News review 15.09.2022
INTERNATIONAL NEWS
UK inflation eased slightly to 9.9% y/y from 10.1% a month earlier
However, the core CPI rose to 6.3% - higher than the forecast and the previous value (6.2%).
The EC recommends that the EU should reduce the funding for Hungary
The reason is concerns about corruption in the country.
Serbia seeks cheap loans from IMF and UAE
Germany plans to impose a tax on the superprofits of the energy companies which benefited from the price hikes
The amount of the fee is expected to be $10 billion.
Morgan Stanley expects investment boom in India
Reason - the country will see capex grow at a rate of 16.7% a year for the next 5 years.
"The most important ingredient in profits is the level of investment. In turn, profit growth drives investment, creating a virtuous cycle: wage growth, consumption growth, investment growth and profit growth."
U.S.: Rates on 30-year mortgages have exceeded 6 percent APR.
This is killing demand for housing.
U.S. manufacturing inflation in August expectedly slowed to 8.7% y/y after July's 9.8%
Business costs are down, thanks in large part to falling gasoline prices. That's good for business margins. But for industrial businesses, of course, the decline in prices is negative.
The U.S. is working to help Kazakhstan export oil bypassing Russia (CPC).
Fitch expects recession in Eurozone and UK as early as 2022
And the U.S. expects a moderate recession in mid-2023.
China will slow to 2.8% this year and accelerate again to 4.5% in 2023.
Exports from Japan rise for 18th straight month
Exports rose 22.1% YoY in August. This is higher than the 19% growth in July but weaker than the 23.9% growth forecast.
There was strong demand for automobiles and semiconductor manufacturing equipment.
Exports are also helped by a weak yen.
There is more and more news about a strike of railroad workers in the U.S.
They say it threatens to raise the price of gasoline and other commodities.
And also for grain yields - the transportation of fertilizer needed to be applied to the soil in the fall after the harvest has been reduced.
70% of gasoline in the United States is transported by rail.
More than 100,000 railroad workers, their unions and some of the nation's largest railroad operators are scheduled to negotiate new contract terms Friday at 00:01. Those unions could then go on a legal strike. This could lead to increased transportation costs, stopping commutes and disrupting shipments of coal, chemicals, cars and grain. Losses to the U.S. economy are estimated at $2 billion (3% of U.S. GDP).
A commission from Biden is involved in the negotiations.
The last railroad workers' strike took place in June 1992. It lasted only two days as Congress passed the Strike and Lockout Ban Act, which was signed into law by President George H. W. Bush.
This is a very important event for the markets and the economy, which alone can cause a recession or stagflation - a simultaneous rise in prices in an economic downturn.
☄️ MARKET NEWS
China's central bank kept its key rate unchanged Thursday at 2.75%
But it injected 400 billion yuan ($57 billion) of liquidity into the market.
That is, the Chinese economy did not get much support. Stocks in Shanghai are down 1% in the morning.
The Japanese authorities again do not exclude the active impact on the market, including currency interventions in order to stop the devaluation of the yen.
- Microsoft (MSFT) updated its forecasts.
Smart cloud turnover will be $20.2-20.5 billion.
PC segment turnover will be $13.1-13.5 billion.
Market reaction is neutral.
- Meanwhile, on Activision (ATVI) came news of difficulties with the Microsoft takeover from examining officials in the EU.
The market reaction was moderately negative. As a result of yesterday's trading, ATVI stock shed 0.2%.
- Amazon (AMZN) faces a lawsuit from California
According to the state, the company is keeping prices "artificially high" and stifling competition.
However, investors are ignoring this threat -- the stock was up 1.4% yesterday.
- Starbucks (SBUX) plans to return $20 billion to shareholders over 3 years
Or about 6% annually.
That would be dividends and buybacks.
The board is improving on 3-year plans and expects average annual
- 7-9% growth in comparable sales,
- 10-12% revenue growth,
- GAAP earnings growth of 15-20%.
They also plan to open more than 25 thousand cafes worldwide (now the company has 34 thousand cafes).
Johnson & Johnson (JNJ) announces a $5 billion buyback.
That's just over 1% of its capitalization.
- The EU court tripled the antitrust fine for Google - from €4.34 billion to €1.25 billion.
Small things but nice - the amount of reduction equals 4% of the company's annual profits.
- IEA points to rising production and shrinking demand for oil
Oil inventories in OECD countries increased by 43 mln barrels in July and fell globally by 26 mln barrels.
Is lithium the new oil? - EC will build up strategic lithium reserves
- Twilio (TWLO) cuts 11% of its workforce
- Evercore ISI downgraded shares of Block (SQ) to "worse than market" from "better than market
The target price has been lowered from $120 to $55.
"We are downgrading SQ given potentially growing impediments to Seller and BNPL (buy now-pay later) business caused by increased competition, tighter lending and an expected slowdown in macroeconomic growth, which will negatively impact our gross profit and EBITDA estimates for 2023."
- Visa (V) and MasterCard (MA) at risk
1,668 retailers (including Macy's, The Home Depot and Walmart) and more than 200 merchants have urged Congress to pass the Credit Card Competition Act, which gives merchants the choice to route credit card transactions to networks other than Visa or Mastercard.
The bill aims to increase competition while reducing the fees merchants pay when they accept credit cards.
Currently, a Visa card transaction can only be processed on the Visa network, and the same is true for Mastercard. That is, payment systems block other transaction processing systems.
Market reaction for V and MA was neutral yesterday.
Investors are still skeptical about the possibility of such a law. But the lobby for it is strong.
PayPal's new chief financial officer (PYPL) is going on leave for health reasons just a few months after he took the job
The stock is down 1% on the post-market.
- South Korea issues arrest warrant for founder of cryptoproject LUNA
- Financial Markets
The U.S. stock market traded with mixed success yesterday, but near the end of trading, the bulls did recoup some of their losses, allowing stock indices to gain an average of 0.4%.
Futures are neutral on almost all fronts this morning. So is the dollar and crypto.
- Ethereum (ETH) will change its consensus algorithm to Proof-of-Stake (PoS) today. If all goes well, we expect ETH to perform better than bitcoin. Although it is rumored to have already happened: ETH rose 37% in the last quarter while BTC fell 7%.