Daily News Snapshots
Tesco says Britons buying less and trading down to navigate inflation https://www.reuters.com/business/retail-consumer/uks-tesco-sees-early-signs-changing-customer-behaviour-inflation-hits-2022-06-17/
Britons are buying less, switching to cheaper products and shopping more often as they try to cope with soaring inflation, describing the market environment as “incredibly challenging”.
Pessimism weighing on Britain’s households has hit unprecedented levels, as wages struggle to keep pace with inflation that reaches 9% in April and is heading for double digits. Food inflation is predicted to hit 15% this summer.
Britain’s biggest retailer, which has an over 27% share of the U.K. grocery market, said it was also seeing early signs of customers opting for cheaper products in areas of significant inflation.
Staples like pasta, bread, and beans is where we’re seeing customers choose to trade down to the entry level or the core brand level products.
India's Reliance considers buying out Revlon in U.S., ET Now reports https://www.reuters.com/markets/deals/indias-reliance-considers-buying-out-revlon-us-et-now-2022-06-17/
The report comes as Revlon filed for bankruptcy earlier this week after global supply chain disruption drove up raw material costs and prompted vendors to demand upfront payments.
Reliance has pushed its way into fashion and personal care space in recent months as it diversifies away from its mainstay oil business. It has already established a foothold in telecom and retail sectors.
After $2 Trillion Wipeout, US Stocks Are Poised for Some Relief https://www.bloomberg.com/news/articles/2022-06-16/u-s-stock-futures-rise-lennar-walmart-gain?srnd=premium
Contracts on the S&P 500 were up 1.1% after the underlying gauge erased $2 trillion in market capitalization this week. Nasdaq 100 futures rose 1.4% and Dow Jones futures gained 0.8%.
Market participants are also bracing for further volatility today from the quarterly event known as the triple witching. The $3.5 trillion options expiry may lead to short covering, which could bring temporary relief for the stock market.
When Crypto’s Own Hedge Fund Geniuses Failed https://www.bloomberg.com/opinion/articles/2022-06-15/when-crypto-s-own-hedge-fund-geniuses-failed?srnd=premium
After Terra and Luna’s $60 billion stable coin collapse and the freeze of withdrawal at crypto-lending platform Celsius, trading firm three arrows capital now appears to be in trouble. The fund is liquidating its holdings amid plummeting prices, and an ominous tweet from co-founder Zhu Su about “communicating with relevant parties” is stirring fears of something potentially more fatal.
A glance at Three Arrow’s past crypto bets, on the likes of Luna and Axie infinity, as well as Bitcoin and Ether, leaves little doubt that the “communicating is probably not of the fun kind. The fund, estimated to be managing $10bn in assets in March, combined Zhu’s derivatives expertise with a kind of beatific conviction in broad crypto “super cycle”.
The waves of forced selling still seem to be rippling through crypto markets shows how complex and lending-driven this market has become. Traditional finance margin call take on a more brutal form in crypto when smart contracts automatically liquidate positions. The current focus is on Three Arrow’s exposure to staked ether, a token designed to earn interest while Ethereum upgrades its network, which is buckling under heavy selling pressure.
Calendar Events Today:
None.
Commentary:
Economics Calendar:
Nothing important.
Equity Market:
$NDX closed -4%, -466, to 11,127. The decline was led by bear-favorite $MELI -9%, EV manufacturer $TSLA -8.5%, and Semi $AMD -8%.
We continue our belief that the floor for $NDX in this downward cycle sets at 10,050. Though we believe the market has overreacted to inflation data, this downward momentum likely won’t stop until it reaches previous said floor.
Hang Seng rallies again today. It is holding strong at our previous mentioned 21,000 resistance. Hang Seng rallied today by 1.1%, or +229, to 21,075. The rally was led by Chinese tech companies e.g., $JD +6%, MEITUAN +5%, etc.
Hang Seng faces some strong buying thanks to several tailwinds; 1) easing policy; 2) reopening; 3) improved Sino-US relationship. The next two weeks are likely important. If $HSI can stay within 5% up-down of the 21,000, it’d mark the end to the Chinese bear market. Anything under 21,000 to 20,000 offers excellent risk/reward to own Chinese names.
Rates Market:
Yield curve bull steepened again. 10s yield declined to 3.28% and 2s declined to 3.14%. 10y2y spreads widened marginally to 0.095 from 0.067.
As we’ve mentioned in our last newsletter, we think yield has likely topped.
Rationale being:
1) From an operational perspective, we don’t think the feds will push feds funds beyond the 3% breakeven between assets and liabilities. Otherwise, at above breakeven, the feds officials will have to explain to congress why their facilities are suffering from bn$ of losses that comes out of Americans’ pockets. This is not a likely scenario.
2) Semiconductor and physical supply chain e.g., ports capacity, bottlenecks were resolved within 6 months’ time. It is possible that current elevated energy and food shortage resolved within 6 months’ time as well.