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%

Volgende week: Cijferseizoen Q3 barst los

Op Wall Street zal het bruisen met winstverslagen wanneer het cijferseizoen voor Q3 deze week in alle ernst van start gaat. Qua macro-economische data verwachten we de nieuwe Amerikaanse CPI en de notulen van de laatste FOMC-vergadering van de Fed.

Amerikaanse CPI duidt ontwikkeling inflatie

We beginnen met woensdag het rapport over de consumentenprijsindex (CPI), dat de inflatie in de VS meet.

Na de bekendmaking in september van de cijfers van augustus, houden Jerome Powell en zijn collega’s vast aan hun script: dat al die hoge inflatie gewoon van tijdelijke aard is. Zullen de cijfers van woensdag dit onderschrijven?

Ter context: afgaande op de CPI die in september werd gepubliceerd, leek het dat de inflatie in augustus was afgekoeld. De onderliggende prijzen stegen in het laagste tempo in zes maanden. De CPI steeg in totaal met 0,3 procentpunt, na in juli al met 0,5 procentpunt te zijn gestegen. In de twaalf maanden voorafgaand aan augustus bedroeg de CPI 5,3 procent, terwijl er in juli sprake was van 5,4 procent op jaarbasis.

Een aantal bestuursleden van de Fed maakt zich echter geen zorgen.

“Ik ben ervan overtuigd dat dit te hoge prijzen zijn en dat ze zullen dalen naarmate de knelpunten in de toeleveringsketens worden aangepakt,” verklaarde Charles Evans, voorzitter van de Fed in Chicago, tegenover CNBC. “Ik denk dat dit zeker langer kan duren dan we verwachtten, absoluut, daar twijfel ik niet aan. Maar ik denk ook dat het verder stijgen van deze prijzen onwaarschijnlijk is.”

De brandstofprijs blijft echter records breken. Olie en aardgas noteerden vorige week nieuwe toppen. Hogere olieprijzen wijzen doorgaans op hogere invoer- en transportkosten in diverse sectoren, die dit vervolgens op de consument kunnen verhalen – met over de hele linie hogere prijzen tot gevolg. Dat gezegd hebbende, is het mogelijk dat de hoge energiekosten en de gevolgen daarvan pas duidelijker worden in de CPI-resultaten van volgende maand, nog niet in die van woensdag.

FOMC-notulen bieden inzicht in gedachtegang Fed

Woensdag worden ook de notulen van de FOMC-vergadering van september gepubliceerd.

Het is inmiddels een bekend verhaal: de rente blijft laag, afbouw van steunprogramma’s komt binnenkort.

Toch weten we ook dat sommige van de meer opportunistische Fed-leden voor eerder dan verwachte renteverhogingen willen kiezen. De verwachting is dat de rentes volgend jaar worden verhoogd.

Voorzitter Powell waarschuwde eveneens voor de gevaren van het niet verhogen van het Amerikaanse schuldplafond. Minister van Financiën Janet Yellen waarschuwde eind vorige maand dat de Amerikaanse overheid zonder geld zal komen te zitten als er geen actie wordt ondernomen.

In gebreke blijven bij het afbetalen van schulden zou “aanzienlijke schade” toebrengen aan de Amerikaanse economie, aldus Powell. President Biden heeft al gezegd dat het goed mogelijk is dat het schuldplafond wordt verhoogd en de crisis wordt afgewend.

Het grote macro-economische thema is echter de afbouw van het obligatie-opkoopprogramma. Men gaat ervan uit dat de Fed stap voor stap het programma zal afbouwen, tot het eind 2022 volledig is stopgezet.

Het is een goed teken dat de VS hoopt op een snelle terugkeer naar economische normaliteit. De dreiging van nieuwe COVID-19-varianten is echter reëel. Laten we hopen dat er geen volgende besmettingsgolven en bijbehorende lockdowns zullen zijn in 2022, anders zal de Fed weer achter de feiten aanlopen.

Het cijferseizoen gaat weer van start

Tijd om weer naar Wall Street te gaan. De bedrijfsresultaten van de mega caps voor het derde kwartaal zullen het spits afbijten.

Zoals altijd beginnen we met de grootste investeringsbanken, die voor Q2 al bizarre groeicijfers rapporteerden. Kan het momentum worden vastgehouden? Onder andere JPMorgan, Wells Fargo, Citigroup en Goldman Sachs komen deze week aan bod; JPMorgan is woensdag de eerste.

Hoewel verwacht wordt dat de groei vergeleken met Q2 zal zijn afgenomen, is de hoop nog steeds dat Q3 een goed kwartaal was. De Amerikaanse financiële-cijferaanbieder FactSet voorspelt dat S&P500-bedrijven in het derde kwartaal een winstgroei van 27,6 procent zullen boeken: de op twee na hoogste winstgroei op jaarbasis die de index sinds 2010 heeft gerapporteerd.

Daarentegen moeten we de impact van wereldwijde toeleveringsproblemen niet vergeten. Hier was al sprake van in de eerste helft van het jaar, maar de verder toegenomen prijs van grondstoffen en energie zou de cijfers kunnen drukken.

Bedrijven zoals Apple hebben eerder al gewaarschuwd dat de groei aan het einde van het jaar zal vertragen. We zijn benieuwd.

Blijf up-to-date met onze Amerikaanse cijferseizoenkalender en weet welke mega caps er met resultaten komen, zodat u op het juiste moment posities kunt innemen. Daarnaast vindt u hieronder een voorproefje van de bedrijven die deze week met cijfers komen.

Belangrijke economische data

Date  Time (GMT+1  Asset  Event 
Tue Oct-12  10:00am  EUR  ZEW Economic Sentiment 
  10:00am  EUR  German ZEW Economic Sentiment 
  3:00pm  USD  JOLTS Job Openings 
       
  6:01pm  USD  10-y Bond Auction 
Wed Oct-13  1:30pm  USD  CPI m/m 
  1:30pm  USD  Core CPI m/m 
  6:01pm  USD  30-y Bond Auction 
  7:00pm  USD  FOMC Meeting Minutes 
       
Thu Oct-14  1:30am  AUD  Employment Change 
  1:30am  AUD  Unemployment Rate 
  1:30pm  USD  PPI m/m 
  1:30pm  USD  Core PPI m/m 
  1:30pm  USD  Unemployment Claims 
  4:00pm  USD  Crude Oil Inventories 
       
Fri Oct-15  1:30pm  USD  Core Retail Sales m/m 
  1:30pm  USD  Retail Sales m/m 
  1:30pm  USD  Empire State Manufacturing Index 
  3:00pm  USD  Prelim UoM Consumer Sentiment 
  Tentative  USD  Treasury Currency Report 

 

Key earnings data 

Wed 13 Oct  Thu 14 Oct  Fri 15 Oct 
JPMorgan Chase & Co (JPM) PMO  Bank of America Corp (BAC) PMO  Goldman Sachs Group Inc (GS) PMO 
     
Wells Fargo & Co (WFC) E  Citigroup Inc (C) PMO  Goldman Sachs Group Inc (GS) PMO 
     
  Morgan Stanley (MS) PMO   

 

Stocks start the session weaker

Stocks in Europe are a tad weaker at the open after Monday’s rally, sticking to the recent well-worn ranges. US trading returns today with futures indicating a flattish open. There was a decent session in Asia overnight spurred on by strong data from China with the Nikkei 225 touching 30,000 for the first time since April, and the Topix hitting a 31-year high as the technical breakout from last week continues. Stocks in Shanghai and Shenzen were also up +1%. Despite all the worries about supply chains and Delta, Chinese exports surged in August by 25.6% year-on-year, up from the 19.3.% increase in July and beating the forecast of 17.1%. Sticking with China for a moment, shares in Evergrande, the indebted real estate giant, sank further to the weakest since 2015 as the fallout from its default risk continues to ripple through the property sector, where bond yields are rising fast. 

 

With stock futures doing little in the US and coming off the back of a three-day weekend, the focus will be on the cash equity open later on Wall Street in the wake of Friday’s disappointing jobs report and the lapsing of those last $300 stimulus cheques.  Still the relentless low-vol grind up is holding and Barclays today has lifted its S&P 500 price target to 4600 from 4400. Question is whether Sep/Oct produces a spike in volatility. A 3% drawdown – mild by anyone’s standards – takes you back to the 50-day SMA support that has held up so well this year, while a 10% correction tests the 200-day SMA. Technicals at the moment indicate sideways action and a loss of upwards momentum – merely a question of timing as to when we get a rollover. 

 

Interesting comments from the Bank of England’s Michael Saunders this morning, who said it might be right to think of rates going up in the next year or so. He indicated that the economy was already about the same size as it was before the pandemic, that inflation has been stronger than expected, and that the country does not need as much stimulus as previously. However, it should be noted that Saunders is about the most hawkish on the nine-member MPC so does not speak for the central consensus. I don’t think it tells us much we don’t already know but it underscores the conundrum facing central banks today as to when to ease off the gas. Saunders makes an important point in noting that continuing asset purchases when inflation is 4% might cause medium-term inflation expectations to drift higher, which could cause a more severe monetary policy response down the road. If central banks don’t get a grip on it now, they could be faced with bigger problems later – but they are all deeply paranoid about choking off recovery too soon. GBPUSD tried to rally on the comments but quickly reversed to hit its weakest since Sep 2nd. 

 

E-commerce winner DS Smith shares rose after the company said trading remains strong with solid box volume growth over 2019 levels, particularly in the US and southern Europe. But input costs continue to rise with management mentioning notable increases in the cost of energy and transportation. ‘Given the strong demand for our packaging we have seen good progress towards recovering these increases,’ the company said. Shares rallied over 2% in early trade.

 

The Reserve Bank of Australia stuck to its taper but will extend the purchase of bond purchases at $4bn a week from Nov 2021 to Feb 2022.  The RBA said the decision ‘reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak’. Looks like the RBA is trying to neutralise the taper they announced recently without actually rowing it back.  

 

Oil prices just tracking sideways after running into the near-term trend resistance last week. Bullish MACD crossover is still in play but momentum clearly drifting. Saudi price cut has tamed bulls but growth in Chinese exports is a +ve.

Spot Oil Chart 07.09.2021

Stocks flattish ahead of US jobs report

A decline in US weekly jobless claims to their lowest level since the pandemic began was greeted by new record highs on Wall Street. To be fair, just about anything is greeted by a new all-time high. Initial claims came in at 340k for the week ended August 28th, versus expectations of 345k, and the lowest since March 2020. But it wasn’t all good news. The total number of continuing claims in the week ending August 14th was 12,186,158, an increase of 178,526 from the previous week. Meanwhile, while that ADP number on Wednesday was a big miss, and as noted here before, the report is not a great predictor for the nonfarms. Indeed, lately, it’s been spectacularly inaccurate.  Elsewhere, US durables orders ex-defence were –1.1% month-on-month, while factory orders ex-transport +0.8% vs +1.4% in the prior month. 

Today’s nonfarm payrolls are the main event. The Federal Reserve has tied monetary policy tightly to the labour market and is yet to see the ‘substantial further progress’ it requires to start tapering bond purchases, let alone raise rates. Therefore, the pace of job creation will give markets a signal as to the pace and timing of the Fed’s long-expected taper. Expectations are running around 720k for today’s print.  

 

Ahead of the jobs data, China’s slowdown is striking a downbeat note for risk this morning. Caixin’s services PMI slid into contraction, hitting 46.7, its lowest reading since April 2020. Meanwhile, there is a report saying that the highly indebted Chinese real estate beast Evergrande is facing demands from creditors for immediate payback. A useful thread on the situation can be read here. 

 

European markets opened broadly lower though the FTSE is making some headway of sorts. The Nikkei 225 jumped 2% on the prospect of yet more stimulus as PM Suga resigned over the handling of the pandemic outbreak. Elsewhere the dollar keeps softer and gold consolidates above $1,800 with Treasury yields holding at 1.30%. Oil is steady with WTI a little under the $70 mark it breached in a strong rally yesterday following the EIA inventory draw and the record implied demand. 

 

Stagflation:  Following revisions to Q3 GDP estimates by Goldman and Bank of America, the Atlanta Fed slashed its GDP forecast to 3.7% from 5.3%. At the same time, Morgan Stanley cut its estimate for the third quarter expansion to just 2.9% from 5.3%. The Atlanta Fed update incorporated the latest auto sales – Ford reported yesterday that its sales fell by a third in August from last year due in large part to the chip shortage. GM will idle most of its North American factories in September as a result of the semi-conductor problem. 

 

Energy prices are soaring – particularly natural gas, particularly in Europe. “Let me calm a little bit the language of crisis,” Beatriz Yordi, director of carbon at the European Commission said. “We don’t expect it’s going to be a lasting situation.” Transitory, always transitory…And this is when Europe is warm – prices tend to spike in the cold weather, not the summer. Storage data showed a rise in stocks but the market remains tight. Working gas in storage was 2,871 Bcf as of Friday, August 27th, according to EIA estimates. This represents a net increase of 20 Bcf from the previous week. Stocks were 579 Bcf less than last year at this time and 222 Bcf below the five-year average of 3,093 Bcf. 

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.

Spot Oil Chart 02.09.2021

Volgende week: alle ogen op de Amerikaanse arbeidsmarkt

De markten gaan een drukke week tegemoet met de Amerikaanse niet-agrarische salarisstrookjes als het hoogtepunt, evenals twee belangrijke verklaringen van centrale banken.

Laten we beginnen met de laatste cijfers over de Amerikaanse niet-agrarische salarisstrookjes.

Juni was een boven verwachting goede maand, en de markten zullen de nieuwste cijfers vrijdag dan ook nauwgezet in de gaten houden.

In juni werden er 850.000 banen toegevoegd aan de Amerikaanse economie, veel meer dan de 720.000 die waren voorspeld. Ook was het de zesde maand op rij waarin er sprake was van groei.

Het werkloosheidspercentage steeg echter van 5,8 naar 5,9 procent, hoger dan de 5,6 procent waar menig analist van uitging. De arbeidsparticipatie, de maatstaf bij uitstek om het tekort aan arbeidskrachten in het hele land te meten, bleef onveranderd op 61,6 procent.

De aanwerving van nieuw personeel lijkt iets te zijn gedaald in het voorjaar. Daarvoor kunnen een aantal redenen worden aangewezen: angst voor het virus, de kosten van kinderopvang, werkloosheidsverzekeringen en de stimulerings- en thuiswerkmaatregelen. Er zijn echter berichten dat bedrijven de lonen aan het verhogen zijn om werknemers te verleiden een nieuwe baan aan te nemen.

De arbeidsparticipatie is ook een belangrijke maatstaaf voor Fed-voorzitter Jerome Powel bij het beoordelen van stimulus- en ondersteuningsmaatregelen voor de Amerikaanse economie.

We weten dat Powell en co. het in principe geen probleem vinden om de economie op volle toeren te laten draaien, zelfs bij oplopende inflatie. Zoals Powell aangaf na de laatste Fed-vergadering ontbreken er nog altijd 7,5 miljoen banen in de Amerikaanse economie, al suggereren sommige rapporten dat dit cijfer dichter bij 6,8 miljoen in de buurt ligt. Totdat deze open vacatures zijn gevuld, verwachten we dat de Fed de stimulus- en ondersteuningsmaatregelen zal handhaven.

Kijken we naar de indices, dan zien we dat de S&P 500 en Nasdaq het goed deden na de uitstekende banencijfers van vorige maand en nieuwe records noteerden. Indextraders zullen hopen dat deze ontwikkeling zich ook in juli zal voortzetten.

Op Amerikaans cijfergebied zal ISM, een van de belangrijkste rapporteurs van Amerikaanse inkoopmanagersindices, deze week de verwachtingen voor de productie- en dienstensector bekendmaken.

De Amerikaanse productie bleef vorige maand robuust, aldus het PMI-rapport van ISM, maar problemen in de toeleveringsketen blijven de groei beperken. De productie-index noteerde op 60,6 punten, lager dan de 61,2 punten van mei.

Het momentum is verder sterk. Vier van de vijf subindices van ISM wezen op aanzienlijke groei. De interesse van consumenten in nieuwe producten is nog steeds hoog, ondanks stijgende prijzen. Arbeidstekorten, in combinatie met de hogere prijs van grondstoffen en materialen, hebben echter geleid tot knelpunten en tekorten nu producenten de vraag proberen bij te benen.

“Langere doorlooptijden voor grondstoffen dan ooit, grootschalige tekorten aan essentiële basismaterialen, stijgende grondstofprijzen en problemen bij het vervoer van producten blijven alle segmenten van de verwerkende industrie beïnvloeden,” aldus Timothy Fiore, voorzitter van het ISM Manufacturing Business Survey Committee.

Hetzelfde kan worden gezegd voor de dienstensector: die breidde weliswaar uit in juni, al bleef de groei achter op de fantastische notering in mei. Hier was er sprake van een daling van de index van 63,5 naar 60,1 punten.

“De uitbreiding van de dienstensector blijft sterk, ondanks de lichte terugval van het groeitempo ten opzichte van de historisch hoge cijfers van vorige maand,” aldus Anthony Nieves, voorzitter van het ISM Services Business Survey Committee. “Uitdagingen op het gebied van materiaaltekorten, inflatie, logistiek en werkgelegenheid blijven een belemmering vormen voor het ondernemingsklimaat”.

Het vasthouden van dat momentum is van groot belang voor de gezondheid van de Amerikaanse economie, zeker nu verwacht wordt dat de VS de rest van het jaar en daarna de motor van het wereldwijde economische herstel zal zijn.

Elders verwachten we ook nieuwe verklaringen van twee centrale banken.

Beginnend met de Bank of England is de stijgende inflatie het belangrijkste thema.

In juni bedroeg de inflatie 2,5 procent als gevolg van breed gedragen prijsstijgingen van consumentengoederen. Het zou kunnen dat de uitgestelde vraag in de Britse economie eindelijk wordt ontketend, maar aangezien de inflatie nu op het hoogste niveau in drie jaar staat, kan dit de zenuwen van economen aardig op de proef stellen.

Gouverneur Bailey heeft zijn standpunt eerder al verduidelijkt: de prijsstijgingen zijn van tijdelijke aard en de inflatie zou aan het einde van het jaar tot wel 3 procent kunnen stijgen. Daarna zou deze weer terug moeten vallen tot acceptabele niveaus. Het mandaat van de BoE is gericht op het vasthouden van een inflatie van ongeveer 2 procent.

Bailey heeft echter aangegeven dat hij open staat voor het verhogen van de rente als de inflatie uit de hand dreigt te lopen.

De Reserve Bank of Australia deelt deze week eveneens de nieuwste monetaire beleidsbeslissingen.

Het is aannemelijk dat er geen grote wijzigingen aangekondigd zullen worden. Gouverneur Philip Lowe heeft duidelijk aangegeven dat de rente in elk geval tot 2024 niet verhoogd zal worden, ondanks de sterke fundamentals van de Australische economie.

De historische lage rente van 0,1 procent zal voorlopig niet veranderen. Interessant is echter dat de vergadering van juli in een aantal kleine aanpassingen van het Australische QE-programma resulteerde. De schaal wordt afgebouwd: vanaf september zal het tempo waarin de RBA obligaties opkoopt afnemen van AUD 5 miljard per week tot AUD 4 miljard.

De basis voor aanvullende beleidswijzigingen is gelegd door gouverneur Lowe. We zijn benieuwd wat we deze week kunnen veranderen als het gaat om kleinschalige aanpassingen.

Een vooruitblik op de belangrijkste gebeurtenissen van volgende week zou niet compleet zijn zonder naar het Amerikaanse cijferseizoen te kijken.

Week drie van de Q2 2021-resultaten van de large caps begint op maandag. Hoewel het niet zo druk is als vorige week, verwachten we nog steeds belangrijke publicaties van onder andere Alibaba en Uber.

Bekijk vooral ook onze Amerikaanse cijferkalender voor meer informatie over welke grote bedrijven deze week hun resultaten bekend zullen maken.

Belangrijke economische data

Date Time (GMT+1) Asset Event
Mon 2-Aug 8.55am EUR German Final Manufacturing PMI
  3.00pm USD US ISM Manufacturing PMI
 
Tue 3-Aug 5.30am AUD RBA Rate Statement
  5.30am AUD Cash Statement
  11.45pm NZD Employment Change q/q
  11.45pm NZD Unemployment Rate
 
Wed 4-Aug 2.30am AUD Retail Sales m/m
  1.15pm USD ADP Nonfarm Employment Change
  3.00pm USD US ISM Services PMI
  3.30pm OIL US Crude Oil Inventories
 
Thu 5-Aug 12.00pm GBP Asset Purchase Facility
  12.00pm GBP BOE Monetary Policy Report
  12.00pm GBP MPC Asset Purchase Facility Votes
  12.00pm GBP Monetary Policy Summary
  12.00pm GBP MPC Official Bank Rate Votes
  12.00pm GBP Official Bank Rate
  3.30pm GAS US Natural Gas Inventories
 
Fri 6-Aug 2.30am AUD RBA Monetary Policy Statement
  1.30pm CAD Employment Change
  1.30pm CAD Unemployment Rate
  1.30pm USD Average Hourly Earnings q/q
  1.30pm USD Nonfarm Employment Change
  1.30pm USD Unemployment Rate

 

Belangrijke cijfers deze week

Mon 2 Aug Tue 3 Aug Wed 4 Aug Thu 5 Aug
Arista Networks Alibaba General Motors Ball Corp
Activision Blizzard The Kraft Heinz Co Beyond Meat
Roku Inc Illumina
Uber Technologies Square Inc
The Trade Desk
Virgin Galactic Holdings

Wall St notches fresh record as US growth surges, Astra beats, Barclays falls

  • Amazon delivers another blowout tech earnings, Twitter misses
  • AstraZeneca tops FTSE 100 after earnings beat expectations, Barclays falls
  • Darktrace IPO off to a flyer

 

Wall Street closed at another record high, copper surged to a new ten-year peak above $10,000 a tonne and oil firmed up above $64 for WTI as the strong cyclical play based on the reopening story held up. The S&P 500 rallied 0.7% to close above 4,211, a new all-time closing high. European stocks are a firmer this morning after a bit of a false start on Thursday that saw early gains erased as the session wore on.

 

US data continues to look very impressive. GDP rose 6.4%, which was a little lighter than expected but still very strong. But this is just the start – we are waiting for the big fiscal relief and infrastructure spending to feed into the data over the next three quarters as the reopening really takes off. New York will be fully open without any restrictions from July 1st. Consumer spending is up big, rising more than 10%. Inflation is feeding through: The PCE price index increased 3.5 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the core PCE price index increased 2.3 percent. Initial jobless claims decreased by 13,000 to 553,000 in the week ended April 24th, the new post-pandemic low.

 

Good numbers from AstraZeneca this morning as revenues rose 15% to $7.3bn despite the impact of Covid delaying diagnosis and treatments of other conditions. The vaccine delivered $275m in revenues but is loss-making for now. Shares ticked higher in early trade, rising 2.5% to the top of the footsie. Barclays dragged on the FTSE 100, sliding 6% to the bottom of the index as a drop in investment banking earnings, lower revenues and a cautious outlook took the shine off a doubling in profits. Net income rose to £1.7bn from £605m a year ago but revenues fell 6% to £5.9bn on lower interest rates and lower demand for credit in Britain. Income from its corporate and investment bank declined 1% to £3.6bn as fixed income trading declined 35%. Consumer, cards and payments income fell 22% to £800m. UK income was down 8% to £1.6bn. Looking ahead, Barclays seemed very cautious, particularly about its UK unit, saying it remains uncertain and subject to change depending on the evolution and persistence of the COVID-19 pandemic. And whilst it reported a massive drop in credit impairment charges, it did not reverse any already allocated, which is in contrast to most peers. Surging ecommerce (see Amazon below), helped Smurfit Kappa return a 6% rise in Q1 revenues.

 

Amazon shares rose over 2% in after-hours trade as the company continued the run of blowout tech earnings. Earnings per share hit $15.79 vs. $9.54 expected on revenues of $108.5bn, a rise of 44% from a year before. Income trebled to $8.1bn, with $4.2bn coming from the cloud business. This was another stunning quarter that confirms not only that the likes of Amazon were short-term winners from the pandemic but remains long-term structural champions as consumer trends change and – often forgotten – more and more businesses migrate to the cloud.

 

On the other hand, Twitter shares tumbled 11% in the after-hours market as the company delivered a cautious outlook and it missed on user growth expectation. The company reported revenue of $1.04bn for the quarter, up 28% from $808m a year before. Ad revenues rose 32% year-on year to $899m. Total monetizable users grew 7m to 199m, a little short of the 200m expected. If ever there were a company with immense potential that it repeatedly fails to realise, it’s Twitter.

 

Another Bank Holiday float, but a very different story this time: Shares in Darktrace soared on their debut this morning. Learning a lesson from the Deliveroo flop perhaps, the company priced the IPO at a more conservative 250p, implying a market cap of £1.7bn, but was up around 38% in early trade around 350p, taking the market cap to £2.4bn. Shares are open for conditional trading with unconditional trading to commence under the ticker DARK on May 6th. The right price is very important for an IPO – let people who are getting in after the primary offer a chance to earn something for their trouble, rather than pricing it too aggressively and taking any upside off the table. Darktrace seems to have learned this lesson, with the £1.7bn market cap at the offer well below the £3bn they had previously hoped for. The area of cyber security in which it operates is also one that is seen growing materially over the next few years. For London it’s a welcome thumbs up after the Deliveroo debacle and an encouraging float for future tech listings.

Something strange is happening on Wall Street

Something strange is happening on Wall Street, or at least to a number of individual stocks, which are getting caught up in a battle between a bunch of Reddit day traders and investors and Wall Street hedge funds. Shares in GameStop (GME) surged another 92% on Tuesday to almost $148, with after-hours trade pointing to shares opening up another 42% higher later today. Other companies’ shares are going through the same weird price action. Shares in AMC Entertainment rose 12% yesterday but shot 66% higher in after-hours trade. BlackBerry, Bed, Bath and Beyond and Nokia are among some of the stocks being bid up.

Now even the likes of Elon Musk, Chamath Palihapitiya and Jon Najarian are getting involved. Lists of stocks being shorted by hedge funds are being circulated online and appear at risk of coordinated efforts to bid up these ailing names by the Reddit crowd. It’s a pile-on and there is no telling what other stocks could be next. Luck be to you if you are sitting on the next ‘stonk’ in the firing line.

Among the many aspects of this story that are strange, what is so unusual is the peculiar vigilante morality of the traders pumping the stock on /r/wallstreetbets. They seem hell-bent on taking on Wall Street, they seem to hate hedge funds and threads are peppered with insults about ‘boomer’ money. It’s a generational fight, redistributive and all about robbing the rich to give to the millennial ‘poor’.

What it is demonstrably not about is searching for value. Or at least, whilst there have been fundamental cases on GME put forward by one or two users, the vast majority it seems are working to YOLO (you only live once) their life savings, (or their parent’s) on a stock that they hope will go to the moon.

The problem it seems to me is that they are all working to artificially bid up the price of the security in question. This raises problems about potential securities fraud and specifically market manipulation. Bloomberg’s Matt Levine makes an excellent observation about the possibility of SEC action on this and whether or not the Redditors are carrying out what the regulator might see as an illegal short squeeze. In short, he thinks it could be seen as dodgy, or could be ignored. It’s up for debate still. But is it covert enough to be classed as market manipulation? The argument – that it’s ok because everyone on Reddit knows the game and are in it for fun – I don’t think holds water when we are talking about capital markets in which not all of us are paid-up /r/wallstreetbets members. I would hardly class this as the smooth functioning of financial markets and the SEC will be starting to pay attention.

Which brings me to the other aspect that concerns me is the idea that everyone will win – or at least everyone in their crowd will win. It’s presented as an open goal and all the believers will hold until payday comes.  For every buyer bragging on the way up, there is a seller. For every seller taking profits at the top, there is a ‘schmuck’ buying at the top. Now, this is fine, the Reddit crowd says, if the schmucks are the hedge funds covering their shorts. And not just them: for many Redditors, it’s a badge of honour to have bought at the top. This is weird, to say the least, and hardly the basis for sound investing. Redditors are told to simply hold to force up the price even further. But this is not sustainable forever; it is reasonable to expect that at some point you will want to realize some profits, so you will need to sell. Who do you sell to? Well it cannot always be hedge funds covering shorts – no doubt it will be your peers in the crowd playing the game. When the music stops, someone, or several thousand people, will be left with the bill to pay as the security’s price collapses with no bid coming through on the market.

The Reddit mania is a greater-fool, pure beggar-thy-neighbour trade pure and simple. It is pump and dump cleverly masked by the preachy moralizing about fat cats, boomers and suits. Users are knowingly conspiring to force up the price of an asset well beyond any reasonable expectation of its fundamental value. It’s presented as an attack on the boomer hedge funds, but at its core, it relies on someone else being prepared to pay an even higher price for the security. Nothing short of the Greater Fool Theory in action and ends only one way.

Elsewhere, stocks in Europe were mixed in early trade ahead of the Federal Reserve meeting later today. Shares in Microsoft rose 3% after-hours following a bumper earnings card which further builds the case for a strong tech-led earnings rebound. Today we have earnings from Tesla, Apple, Facebook and Boeing.

The Federal Open Market Committee (FOMC) convenes today for its first meeting of 2021, with some new faces (not least Janet Yellen at Treasury) but the same old problems facing the Federal Reserve as it seeks to steer the US economy out of the pandemic. The statement is released at 19:00 (GMT), followed by the press conference with Chair Jay Powell at 19:30.

Not a lot has materially changed since the December meeting, when the Fed provided updated forecasts on the economic trajectory. Vaccines and stimulus support a bullish case for recovery longer term (eventually things will pan out) but near-term risks to the outlook are elevated (vaccines could be slower to reach people, governments may be reluctant to ease restrictions as quickly as we’d hoped back in November + scarring). The one major change of course is the arrival of Biden in the White House. We also have some greater clarity around the stimulus package being discussed and around vaccines (albeit not all positive).

Economic outlook: Whilst the longer-term outlook remains solid enough and perhaps a little firmer given greater clarity around the fiscal side of things and vaccines, near term softness presents risks and calls for the Fed to remain very dovish and hammer home its willingness to remain as accommodative as necessary for as long as required. Recent deterioration in the labour market supports the thesis that the Fed will be disinclined to even signal it is thinking about taking its foot off the pedal. Moreover, whilst there is hope the stimulus-vaccine cavalry are riding to the rescue later this year, there is no immediate boost from these and, if anything, it could take longer to benefit from these than first expected during the rotation trade of Nov-Dec. Whilst the holiday (Thanksgiving + Christmas) rise in cases is easing, clearly there is just not enough visibility yet about the pandemic for the Fed to sound anything other than cautious about the near-term outlook. The Fed will be mindful about scarring to the economy long term, but this only cements the case for greater accommodation today.

Nonfarm employment growth is stalling

Nonfarm employment growth is stalling

 

Financial conditions remain loose and present little by way of a problem for the Fed right now. The recent rise at the long end of the yield curve seems to be down to expected reflationary trends in 2021 and beyond, so is not a major worry. In the last day the yield on 10s has retreated to a three-week low, giving the Fed even less to think about. AIT implies an acceptance of higher inflation anyway, so I’d expect the Fed to remain very relaxed even if/when CPI and PCE prints push up in the coming months.

Financial conditions remain loose

Financial conditions remain loose

 

Breakevens outpacing nominal yields

Breakevens outpacing nominal yields

Earnings Season Preview

  • Wall Street banks kick off earnings season on Friday
  • EPS estimates seen down -10%
  • BofA, Citi calling top on frothy market

The S&P 500 has risen over 1% this week to make a fresh record high, closing above 3,800 for the first time in its history. Ebullience is a factor of the hope in vaccines leading to a return to normal, corporate earnings improving sharply in 2021, and a broadly expansionary fiscal and monetary environment offering succour to equity valuations. So we come into earnings season with markets in overall good shape, arguably looking a bit toppy and expensive as multiples are stretched and vaccines are yet to deliver the bounce back hoped for. Payroll numbers on Friday (-140k) highlight the problem facing the US economy in terms of long-term damage but also the low bar being set. Looking beyond the Q4 figures, guidance on the upcoming Q1 2021 quarter will no doubt be more important than ever.

All else equal, stretched multiples in 2021 ought to contract slightly as rates rise but EPS should improve faster with more expansionary and redistributive pro-cyclical policy in Washington. The Democrat wins in Georgia have taken us to Blue Wave territory, though it’s important to stress that with the Senate 50/50 and one Democrat (Joe Manchin) already saying he would not approve more radical policies, we are not in Blue Tsunami mode.

The average earnings per share (EPS) on the S&P 500 are seen falling by around -10% on last year’s fourth quarter, with revenues seen flat. This compares with the –7% drop in Q3 and –32.2% decline in Q2 at the height of the pandemic and it has been revised up from –12.8% in September. Q1 2021 EPS is currently forecast at +12.6% so a key theme of this season will be to what extent corporates think the growth trend will pick up at the start of this year, or do they fear of a stop-start recovery?

Key themes

  • Are banks optimistic about net interest margins as yield curve steepens?
  • Are banks ready to recommence buybacks? Or, rather, just big are these buybacks going to be?
  • Do they see further reflationary pressures?
  • Do CFOs predict earnings growth to pick up further in Q1 on the vaccine rollout?
  • What do CEOs think about the likely fiscal expansion and procyclical stimulus from a Democrat Congress?
  • Are CEOs fearful of Blue Wave of regulation and higher corporate taxes?
  • How confident are the energy companies about oil price stabilisation persisting?
  • How have the Stay-at-home stocks performed after the pull-forward in demand in Q2 and Q3?
  • Are Zoom, Amazon, Netflix et al able to manage expectations for future growth?

This week’s highlighted stock

JPMorgan Chase & Co (JPM): JPM has been buoyed by strong trading revenues at its investment bank, whilst bad loans are not as big a problem as investors thought they would be at the peak of the pandemic. The arrival of fresh stimulus has undoubtedly been a boost to bank shares as it limits the damage of bad loans and it helps steepen the yield curve, boosting net interest income. JPM has already committed to buying back $30bn in stock after the Fed announced in December that it will allow Wall Street’s largest banks to resume share buybacks in the first quarter of 2021, subject to certain rules.

In particular, we will be keen to hear from Jamie Dimon and co about their outlook for rates and how this could impact net interest margins and income. In Q3 net interest income was $13.1 billion, down 9% year-over-year, predominantly driven by the impact of lower nominal rates. However, since then the 10-year yield has risen to nine-month highs above 1.10% and spreads have widened with the with the 2s10s curve steepening further to 0.91%, the widest in well over 3 years. The 5s30s spread is at its widest since 2016. Revenues expected $28.337bn. EPS expected $2.50.

Sentiment for JP Morgan Analysis

 

Citigroup Inc (C) and Wells Fargo & Co (WFC) are also reporting on Friday a day after BlackRock Inc (BLK) gets the show on the road.

Jefferies upgraded JPM and WFC this week, stating that EPS estimates are up on a “less bad” credit outlook. And whilst banks are struggling to drive revenue growth, the analysts believe that “higher long rates and an eventual turn in loan growth could join strong deposit growth, better cost control, and a restart of buybacks as positives”.

US Earnings Calendar Highlights

 

Mon 11 Jan
Tue 12 Jan
Wed 13 Jan
Thu 14 Jan Blackrock Inc (BLC)
Fri 15 Jan JPMorgan Chase Co. (JPM)
Citigroup (C)
Wells Fargo (WFC)
Mon 18 Jan
Tue 19 Jan Bank of America Corp (BAC)
Goldman Sachs Group Inc (GS)
Netflix Inc (NFLX)
Wed 20 Jan Morgan Stanley (MS)
Proctor & Gamble (PG)
Thur 21 Jan IntelCorp (ITC)
International Business Macines (IBM)
Fri 22 Jan Schlumberger Ltd (STB)
Mon 25 Jan
Tue 26 Jan 3m Co (MMM)
American Express (AXP)
General Electric (GE)
Johnson & Johnson (JNJ)
Verizon Communications Inc (VZ)
Advanced Micro Devices (AMD)
Starbucks Group (SBUX)
Wed 27 Jan AT&T (T)
Automatic Data Processing (ADP)
Boeing (BO)
Apple Inc (AAPL)
Facebook (FB)
Thu Jan 27 McDonald’s Corp (MCD)
Fri Jan 28 AON (AON)
Caterpillar Inc (CAT)
Chevron (CVX)
Mon 1 Feb Alphabet Inc C (GOOG)
Alphabet Inc A (GOOGL)
Tue 2 Feb ExxonMobil (XOM)
Lumentum Holdings (LITE)
Pfizer (PFE)
Gilead Sciences Inc (GILD)
Snap IncA (SNAP)
Wed 3 Feb General Motors (GM)
Mastercard (MA)
Spotify Tehcnology SA (SPOT)
Illumina (ILMN)
Microsoft Corp (MSFT)
Mondelez (MDLZ)
PayPal Holdings (PYPL)
Peloton (PTON)
Qualcomm Inc (QCOM)
Tesla Inc (TSLA)
Twilio (TWL)
Thu 4 Feb Coca-Cola Co (KO)
Merck & Co Inc (MRK)
Philip Morris International (PM)
Takeda Pharmaceutical (TAK)
Twitter Inc (TWTR)
Activision Blizzard (ATVI)
Amazon.com Inc (AMZN)
Pinterest (Pins)
Uber Technologies (UBER)
Visa Inc Class A (V)

European stocks mixed after Wall Street sell-off

  • European stocks mixed after Wall Street sell-off ahead of Georgia run-offs
  • Recovery concerns as cases mount, UK heads for tough lockdown
  • OPEC+ talks continue after no agreement reached

European stock markets chopped around the flatline early on Tuesday as investors sought direction following heavy selling on Wall Street and broader concerns about rising coronavirus cases and the impact these will have on the global economic recovery. Sterling retreated from its strongest in almost three years against the dollar as the UK enters its third lockdown, which will be reviewed in mid-February.

Wall Street indices hit record highs but retreated sharply in a wild session that saw the Dow and S&P 500 suffer their biggest declines since Oct 28th. Yesterday, the S&P 500 declined 1.5% but just was off the lows and held on to 3,700 at the close after dropping as low as 3,662. The Dow Jones fell almost 400pts but was about 350pts off its lows of the day by the close. Whilst it was a tough start to the year on Wall Street, rejection of the lows is a positive sign that there is not much appetite to fight the Fed. The Georgia runoffs today will be crucial for the bond market and we should start to get an idea from midnight tonight. Currently, latest polls indicate the Democrats could take both seats and end the GOP’s Senate Dominance.

Today, the FTSE 100 opened down but quickly turned higher, lifted by the likes of Shell and BP, which both rose around 2-3% in the first part of the session. Reopening stocks struggled at the open before paring losses. Although there is a lot of noise around this lockdown in the UK, the long-term narrative remains tentatively optimistic about vaccines allowing a return to relative normality by the spring. Whilst those of with children in school are disappointed that they are being asked to shoulder any of the burden, let alone see their lives upended again, the market is relatively comfortable with the fact Q1 is going to be tough.

Shares in China Telecom, China Unicom and China Mobile all rose sharply after the NYSE backtracked on plans to delist the companies. Could this be a sign of a more emollient Biden regime? It won’t harm US-China relations. The China-Europe investment deal is also boosting sentiment in Chinese markets. Stocks in China also rose broadly on hopes that Beijing will continue to deliver greater policy support

Next always likes to under-promise and over-deliver. Shares surged 8% in early trade today, hitting the best level in 5 years, after the company reported a far stronger Christmas trading period than it had guided for back in October; something investors should be used to. Full prices shares in the nine weeks to Boxing Day declined 1.1% from a year before, vs the -8% guided at the last update. Having hiked the full-year profit guidance to £365m in October, from the £300m guided in September, management is able to say full-year profit before tax will be £370m this year. Next’s shift to online is really the blueprint for any retailer. Even with a collapse in the high street, it can consistently deliver free cash flow. The pandemic has proved more challenging – suspending buybacks and dividends, and selling off assets have been required to shore up the balance sheet this year. But it remains a resilient company able to generate pre-tax profit on a consistent basis.

The OPEC+ meeting continues today after the 23 nations in the cartel and allied group failed to reach agreement on production levels for February. Russia is pushing for an increase of 500k bpd next month, but Saudi Arabia is warning that this is too soon, and the market remains fragile. The Saudis don’t want to gamble price stability for a few thousand extra barrels, but it is clear unity is a problem and they cannot assume they can take everyone with them for much longer. Prices were volatile with Brent swinging around a range of $53-$51 and WTI moving up close to $50 before finding support at $47.

Gold prices checked after hitting fresh highs after breaking the recent downtrend and securing the move above the 23.6% retracement at $1,929. – momentum still looking positive. US real rates dropped further as breakeven inflation expectations topped 2%.

Gold prices checked after hitting fresh highs after breaking the recent downtrend.

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