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Breakfast Bites - The Divergence Widens!

Fedspeak remains cautious; US Data points come in better; China Sec Regulator looks at IPO; Reddit files IPO prospectus

Rise and shine everyone.

It’s a quiet day after yesterday’s massive levels of bullishness across the globe. We saw several markets hitting all-time highs including the US.

There’s not much on the macro or earnings front today.

Aercap (one of our recent stock picks) reported earnings. Shares are up over 5% in the pre-market. Revenues rose 3.8% year/year to $1.9 bln but missed the $1.94 bln FactSet Consensus. Earnings of $5.37 per share, may not be comparable to the FactSet Consensus of $2.59. Cash flow from operating activities of $1.4 billion for the fourth quarter of 2023, bringing the total for the full year 2023 to $5.3 billion. They announced a share purchase authorization of $500 million.

US equity Futures are flat this morning. On a trending basis, yields still look quite bullish with the US Dollar heading for a slight weekly loss, with the focus on fewer rate cuts. Oil and Bitcoin are lower again, while Gold is marginally higher.

Big Stories

Fedspeak remains cautious

Continued central bank speak continues to stress patience to deliver rate cuts; Markets now expect Fed to begin rate cuts in June, rather than March and the market is pricing in 3.5 rate cuts as opposed to 5 earlier. We had several Fed speakers yesterday:

  • Fed's Waller (voter, hawk): No rush to cut rates; "What's the Rush?" - speech

  • Fed's Kashkari (non-voter): 'We still have some work to do on inflation'

  • Fed's Cook (voter): Sees an eventual rate cut as adjusting policy to reflect a shifting balance of risks

US Data Points

February S&P Manufacturing PMI came in stronger 51.5 V 50.7E

  • Weekly Initial Jobless Claims declined to the lowest since mid-Jan: 201K V 216K E Continuing Claims came in lower as well: 1.862M V 1.884M Est - (US)

  • January Existing Home Sales came in better: 4.0M V 3.97ME - This is a good sign and as the US housing market needs to moderate for shelter inflation to decline.

China’s Security Regulator to look at IPOs

The China Securities Regulatory Commission (CSRC) aims to enhance fraud detection in listed companies, intensify IPO candidate inspections, and fight market manipulation without reviewing past IPOs. This strengthens its oversight and aligns with investor expectations. These steps follow regulatory actions to stabilize the market, including a ban on major investors reducing equity at market open/close on February 21st, and a temporary account freeze on quantitative hedge fund Ningbo Lingjun by China's main stock exchanges on February 20th after it sold CNY2.57 billion in stocks. These actions are part of China's efforts to maintain market order and protect investor interests.

Quote of the Day

“Must be convinced that disinflation is sustainable; Q4 wages data was encouraging, but Q1 wage data will be important for ECB assessment” ECB’s President Lagarde

Chart of the Day

Chart courtesy of Mayhem. I’m sure he’s shared this before but wanted to re-iterate it. With what we’re seeing in the market right now. Led by the narrow Mega Cap Tech stocks, we’re seeing a massive divergence between stocks and bonds. I can’t help but also re-iterate his warning that this is a time for caution. Can the market go up from here? It certainly can. But with yields inching higher, and the bond market pricing in the reality of fewer Fed cuts, we best be cautious.

BofA Flow Show:

  • Reddit Files their IPO prospectus. The numbers are underwhelming. Here’s a thread I put out on Twitter:

  • The European Central Bank's (ECB) latest Consumer Price Index (CPI) expectations indicate a slight increase in the 1-year CPI forecast to 3.3% from the previous 3.2%. Meanwhile, the 3-year CPI expectations remain steady, with a slight adjustment to 2.5% from the previously surveyed 2.4%.

  • Standard Chartered announced a significant buyback, causing its shares to jump, despite the CEO's critical comments on the bank's share price

  • The Shanghai Composite reached the significant 3,000 mark for the first time since December, but couldn't maintain that level as the day went on.

  • A former member of the Bank of Japan (BOJ), Sakurai, mentioned that the chances of the BOJ beginning its exit strategy in March or April were even, contingent on this year's wage negotiations leading to salary increases of over 4%.

  • For the seventh consecutive month, China's new home prices in January experienced a decline.

  • In the Asian trading session, shares of Intuitive Machines (LUNR) surged by 50% following its successful lunar landing, marking the first American moon landing since the Apollo mission in 1972.

  • The Chinese securities regulator refuted the recent news that mainland stock exchanges had restricted the ability to sell shares at the opening and closing of the market.


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

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