As we approach the open... 3/31/21

March 31, 2021

As we bring an eventful first quarter to a close, US equity futures trade with an upside bias at the highs of the overnight session. Growth getting the best of the bid this morning as the 10-year yield trades little changed with NDX indicated up three-quarters of a percent, RUT a third, and SPX little under two tenths.

Equity notes include Apple (AAPL 121.81, +1.91): +1.6% after the stock was upgraded to Buy from Neutral at UBS. Walgreens Boots Alliance (WBA 54.28, +1.30): +2.5% after beating EPS estimates on below-consensus revenue. WBA also raised its fiscal 2021 guidance. Pfizer (PFE 36.35, +0.24): +0.7% top-line results for its COVID-19 vaccine trial demonstrated 100% efficacy and robust antibody responses in kids aged 12-15. lululemon athletica (LULU 312.20, -4.89): -1.5% after guiding FY21 EPS below consensus, although it beat top and bottom-line estimates, issued upbeat guidance for its April quarter, and issued upbeat FY21 revenue guidance. Chewy (CHWY 88.55, +8.17): +10.2% after beating top and bottom-line estimates and issuing upside Q1 revenue guidance.

Asia

This follows a mostly downbeat Asian session with Japan's Nikkei: -0.9% Hong Kong's Hang Seng: -0.7% China's Shanghai Composite: -0.4% India's Sensex: -1.3% South Korea's Kospi: -0.3% Australia's ASX All Ordinaries: +0.7%.

In the biggest economic news out of Asia, Chinese PMI's bounced back after several months of deceleration to 51.9 manf (from 50.6) and very strong 56.3 services (from 51.4) which was well above expectations. S Korean business surveys and industrial production improved m/m (but after previous month revised down for IP), but Japanese IP fell more than expected (down 2.1% m/m). Also notable is that Japan's fiscal year ended today. Many are theorizing that Japanese pension funds were lightening their exposure to US Treasuries in advance of that, so we may see them back into the market in coming weeks for US bonds.

Europe

Major European indices trade near their flat lines. STOXX Europe 600: +0.1% Germany's DAX: UNCH U.K.'s FTSE 100: -0.2% France's CAC 40: -0.2% Italy's FTSE MIB: +0.3% Spain's IBEX 35: +0.2%.

EU CPI came in slightly below expectations as did German unemployment. French Feb consumer spending improved to flat levels from deeply negative in January but that was below expectations for a gain. Covid cases continue to rise in most regions with France mulling a national lockdown. Also ECB President Lagarde gave a speech and said what you'd expect - "[bond traders] can test us as much as they want. We have exceptional circumstances to deal with at the moment and we have exceptional tools to use at the moment, and a battery of those. We will use them as and when needed."

US Data

ADP released earlier which showed a big jump as expected above 500k jobs but was a little lighter than expected, although February was revised up by 60k jobs. Also earlier were mortgage apps which decreased 2.2% headline with both refis and purchase apps falling a bit. Pending home sales will be released at 10 am. I'll have reports on all three and EIA.

US Commodities/Currencies/Bonds

OPEC+ JJMC (recommendation body) meeting starts at 10.30 EST. As noted early indications are a rollover of most of the supply cuts another month (or two). With refinery maintenance, particularly in China, demand declines in Europe/India/Brazil due to Covid spikes, increased Iranian sales to China, etc., inventory destocking will be much less next month or two, so this is probably a necessary condition if prices are to be supported which is what most of OPEC wants to see. In advance oil trades a bit red but WTI holding the $60 level.

As noted bonds are little changed taking a little wind out of the dollar rally which is also little changed. Gold and copper are getting a bit of a lift with mild gains while nat gas trades flat as does the VIX. According to Helene Meisler DSI on the VIX is around 13. Anything in single digits is very extended and generally leads to a short term reversal.

Misc.

Fallout from Archegos blowup spreads with MUFG coming out with a huge $2.7B hit and UBS a "three-digit-million" loss. Sounds like we're going to be near the high end of JPM's $5-10B estimate for total losses from this thing.

Also later today the WH will unveil its infrastructure plan. Things are still being settled but looks like around $2.25T to be "paid for" in part by corporate tax hikes.

But it does appear that the administration continues to plot a path inside the most aggressive factions of the Dem party.

But it's not just the government that is looking to invest in itself. According to BoA capex guidance is increasing which is good to see (assuming it's spent wisely (often a problem)).