Live Markets: Smoking: 2050 ain't the end of it!

KT&G

16/03/2021 15:51

* Nasdaq up ~1%, S&P rises slightly, Dow dips
    * Comm Svcs leads S&P sector gainers; Energy down most
    * Euro STOXX 600 up ~0.9%
    * Dollar up slightly; gold dips, crude down
    * U.S. 10-Year Treasury yield ~1.61%

    March 16 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    
    
    SMOKING: 2050 AIN'T THE END OF IT! (1142 EDT/1542 GMT)
    According to Citi Research, there's a good chance the last
U.S. smoker will put out his last cigarette bud by 2050 but that
doesn't mean tobacco companies are doomed.
    Actually, according to the equity research team, tobacco
stocks are currently...undervalued!
    "We think tobacco valuations would be justified if the
entire business was likely to disappear in 2050", the Citi
analysts argue, adding that it most probably won't be the case. 
    Why? 
    Well, bad habits die hard and in many parts of the world, 
smoking is pretty much still expected to be a thing in 2050.
    China, Germany, France, Russia, South Africa or Chile are
among the countries where the current trends suggest humans will
still be commonly found willingly inhaling tar. 
    And while people do quit smoking, some of them may continue
to consume nicotine through vaping or other 'Reduced-Risk
Products (“RRPs”)" which present less risk to health than a good
old deadly cigarette.
    So the decline in people smoking might not necessarily be
followed by a similar decline in nicotine consumption,
particularly if regulators encourage people to vape as an
alternative to smoking. 
    "RRPs might become socially acceptable in a way that
cigarettes are frequently not, and that as a result nicotine
volumes might even start to grow again", Citi analysts reckon.
    In a nutshell, Citi has no 'Sell' tags on the 7 tobacco
companies it reviews in the note but 3 'Buy' (Philip Morris,
BAT, KT&G) and 4 'Neutral' (Altria, Imperial, Japan Tobacco and
Swedish Match).
    
    (Julien Ponthus) 
    ***** 
    
    
    RETAIL SALES, ET AL: THE ECONOMY RECOVERS FROM FROST BITE
(1120 EDT/1520 GMT)
    The chill of last month's brutal winter weather reverberated
through a spate of indicators released on Tuesday.    
    Receipts at U.S retailers  USRSL=ECI  plunged last month as
arctic conditions froze wallets shut and kept consumers home.
 urn:newsml:reuters.com:*:nL1N2LD1V6
    The Commerce Department's retail sales report for February
was much worse than expected, dropping 3% from January's
upwardly-revised 7.6% surge.
    The data also suggests consumers quickly burned through the
$600 direct stimulus payments from December's $900 billion
fiscal relief package.
    However, Lydia Boussour, lead economist at Oxford Economics,
expects February's drop to be a weather-induced blip.
    "With healthier and warmer days nearing, and generous
stimulus checks on their way, consumers are poised to shake off
the winter chills," Boussour writes. "This year, we expect the
combination of an improved health situation and generous fiscal
stimulus to fuel a consumer boom for the history books, with
real consumer spending likely to grow 7.7% – its fastest rate
since 1946. This should help support real GDP growth of 7.0%." 
    "Core" retail sales - which excludes autos, gasoline,
building materials and food services, and corresponds to the
consumer spending component of GDP - dropped 3.5% from an 8.7%
jump the previous month.
    
    
    The U.S. Federal Reserve contributed to the buzzkill with
its dreary industrial production  USIP=ECI  report.  urn:newsml:reuters.com:*:nL1N2LD290
    The data showed U.S. factory output unexpectedly dropping by
2.2% last month, compared with the 0.3% consensus gain. 
    "These indicators often are found wanting in the face of
weather shocks," says Ian Shepherdson, chief economist at
Pantheon Macroeconomics. "(It) tells us nothing about either the
current underlying trend or the outlook for the industrial
sector as Covid recedes. We expect a huge rebound in production
in March."
    Capacity utilization  USCAPU=ECI , a gauge of economic
slack, dropped by 1.8 percentage points to 73.8%.
    
    
    Bucking the freeze-out trend, rumors of inflation heating up
were further confirmed by the cost of imported goods  USIMP=ECI 
increasing more than anticipated. February import prices grew by
1.3% from January and 3% year-over-year, per the Labor
Department.  urn:newsml:reuters.com:*:nW1N2LE005  
    "Recovering commodity prices and strong base effects are set
to continue to boost import prices in the near term," says Kathy
Bostjancic, chief U.S. financial economist at Oxford Economics.
"Yet the rise should be transient and import costs have just a
moderate impact on wider prices.
    Import prices now join two other major indicators above the
U.S. Federal Reserve's average annual 2% target - although the
Fed's preferred inflation yardstick, core PCE, remains below
that level for now.
    
    
    Winter's deep freeze even weighed on usually jolly
homebuilder sentiment.
    The National Association of Home Builders' (NAHB) Housing
Market index  USNAHB=ECI  pulled back 2 points to a reading of
82, a bigger drop than economists predicted.
    While spiking demand for new homes has driven supply to
historic lows, thereby supporting the need for residential
construction, rising materials costs and stretched supply chains
took some spring out of the sector's step.
    "Though builders continue to see strong buyer traffic,
recent increases for material costs and delivery times,
particularly for softwood lumber, have depressed builder
sentiment this month," noted the NAHB in its press release.
"Supply shortages and high demand have caused lumber prices to
jump about 200 percent since last April."
    
    
    Finally, the Commerce Department also reported that U.S.
businesses beefed up the goods in their store rooms  USBINV=ECI 
by 0.3% in January, inline with consensus but a deceleration
from December's more robust 0.8% increase.  urn:newsml:reuters.com:*:nL1N2LD1MN
    This coincided with a 4.7% jump in sales, which drove months
supply down to 1.26, the lowest level since April 2012.
    Wall Street is mixed in morning trading, with the tech-laden
Nasdaq  .IXIC  taking the lead, the S&P 500  .SPX  up modestly,
and the Dow  .DJI  set to snap a seven-day win streak.
    
    (Stephen Culp)
    *****
    
    SIX BOOKS TO READ FOR THE POST PANDEMIC WORLD (1027 EDT/1427
GMT)
    If you're still locked in at home and wish to prepare for a
new narrative in a post pandemic world, here are six book
recommendations, courtesy of Bernstein strategist Inigo
Fraser-Jenkins and team.
    * Jonathan Crary: 24/7 - Late capitalism and the ends of
sleep
(2013)
    * Scott Galloway: Post Corona (2020)
    * Charles Goodhart and Manoj Pradhan: the great demographic
reversal: ageing societies, waning inequality and an inflation
revival (2020
    * Stephanie Kelton: The deficit myth -- Modern monetary
theory and
how to build a better economy (2020)
    * Alex Williams and Nick Srnicek: Inventing the Future:
Postcapitalism and a world without work (2015)
    * Yanis Varoufakis: Another Now: Dispatches from an
alternative
present (2020)

    "We recognise that the collection may appear eclectic. After
all, Yanis Varoufakis' contribution is a work of fiction,
Jonathan Crary is a professor of modern art and theory. Some of
the authors are espousing profoundly anti-capitalist (or rather,
post-capitalist) theories while others are firmly within a
capitalist frame of reference," they say.
    "Yet we think that all are important in defining an
intellectual basis for a post pandemic policy environment, and
hence a basis for investing," they argue.
    Happy reading!
    
    (Danilo Masoni)
    *****
    
    U.S. STOCKS MIXED, BUT GROWTH TOPS VALUE (1014 EDT/1414 GMT)
    Major U.S. indexes are mixed in early trade with the Nasdaq
 .IXIC  showing the most strength. The S&P 500  .SPX  is
slightly higher, while the Dow Industrial Average  .DJI  is
modestly down. Small caps are being hit with the Russell 2000
 .RUT  off more than 1%.
    This ahead of the Federal Reserve's two-day policy meeting
against the backdrop of rising borrowing costs.  .N 
    In any event, growth  .IGX  is outperforming value  .IVX .
Tech  .SPLRCT  and communication services  .SPLRCL  are the best
performing major S&P sectors, while more economically sensitive
groups, such as energy  .SPNY , financials  .SPSY , industrials
 .SPLRCI , and materials  .SPLRCM  are packed at the bottom of
the S&P 500 tote board.
    Meanwhile, the Dow's 7-day winning streak is in jeopardy.
The blue-chip average last rose 8-straight days in
late-July/early-August of last year.  urn:newsml:reuters.com:*:nL1N2LD27G
    Here is where the changes in the major averages in early
trade:
    
 Nasdaq Composite  +0.83%
 S&P 500           +0.20%
 Dow Industrials   -0.24%
   
    (Terence Gabriel)
    *****         
    
    
    STOXX 600: POST-CORONA EARNINGS BONANZA (0910 EDT/1310 GMT)
    The consensus for earnings growth is already quite bullish
when it comes to European equities: about 33% for the MSCI
Europe index according to Refinitiv IBES data:
    
    
    But there are analysts out there who believe it could be
much better than that.
    The UBS strategy team for European equities now expects
European corporate earnings to rise by 50% in 2021, on the back
of higher global GDP growth boosted by the $1.9 trillion U.S.
stimulus package.
    Almost two-thirds of 2021 EPS growth in Europe will come
from just five sectors, the bank said: energy, autos, capital 
goods, banks and mining.
    This comes after a thorough pandemic-driven drubbing to
earnings in 2020, which are expected to have fallen by around
29%. 
    The third and fourth quarters of 2020 did already see
improving sentiment, as companies recovered from the initial
shock of the pandemic, and fiscal stimulus released earlier in
the year began to take effect. 
    Other tailwinds such as COVID-19 vaccine rollouts and the
Brexit trade deal also bolstered the UBS' outlook, and it
flagged a 470 level year-end target for the pan-European STOXX
600 index  .STOXX , representing a 17.8% jump from the index's
2020 close.
    The improving earnings outlook is also reflected in share
prices, with the STOXX 600 trading about 6.5% higher so far this
year. The pace of the index's recovery has also surpassed its
U.S. peers, with the latter coming under pressure from a drop in
heavyweight tech.
    
 
    UBS also flagged a bullish outlook for UK equities, raising
its year-end target for the FTSE 100  .FTSE  to 7,600 from
7,200- a 17.6% premium to its 2020 close.
    But the bank warned that a sharper-than-expected spike in
bond yields posed a threat to any recovery. A slower exit from
virus-led lockdowns and vaccination hiccups are also downside
risks.     
    
    (Ambar Warrick)
    *****
    
    S&P 500: TURN-DATE TUMBLE, OR TIME TO THROTTLE UP? (0900
EDT/1300 GMT)
    The S&P 500 index  .SPX  ended Monday at a record high.
However, with the Northern Hemisphere's spring equinox this
Saturday, it may shortly become clear whether the benchmark
index is on the verge of a moon-shot to fresh records, or if the
equinox's orb of influence will coincide with a reversal.
    Proponents of Gann Theory, or methods of technical analysis
developed by trader W.D. Gann, may look for either acceleration
of the prevailing trend, or a reversal, around the summer and
winter solstices, as well as the fall and spring equinoxes.
    Just looking back over the past year, there has been
interesting market action around these events:
    
    
    The 2020 spring equinox took place on Thursday, March 19, at
11:49 PM EDT. Two trading days later, on March 23, the S&P 500
put in a surprise bottom that ended the more than 30%
February/March bear market.
    The 2020 summer solstice then occurred on Saturday, June 20,
at 5:43 PM EDT. Earlier that week, the SPX abruptly ended what
was a more than 8% one-week slide.
    The 2020 fall equinox took place on Tuesday, September 22 at
09:30 AM EDT. Just one day later, the SPX concluded what was a
more than 10% intraday drop from its early September high.
    Most recently, the 2020 winter solstice occurred at 5:02 AM
EST on December 21st. The SPX ended a more than 2% decline that
day, and has since tacked on another 9% into Monday's high.
    The 2021 spring equinox occurs at 05:37 AM EDT on Saturday,
March 20.
    Meanwhile, just as this potential turn date arrives, the SPX
is up five straight days  urn:newsml:reuters.com:*:nL1N2LD27G, and nearing a more than
10-year channel resistance line that now resides around 4,010,
or just 1% above Monday's finish.  urn:newsml:reuters.com:*:nL1N2K7193
    This, as the Dow Industrials  .DJI , up  seven straight
days, ended Monday within 0.5% of a 92-year resistance line.
 urn:newsml:reuters.com:*:nL1N2LD0ZV
    Thus, action may be about to heat up, one way or the other.
    
    (Terence Gabriel)
    *****
    
    FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE:  urn:newsml:reuters.com:*:nL1N2LE0RG

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX03162021    https://tmsnrt.rs/3bRcuq3
STOXX 600 vs S&P 500 in 2021    https://tmsnrt.rs/3qOZpl7
earnings growth    https://tmsnrt.rs/3tCXm5J
Retail sales    https://tmsnrt.rs/3vyodBI
Industrial production    https://tmsnrt.rs/3qUpH5z
Inflation    https://tmsnrt.rs/3cDVvq5
NAHB    https://tmsnrt.rs/3bP0lll
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)