the Swedish company said in a statement.

As with pretty much all legacy car manufacturers, Volvo is looking to electrify its line up away from the Polestar brand. New electric models from Volve Cars will be badged as such. Think of Polestar as the premium of the premium. Volvo Cars are more in line with midrange BMW models, like the 1, 2 and 3 series, although it does offer models that can compete in the saloon and SUV/Crossover classes.

Could Volvo become one of the top EV stocks to watch?

The float, if successful, will help fund Volvo’s electric ambitions.

By 2030, Volvo aims to have removed internal combustion engines from its range. It expects 50% of total sales to come from electric-powered vehicles by 2025. In an interesting move, the auto manufacturer also expects 50% of its sales to come from online via the Volvo website by this time too rather than bricks-and-mortar dealerships.

“There is no long-term future for cars with an internal combustion engine,” Henrik Green, Volvo Cars’ Chief Technology Officer, said earlier in the year. “We are firmly committed to becoming an electric-only car maker and the transition should happen by 2030.”

September saw global Volvo sales fall 30% year-on-year. Supply chain chaos, chipset shortages, and worker COVID-19 breakouts all impacted manufacturing and delivery at this time. Volvo has said all workers have been given vaccines in its Southeast Asia factories, but it will still be hampered by semiconductor supply constraints.

Stocks weaker, THG strives for credibility

Stock markets looking a tad heavy in early trade Monday with all the major bourses tracking lower amid the customary cluster of inflation and slowing growth ‘fears’. The FTSE 100 eased back 0.2% from Friday’s 18-month high, losses for the CAC and DAX were larger. It’s been a mixed bag for Asia with Japan and Australia higher and Hong Kong and mainland China lower. US futures are a shade lower after a strong finish on Friday took the S&&P 500 back to within just 2% of its all-time high. Strong bank earnings buoyed sentiment – this week sees Netflix and Tesla among the big hitters and the first of the megacap momentum type names to report. Retail sales rose 0.7% in September, beating expectations in the process to show US consumers in fine health still. Chinese growth has slowed to 4.9% in the third quarter amid a crackdown on a broad range of business sectors, an energy crisis and a property market teetering under the weight of Evergrande. On a quarterly basis, the economy grew just 0.2%. Commodities are firmer, with copper re-approaching its May peak again and oil at over $82 for WTI and $85 for Brent. Nat gas is weaker though. Benchmark 10yr Treasury yields are at 1.6%. US industrial production numbers are on the taper later today.

THG’s Matt Moulding will forego his ‘golden share’ in a bid to restore confidence in the business among City investors. The plan will enable the company to apply for a premium listing on the LSE, likely in 2022, and on the face of things should go a long way to fixing a key grievance that investors have had about the company. But we should note that this dual-class structure was only ever going to last 3 years. Bringing forward the move by a year is not exactly sweeping reform. Nor is it a magic wand. Clearly, governance concerns run much deeper than a quick bit of airbrushing can cope with. And following the disastrous capital markets day last week, there are obviously far deeper concerns about the state of the business and a lack of visibility over how different parts fit together. Shares rallied 7% before paring gains – a drop in the ocean compared with the gigantic falls in recent weeks.

Sterling remains supported following hawkish comments from the Bank of England’s governor, Andrew Bailey, who said the central bank would act to curb inflation. He said that “we, at the Bank of England, have signalled, and this is another such signal, that we will have to act [on inflation].” It’s another firm signal that the BoE will act to get ahead of the curve by going early on rate hikes, with one increasingly likely this year. Markets have already braced for a swifter tightening of monetary policy, so sterling may not get much more from the BoE now.  Still momentum sides with the bulls for the time being. GBPUSD trades above 1.37 still, but has pulled back from Friday’s month high around 1.3770 with the dollar holding slightly higher at the start of the session. Meanwhile the pound has made a fresh 18-month high versus the euro.

GBPUSD Chart 18.10.2021

Bitcoin trades higher, moving closer to its all-time again as the first Bitcoin ETFs prepare to launch. The ProShares Bitcoin Strategy ETF, which will offer exposure to Bitcoin futures, could begin trading as early as today. It will trade under the ticker “BITO.” Unless there is a last-ditch intervention from the SEC, the ETF seems set to begin trading this week. Bitcoin rallied above $62k, moving ever closer to a fresh all-time high.

Bitcoin Chart 18.10.2021

La settimana che ci aspetta: L’inflazione elevata nel Regno Unito è destinata a restare?

Questa settimana c’è molta carne sul fuoco in termini di big data. Per prima cosa, ci sono i dati dell’IPC nel Regno Unito. L’inflazione sta resistendo più a lungo di quanto ci aspettassimo? Arrivano anche i PMI flash del Regno Unito e dell’UE, in un momento in cui sembra che l’attività economica stia iniziando a rallentare. Inoltre, è in arrivo la stagione degli utili negli Stati Uniti, con i report delle principali aziende tecnologiche.

L’IPC nel Regno Unito: i falchi in attesa e i dati più importanti

Sul fronte dei dati, uno dei momenti più importanti della settimana è rappresentato dalle ultime cifre dell’indice dei prezzi al consumo nel Regno Unito.

La lettura di settembre ha mostrato che ad agosto l’inflazione nel Regno Unito aveva superato di gran lunga l’obiettivo del 2% della Banca d’Inghilterra. Come hanno mostrato i dati ufficiali, i prezzi al consumo sono cresciuti del 3,2% da agosto 2020, il più alto aumento su base mensile da quando vengono registrati questi dati nel 2017.

L’Office for National Statistics ha affermato che l’aumento è stato “un probabile cambiamento temporaneo” e ha segnalato che il programma governativo Eat Out to Help Out (EOHO, letteralmente “mangiare fuori per dare una mano”) potrebbe aver contribuito a questo incremento.

“Ad agosto 2020 molti prezzi nei ristoranti e nei caffè erano scontati grazie al programma del governo Eat Out to Help Out, che offriva ai clienti cibo e bevande a metà prezzo da consumare (fino a un valore di 10 GBP) tra il lunedì e il mercoledì”, ha spiegato l’ONS nella sua dichiarazione.

“Dal momento che l’EOHO è stato un programma a breve termine, è probabile che lo spostamento in alto del tasso di inflazione a 12 mesi registrato ad agosto 2021 sia un fatto temporaneo”.

La linea ufficiale è stata che i prezzi più alti sarebbero dovuti essere transitori, ma alcune indiscrezioni all’interno della Banca d’Inghilterra segnalano che questo fenomeno potrebbe protrarsi più a lungo di quanto si pensasse.

Secondo il nuovo capo economista della Banca d’Inghilterra, Huw Pill, l’inflazione elevata potrebbe restare.

“A mio avviso, l’equilibrio dei rischi si sta attualmente spostando verso le grandi preoccupazioni per le prospettive legate all’inflazione, poiché l’attuale forza dell’inflazione pare destinata a dimostrarsi più duratura di quanto era stato originariamente previsto”, ha dichiarato Pill a settembre.

Pill presta la sua voce ai falchi che stanno costantemente crescendo di numero all’interno del consiglio della Banca d’Inghilterra. Svariati membri del Monetary Policy Committee chiedono un aumento dei tassi all’inizio del prossimo anno. Pertanto, un’altra lettura al rialzo dell’IPC a settembre potrebbe portare a un numero ancora maggiore di falchi.

L’indice PMI indicherà dei rallentamenti nell’economia?

È anche il momento del mese in cui i punteggi PMI flash iniziano ad arrivare con maggiore frequenza.

Questa settimana vengono pubblicati i dati del Regno Unito e dell’UE, sulla scia dei rapporti del mese scorso che indicano che la crescita sta rallentando in queste due importanti economie.

Partiamo dal Regno Unito. L’indice flash composite IHS Markit di settembre ha indicato che la produzione è scesa ai livelli più bassi da febbraio. A settembre il punteggio del Regno Unito è arrivato a 54,1 punti, in calo rispetto ai 54,8 di agosto.

Sembra esserci uno stallo nella ripresa, mentre ci si avvia verso l’inverno. Una minore attività economica abbinata ad un’inflazione più alta non contribuiscono a creare le migliori condizioni per il futuro dell’economia britannica.

L’indice PMI relativo al settore dei servizi è sceso a 54,6 punti a settembre rispetto ai 55,0 di agosto, raggiungendo il livello più basso da febbraio, quando la Gran Bretagna era ancora in pieno lockdown. Il settore manifatturiero è sceso da 60,3 punti a 56,4, toccando anche in questo caso il livello più basso da febbraio.

Lo stesso vale dall’altra parte della Manica. La crescita in Europa è stata ostacolata dai problemi alle forniture, che lo scorso mese hanno spinto i costi di produzione ai massimi da 20 anni in tutta l’UE. I dati PMI saranno sulla stessa linea questo mese?

In termini di punteggi, la lettura dell’indice IHS composite ha mostrato che a settembre la crescita economica è scesa al minimo da cinque mesi a questa parte. A settembre l’UE ha raggiunto 56,1 punti contro i 59,0 di agosto.

Un risultato ben al di sotto delle previsioni del mercato. Un sondaggio di Reuters ha rivelato che economisti e analisti pensavano che la produzione sarebbe calata, ma ad un tasso molto più basso (58,5 punti).

In questo caso, i principali responsabili sembrano essere i problemi alla catena di approvvigionamento e un rallentamento generale della crescita del PIL. L’economia dell’UE si sta avvicinando alla sua dimensione pre-pandemia, perciò sulla carta era prevedibile un rallentamento, ma non così drastico.

Venerdì, quando arriveranno gli ultimi dati, c’è da aspettarsi una lettura dei dati PMI nell’UE più bassa.

Gli utili di Wall Street continuano ad arrivare: tocca ai titoli tecnologici

La prossima settimana, ci troveremo nel bel mezzo della stagione degli utili del terzo trimestre. Le grandi banche, tra cui Goldman Sachs, Citigroup e JPMorgan hanno dato iniziato la settimana scorsa. Ora saranno alcune tra le più grandi aziende tecnologiche ad alta capitalizzazione a condividere i loro ultimi dati finanziari.

Netflix e Tesla sono i due titoli principali da tenere d’occhio questa settimana. Entrambi hanno riportato ottimi risultati nel primo e nel secondo trimestre, ma hanno ventilato che le performance potrebbero iniziare a diminuire nel terzo trimestre del 2021.

Per ulteriori informazioni su quali aziende stanno riferendo sui loro guadagni, assicurati di dare un’occhiata al nostro calendario degli utili negli USA.

I principali dati economici

Date  Time (GMT+1)  Asset  Event 
Mon 18-Oct  3:00am  CNY  GDP q/y 
  3:00am  CNY  Retail Sales y/y 
  2:15pm  USD  Industrial Production m/m 
  3:30pm  CAD  BOC Business Outlook Survey 
Tue 19-Oct   1:30am  AUD  Monetary Policy Meeting Minutes 
       
Wed 20-Oct  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  USD  Crude Oil Inventories 
       
Thu 21-Oct  1:30pm  USD  Philly Fed Manufacturing Index 
    USD  Unemployment Claims 
       
Fri 22-Oct  7:00am  GBP  Retail Sales m/m 
  8:15am  EUR  French Flash Manufacturing PMI 
  8:15am  EUR  French Flash Services PMI 
  8:30am  EUR  German Flash Manufacturing PMI 
  8:30am  EUR  German Flash Services PMI 
  9:00am  EUR  Flash Manufacturing PMI 
  9:00am  EUR  Flash Services PMI 
  9:30am  GBP  Flash Manufacturing PMI 
  9:30am  GBP  Flash Services PMI 
  1:30pm  CAD  Core Retail Sales m/m 
  1:30pm  CAD  Retail Sales m/m 
  2:45pm  USD  Flash Manufacturing PMI 
  2:45pm  USD  Flash Services PMI 
  Tentative  USD  Treasury Currency Report 

 

I principali rapporti sugli utili

Tue 19 Oct  Wed 20 Oct  Thu 21 Oct  Fri 22 Oct 
Philip Morris International (PM)   Verizon Communications Inc (VZ)   AT&T (T)   American Express (AXP)  
       
Johnson & Johnson (JNJ)   International Business Machines (IBM)  Intel Corp (INTC)   Schlumberger Ltd (SLB)  
       
Procter & Gamble (PG)  Tesla Inc (TSLA)   Snap Inc A (SNAP)    
       
Netflix Inc (NFLX)        

 

FTSE makes new post-pandemic high, Bitcoin up on ETF hopes

GPs will be paid more to do what they used to do before the pandemic, like see patients face to face. This is what dislocation and the ‘new normal’ looks like: same service, costs more. That’s one of the reasons why inflation is not going to be as transitory as central bankers have been telling us.

Markets are not that concerned by this, so it seems. The FTSE 100 has broken out to a new post-pandemic high, stretching its recent range by a few more points on the upside to hit a high of 7,242 this morning. This marks a roughly 400pt reversal from the Sep 20th intraday low. It’s been a very tight range of that size since April but there are encouraging signs the FTSE can yet end the year at its pre-pandemic level of 7,700.

Why the rally? Key is energy – BP and Shell among the top performers of the last month and have a big index weighting. That’s BP and Shell, which are both up more than 20% in the last month as oil and natural gas prices have soared. WTI is back above $82 this morning. Next is the two big reopening stories – IAG and Rolls Royce, they are the best performers of the last month among the blue chips. Reopening of travel has been a major factor and we see more good news today with the move to lateral flow tests for international arrivals. Then third we have the big banks – HSBC, Lloyds, StanChart and NatWest have all rallied over 10% in the last month as rates have risen and the macro environment has held up pretty well. Bets the Bank of England is far closer to raising rates have helped, but global bond yields have also been moving higher. The FTSE is exposed to the winds of the global economy and trade, which despite it all are holding up well, and UK shares remain heavily discounted to peers. The FTSE 250, a better gauge of the UK economy, has ticked higher in the last few sessions but is down by around 5% from its Sep high.

Wall Street closed firmly higher yesterday amid a rush of positive earnings reports from the big banks. Walgreens and UnitedHealth also delivered positive results that indicate the large corporations are still able to deliver earnings growth and higher profits despite the rising costs. Supply chain problems will become more obvious when some more consumer discretionary names report, but so far the storm is being weathered. Meanwhile lower rates lifted the big tech boats. The 1.7% rally for the S&P 500 was its best day since March.

On the data front, US initial jobless claims fell below 300,000 for the first time since the pandemic, but inflation is not going away. US PPI was a tad cooler than expected but still running hot at 8.6% year-on-year, however core PPI ticked up to 6.8% from 6.7%. The headline 8.6% was the largest advance since 12-month data were first calculated in November 2010. Today – US retail sales, Empire State mfg index.

Bitcoin eyes $60,000 as traders bet the SEC is poised to allow the first exchange-traded fund based on BTC futures. The SEC is reviewing around 40 Bitcoin-linked ETFs and a report from Bloomberg suggests the regulator will approve some of these. Bitcoin spiked on the report, which indicated that Invesco and ProShares could be among the providers cleared to start trading on Bitcoin ETFs. With the kick on to the $60k level it may be a matter of time before we see a fresh all-time high.

Gold – pulling back to the 23.6% retracement as it pares gains in the face of the $1,800 test.

GBPUSD: Nudging up to the trend line again at yesterday’s 3-week high.

US pre-mkts: Bank earnings strong, Cat upgrade

Very strong bank earnings coming through this morning – JPM led the way yesterday and the latest numbers from peers also look strong. Real good signs of improving loan growth in particular is a positive for BAC.

US pre-market key pointers

Bank of America (BAC)

Strong performance from Bank of America.

  • Net income of $7.7bn, EPS of $0.85 vs $0.71 expected
  • Revenues up 12% year-on-year – JPM was just up 2.2%
  • Net interest income up 10% to $11.1bn – most rate-sensitive of the big banks
  • Record M&A activity – Noninterest income up 14% to $11.7bn, driven by record asset management fees, strong investment banking revenue and higher sales and trading revenues
  • Expenses down on the quarter, flat on the year
  • $624m clawback from bad loan provisions – bottom line flattered less than the JPM numbers.
  • Stock up pre-mkt to tune of 2.5%, having fallen 0.92% yesterday in sympathy with JPM, which is trading mildly higher in pre-mkt.

Wells Fargo (WFC)

Wells Fargo results showed:

  • Net income of $5.1bn, EPS $1.17 vs $0.98 expected
  • Net interest income was down 5%, due to lower loan balances that reflect soft demand, also higher prepayments, lower yields
  • Results include $1.7bn decrease in credit loss provisions – equivalent to $0.30 per share.
  • Pre-mkt trades +1%, having slipped 1.3% yesterday.

Meanwhile, ahead of the cash open on Wall Street, US futures indicate all the major averages will open higher. SPX seen opening up 30+pts at just under 4,400, Dow Jones +200pts at 34,610, NDX at 14,900. Risk looking solid.

  • Walgreens Boots Alliance reported earnings $1.17, vs $1.02 expected, revenues $1bn ahead of expectations, cost-cutting programme a year ahead of schedule. US comparable sales up 8.1% from a year before.
  • UnitedHealth shares +2% pre-mkt after reporting earnings beat and raised guidance.
  • Caterpillar +1% pre-mkt, bouncing of its weakest level since Jan, as Cowen advises clients to buy ahead of the first ‘megacycle’ in 14 years, initiates with ‘Outperform’ rating and PT of $241.
  • Tesla shares are up pre-mkt to their best level in 7 months.
  • Boeing down 1% pre-mkt after report says co. dealing with new Dreamliner defect, production problems
  • FTSE 100 at HOD just a whisker under 7,200
  • Dollar continues to struggle. GBPUSD making a fresh 3-week high at 1.37334.
  • Gold also trades at HOD at $1,800, sitting on its 100-day SMA.
  • Treasury yields lower, 10s at 1.532%

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