1. Fed minutes – 13/10 - the recent Fed statement came across as a neutral one, so it was somewhat of a surprise, when Fed chair Jay Powell’s press conference was anything but. In its statement the Fed stated that “if progress continues broadly as expected, the Committee judges a moderation in the pace of asset purchases may soon be warranted”. Nobody really expected this to mean November but from the tone of Powell’s press conference later this appears to be what the FOMC wants us to think, despite there only being one payrolls report between now and the November meeting. While a taper seems pretty much nailed on now, speculation has now shifted to the timing of the first interest rate increase. This is especially important given that the number of FOMC members who saw the potential for a rate rise in 2022 increased from 7 in June, to 9, meaning the committee are evenly split, however that is likely to change if the data evolves as expected, which means that a rate hike for 2022 is likely to become a majority view by the end of this year, which is a big shift in thinking from earlier this year. Since that meeting a lot of water has passed under the bridge, we’ve seen further sharp rises in the costs of energy, as well as further supply chain disruption feeding into headline inflation. It is clear the Federal Reserve is much more concerned about higher levels of inflation than they were a few months ago, and this week’s minutes should give us an indication of how high this level of concern is. Bond markets aren’t waiting to find out with the yield curve steepening and short-term rates also rising sharply as well.
     
  2. UK Unemployment (Aug) – 12/10 - The unemployment picture for the UK economy has continued to improve over the last few months, a trend that has been no better illustrated than with the sharp decline seen in the claimant count rate since March, when it was at 7.2%. Since then, we’ve seen steady declines, falling to 5.7% in July, as businesses continue to reopen, even with the delay to reopening to July 19th. The ILO rate has fallen to 4.7%, even as furlough continues to roll-off. With the various supply chain disruptions being seen across sectors it is becoming increasingly apparent that furlough has outlived its usefulness. Job vacancies in July rose to over 1m, with 182k new roles added as the UK economy reopened and the rest of the remaining restrictions were removed. Wages are also pushing higher, and while some of the gains can be put down to base effects caused by the pandemic, they still rose from 6.6% to 7.4%, excluding bonuses, which means they are still rising much faster than headline CPI. This looks set to continue in the coming months as we head into yearend if the howls of anguish from businesses about labour shortages are in any way accurate. This could see the ILO measure edge higher, as struggling businesses decide to let any remaining employees go, suggesting that the next few months could be difficult ones for the labour market, especially where there are skills mismatches which result in delays in returning to the labour force.
     
  3. China Trade (Sep) - 13/10 – the August trade numbers for China were slightly better than expected, despite disruption at Chinese ports and the various lockdown restrictions that would have been expected to impact the flow of goods and services around the country at the time. On the exports front there was also a pickup in demand as we saw a rise from 19.3% to 25.6%, driven by a rise in demand out of the US and EU, which appeared to be driven by retailers bringing forward their pre-Christmas order spend over concerns about supply chain disruption. Imports also proved to be slightly more resilient as well rising 33.1%, however these numbers also need to be set in the context of a year ago as well, however as we head into September, and the various power cuts and production shutdowns of China’s heavy industries during the month we could well see some weakness on the imports side. Exports might stay resilient as retailers continue to bring forward their pre-Christmas spend over concerns over struggling supply chains.
     
  4. US CPI (Sep) – 13/10 – are we getting any closer to peak CPI? If energy prices are any guide, then the answer is probably not, and there is increasing nervousness amongst central bankers about this very notion. While a rise in food and energy prices isn’t reflected in the Feds preferred measure of inflation, the PCE Deflator, it is still causing sleepless nights for most central bankers as they look at pulling back on their stimulus programs, at the same time as trying to keep their respective economies ticking over. In August US CPI fell back from 5.4% in July to 5.3%, while core prices fell from 4.3% to 4%. A further fall would be most welcome, however given the continued resilience in energy prices and the disruption caused by Hurricane Ida that may be more of a hope than an expectation.
     
  5. US Retail Sales (Sep) – 15/10 – US retail sales rather confounded expectations in August, with most predictions expecting a fall in line with weaker consumer confidence. A rise of 0.7% ran counter to expectations of a decline of -0.7%, although a revised July reading of -1.8% tempered some of the positive narrative. Recent earnings reports from US retailers suggest that consumer spending has been rather subdued, with significant disruption from Hurricane Ida likely to have played a part. When you take into account a poor jobs report in August, and the expiration of various unemployment fiscal support measures, there is a chance we could well see a weak September number, with expectations of a decline of -0.2%   
     
  6. ASOS FY 21 – 14/10 – the last few months have seen ASOS share price roll over in spite of a good H1 trading update back in April, and a decent Q3 update in July, which saw the shares drop sharply, with the shares down over 30% year to date. Q3 saw total retail sales rose by 26%, with the UK sales rising by 60%. For the four months to June total revenue rose by 27% to just shy of £1.3bn. Having acquired the brands of Topshop, Topman, Miss Selfridge and HIIT brands for £265m, in February, fully funded from cash reserves, the company now has a host of other brands to add to its catalogue, while the integration costs came in lower than expected. While the business appears to have done well due to the various lockdowns it would appear that investors have lost confidence that this can continue as the economy reopens and consumers find other things to do. This was borne out by Boohoo’s numbers last month, and the fear is that this could well impact ASOS as well. Management don’t appear to be too concerned leaving recent guidance unchanged, however this could change as a result of the various supply chain disruptions that are likely to get worse as we head towards Christmas. We’ve heard very little from management about the risks of higher costs and their impact, although they did acknowledge them back in July, with the share price slide since then suggesting that some of that may be already priced in?    
     
  7. Entain PLC Q3 21 – 12/10 – the recent $22bn bid by US betting giant DraftKings is a bold move for a company that appears to want to extend its market reach beyond the US. Putting to one side Entain is still in the process of enacting its own program of integrating various brands over the years, the owner of Ladbrokes and Corals, and which was previously known as GVC Holdings has been spreading out across the world at pace. The move by DraftKings is bold given Entain’s relationship with MGM Resorts and given that MGM made a bid earlier this year of $11bn. Entain certainly has a lot of assets, with a strong brand in the UK as well as its other 27 markets. MGM is highly unlikely to want to give up its designs on Entain, but if it does it may look to extract a high price from DraftKings. Either that, or it will have to decide whether it wants to even get close to the current offer which is double its own offer. That’s a lot of bid inflation in less than a year, and raises the question whether the talks will amount to anything, and that’s before competition authorities stick their noses in.
     
  8. JPMorgan Chase Q3 21 – 13/10 – at the end of June JPMorgan Chase CEO Jamie Dimon went to great lengths to play down expectations for the bank’s Q2 earnings numbers, having seen both Q4 of last year and then Q1 set new records. With the bank also pledging to boost its quarterly dividend to $1 a share, investors seemed confident that more cash is likely to come their way, after the bank released another $5.2bn in loan loss reserves in Q1. In Q2, the bank released another $3bn from reserves delivering another decent quarter. Revenues came in at $30.4bn while profits came in at $3.75c a share, both decent beats on market expectations. On the fixed income side revenues came in below expectations at $4.1bn however in other areas of the business the performance was really strong pointing to a bank that doesn’t appear to have a weak link. Loan growth continues to be a concern, with CFO Jeremy Barnum saying at the time it was unlikely to improve this year. This looks set to continue for the current quarter given the delta disruptions that were seen in July and August, with both companies and consumers reluctant to borrow, while deposits rose by 23%. Costs are also likely to be a key area, especially since they rose to $71bn in Q2. As we look to Q3, its unlikely that profits will be able to match the levels seen in Q1 or Q2, unless the bank decides it wants to release some more reserves. Profits are expected to come in at $2.89c a share.
     
  9. Citigroup Q3 21 – 14/10 – the release of loan loss reserves was a similar theme for Citigroup when they reported in Q2, with profits boosted by a $2.4bn boost in that area, pushing profits up to $2.85c a share, well above expectations of $2 a share, while revenues rose to $17.47bn. The patterns in terms of revenue and profitability by division were similar to its peers, FICC underperforming, while equities and trading doing better than expected. In retail banking, revenue was 7% lower, as consumers paid down debt while deposits rose by 18% as consumers cashed in their stimulus payments. There was some disappointment that the bank was one of the few banks not to announce a dividend payout increase, and this quarters upcoming Q3 numbers seem unlikely to change that in the short term, with profits set to come in at $1.82c a share.
     
  10. Goldman Sachs Q3 21 – 15/10 – Goldman Sachs also had a decent Q2, with revenues coming in at $15.39bn, well above expectations of $12.43bn, however trading revenue fell short at $4.9bn, and this could well continue to struggle in Q3 given the fairly low levels of turnover during the summer months. This was more than offset by investment banking revenue which rose 26% to $3.45bn, with the high number of IPOs helping to boost the numbers. Consumer and wealth management, which was expanded to the general public at the beginning of this year, generated a record $1.75bn in revenues in Q2. Profits came in at $15.02c a share well above consensus of $10. Operating expenses were over 17% lower from a year ago, coming in at $8.64bn, and also lower than they were in Q1. Unlike JPMorgan, Goldman seems to have a better handle on costs, however that’s probably easier given they have far fewer bank branches and no retail operation to speak of. Q3 profits are still expected to come in lower, below $10 a share, at $9.77c.
     
  11. Delta Airlines Q3 21 – 13/10 – having posted a $1.2bn loss at the end Q1, the airline returned to a profit of $652m in Q2, when it reported back in July, largely due to help on the payrolls front from the Federal government, and a recovery in domestic demand. If that aid is stripped out, we still saw a loss of $1.07c a share, on revenues of $7.13bn. The airline went on to say that it expected to be profitable through the second half of the year without that help. For Q3 Delta said it expected to see revenue fall between 30% to 35% from 2019 levels, when it made $12.5bn. Events since then took a different turn, when at the beginning of September, we had the likes of United, Southwest and American Airlines downgrade their Q3 guidance after August bookings came in at the lower end of expectations, with business travel also underperforming. While Delta said that it expected to see a hit to revenues, it still expected to be able to turn a small profit. The slowdown in bookings is expected to continue into Q4 as well, and despite the resumption of international travel between the UK, Europe and the US, the US domestic market is still a big revenue earner for all of the US airlines. Profits are expected to come in at $0.18c a share. 

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