“In China, Covid-19 cases continue to explode higher and there were reports of overwhelmed hospitals, but officials are proceeding with a full economic reopening.” said Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
U.S. equity futures have a tentative bid to start the new year today as tech stocks are outperforming amid a sharp pullback in Treasury yields.
Economically, China’s Manufacturing PMI fell to 49.0 in December from 49.4 in November while the U.K.’s Manufacturing PMI came in at 45.3 vs. (E) 44.7 last month. Both figures remained well below 50, in contraction territory, and that is seeing some of the recent hawkish central bank expectations unwind as we begin the new year.
Looking into today’s session, there are two economic reports to watch in the U.S., the Manufacturing PMI (E: 46.2) and Construction Spending (E: -0.4%).
Investors will be looking for data that points to a continued slowdown in growth but a more pronounced drop in price readings as that should help further ease hawkish policy expectations and allow the early but tentative risk-on money flows to continue.
There are no Fed officials scheduled to speak and no notable Treasury auctions today. That will leave investors focused on Treasuries as a continued drop in yields today should support a continued bid in tech stocks and equities more broadly as traders reposition into the new year.
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What’s in Today’s Report:
Futures are slightly higher following a quiet night of news as markets bounce following Wednesday’s declines.
The economic calendar was mostly quiet overnight and the only notable economic report was Euro Zone Money Supply while was essentially in-line with expectations, rising 5.4% vs. (E) 5.5%.
In China, COVID cases continue to explode higher and there were reports of overwhelmed hospitals, but officials are proceeding with a full economic reopening.
Today the focus will be on Jobless Claims (E: 222K) and markets will want to see this number move higher towards 250k (and ultimately 300k). If claims remain stubbornly low, that could weigh on stocks (like it did last week).
“Specifically, despite skyrocketing cases and reports of stressed hospitals, Chinese authorities are not locking down cities and that implies continued increases in energy demand as the world’s second largest economy comes back online,” said analysts at Sevens Report Research, in a note. Click here to read the full article.
What’s in Today’s Report:
U.S. equity futures are tracking global markets higher while the dollar is lower in risk-on trading this morning following more positive reopening news out of China.
China will end its eight day quarantine for inbound travelers on January 8th and scrapped international flight limits in the latest move away from Covid-Zero which is bolstering the outlook for global growth in the months ahead and markets are responding favorably to the news.
Today, there are three economic reports due to be released: International Trade in Goods (E: -$97.0B), Case Shiller Home Price Index (E: -1.2%), and FHFA House Price Index (E: -0.5%) but none of them should meaningfully impact the outlook for Fed policy and therefore are likely to have a limited impact on stocks.
There are no Fed speakers today but the Treasury will hold a 2-Yr Note auction at 1:00 p.m. ET. If demand is weak and yields rise following the auction, that could weigh on equities as it would be a mildly hawkish signal from the fixed-income market as we approach the end of the year.
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What’s in Today’s Report:
Futures are slightly lower following a disappointing earnings report by Micron (MU).
Micron (MU down –3% after hours) reported underwhelming results and guidance and announced layoffs, and that’s reversing some of the earnings-driven gains we saw in stocks on Wednesday.
Economic data remained sparse but UK GDP slightly missed estimates, falling –0.3% vs. (E) -0.2%.
Today’s focus will be on Weekly Jobless Claims (E: 225k) and this number needs to move higher (towards 300k) to show the Fed that the labor market is returning to better balance (something the Fed said is needed before they can think about a pivot). We also get the Final Q3 GDP (E: 2.9%) but that data is very old now (July-September) and it shouldn’t move markets.
What’s in Today’s Report:
Futures are moderately higher following better-than-expected earnings overnight.
Both Nike (NKE up 12% after hours) and FedEx (FDX up 4% after hours) posted better-than-expected earnings overnight and those results are helping to ease rising anxiety about 2023 earnings.
The only notable economic report was German Gfk Consumer Climate and it was in line (–37.8 vs. (E) -37.5).
Today the calendar stays quiet (it picks up tomorrow) but the focus will be on Consumer Confidence (E: 101.0) and Existing Home Sales (E: 4.2M) and the key for data will remain moderation (but not a collapse that implies looming stagflation).
What’s in Today’s Report:
Futures were volatile overnight but are now little changed following the Bank of Japan’s shock announcement of an effective interest rate increase.
The BOJ announced that it is widening the trading band on the 10 year Japanese Government Bond to 0.00% – 0.50% from the previous 0.0% – 0.25%. This amounts to a 25 basis point rate hike.
Economic data was positive as German PPI fell more than expected (-3.9% m/m vs. (E) -2.2%) in what is another sign of global dis-inflation.
Today there is one economic number, Housing Starts (E: 1.4M), but that won’t move markets.
Instead, focus will be on the fallout from the BOJ surprise “ rate hike.” Bottom line, markets dropped late last week and yesterday in part on higher global bond yields (following the hawkish ECB announcement) so this rate hike by the BOJ is another headwind and I’d not be surprised to see stock decline modestly on this news today, barring any positive surprises.
What’s in Today’s Report:
Futures are slightly higher on a mild oversold bounce following last weeks’ losses and a quiet weekend of news.
China announced the closing of schools in Shanghai on Monday in response to surging COVID cases, but the broader economic reopening remains on track.
Economically, the German IFO Business Expectations Survey was higher than expected (83.2 vs. (E) 82.0) as was UK Industrial Trends (-6% vs. (E) -9%) but neither number is moving markets.
Today the only notable economic report is the Housing Market Index (E: 34) and markets will want to see continued moderation in the data (housing remains a major contributor to high CPI so more progress on that front will be a mild positive).
What’s in Today’s Report:
S&P 500 futures are little changed, notably hovering within a few points of their pre-CPI levels from yesterday as traders await the December Fed decision.
Economically, U.K. CPI favorably dropped sharply from 2.0% in October to 0.4% in November, below estimates of 0.6% in the latest sign of easing global inflation pressures.
China is moving forward with economic/Covid policy meetings this week after previously saying they would be postponed pointing to a potential reopening occurring sooner than later.
Today, there is just one economic report due early in the day: Import & Export Prices (E: -0.5%, -0.6%) but unless there is a huge surprise the numbers are not likely to have an impact on equities with the Fed looming.
Turning to the Fed, the FOMC Announcement will hit the wires at 2:00 p.m. ET with markets pricing in a high likelihood of a 50 bp hike while the market will be focused on the “dot plot.” A terminal rate of 5% or above will be viewed as hawkish and likely weigh on stocks.
Finally, Fed Chair Powell’s Press Conference is at 2:30 p.m. ET and his tone could very well decide the final direction of stocks into the close today (a stubbornly hawkish stance remains a threat to equities and other risk assets right now).