Daily Markets: Bank Earnings, September CPI and Fed Minutes Ahead


Today’s Big Picture

Earnings season kicks into gear today when JPMorgan Chase (JPM) reports, followed by much of the banking world in the coming week. Next week is mostly about airlines followed by tech the week after. Outside of earnings, the major focus for today will be on the consumer price index (CPI) release today from the Bureau of Labor Statistics and the minute from the latest Federal Open Market Committee meeting.

Markets in Asia were mixed today on stronger than expected export data out of China, which saw China’s Shanghai Composite gain 0.4% and the Shenzhen Component add 1.5%. South Korea’s Kospi rose 1.0% but Australia’s ASX 200 dropped 0.1% and Japan’s Nikkei 225 fell 0.3%. Hong Kong markets were closed because of a typhoon warning. By midday trading markets in Europe were mixed but U.S. equity futures point to positive moves at the open.

Most importantly, today Captain James T. Kirk, aka William Shatner, will become the oldest person at 90 years of age to fly to space when he hitches a ride on a Blue Origin rocket today.

Data Download

International Economy

China’s imports of coal surged by 76% in September as power plants scrambled for fuel to ease the power crunch that goosing coal prices and hobbling manufacturing activity. Reports of flooding in a key coal producing province has worsened the coal supply outlook and is expected to result in electricity shortages into 2022.

Despite factories closures due to power shortages and supply bottlenecks, China’s exports rose 28.1% YoY to an all-time high of $305.7 billion in September, up from the 25.6% YoY pace in August and well above the expected decline to 21%. Imports were weaker than expected, rising 17.6% YoY in September, down from 33.1% pace in August and weaker than consensus for 20% YoY growth.

The UK’s 3-month average GDP in August came in weaker than expected, slowing to 2.9% from July’s 4.2%, slightly below consensus for 3.0%. GDP MoM in August was also weaker than expected at 0.4%, versus consensus for 0.5%, but better than the -0.1% contraction in July. Industrial Production for August was much stronger than the expected 0.2% MoM at 0.8%, and well above July’s 0.3% MoM pace. Manufacturing Production came right at consensus estimate for 4.1% YoY in August, slowing from July’s 6.1%.

Industrial Production for the Eurozone in August came in stronger than the expected 4.7% YoY pace at 5.1%, but below July’s 8.0% YoY pace.

Domestic Economy

Yesterday, St. Louis Fed President James Bullard shared his view the Federal Reserve should start cutting back its asset-purchase program in November, with a goal of ending the tapering process by Q1 2022’s end. Bullard also shared he could see the Fed raising interest rates “in the spring or summer” of 2022 if “we had to do so.”

Yesterday’s JOLTS report (Job Openings and Labor Turnover Survey) found that total job openings have pulled back from the asymptotic rise over the past few months, but remain at extremely elevated levels at 7.1% of the labor force. The quit rate sits at 3.3% of the labor force, which is higher than any period since at least December 2000. Put quits and openings together and you’ve got companies doing everything they can to hold on to employees.

Yesterday also brought the New York Fed’s September Survey of Consumer Expectations, whose main focus is on inflation expectations. The survey revealed that expectations have continued to rise with the 1-year and 3-year median readings at record highs of 5.3% and 4.2% respectively. Conversely, home price expectations decelerated to 5.5% from May’s peak of 6.2%. Income growth expectations rose over 3% for the first time, but the probability of missing a debt payment also rose to 9.9%. Those reporting that their financial position is worse than a year ago also increased to 35.8% from 25.0% in August. Those reporting that they expect their financial position to be “much worse off” in a year reached a record high of 5.2%.

After the market opens, the weekly EIA Crude Oil Inventories data will be had, and we suspect given the growing attention on oil prices, this report is one many will be looking forward to. Later this afternoon, the Federal Reserve will publish the FOMC meeting minutes from its last monetary policy meeting. Hopefully those meeting minutes will bring some additional clarity on the factors Fed officials will be watching as they determine when to start their bond purchase tapering. We say this keeping in mind the wide miss for the September Employment Report late last week.

Markets

Stocks fell for a third consecutive session yesterday as inflation concerns continue to pull at investor confidence. The Dow dropped 0.3%, the S&P 500 fell 0.2%, and the Nasdaq lost 0.1%, but small caps managed to squeeze out a gain, as the Russell 2000 added 0.6%. Real estate was the strongest sector, rising 1.3% while Communication Services was the weakest, falling 0.9%.

Stocks to Watch

Before U.S. equity markets open this morning, BlackRock (BLK), Delta Air Lines (DAL), and JP Morgan Chase (JPM) are expected to report their quarterly results.

Citing “people with knowledge of the matter,” Bloomberg reports Apple (AAPL) will cut its iPhone 13 targets for 2021 by as many as 10 million devices due to supplier related issues with Broadcom (AVGO) and Texas Instruments (TXN). For context, Apple reportedly expected to produce 90 million new iPhone models in the last three months of the year. These aren’t the first signs that Apple’s iPhone production were bumping up against constraints. Last week, Apple supplier TPK Holding Co. shared its subsidiaries in the southeastern Chinese province of Fujian were modifying production schedules due to local government power restrictions. That followed news from iPhone assembler Pegatron Corp. that it adopted energy-saving measures amid government-imposed power curbs.

SAP SE (SAP) reported Q3 preliminary EPS of €1.74 vs. a consensus of €1.36 with revenue for the quarter up 5% YoY to €6.84 billion. Current cloud backlog was up 24% to €8.17 billion. For the full-year, SAP now expects €9.4-9.6 billion cloud revenue vs. the the previous range of €9.3-9.5 billion, and cloud and software revenue of €23.8-24.2 billion vs. the prior guidance of €23.6-€24.0 billion.



Read More: Daily Markets: Bank Earnings, September CPI and Fed Minutes Ahead

2021-10-13 12:45:09

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