Earnings Calendar Quiet Next Week; U.S. Inflation Print Could Dictate Market Trend

Earnings Calendar For The Week Of September 13

Monday (September 13)

IN THE SPOTLIGHT: ORACLE

The world’s largest database management company is expected to report its fiscal first-quarter earnings of $0.97 per share, which represents year-over-year growth of over 4% from $0.93 per share seen in the same period a year ago. The Austin, Texas-based computer technology corporation would post revenue of $9.8 billion.

Oracle’s current low valuation at ~16.7x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” noted Keith Weiss, equity analyst at Morgan Stanley.

“With management guiding to mid-single-digit CC revenue growth in a software sector filled with strong secular growth stories, and operating margins declining in FY22 due to heightened investment in Cloud, we remain Equal-weight while our price target moves up to $77.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 13

Ticker Company EPS Forecast
ORCL Oracle $0.97
HRB H&R Block -$0.34

 

Tuesday (September 14)

IN THE SPOTLIGHT: KASPIEN HOLDINGS

Kaspien Holdings, an American company that provides software and services for e-commerce, is expected to report a loss of 47 cents a share revenue of around $39 million in the fiscal second quarter.

U.S. Inflation Data: On September 14, the consumer price index is scheduled to be released. Global trends and inflation data will drive equity markets next week, which after a run of record-breaking trades have taken a breather. If the data continues to be hot, Treasury yields could rise, which would be negative for the market.

“High inflation is also a reason to justify a Fed taper. Headline CPI is likely to remain close to 5.5% year-on-year this week with core inflation remaining at 4.3%. Given ongoing supply issues, rising labour costs and a clear sense of strong corporate pricing power – note the latest Federal Reserve Beige Book stated “several Districts indicated that businesses anticipate significant hikes in their selling prices in the months ahead” – we see little reason for inflation to fall meaningfully before 2Q 2022,” noted James Knightley, Chief International Economist at ING.

“The risk is that rising inflation expectations keeps it higher. Consequently, we continue to look for the Federal Reserve to conduct a swift taper with asset purchases ending in 2Q and interest rates increasing from late 2022 onwards.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 14

Ticker Company EPS Forecast
JD Jd Sports Fashion -£3.35

 

Wednesday (September 15)

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR -$1.03
RDW Redrow £0.17

 

Thursday (September 16)

Ticker Company EPS Forecast
AHT Ashtead Group £0.51

 

Friday (September 17)

No major earnings are scheduled for release

The Week Ahead – A Busy Economic Calendar to Test Market Risk Sentiment…

On the Macro

It’s a busy week ahead on the economic calendar, with 62 stats in focus in the week ending 17th September. In the week prior, 42 stats had also been in focus.

For the Dollar:

Inflation figures for August kick things off on Tuesday. We’ve seen labor market numbers disappoint. Another spike in inflation, however, would raise questions over whether the FED can stand pat on policy.

On Wednesday, industrial production figures will be in focus ahead of a particularly busy Thursday.

Retail sales, Philly FED Manufacturing PMI, and weekly jobless claims will be in focus on Thursday.

Expect retail sales and jobless claims to be key.

At the end of the week, consumer sentiment figures for September will also influence.

In the week ending 10th September, the Dollar Spot Index rose by 0.59% to 92.582.

For the EUR:

It’s a quieter week on the economic data front.

Eurozone 2nd quarter wage growth and July industrial production figures will be in focus on Wednesday.

In the 2nd half of the week, trade data and finalized inflation figures for the Eurozone will also influence.

For the week, the EUR fell by 0.56% to $1.1814.

For the Pound:

It’s a busier week ahead on the economic calendar.

Employment figures will draw attention on Tuesday. August claimant counts and July’s unemployment rate will be key.

On Wednesday, inflation figures will also draw plenty of attention ahead of retail sales figures on Friday.

The week’s data set should give the BoE enough data to make a more informed decision on the policy front.

The Pound ended the week down by 0.23% to $1.3839.

For the Loonie:

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

Manufacturing sales on Tuesday and wholesale sales figures on Thursday will influence.

For the week, however, August inflation figures due out on Wednesday will be key stat.

While the stats will influence, crude oil prices and OPEC’s monthly report will also provide direction.

The Loonie ended the week down 1.34% to C$1.2692 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Consumer and business confidence figures will be key on Tuesday and Wednesday.

On Wednesday, inflation figures will also draw interest, though expect employment figures on Thursday to have a greater impact.

Following the latest lockdown measures and the RBA’s more dovish stance, the markets will be looking to assess the damage.

The Aussie Dollar ended the week down by 1.39% to $0.7356.

For the Kiwi Dollar:

It’s another quiet week ahead.

2nd quarter GDP numbers are due out on Thursday ahead of Business PMI numbers on Friday.

Expect the GDP numbers to be key. While the RBNZ hit pause on lifting rates, the markets will be expecting solid numbers.

The Kiwi Dollar ended the week down by 0.63% to $0.7113.

For the Japanese Yen:

BSI large manufacturing conditions data for Q3 and trade data for August due out on Monday and Thursday will be key.

Finalized industrial production figures on Tuesday should have a muted impact on the Yen and the Asian markets…

The Japanese Yen fell by 0.21% to ¥109.94 against the U.S Dollar.

Out of China

Fixed asset investment, industrial production, and retail sales figures on Wednesday will be in focus.

Expect industrial production and retail sales figures to be the key numbers…

The Chinese Yuan ended the week up by 0.18% to CNY6.4443 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 monitoring following recent events in Afghanistan.

U.S Mortgage Rates Hold Steady as Economic Uncertainty Lingers

Mortgage rates were relatively flat, with 30-year fixed rates rising by just 1 basis point. After holding steady in the week prior, rates rose for just the 4th time in 11-weeks.

In the week ending 9th September, 30-year fixed rates rose by 1 basis point to 2.88%.

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 up by 2 basis points.

30-year fixed rates were still down by 206 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a quieter first half of the week, with the U.S markets closed for Labor Day on Monday.

Key stats included JOLT’s job openings from the U.S, which were upbeat following the disappointing NFP numbers from the week prior.

With stats from the U.S on the lighter side, the weaker than expected nonfarm payrolls from the Friday prior pegged rates back in the week, however.

Freddie Mac Rates

The weekly average rates for new mortgages as of 9th September were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 1 basis point to 2.88% in the week. This time last year, rates had stood at 2.86%. The average fee remained rose from 0.6 to 0.7 points.
  • 15-year fixed increased by 1 basis point 2.19% in the week. Rates were down by 18 basis points from 2.47% a year ago. The average fee remained unchanged at 0.6 points.
  • 5-year fixed rates fell by 1 basis point to 2.42%. Rates were down by 69 points from 3.11% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • While the economy continues to grow, it has lost momentum over the last 2-months due to the current wave of the Delta variant.
  • Weaker employment, lower spending, and declining consumer confidence has resulted, pegging back rates.
  • Rates have held steady despite increases in inflation caused by supply and demand imbalances.
  • The net result for housing is that these low and stable rates allow customers more time to find the homes they are looking to purchase.

Mortgage Bankers’ Association Rates

For the week ending 3rd September, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.03%. Points decreased from 0.34 to 0.33 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 3.09% to 3.07%. Points rose from 0.25 to 0.30 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.13% to 3.14%. Points rose from 0.26 to 0.30 (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, declined by 1.9% in the week ending 3rd September. In the previous week, the index had decreased by 2.4%.

The Refinance Index decreased by 3% and was 4% lower than the same week a year ago. The Index had fallen by 4% in the previous week.

In the week ending 3rd September, the refinance share of mortgage activity remained unchanged at 66.8%. The share had fallen from 67.3% to 66.8% in the week prior.

According to the MBA,

  • Mortgage application volumes fell last week to its lowest level since mid-July, as mortgage rates remained above 3% for several weeks.
  • Refinance volume has been moderating, while purchase volume continues to be lower than expected given the lack of homes on the market.
  • Economic data has seen mixed signals, with slower job growth but a further drop in the unemployment rate in August.
  • We expect that further improvements will lead to a tapering of the FED MBS purchases by the end of the year. This should put some upward pressure on mortgage rates.

For the week ahead

It’s a busier week ahead on the economic data front. U.S inflation figures on Tuesday and industrial production figures on Wednesday will influence.

Another pickup in inflationary pressure would likely bring forward the FED’s timelines on tapering. While employment growth has slowed, a continued pickup in inflationary pressure would need to be curbed. Expect, therefore, further inflationary pressure to nudge mortgage rates northwards.

European Equities: A Week in Review – 10/09/21

The Majors

It was a bearish week for the majors in the week ending 10th September. The DAX30 and the EuroStoxx600 slid by 1.09% and by 1.18% respectively. After bucking the trend in the previous week, the CAC40 saw a more modest 0.39% loss in the week.

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

Concerns over the economic recovery, stemming from the spread of the Delta variant, weighed on the majors.

Economic data from China and the U.S also failed to support the majors, in spite of better-than-expected numbers.

In August, China’s U.S Dollar trade surplus widened from $56.59bn to $58.35bn, with exports up 25.6% year-on-year, and imports up 33.1%. In July, imports had been up by 28.1% and exports up by 19.3%. Economists had forecast the trade surplus to narrow from $56.59bn to $51.05bn.

The Stats

Economic data included factory orders, industrial production, and trade data from Germany.

While the stats were skewed to the positive, there was little support for the majors, with the markets looking ahead to the ECB policy decision.

ZEW Economic Sentiment figures for Germany and the Eurozone were disappointing, however, pegging the majors back.

At the end of the week, finalized inflation figures from Germany had a muted impact on the majors.

While there were plenty of stats for the markets to consider, it was ultimately the ECB monetary policy decision and press conference that was the main event.

In line with market expectations, the ECB held policy unchanged and talked of economic uncertainty stemming from the Delta variant. Lagarde did confirm plans to modestly reduce the asset purchasing program.

While supporting the majors on the day, the Thursday press conference marked the beginnings of the end to pandemic measures.

From the U.S

Early in the week, JOLT’s job openings for July were upbeat with openings rising from 10.185m to 10.943m. Economists had forecast a decline to 10.000m.

On Thursday, jobless claims were also impressive. In the week ending 3rd September initial jobless claims fell from 345k to 310k.

At the end of the week, wholesale inflation was in focus. In August, the core PPI rose by 0.6% versus a forecasted 0.5%, with the Producer Price Index rising by 0.7% versus a forecasted 0.6%. Both had risen by 1.0% in July.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Volkswagen slid by 3.46%, with Continental and Daimler ending the week down by 2.84% and by 1.65% respectively. BMW saw a more modest 0.40% loss in the week.

It was a bullish week for the banking sector, however. Deutsche Bank rallied by 2.32%, with Commerzbank rising by 0.55%.

From the CAC, it was a bearish week for the banks. BNP Paribas and Credit Agricole fell by 1.95% and by 1.24% respectively, with Soc Gen ending the week down by 0.49%.

It was also a bearish week for the French auto sector. Stellantis NV and Renault slid by 2.46% and by 2.86% respectively.

Air France-KLM fell by a further 3.39%, with Airbus ending the week with a 0.1% loss.

On the VIX Index

It was a 2nd consecutive week in the green for the VIX in the week ending 10th September.

Following an 0.12% rise from the previous week, the VIX jumped by 27.67% to end the week at 20.95.

3-days in the green from 4 sessions, which included a 11.44% rise on Friday delivered the upside.

For the week, the Dow slid by 2.15%, with the NASDAQ and the S&P500 falling by 1.61% and by 1.69% respectively.

VIX 110921 Weekly Chart

The Week Ahead

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

Key stats include industrial production and trade data for the Eurozone, the numbers due out on Wednesday and Thursday.

Finalized inflation figures for member states and the Eurozone are also due out in the week.

Barring any marked revisions from prelim figures, expect the Eurozone’s numbers to have a greater influence.

From the U.S, it’s a busy week ahead, with inflation and industrial production in focus early in the week.

On Thursday, retail sales and jobless claims figures will also have a material impact on market risk sentiment.

Consumer sentiment figures for September wraps things up on Friday.

We can also expect economic data from China to influence in the week.

Industrial production, fixed asset investment, and retail sales figures will be in focus on Wednesday.

Away from the economic calendar, expect COVID-19 news updates and central bank chatter to also influence.

The Weekly Wrap – Dovish Central Banks and Concerns over the Recovery Delivered Dollar Support

The Stats

It was a quieter week on the economic calendar, in the week ending 10th September.

A total of 42 stats were monitored, which was down from 81 stats in the week prior.

Of the 42 stats, 20 came in ahead forecasts, with 21 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 21 of the stats reflected an upward trend from previous figures. Of the remaining 21 stats, 21 reflected a deterioration from previous.

For the Greenback, dovish FOMC member chatter failed to deliver Dollar weakness. Concerns over the economic recovery and dovish central banks drove Dollar demand in the week. In the week ending 10th September, the Dollar Spot Index rose by 0.59% to 92.582. In the previous week, the Dollar had fallen by 0.59% to 92.137.

Out of the U.S

Early in the week, JOLT’s job openings for July were upbeat with openings rising from 10.185m to 10.943m. Economists had forecast a decline to 10.000m.

On Thursday, jobless claims were also impressive. In the week ending 3rd September initial jobless claims fell from 345k to 310k.

At the end of the week, wholesale inflation was in focus. In August, the core PPI rose by 0.6% versus a forecasted 0.5%, with the Producer Price Index rising by 0.7% versus a forecasted 0.6%. Both had risen by 1.0% in July.

Out of the UK

Economic data was on the busier side. Early in the week, construction PMI and BRC retail sales monitor figures were skewed to the negative.

In August, the construction PMI fell from 58.7 to 55.2, with the BRC Retail Sales Monitor rising by just 1.5%. The Retail Sales Monitor had risen by 4.7%, year-on-year, in July.

At the end of the week, key stats included GDP, manufacturing and industrial production, and trade data.

In July, the UK economy expanded by 0.1% and grew by 7.5% year-on-year.

While industrial production rose by 1.2%, manufacturing production stalled in July.

Trade figures were mixed, however. The UK’s trade deficit widened from £11.99bn to £12.71bn in July, while the non-EU deficit narrowed from £7.19bn to £6.99bn.

In the week, the Pound fell by 0.23% to end the week at $1.3839. In the week prior, the Pound had risen by 0.78% to $1.3871.

The FTSE100 ended the week down by 1.53%, following a 0.14% loss from the previous week.

Out of the Eurozone

Economic data included factory orders, industrial production, and trade data from Germany.

While the stats were skewed to the positive, there was little support for the EUR, with the markets looking ahead to the ECB policy decision.

ZEW Economic Sentiment figures for Germany and the Eurozone were disappointing, however, pegging the EUR back.

At the end of the week, finalized inflation figures from Germany had a muted impact on the majors.

While there were plenty of stats for the markets to consider, it was ultimately the ECB monetary policy decision and press conference that was the main event.

In line with market expectations, the ECB held policy unchanged and talked of economic uncertainty stemming from the Delta variant. Lagarde did confirm plans to modestly reduce the asset purchasing program. The forward guidance was not enough to deliver a EUR rally, however.

For the week, the EUR fell by 0.56% to $1.1814. In the week prior, the EUR had risen by 0.70% to $1.1880.

The CAC40 fell by 0.39%, with the DAX30 and the EuroStoxx600 ending the week with losses of 1.09% and 1.18% respectively.

For the Loonie

Economic data included Ivey PMI and employment figures for August.

The stats were skewed to the positive. In August, the Ivey PMI rose from 56.4 to 66.0, with Canada’s unemployment rate falling from 7.5% to 7.1%.

While the stats were upbeat, the Bank of Canada’s monetary policy decision and forward guidance weighed.

In line with expectations, the BoC left policy unchanged, with the BoC also taking a cautious view on the economic recovery. Supply chain disruption and the Delta variant remained key concerns…

In the week ending 10th September, the Loonie fell by 1.34% to C$1.2692. In the week prior, the Loonie had risen by 0.76% to C$1.2524.

Elsewhere

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

The Aussie Dollar slid by 1.39% to $0.7356, with the Kiwi Dollar ending the week down by 0.63% to $0.7113.

For the Aussie Dollar

There were no major stats for the markets to consider.

On Tuesday, the RBA delivered it’s September monetary policy decision, which was in line with expectations.

The RBA left policy unchanged and talked of the likely impact of the latest lockdown measures on the economy.

For the Kiwi Dollar

It was a quiet week, with retail sales in focus.

In August, electronic card retail sales tumbled by 19.8%, with the decline attributed to the latest lockdown measures introduced in mid-August.

The markets were forgiving, however, with a material decline in retail sales expected.

For the Japanese Yen

It was a relatively busy week, with the numbers skewed to the positive.

In July, household spending rose by 0.7%, month-on-month, coming in ahead of a forecasted 0.1% rise. Spending had tumbled by 5.1% in June. Year-on-year, spending was down by 0.9%, however, versus a forecasted 1.1% increase. Spending had been down by 3.2% in June, year-on-year.

In the 2nd quarter, the Japanese economy expanded by 0.5%, which was up from a prelim 0.4%. The economy had contracted by 0.9% in the previous quarter. Year-on-year, the economy grew by 1.9%, which was up from a prelim 1.6%. In the 1st quarter, the economy had contracted by 3.7%.

The Japanese Yen fell by 0.21% to ¥109.94 against the U.S Dollar. In the week prior, the Yen had risen by 0.12% to ¥109.72.

Out of China

Trade and inflation figures were in focus in the week.

In August, China’s U.S Dollar trade surplus widened from $56.59bn to $58.35bn. Economists had forecast a narrowing to $51.05bn. Exports rose by 25.6% versus a forecasted 17.1% increase, with imports up 33.1%. Economists had forecast imports to rise by 26.8%.

Inflation figures were skewed to the negative, however, with the annual rate of inflation softening from 1.0% to 0.8%. In August, consumer prices rose by just 0.1% after having risen by 0.3% in July.

Wholesale inflationary pressures were still evident, however. The annual rate of wholesale inflation picked up from 9.0% to 9.5% in August.

In the week ending 10th September, the Chinese Yuan rose by 0.18% to CNY6.4443. In the week prior, the Yuan had ended the week up by 0.25% to CNY6.4560.

The CSI300 and the Hang Seng ended the week up by 1.17% and by 3.52% respectively.

U.S. Senate Democrats Float Stock Buyback Tax as Part of $3.5 Trillion Bill

Senate Finance Committee Chair Ron Wyden and Senate Banking Committee Chair Sherrod Brown said the “Stock Buyback Accountability Act” would encourage large corporations to invest in their workers rather than enriching investors executives by boosting stock prices.

The proposal is among several floated by Wyden to boost government revenues, including imposing additional taxes on corporations that give out CEO pay that exceeds a certain multiple of the company’s average worker wages.

Biden and congressional Democrats have already been pushing to raise taxes on the wealthy and corporations to help pay the $3.5 trillion bill.

But resistance from moderate members of the party, including some who represent states or districts that supported former Republican President Donald Trump, have prompted Democrats to search for a new mix of revenue-raisers.

Republicans are attacking Democrats over the bill as both parties position themselves for the 2022 mid-term elections which will determine control of Congress.

Representative Kevin Brady, the senior Republican on the tax-writing House Ways and Means Committee, said Democratic tax hikes “could kill a million U.S. jobs, raise fuel prices and leave America more dependent on foreign oil.”

Democrats portray their effort as a “once-in-a-generation” chance to improve the lives of the elderly and disadvantaged children, address climate change and reform immigration.

Multiple House committees this week began considering amendments to the $3.5 trillion bill. Ways and Means has defeated several Republican amendments aimed at limiting its scope.

Next week, that panel is expected to debate the politically-charged issue of tax increases in the bill, which also contains some tax breaks for those earning less than $400,000.

WORKERS

The 2% stock buyback tax seeks to address Democrats’ frustrations with an increase in stock buybacks by publicly traded companies in 2018 after a massive corporate tax cut passed by Republicans at the end of 2017 that allowed firms to repatriate profits held overseas at low rates.

“Instead of spending billions buying back stocks and handing out CEO bonuses, it’s past time Wall Street paid its fair share and reinvested more of that capital into the workers and communities who make those profits possible,” said Brown, who is also a Senate Finance Committee member.

The Brown-Wyden legislation would prohibit companies from deducting the cost of the excise tax from their income but would exclude stock repurchases to fund an employee pension plan or employee stock plans.

In the face of strong Republican opposition to the legislation, Democrats in both houses of Congress aim to craft a bill that they can pass on their own.

That is particularly important in the Senate because under special budget “reconciliation” rules Democrats would not need the 60 votes in the 100-member chamber normally required to advance legislation.

The Senate currently is split 50-50 between the two parties.

House committees are expected to complete their work next week, which would leave leading Democrats in the House and Senate working on revisions to bring down the $3.5 trillion price to give it a better chance of passing.

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

(Reporting by David Lawder and Richard Cowan; Editing by Cynthia Osterman and Sonya Hepinstall)

Strained Supply Chains Keep U.S. Producer Prices Hot

Strong demand and supply constraints were underscored by other data on Friday showing the pace of inventory accumulation at wholesalers slowed in July. It is now taking wholesalers the fewest months in seven years to clear shelves.

“Supply chain bottlenecks have persisted longer and more intensely than most predicted at the beginning of this year, and widespread labor shortages are among the main input issues producers are dealing with,” said Will Compernolle, a senior economist at FHN Financial in New York. “This means consumer price inflation should remain elevated for a while.”

The producer price index for final demand rose 0.7% last month after two straight monthly increases of 1.0%, the Labor Department said. The gain was led by a 0.7% advance in services following a 1.1% jump in July.

A 1.5% increase in trade services, which measure changes in margins received by wholesalers and retailers, accounted for two-thirds of the broad rise in services. Goods prices jumped 1.0% after climbing 0.6% in July, with food rebounding 2.9%.

Transportation and warehousing prices shot up 2.8%.

The latest global wave of COVID-19 infections, driven by the Delta variant of the coronavirus, has disrupted production at factories in Southeast Asia, key raw materials suppliers for manufactures in the United States. Congestion at Chinese ports is also adding to the pressure on U.S. supply chains.

In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010 when the series was revamped, after surging 7.8% in July.

Economists polled by Reuters had forecast the PPI gaining 0.6% on a monthly basis and rising 8.2% year-on-year.

Stocks on Wall Street were lower. The dollar was steady against a basket of currencies. U.S. Treasury prices fell.

LOGISTICS DELAYS

Though surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries fell significantly in August, they remained elevated. Factories and services providers still struggled to secure labor and raw materials, and faced logistics delays.

This was corroborated by the Federal Reserve’s Beige Book report on Wednesday compiled from information collected on or before Aug. 30 showing “contacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price.”

The supply bottlenecks are making it harder for businesses to restock after running down inventories in the first half of the year. In a separate report on Friday, the Commerce Department said wholesale inventories rose 0.6% in July after surging 1.2% in June. Sales increased 2.0%. At July’s sales pace it would take wholesalers 1.20 months to clear shelves, the fewest since July 2014, from 1.22 in June.

“Producers are struggling to replenish their stockpiles against surging demand,” said Matt Colyar, an economist at Moody’s Analytics in West Chester, Pennsylvania.

With inventories tight, producers are easily passing on the higher costs to consumers. Federal Reserve Chair Jerome Powell has steadfastly maintained that high inflation is transitory.

Though most economists share this view, some argue that strong wage growth from a tightening labor market suggests inflation could be more persistent.

“Today’s data on wholesale prices should be eye-opening for the Fed, as inflation pressures still don’t appear to be easing and will likely continue to be felt by the consumer in the coming months,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

The Fed’s preferred inflation measure for its flexible 2% target, the core personal consumption expenditures price index, increased 3.6% in the 12 months through July after a similar gain in June. Data next week will likely show the consumer price index rising 0.4% in August and increasing 5.3% on a year-on-year basis, according to a Reuters survey.

High inflation and supply constraints, which tanked motor vehicle sales in August, have prompted economists to slash their third-quarter gross domestic product growth estimates to as low as a 3.5% annualized rate from as high as 8.25%. The economy grew at a 6.6% rate in the second quarter.

“The danger with inflation is once prices go up, they don’t go back down and the economy and producers and consumers all have to live in a costlier world where many don’t have the means to do more than just barely survive,” said Chris Rupkey, chief economist at FWDBONDS in New York.

There are, however, signs that inflation is likely nearing its peak. Excluding the volatile food, energy and trade services components, producer prices rose 0.3%, the smallest gain since last November. The so-called core PPI shot up 0.9% in July.

In the 12 months through August, the core PPI accelerated 6.3%. That was the largest rise since the government introduced the series in August 2014 and followed a 6.1% increase in July.

Details of the PPI components, which feed into the core PCE price index, were mixed. Healthcare costs fell 0.2%. Portfolio management fees rose 1.1% and airline tickets increased 8.9% after soaring 9.1% in July.

“Soft medical services suggest that evidence of persistently stronger inflation in PCE may be more limited,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Albemarle Shares Hit All-Time High on Solid 2022 Earnings Forecast

Albemarle shares hit a fresh record high on Friday after the largest producer of lithium forecast a sharp jump in adjusted core earnings for 2022, largely due to higher pricing and volumes for Lithium and anticipated stronger performance for catalysts following previous pandemic-related weakness.

The Charlotte, North Carolina-based company forecasts full-year 2022 adjusted core earnings to jump 25%-35% compared to 2021.

Moreover, Albemarle introduced its 2026 adjusted EBITDA forecast, which ranges between $2.2 billion and $2.6 billion. Adjusted EBITDA is expected to be between $810 million and $860 million in 2021.

Following this, Albemarle shares hit an all-time high of $252.97, rising about 4% on Friday. The stock has surged nearly 70% so far this year.

“We see exciting growth opportunities ahead for Albemarle, primarily driven by the importance of electrification in the transition to more sustainable sources of energy,” said Albemarle CEO Kent Masters.

“We are actively implementing our structured operating model, the Albemarle Way of Excellence, to help ensure we successfully achieve our strategic goals. With our focus on sustainable practices, our access to world-class resources, and our position as an industry leader, we aim to maintain a leadership position in all our businesses to serve our customers’ growing needs and create shareholder value well into the future.”

Analyst Comments

Albemarle will struggle to grow its lithium EBITDA over time as the continued reset in its lithium contract prices that we expect (whether the reset continues gradually in 2022+ as in 2020 and 2021, or suddenly in 2022) is likely to offset volume growth,” noted Vincent Andrews, Equity Analyst at Morgan Stanley.

“The lack of free cash flow through 2022 (MSe) raises questions about how aggressively Albemarle will pursue future lithium volume growth and/or how it will fund it. As it becomes apparent that contract lithium prices will not revert to prior peaks, we expect lithium to derate from >40x to ~16.5x EBITDA, in line with industrial gas (IG) companies.”

Albemarle Stock Price Forecast

Twelve analysts who offered stock ratings for Albemarle in the last three months forecast the average price in 12 months of $230.08 with a high forecast of $280.00 and a low forecast of $127.00.

The average price target represents a -7.15% change from the last price of $247.81. From those 12 analysts, seven rated “Buy”, three rated “Hold” while two rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $80 with a high of $200 under a bull scenario and $60 under the worst-case scenario. The firm gave an “Underweight” rating on the company’s stock.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $280 from $260. Berenberg lifted the price objective to $280 from $115. Cowen upped the price target to $260 from $180.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Gains After Solid Jobs Report Leaves BoC on Track to Taper

The Canadian dollar strengthened against its U.S. counterpart for the second straight session on Friday after an upbeat August jobs report puts the Bank of Canada on track for another taper next month.

The USD/CAD pair fell to 1.2578 today, down from Thursday’s close of 1.2662. The Canadian dollar lost over 1.2% last month and has depreciated about 0.2% so far this month.

In August, Canada added 90,200 jobs, and the unemployment rate fell to 7.1%, its lowest level since the COVID-19 pandemic began. The data might support the Bank of Canada’s next taper in October.

The Governor of the Bank of Canada, Tiff Macklem, said yesterday that Canada is on its way to no longer needing quantitative easing to stimulate the economy.

On Wednesday, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.

“There is some progress and we think the data should offset a lot of the concern about the Bank’s policy stance following the weak Q2 GDP data and should provide some additional lift for the CAD via some stabilization (or re-widening) in short-term US-Canada spreads that have moved against the CAD in recent weeks,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Technical signals are mixed, reflecting some of the choppy trade seen in the past few weeks.  The USD retains a fair degree of bullish trend momentum on the daily and weekly DMI oscillators but the longer run charts also reflect persistent USD selling pressure on strength over the past two months and spot has pressure daily support (40-day MA) at 1.2593 into the end of the week.  A clear push below this point is needed to unlock more USDCAD weakness towards 1.2500/10 and, potentially, the low 1.24 zone (early August low at 1.2424).”

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 2.22% higher at $69.65 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.01% higher at 92.487. After news that Chinese President Xi Jinping and US President Joe Biden talked for the first time in seven months, pro-growth currencies gained, weakening the greenback.

However, 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.

Kroger Shares Slump Over 8% After Gross Margin Disappoints in Q2

Kroger shares slumped over 8% on Friday after the food retailer said its gross margin – business’s net sales minus the cost of goods sold – fell to 21.4% year-on-year during the second quarter from 22.8% a year ago despite beating earnings estimates.

The company said this was primarily due to continued price investments, and higher shrink and supply chain costs, partially offset by sourcing benefits and growth in the alternative profit business.

However, the U.S. supermarket chain reported better-than-expected earnings and revenue in the second quarter and lifted its full-year guidance. The retailer, which operates over 2,500 supermarkets in the U.S., reported adjusted earnings per share of $0.80, beating the market expectations of $0.64 per share.

The supermarket chain is known for exceeding earnings expectations. Kroger has beaten earnings estimates in seven of the last eight quarters.

Kroger posted revenues of $31.68 billion for the quarter ended July 2021, beating the Wall Street consensus estimates of 30.4 billion. Compared to an earlier forecast of 2.5%-4% decline, the company now expects a smaller decline of 1%-1.5% annually.

Kroger shares slumped over 8% to $42.08 on Friday. The stock has surged over 30% so far this year.

Executive Comments

Kroger’s strong execution resulted in identical sales above our internal expectations for the second quarter, and we continued to remove costs from the business. Driven by the momentum in our results and sustained food at home trends, we are raising our full-year guidance,” said CFO Gary Millerchip.

“We now expect our two-year identical sales stack to be in the range of 12.6% to 13.1%. We expect our adjusted net earnings per diluted share to be in the range of $3.25 to $3.35.”

Analyst Comments

“Another beat & raise as expected with solid IDs, OG&A leverage, and EBIT/EPS. One (big) caveat: gross margin missed and should stoke fears about margin pressure from inflation. Risk/reward skews negative in our view with share price & valuation elevated,” noted Simeon Gutman, Equity Analyst at Morgan Stanley.

“Our view is industry sales will eventually unwind and normalize; back to school/office post-Labor Day could be a catalyst for this to occur in 2H. But the Delta variant may keep demand elevated and inflation should provide a top-line tailwind. Importantly, we think the stock was already discounting at least $3.50 in ’21 EPS and as much as $3.75-$4.00. KR should still beat its updated guidance range, but we don’t see much upside beyond $3.50-$3.75 given gross margin choppiness and IDs that are unlikely to reaccelerate above 1H levels.”

Kroger Stock Price Forecast

Fifteen analysts who offered stock ratings for Kroger in the last three months forecast the average price in 12 months of $38.71 with a high forecast of $46.00 and a low forecast of $31.00.

The average price target represents a -8.38% change from the last price of $42.25. From those 15 analysts, two rated “Buy”, ten rated “Hold” while three rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $31 with a high of $50 under a bull scenario and $16 under the worst-case scenario. The firm gave an “Underweight” rating on the food retailer’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $40 from $36. Deutsche Bank lifted the price target to $42 from $41. Guggenheim upped the target price to $41 from $37.

Check out FX Empire’s earnings calendar

Stocks Rebound After Yesterday’s Pullback

Stocks Move Higher Ahead Of The Weekend

S&P 500 futures are gaining ground in premarket trading as traders look ready to buy stocks after yesterday’s pullback.

S&P 500 has moved away from all-time high levels in recent trading sessions which may attract speculative traders who are willing to be that current pullback will be quickly bought.

Meanwhile, the U.S. dollar remains under pressure against a broad basket of currencies, which shows that demand for safe-haven assets is decreasing. Dollar’s weakness provided some support to gold and silver, although gold failed to settle back above the key resistance level at $1800. Treasury yields are currently gaining some ground but remain well below recent highs which is bullish for stocks.

Producer Prices Increased By 0.7% In August

U.S. has just released Producer Prices report for August. The report indicated that Producer Prices increased by 0.7% month-over-month compared to analyst consensus which called for growth of 0.6%. On a year-over-year basis, Producer Prices grew by 8.3% compared to analyst consensus of 8.2%.

The report indicated that Producer Prices continued to grow at a fast pace, but it remains to be seen whether this data will have an impact on stock market dynamics. Most traders will likely wait for Inflation Rate and Core Inflation Rate reports which will be released next Tuesday. Currently, analysts expect that Inflation Rate will declined from 5.4% year-over-year in July to 5.3% in August. In case this report exceeds analyst expectations, stocks may find themselves under pressure.

WTI Oil Gets Back Above The $69 Level

WTI oil received strong support near $67.50 and moved back above the $69 level as worries about the spread of the Delta variant of coronavirus were offset by concerns about U.S. oil production recovery after Hurricane Ida.

This move highlights the strength of the current bullish trend in the oil market and shows that WTI oil has good chances to settle above the psychologically important $70 level and continue its upside move, which will be bullish for oil-related stocks.

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

US Stock Futures Posting Small Gains in Attempt to Claw Back Weekly Losses

The major U.S. stock index futures contracts are trading higher in the premarket session on Friday as investors try to claw back some of this week’s losses after posting four straight days of decline.

At 06:46 GMT, the benchmark December E-mini S&P 500 Index is trading 4493.50, up 10.50 or +0.23%. The blue chip December E-mini Dow Jones Industrial Average is at 34871, up 118 or +0.34% and the technology-weighted December E-mini NASDAQ-100 Index is trading 15583.50, up 32.75 or +0.21%.

Thursday Recap

U.S. stocks closed lower for the fourth consecutive day on Thursday, putting all three major cash market indexes in a position to close lower for the week.

The best performer in the benchmark S&P 500 Index during the holiday-shortened week has been the Consumer Discretionary Sector, up about a quarter of one percent. The other ten sectors are all lower. Industrial and real estate stocks are the biggest losers, with each sector down more than 2%.

US Economic News

The number of Americans filing new claims for jobless benefits fell to the lowest level in nearly 18 months last week, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers, Reuters reported.

The weekly unemployment claims report from the Labor Department on Thursday, the timeliest data on the economy’s health, also showed the number of people on state unemployment rolls plunging to levels last seen in mid-March 2020 when the economy was reeling from mandatory shutdowns of nonessential businesses to slow the first wave of COVID-19 cases.

Initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week-ended September 4, the lowest level since mid-March 2020. Economists polled by Reuters had forecast 335,000 applications for the latest week.

Unadjusted claims, which economists say offer a better read of the labor market, fell 8,005 to 284,287 last week.

Claims have dropped from a record 6.149 million in early April 2020. They are closing in on the upper end of the 200,000-250,000 range viewed as consistent with healthy labor market conditions.

Treasury Yields Fall after Weekly Jobless Claims Drop to COVID-Era Low

U.S. Treasury yields fell on Thursday as last week’s initial jobless claims dropped to a new COVID-Era low in the face of the highly contagious delta variant.

The yield on the benchmark 10-year Treasury note fell 4 basis points to 1.295%. The yield on the 30-year Treasury bond dropped 6 basis points to 1.888%.

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

Marketmind: Hitting the Buffers

A look at the day ahead from Sujata Rao.

Yet there is no dismissing the brewing concerns — we seem to be past peak liquidity and peak growth, yet inflationary pressures show no sign of abating. Chinese factory gate prices have hit 13-year highs, the ECB just upped inflation projections and later on Friday, we will see what U.S. producer prices looked like in August. Remember last month brought the biggest annual increase in over a decade.

Warnings about input costs are coming through from companies too, with Nestle warning of even higher factory prices in 2022. The question is when these costs trickle down to consumers and their earnings; wage inflation, as we know, tends to be less easily tamed.

It comes as the post-pandemic growth rebound fizzles. Data shows Britain’s economy barely grew in July (versus expectations for a 0.6% expansion), even as tax hikes loom.

What of stimulus? The Bank of England appears well on the road to a 2022 interest rate rise while the Bank of Canada on Thursday flagged plans to stop adding new stimulus and to raise interest rates.

Policy has long been tightening across emerging markets and later on Friday, Russia will likely raise interest rate for the fifth time this year.

Finally, there is no getting away from the fact that the ECB — among the more dovish central banks — has hit peak QE, even though it was at pains on Thursday to describe its stimulus slowdown as recalibration rather than tapering.

So while equity futures signal a more cheerful session in Europe and Wall Street, stocks may face a rocky ride from here.

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

-U.S. President Joe Biden and Chinese leader Xi Jinping spoke for 90 minutes

-China Evergrande bonds rebound as loan payment extensions ease default worries

-Willis Towers Watson has $5 bln of capital, possibly for M&A

-Euro zone finance ministers meet

-Fed speakers: Cleveland President Loretta Mester 1300 GMT

Russia central bank meeting

Ratings: S&P: Ukraine, Ghana, Jordan, Malta; Moody’s: Montenegro

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

(Reporting by Sujata Rao; Editing by Dhara Ranasinghe)

European Equities: A Light Economic Calendar to Test Support ahead of the U.S Open

Economic Calendar

Friday, 10th September

German CPI (MoM) (Aug) Final

The Majors

It was a mixed day for the European majors on Thursday.

The DAX30 and the CAC40 saw modest gains of 0.08% and 0.24% respectively, while the EuroStoxx600 slipped by 0.04%.

Economic data had a limited impact on the majors, in spite of positive numbers from Germany and the U.S.

The ECB’s monetary policy decision and press conference delivered much-needed support to the majors, however.

Through the early part of the sessions, concerns over a more hawkish shift on monetary policy had weighed on the majors.

Plans to modestly cut the pandemic’s emergency bond purchasing program was good enough to leave the majors relatively flat.

The Stats

German trade data was in focus going into the European open.

In July, Germany’s trade surplus widened from €13.6bn to €17.9bn. Economists had forecast a narrowing to €13.0bn

According to Destatis,

  • Exports were up 0.5% on the previous month and up by 12.4% on the same month a year earlier.
  • Imports were down 3.8% on the previous month, while up 16.6% on the same month a year earlier.

Trade with EU Countries:

  • Goods exports to EU member states rose by 17.7%, year-on-year, with imports up 18.7%.
  • To euro area countries, exports rose by 17.4%, with imports from euro area countries up 22.4%.
  • Exports to EU countries not belonging to the euro area increased by 18.4%, while imports were up by 11.0%.

Trade with non-EU Countries:

  • Exports to third countries increased by 6.8%, with imports from third countries up 14.2%.

Trade with the UK:

  • Compared with the same month last year, exports were up 7.2% to the UK. Imports from the UK increased by 15.6%.

Elsewhere:

Exports to China fell by 4.3%, year-on-year, while exports to the U.S were up 15.7%.

From the U.S

Jobless claim figures were in focus, though the stats had a muted impact, with the release coinciding with the ECB press conference.

In the week ending 3rd September, initial jobless claims fell from 345k to a post-pandemic low 310k. Economists had forecast a decline to 335k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Volkswagen and BMW ended the day up by 0.84% and by 0.03% respectively. Daimler and Continental fell by 0.15% and by 0.55% respectively, however.

It was also a mixed day for the banks. Deutsche Bank rose by 0.14%, while Commerzbank slid by 2.10%.

From the CAC, it was a relatively bullish day for the banks. BNP Paribas and Credit Agricole rose by 0.45% and by 0.17% respectively, with Soc Gen ending the day up by 0.57%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.40%, while Renault fell by 0.47%.

Air France-KLM joined airline stocks in the red, falling by 0.97%, while Airbus SE rose by 1.30%.

On the VIX Index

It was back into the green the VIX on Thursday.

Reversing a 0.99% fall from Wednesday, the VIX rose by 4.68% to end the day at 18.80.

On Thursday, the NASDAQ fell by 0.25%, with the Dow and S&P500 ending the day down by 0.43% and by 0.46% respectively.

VIX 100921 Daily Chart

The Day Ahead

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

Finalized August inflation figures for Germany are due out going into the European open.

Barring a marked revision from prelim figures, however, the numbers should have a muted impact on the majors. On Thursday, the ECB stood by its transitory view on inflation. That should limit the impact of any marginal upward revision.

From the U.S, wholesale inflation figures will likely have a greater impact, however. A spike in wholesale inflation could give the FOMC hawks firmer footing for a near-term shift in policy, albeit a tapering to the asset purchasing program.

Following a pullback in the U.S markets on Thursday, concerns over the economic outlook will likely remain a factor with little on the economic calendar for the markets to consider.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 9 points.

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

New Biden Plan Could Mandate COVID Shots or Tests for Two-Thirds of U.S. Workers

The new measures, which Biden was due to lay out in remarks at 5 p.m. ET (21:00 GMT), cover about two-thirds of all U.S. employees, part of a broader, more aggressive attempt to get Americans vaccinated amid a surge in COVID-19 cases from the fast-spreading Delta variant.

Under Biden’s plan, the administration would also require vaccinations for more than 17 million healthcare workers at hospitals and other institutions that participate in Medicare and Medicaid social programs for poor, disabled and older Americans, senior administration officials said.

The new vaccination requirements cover about 100 million workers, or about two-thirds of all workers in the United States, officials said. In addition, the administration plans to ramp up testing capacity for the virus.

Biden will use his authority under the Defense Production Act to spur industry to accelerate production of the tests, and big retailers including Walmart, Amazon.com and Kroger will sell the tests at cost for the next three months to make them more affordable, the officials said.

The full recovery of the U.S economy depends on blunting the spread of the virus, which is a key health and political goal of the president, a Democrat who took entered the White House in January.

“Our overarching objective here is to reduce the number of unvaccinated Americans,” White House spokeswoman Jen Psaki said, noting that 80 million still have not been vaccinated. “We want to reduce that number, decrease hospitalizations and deaths and allow our children to go to school safely.”

Federal workers unions suggested on Thursday they would accept the vaccine mandate.

Federal workers will have a 75-day “ramp up” period to get vaccinated, and then be referred to human resources for counseling and possible disciplinary action, Psaki said. Workers who are not exempt from vaccination and refuse to get a vaccine may be terminated.

53% VACCINATED

Despite a full-throttled campaign by the Biden administration urging all eligible Americans to get the free vaccines, just over 53% of Americans are fully vaccinated, according to date from the U.S. Centers for Disease Control and Prevention (CDC).

The disease has killed more than 654,000 people in the United States, and deaths and hospitalizations have been rising sharply as the easily transmissible Delta variant of the virus spreads.

In July, Biden said federal workers had to get vaccinated or face regular COVID-19 testing and other restrictions like mandatory face covering at workplaces.

Biden’s speech also will cover mask-wearing, protecting the economic recovery from the pandemic-induced recession, and improving healthcare for people infected with COVID-19, Psaki said.

“He’s going to speak directly to vaccinated people and their frustration, and he wants them to hear how we’re going to build on what we’ve done to date to get the virus under control and to return to some version of normal in this country,” she said.

The White House COVID recovery plans, and the projected U.S. economic rebound were based on the vast majority of eligible Americans being vaccinated this year. But the public health issue has become politicized, with a vocal minority refusing the shots and mask mandates, arguing that they are an infringement on their individual rights.

COUNTRY ‘STILL IN PANDEMIC MODE’

The spread of the Delta variant has raised concerns as children head back to school, while also rattling investors, upending company return-to-office plans, and tamping down hiring.

With 160,000 new infections a day, the country is “still in pandemic mode … That’s not even modestly good control,” Biden’s chief medical adviser, Dr. Anthony Fauci, told Axios.

“You’ve got to get well below 10,000 (a day) before you start feeling comfortable,” Fauci added.

The White House plans to offer booster shots providing additional protection to those who are fully vaccinated. That goes against arguments from the World Health Organization and other advocates that say with global vaccine supplies limited, rich countries should pause booster programs until more people worldwide are inoculated.

But with Delta causing more symptomatic breakthrough infections among fully inoculated individuals, most vaccinated Americans want a booster, a recent Reuters/Ipsos opinion poll found.

Abbott Laboratories and other test manufacturers are trying to boost production as cases soar, after having scaled back in recent months. CVS Health Corp recently imposed limits on the number of at-home tests customers can buy.

The White House said the federal government cannot mandate vaccines nationwide, but it has encouraged school districts, businesses and other entities to require shots.

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

(Reporting by Jeff Mason, Ahmed Aboulenein, David Shepardson, and Trevor Hunnicutt; Additional reporting by Steve Holland and Susan Heavey; Writing by Steve Holland and Jeff Mason; Editing by Heather Timmons, Bill Berkrot and Howard Goller)

Torrid Holdings Shares Soar Over 30% on Earnings Beat; Target Price $32 in Best Case

Torrid Holdings shares jumped over 30% on Thursday after the largest direct-to-consumer brand of women’s plus-size apparel reported better-than-expected earnings and revenue in the second quarter and said its net sales increased 34% on e-commerce business and improvement in-store productivity.

The company, which offers plus-size clothing and accessories for women size 10-30, reported adjusted earnings per share of $0.36, beating the Wall Street consensus estimates of $0.13.

The company’s revenue jumped over 30% year-on-year to $332.9 million. That was also higher than the market expectations of $290 million. That increase was largely driven by continued growth in its e-commerce business and improvement in-store productivity trends.

Torrid forecasts fiscal third-quarter net sales in the range of $305 million and $315 million and adjusted EBITDA of between $47 million and $52 million. For the full year, the company predicted net sales in the range of $1.29 billion to $1.31 billion and adjusted EBITDA of between $248 million and $258 million.

Following this Torrid Holdings shares jumped over 30% to $24.43 on Thursday. The stock is up over 16% since its debut on the New York Stock Exchange in July with an IPO price of $21.

Analyst Comments

Torrid Holdings (CURV) reported significant 2Q upside (top-line, GM), with strength continuing into 3Q, driving the guide ~40% ahead of cons. While sourcing bottlenecks are a headwind, they appear less onerous than feared. Concerns around potential competitive pressures are likely to linger background for now, but current momentum should help to quell near-term concerns. Raising estimates, Reiterate Buy,” noted Janine Stichter, Equity Analyst at Jefferies.

“As the leader in the plus-size market with strong digital capabilities, Torrid looks well-placed to benefit from outsized growth in the sector while driving share gains. A loyal customer base and low-risk merch strategy mitigate risk and drive stability in the model. LT earnings algo (HSD%+ revs, LDD% EBITDA growth) is likely conservative.”

Torrid Stock Price Forecast

Eight analysts who offered stock ratings for Torrid in the last three months forecast the average price in 12 months of $29.14 with a high forecast of $32.00 and a low forecast of $26.00.

The average price target represents a 19.13% change from the last price of $24.46. From those eight analysts, seven rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $28 with a high of $41 under a bull scenario and $10 under the worst-case scenario. The firm gave an “Overweight” rating on the company’s stock.

“2Q’s 3% revenue beat & strong flow thru highlight a strong print. At 1-2% share of women’s plus size apparel spending, we see upside to our 7% 2021-23 Base Case revenue CAGR forecast. Superior fit, fashion & quality differentiate CURV from value-priced players. Raising 2022/23 adj EBITDA 9%/4%,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“We are constructive on CURV’s product fit expertise in women’s plus sizes, low fashion risk assortment, and sector-leading digital penetration (70% 2020), with eComm EBIT margin at least at parity with the store. The plus-size clothing category is forecast to grow at twice the rate of the US apparel industry comparable to the demand outlook for global activewear. Our 9% 2019-23 CURV revenue growth CAGR appears conservative given < 2% dollar market share, underdeveloped digital marketing versus peers, and new store growth opportunity. Stronger than expected comps and improving leverage on non-merchandise expenses could provide some upside to our near-term revenue and EBIT margin estimates.”

Several other analysts have also updated their stock outlook. Robert W. Baird set an “outperform” rating and a $30 price target. The Goldman Sachs Group issued a “neutral” rating and a $26 target price. Cowen issued an “outperform” rating and a $30.

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Snaps Three-Day Losing Streak Ahead of BoC Macklem’s Speech

The Canadian dollar snapped its three-day losing streak against its U.S. counterpart on Thursday as investors were awaiting Bank of Canada Governor Tiff Macklem’s speech that may provide insight into future bond purchases.

The USD/CAD pair fell to 1.2651 today, down from Wednesday’s close of 1.2689. The Canadian dollar lost about 1% in July and has further dropped over 1.2% last month.

On Wednesday, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.

At 1600 GMT, Governor Macklem will deliver a speech regarding the reinvestment phase of the QE program.

“In general, it appears that most of the negatives are already in the price when it comes to CAD: our short-term fair value model is showing a 2.1% overvaluation in USD/CAD, which is above the 1.5 standard deviation band, so clearly indicating a risk premium has been built on the loonie. At the same time, a more cautious BoC should mean that CAD may struggle to recover some of the recent losses just yet,” noted Francesco Pesole, FX Strategist at ING.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.04% lower at 92.614. After the European Central Bank said it would reduce its emergency bond purchases in the coming quarter, the euro remained modestly up against 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.

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 0.29% higher at $69.51 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

On the other hand, Global demand for crude oils is declining due to recent restrictions over the Covid-19 Delta variant and a lack of buyers. The slowing Chinese economy dampened sentiment and have knocked investors off balance. As a major exporter of commodities, including oil, Canada’s dollar tends to be sensitive to the outlook for global economic growth.

Stocks Decline Despite Encouraging Initial Jobless Claims Report

Initial Jobless Claims Declined To 310,000

U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 310,000 Americans filed for unemployment benefits in a week compared to analyst consensus of 335,000. Continuing Jobless Claims decreased from 2.81 million (revised from 2.75 million) to 2.78 million compared to analyst consensus of 2.74 million.

Initial Jobless Claims declined to pandemic lows but S&P 500 futures are losing some ground in premarket trading as traders remain cautious due to the potential reduction of Fed’s asset purchase program and the spread of the Delta variant of coronavirus.

WTI Oil Moves Higher As Damage From Hurricane Ida Exceeds Expectations

WTI oil moved closer to the $70 level as it turned out that Hurricane Ida did more damage to U.S. oil production than expected while production was recovering at a slow pace.

Yesterday, traders had a chance to take a look at API Crude Oil Stock Change report which indicated that crude inventories declined by 2.88 million barrels compared to analyst consensus of 3.83 million barrels.

While the report failed to meet analyst expectations, traders focused on production problems in U.S. and pushed oil towards the psychologically important $70 level. In case WTI oil manages to settle above this level, it will gain additional upside momentum which will be bullish for oil-related stocks.

ECB Decided To Slow The Pace Of Asset Purchases

European Central Bank has recently announced its Interest Rate Decision and provided updates on its asset purchase programme (APP) and pandemic emergency purchase programme (PEPP).

The interest rate was left unchanged at 0.0%, in line with analyst expectations. The pace of purchases under the APP was left intact at 20 billion euros per month. However, ECB decided to decrease the pace of net asset purchases under the PEPP compared to the previous two quarters.

This move provided support to euro and put some pressure on the U.S. dollar, which was bullish for precious metals. Gold moved back to the $1800 level while silver made an attempt to settle above the resistance at $24.20.

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

German Trade Data Fails to Move the EUR as the Markets Await the ECB

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

German trade data was in focus going into the European open.

Trade

In July, Germany’s trade surplus widened from €13.6bn to €17.9bn. Economists had forecast a narrowing to €13.0bn

According to Destatis,

  • Exports were up 0.5% on the previous month and up by 12.4% on the same month a year earlier.
  • Imports were down 3.8% on the previous month, while up 16.6% on the same month a year earlier.

Trade with EU Countries:

  • Goods exports to EU member states rose by 17.7%, year-on-year, with imports up 18.7%.
  • To euro area countries, exports rose by 17.4%, with imports from euro area countries up 22.4%.
  • Exports to EU countries not belonging to the euro area increased by 18.4%, while imports were up by 11.0%.

Trade with non-EU Countries:

  • Exports to third countries increased by 6.8%, with imports from third countries up 14.2%.

Trade with the UK:

  • Compared with the same month last year, exports were up 7.2% to the UK. Imports from the UK increased by 15.6%.

Elsewhere:

  • Exports to China fell by 4.3%, year-on-year, while exports to the U.S were up 15.7%,

Market Impact

Ahead of today’s figures, the EUR had fallen to a pre-stat and current day low $1.18114 before finding support.

In response to today’s stats, the EUR fell to post-stat low $1.18121 before rising to a post-stat and current day high $1.18360.

At the time of writing, the EUR was up by 0.14% to $1.18322.

EURUSD 090921 Hourly Chart

Next Up

The ECB monetary policy decision and all-important Lagarde press conference. Will there be the talk of more than just tapering to spook the markets and drive the EUR northwards?

Initial jobless claim figures from the U.S are also due out but will likely play 2nd fiddle to the ECB…

European Equities: Economic Data and the ECB in Focus

Economic Calendar

Thursday, 9th September

German Trade Balance (Jul)

ECB Interest Rate Decision (Aug)

ECB Press Conference

Friday, 10th September

German CPI (MoM) (Aug) Final

The Majors

It was another bearish day for the European majors on Wednesday.

The DAX30 and the EuroStoxx600 fell by 1.47% and by 1.06% respectively, with the CAC40 ending the day down by 0.85%.

Economic data from the Eurozone was on the lighter side, leaving the negative sentiment from Tuesday to linger.

Concerns over the resilience of the economic recovery weighed on the majors ahead of today’s ECB monetary policy decision.

How the ECB responds to inflationary pressures, previously considered transitory, has also left the markets on unsteady ground.

According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August…

The Stats

French non-farm payrolls were in focus early in the session.

In the 2nd quarter, non-farm payrolls increased by 1.1% quarter-on-quarter. In the previous quarter, payrolls had risen by 1.2%.

From the U.S

JOLT’s job openings were in focus late in the European session.

In July, job openings jumped from 10.185m to 10.934m in July, coming in well ahead of a forecasted 10.000m.

The numbers failed to change the mood, however.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Volkswagen slid by 3.05% to lead the way, with Daimler ending the day down by 2.44%. BMW and Continental both fell by 2.35% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank saw losses of 0.46% and 2.35% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.53% and by 1.29% respectively, with Soc Gen ending the day down by 2.11%.

Things were not much better for the French auto sector. Stellantis NV slid by 2.86%, with Renault falling by 0.82%.

Air France-KLM bucked the trend, rising by 0.64%, while Airbus SE fell by 0.33%.

On the VIX Index

It was back into the red the VIX on Wednesday.

Following a 10.54% jump on Tuesday, the VIX fell by 0.99% to end the day at 17.96.

On Tuesday, the NASDAQ declined by 0.57%, with the Dow and S&P500 ending the day down by 0.20% and by 0.13% respectively.

VIX 090921 Daily Chart

The Day Ahead

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

Trade data from Germany will draw interest in the early part of the session. While we can expect market sensitivity to the numbers, the ECB will be the main area of focus on the day.

Later in the day, the ECB will deliver its 1st policy decision of the final quarter of the year. While the markets are expecting tapering to the asset purchasing program, there is some uncertainty over other policy measures.

There’s been plenty of hawkish chatter amidst persistent inflationary pressure. Economic uncertainty remains as a result of the Delta variant, however.

From the U.S, jobless claims will also influence, though the release coincides with Lagarde’s press conference.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 12 points.

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