Rise and shine everyone!
The big news today is the US CPI. There’s a lot of debate as to whether the CPI comes in hotter or not - particularly with Core CPI numbers. The consensus suggests Headline is likely to rise slightly with the roll-off base effects and perhaps some increases from commodity prices. We did see energy slightly higher in last month’s CPI heat map. Consensus is for 3.3% YoY vs. last month’s 3%.
But the debate is around core CPI - namely what happens with Shelter, Autos, Hotels and Air Tickets. Consensus is for a 0.2% increase MoM (flat from June) - Morgan Stanley agrees. But, Goldman and JPM have it declining to 0.15% mainly on Used Car prices declining. I’m leaning with MS on this one but I think market reaction favors the upside. The view is that anything hotter than 0.4% may force the Fed to hike but, we’re likely to be in the clear below that level.
US Equity Futures are trading higher on the anticipation of a soft inflation number. Crude Oil is pulling back after yesterday’s surge. Gold is higher. The US Dollar Index, Bitcoin and Rates are lower. The Yield Curve is at -0.79%.
Asia and Australia
Asian equities trading mixed Thursday. Japan to close at day's highs despite a weaker opening, Australia also eked out small gain.
Major news yesterday: US Biden Administration signs an agreement to stop US investments into #China for certain sectors - chips, micro electronics, quantum information tech and AI. The goal is to protect National Security and they don't want US investments to be able to boost China's military capabilities. Chinese firms have already place $5B in orders with NVDA for chips.
Bloomberg noted higher US Treasury yields are threatening to accelerate recent selloff in Asian stocks by making valuations less attractive.
Philippines economy grew 4.3% y/y in Q2, less than 6.0% expected and 6.4% in Q1. On q/q basis, economy contracted 0.9%. Philippine economic planning secretary said economy feeling effect of consecutive rate hikes, added confident country can address issues as decelerating inflation reduces pressure on central bank to increase rates.
Reserve Bank of India holds interest rate at 6.5%
Europe, Middle East, Africa
European equity markets higher, led my France and Spain, but off best levels, following a positive close on Wednesday. Regional bond yields are higher in response to higher gas prices.
In latest edition of ECB's Economic Bulletin, Council reiterated stance that inflation continues to decline but is still expected to remain too high for too long.
Natural Gas - “Risks for LNG supply side disruptions are clearly mounting in Australia of worker strikes from fairly sizeable facilities(accounting for nearly 50% of Australia’s total capacity) but whether it will actually happen, the timing and the longevity are all uncertain. This could disrupt ~9.5% of global LNG supply.” - JPM. We already saw European Natural Gas prices strongly on this news and expect prices to stay elevated, even if the rally was overdone.
The Americas
Disney posted mixed fiscal Q3 results with revenue light but EBIT ahead on the back of better-than-expected DTC losses and a Parks beat driven by International. Company maintained its FY23 HSD revenue and operating income growth guidance, though this now excludes $250M of Start Wars hotel write down costs. Takeaways largely focused on the company's update surrounding key strategic initiatives. Much of the focus was on DTC, where Disney remains committed to achieving profitability by the end of 2024.
Kate Spade owner Tapestry agrees $8.5bn deal for Jimmy Choo parent Capri
Illumina down big after it cut guidance, citing cautious customer purchasing, slower China recovery and transition to NovaSeq X.
Wynn Resorts had a big EBITDAR beat on upside at Macau and Las Vegas.
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Benzinga Pro)
