(Reuters) – 1/SNOWFLAKES ON FIRE
IPOs are back. And how. A market that was enduring its worst slump in eight years has been revived by red-hot equity markets and floods of central bank stimulus, with listings coming thick and fast. Alibaba’s fintech arm Ant Group is planning for what could be the largest ever IPO, while e-commerce firm The Hut Group gave London its biggest IPO in seven years, its shares immediately rallying 30%.
That was eclipsed by U.S. software firm Snowflake whose value doubled after its debut — astonishing even by New York’s incredible history of first-day pops.
Bankers are talking about a swelling pipeline as firms accelerate listing plans. Europe will soon see German defence firm Hensoldt’s IPO; Russia’s Sovcomflot and Poland’s Allegro are also expected.
Upcoming New York IPOs include online prescription drug platform GoodRx which hopes to raise $1 billion. Year-to-date IPO volumes are near $120 billion, Refinitiv data shows, a third higher than year-ago levels.
(GRAPHIC: Global IPO volumes – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/rlgvdjlnyvo/chart.png)
2/EARNINGS: POST-PEAK PESSIMISM
Equity analysts may have passed the point of peak pessimism as earnings forecasts are increasingly revised higher, according to Refinitiv I/B/E/S. It’s an important turning point after a horrendous second quarter when, according to JPMorgan, earnings plunged 33% worldwide.
Now analysts appear less gloomy about what remains of 2020 and more confident of a 2021 profits bounceback; globally, earnings upgrades are outnumbering downgrades. The exception is Europe where expectations haven’t fully stabilized for 2020 — but even here, a 2021 rebound is expected.
(GRAPHIC: Earnings Revisions World – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbjywyvq/Pasted%20image%201600348167938.png)
(GRAPHIC: Earnings Europe-US – https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjbkxbvr/Pasted%20image%201600348823961.png)
3/FOOD OR LEISURE?
Quarterly results from U.S. firms, Nike <NKE.N> and General Mills <GIS.N> will offer different perspectives on consumer spending in the midst of the pandemic. Athletic footwear and apparel maker Nike is expected to report a 15% revenue drop and a 49% tumble in adjusted earnings-per-share on Tuesday, Refinitiv data shows.
In contrast, pantry staples company General Mills may post a 5% rise in revenue and a 10% jump in adjusted earnings on Wednesday, benefiting from consumers stocking up on essential groceries.
With extended unemployment benefits cut for millions of Americans, consumer spending slowed in August and a key retail sales gauge unexpectedly declined. It really boils down to what you need against what you would like.
(GRAPHIC: Nike, General Mills shares in 2020 – https://fingfx.thomsonreuters.com/gfx/mkt/azgvoabgdvd/Pasted%20image%201600370318316.png)
4/FRANC FIGHTING
Many central banks are battling to lift inflation and growth but the Swiss National Bank has it tougher than most. Despite the world’s lowest interest rates, its currency, a popular safe-haven, is near five-year highs and Switzerland has endured a seventh month of annual price deflation.
Policymakers will likely hold off on new announcements on Thursday and wait instead for the European Central Bank’s next move. They have spent 2020 intervening to tamp down the franc; the result is a swelling portfolio of valuable U.S. tech stocks.
But interventions risk the wrath of the United States, which has Switzerland on a currency manipulation watchlist. And despite all efforts, the franc is not far off five-year highs versus the euro <EURCHF=EBS> and 5-1/2 year peaks to the dollar <CHF=EBS>.
Upcoming meetings of Sweden’s Riksbank and Norway’s Norges Bank won’t spark fireworks either. Like the SNB, they will probably pledge to keep rates low as they monitor the ECB’s stimulus splurge.
(GRAPHIC: SNB interventions – https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqneeevx/chf.PNG)
5/AUCKLAND OPENS
The negative-rates debate is heating up, with the Bank of England admitting to studying them. All eyes, therefore, on the Thursday policy meeting of the Reserve Bank of New Zealand, whose governor Adrian Orr has signalled willingness to take that step.
So far, Orr is sticking to his line that rates will stay at 0.25% until March. But the meeting takes place just as the country’s largest city Auckland lifts coronavirus restrictions, New Zealand endures its worst recession in a decade and campaigning heats up for October elections.
Other countries’ experience implies the RBNZ may end up with asset price inflation rather than a weaker currency, should it embrace sub-zero rates. While the debate is mostly moot for now, the RBNZ’s latest views on the subject will be watched.
(GRAPHIC: New Zealand in recession – https://fingfx.thomsonreuters.com/gfx/mkt/jbyprmrjyve/Pasted%20image%201600410135979.png)
(Reporting by Abhinav Ramnarayan, Tommy Wilkes and Julien Ponthus in London; Lewis Krauskopf in New York and Vidya Ranganathan in Singapore; Compiled by Sujata Rao; Editing by Catherine Evans)
