The Poon Report
News Summary
Surge in bullish bets could help push stocks higher with $2.4 trillion in options set to expire Friday
Taken from MarketWatch Friday, 17 November 2023
Traders have piled into call options linked to popular U.S. equity exchange-traded funds as U.S. stocks rallied following the release of Tuesday’s consumer-price index.
That could help push stocks even higher in the days ahead, options-market strategists said.
Options tied to $2.4 trillion in stocks, exchange-traded funds and equity indexes are set to expire on Friday, according to data compiled by Rocky Fishman, founder of Asym50, a provider of analytics about the U.S. options market.
A chart from a team of analysts at Goldman Sachs Group showed that call buying tied to popular index-tracking exchange-traded funds exploded this week, causing the ratio of outstanding calls to puts tied to the SPDR S&P 500 ETF Trust SPY, the Invesco QQQ ETF QQQ and the iShares Russell 2000 ETF IWM to sink as traders dumped puts and piled into calls. This ratio is typically referred to as “skew” in Wall Street parlance.
Is the Stage Set for a Year-End Rally?
Taken from WSJ Friday, 17 November 2023
The outlook for stocks has improved, but high valuations and the impact of lofty rates on laggard sectors aren’t going away
Stock investors are getting early Christmas presents: Third-quarter corporate earnings were strong and inflation keeps heading lower. With all the good news already priced in and bond yields offering stiff competition, though, there is less room for the usual seasonal rally.
Investors are feeling optimistic following Tuesday’s lower-than-expected inflation data. The S&P 500 and the Stoxx Europe 600 are up 2.1% and 1% since, respectively, and with their November rebound they have almost erased their losses since the start of August. The two indexes are up 17% and 6%, respectively, in 2023.
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There are good reasons to hope for more gains. The Federal Reserve has likely already announced its last interest-rate increase, which historically has almost always led to a drop in 10-year Treasury yields in the following 12 months, a JPMorgan analysis shows. The bond market is anticipating this now.
Furthermore, stocks tend to do well in the final quarter of the year.
FT LIVE: S&P 500 closes higher despite energy stock sell-off
Taken from FT Live Friday, 17 November 2023
US stocks closed slightly higher on Thursday after a late afternoon rally, marking three positive sessions in a row despite a steep decline in oil prices, which sent energy stocks lower.
The benchmark S&P 500 added 0.1 per cent on Thursday, even as the index’s energy sector dropped more than 2 per cent.
Brent crude, the international oil benchmark oil, settled 4.6 per cent lower at $77.42 a barrel, its steepest fall since early October. US marker West Texas Intermediate fell 4.9 per cent to $72.90.
The tech-heavy Nasdaq Composite added 0.1 per cent.
Walmart tumbles 8% on cautious holiday outlook for consumer spending
Taken from FT Friday, 17 November 2023
World’s largest retailer’s restrained earnings guidance contrasts with improved outlook from rival Target
Walmart shares closed 8.1 per cent lower on Thursday after the world’s largest retailer predicted weaker consumer spending during the holiday season.
John Rainey, chief financial officer, noted “a softening” had started in October, with “somewhat uneven” sales since. “And this gives us reason to think slightly more cautiously about the consumer versus 90 days ago” when Walmart last reported results, he told analysts.
The Arkansas-based company’s results are closely followed as a gauge of the mood of US consumers, who have proven relatively resilient in the face of persistent inflation. Data on Wednesday showed underlying US retail sales rose 0.2 per cent in October, while September’s increase was revised higher.
However, retailers say shoppers have been shifting their spending towards essentials and groceries and away from discretionary purchases.
GM Workers Approve New Labor Deal by Slim Margin
Taken from WSJ Friday, 17 November 2023
UAW members voted 54.7% in favor of the 4½-year contract
United Auto Workers employees at General Motors approved a new 4½-year labor contract, ending a tumultuous monthslong bargaining process by a slim margin of votes.
Workers voted 54.7% to approve the labor deal, according to a UAW spreadsheet, in a nail-biter count that came down to the final facilities after several major factories rejected the contract.
The UAW hasn’t officially announced the results and didn’t respond to a request for comment. GM declined to comment.
The historic deal will see worker base wages increase 25% over the life of the contract, the return of cost-of-living adjustments and the ability to strike over plant closures.
Hyundai to be First Automaker to Sell New Cars on Amazon
Taken from WSJ Friday, 17 November 2023
Companies say Hyundai will be first brand available to car buyers on tech company’s platform starting in 2024
Hyundai customers who want to skip going to a dealership will have a new option next year: shopping on Amazon.com.
The South Korean automaker announced the move Thursday with Amazon at the Los Angeles Auto Show. Starting in 2024, U.S. auto dealers will be able to sell vehicles on the tech company’s platform, making Hyundai the first automotive brand to offer such an option for customers.
“Despite the industry’s focus on improving this experience, customers continue to express frustration with the process,” José Muñoz, chief operating officer of Hyundai Motor said at the LA Auto Show. “They see how easy it is to buy all the products on Amazon, and they want that convenience when buying a car.”
Companies’ confusing cash hoards
Taken from FT Friday, 17 November 2023
Why aren’t they getting spent?
Americans have steadily spent their pandemic savings since 2022. US companies are taking a different approach.
Non-financial corporations have $6.9tn in liquid securities and cash, constituting about 12 per cent of their assets, according to Barclays. That’s close to the pre-Covid trend. But the picture changes substantially when the strategists exclude securities and focus only on cash.
Now, Barclays doesn’t mention what share of companies’ liquid securities are held in corporate bonds these days. It’s possible that given the steep losses in duration over the past couple of years, companies have been holding cash instead of corporate bonds.
Still, their relative surplus of cash is weird for two reasons.
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First, most of the “excess” savings is being kept in checking-account deposits at banks, says Barclays. This means companies aren’t earning the substantial yield they could be earning in money-market funds. Second, companies have also been ratcheting up their short-term borrowing — and paying high short-term rates despite their cash hoards. On aggregate, companies have taken on an additional $600bn in short-term debt since early 2022, the bank found.
Gillian Tett: Do not discount the chance of a Trump return
Taken from FT Friday, 17 November 2023
The former president’s team is running a slicker operation than in 2016
“Remember, remember the fifth of November! Gunpowder, treason and plot.” Thus goes the traditional ditty that British children (such as myself) have chanted in past Novembers, in memory of Guy Fawkes, the rebel who tried to blow up the British parliament back in 1605.
These days, however, those words carry a 21st-century twist: on November 5 2024, America will stage its next — contentious — presidential election.
And with the countdown under way, there are two key points to understand. First: notwithstanding the drama around the administration of former president Donald Trump — and his own attempted insurrection on January 6 2021 after he lost the previous election — it would be foolish to discount the chance of his return.
National polls currently suggest that Trump is neck-and-neck with Joe Biden in voter support, and that he eclipses the president in almost all the key swing states. This latter finding matters enormously, given the nature of presidential races.
Turkish parliament postpones vote on Sweden’s Nato accession
Taken from FT Friday, 17 November 2023
Foreign affairs committee requests fresh review before agreeing to Stockholm’s bid
Turkey’s parliament has postponed a vote on ratifying Sweden’s accession to Nato, in a fresh snag to the Nordic country’s hopes of joining the western military alliance.
The parliament’s foreign affairs committee on Thursday debated Stockholm’s bid but held off from voting pending further review. The committee must give its approval before the parliament as a whole can vote on it.
President Recep Tayyip Erdoğan, whose coalition controls parliament, vowed in July at a Nato summit to approve Sweden’s accession, but the process has been beset by delays. Allowing the Scandinavian country to join is a crucial priority in many western capitals nearly two years after Russia launched its full-scale invasion of Ukraine.
IBM pulls adverts from X after report finding they ran next to Nazi content
Taken from FT Friday, 17 November 2023
Tech company’s move is the latest setback to Linda Yaccarino’s efforts to convince brands Elon Musk’s platform is safe
IBM has said it has pulled its global advertising from Elon Musk’s X following a report that the social media platform ran the tech company’s adverts alongside pro-Nazi material, in a fresh blow to the company’s efforts to bring back sales revenues.
On Thursday, left-leaning non-profit Media Matters put out a report saying it had found adverts from big brands including IBM, Apple, Oracle and Comcast’s Xfinity and Bravo running next to content “that touts Adolf Hitler and his Nazi Party”.
“IBM has zero tolerance for hate speech and discrimination and we have immediately suspended all advertising on X while we investigate this entirely unacceptable situation,” the company said in a statement.
Hunt’s room for tax cuts squeezed by £15bn-a-year losses on Bank of England bond sales
Taken from The Telegraph Friday, 17 November 2023
Bank’s decision to sell bonds at a time when prices are potentially at their lowest adding to the losses
The Bank of England’s decision to sell-off government bonds is costing taxpayers £15bn a year and squeezing Jeremy Hunt’s room to cut taxes, a top investment bank has warned.
Deutsche Bank said Threadneedle Street’s decision to reduce the size of its balance sheet by actively selling gilts bought during the pandemic, rather than letting them mature, meant taxpayers faced much heavier losses in the short term.
Based on the current path of interest rates, taxpayers face £15bn-a year in extra losses compared to a scenario where the bonds just matured. The Treasury is on the hook to make the Bank whole on any losses from the bond-buying programme, known as quantitative easing (QE).
Biden vows not to decouple from China while deepening Indo-Pacific ties
Taken from Nikkei Asia Friday, 17 November 2023
U.S. president tells APEC CEO Summit that 'region more vital than ever'
U.S. President Joe Biden said Washington would not decouple from China at an address Thursday, a day after he held a four-hour summit with his Chinese counterpart Xi Jinping.
"Let me be clear, we are de-risking and diversifying our economic relations with [China], not decoupling," Biden said at the APEC CEO Summit, which brought together private-sector and government leaders.
"Stable relations between the world's two largest economies is not merely good for the two economies, it's good for the world, a stable relationship is good for everyone," he added.
EU leader Ursula von der Leyen urges states to begin economic de-risking from China or face trouble
Taken from SCMP Friday, 17 November 2023
European Commission President Ursula von der Leyen has warned the EU’s 27 member states to get moving with de-risking economic ties with China or prepare for their businesses to be steamrollered by unfair Chinese competition.
During two pointed speeches in Berlin on Thursday, von der Leyen painted a bleak picture of bilateral relations, with few notes of optimism, as she prepares to travel to Beijing next month for the EU-China Summit.
In an address to conservative lawmakers at the German Bundestag – the national parliament – she tried to drum up support for her de-risking agenda, suggesting that European businesses in China will eventually run into trouble if governments do not take action.
“Entire industries and value chains for which China used to rely on the rest of the world are being increasingly relocated domestically. Many European investors like to call this ‘in China for China’. However, this only works until European companies are squeezed out by Chinese competition or get caught up in political turmoil,” von der Leyen said.
China’s premium EV segment set for ‘cutthroat competition’ as Huawei, Baidu and Xiaomi join the fray
Taken from SCMP Friday, 17 November 2023
New models introduced by technology firms are redrawing China’s electric vehicle (EV) landscape, as premium cars with cutting-edge digital features such as automation lure mainland Chinese drivers away from segment leader Tesla’s Model 3 and Model Y, industry observers said.
In China, the world’s largest EV market, where “intelligent” battery-powered vehicles are a must-have, Huawei Technologies, Baidu and Xiaomi are challenging established players and heightening concerns about overcapacity and a price war.
“Intelligent features such as autonomous driving technology and voice-activated controls are what sell cars [in China] now,” said Zhao Zhen, a sales director with Shanghai-based dealer Wan Zhuo Auto. “It is not like a decade ago, when horsepower and exterior design attracted Chinese motorists.”
The intelligent features in demand also include facial recognition, over-the-air software upgrades, phone-linked features and self parking.