盘前最重要的五件事
# CPI day
All eyes will be trained on [today’s consumer prices report which is set to show a second consecutive reading on core inflation in line with the Federal Reserve’s target. Bloomberg Economics expects CPI, excluding food and energy, to rise by 0.2% for the month, similar to June. “July’s CPI report will show a wave of disinflation hitting the US economy,’’ the team, led by Anna Wong, said.
# China limits
President Joe Biden has [imposed limits on US investments in China] as part of a broader push to restrict the ability of the country to develop next-generation military and surveillance technology. It follows nearly two years of deliberations pitting hawks arguing for faster and tougher action against those advocating a more cautious approach. Details still need to be worked out, but the initial indication is that the more cautious approach won out.
# Disney spending
Shares in Walt Disney Co. are rising in premarket trading as the group said losses for its Disney+ streaming service narrowed [and it pointed to lower spending. It now expects to spend about $27 billion on content in the coming year, compared with a typical $30 billion, in part owing to production cuts related to actor and writer strikes in Hollywood. CEO Bob Iger also said the company intends to crack down on password-sharing, akin to rival Netflix.
# Futures rise
S&P 500 and Nasdaq 100 futures are both pointing higher, suggesting markets will rally after the decline on Wednesday. The dollar is slightly weaker against most other G10 currencies, while Treasuries are mixed. Oil slipped while metals prices are nudging higher.
# Coming Up…
The CPI release will be top of the agenda, along with jobless claims, and there will be comments from Atlanta Fed President Raphael Bostic. A quieter earnings slate will include News Corp. and Ralph Lauren.
盘前数据点评
Expectations for this morning's must-watch CPI print were for a MoM and YoY rise in the headline, and modest slowing of the core YoY. However, The Fed will be watching its new favorite signal - Core Services CPI Ex-Shelter - which reaccelerated in July (+0.2% MoM, and from +3.9% to +4.0% YoY)...
The headline CPI rose 0.2% MoM in July (as expected), the same as in June, pushing the YoY up to 3.2% (from 3.0% in June) but below the 3.3% expected...
Today's increase in CPI YoY broke the record-equaling streak of 12 straight months of declines.
Core CPI rose 0.16% MoM, with the YoY growth in prices slowing to 4.7%.
Both Goods and Services inflation (YoY) slowed in July - but Services remain extremely high at +6.1%...
Taking a closer look at the numbers, we find the following:
CPI MoM:
The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing
The food index increased 0.2 percent in July after increasing 0.1 percent the previous month. The index for food at home increased 0.3 percent over the month while the index for food away from home rose 0.2 percent in July. The energy index rose 0.1 percent in July as the major energy component indexes were mixed
CPI Core MoM:
The index for all items less food and energy rose 0.2 percent in July, as it did in June. Indexes which increased in June include shelter, motor vehicle insurance, education, and recreation.
The indexes for airline fares, used cars and trucks, medical care, and communication were among those that decreased over the month.
Drilling deeper into the main categories we find that shelter inflation continued to rise, but it is now slowing dramatically. Meanwhile, quite a few categories posted sequential declines as noted below:
Increases:
The index for all items less food and energy rose 0.2 percent in July, as it did in June.The shelter index increased 0.4 percent over the month, the same increase as in June.The index for rent rose 0.4 percent in July, and the index for owners’ equivalent rent increased 0.5 percent over the month.The index for lodging away from home decreased 0.3 percent in July after falling 2.0 percent in June.The shelter index was the largest factor in the monthly increase in the index for all items less food and energy.
Among the other indexes that rose in July was the index for motor vehicle insurance, which increased 2.0 percent after rising 1.7 percent the preceding month.
The indexes for education and recreation also increased in July.
Declines:
The airline fares index fell 8.1% over the month, its fourth consecutive monthly decline, although judging by still soaring airplane ticket prices, this is just another seasonally-adjusted excel gimmick
The index for used cars and trucks fell 1.3% in July, after decreasing 0.5% in June.
The communication index declined 0.1% over the month, as did the new vehicles index and the household furnishings and operations index.
The medical care index fell 0.2% in July, after being unchanged the previous month.
The index for hospital services decreased 0.4% over the month, while the index for physicians’ services rose 0.2%.
The prescription drugs index was unchanged in July.
On an annual basis, the index for all items less food and energy rose 4.7% over the past 12 months with the shelter index rising 7.7% over the last year, accounting for over two-thirds of the total increase in all items less food and energy.
Other indexes with notable increases over the last year include motor vehicle insurance (+17.8 percent), recreation (+4.1 percent), new vehicles (+3.5 percent), and household furnishings and operations (+2.9 percent).
Taking a closer look at the all important shelter index, while it is still growing both sequentially and annually, the slowdown in growth is increasing more visible:
Shelter inflation up 7.69% YoY in July vs 7.83% in June, lowest since Dec 22; also up 0.43% MoM, lowest monthly increase since Jan 22
Rent inflation up 8.03% in July vs 8.33% in June, lowest since Nov 22; also up 0.41% MoM, lowest since March 22
The silver lining here, as noted by former Fed staffer Julia Coronado, is that "we are seeing core inflation slow before the expected big step down in rent/oer" which is great news as "lots of price sensitivity in travel and core goods that was slow to take hold but is now fully coming through." In other words, if and when rent/shelter inflation actually post a decline (with the usual 12-18 month BLS lag), the Fed will be scrambling to fight inflation.
The fact that we are seeing core inflation slow before the expected big step down in rent/oer is great news--lots of price sensitivity in travel and core goods that was slow to take hold but is now fully coming through pic.twitter.com/FEinGLub0o
— Julia Coronado (@jc_econ) 网页链接{August 10, 2023}
Turning to the wage aspect, for the second month in a row, 'real' wages rose YoY in July (but barely, +0.2%), and it appears that we are about to dip back into real contraction next month.
So the question becomes - is this an inflection point in inflation? (or is M2 still leading the way?)
大类资产和波动率摘要
Spot | US indices were once again weighed down by tech stocks as AI names took a hit. Other region were more steady ahead of CPI today. VIX was choppy but gave back gains to finish lower despite market weakness into the close. Oil continues break higher as precious metals drift lower as the dollar trades flat. Bonds were firm after a solid 10Y auction. ARKK noticeably weak along with soggy banks, but energy outperforming again.
Vol & Carry | Vols were slightly higher on the spot move down but on fixed strike they struggled to rally, suggesting less fragility in dealers books. Oil vol starting to finally move up with spot. Energy sector also seeing firmer vol on the rally as the upside breakout starts to gather momentum. Banks vol still bid. Positive carry returns as realized moves not impressive.
Skew | SPX skew held gains but other indices drifted back. Metals skew close to neutral as price action has been soft. HYG skew drifting lower as stress in markets abates. XLE skew flattening as call demand comes in.
All Eyes On CPI As Oil Prices Break Higher
Today’s big macro data point is the US CPI, which comes hot on the heels of a weaker non-farm payrolls print last week. Consensus is for the core reading to show a 0.20% MoM increase and the YoY to come in around 3%. Brent has now had positive returns for 6 weeks in a row and is at 9-month highs on OPEC production cuts taking the market tighter over recent months. The market is unlikely to care too much about the headline due to the high volatility in food and energy prices. What they will care about is the Core figures, which Goldmans are calling for to miss expectations due to factors such as weaker used and new car prices, apparel and lodging seasonality and shelter inflation stabilizing.
QQQ/IWM TRADE IDEA | Is Tech Ripe For A Bounce On CPI
With the heavyweight tech stocks AAPL and MSFT having had reasonable correction recently, we see scope for a NDX bounce from current levels. This happens to be at the same time we’ve seen some negative headlines come back around the regional banks and this may create a headwind for the Russell 2000. The QQQ/IWM ratio has pulled back around 5% from its recent highs made in July and is testing support with waning downside momentum. If you have less conviction but want to get exposure to a recovery in the market, and you agree that this will most likely be led by tech if yields come down and we enter a Goldilocks regime (growth higher, inflation lower), then call switches can makes sense.
债券市场摘要
US Treasury yields were broadly steady across the curve as markets await the US CPI figures tonight. Forecasts point to a 3.3% YoY rise as compared to a 3% in June. Meanwhile, Core CPI is expected to cool to 4.7% YoY from 4.8% in June. Separately, Philadelphia Fed President Patrick Harker, a voting member, said that they may be able to hold rates steady so long as there are no surprises in the economy. However he pointed out that rates will need to stay elevated for some time. US IG credit spreads were tighter by 0.7bp and HY CDS spreads tightened by 0.5bp. The S&P and Nasdaq were down 0.7% and 1.2% respectively.
European equity markets ended higher on the other hand. In credit markets, European main CDS spreads were 1.4bp tighter and Crossover CDS tightened 2.7bp. Asia ex-Japan CDS spreads tightened by 0.3bp. Asian equity markets have opened broadly weaker this morning. China has slid into deflation territory with its CPI for July at -0.3% YoY compared to a 0% change in June. This compares to forecasts of a -0.4% print. Its PPI saw a much larger -4.4% YoY print, worse than forecasts of a -4.1% drop but slower than the -5.4% number seen in the month prior.
Rating Actions
网页链接{Moody's upgrades Rolls-Royce's ratings to Ba2; maintains positive outlook}
网页链接{Moody's upgrades American Airlines Group; CFR to B1, outlook to stable}
网页链接{Albertsons Cos. Upgraded To 'BB+' On Robust Operating Performance, Reduced Leverage; Ratings Remain On Watch Positive}
网页链接{Fitch Revises Outlook on Yunnan Energy to Stable; Affirms at 'BBB-'}
网页链接{Braskem S.A. Outlook Revised To Negative On Weak Profitability Raising Leverage, 'BBB-' Ratings Affirmed}
网页链接{Moody's changes Cimpress rating outlook to positive, affirms credit ratings}
网页链接{Methanex Corp. Outlook Revised To Stable From Positive On Weak Methanol Prices; 'BB' Rating Affirmed}
Country Garden Misses Coupon on Dollar Bonds
Country Garden (COGARD), the largest Chinese developer by sales, has missed coupon payments on two of its dollar bonds. The bonds in question are its 4.2% 2026s and 4.8% 2030s where a 30-day grace period has been triggered for both notes. The total coupons on the notes amounted to $22.5mn. CreditSights analyst Nicholas Chen said, "The fact that (Country Garden) is struggling to address an interest payment, rather than a full bond principal repayment, perhaps underscores its very tight liquidity... we think such an event will have a negative spillover effect for the sector". Bloomberg Intelligence analysts note that COGARD's chairwoman might help the company make the payments by using part of an RMB 453mn ($62.8mn) dividend payout on her stake in Country Garden Services, the developer's property management service provider.
The Chinese property sector has been suffering with the top 100 developers' pre-sales falling 33.1% YoY to RMB 350.4bn ($48.9bn) in July. 网页链接{COGARD's contracted sales fell 60% YoY} in July to $1.7bn. Besides, tight financing conditions and liquidity constraints have only worsened developers' finances. The company was 网页链接{downgraded last week to B1} from Ba3 by Moody's citing the above. With over $2.9bn in bond payments due by year-end, including $2.3bn in onshore notes, COGARD also 网页链接{warned of a net loss in 1H 2023} earlier last week.
Country Garden's dollar bonds due 2025 and beyond fell 3-4 points to trade at just over 9 cents on the dollar. Its 网页链接{8% 2024s} plummeted by 10 points to now trade at just 13 cents on the dollar.
WeWork's Bonds Collapse to 10 Cents on the Dollar after Bankruptcy Warning
WeWork’s dollar bonds have plunged by ~20 points to trade at just 10 cents on the dollar after it announced that there is "substantial doubt" about its ability to continue operating, citing sustained losses and cancelled memberships. WeWork continued to report losses with a Q2 net loss of $397mn and an occupancy rate of 72%.Once one of America’s most valuable startups, WeWork started its decline after launching a failed IPO in 2019 that necessitated a takeover from its largest investor SoftBank. Later, it was badly hit by the pandemic when its offices were vacated as workers transitioned to remote working. Despite a pickup in office occupancy over the last year, analysts note the recovery appeared to be unsustainable. It also suffered an exodus of executives with three of its board members departing just this week alone. In March this year, the company struck a deal with SoftBank and other major creditors to reduce its debt load by roughly $1.5bn and extend its other maturities. The company has said that it will remain committed to reducing rental costs, negotiating more favorable leases, increasing revenue, and raising capital over the next 12 months.
American Airlines Upgraded to B1 by Moody's
American Airlines was upgraded to B1 from B2 by Moody's. It also upgraded senior secured ratings to Ba2 from Ba3 and senior unsecured debt to B3 from Caa1. The upgrade was a reflection of the company’s improving operating performance due to a recovery in travel demand. Moody’s expects a 300bp improvement in operating margins to 8% in 2023 and expects these margins to sustain in 2024 and 2025. Given that its credit metrics are expected to strengthen over the next year, Moody's also believes the carrier will continue to maintain a "very good liquidity". The upgrade also reflects Moody's belief that American Airlines will reduce reported debt by at least $5bn between end-2022 to 2024 and by at least $3.5bn in 2025. Its debt maturities due 2025 currently stand at $7.5bn, including the company's $1bn of 6.5% convertible notes. The upgrade of its senior secured and unsecured ratings are due to its Loss Given Default (LGD) rating methodology benefitted by its loyalty program financing.
American Airline's bonds were trading steady with its 网页链接{3.375% 2027s} trading at 90.25 yielding 9.06%
Adani Enterprises Mulls Selling Stake in Wilmar Joint Venture
Adani Enterprises, the flagship entity of Adani Group, is considering exiting its JV with Wilmar International by selling its 44% stake, currently worth about $2.6bn, in the JV. This sale would free up capital for Adani Group’s core business, as per reports. The JV, which offers many essential kitchen commodities for Indian consumers like edible oils and sugar, raised roughly $435mn in an IPO in 2022, with Adani’s and Wilmar’s stakes combined making up nearly 88% of the company’s shares. The company reported a net loss of roughly $9.5mn for Q2 2023 due to falling edible oil prices and high-cost inventory. The group’s chairperson Gautam Adani and his family may retain a minority stake in a personal capacity if the sale goes through, while Wilmar may decide to retain its stake in the business.
Adani’s 网页链接{4.375% 2024s} are currently trading stable at 93.9 cents on the dollar, yielding 10.5%.
宏观交易员观点节选
- The federal deficit as a percentage of GDP is comparable to levels during the Global Financial Crisis (GFC), which should typically be interpreted as stimulus. However, California tax collections are playing havoc with the already shoddy data.
- The author disagrees with Warren Mosler's view that rate hikes are stimulative in a highly indebted economy. While rate hikes do not efficiently combat inflation in such economies, they create “breaking point” dynamics where real-world corporate and household solvency constraints lead to disruption.
- Albert Edwards' data showing that rate increases aren't working appears to be based on flawed data and has too many variables involved in the analysis to be helpful.
- This is reinforced by the opposite effect in the household sector, which holds more cash than it borrows short-term, and historically benefits from rising interest rates. While corporate interest payments have plunged, interest income has stagnated for households.
**Top Comment:**
*John Taylor: The teaser rates and low down payments offered by the big homebuilders are a cost for them, equivalent to selling the houses at a lower price. The difference is that the sales are recorded at the purchase price, ignoring these subsidies, so people don’t see the values of homes decline. Good for the builders because their inventory isn’t marked down to lower values.*
*For resales, homeowners generally lack the ability to offer low rates and low down payments, its based on what the bank offers. As a result, many are pricing their properties above the prevailing market rate without realizing it.*
*Thus home sales are shifting to new homes because new homes are selling at the market rate, after accounting for financial discounts, while existing homes remain stubbornly overpriced.*
*MWG: I don’t think this is quite right. New home sales in aggregate are still quite low. At 697K annualized we’re running about 30% below the population-adjusted average of the last 70 years. I agree that the subsidy lowers the cost so that they are more competitive, but my hunch is that new buyers are being seduced by a lower payment rather than a lower price in total. A 2yr teaser rate is roughly akin to a 2% price cut even as it lowers payments over the 2yr period by 20%. The challenge will come in refinancing that teaser rate with a 3.5% down payment if further price declines occur, even if rates are lower.*
In previous commentary, I highlighted that a massive increase in government deficit spending is a concern for any bearish interpretation of economic outcomes. Governments can, of course, spend us into a nominal boom (destroying the currency in the process). In part, Warren is highlighting what I’ve been screaming about for almost exactly a year — rate hikes in a highly indebted economy do not work for fighting inflation as they add to the fiscal impulse even as they slow investment faster than consumption. I'm afraid I have to disagree with Warren that they are “stimulative” due to the fallacy of composition. Those receiving income from higher interest rates are not the same agents paying the higher interest expense and this leads to “brittle” outcomes where business insolvencies can rapidly change economic conditions. In fact, every recession has been characterized by this dynamic of rising outlays and falling revenues:
To Warren’s credit, every recession also ends with deficits approaching these levels as government expenditures slowly refill household and corporate income streams while government revenues take less of the economic pie. We can certainly see elements of this today, as most readers are likely enjoying substantially higher yields on their cash assets than they were last year, even as their mostly fixed-rate interest obligations have not increased. This is the source of the recently famous Albert Edwards’ chart showing that “rate increases are not working!” because net interest is falling:
I personally hate this chart, as there are simply too many variables at play. There are two variables in “net interest” — interest paid and interest received. In the data series presented by Edwards, there is a third variable “miscellaneous payments” which is largely tied to property licensing from the US government. And finally, he adds a fourth variable, corporate profits, to convert it into a ratio. The interest paid and interest received sub-variables are not available except on an annual basis which further complicates the analysis. I believe the chart is wrong...
财经媒体评论精选
BBG：网页链接{Treasury yields edging lower over time as Fed shifts to Cuts}
Mark Cabana，BofA：“随着联邦储备委员会在最终降息前将利率维持在较高水平，并以比市场预期更慢的速度进行削减，国债收益率有望随时间而逐步下降。”“建议在国债曲线后端进行‘战术性偏多偏向’交易。”Patrick Harker，费城联邦储备银行行长：“在没有任何经济意外情况下，美国中央银行可能能够停止加息，尽管利率需要维持当前的高位一段时间。”
BBG：网页链接{US Inflation Gauge Casting Doubts About Fed Victory}
Ed Al-Hussainy，哥伦比亚Threadneedle投资的利率策略师：“通胀已经下降，因为联邦储备委员会采取了积极的行动——然而，潜在的通胀预期存在上升的风险。市场已经将未来的通胀预期和实际利率嵌入到更高的水平。”
BBG：网页链接{Wall Street's Demand for 20-Year Treasuries}
Michael Collins，PGIM的基金经理：“你希望拥有尽可能多的20年期国债。20年期债券的交易价格便宜，如果你卖空10年期、30年期并购买20年期，则可以实现利润。”
SCMP：网页链接{Wall Street's Demand for 20-Year Treasuries}
Wu，BofA证券的股票策略师：“我们希望看到一个潜在的上涨，并建议投资者在未来几周里‘买入低点’。如果政府能够迅速推出一种有效的房地产刺激政策，使房地产再次成为人们的首选，上涨趋势可能会持续几个月……中国股票可能不是长期持有的投资，而是交易工具。对于全球投资者来说，完全回避中国股票是不可能的。”
BBG每日图表
CPI日快乐。今天的预期故事是核心CPI将以顺序基础冷静或良性，但至少在同比基础上，总CPI将上涨。或者换句话说，有持续的降温或通货紧缩迹象（二手车，租金等），但能源价格的大幅下跌已经结束。截至目前，WTI期货价格处于2022年11月16日以来的最高水平。其他相关的能源指标（汽油，柴油）自夏季以来也大幅上涨，有助于打破我们一直看到的通货紧缩进展。至于美联储，它一直专注于核心通胀指标，甚至是核心的特定部分，例如“排除住房的服务通胀”。但如果能源成本继续上涨，它无法不将注意力转向总CPI。正如鲍威尔过去所说，总CPI在塑造人们的通货膨胀预期方面起着作用，这反过来又在确定实际实现的通货膨胀方面发挥作用。因此，在其他条件相等的情况下，由上涨的能源价格带来的热情可能会成为美联储焦虑的来源。
