Happy Halloween folks! We hope the markets don’t spook you this week as we are set to end one of the best Octobers since 2011 with a 9% gain since the first of the month. That said, the macro landscape has an action-packed week for investors everywhere as OPEC+ is slated to cut production as of Tuesday, the year’s final FOMC meeting kicks off on Wednesday and the US’ tone-setting employment figures for October get released on Friday…and that’s not to mention the slew of earnings being released as we cap off this Q3 reporting period. Read on for your daily dose of market inspiration as we kick off the 29th week of the Coachman’s Report!
Markets in Review
Agricultural commodities will be in focus this week as Russia has dropped a bombshell over the weekend and ended a UN-brokered grain deal with Ukraine to export shipments through the Black Sea. Many grain-based commodities such as corn, wheat, oats and soybean contracts appreciated sharply on this news with the aforementioned contracts up middle-single digits over the last 24 hours at the time of writing. Russia claims this decision was made after multiple Ukrainian drones that were intended to guard these shipping lanes attacked their vessels. This has put food security on top of the international agenda as Russia’s foreign ministry announced this deal will stay suspended for an “undetermined period” - read more on the story here.
Lastly, the following is a roundup of the updated Q3 reporting results and a preview of the issuers announcing earnings results throughout the week: Earnings Scorecard: For Q3 2022 (with 52% of S&P 500 companies reporting actual results), 71% of S&P 500 companies have reported a positive EPS surprise and 68% of S&P 500 companies have reported a positive revenue surprise. Earnings Growth: For Q3 2022, the blended earnings growth rate for the S&P 500 is 2.2%. If 2.2% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q3 2020 (-5.7%). Earnings Revisions: On September 30, the estimated earnings growth rate for Q3 2022 was 2.8%. Five sectors are reporting lower earnings today (compared to September 30) due to downward revisions to EPS estimates and negative EPS surprises. Earnings Guidance: For Q4 2022, 28 S&P 500 companies have issued negative EPS guidance and 14 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 16.3. This P/E ratio is below the 5-year average (18.5) and below the 10-year average (17.1).
Short: Eastman Chemical Company (EMN-NYSE) | Timeline: 2 days
Eastman Chemical Company (EMN), which operates as a specialty materials company internationally, reported earnings last Thursday after the market closed. Though the company was able to marginally beat analyst estimates, profit was recorded at $301 million, down roughly 24% year-over-year as increasing costs of raw materials, energy, and distribution stay on the rise. (Full Story) Referring to the chart, EMN has had a quite bearish year so far dropping from highs of $130, with a death cross appearing towards the end of Q1. That said, as the price consolidates at these levels, a pennant has formed and Stochastic RSI has reached its most overbought levels - signalling the stock is poised for another downward move over the next couple of days.
Biden’s win in Brazil
The final runoff vote in the Brazilian elections took place on Sunday and candidate Luiz Inacio Lula de Silva can now count himself as a former, and upcoming President. Lula was previously in power between 2003 and 2010, while also being ineligible to run in the 2018 elections after a corruption scandal landed him behind bars. The charges from this scandal were later annulled by Brazil’s highest courts for procedural reasons.
He leans far further to the left relative to his predecessor Jair Bolsonaro and has already made statements that suggest he’s willing to work with the USA. This can be seen as a huge win for Biden, as now the B in BRIC, and the only South American country in the group now has a friendly administration in power. Especially so as global discontent rises against the R and C of the alliance.
After solidifying his 3rd term in power, Xi is hosting a variety of nations this week in Beijing while teasing “major diplomatic events”. Notable names include Germany’s Olaf Scholz, Vietnam’s Nguyen Phu Trong, and Pakistani PM Shahbaz Sharif, while an additional few heads of state will also make the journey.
Recent photos of a Chinese made island in the SCS (Source)
In recent months many western countries have decried various Chinese policies, including but not limited to the South China Sea territorial disputes and the labour camps of Xinjiang. Most recently, these criticisms have stemmed from reports of Chinese foreign police forces that stalk, harass, and enforce party will on Chinese nationals living abroad. One notable country not so involved in the criticism - Germany. Last week chancellor Olaf Scholz made comments in favour of cooperation with China that can be summarized with the following quote “decoupling from China is not an option for companies in the European Union”. Especially with the acceptance of Xi’s special invitation, it seems as if Germany has touched the hot stove once, and without learning its lesson will do so again.
Credit Suisse Hires 20 Banks for $4 Billion Capital Increase
Credit Suisse Group AG disclosed a large roster of banks that will help it drum up $4 billion in capital to fund its extensive restructuring and laid out more detail about the discounted price it will offer shareholders. (Full Story)
China Dismisses ‘Fabricated’ Virus Leak Theory Revived by Report
China lashed out at a report about a lab in the city of Wuhan where the coronavirus first appeared, saying it was driven by politics in the US. (Full Story)
Shanghai Disney: Visitors unable to leave without negative Covid test as park shuts
Shanghai Disney has become the latest high-profile venue to shut its gates thanks to China's strict zero-Covid policy, trapping visitors inside. (Full Story)
Iran Charges 1k people
Iran will hold public trials of about 1,000 people charged in Tehran over unrest, a semi-official news agency said on Monday, as authorities step up efforts to crush more than six weeks of protests ignited by Mahsa Amini’s death in police custody. (Full Story)
Guantanamo Bay: US releases oldest detainee Saifullah Paracha
Guantanamo Bay's oldest prisoner has been released to his home country, Pakistan, after almost two decades. (Full Story)
Chart of the Day: Bank Deposit vs Money Market Fund Return
“The future influences the present just as much as the past”
- Friedrich Nietzsche
The Coachman's Report - Terms and Conditions