June 28, 2023

📰 News Organizations

• Russia Poised to Surpass Saudi Arabia as Top Oil Supplier to China. Russia is on the verge of becoming China's largest oil supplier, overtaking Saudi Arabia. Since the beginning of the war, Saudi Arabia has been steadily losing market share* in China—the world’s biggest energy market—thanks to Russia selling its oil at steep discounts.

• China Premier Warns of Rising Economic Barriers Leading to Confrontation. China's second-ranking official expressed concerns about increasing economic barriers* causing fragmentation and confrontation in the world. The warning came during the World Economic Forum's Annual Meeting of the New Champions, highlighting the need for collaboration and openness in global trade.

• Microsoft CEO Nadella Sets Ambitious $500 Billion Sales Target by 2030. Microsoft CEO, Satya Nadella, aims to achieve annual growth of at least 10%, propelling the company to reach a revenue milestone of $500 billion by 2030. Nadella attributes Microsoft Cloud as the primary driver of growth in the coming years.

• Morgan Stanley Expects Fed to Raise Rates in July Following Powell's Speech. Morgan Stanley anticipates the Federal Reserve to increase interest rates at its July meeting after Chair Jerome Powell indicated that the central bank's aggressive hiking cycle is not yet complete. The forecast suggests a potential 25 basis point hike* next month.

• Eli Lilly's Experimental Obesity Drug Shows Promising Weight Loss Results. In a recent trial, Eli Lilly's experimental drug, retatrutide, demonstrated remarkable weight loss outcomes with patients losing up to 24% of their weight over almost a year. The drug's potential effectiveness in the obesity space presents a significant advantage over competitors.

• Stellantis Launches EV Charging Unit to Alleviate Range Anxiety. Automaker Stellantis introduces "Free2move Charge," a unit that offers energy storage, charging equipment, and a smartphone app for route planning and finding charging stations, addressing the range anxiety associated with electric vehicles. The move follows Tesla's successful strategy* and aims to support plug-in owners and businesses.

• Delta Raises Profit Forecast on Strong Demand and Premium Ticket Sales. Delta Airlines boosts its second-quarter adjusted earnings forecast to $2.25 to $2.50 per share, reflecting robust travel demand and strong performance in premium ticket sales. While other sectors face challenges, Delta and its competitors experience solid travel demand, particularly in international travel.

🐦 Twitter

• Homebuilder stocks have rallied sharply and direction is not unjustified, given forward earnings (orange) have been moving higher since the bear market started in 2022, prices have been leading EPS in both directions. Source.

• A benchmark German yield curve is the most inverted since 1992 as ECB members deliver hawkish messages, regardless of recent data pointing to economic softening. German 2-year yields are now nearly 0.8 percentage point higher than 10-year yields. Source.

• Microsoft and Apple, together with next 5 ranked companies by market cap, made up over 50% of total weight of NASDAQ 100 in April; joined by Alphabet (Google), Amazon, NVIDIA, Meta, and Tesla, with Alphabet’s class A and class C shares occupying 2 spots. Source.

• Bullish bets on chip stocks (call option volume) is on pace to set a new record in June. Source.

• Through Q1, the mortgage debt service ratio is still below pre-pandemic levels. In the aggregate mortgage debt service is still not a burden on households despite 7% mortgage rates. Source.

📓 Online Publications

• Tom Lee Says "Buy the Dip" in S&P 500 as IPO Market Heats Up. Tom Lee highlights the increasing activity in the IPO market and the substantial cash reserves held by investors. He remains optimistic about corporate earnings and does not support the recession narrative, given corporate earnings appear to have bottomed.

• AMD Positioned to Capitalize on Booming AI Chip Market Amid Nvidia Shortage. The high demand for Nvidia's data center GPUs and subsequent price increases present an opportunity for AMD to fill the gap and benefit from the lucrative AI chip market. AMD plans to launch its MI300 data center GPUs for AI, further enhancing its position.

• Carnival Stock Faces Selling Pressure Despite Strong Bookings. Despite positive results and raised guidance, investors have sold off Carnival stock, possibly indicating that the positive news was already factored into the stock price. While the shares have seen significant year-to-date gains, investors remain cautious as pandemic-related concerns ease.

• Multi-Family Delinquencies Rise as Single-Family Declines. Delinquency rates for multi-family properties have been increasing, reflecting slower rent growth, higher vacancy rates, and rising interest rates. This trend should be monitored closely, especially with the softening of rents.

• Economists Forecast Modest Recession as Fed Tightens. Fannie Mae's Economic and Strategic Research Group suggests that a recession may be inevitable* as the Federal Reserve tightens monetary policy. Although the exact timing is uncertain, economists believe that when inflation cools and interest rates decline, a recession is likely to follow.

🎧 Podcasts

• Bets on bond renaissance frustrated by stubbornly high inflation. The Federal Reserve’s interest rate hike campaign is doing damage to short-term bonds. Yields on short-term bonds go up as the Fed raises rates. In recent months, the yield on the two-year Treasury bond has hovered between four and a half and 5 percent. Source(5:53)

• China’s biggest IPO in years poses $9bn question for western banks. Swiss chemicals giant Syngenta is planning to go public in Shanghai. The initial public offering is expected to raise about $9bn. That would make it one of the largest listings in Chinese history. Big western banks like JPMorgan and Goldman Sachs have been waiting eagerly for this kind of prime business opportunity. But they’re also worried that they might not be able to participate. Source(2:33)

• Wagner boss says he wasn’t trying to oust Putin; Putin’s still mad. In his first public speech since the mutiny over the weekend led by Yevgeny Prigozhin, whose paramilitary Wagner Group had been fighting in Ukraine but turned on Russia, President Vladimir Putin called the rebellion’s organizers traitors and said Wagner soldiers could fight with Russia’s military, go home, or move to Belarus. The speech came after Prigozhin said his aim was not to stage a coup but to prevent his force from being taken over by the military. Source(2:30)

• Commodities are correlated to China, says Marko Papic. Going forward, the destabilization of Russia is a longer-term story and it fits into the pillars of a commodity supercycle that themselves are a longer story with ties to China. Understanding the situation in China is crucial when making decisions about calls in Europe, Japan, or commodities like copper and oil. Source(21:40)

• Corelogic's monthly single-family rent report: it's up 4.3%. Jason Hartman says that with all this news of rents collapsing or rents slowing down, people will get misled because while rents are indeed slowing, it is still healthy and strong at 4.3%, and is still favorable for landlords. He also thinks that we will still see a lot of rent increases in the future because affordability is so low. Source(2:41)

• Wall Street Excited For Weight Loss Pill. Novo Nordisk, a pharmaceutical company, is pursuing FDA approval for Wegovy, a pill-based weight loss drug. The success of Ozempic, initially a diabetes medication but found to aid in weight loss, has sparked a race among major drug manufacturers to capture a share of the projected $100 billion weight loss industry. Source(6:30)