Executive Summary
Softbank reports its 2nd largest quarterly loss on record. $21.6 billion in Q2; Unloads investments in Uber and Opendoor to raise cash. (read more)
"Recession-proof" gaming industry facing challenges with rising consumer prices as evidenced by Take-Two Interactive Software’s quarterly results and warning guidance from Nvidia. (read more)
Thermal coal prices continue to far outstrip met-coal prices given energy market crisis. Long term deals between Glencore and Nippon Steel locking in at USD 375/ton for the next 12 months, this price imbalance is unlikely to correct anytime soon. (read more)
U.S. productivity posts biggest ever annual drop in Q2. Nonfarm productivity had its steepest yearly fall since 1948. (read more)
US July headline CPI was flat MoM, rose 8.5% YoY still at 40-year high (9.1% in June). (read more)
Disney streaming growth surprises estimates; earnings beat on top and bottom line. Disney+ races past Netflix in number for the first time. (read more)
US weekly jobless claims last week were 262k (263k expected) but still below slowdown alarm levels. (read more)
UK Economic data shows GDP contraction but less than expected; EU Economic data shows increasing costs, slowing industrial output. (read more)
India’s ONGC Q1 results show 84% increase in revenue YoY on high commodity prices. (read more)
Are investors too complacent with VIX below 20? Equities have bounced off June lows and trading now in "technical" bull market. (read more)
Story 1: Softbank reports its 2nd largest loss of $21.6B; Unloads Uber stake; Plans 400B Yen (~USD 3B) in share buyback.
USD 21.6B in quarterly losses
Softbank reported its second largest quarterly loss of 2.93T Yen for its Vision Fund for the June Quarter.
Total net loss of 3.16T Yen for the quarter, compared to a profit of 0.761T Yen last year during the same period.
Softbank authorised a 400B Yen share buyback program as reported on CNBC.
Son pointed to cutting costs through limiting the second fund just to managing its current portfolio of investments, while planning workforce cuts at Vision Fund and cost reductions across the group reports Reuters.
To raise cash, SoftBank has exited companies including Uber Technologies and home-selling platform Opendoor Technologies, for a total gain of $5.6 billion. Uber was sold at an average price of $41.47, higher than its current trading level.
Source: Trading View
Story 2: "Recession-proof" gaming industry facing challenges with rising consumer prices
NVDA shares tanked 8% on earnings warning
Take-Two posts EPS of -0.76 (0.86 expected) and revenue of 1.1B (1.09B expected). Shares drop 7% in extended trading. Full-year adjusted sales expected to be below analyst estimates. Consumer spending on video games in the US fell 11% in June. (Reuters)
Nvidia also warns of lower second-quarter revenue on weakness in its gaming business, sending NVDA down 8%. Nvidia earnings are expected on the 24th of August. (Reuters)
Source: Trading View
Story 3: Thermal coal prices continue to far outstrip met-coal prices given energy market crisis.
With thermal coal prices still far outstripping met-coal prices, coking producers may be tempted to market their product as a high grade thermal - while profitable, will cause significant supply pressures for steel makers (not to mention the insurance and finance implications on their ESG credentials if their thermal ratios exceed ~30%).
With the likes of Glencore striking a deal with Nippon Steel last month locking in USD 375/ton thermal coal price for the next 12 months, this is an imbalance that is unlikely to change in a hurry. (Adam Battista on Linked In)
Coal India Limited posted a 179% rise in its consolidated net profit gaining from buoyant coal prices. (ET)
Story 4: U.S. productivity posts biggest ever annual drop in Q2. Nonfarm productivity had its steepest yearly fall since 1948.
Steepest fall in Non farm productivity since 1948
U.S. worker productivity in Q2 fell at its steepest pace on an annual basis since 1948 when the Labor Department began tracking it.
Meanwhile, growth in unit labor costs accelerated, suggesting strong wage pressures will continue to help keep inflation at elevated levels.
Nonfarm productivity, which measures hourly output per worker, fell at a 2.5% pace from a year ago. It also declined sharply in Q2 at a 4.6% annualized rate, after having declined by an upwardly revised 7.4% in the first three months of the year.
Unit labor costs rose 10.8% (following a 12.7% rise in Q1). An acute shortage of workers is boosting wage growth.
Source: Reuters
Story 5: July headline CPI was flat MoM, rose 8.5% YoY (9.1% in June).
US July Inflation at 8.5% YoY
While easing on MoM basis, numbers are still at 4-decade high & far from Fed's 2% target inflation rate.
US CPI staying flat in July points to slowing inflation; Equities rallied on expectations that Fed rate increases will ease.
July headline CPI was flat MoM, rose 8.5% YoY (9.1% in June). Core inflation numbers, which excludes food and energy, also came in below expectations at 0.3% MoM increase (0.5% expected).
Numbers indicate that inflation pressures are easing somewhat but still remain near their highest levels since the early 1980s.
Treasury yields mostly pulled back from an earlier plunge as investors digested data showing that consumer prices did not rise in July as gasoline prices fell.
Decelerating U.S. inflation prompted bets that the Federal Reserve would raise interest rates at a slower pace than previously expected.
Story 6: Disney streaming growth surprises estimates; earnings beat on top and bottom line.
152.1M subscribers for Disney+
Disney+ subscriptions rose to 152.1M during its fiscal Q3, crushing 147M forecasted by analysts.
Disney reported that total Disney+ subscriptions rose to 152.1 million during the fiscal third quarter, higher than the 147 million analysts had forecast, according to StreetAccount.
The company unveiled a new pricing structure that incorporates an advertising-supported Disney+ as part of an effort to make its streaming business profitable.
They also lowered 2024 forecast for Disney+ to 215-245M subscribers, down 15 million on both the low end and high end of previous guidance as a result of their loss of streaming rights to cricket matches in India
Disney’s parks, experiences and products division saw revenue increase 72% to $7.4 billion during the quarter, up from $4.3 billion during the same period last year.
Disney passes Netflix in number of subscribers for the first time ever. Disney added 14.4m subscribers in the latest quarter, beating estimates and now has a total of 221 million worldwide - the most of any streaming service.
Of the 14.4m new customers, just 100k were from the North America pointing to growing popularity across the globe. Streaming wars are heating up cited Oktay Kavrak of Leverage Shares.
Story 7: US weekly jobless claims last week were 262k (263k expected) but still below slowdown alarm levels.
262,000 weekly jobless claims in US
US weekly jobless claims last week were 262k (263k expected), this is the second consecutive week of increases. However, that's still below the 270k-300k range that economists say would signal a material slowdown in the labor market.
The number of people receiving benefits after an initial week of aid increased 8k to 1.428 million during the week ending July 30. The so-called continuing claims are a proxy for hiring.
Source: Reuters
Story 8: UK Economic data shows GDP contraction but less than expected; EU Economic data shows increasing costs, slowing industrial output
Rising energy costs will leave millions of households struggling to pay their utility bills in the UK
UK Q2 GDP shrank by 0.1% QoQ (0.3% contraction expected).
Monthly data showed that GDP fell 0.6% in June, less than the 1.3% forecast, but down from a revised 0.4% expansion in May.
“U.K. growth is stagnating as the economy faces challenges from a severe real income squeeze amid elevated inflation and higher interest rates,” said Hussain Mehdi, macro and investment strategist at HSBC Asset Management.
The U.K.’s energy price cap has been projected to hit £4,266 ($5,191), according to Cornwall Insight, which would leave millions of households struggling to pay their bills.
EU Industrial Production in June rises 0.7%, more than the expected 0.2% but below May's revised 2.1% growth.
France and Spain CPI data comes in as expected at 0.3% and 10.8% respectively.
Source: CNBC
Story 9: ONGC Q1 results show 84% increase in revenue YoY on high commodity prices
251% jump in YoY Q1 standalone profits at India’s ONGC
The PSU oil explorer's revenue from operations increased about 84% to Rs 42,321 crore in Q1.
ONGC reported a 251% YoY jump in its Q1 standalone profit to Rs 15,205.85 crore against Rs 4,334.75 crore in the year-ago period.
ONGC's operating margin also improved to 49.57% during the June quarter against 32.01% in Q1 of FY22.
Source: ET
Story 10: Are investors too complacent with VIX below 20?
Hedge Funds are running record net shorts adding fuel to bear market rallies
Equities have bounced off June lows and trading now in "technical" bull market.
Too many investors are defensively positioned.
Especially hedge funds with record net short positions are forced to cover positions, hence providing more fuel to the rally.
Surprise to see the VIX (the fear index) below 20 despite the following headwinds - (a) Inflation still near record high (8.5%), (b) Hawkish #fed with more rate hikes to come + QT to 2x to $95bn a month from September onwards, (c) Negative revisions to earnings, (d) Declining ISMs/PMIs, (e) Energy crisis in the EU, and (f) Geopolitical risks (Russia/Ukraine war, China/Taiwan/US tensions).
Source: Charles-Henry Monchau of Syz Group on Linked In
Image source: Hedge Eye
MINT FINANCE DISCLAIMER
Mint Macro Review is for informational purposes only and does not constitute financial, investment, risk management, accounting, or tax advice.
Nothing stated here is to be construed as a recommendation, solicitation, endorsement or offer to buy or to deal in any financial products.
Trading and investment in any financial products are exposed to risk. There are no such thing as risk-free returns.
This material has been published for general education purposes only. It does not address specific investment or risk management objectives, financial situation, or needs of any person.
Advice should be sought from a financial advisor regarding the suitability of any investment or risk management product before investing or adopting any investment or hedging strategies.
Past performance is not indicative of future performance.