Month: June 2021

By Michael Every of Rabobank

While We Wait

It goes without saying that today will be all about US payrolls – more so after a bumper ADP print of 978K yesterday. Which means those of us in Asia face a long day of waiting ahead. However, we have enough to chew on in the meantime.

In the US, President Biden has dropped some proposed tax increases as part of the fiscal package he now seems less likely to be able to get through due to having less ‘reconciliation’ bullets than had been thought (or so says the Senate Parliamentarian). He’s apparently prepared to discuss a floor corporate tax rate of 15%, closing off loopholes and exemptions, rather than any increases. This would match the rate being proposed globally to be discussed at the G7 next week – and G7 finance ministers, including Yellen, will be meeting today in advance of the national leaders. Expect related headlines today and Saturday. The press reports the president also had a call with Larry Summers, who despite being regarded as the one who discovered “secular stagnation” (rather than Kalecki), is also a critic of current US fiscal stimulus plans.

On another front, the White House issued an executive order expanding, not reducing, the Trump-era list of Chinese firms off-limits to US investors due to their links to the Chinese military. There are 59 now named, including China Mobile and Huawei. US China hawks suggest this was actually a step backwards by not expanding the scope of the order, and excluding some candidates, but it is still not going to improve US-China relations. Then again, for those thinking this is bad, in the background former-President Trump has stated that China should have to pay $10 trillion in compensation for Covid-19 – and he still seems to have a lot of sway over the Republican party’s general line of thinking, so goodness knows where this all ends up.

Meanwhile, as supply-chain driven inflation continues to bite, a key world food price index just hit the highest level since the Arab Spring of 2008, a worrying trend we flagged as possible a few months ago. The correlation between expensive food and global political instability should be obvious as a huge threat ahead given there is no immediate sign of this trend reversing: except perhaps to those who never, ever go hungry, and who see not being able to go to their favourite restaurant on a Friday night, and having to order in instead, as the real punishment.

On which relative ‘First World Problems’ front, the UK is up in arms because Portugal has been removed from the government’s ‘Green List’ of summer holiday destinations at the last minute due to a surge in worrying new Covid variants – the logical result of Portugal opening up to global tourism before it had been fully vaccinated. That basically leaves Brits with the choice of Iceland (population: 300,000 – so bring a sleeping bag), or Israel (which isn’t at war this month – so far), or the windswept Falkland Islands. Or Devon and Cornwall – like the G7. So time to go long cream teas again. And at least all the stimulus money is circulating at home, as any good proponent of MMT knows it should.

But more serious news stems from the Taiwanese port of Kaohsiung –the 14th busiest in the world, just behind Antwerp, and well above LA at #17– where a Chinese-owned vessel collided with a Taiwanese one, causing substantial damage to the port itself. Without getting into any (more) finger pointing, the last thing strained global supply chains needed to see was another major port facility operating at reduced capacity – and yet that is what we just got. Taiwan seems to be having a really bad run of logistical luck in the past few months.

And on strains, both geopolitical and supply-chain, yesterday saw bombshell news from the EU too: Europe plans to impose carbon emission costs –read tariffs– on imports of iron and steel, aluminium, cement, fertilisers, and electricity, potentially starting as soon as 2023. In other words, as was promised in the Commission’s early 2021 trade review, the EU is serious about ensuring it does not spend its money on goods produced by ‘dirtier’ economies. The question is if this really goes ahead, and if it stops at the above list of goods – because almost everything can be produced sustainably or unsustainably; and if the US then follows, setting up a new “Greenies vs. Meanies” world trading order. The key point for markets is that global supply chains will not have fully recovered from the current disruption by the time new structural changes may then kick in.

And on structural changes, one also has to note Russia taking the decision to strip the USD from its sovereign wealth (“National Wellbeing”) fund’s $186bn holdings. (Yet note which currency I just had to denominate the soon-to-be-dollarless entity in.) It will instead shift to a basket of Euro (40%), Yuan (30%), Gold (20%), Yen (5%) and Sterling (5%: “Go, Global Britain, Go!”, as Russians clearly really like Cornish/Devonian cream teas too). And so begins a great global game of pass-the-parcel, as everyone else who still does use the dollar has to end up making those dollar transactions for Russia instead.

Lastly, a lot of ‘things’ happened in meme-stocks, which would require a separate Daily of its own to do justice to, but isn’t the primary focus here.

US stock index futures fluctuated listlessly in a narrow range on Friday as investors braced for a crucial report that is likely to show jobs growth accelerated last month, possibly fanning fears over inflation and easing of the Federal Reserve’s support. At 7:30am emini were down 11 points, or 0.03%, S&P 500 e-minis were up 3 points, or 0.08%, and Nasdaq 100 e-minis were up 22 points, or 0.16%. The meme mania was dormant this morning with reddit stocks all lower after peaking two days ago.  Treasuries were steady and the dollar rose modestly to fresh 3-week highs. Gold dropped and bitcoin slumped after a Elon Musk tweet trolled cryptos.

Shares of so-called “meme-stocks” weakened in early trade, with AMC Entertainment down nearly 10% a day after the Reddit darling completed its second share offering this week. Here are some of the more notable premarket movers:

• AMC Entertainment (AMC) drops 6% in Friday’s premarket session, falling 6% from the last close, as it sold equity to shore up a depleted balance sheet.Shares of Koss Corp (KOSS), BlackBerry and GameStop (GME) dropped between 2% and 5%.
• Cryptocurrency-exposed companies like Coinbase (COIN) and Marathon Digital (MARA) decline Friday after Elon Musk tweets a broken-heart emoji which appeared to hint at a potential split between the Tesla boss and Bitcoin.
• Other meme stocks like Koss Corp. (KOSS), Express Inc. (EXPR) and BlackBerry (BB) also slide as the meme rally cools.
• Pershing Square Tontine (PSTH) blank-check company falls 7.2% in premarket trading after confirming talks to buy 10% of Universal Music Group from France’s Vivendi.
• Senseonics Holdings (SENS) jumps 40% in premarket trading on Friday after saying Promise study demonstrated strong accuracy of 180 Day CGM Sensor.
• Workhorse (WKHS) slides 7.6% after Cowen downgrades the stock, saying that it now looks fairly valued following the retail trader-driven rally.
• Facebook Inc (FB) dropped 1.1% after EU antitrust regulators opened an investigation into the world’s largest social network’s use of advertising data to see whether it breached EU rules

The May jobs report at 8:30 a.m. ET (full preview here) is expected to show nonfarm payrolls increased by 674,000 jobs in May, after an unexpected slowdown in labor market in April. However, A scheduled appearance by Joe Biden after the report has lifted the whisper number to above 1 million. The release is likely to spur volatility as traders scramble to reassess the case for ongoing policy accommodation: a (much) stronger-than-expected reading could further stoke worries that the robust economic recovery could push the Fed to contemplate paring back its bond buying and raising interest rates.

“Any major surprise today could go a long way in shaping the narrative around the Fed’s normalization timeline,” said Marios Hadjikyriacos, investment analyst for XM. “The market reaction will depend on the size of any surprise.”

“If the nonfarm payroll numbers were to surprise to the upside, and I’m talking about anything above 700,000, that’s going to keep the pressure on the U.S. fixed income market and definitely very supportive of the dollar,” Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore, said in a Bloomberg TV interview.

European equities give back small gains, trading little changed onvolumes down 30% vs 20DMA. Spain’s IBEX fares the worst with a 0.7% drop. Banks, utilities and telecoms are the worst performing sectors. Here are some of the biggest European movers today:

• Saipem shares rise as much as 5.3% in Milan, the steepest intraday advance since April 8 and the day’s best-performer on the FTSE MIB index. Analysts highlight the acquisition of Naval Energies’ floating wind business, noting deal will boost company’s position in this field.
• Collector gains as much as 8.3%, the most since April 30, after Chairman Erik Selin purchased 700,000 shares in the Swedish company.
• Boliden climbs as much as 3.2% after DNB raised the stock to buy from hold, seeing potential from hidden value, according to a note.
• European airline stocks fall again after Thursday’s news that the U.K. cut Portugal from its “green list“ of travel destinations, and added no new countries to the roster.
• EasyJet slide as much as 3%, Wizz -3.7%, British Airways/Iberia-parent IAG -2.3%, Ryanair -1.7%, Lufthansa -1.6%
• ING shares drop as much as 2.3% after Barclays downgraded the stock to underweight, saying “goldilocks is going overboard” as company-compiled consensus has “become overly optimistic.”
• Fingerprint Cards falls as much as 15%, the most since Feb. 16, after the company said it’s withdrawing its 2Q revenue forecast.

Earlier in the session, Asia stocks slipped, as strong U.S. jobs data stoked inflation concerns, while China shares reversed initial declines after President Joe Biden amended an investment ban list for the country’s companies. The MSCI Asia Pacific Index fell 0.2% at 5:47 p.m. in Singapore, led lower by shares in the tech-heavy markets of Taiwan and South Korea as worries of higher interest rates affect the sector’s earnings outlook. Data released overnight showed an increase in U.S. private payrolls and record service-sector growth, bringing up the possibility of faster withdrawal of central bank stimulus. Japan’s Topix eked out gains, climbing for a fourth straight day. Meanwhile, China’s CSI 300 Index closed 0.5% higher led by gains in consumer staples and financial stocks. The gain came even as the Biden administration moved to put 59 companies on a list that bans U.S. investment. The docket includes Huawei Technologies Co. and the country’s three biggest telecommunications companies. Asia-based investors are looking ahead to the monthly U.S. payrolls report due Friday for cues on the direction of growth and inflation. The Asian stock gauge is still set for a third straight week of gains, its longest winning streak since February. “Market positioning ahead of the US jobs data showed a preference for derivatives in FX, bond and equity markets as traders hedged their portfolio risks and built leverage bets in anticipation of the data,” Anderson Alves, a trader at brokerage ActivTrades, wrote in a note. Malaysian stocks were the biggest decliners in the region as Covid-19 cases in the country remain elevated. India’s Sensex pared gains as the central bank kept borrowing costs at a record low level and cut its economic-growth projection.

In rates, trading was also quiet, with Treasuries steady over Asia and early European session with price action limited ahead of the jobs report. Treasury 10-year yields around 1.622%, near to Thursday’s closing levels and trading broadly in line with bunds and gilts. Range on 10-year yields was just 1.4bp through the overnight session and up to 7am ET. 10y German yields are little changes near -0.187%, with peripheral spreads widen a touch, Italy underperforms ahead of today’s scheduled ratings review by Fitch.

In FX, the Bloomberg Dollar index extended gains to a three-week high; the greenback was mixed versus its Group-of-10 peers, though most currencies were confined to tight ranges. The euro fell a fourth day to approach $1.21, a level last seen in mid- May; European government bonds were steady, in line with Treasuries. The pound reversed a modest Asia session loss, with concerns lingering over a delay to the U.K.’s full economic reopening. The Aussie held near a seven-week low while Australia’s bonds fell after Westpac’s Bill Evans said that the central bank won’t roll over its three-year yield target to the November 2024 maturity.Turkish lira faded ~0.6% of early weakness to trade flat.

In commodities, crude futures rose toward best levels for the week. WTI is 0.6% higher, back on a $69-handle. Spot gold fades Asia’s modest weakness to trade little changed near $1,870/oz. Most base metals are in the green, trading off worst levels for the week; LME aluminum and tin outperform peers

Looking at the day ahead, the highlight will be the aforementioned US jobs report later on. There’s also an array of central bank speakers including Fed Chair Powell, ECB President Lagarde, BoJ Governor Kuroda and PBoC Governor Yi Gang, while G7 finance ministers will be meeting in London. Otherwise, the data highlights will include the German and UK construction PMIs for May, as well as Euro Area retail sales and US factory orders for April.

Market Snapshot

• S&P 500 futures little changed at 4,190.75
• STOXX Europe 600 little changed at 450.72
• MXAP down 0.2% to 209.49
• MXAPJ down 0.2% to 703.68
• Nikkei down 0.4% to 28,941.52
• Topix little changed at 1,959.19
• Hang Seng Index down 0.2% to 28,918.10
• Shanghai Composite up 0.2% to 3,591.85
• Sensex down 0.3% to 52,061.15
• Australia S&P/ASX 200 up 0.5% to 7,295.35
• Kospi down 0.2% to 3,240.08
• Brent Futures up 0.5% to $71.66/bbl
• Gold spot down 0.05% to $1,869.75
• U.S. Dollar Index little changed at 90.56
• German 10Y yield fell 0.1 bps to -0.184%
• Euro down 0.1% to $1.2113

Top Overnight News

• Treasury Secretary Janet Yellen is facing pressure to move toward a global tax deal by the end of the week as she meets her Group of Seven counterparts for the first time as the world’s most powerful finance minister at a summit in London
• Goldman Sachs Group Inc. and HSBC Holdings Plc are opening their offices fully in Hong Kong as a fourth wave of infections was contained and the U.S. investment bank said half of its staff in the financial hub are now vaccinated
• As European government bond yields rise amid inflation expectations and an economic recovery, investors may opt to buy such debt instead of corporates, said Martine Wehlen-Bodé, a senior portfolio manager at UBS Asset Management in Zurich

Quick look at global markets courtesy of Newsquawk

Asian equity markets traded cautiously following the tech-led declines in the US and with sentiment constrained by US-China tensions, as well as the looming NFP jobs data. ASX 200 (+0.5%) was initially subdued with underperformance in the mining-related sectors after underlying metal prices suffered the ill-effects of a stronger dollar, although the index managed to recover helped by strength in healthcare and resilience in the top-weighted financials industry. Nikkei 225 (-0.4%) was dragged lower amid the early broad cautious tone and a predominantly firmer currency which overshadowed the better-than-expected Household Spending data for Japan that printed the largest Y/Y increase since comparable data was made available in 2001. Hang Seng (-0.3%) and Shanghai Comp. (+0.2%) initially declined amid ongoing frictions between the world’s two largest economies after US President Biden signed an order which expanded on the Trump investment ban and included 59 companies linked to China’s military and surveillance technology, while there were also reports that China’s market regulator warned another eight sharing-economy companies regarding unclear prices which resulted in early heavy pressure for Meituan shares. However, Chinese markets gradually recovered, helped by easing of mainland money market rates and with China also proposing an appropriate reduction in stamp duty. Finally, 10yr JGBs were lower on spillover selling from T-notes after the strong data stateside and with some questions raised following the Fed’s recent plan to unwind its corporate bond holdings, while a lack of BoJ presence in the market today also contributed to the constrained demand for Japanese government bonds.

Top Asian News

• Goldman, HSBC to Open Hong Kong Offices Fully as Virus Wanes
• With or Without the PBOC, the Yuan Is Set to Weaken From Here
• Meituan Founder Donates $2.3 Billion Stake as Probe Persists
• Japan Enters Taiwan-China Fight With Vaccine Shipments to Taipei

Major bourses in Europe exhibit the same indecisive and lacklustre trade seen throughout most of the week in the run-up to the US jobs report (full preview available in the Newsquawk Research Suite), with US equity futures trading sideways in the absence of any fresh catalysts. From a macro perspective, the noise surrounding the possible start of taper discussions has grown over the week, especially after the Fed opted to end its Secondary Market Corporate Credit Facility – which although was not meant to be seen as a broader unwind signal – has riled up conversations about what lies ahead at the bank. Further, Fed’s Harker (2023 voter), Rosengren (2022 voter), and Kaplan (2023 voter) all hinted at the possibility of beginning to talking about the taper plan as soon as this month (meeting on June 15-16), albeit the more influential members have yet to come on board. Back to European trade, some mild underperformance can be seen in Spain’s IBEX (-0.5%) as its heavy-weighted Travel & Leisure sector sees headwinds from the UK’s latest travel list revisions which reminds us of the threats to the tourism-dependent countries going ahead. The overall breadth of the market remains narrow, but the UK’s FTSE 100 (-0.2%) also errs lower due to the overnight losses across base metals coupled with a modestly firmer Sterling. Sectors are mixed with no overarching theme nor bias, and again with a narrow breath. In terms of individual movers, Vivendi (-0.4%) is softer despite confirming that Pershing Square SPAC is to acquire 10% of Universal Music Group for around USD 4bln, representing an enterprise value of EUR 35bln. Meanwhile, NN Group (+0.2%) failed to garner much traction from source reports that its asset management unit valued at EUR 1.5bln has reportedly drawn interest from UBS, Allianz, Generali, and DWS.

Top European News

• Swiss Banker on Trial With Alleged $2.2 Million Insider Trader
• Swedish Wind Developer OX2 Plans $400 Million IPO
• Grocery Startups Raise $795 Million in Rapid-Shopping Boom
• Deutsche’s DWS, Generali Said to Vie for NN’s Asset Manager

In FX, the Dollar is mixed vs major counterparts, but maintaining recovery momentum after extending gains in wake of yesterday’s largely supportive US releases (ADP, final Markit services/composite PMIs and several elements of the non-manufacturing ISM), and now looking towards NFP for further validation or another fall from grace if the headline number disappoints again. The index made a firm break above 90.000 on Wednesday and is now forming a solid base around 90.500 between 90.629-464 parameters awaiting the BLS report, while also keeping eyes on technical levels and some hefty option expiries in G10 pairings that might curtail price action ahead of 13.30BST if not the actual NY cut itself.

• GBP/JPY/AUD/NZD – Sterling caught a bid even before a firmer than expected UK construction PMI, lifting Cable back above the 1.4100 mark to touch the 21 DMA (circa 1.4132 today) and the move seemed to be Eur/Gbp cross related as it reversed through 0.8600 to retest a low congestion zone from 0.8578 to 0.8575. Meanwhile, the Yen has pared some loses from a virtual double bottom in wake of considerably better than forecast Japanese household spending data, though not quite to the extent of threatening option expiry interest starting at the 110.00 strike and reaching 109.90 in 1.4 bn. Similarly, the Aussie and Kiwi have regained a bit of poise to trade back above 0.7650 and around 0.7150 respectively, and with the former flanked by big option expiries at 0.7730-50 (1.8 bn) and 0.7780-0.7800 (2.3 bn).
• EUR/CHF/CAD/NOK/SEK – G10 laggards, albeit marginally, as the Euro strives to keep hold of the 1.2100 handle amidst mixed Eurozone construction PMIs and a retail sales miss, though also looks enshrined and liable to have its direction defined by expiry interest covering a large part of the expanse from 1.2100 to 1.2200. Indeed, 1.4 bn resided between 1.2100-10, 1 bn at 1.2150, 1.2 bn from 1.2170-75 and 1.1 bn at 1.2200. Elsewhere, the Franc is still striving to contain the downside beneath 0.9050, but remains firmer against the Euro near 1.0950 vs 1.1000 earlier this week, while the Loonie is trading defensively under 1.2100 irrespective of ongoing strength in crude ahead of Canada’s payrolls showdown with the US. Turning to Scandinavia, the Swedish Crown is holding around 10.1000 vs the Euro following a solid Q1 current account surplus, but the Norwegian Krona is lagging sub-10.1700 after mixed revisions to core inflation and growth estimates from Stats Norway for 2021 and next year.

In commodities, WTI and Brent front month futures err higher in early European trade but remain within recent ranges, with WTI Jul just north of USD 69/bbl (68.33-69.26 range), whilst Brent Aug hovers above USD 71.50 (70.73-71.76 range). Participants will be looking ahead to the US jobs release for influence on the crude complex, with scheduled oil-specific events/data for the week out of the way, barring the Baker Hughes Rig Count. Meanwhile, the week ahead sees the release of the EIA STEO followed by the OPEC and IEA MOMR towards the latter part of the week. However, these releases are unlikely to provide much colour given the fluidity of energy fundamentals and OPEC+ holding monthly meetings. Elsewhere spot gold and silver remain on standby for the key data release, with the former around its 21 DMA (1,870/oz) ahead of the 200 DMA at 1,840/oz, whilst spot silver consolidates in the low USD 28/oz levels. LME copper has clambered off worst levels but remains sub-USD 10,000/t as it moved in sympathy to the losses seen in Shanghai futures as US-Sino relations remain sour despite the recent constructive engagement. Overnight, Chinese steel rebar futures logged in its first weekly gain in four, with some citing off-peak season demand as a factor.

US Event Calendar

• 8:30am: May Change in Nonfarm Payrolls, est. 674,000, prior 266,000
  • 8:30am: May Change in Private Payrolls, est. 610,000, prior 218,000
  • 8:30am: May Change in Manufact. Payrolls, est. 25,000, prior -18,000
• 8:30am: May Unemployment Rate, est. 5.9%, prior 6.1%
  • 8:30am: May Underemployment Rate, prior 10.4%
  • 8:30am: May Labor Force Participation Rate, est. 61.8%, prior 61.7%
• 8:30am: May Average Hourly Earnings YoY, est. 1.6%, prior 0.3%; Average Hourly Earnings MoM, est. 0.2%, prior 0.7%
  • 8:30am: May Average Weekly Hours All Emplo, est. 34.9, prior 35.0
• 10am: April Durable Goods Orders, est. -1.3%, prior -1.3%; -Less Transportation, est. 1.0%, prior 1.0%
• 10am: April Factory Orders, est. -0.3%, prior 1.1%; Ex Trans, prior 1.7%
• 10am: April Cap Goods Orders Nondef Ex Air, est. 2.3%, prior 2.3%
• 10am: April Cap Goods Ship Nondef Ex Air, prior 0.9%

DB’s Jim Reid concludes the overnight wrap

In a career where I’ve seen around 310 US payroll Fridays and the same number of US CPI releases I suspect that today’s employment is in the top 5% for anticipation levels but with next week’s CPI close to being the most potentially interesting I’ve ever seen. Obviously either or both could end up being a damp squib but it feels like something exciting is going to come out of these reports.

A reminder that payrolls grew by just +266k last month, which was well beneath the +1m job growth expected. Fortunately, the consensus is expecting that last month’s jobs report will prove a blip rather than the trend, and our own US economists are looking for an +800k increase in nonfarm payrolls, with the unemployment rate in turn falling back to a post-pandemic low of 5.9%.

However, whatever happens today the arguments on both sides of the inflation and overheating debate are hardly likely to go away soon. Even if the +800k jobs growth were realised, that would still leave nonfarm payrolls more than 7m beneath their pre-Covid peak, which would back up Fed Chair Powell’s argument that he wants to see a “string” of good jobs numbers before the Fed starts to pare back its support. And as our US economists have noted, it’s also worth looking at some of the broader labour market variables that the Fed are tracking in addition to the standard unemployment rate, as they seek to achieve their maximum employment objective. Expect every last drop of the report to be pored over for clues about the real state of the labour market.

With all that excitement to come, yesterday saw a bunch of better-than-expected data releases that led investors to slightly upgrade the likely path of future policy tightening, which subsequently put some pressure on a number of different financial assets. Firstly, the ADP’s report of private payrolls came in at +978k in May (vs. +650k expected), marking the biggest rise since last June, and then we also had the weekly initial jobless claims for the week through May 29, which fell to another post-pandemic low of 385k (vs. 387k expected). And on top of those, the ISM services index rose to a record 64.0 (vs. 63.2 expected), adding further evidence of a still strengthening recovery. The ISM prices paid figure (80.6) reached the second highest level on record while supplier delivery times remained elongated. Both service providers and manufacturers reported their largest order backlogs ever, with the manufacturing sector building on the record from last month.

US Treasuries sold off in response to all this data, with 10yr yields up +3.8bps to 1.625%, in a rise that was more than driven by real yields (+6.1bps) rather than inflation expectations (-2.4bps). The moves were echoed in Europe too, where yields on 10yr bunds (+1.5bps), OATs (+1.5bps) and BTPs (+0.5bps) all rose too. And over in equity markets, interest-sensitive tech stocks underperformed, with the NASDAQ losing -1.03%, whilst Europe’s STOXX 600 (-0.12%) also slipped back from its record high the previous day.

The US market looked set for bigger losses (-0.95% at the early lows) but headlines from the Washington Post mid-way through the session that President Biden had offered to create a tax floor of 15% rather than raising the corporate tax rate to 28% sparked a rally that saw the S&P 500 close only -0.36% lower. For reference, 116 companies in the S&P 500 reported an effective tax rate less than 15% last year. This story was not entirely new news as the Biden administration had previously included the minimum corporate tax in its future tax plans. However the idea that the Biden administration may delay a tax hike on the higher rate seemed to help markets.

So all-in-all, while the S&P “broke out” and ended its run of moving less than a quarter of a per cent in either direction it still hasn’t moved more than half a per cent either way for the last seven sessions – the longest run since November 2019.

Overnight, Asian markets are trading mixed after recovering from initial losses. The Hang Seng (+0.14%) and Shanghai Comp (+0.14%) are up while the Nikkei (-0.39%) and Kospi (-0.08%) are down. Futures on the S&P 500 are up +0.04% while those on the Stoxx 50 are down -0.15%. In terms of overnight data releases, Japan’s April household spending came in strong at +13.0% yoy (vs. +8.7% yoy expected).

In other news, President Biden yesterday signed the amended order we highlighted yesterday banning US investment in Chinese companies with ties to China’s military or in the surveillance industry. The order named 59 companies in total with most of them being carried forward from the previous administrations list. However there were a few new names like Zhonghang Electronic Measuring Instruments Co. and Jiangxi Hongdu Aviation Industry Co. Shares in the targeted companies are trading mixed this morning with Hikvision broadly flat as we type while SMIC fell as much as -3.3% Hong Kong trading.

In terms of Fed speak, we heard from Federal Reserve Bank of St. Louis President James Bullard that the ratio of unemployed workers to job openings which is approaching an all-time low, “suggests a very tight labor market, which would be consistent with anecdotal reports that it is hard to hire workers.”

On the pandemic, there was some positive news from the UK yesterday, as more than half of the adult population have now received both doses of the vaccine. However, the UK also confirmed that Portugal would be moving to their amber travel list, meaning that those returning have to self-isolate.

As we noted yesterday in my CoTD (see here), younger Americans are not getting vaccinated at as a high a rate as other groups and accordingly New York City announced plans to offer shots at bars, restaurants and other nightlife locations. Even still New York State, once the global epicenter of the pandemic, had fewer than 1000 hospitalisations for the first time since October and the positive rate on first time tests fell to a record low of 0.44%.

Looking at yesterday’s other data, the final services and composite PMIs for May generally showed upgrades from the flash readings, with the Euro Area composite PMI revised up to 57.1 (vs. flash 56.9) and the US composite PMI revised up to 68.7 (vs. flash 68.1). For the Euro Area, that was the strongest composite PMI since February 2018, while for the US it was the highest reading since the series began in 2009.

To the day ahead now, and the highlight will be the aforementioned US jobs report later on. There’s also an array of central bank speakers including Fed Chair Powell, ECB President Lagarde, BoJ Governor Kuroda and PBoC Governor Yi Gang, while G7 finance ministers will be meeting in London. Otherwise, the data highlights will include the German and UK construction PMIs for May, as well as Euro Area retail sales and US factory orders for April.

In just a short time, AMC CEO Adam Aron has earned a reputation as a masterful pied piper of the “ape” army of retail traders who have rallied around his company, driving the firm’s shares up by nearly 400% in under 2 weeks.

Earlier this week, Aron announced a unique “rewards program” promising AMC shareholders special offers (for starters: free large popcorn). Bloomberg’s Matt Levine suggested that this might pay dividends for AMC in terms of shareholder engagement since popcorn is cheap, and the company could just about cover its food and beverage costs for the last three years (just shy of $640M, according to the company’s annual report) by selling another 12M shares at last night’s close of $51.34.

After AMC shares went on another wild ride Thursday (and management asked for shareholders’ permission to raise the cap on the shares it can issue), Aron sat for an interview with Trey’s Trades, a popular YouTube channel that has gained a following thanks to the retail trading boom. The interview afforded Aron an almost uninterrupted opportunity to expound upon the company’s strategy, including its plans for strengthening its capital structure via more share offerings.

While Aron promised he would leave some ammo in the hopper in case of an unforeseen emergency, he also vigorously defended the company’s decision to repeatedly tap the markets for more capital, and why he wants to ask for even more, while sketching out what some might describe as a grandiose vision for the future of AMC.

The take

“We can also use the $800M we just raised…and whatever we might be able to raise in 2022, or 2023…maybe there’s another movie theater company we can buy, maybe there’s a great acquisition for us outside of pure-play movie theaters that would allow us to vertically integrate…if you arm us with the tool to go find value-creating opportunities for AMC shareholders, we can do that. If you don’t arm us with this tool, you will be tying our hands behind our back.”

Could AMC buy another movie chain? Or perhaps even a movie studio? Who knows? But with 80% of the company’s float owned by retail traders, Aron has a lot of wiggle room to do pretty much whatever he wants with the money…so long as he can make an argument that it will benefit AMC’s bottom line.

Readers can watch the full interview below:

But Aron really got the audience’s attention when he appeared to accidentally knock over his camera, inadvertently revealing that he wasn’t wearing pants.

The accident occurred just as Aron was making the conclusion to his argument for AMC’s long-term future.

#AMC CEO Adam Aron caught wearing no pants to the Zoom meeting 😭 pic.twitter.com/BccJXK1igw

— Brother Voodoo (@DonRubix) June 3, 2021

As Aron admitted during the interview, he has been spending a lot of time on twitter lately. So he probably understands that these types of “viral moments” play well with the Internet-addicted ‘apes’ that are buying his stock.

Some interpreted the move as a sign: perhaps some kind of message to AMC shorts that more pain lies ahead? Is AMC going to make some kind of big announcement in the near future?

Are they going to “diversify” by launching their own streaming platform? Probably not. But Aron strongly hinted at the possibility of AMC buying a rival chain, so long as the market doesn’t tie the company’s hands by dumping the stock.

Major takeaways from part 2 of @CEOAdam and @TradesTrey:

– Short sellers annoy Adam
– Adam has lead 5 successful companies over 40 years
– Adam reads thousands of tweets instead of watching TV
– Adam might not have been wearing any pants
– Trey and Adam are LEGENDS #AMC

— Chuck (@ChuckHodl) June 4, 2021

At any rate, the interview is just the latest sign of how the army of retail traders is changing markets and media, as CNBC was left scrambling for a follow-up.