Live Markets: U.S. home sales unease

Applied Energetics

25/05/2022 13:08

* European stocks turn to flat
    * Wall Street futures fall   
    * Markets await Fed minutes 

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    THE U.S. HOME SALES WARNING (1208 GMT) 
    It must be noted there were no signs of panic nor queues of
pundits ringing alarm bells yesterday when data showed sales of
new U.S. single-family homes surprisingly dropped to a two-year
low. 
    "The housing market is now back to pre-pandemic levels, so
this massive hit in April should not be construed as the popping
of a bubble," Jeffrey Roach, chief economist at LPL Financial
was quoted as saying in the Reuters report. 
    Still, with the Fed's tightening cycle fuelling recession
fears and speculation about possible market capitulation, a few
analysts believe the housing data constitutes a sombre omen.
    ACY Securities chief economist Clifford Bennett, who fears a
property bubble could pop in the U.S., said one shouldn't
overlook the data.
    "The collapse in New Home Sales from a point of extreme
upward price extension, artificially created by a behind the
curve Fed that fed the speculation, can to be honest only end
one way (...) That is a property price collapse", he wrote in a
note. 
    Michael Every, a strategist at Rabobank wrote in a note
titled 'House of cards' that the data reminded him of the years
just ahead of the 2007-2008 subprime crisis when many investors
were in denial of the dangers building up in the property   
    He also pointed out a cryptic tweet by “The Big Short”
investor Michael Burry, who had bet against the housing bubble
at the time. 
    "As I said about 2008, it is like watching a plane crash",
Burry wrote, to which Rabobank's Michael Every commented: "Once
again I agree with him". 
    
    See: Record high U.S. house prices, rising mortgages depress
new home sales  urn:newsml:reuters.com:*:nL2N2XG1FL
    
    (Julien Ponthus) 
    *****
    
      
    EUROPE WORST OFF AS INVESTOR CONFIDENCE PLUMMETS (1017 GMT)
    Investor confidence fell across the board in May amid
soaring inflation and economic uncertainty, according to a
survey by Hargreaves Lansdown, but it fell the most in Europe. 
    The monthly survey, sent to 6000 clients with a typical
response rate of 10%, found sentiment plunging 21% on average.
    European investor confidence was down by the most, 25%
lower. Sentiment across the pond fared better but still tanked
with North American investor confidence down 18%. 
    Investors are struggling to make sense of market volatility
and an uncertain economic outlook, said Emma Wall, Head of
Investment Analysis and Research at Hargreaves Lansdown in a
note. 
    "The ongoing tragedy of the war in Ukraine, rising
inflation, and the corresponding central bank policy reaction
have added risk to equity markets, and turned clients off
investing."
    Describing the dilemma faced by central banks of tackling
inflation while avoiding recession as a "tightrope walk", Wall
advises investors to focus on the long-term and ignore daily
movements if they can. 
    "Diversification is key, and drip feeding monthly through
regular savings is the best way to smooth volatility," she
concluded. 
    (Lucy Raitano)
    *****
    
    RETAIL: STOCK SHOPPING DISORDERS (0952 GMT) 
    European retail stocks have had a horrid run in 2022 with
the sector losing a third of its value as fears about slower
growth and even recession continue to grow.
    The recent grim updates from Walmart and Target in the U.S.
didn't do much to reassure investors who seem to be struggling
to make up their mind about what to do with Marks & Spencer
shares this morning. 
    Shares have swung between 127 and 135 pounds so far this
morning after the iconic retailer released results which were in
line or rather slightly higher than expected.            
     "Given how many of the US supermarket companies saw their
share prices tank on their latest updates, investors in Marks &
Spencer will be breathing a sigh of relief it hasn’t done the
same", argued AJ Bell investment director Russ Mould.     
    While most analysts seem pretty pleased with the amount of
profits extracted from the 2021-2022 fiscal year and the general
direction of travel, they all stress how uncertain the outlook
is given the economic backdrop.
    "Customers are seeing their incomes stretched by rising
inflation and that’s likely to weigh on sales growth moving
forward", Laura Hoy, at Hargreaves Lansdown warned.
    And while consumers will have less to spend, costs will
continue to rise for M&S.
    "M&S chairman Archie Norman warned that even with being
partially hedged on energy costs, prices of food and clothing
was likely to increase sharply in the coming months, due to
higher freight, container, and wages costs", CMC Markets analyst
Michael Hewson recalled. 
    See: 
    Britain's M&S pulls out of Russia and warns on outlook
 urn:newsml:reuters.com:*:nL5N2XH15Q
    
    (Julien Ponthus) 
    ***** 
 

    
    
    EUROPE IN THE GREEN (0750 GMT)
    The pan-European  STOXX  index is gaining 0.55% at the open
today, with basic resources  SXPP  leading the pack up 2%.
    Mostly all sectors are flashing green, apart from tech names
 SX8P  which are shedding a tiny 0.1%.
    Some major UK supermarkets are losing ground after M&S
reported a profit jump but warned on outlook amid a consumer
squeeze  urn:newsml:reuters.com:*:nL5N2XH15Q. 
    While M&S  MKS.L  shares jumped 1.1%, Ocado  OCDO.L  shares
are among the biggest losers on the  STOXX  index so far, down
3.3%. Tesco  TSCO.L  shares are down 0.2% and Sainsbury's
 SBRY.L  are 2% lower. 
    Swedish medical gear company Elekta is the  STOXX  highest
performer, up 6.3% after Q4 profit beat estimates. 
    (Lucy Raitano)
    *****
    
    WHACK-A-MOLE ON MARKETS (0658 GMT)
    While investors obsess over what the world's biggest central
bank might do next, the uneasy calm prevailing in global markets
is under threat.
    First, Russia has edged closer to default after the United
States said it would not extend a waiver that had allowed Moscow
to pay U.S. bondholders  urn:newsml:reuters.com:*:nL2N2XG27L.
    Second, North Korea likely fired an intercontinental
ballistic missile on Wednesday, hours after U.S. President Joe
Biden ended his trip to Asia  urn:newsml:reuters.com:*:nL2N2XG2PN.
    And in Britain, a report by senior civil servant Sue Gray
into lockdown-breaking events in Downing Street may be published
later in the day, heaping more pressure on Prime Minister Boris
Johnson, who is facing a sharp slowdown in the UK economy.
    For now, markets seem to be overlooking these developments.
Asian stocks inched higher while European and U.S. equity
futures are in the green, primarily due to a pullback in U.S.
Treasury yields, where 10-year borrowing costs are near the
lowest in nearly a month.
    But that fall is down to a raft of lacklustre PMI and
housing data that points to a cooling economy.
    On currency markets, the New Zealand dollar was the standout
gainer, following a 50 basis-point (expected) interest rate rise
and a more hawkish tone than expected from the central bank.
    The U.S. dollar remains just off one-month lows, as the weak
dataprints forced traders to dial back some of their aggressive
bets on monetary tightening. Money markets now see around 131
bps of rate hikes over the next three meetings, down from 145
bps at the start of the week.  .IRPR 
    And Atlanta Fed President Raphael Bostic sounded a warning
that headlong rate hikes risked "significant economic
dislocation"  urn:newsml:reuters.com:*:nL2N2XG1R3.Markets will watch now for minutes
from the Fed's last meeting, due later on Wednesday.
    Key developments that should provide more direction to
markets on Wednesday:
    -Speakers' corner: ECB President Lagarde, Rehn, Panetta,
Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair
Brainard and BoE policymaker Tenreyro.
    -Data: U.S. April data on durable goods orders and core
capital goods orders.
    -TotalEnergies agrees to buy 50% of U.S. renewables company
Clearway  urn:newsml:reuters.com:*:nL2N2XH08T
    (Saikat Chatterjee)
    *****
    
    SEESAW STOCKS SIGNAL HIGHER OPEN: (0628 GMT) 
    European bourses are seen opening around 0.65% higher this
morning, in keeping with a see-saw effect which has repeatedly
seen stocks lose ground only to rebound the following day. 
    They are closely tracking higher Asian equities. The dollar
also rose before publication of the Fed's May meeting notes, as
traders look for more direction on future hikes.  urn:newsml:reuters.com:*:nL2N2XG1R3
    Meanwhile the U.S. said it will not extend a key waiver set
to expire on Wednesday that allows Russia to pay U.S.
bondholders, which could push Moscow closer to the brink of
default as Washington ramps up pressure on the country following
its invasion of Ukraine. urn:newsml:reuters.com:*:nL2N2XG27L
    In company news, TotalEnergies  .TTEF.PA  has agreed to buy
50% of the U.S's fifth largest renewables company Clearway
Energy Group.  urn:newsml:reuters.com:*:nL2N2XH08T Miner Glencore  .GLEN.L  said on
Tuesday it anticipates paying up to $1.5 billion to settle
accusations of bribery and market manipulation  urn:newsml:reuters.com:*:nL3N2XG2NU, and
Chanel has hinted at more purchase limits on products as luxury
houses tighten their grip on distribution amid soaring demand.
 urn:newsml:reuters.com:*:nL5N2XG3VO
    (Lucy Raitano)
    *****

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MORNING BID    https://tmsnrt.rs/38Mc8Cd
MKS    https://tmsnrt.rs/3sUvH1S
New home sales    https://tmsnrt.rs/38FJ3Zf
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