Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

The Week Ahead – Central Banks back in Focus with the BoE and the FED in Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 37 stats in focus in the week ending 17th September. In the week prior, 62 stats had also been in focus.

For the Dollar:

Prelim private sector PMIs for September will be in focus on Thursday.

Expect the services PMI to be the key stat of the week.

Other stats include housing sector data that will likely have a muted impact on the Dollar and the broader market.

The main event of the week, however, is the FOMC monetary policy decision on Wednesday.

With the markets expecting the FED to stand pat, the economic and interest rate projections and press conference will be pivotal. FED Chair Powell prepped the markets for the tapering to begin this year. The markets are not expecting any hint of a shift in policy on interest rates, however…

In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195.

For the EUR:

It’s a relatively busy week on the economic data front.

Prelim September private sector PMIs for France, Germany, and the Eurozone will draw plenty of interest on Thursday.

While Germany’s manufacturing PMI is key, expect influence from the entire data set. Market concerns over the economic recovery have tested support for riskier assets. Softer PMI numbers would test EUR support on the day.

For the week, the EUR fell by 0.75% to $1.1725.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

On the economic data front, CBI Industrial Trend Orders and prelim private sector PMIs are due out.

Expect the services PMI for September to be the key stat on Thursday.

While the stats will influence, the BoE’s monetary policy decision on Thursday will be the main event.

Persistent inflationary pressure has raised the prospects of a sooner rather than later move by the BoE. Weak retail sales figures have made things less clear, however.

Expect any dissent to drive the Pound towards $1.40 levels.

The Pound ended the week down by 0.71% to $1.3741.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Early in the week, house price figures for August are due out. The numbers are not expected to have a material impact on the Loonie, however.

Retail sales figures for July, due out on Thursday, will influence, however. Another sharp increase in spending would deliver the Loonie with much-needed support.

The Loonie ended the week down 0.57% to C$1.2764 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no major stats to provide the Aussie Dollar with direction.

While there are no major stats, the RBA monetary policy meeting minutes on Tuesday will influence. The markets will be looking for forward guidance following the latest lockdown measures.

The Aussie Dollar ended the week down by 1.05% to $0.7279.

For the Kiwi Dollar:

It’s another quiet week ahead.

Early in the week, consumer sentiment figures for the 3rd quarter will be in focus.

Trade data, due out on Friday, will be the key numbers for the week, however.

Away from the economic calendar, however, COVID-19 news updates will also be key.

The Kiwi Dollar ended the week down by 1.03% to $0.7040.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar.

Inflation and prelim private sector PMIs are due out on Friday. We don’t expect the numbers to influence the Yen, however.

On the monetary policy front, the BoJ is in action on Wednesday. We aren’t expecting any surprises, however, as the Delta variant continues to deliver economic uncertainty.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar.

Out of China

There are also no major stats due out of China for the markets to consider, with the Chinese markets closed early in the week.

On the monetary policy front, the PBoC is in action. We don’t expect any changes to the Loan Prime Rates, however.

The Chinese Yuan ended the week down by 0.34% to CNY6.4661 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the Middle East, in particular, will need continued monitoring following recent events in Afghanistan.

U.S Mortgage Rates Fall Ahead of the FOMC Meet and Projections

Mortgage rates were relatively flat once more, with 30-year fixed rates falling by just 2 basis points. After a 1 basis point rise in the week prior, rates fell the 6th time in 11-weeks.

In the week ending 16th September, 30-year fixed rates fell by 2 basis points to 2.86%.

30-year mortgage rates have risen just once beyond the 3% mark Since 21st April.

Compared to this time last year, 30-year fixed rates were down by just 1 basis point.

30-year fixed rates were still down by 208 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a relatively busy first half of the week, with inflation figures for August in focus on Tuesday.

Softer inflation figures pegged back mortgage rates in the week.

In August, the U.S core annual rate of inflation slipped from 4.3% to 4.0%. While softer, the continued spike in inflation left a FED tapering on the table for this year.

On Wednesday, industrial production and NY Empire State Manufacturing data failed to drive yields in spite of upbeat numbers.

The NY Empire State Manufacturing Index climbed from 18.3 to 34.3 in September. Industrial production rose by 0.4% in August, following a 0.8% increase in July.

While the stats from the U.S were upbeat, economic data from China raised yet more red flags over the Chinese economic recovery.

In August, industrial production increased by 5.3%, year-on-year, which was down from 6.4% in July. Fixed asset investments also disappointed, rising by 8.9% versus 10.3% in July. Both fell short of forecasts.

Freddie Mac Rates

The weekly average rates for new mortgages as of 16th September were quoted by Freddie Mac to be:

  • 30-year fixed rates decreased by 2 basis points to 2.86% in the week. This time last year, rates had stood at 2.87%. The average fee remained unchanged at 0.7 points.
  • 15-year fixed fell by 7 basis points 2.12% in the week. Rates were down by 23 basis points from 2.35% a year ago. The average fee remained unchanged at 0.6 points.
  • 5-year fixed rates increased by 9 basis point to 2.51%. Rates were down by 45 points from 2.96% a year ago. The average fee fell from 0.3 points to 0.1 point.

According to Freddie Mac,

  • Mortgage rates continued to remain flat, reflecting the markets’ view that prospects for the economy have dimmed as a result of the latest spike in new COVID-19 cases.
  • Fundamental changes to the economy are occurring, however, which will likely lead to significant investment and new post-pandemic economic models that will spur economic growth.
  • Such changes include increased migration, a continuation of remote work, increased use of automation, and focus on a more energy efficient and resilience economy.

Mortgage Bankers’ Association Rates

For the week ending 10th September, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.03%. Points decreased from 0.33 to 0.32 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 3.07% to 3.04%. Points fell from 0.30 to 0.27 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.14% to 3.13%. Points declined from 0.30 to 0.21 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, increased by 0.3% in the week ending 10th September. In the previous week, the index had declined by 1.9%

The Refinance Index declined by 3% and was 3% lower than the same week a year ago. The index had also fallen by 3% in the week prior.

In the week ending 10th September, the refinance share of mortgage activity fell from 66.8% to 64.9%. The share had remained unchanged at 66.8% in the week prior.

According to the MBA,

  • Purchase applications, after adjusting for the impact of Labor Day, increased over 7% to their highest level since Apr-21.
  • Compared with Sept-2020, which was in the middle of a significant upswing in home purchases, applications were down 11%.
  • The average loan size for a purchase application rose to $396,800, with a competitive purchase market pushing sales prices upwards.
  • By contrast, refinance applications fell to their slowest pace since early July.

For the week ahead

It’s a quieter week ahead on the economic data front. Economic data is limited to housing sector data that should have a muted impact on yields.

The market focus will be on the FOMC monetary policy decision and projections due late on Wednesday.

A hawkish FED would push yields northwards that should support a pickup in mortgage rates in the coming weeks.

India Antitrust Probe Finds Google Abused Android Dominance, Report Shows

Alphabet Inc’s Google reduced “the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android,” says the June report by the Competition Commission of India’s (CCI) investigations unit.

The U.S. tech giant told Reuters in a statement it looks forward to working with the CCI to “demonstrate how Android has led to more competition and innovation, not less.”

Google has not received the investigation report, a person with direct knowledge of the situation told Reuters.

The CCI did not respond to a request for comment on the report. Senior CCI members will review the report and give Google another chance to defend itself, before issuing a final order, which could include penalties, said another person familiar with the case.

Google would be able to appeal any order in India’s courts.

Its findings are the latest antitrust setback for Google in India, where it faces several probes in the payments app and smart television markets. The company has been investigated in Europe, the United States and elsewhere. This week, South Korea’s antitrust regulator fined Google $180 million for blocking customised versions of Android.

‘VAGUE, BIASED AND ARBITRARY’

Google submitted at least 24 responses during the probe, defending itself and arguing it was not hurting competition, the report says.

Microsoft Corp, Amazon.com Inc, Apple Inc, as well as smartphone makers like Samsung and Xiaomi, were among 62 entities that responded to CCI questions during its Google investigation, the report says.

Android powers 98% of India’s 520 million smartphones, according to Counterpoint Research.

When the CCI ordered the probe in 2019, it said Google appeared to have leveraged its dominance to reduce device makers’ ability to opt for alternate versions of its mobile operating system and force them to pre-install Google apps.

The 750-page report finds the mandatory pre-installation of apps “amounts to imposition of unfair condition on the device manufacturers” in violation of India’s competition law, while the company leveraged the position of its Play Store app store to protect its dominance.

Play Store policies were “one-sided, ambiguous, vague, biased and arbitrary”, while Android has been “enjoying its dominant position” in licensable operating systems for smartphones and tablets since 2011, the report says.

The probe was triggered in 2019 after two Indian junior antitrust research associates and a law student filed a complaint, Reuters reported.

India remains a key growth market for Google. It said last year it would spend $10 billion https://www.reuters.com/article/us-google-india-idINKCN24E0YL in the country over five to seven years through equity investments and tie-ups, its biggest commitment to a key growth market.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Aditya Kalra in New Delhi; Editing by William Mallard)

European Equities: A Week in Review – 17/09/21

The Majors

It was another bearish week for the majors in the week ending 17th September. The CAC40 led the way down, falling by 1.40%, with the DAX30 and the EuroStoxx600 seeing losses of 0.77% and 0.96% respectively.

Economic data for the Eurozone failed to support the majors, in spite of the stats being skewed to the positive.

Mid-week, disappointing economic data from China fueled market concerns over the economic outlook.

Industrial production in China was up by 5.3%, year-on-year, in August versus a forecasted 5.8% increase. In July, production had been up by 6.4%.

Fixed asset investment was up 8.9% versus a forecasted 9.0%. In July, fixed asset investments had been up 10.3%.

While the numbers from China raised yet more red flags, economic data from the U.S impressed, raising policy uncertainty.

Market jitters ahead of next week’s FOMC policy decision and projections delivered the losses for the DAX30 at the end of the week.

The Stats

Economic data wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the majors.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

From the U.S

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment also improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental slid by 10.98%, with Volkswagen ending the week down by 3.40%. BMW and Daimler ended the week up by 1.44% and by 2.88% respectively, however.

It was also a mixed week for the banking sector. Deutsche Bank rallied by 2.64%, while Commerzbank fell by 0.18%.

From the CAC, it was a mixed week for the banks. BNP Paribas rose by 1.36% to buck the trend. Credit Agricole and Soc Gen fell by 2.59% and by 1.48% respectively.

It was also a mixed week for the French auto sector. Stellantis NV rose by 0.63%, while Renault slid by 1.71%.

Air France-KLM found much needed support, rising by 2.29%, while Airbus ended the week with a 1.15% loss.

On the VIX Index

It was back into the red for the VIX in the week ending 17th September, ending a run of 2 consecutive weekly gains.

Following a 27.67% jump from the previous week, the VIX slipped by 0.67% to end the week at 20.81.

2-days in the red from 5 sessions, which included 6.58% fall on Wednesday delivered the downside. An 11.34% rise on Friday limited the downside from the week, however.

For the week, the NASDAQ fell by 0.47%, with the Dow and the S&P500 ending the week down by 0.07% and by 0.57% respectively.

VIX 180921 Weekly Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Key stats include prelim September private sector PMIs for France, Germany, and the Eurozone.

At the end of the week, German IFO business climate figures will also influence.

From the U.S, it’s a quieter but influential week ahead.

On the economic data front, prelim private sector PMIs for September and weekly jobless claims will influence.

The main event of the week, however, is the FED monetary policy decision and projections.

With the FED expected to stand pat on policy, expect the FED’s economic projections and policy outlook to be key.

The Weekly Wrap – Economic Data and Policy Jitters Delivered a Boost for the Greenback

The Stats

It was a busier week on the economic calendar, in the week ending 17th September.

A total of 61 stats were monitored, which was up from 42 stats in the week prior.

Of the 61 stats, 21 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 29 of the stats reflected an upward trend from previous figures. Of the remaining 32 stats, 30 reflected a deterioration from previous.

For the Greenback, upbeat economic data and sentiment towards monetary policy delivered support in the week. In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195. In the previous week, the Dollar had risen by 0.59% to 92.582.

Out of the U.S

Early in the week, inflation figures were in focus.

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

Out of the UK

It was also a busy week. Employment, inflation, and retail sales figures were in focus. The stats were skewed to the positive.

In August, claimant counts fell by a further 58.6k after having fallen by 48.9k in July. In July, the unemployment rate fell from 4.7% to 4.6%.

The UK’s annual rate of inflation accelerated from 2.0% to 3.25 in August, also delivering Pound support.

At the end of the week, retail sales disappointed, however. Month-on-month, core retail sales fell by 1.2% in August, following a 3.2% slide in July. Retail sales fell by 0.9% after having fallen by 2.8% in July. Economists had forecast a pickup in spending.

In the week, the Pound fell by 0.71% to end the week at $1.3741. In the week prior, the Pound had fallen by 0.23% to $1.3839.

The FTSE100 ended the week down by 0.93%, following a 1.53% loss from the previous week.

Out of the Eurozone

Economic data included wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the EUR.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

For the week, the EUR fell by 0.75% to $1.1725. In the week prior, the EUR had fallen by 0.56% to $1.1814.

The CAC40 slid by 1.40%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.77% and 0.96% respectively.

For the Loonie

Economic data included manufacturing sales, inflation, and wholesale sales figures.

The stats were mixed in the week.

In July, both manufacturing sales and wholesale sales disappointed with falls of 1.5% and 2.1% respectively.

Providing support, however, was a pickup in the annual rate of inflation from 3.3% to 3.5%.

The pickup in inflationary pressure and rising oil prices were not enough to support the Loonie against the Greenback.

In the week ending 17th September, the Loonie fell by 0.57% to C$1.2764. In the week prior, the Loonie had fallen by 1.34% to C$1.2692.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 1.05% to $0.7279, with the Kiwi Dollar ending the week down by 1.03% to $0.7040.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the 1st half of the week.

In spite of the latest lockdown measures, the stats were skewed to the positive.

The NAB Business Confidence Index rose from -8 to -5 in August.

More significantly, the Westpac Consumer Sentiment Index increased by 2.0% in September. The index had fallen by 4.4% in August.

On Thursday, employment figures disappointed, however.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

For the Kiwi Dollar

It was also a mixed week on the economic data front.

2nd quarter GDP numbers impressed, with the NZ economy expanding by 2.8%, quarter-on-quarter. The economy had expanded by a more modest 1.4% in the previous quarter.

On the negative, however, was a slide in the Business PMI from 62.6 to 40.1 in August. The figures reflected the impact of the latest lockdown measures on production, justifying the RBNZ’s decision to leave the cash rate unchanged.

For the Japanese Yen

It was a relatively quiet week, with the numbers skewed to the negative.

According to finalized figures, industrial production fell by 1.5% in July. While in line with prelim figures, this was a partial reversal of a 6.5% jump from June.

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Exports rose by 26.2%, year-on-year, after having been up by 37% in July.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar. In the week prior, the Yen had fallen by 0.21% to ¥109.94.

Out of China

Fixed asset investment and industrial production figures were in focus mid-week.

There were yet more disappointing numbers from China for the markets to consider.

In August, fixed asset investment increased by 8.9%, year-on-year. This was softer than a 10.3% increase in July.

More significantly, industrial production was up by 5.3% in August versus 6.4% in July.

In the week ending 17th September, the Chinese Yuan fell by 0.34% to CNY6.4661. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.4443.

The CSI300 and the Hang Seng ended the week down by 3.14% and by 4.90% respectively.

Wall Street Closes Rollercoaster Week Sharply Lower

All three major U.S. stock indexes lost ground, with the Nasdaq Composite Index’s weighed down as rising U.S. Treasury yields pressured market-leading growth stocks.

They also posted weekly losses, with the S&P index suffering its biggest two-week drop since February.

“The market is struggling with prospects for tighter fiscal policy due to tax increases, and tighter monetary policy due to Fed tapering,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

“Equity markets are also a little softer due to today’s weak Consumer Sentiment data,” Carter added. “It’s triggering concerns that the Delta variant could slow economic growth.”

A potential hike in corporate taxes could eat into earnings also weigh on markets, with leading Democrats seeking to raise the top tax rate on corporations to 26.5% from the current 21%.

While consumer sentiment steadied this month it remains depressed, according to a University of Michigan report, as Americans postpone purchases while inflation remains high.

Inflation is likely to be a major issue next week, when the Federal Open Markets Committee holds its two-day monetary policy meeting. Market participants will be watching closely for changes in nuance which could signal a shift in the Fed’s tapering timeline.

“It has been a week of mixed economic data and we are focused clearly on what will come out of the Fed meeting next week,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Helena, Montana.

The Dow Jones Industrial Average fell 166.44 points, or 0.48%, to 34,584.88; the S&P 500 lost 40.76 points, or 0.91%, at 4,432.99; and the Nasdaq Composite dropped 137.96 points, or 0.91%, to 15,043.97.

The S&P 500 ended below its 50-day moving average, which in recent history has proven a rather sturdy support level.

Of the 11 major sectors in the S&P 500, all but healthcare ended in the red, with materials and utilities suffering the biggest percentage drops.

COVID vaccine manufacturers Pfizer Inc and Moderna Inc dropped 1.3% and 2.4%, respectively, as U.S. health officials moved the debate over booster doses to a panel of independent experts.

U.S. Steel Corp shed 8.0% after it unveiled a $3 billion mini-mill investment plan.

Robinhood Markets Inc rose 1.0% after Cathie Wood’s ARK Invest bought $14.7 million worth of shares in the trading platform.

Volume and volatility spiked toward the end of the session due to “triple witching,” which is the quarterly, simultaneous expiration of stock options, stock index futures, and stock index options contracts.

Volume on U.S. exchanges was 15.51 billion shares, compared with the 9.70 billion average over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.97-to-1 ratio; on Nasdaq, a 1.00-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and two new lows; the Nasdaq Composite recorded 67 new highs and 82 new lows.

(Reporting by Stephen Culp; Additional reporting by Krystal Hu in New York and Ambar Warrick in Bengaluru; Editing by Richard Chang)

China Applies to Join Pacific Trade Pact to Boost Economic Clout

Commerce Minister Wang Wentao submitted China’s application to join the free trade agreement in a letter to New Zealand’s trade minister, Damien O’Connor, the Chinese ministry said in a statement late on Thursday.

The CPTPP was signed by 11 countries including Australia, Canada, Chile, Japan and New Zealand in 2018.

Before that, it was known as the Trans-Pacific Partnership and seen as an important economic counterweight to China‘s regional influence.

Japan, the CPTPP’s chair this year, said it would consult with member countries to respond to China’s request, but stopped short of signalling a timeline for doing so.

“Japan believes that it’s necessary to determine whether China, which submitted a request to join the TPP-11, is ready to meet its extremely high standards,” Japanese Economy Minister Yasutoshi Nishimura told reporters on Friday.

The TPP was central to former U.S. President Barack Obama’s strategic pivot to Asia but his successor, Donald Trump, withdrew the United States from the pact in 2017.

Asked to comment on China’s bid, a spokesperson for the U.S. State Department said it deferred to CPTPP, given that the United States was not a member, but added: “That said, we would expect that China’s non-market trade practices and China’s use of economic coercion against other countries would factor into CPTPP parties’ evaluation of China as a potential candidate for accession.”

CPTPP accession would be a major boost for China following the signing of the 15-nation Regional Comprehensive Economic Partnership free trade agreement last year.

Beijing has lobbied for its inclusion in the pact, including by highlighting that the Chinese and Australian economies have enormous potential for cooperation. However, relations between the two countries have soured.

In a new alliance dubbed AUKUS announced this week, the United States and Britain said they would provide Australia with the technology to deploy nuclear-powered submarines, a move seen as aimed at countering China’s influence in the Pacific.

Zhao Lijian, China’s foreign ministry spokesman, said on Friday that the application to join CPTPP was “completely unrelated” to AUKUS.

China was pushing for regional integration while AUKUS countries were “promoting war and destruction,” he said at a briefing in Beijing.

Taiwan, which has also been angling to join the trade pact, expressed concern about China’s decision to apply.

China claims Taiwan as its own territory and would not be pleased if Taipei was allowed to join the grouping before Beijing.

Japan’s deputy finance minister suggested in a tweet on Friday that China’s subsidies of state-owned firms and arbitrary application of the law were likely to make it hard for the country to join the trade pact.

“China … is far removed from the free, fair and highly transparent world of TPP, chances that it can join are close to zero,” State Minister of Finance Kenji Nakanishi said in a tweet. “This can be thought of as a move to prevent Taiwan from joining.”

Britain in June began negotiations to enter the trade pact, while Thailand has also signalled interest in joining it.

Wang and O’Connor held a telephone conference to discuss the next steps following China’s application, the Chinese Ministry of Commerce said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Colin Qian, Twinnie Siu, Tom Daly and Gabriel Crossley in Beijing, Daniel Leussink and Sakura Murakami in Tokyo, Ben Blanchard and Jeanny Kao in Taipei and David Brunnstrom in Washington; Editing by Angus MacSwan, Alex Richardson and Mark Porter)

UK’s Meat Industry Warns CO2 Shortage Could Hit Food Supplies

The gas is used to stun animals before slaughter, in the vacuum packing of food products to extend their shelf life, and to put the fizz into beer, cider and soft drinks.

It is also required for some medical procedures and used in the nuclear and semi-conductor industries.

Britain’s food supply chain, already creaking from an acute shortage of heavy goods vehicles (HGV) drivers and the impact of Brexit and COVID-19, is heavily reliant on fertiliser producers for CO2 which is a by-product of their production process.

However, two of the largest fertiliser producers, Norway’s Yara and rival CF Industries Holdings, have curbed production due to a surge in natural gas prices, which has in turn started to dry up CO2 supplies.

Nick Allen, chief executive of the British Meat Processors Association (BMPA), said that once current stocks of the gas run out some meat companies will have to stop taking animals and close production lines, leading to a logjam of animals back to the farms.

“We already have this situation in the pig industry which is now facing the imminent prospect of a humane cull on farms,” he said.

The BMPA is lobbying Business Minister Kwasi Kwarteng to help prop up UK CO2 production in the short-term.

“We are monitoring this situation closely and are in regular contact with the food and farming organisations and industry, to help them manage the current situation,” said a UK government spokesperson.

“The UK benefits from having access to highly diverse sources of gas supply to ensure households, businesses and heavy industry get the energy they need at a fair price.”

Britain last suffered a major CO2 shortage in 2018, leading to some drinks wholesalers to ration sales.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by James Davey; Editing by Aurora Ellis)

 

USD/CAD: Loonie Hits Nearly One-Month Low Ahead of Snap Election

The Canadian dollar hit a near one-month low against its U.S. counterpart on Friday as falling energy prices and September 20 election uncertainties weighed on the commodity currency.

Next week’s federal reserve decision and the election in Canada will be closely watched by investors. Investors are concerned that Monday’s elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

The USD/CAD pair rose to 1.2762 today, up from Thursday’s close of 1.2681. The Canadian dollar lost over 1.2% last month and has depreciated about 1% so far this month.

“Barring the scenario of a hung parliament, political uncertainty in Canada should ultimately dissipate, helping CAD realign with its short-term fair value. The latest data (labour market and inflation) have all but confirmed the view that the Bank of Canada will have to step in with another round of tapering in October, which should leave it on track to fully unwind QE by year-end, or by early-2022,” noted Francesco Pesole, FX Strategist at ING.

“Ultimately, markets will be left with some room to speculate that the first hike will be delivered before mid-2022 (which is currently in the BoC rate-path projections). The set of good fundamentals should, in our view, provide some sustained support to CAD into year-end, and we expect USD/CAD to trade consistently below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.29% lower at $71.66 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

On Thursday, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.25% higher at 93.164. The dollar reaches a three-week high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet next week and open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Stocks Remain Under Pressure Ahead Of The Weekend

Stocks Set To Open Lower

S&P 500 futures are losing ground in premarket trading as traders remain cautious ahead of Fed Interest Rate Decision which will be released on September 22.

Yesterday, Retail Sales and Continuing Jobless Claims reports exceeded analyst expectations and raised worries that Fed will soon announce the reduction of its asset purchase program.

Today, traders will have a chance to take a look at Michigan Consumer Sentiment report for September. Analysts expect that Consumer Sentiment increased from 70.3 in August to 72 in September.

Gold Tries To Rebound After Yesterday’s Sell-Off

Gold failed to settle below the support level at $1750 and is trying to rebound while the U.S. dollar is losing some ground against a broad basket of currencies.

Yesterday, gold gained strong downside momentum after it managed to get below the support at $1775. Not surprisingly, gold mining stocks found themselves under strong pressure and moved closer to yearly lows.

It remains to be seen whether traders will be ready to buy gold mining stocks today as the current rebound in the gold market is not strong, and gold may lose momentum in case U.S. dollar gains some ground or Treasury yields move closer to recent highs.

WTI Oil Failed To Settle Below The $72 Level

WTI oil has recently made another attempt to settle below the $72 level but failed to develop sufficient downside momentum. Oil found itself under pressure after the recent rally, but it looks that many traders were ready to buy oil on pullback.

The number of new daily coronavirus cases in the world is trending down which is bullish for oil. In addition, U.S. domestic oil production has not fully recovered from hurricane-related damage. Recent spikes in natural gas prices in Europe have also boosted traders’ enthusiasm. In this environment, WTI oil has good chances to get back to recent highs.

For a look at all of today’s economic events, check out our economic calendar.

Preview: What to Expect From FedEx’s Q1 Earnings on Tuesday

The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

The company’s next earnings report is expected to be released on Tuesday, Sep 21 after market close.

Analyst Comments

“After 18 months of topline focus, attention turns to costs in F1Q22 as FedEx (like most other companies) grapples with labour and general inflation. With revenues running into tougher comps + normalizing trends as well (particularly in Ground), results could be challenging for the 2nd successive quarter,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

FedEx Stock Price Forecast

Twenty-one analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $351.32 with a high forecast of $397 and a low forecast of $270.

The average price target represents a 35.97% change from the last price of $258.38. From those 21 analysts, 17 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $270 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. Evercore ISI lowered the target price to $350 from $360. Citigroup slashed the price target to $360 from $365. JPMorgan cut the target price to $346 from $366.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

Check out FX Empire’s earnings calendar

UK Shares Rise on Travel, Banking Boost; Retail Sales Data Ease Taper Fears

The blue-chip FTSE 100 index rose 0.3%, with banking shares gaining after a series of brokerage upgrades and price target hikes.

Asia-focused banks HSBC Holdings and Standard Chartered jumped 1.8% and 0.5%, respectively, after Barclays raised price targets on the stocks. RBC also upgraded HSBC to “outperform” from “sector perform”.

However, gains on the FTSE 100 were capped by miners Rio Tinto and Anglo American, which slipped 2.7% and 3.6% after Morgan Stanley cut its price targets on the stocks.

The domestically focused mid-cap FTSE 250 index advanced 0.5%.

British retail sales dropped 0.9% on the month in August versus a Reuters poll for a rise of 0.5%, after data earlier this week pointed towards a sharp recovery in the jobs market and a spike in inflation.

Investor focus will now be on the outcome of Bank of England’s (BoE) policy meeting next week.

“Next week’s policy decision should reaffirm that some tightening will be needed over the next few years to keep inflation (and the economy) in check. But we don’t expect the BoE to conclude that there is a sufficient case yet for near-term rate hikes,” Deutsche Bank economist Sanjay Raja said.

Airlines Wizz Air, Ryanair Holdings and British Airways owner IAG, and holiday company TUI AG rose between 1.2% and 4.7%, as Britain was set to consider easing its COVID-19 rules for international travel.

“The hope will be that a shift in the rules is the precursor to people jetting off for autumn and winter getaways,” said Russ Mould, investment director at AJ Bell.

Wickes Group jumped 5.6% to the top of FTSE 250 index after Deutsche upgraded the DIY retailer to “buy” from “hold”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Devik Jain in Bengaluru; Editing by Uttaresh.V and Shounak Dasgupta)

European Equities: A Quieter Economic Calendar to Put Support to the Test

Economic Calendar

Friday, 17th September

Eurozone Core CPI (YoY) (Aug) Final

Eurozone CPI (MoM) (Aug) Final

Eurozone CPI (YoY) (Aug) Fina

The Majors

It was a relatively bullish day for the European majors on Thursday.

The CAC40 and the EuroStoxx600 rose by 0.59% and 0.44% respectively, with the DAX30 ending the day up by 0.23%.

While economic data from the Eurozone provided direction, stats from the U.S were key later in the European session.

Impressive economic data from the U.S, which included an unexpected rise in retail sales, delivered the majors with support.

Following softer inflation figures for August, Thursday’s numbers also included a marked jump in the Philly FED Manufacturing PMI.

All in all, the numbers eased concerns over the economic recovery, which had returned following weak numbers from China on Wednesday.

The Stats

It’s a was a quiet day on the Eurozone economic calendar.

Eurozone trade data was in focus early in the European open.

Trade

In July, the Eurozone’s trade surplus widened from €17.7bn to €20.7bn.

According to Eurostat,

  • Euro area exports of goods to the rest of the world increased by 11.4%, year-on-year, to €206.0bn.
  • Imports from the rest of the world jumped by 17.1% to €185.3bn.
  • Intra-euro area trade rose by 16.8%, year-on-year, to €179.7bn.

From the U.S

It was a busy day on the economic calendar. Retail sales, jobless claims, and manufacturing data were in focus.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen fell by a 1.46%, with BMW and Daimler seeing losses of 1.15% and 0.84% respectively. Continental led the way down, however, tumbling by 15.98%. Continental’s slide came in response to the Vitesco unit spinoff.

It was a bullish day for the banks. Deutsche Bank and Commerzbank rose by 1.00% and by 0.82% respectively.

From the CAC, it was a bullish day for the banks. Soc Gen and Credit Agricole ended the day up by 0.50% and by 0.29% respectively. BNP Paribas led the way, however, gaining 0.99%.

It was a mixed day for the French auto sector. Stellantis NV rose by 0.40%, while Renault fell by 1.69%.

Air France-KLM ended the day up by 1.81%, with Airbus SE rallying by 2.24%.

On the VIX Index

It was back into the green for the VIX on Thursday, marking a 4th daily gain in 6 sessions.

Partially reversing a 6.58% fall from Wednesday, the VIX rose by 2.81% to end the day at 18.69.

On Thursday, the NASDAQ rose by 0.13%, while the Dow and S&P500 ended the day down by 0.18% and by 0.16% respectively.

VIX 170921 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone’s economic calendar.

Finalized August inflation figures for the Eurozone are due out later today. Expect any upward revisions to influence.

From the U.S, consumer sentiment figures for September will also provide direction late in the European session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 10 points.

For a look at all of today’s economic events, check out our economic calendar.

S&P Ends Modestly Lower as Rising Treasury Yields Offset Robust Retail Data

The three major indexes spent much of the day in negative territory as rising U.S. Treasury yields pressured market-leading tech stocks, and the rising dollar weighed on exporters.

Amazon.com Inc, buoyed by solid online sales in the Commerce Department’s report, helped push the Nasdaq into positive territory.

“Looking at today, clearly we had positive news from retail sales and it looks as if the massive slowdown in the economy is not materializing as a lot of people expected,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“It’s a nice reminder that the economy is still taking two steps forward for each step back even amid the COVID concerns,” Detrick added.

Economically sensitive transports and microchips were among the outperformers.

Data released before the opening bell showed an unexpected bump in retail sales as shoppers weathered Hurricane Ida and the COVID Delta variant, evidence of resilience in the consumer, who contributes about 70% to U.S. economic growth.

“Once again, it shows the U.S. consumer continues to spend and continues to help this economy grow,” Detrick said.

The Dow Jones Industrial Average fell 63.07 points, or 0.18%, to 34,751.32; the S&P 500 lost 6.95 points, or 0.16%, at 4,473.75; and the Nasdaq Composite added 20.40 points, or 0.13%, at 15,181.92.

Eight of the 11 major sectors in the S&P 500 ended lower, with materials suffering the largest percentage drop.

The consumer discretionary spending sector posted the biggest gain, with Amazon.com doing the heavy lifting.

Apparel company Gap Inc gained 1.6%. Online marketplace Etsy Inc and luxury accessory company Tapestry Inc rose 3.1% and 1.9%, respectively.

Ford Motor Co rose 1.4% after it announced plans to boost production of its F-150 electric pickup model.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers.

The S&P 500 posted nine new 52-week highs and one new low; the Nasdaq Composite recorded 82 new highs and 94 new lows.

Volume on U.S. exchanges was 9.37 billion shares, compared with the 9.44 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stephen Culp; Additional reporting by Ambar Warrick in Bengaluru; Editing by Richard Chang)

World Shares Slide on Wall Street Sell-Off, China Worries

International investors that have been piling into China in recent years are now bracing for one of its great falls as the troubles of over-indebted property giant China Evergrande come to a head.

The developer’s woes have been snowballing since May. Dwindling resources set against 2 trillion yuan ($305 billion) of liabilities have wiped nearly 80% off its stock and bond prices, and an $80 million bond coupon payment now looms next week.

Hong Kong’s Hang Seng index dropped to its lowest level so far this year.

A report from the U.S. Commerce Department showed retail sales unexpectedly rose in August, indicating America’s economic recovery is strengthening on positive trends in consumer spending. The strong data lifted the dollar and pushed up treasury yields, and sent safe-haven gold down nearly 3%.

However, the U.S. labor market remains under pressure, with initial jobless claims rising by slightly more than expected last week.

Losses on Wall Street were dominated by technology and energy stocks as oil retreated from recent highs now that the threat to U.S. Gulf production from Hurricane Nicholas has receded.

The MSCI world equity index was last down by 0.29%, off an all-time high on Sept. 7. MSCI’s broadest index of Asia-Pacific shares outside Japan closed down 0.87%.

European equities bucked the trend, and Europe’s STOXX 600 closed up 0.44%.

The Dow Jones Industrial Average fell 91.51 points, or 0.26%, to 34,722.88, the S&P 500 lost 11.6 points, or 0.26%, to 4,469.1 and the Nasdaq Composite dropped 15.52 points, or 0.1%, to 15,146.01.

“(Retail spending) categories that were strongest in August were in Covid-beneficiary categories,” wrote Ellen Zentner, chief U.S. economist at Morgan Stanley.

“Now incorporating today’s retail sales release, we lift our real (personal consumer expenditures) tracking to +1.9% and GDP to +5.0%.”

Markets remain focused on next week’s Federal Reserve meeting for clues as to when the U.S. central bank will start to taper stimulus, especially after the flurry of U.S. economic data out this week.

On Tuesday, data from the U.S. Labor Department showed inflation cooling and having possibly peaked, but inflation in Britain was the highest in years, according to data on Wednesday.

“We have an unusual situation where the overall market is sideways to lower but with a  risk-on trend underneath and that’s down to signs the Delta variant may be peaking in the U.S., which is driving people into reflation and recovery plays,” said Kiran Ganesh, head of cross assets at UBS Global Wealth Management.

U.S. crude recently fell 1.2% to $71.74 per barrel and Brent was at $74.69, down 1.02% on the day.

The dollar index rose 0.506%, with the euro down 0.51% to $1.1755.

Spot gold slid 2.1% to $1,755.75 per ounce, after hitting an over one-month low of $1,744.30. U.S. gold futures settled down 2.1% at $1,756.70.

Caught in gold’s slipstream, silver was last down 4.3% at $22.79.

The U.S. 10-year Treasury yield was 1.3327%, while core euro zone government bond yields were little changed.

(Reporting by Elizabeth Dilts Marshall; editing by David Evans and Steve Orlofsky)

USD/CAD: Loonie Weakens as Oil Prices Slip, Election in Focus

The Canadian dollar weakened against its U.S. counterpart on Thursday as the firm greenback and falling energy prices weighed on the commodity currency ahead of the September 20 election.

The USD/CAD pair rose to 1.2688 today, up from Wednesday’s close of 1.2633. The Canadian dollar lost over 1.2% last month and has depreciated about 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge lower as the U.S. storm threat fades. U.S. West Texas Intermediate (WTI) crude futures were trading 0.92% lower at $71.96 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

Moreover, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

“In the near term, CAD faces a number of headwinds. Economic data momentum has turned negative. Softening incoming data combined with an impending election (20 September) means that BoC messaging is likely neutral in the near term,” noted analysts at Citi.

“However, for our medium-term view, given Canada’s high vaccination rate, more lockdowns seem very unlikely, and the economic data should come in more strongly as we shift away from 2Q prints. Canada will also likely see more fiscal post-election.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.37% higher at 92.892. On Thursday, retail sales data showed an unexpected increase in August, easing some concerns about slowing economic growth, which supported the greenback.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Stocks Retreat Despite Encouraging Retail Sales Report

Retail Sales Increased By 0.7% In August

U.S. has just released Retail Sales report for August. The report indicated that Retail Sales grew by 0.7% month-over-month in August compared to analyst consensus which called for a decline of 0.8%.

While the Retail Sales report exceeded analyst estimates, it should be noted that the previous report for July was revised from -1.1% to -1.8%, which partially explains the big difference between August’s actual Retail Sales and analyst estimates.

Continuing Jobless Claims Declined To 2.67 Million

U.S. has also released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 332,000 Americans filed for unemployment benefits in a week compared to analyst consensus of 330,000. Continuing Jobless Claims decreased from 2.85 million (revised from 2.78 million) to 2.67 million compared to analyst consensus of 2.78 million.

S&P 500 futures remained under pressure in premarket trading despite encouraging data on Retail Sales and Continuing Jobless Claims. It looks that traders continue to take some profits off the table while S&P 500 remains not far away from historic highs. In this environment, the market will need additional upside catalysts to get back to all-time high levels.

WTI Oil Pulls Back After Rally

WTI oil has recently made an attempt to settle above the resistance level at $72.50 but failed to develop sufficient upside momentum and pulled back.

Yesterday, EIA released its Weekly Petroleum Status Report which indicated that crude inventories decreased by 6.4 million barrels compared to analyst consensus which called for a decline of 3.5 million barrels. U.S. domestic oil production increased from 10 million barrels per day (bpd) to 10.1 million bpd, which was also bullish for the oil market as oil production remained well below pre-hurricane levels.

However, it looks that some traders were ready to take profits after the upside move which took WTI oil from $67.50 to $73, so oil found itself under pressure.

For a look at all of today’s economic events, check out our economic calendar.

Eurozone Trade Surplus Widens but Fails to Impress the EUR ahead of Lagarde

It’s a been a quiet start to the day on the Eurozone economic calendar.

Eurozone trade data was in focus early in the European open.

Trade

In July, the Eurozone’s trade surplus widened from €17.7bn to €20.7bn.

According to Eurostat,

  • Euro area exports of goods to the rest of the world increased by 11.4%, year-on-year, to €206.0bn.
  • Imports from the rest of the world jumped by 17.1% to €185.3bn.
  • Intra-euro area trade rose by 16.8%, year-on-year, to €179.7bn.

Market Impact

Ahead of today’s figures, the EUR had risen to a pre-stat and current day high $1.18208 before hitting reverse.

In response to today’s stats, the EUR rose to a post-stat high $1.17775 before falling to post-stat and current day low $1.17663.

At the time of writing, the EUR was down by 0.41% to $1.17686.

EURUSD 160921 Hourly Chart

Next Up

Initial jobless claims and retail sales figures from the U.S. ECB President Lagarde is also scheduled to speak ahead of today’s stats from the U.S.

Marketmind: When the Dragon Sneezes, Europe Catches a Cold

A look at the day ahead from Danilo Masoni.

The STOXX 600 index has fallen 1% so far in September, twice as much world stocks, and while Europe broadly is still in favour with investors and research analysts, the index has slipped all the way down to July lows.

Wall Street’s strength overnight could trigger a relief bounce this morning, but the China woes are far from over.

The worsening crisis at China’s No. 2 property developer Evergrande has sent its shares to decade lows, pushed Asian stock markets to their fourth day of losses. Trading in Evergrande bonds has been suspended. And virus outbreaks are clouding travel plans during next week’s Mid-Autumn Festival.

Europe Inc faces internal woes too. Soaring power prices have prompted Spain to cap energy bills and Italy said on Thursday it plans “short-term measures” to offset the price rises. Worries are other governments could resort to similar measures — at the expense of utility firms.

There’s some market support from signs U.S. inflation has peaked and the world’s biggest economy is in robust shape. Retail sales will be eyed later on for more clues on the health of the world’s largest economy.

Key developments that should provide more direction to markets on Thursday:

Japan’s hot exports growth cools as COVID-19 hits supply chains

Philip Morris seals deal to buy UK’s Vectura with 75% stake tendered; French utility Veolia launches 2.5 bln euro capital increase[nL1N2QI0D1; Vivendi paves way for Lagardere takeover

German car registrations Aug

ECB Speakers: Christine Lagarde

Norges Bank Governor Oystein Olsen speaks

Egypt central bank meeting

U.S. weekly jobless claims/Philly Fed September

U.S. Retail sales/business inventories

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Danilo Masoni; editing by Sujata Rao)