Nasdaq Markets Outlook

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq's IR team.

#marketseverywhere | "Global bond losses are approaching $4 trillion since July. The biggest risk? Banks stuck with deteriorating bonds. At the end of June, there were $500 billion of unrealized bond losses at 289 U.S. banks."

-Andy Kessler, Beware Market Complacency

| "There is no lack of uncertainty in the world today; domestic politics, an escalating geopolitical crisis, and the unknown extent of the lagged effects of tightening are all on investors’ radar today."

-Piper Sandler, Michael Kantrowitz

| "Recent volatility in the Treasury market has driven increased investor concern over the fiscal position of the United States andthe supply/demand mismatch for Treasury securities."

-David, Kostin, Goldman Sachs Global Investment Research

| Bond volatility has not gone away...unsettling for equity markets:

* source: Deutsche Bank

| Earnings: "Q3 should see headline S&P 500 earnings exceed their highs after a profits recession from early 2022 levels. Macro data was strong in the quarter, which would have helped."

-Deutsche Bank, Jim Reid

* source: Deutsche Bank

| End of earnings recession...where will earnings take us? | "3Q marks the start of earnings recovery...We expect a sizeable 4% beat (vs. a typical 2% beat)." -BofA

* source: BofA

| #QualityMatters | "While the economy wrestles with the ramification of the lag of monetary policy, investors continue to lean on high quality themes (i.e. profitability, realized growth …)." -Piper Sandler

* source: Piper Sandler

| "Looking under the surface of S&P earnings, the modest strength we have seen recently is being driven primarily by the comm services, discretionary and tech sectors." -Piper Sandler

* source: Piper Sandler

| shelter costs one reason inflation has remained elevated...

* source: Oxford Economics

| THEMES: yields peaking for now? = helping market sentiment | stubborn moderate inflation a risk (CPI +PPI >expected) | where is oil going with geopolitical risks building? | Fedspeak turning dovish | Rising Federal Deficit | Optimism around upcoming Q3 earnings season | Q3 Bank earnings better than expected – will this earnings season be better than expected? | disappointing Treasury auctions, causing supply worries.

-by Shon Wilk, Nasdaq

1) KEY TAKEAWAYS

1) Equities + TYields HIGHER / Oil + Dollar + LOWER

| geopolitical tension

| US Will Tighten Curbs on China’s Access to Advanced Chip Tech -BBG

DJ +0.7% S&P500 +0.5% Nasdaq +0.4% R2K +0.9% Cdn TSX +0.2%

Stoxx Europe 600 +0.2% APAC stocks LOWER, 10YR TYield = 4.708%

Dollar LOWER, Gold $1,916, WTI -1%, $87; Brent -1%, $90, Bitcoin $29,817

* source: Goldman Sachs Global Investment Research

2) LAST WEEK: Energy (higher oil prices)+ Utilities (Treasury yields falling) outperformed. Small Caps underperformed while markets closed mixed.

* source: Oppenheimer Asset Management

* source: Piper Sandler

3) THIS WEEK: "US activity data, Q3 GDP in China and the CPI in Japan. In Europe, the spotlight will be on inflation and labour market indicators in the UK.

From central banks, key events include the Fed's Beige Book, Chair Powell's speech, as well as rate fixings in China. Notable earnings releases include TSMC, Tesla and Lockheed Martin." -Deutsche Bank

* source: Grindstone Intelligence

4) how corporate cash is spent...

* source: Goldman Sachs Global Investment Research

5) Financial conditions have tightened...

* source: Oxford Economics

2) ESG, COMPILED BY NATHAN GREENE

Banks Told to Review Clients Amid Historic ESG Crackdown in EU - BNN

-The European Banking Authority is revising the framework that sets industrywide capital requirements for lenders — known as Pillar 1 — to incorporate environmental and social risks. 

-For banks, the regime means they’ll have to review default and loss probabilities, as well as the risk weights that go into determining how much capital they set aside for each client account. The development may have major implications for high-emitting sectors such as oil, gas, cement, steel and mining.

EU wrangles over negotiating stance for COP28 climate summit - Reuters 

-Around 10 of the EU's 27 member countries including Denmark, France, Germany, Ireland, the Netherlands and Slovenia want the bloc to demand a phase-out of all fossil fuels, EU diplomats told Reuters. 

-Fossil fuel producers and consumers - some of whom, like Saudi Arabia, have blocked attempts to agree a phase-out in recent meetings including this year's G20 summit - are expected to offer similar resistance at the COP28 summit.

3) MARKETS, MACRO, CORPORATE NEWS

• US banks ponder end to bumper profits from higher interest rates-FT
• Israeli invasion plans target Gaza City and Hamas leadership-NYT
• US warns Iran against escalating Israel-Hamas war into regional conflict-FT
• Iran warns Israel through UN against ground offensive in Gaza-AXIOS
• Do not get involved in Israel crisis, top U.S. general warns Iran-RTRS
• Ukraine worries that prolonged war in Gaza may dilute global support-NYT
• Young Americans cut spending, shun restaurants as prices rise-RTRS
• Mortgage cost surge makes it cheaper to rent in tough US market-BBG
• Bonds are becoming more volatile than stocks by most on record-BBG
• Biden to push Israel, Ukraine aid package well over $2 billion this week-RTRS
• Biden's team to announce new export limits on AI chips to China-AXIOS

• AstraZeneca chair tasked with finding replacement for boss Pascal Soriot-MAIL
• Sony begins talks with Disney to buy India biz-MINT
• Ferrari to accept crypto as payment for its cars in the US-RTRS
• Stellantis, Ford furlough another 1,250 workers because of UAW strike-RTRS
• Qatar's Sheikh Jassim withdraws from process to buy club-BBC
• Ratcliffe would pay more than $1.5 bln for 25% Manchester United stake-RTRS
• Drug retailer Rite Aid files for bankruptcy protection-RTRS
• AstraZeneca bruised by China’s anti-corruption drive-LT
• TCS seeks to use Microsoft AI partnership to improve margins-BBG
• End of corporate America’s profit recession comes with concerns-BBG
• Activist hedge fund Starboard eyes Rupert Murdoch's News Corp-RTRS
• Qatari investors withdraw bid for Manchester United-BBG
• EU delays approval of Novavax’s revised Covid jab-FT 

• Oil/Energy Headlines: 1) Putin’s visit to Beijing underscores China’s economic and diplomatic support for Russia-AP 2) Russia-China energy cooperation in focus as Putin visits Xi-RTRS 3) Biden sold off nearly half the U.S. oil reserve. Is it ready for a crisis?-POLITICO 4) Russia expects Venezuela's Maduro to visit as relations deepen - Novak-RTRS 5) Persistent US services inflation dampens oil outlook-RTRS 6) The Trading Tycoon Steering Russia’s Global Oil Business-BBG 7) Crude quota squeeze may prompt China independents to turn to alternative feedstocks-Platts