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Breakfast Bites - Thu Sep 28, 2023

Rise and shine everyone.

Today marks the one-year anniversary of Breakfast Bites. I hope that you enjoyed reading this daily post as much as I have enjoyed writing it. Thank you for staying with us for the last one year.

Now, on to more important things. WTI Crude briefly crossed $95/bbl yesterday and this is big news. While the price has pulled back to just over $92/bbl since then, the surge to this higher level sets up a new intermediate price point. The idea that oil may hit $100/bbl is no longer such a far fetched notion. Prices rose on news of dangerously low levels of stockpiles at Cushing, Oklahoma, the delivery point for US futures. The obvious result is higher levels of headline inflation.

Speaking of inflation, there are reports of Used and New Car prices going up because of the UAW strikes at the major US car manufacturers. Dealers have been hoarding supply in anticipation of shortages due to factory shutdowns. The US core CPI was seeing vehicle prices come down over the last couple of months but, this situation may make it challenging to see a lower level going forward.

Inflation in Germany came in lower at 4.5% YoY vs. consensus of 4.6% and previous month’s 6.1%.

We have Tokyo CPI numbers later today and Fed Chair Powell speaking at a teacher town hall meeting at 4pm ET. Nike reports after the close.

US Equity Futures are flat this morning after reversing lower during trading hours yesterday as yields spiked. Yields continue to march upwards with the Yield Curve steepening further to -0.49%. The US Dollar Index is lower from previous levels but still remains above 106. Gold and Bitcoin are higher.

Asia and Australia

  • Asian equities mostly lower Thursday. Nikkei selloff deepened with index hitting one-month low. Losses also intensified in Hong Kong as property developers extended drop and sharp falls in Hang Seng tech index. Mainland China eked out very small gains to cap off a losing September.

  • Global funds sold the most Japanese stocks on record last week, totaling ¥3.03 trillion ($20.3 billion), according to Ministry of Finance data.

  • China's Ministry of Culture and Tourism estimates people will make more than 100M trips a day during the most popular Golden Week in history. The holiday, from 29-Sep to 6-Oct, will likely see 190M passengers travel by railway and 21M by air.

  • China government bond issuance totaled CNY1.2T ($164B) in September, the largest YTD and 60% higher than the average for the same period in the past three years.

Europe, Middle East, Africa

  • European equity markets mostly lower, yet off session lows. Energy, Basic Resources and Media lead; Travel/Leisure, Technology, Retail lag.

  • Eurozone bond yields head higher again with Bund up ~4 bps near 2.90%, while bigger moves via periphery with Italian BTPs and Spanish Bonos ~7 bps firmer.

  • Spanish inflation data came in higher for the second month in a row. Harmonized Headline CPI came in at 3.2% versus prior 2.4%, just shy of the 3.3% median forecast due to higher electricity and fuel costs.

  • Inflation in Germany's bellwether industrial region North Rhine-Westphalia came in lower at 4.2% YoY vs 5.9% prior.

  • European gas prices jump with October contract up ~4.5% on its last trading day before expiry. Dutch TTF has gained ~15% on the month.

  • The UK's National Grid is preparing for a supply crunch with several planned nuclear outages in January which coincide with peak winter demand

The Americas

  • Pension rebalancing into the month end is non-event at -$2 billion in equities to sell, according to GS.

  • Unemployment Rate in Mexico decreased to 3 percent in August from 3.10 percent in July of 2023.

  • Micron FQ4 results better than feared with EPS decline smaller than expected and revenue ahead, though ASPs in both DRAM and NAND segments fell more than expected. Guidance offered mixed takeaways with EPS loss forecast larger than expected though revenue ahead.

  • At its analyst meeting on Wednesday, Workday guided subscription growth to 17-19% through FY27, down from its prior long-term target of ~20% and below the 20%+ consensus. In addition, it lowered it OCF margin target to 30% from 35%, while the 25%+ operating margin target also seemed to underwhelm.

Interesting side note from Goldman Sachs:


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)


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