Asian Stocks Set for Muted Open; Currencies Steady: Markets Wrap

1 / 2

Asian Stocks Set for Muted Open; Currencies Steady: Markets Wrap

Andreea Papuc

(Bloomberg) -- Asian stocks are poised for a muted start to the week as investors assess rising bond yields and signs that some vaccines reduce transmission of Covid-19. Currencies were mostly steady.

Equity futures slipped in Australia and rose in Japan. Australian 10-year bond yield jumped almost 10 basis points. Bitcoin notched up another record high.

U.S. stocks finished mostly lower on Friday as benchmark Treasury yields climbed to the highest levels in a year. Oil traded below $60 a barrel as wells slowly restarted in Texas after being hit by a big freeze.

A global bond selloff on expectations of rising inflation as the world economy recovers from the pandemic has turned the spotlight back on stretched equity valuations. Investors are wondering how much higher the reflation trade will drive up yields, and will be monitoring this week’s testimony from Federal Reserve Chair Jerome Powell for any sign that he’s troubled by steeper long-term borrowing costs.

“Any further significant upside is going to create increasing levels of concern,” said Simon Ballard, chief economist at First Abu Dhabi Bank. “It’s driven by, on one side, stimulus expectations from Mr. Biden and also the expectation of that continued dovish rhetoric and more acceptance of early stages of inflation from the Fed before even thinking of moving to a tightening bias.”

A U.S. stimulus package of around $1.9 trillion is heading for a House vote this week and the Biden administration could unveil a multitrillion-dollar recovery package in March that funds infrastructure and possibly an Obamacare expansion.

Meanwhile, the Pfizer Inc. and BioNTech SE Covid-19 vaccine appeared to stop the vast majority of recipients in Israel from infection, providing the first real-world indication that the immunization will curb transmission of the coronavirus.

Elsewhere, Bitcoin continued its stratospheric ascent to set another record above $58,000 on Sunday after reaching more than $1 trillion in market value for the first time.

Some key events to watch this week:

Fed Chair Jerome Powell delivers the central bank’s semi-annual monetary policy report to the Senate Banking Committee on Tuesday.EIA crude oil inventory report is out Wednesday.Bank of Korea monetary policy decision is out Thursday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.

These are some of the main moves in markets:

Stocks

S&P 500 fell 0.2% Friday.Nikkei 225 futures rose 0.3% earlier.Australia’s S&P/ASX 200 Index futures fell 0.2%.

Currencies

The yen was at 105.44 per dollar.The euro was at $1.2122.The pound traded at $1.4023.The Aussie was at 78.72 U.S. cents.

Bonds

The yield on 10-year Treasuries rose four basis points to 1.34% on Friday.Australia’s 10-year bond yield rose as much as nine basis points to 1.53%.

Commodities

West Texas Intermediate crude declined 2.1% to $59.84 a barrel.Gold rose 0.5% to $1,784.25 an ounce.

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

Recommended Stories

  • Fintech Focus For February 22, 2021

    Quote To Start The Day: “I think we’ve positioned ourselves as the finance super app because I don’t think people want to go to four, five, and six different solutions to manage their money,” M1 Finance marketing vice president Bob Armour said. “We’re a place for investing, borrowing, spending, and credit.” Source: Bob Armour One Big Thing In Fintech: When typically discussed, blockchain lacks a utility component. That’s what Morpher CEO Martin Fröhler is looking to change. Fröhler is a mathematician, with a background in quantitative finance, specializing in research and trading algorithms. After founding a decentralized quantitative hedge fund in Silicon Valley, Martin co-developed the Morpher Protocol to replicate the trading of any market, on the blockchain, without actually trading underlying assets. In the simplest way, Morpher cuts out the middleman -- brokers, exchanges, and counterparties -- allowing market participants the ability to trade assets, with infinite liquidity, on an incorruptible protocol. The solution cuts the costs associated with fixed liquidity, enabling participants, globally, to transact any asset, fractionally, with leverage and no fees. “Our goal is to democratize trading and investing as a whole,” the CEO said. “Morpher provides global access to anyone who trades on limited markets, with infinite liquidity.” Source: Benzinga Other Key Fintech Developments: Fintech Spotlight: Meet M1 Finance. Fintech Spotlight: What is Morpher? M1, Acorns, Public see big sign-ups. May crypto retail be generating risk? Boston Protocol, Royale teamed up. Google introducing pay for parking. Diginex adding digital asset access. France emerging as fintech hotspot. Mastercard, Island Pay eye a CBDC. Citadel’s Ken Griffin supporting T+1. Coinbase stock is trading at $100B. Brex applies for charter, taps talent. NYDIG files to create a new BTC ETF. Bitcoin breaks $50K, Coinbase IPO. NBA All-Star leads Varo investment. Watch Out For This: Another week and the biggest story in a sea of big stories continues to center on SPACs, these blank-check companies that raise capital through IPOs expressly to acquire a privately held company and take it public. But some industry watchers as starting to wonder: Is the party just getting started, with more early guests still trickling in? Have we reached the party’s peak, with the music still thumping? Or did someone just quietly barf in the corner, an indicator it’s time to wrap things up before something worse happens? Source: TechCrunch Interesting Reads: Uber has lost the U.K. legal challenge. Bill Gates on plan for climate change. Signal sees a record pace in growth. How drones have added to conflicts. U.S. on engaging with the euro area. Facebook news in Australia now dark. A U.S. vaccine surge is coming soon. Pfizer-BioNTech vaccine distribution. Laws “Uber-izing” the U.S. workforce. WhatsApp detailing privacy changes. The best stock education newsletters. Market Moving Headline: U.S. stock index futures auctioned lower last week. Key Takeaways: - Debt, inflation threatening low-rate regime. - Markets most complacent in two decades. - Sentiment turns hot from hotter amid slide. - Global equity fund net inflows decelerated. - Markets fret about economic performance. - Retail sales and industrial production gain. In the coming sessions, participants will want to pay attention to the VWAP anchored from the S&P 500's $3,959.25 overnight rally-high and $3,909.25 high-volume area. In the best case, the S&P 500 opens and remains above the $3,909.25 volume area. Additionally, auctioning above the $3,915.00 VWAP would suggest buyers, on average, are in control and winning, since the February 15 rally high. For more on next week's trade in the S&P 500, see the link below. Source: Physik Invest See more from BenzingaClick here for options trades from BenzingaFintech Spotlight: M1 Finance, A Mobile Wealth Creation And Management ToolFintech Focus Roundup For February 20, 2020© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  • Foxconn chairman says expects 'limited impact' from chip shortage on clients

    The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only "limited impact" from a chip shortage that has rattled the global automotive and semiconductor industries. "Therefore, the impact on these large customers is there, but limited," he told reporters. Liu said he expected the company to do well in the first half of 2021, "especially as the pandemic is easing and demand is still being sustained."

  • Is PayPal Stock A Buy Right As Bitcoin Tops $57,000? Here's What Earnings, Charts Show

    Top digital payments stock PayPal is one of the leading growth stocks in the current stock market. But is it a buy right now?

  • 2 Great Stocks for Around $10 or Less

    You can find good values in companies that have been beaten down due to macroeconomic or other forces, but you can also find great growth stocks of small companies that are poised to break out in an improving economy. One is USA Technologies (NASDAQ: USAT), which provides the cashless technology for vending machines, and the other is Republic First Bancorp (NASDAQ: FRBK). USA Technologies' devices allow people to use their credit cards at vending machines.

  • London area has ‘one of highest COVID rates in world’ with two in three infected with virus

    The area of London has seen 75% of working adults test positive for coronavirus compared to 7% of the whole of the UK.

  • Surging U.S. Yields Loom Over Emerging Markets Beholden to Fed

    (Bloomberg) -- Rising U.S. Treasury yields are starting to concentrate minds in the world of emerging markets.Developing-nation local-currency notes had their worst week since September in the five days through Friday, while dollar debt declined by the most since January as surging inflation expectations fueled a rout in Treasuries. The selloff in the world’s largest bond market also sent implied volatility for currencies and stocks to the biggest weekly jump of 2021.All eyes will be on Federal Reserve Chair Jerome Powell’s testimony to Congress this week. The central bank chief is set to echo remarks that policy makers are fully committed to supporting the economy. Investors will also look for any sign that he’s troubled by steeper long-term borrowing costs after the real rates on long bonds rose above zero for the first time since June.“We will still need to see the Fed vastly expanding its QE purchases, as the market simply can’t absorb the net U.S. Treasury issuance later this year without much higher real yields, which would eventually be toxic for asset markets,” John Hardy, head of FX strategy at Saxo Bank in Hellerup, Denmark, wrote in a report. “Rising yields don’t even necessarily have to trigger any notable meltdown in risk sentiment as long as the market is comfortable that real interest rates will continue to decline.”A Bloomberg study in January found all developing-world currencies typically sell off when yields jump at a rate greater than about 25 basis points per month. The 10-year Treasury yield has risen by 27 basis points this month through Friday.Oil will also keep traders on their toes, with Saudi Arabia and Russia differing once again on their output strategy heading into an OPEC+ meeting. The Mexican peso, Colombian peso and Russian ruble were among the worst performers in emerging markets as Brent crude retreated on Friday.“Our optimistic emerging-market currency outlook is not without risks of setbacks along the way,” Ehsan Khoman, the Dubai-based head of emerging-market research in Europe, the Middle East and Africa at MUFG Bank. “By and large, we believe relative cyclical outperformance and attractive yields on offer continue to favor stronger EM currencies as Covid-19 ebbs.”South Korea and HungaryThe Bank of Korea will probably stand pat by unanimous consensus on ThursdayThe most interesting aspect of the meeting could be any signals on government debt purchases. Lawmakers are planning to draw up another supplementary budget in the coming weeks -- with the potential for additional debt issuance likely to put upward pressure on yieldsThe BOK would opt to use ad-hoc debt purchases to counter any bond market volatility rather than shift to a full-fledged quantitative-easing program, according to Bloomberg Economics Korean 10-year bond yields rose around 9 basis points last week, mirroring the moves in U.S. yieldsHungary will probably keep its base rate at 0.6% on Tuesday, with the forint among the worst performers in emerging markets this monthThe central bank had developed a reputation for being one of Europe’s most dovish before the coronavirus pandemic. Now, it’s among the strictest, pursuing caution to prevent volatility in financial markets and inflationPolicy CluesIn Brazil, swap rates traders will watch a mid-February reading of consumer price inflation on Wednesday, which probably accelerated on an annual basis, underscoring bets on a rate hike in MarchInvestors will also monitor the congressional debate surrounding the 2021 budget and prospects for another round of cash handoutsJanuary current-account data on Wednesday and unemployment and primary budget balance figures on Friday could offer further signs of the pandemic’s impactPresident Jair Bolsonaro said more changes are underway after naming a former general to replace the University of Chicago-educated economist running state-controlled Petroleo Brasileiro SAMexico’s mid-month inflation data, scheduled for Wednesday, will be scrutinized after January consumer prices topped expectationsPolicy makers will release the minutes from their February meeting on Thursday, which investors will monitor for clues on the central bank’s next steps after a unanimous decision to cut rates by 25 basis pointsOn the same day, the country will release a reading of December economic activity and January unemploymentMalaysian January CPI on Wednesday is expected to remain in negative territoryThe January trade balance is likely to remain in strong surplus in data to be released on FridayRinggit was stock-still last week -- buffeted between opposing forces of strong dollar and robust oil prices as a net exporter of energySouth African BudgetSouth Africa’s Finance Minister Tito Mboweni will present the 2021-2022 budget on WednesdayMboweni must convince investors he has a credible plan to support an economy that contracted the most in nine decades last year, while also curbing growth in government debtThe market also wants clarity on plans for debt-ridden state-owned companies such as Eskom Holdings SOC Ltd. Nedbank Group Ltd. is leading discussions to restructure the South African power utility’s debt load, according to people familiar with the talksThe rand had its worst weekly performance since early January in the five days through FridayData and EventsSudan’s central bank said Sunday it was implementing a unified exchange rate system, part of broader measures aimed at reviving its struggling economySouth Korea’s 20-day export numbers for February are due on Monday. The steep rise in 10-day exports may have been a bunching in sales occurring before Lunar New Year and working day effects, so anyone expecting a similarly big jump is likely to be disappointedThe nation’s export numbers often contain early clues on global production. For instance, a Bloomberg study covering 2015-19, shows a 23% correlation between misses versus consensus for these figures and misses from the subsequently available U.S. ISM dataThe won was flat last week, despite the rise in the U.S. dollar, perhaps insulated by past poor performance against its behavioral driversRead more: BEER and Beta Blockers, Steadying One’s Aim in EMFX: Macro ViewThailand’s trade numbers are due on Tuesday. The balance should be just above zero, with a steep decline in imports responsible for keeping the numbers in the blackJanuary’s current-account figures may show a third straight deficit in data to be released on ThursdayThai baht depreciated 0.4% last week, a little more than the global averageTaiwan’s January export orders might show another sizable increase on Wednesday, with consensus about 46% year-over-yearJanuary industrial production is likely to tell a similar story of rapid recovery on Thursday -- with consensus at about 19% year-over-yearAnother vast current-account number for the fourth quarter will be released on FridayTaiwan’s dollar was one of the top gainers in Asia last weekIndia’s fourth-quarter GDP due Friday is likely to show the first year-over-year expansion since the first three months of 2020The Indian rupee was one of the strongest performers in Asia last week as inflows poured into local equity marketsChina’s official February PMIs –- for both manufacturing and services are due on Feb. 28The Chinese yuan was the third-weakest currency in Asia last week, although the stronger-than-expected fixing in yuan terms on Friday offered a glimmer of hope for bullsRead more: Yuan Fixing Miss May Herald Future Dollar DeclineA reading of Peru’s fourth-quarter gross domestic product, scheduled on Monday, may show a recovery from the lows seen amid the emergence of Covid-19 while lingering below levels from before the pandemic, Bloomberg Economics estimates.Chile’s January copper production on Friday will be watched as the metal trades near decade highs, fueling a rally in the pesoA gauge of Argentina’s economic activity index may flag a slowdown in December after seven straight monthly gains, according to Bloomberg EconomicsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Dow Jones Futures: Watch This Market Rally Warning; Bitcoin Soars, Tesla Model Y SR+ Pulled

    The stock market held up well last week but margin debt is a growing concern. Bitcoin rose while Tesla pulled its recently launched Model Y SR+.

  • WSJ Opinion: The Trump Legacy on China Policy

    Paul Gigot interviews former Trump national-security official Matthew Pottinger. Photo: ZUMA Press

  • Ocean Cargo Snarls Force Global Commerce to Look Outside the Box

    (Bloomberg) -- Supply Lines is a daily newsletter that tracks Covid-19’s impact on trade. Sign up here, and subscribe to our Covid-19 podcast for the latest news and analysis on the pandemic.An ongoing surge in the cost of shipping goods around the world is prompting manufacturers and their customers to scramble for cheaper solutions.Exporters, importers and their agents are considering buying their own shipping containers and chartering vessels to avoid the sky-high costs and delays of existing services. Most of the 25 million containers in global use are owned or leased by about a dozen ocean carriers including Copenhagen-based A.P. Moller-Maersk A/S and China’s Cosco Shipping Holdings Co.The steel boxes are still scarce on routes from China, the world’s biggest trading nation. Exporters in Asia complain that rates to move freight to Europe or the U.S. jumped fivefold in the past year. One large maker of toys such as Sea-Monkeys says buyers are deferring shipments until prices cool down.If it persists, the crunch threatens to dim hopes of a smooth recovery from the world economy’s pandemic slump. While a boom in demand for work-from-home technology and medical equipment fueled a sharp rebound in trade, pressures on the supply side are straining inventories and weighing on balance sheets.“We still have a backlog that’s the highest we’ve had in our history,” Clarence Smith, chairman of 135-year-old Haverty Furniture Cos. of Atlanta, said on a conference call last week. “We’re paying a premium to get the product to make sure we can serve our customers” and “we are increasing prices.”While some economists expect the snarls to ease around midyear, a prolonged period of elevated freight rates can eventually bite consumers’ wallets. A 2016 paper by the Federal Reserve Bank of Kansas City said “a 15% increase in shipping costs leads to a 0.10 percentage point increase in core inflation after one year.”‘Overlooked’ EffectsIn the U.S., the volume of imported goods accounts for about 12% of gross domestic product and most arrive by sea. Because U.S. import price indexes don’t include information about cargo rates, “shipping cost pressures act as an additional, but often overlooked, channel through which imports affect aggregate price growth,” the Kansas City Fed paper said.Illustrating just how dire the bottlenecks have become, a unit of Germany’s Schwarz Group -- one of the world’s biggest supermarket operators -- recently considered hiring lorries to drive its stock from China to Europe before ruling the option out. Now, the unit -- Schwarz Asia Pacific Sourcing Ltd., or SAPS Ltd. -- is examining ways to rent a whole ship to transport goods, according to Hong Kong-based executive Bjoern Lindner.“We are looking at every single form of transportation which might be possible for us to bring goods to Europe,” Lindner, managing director of SAPS, said in an interview. “All of my peers in the industry are scrambling for capacity” and “we have to be creative.”Others are thinking along the same lines. Brian Sondey, chief executive of container leasing firm Triton International Ltd. of Hamilton, Bermuda, said some shippers of cargo are looking to buy their own boxes and “finding that somehow it’s a net lower price.”“We’ve seen some interest in people like the Amazons of the world to start maybe owning some of their own containers because they get charged by the shipping lines when they hold on to containers longer than they are supposed to,” Sondey said on a conference call last week.The Global Shippers’ Alliance, an industry group for manufacturers, retailers and wholesalers, said in a Feb. 17 release that shippers are “furious at the chaotic shipping market and the lack of mechanisms to resolve it.”‘All Stops’But the container carriers are “pulling out all stops” to meet the sustained high demand, said John Butler, CEO of the World Shipping Council, a group representing the liner industry. “All vessels are sailing, all available container equipment is being used, carriers are setting up new inland depots to speed up trucking turn-time operations and doing their best to keep customers informed in an extremely unpredictable situation,” he said.Some of supply pressure may ease in coming months, given container throughput at Shanghai Port increased by more than 20% during the Lunar New Year holiday compared with a year ago, and throughput at Ningbo Zhoushan Port rose about 29%, Xinhua reported, citing data from from the China Ports & Harbours Association.Li Muyuan, vice president of the China Container Industry Association, which represents container manufacturers, wrote in an article this month that the container shortage had reduced slightly from the final quarter of last year. Chinese manufacturers produced 440,000 containers in January, he added, roughly equal to market demand for new containers.Still, the longer shipping costs remain elevated, the more the question lingers of whether they’ll start to show up in the price of consumer goods.Sea-MonkeysToymaker Dave Cave, who runs Hong Kong-based Dragon-I Toys -- one of the world’s biggest manufacturers of toy dinosaurs and whose products include aquatic pets called Sea-Monkeys and Chatimal the Talking Hamster -- said it’s not worth shipping some toys given the tight margins already in the industry.He warns that unless conditions improve, retailers may raise their prices. “If nothing changes between now and the end of May, everyone who is shipping will land products at a much higher price than the actual products already in the store,” he said in an interview.Some of Cave’s clients are deferring shipments until April on hopes that conditions improve. “Never, ever, ever has a container price ever been more than 20% or 30% up or down, never. To be 500% up, this is something new to everybody.”At this stage, though, many economists remain sanguine on the inflation threat and don’t expect shipping costs to materially dent shopping baskets in the U.S. and Europe.“Ultimately, whether such costs can be passed on to consumers depends on the strength of consumer demand, which is more related to fiscal and monetary policy in the U.S. and Europe,” said Helen Qiao, chief Greater China economist at Bank of America.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Don't Buy Diageo plc (LON:DGE) For Its Next Dividend Without Doing These Checks

    Diageo plc ( LON:DGE ) is about to trade ex-dividend in the next three days. You can purchase shares before the 25th of...

  • Bitcoin and ethereum prices 'seem high,' says Musk

    The chief executive of Tesla Inc, whose recent tweets have fueled the digital-currency rally, made the remark on Twitter while replying to a user who said that gold was better than both bitcoin and conventional cash. Musk, who earlier in the week remarked that he found the prospect of holding bitcoin adventurous for an S&P 500 company, said in a tweet: "Money is just data that allows us to avoid the inconvenience of barter ..." Bitcoin, the world's most popular cryptocurrency, hit a fresh high in Asian trading on Saturday, extending a two-month rally a day after the digital currency's market capitalization exceeded $1 trillion.

  • Lawyer: Kardashian-West divorce should be 'amicable and fair' — for the sake of a $2.1B fortune

    A divorce lawyer explains how Kim and Kanye need a clean break to divide the assets they accumulated during a 7-year union.

  • All the Ways the Biden Family Has Made Money Over the Past 20 Years

    Most Americans became familiar with Joe Biden as the vice president to Barack Obama, the nation’s 44th president. Now, he’s been elected the 46th president of the United States, formally...

  • How Rich Are Donald Trump and All the Other Living US Presidents?

    Although the current presidential salary is not too shabby at $400,000 a year, many former presidents make the bulk of their money after leaving the White House through speaking engagements, book...

  • 'We could be approaching herd immunity': Epidemiologist on coronavirus pandemic

    As the number of newly confirmed COVID-19 cases in the U.S. dramatically declines, Suzanne Judd, epidemiologist at the University of Alabama at Birmingham School of Public Health, says it’s “possible” we’re approaching herd immunity.

  • Two NYC bars are for sale — asking price is 25 bitcoin

    Patrick Hughes put his side-by-side bars in Manhattan’s Hell's Kitchen neighborhood, Scruffy Duffy's and Hellcat Annie's, up for sale in January.

  • Inflation Angst Is About to Rewrite the Stock Market Playbook

    (Bloomberg) -- For bond investors, inflation is pretty much all bad news, eating into the value of future returns. For equity traders, the tidings can be less categorically awful, given the ability of certain companies to wring profits from higher prices.While there will be plenty of stock-market casualties should price pressures perk up, history suggests the landscape isn’t devoid of opportunity. Energy shares have been persistent winners during times of high inflation over the past five decades, a study from Ned Davis Research shows.Goldman Sachs Group Inc. recommends companies better equipped to derive earnings from sales, such as automaker Ford Motor Co. and media firm Discovery Inc. To Societe Generale SA, supply and demand imbalances suggest mining shares and fertilizer producers offer better hedges should pressures build.No matter how sanguine Federal Reserve Chair Jerome Powell is about the topic right now, inflation will one day matter again for stocks. Just in the last few weeks, hawks have observed worrying signs in everything from a global shortage of computer chips to the biggest jump in U.S. producer prices on record.With the economic outlook brightening, Covid-19 cases falling and more fiscal stimulus on the horizon, nervousness about inflation is percolating. That means pricing power is set to become “an intriguing alpha generator” due to the wide variance in how companies cope with it, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.“Lead indicators suggest that an inflation scare may be in the making,” Levkovich wrote. “Companies with price flexibility should come out as winners.”Energy stocks have the best track-record during periods of rising consumer prices, according to Ned Davis. In seven out of nine cases of high inflation since 1972, the industry outperformed the S&P 500 by a median of 14 percentage points, the study showed.When ranked by investment style, cyclical value stocks -- companies whose sales are more sensitive to economic swings and usually trade at relatively cheap valuations -- tend to do better when inflation runs high, Ned Davis noted.Crude oil has surged this year, bolstered by confidence in a global economic recovery. Those bets have been reflected in the stock market, with energy producers including Exxon Mobil Corp. and Marathon Oil Corp. soaring. The industry has led gains in the S&P 500 in 2021, climbing five times more than the equity benchmark.While inflation’s ramifications for the broader market are not straightforward, a look under the surface shows investors are preparing for the outcome by favoring companies with high operating leverage, or the ability to extract profits from revenue.While both sales and input costs tend to increase when inflation rises, companies with strong leverage potentially offer a safer trade. The reason is: the effect of growing revenue would outweigh the production costs.Since the start of February, a basket of stocks with the highest operating leverage that strips out industry bias has beaten the cohort of weakest ones by 1.7 percentage points, data compiled by Goldman Sachs and Bloomberg show. The gauge is poised for a fourth straight month of outperformance, the longest streak since the taper tantrum year of 2013.Higher input costs such as commodities pose little threat to overall earnings for S&P 500 companies partly because some industries gain as material prices climb and others hedge exposure, according to Goldman Sachs strategists including David Kostin.Labor costs, on the other hand, are a bigger headwind, with an increase of 100 basis points in wage growth likely amounting to a 1% reduction in company profits, their estimates show. Accordingly, they advise investors to favor firms whose labor costs make up a smaller share of revenue, such as Under Armour Inc. and Biogen Inc.“Many investors believe the spending boost will lead to higher inflation and interest rates, which would reduce the value of equity duration and increase the importance of near-term growth,” Kostin wrote in a note earlier this month. “Historically, inflation has boosted nominal S&P 500 revenues, but weighed on profit margins as companies struggled to lift prices at the same pace as rising input costs.”Societe Generale’s strategists led by Andrew Lapthorne have built a basket of stocks based on their sensitivity to metrics like fluctuations in copper and food prices. Basic materials, technology and energy shares currently make up two thirds of the portfolio.While the group has proved its worth by rising with inflation expectations in recent months, one drawback is its poor performance during times of disinflation -- something that has gripped the market for much of the past decade, they noted. To offset that deficiency, the Societe Generale strategists designed a trade dubbed “call replication” that limits the downside risk while maximizing the upside.“When we speak to investors, they want the upside from value rallies and would like to hedge inflation risk, but most find the volatility incompatible with their risk tolerance,” Lapthorne wrote in a note Thursday. “Call replication strikes the right balance.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Texas power outage brings electrification-natural gas debate to a head

    Research shows the dangers of fossil fuels, including natural gas, but the recent winter storm that led to crippling power outages across regions in Texas has put into question the use of renewable energy instead of natural gas.

  • Here's why gas prices are rising — and how high they're likely to go

    Prices are already the highest since the pre-pandemic days — and they're likely to spike.

  • UK's Sunak to raise business tax to pay for COVID-19 support - The Sunday Times

    British finance minister Rishi Sunak isset to increase a tax on business to pay for an extension toCOVID-19 support schemes in the budget next month, The SundayTimes reported https://bit.ly/3ujaBcU. Sunak, in his speech on March 3, will announce he isincreasing corporation tax from 19 pence in the pound and willoutline a pathway where it rises to 23 pence in the pound by thetime of the next general election, the report said. Allies of Sunak clarified he would not increase corporationtax higher than 23%.