For Immediate Release
Chicago, IL – June 8, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: PetroChina Company Limited PTR, Petroleo Brasileiro S.A. PBR and Suncor Energy Inc. SU.
Here are highlights from Monday’s Analyst Blog:
Will Consumer Price Inflation Be a Non-Event? Global Week Ahead
In the Global Week Ahead, a key U.S. update hits the tape: the Consumer Price Inflation (CPI) rate for the month of May. That set of surging data lands on Thursday.
Zacks economists put a piece out last Friday: Is There a Shortage Crisis Looming?
Click that link.
Get our views on this critical and timely subject. We are not alone in focusing our efforts on this. This is (perhaps) the key macro data event on the near horizon, globally.
With the U.S. 10-year Treasury rate trading at 1.55% after last Friday's May nonfarm payroll data, however, it may well be a non-event.
Stock traders expect a hefty transitory increase to show up, already. Hence, a spiky May CPI number won't get the stock markets excited.
For a view from outside the USA, as usual, I turn northwards to the Canadian FX economists at Scotiabank.
Much like Zacks economists, they are in the consensus 'transitory' camp.
The following excerpt is from their global economist Derek Holt:
"Here we go again.
"The Scotiabank estimate is for headline inflation to rise to 4.5% y/y (from 4.2% prior) and +0.4% m/m with core CPI increasing to 3.3% y/y (from 3% prior) and 0.2% m/m.
"Conservative assumptions were used which may suggest there is more risk of a higher rather than a lower set of readings including on core inflation.
"Once again, the main uncertainty is around whether supply chain pass-through effects from businesses onto consumers will be high or take a breather after recent adjustments.
"I went with a conservative estimate of this effect in the breakdown of the drivers and so there could be upside risk to both estimates.
"After large gains of nearly 1% m/m in both headline and core CPI there may be some moderation, but if we continue to get as powerful pass-through effects into May then we could get headline CPI venturing toward the 4.5–5% y/y range.
"One challenge is clearly that final demand producer prices for May won't arrive until the following week and so assessing pass-through risk to consumers is clearly difficult absent business prices!
"Transitory or not (some is, some isn't), it's not clear that markets will just shrug over a 4.5–5% y/y print with core pushing above 3¼%.
"We're probably in more of a secular upswing in inflationary pressures that should fade arguments rooted in the past about secular downward forces (most are turning the other way btw...) and weight a stimulus-overshoot that may persist for years in response to a transitory shock.
"A really, really bad transitory shock, but a transitory shock nonetheless."
Next are Reuters' five world market themes, reordered for equity traders.
(1) On Thursday, Traders Get May U.S. Consumer Price Index (CPI) Data
A critical view into inflation comes with Thursday's May U.S. Consumer Price Index.
It is shaping up as one of the most watched numbers for some time after consumer prices jumped by the most in nearly 12 years in April and a debate rages over whether a pick-up in price pressures is fleeting or more sustained.
The reading is also one of the last key pieces of economic data before the Federal Reserve's June 15-16 meeting.
The Fed's Randal Quarles believes a recent jump in inflation will prove transitory. Another strong inflation print that lifts Treasury yields could pressure valuations on tech and other growth stocks.
(2) On Wednesday, Traders Get Mainland China Producer Price Inflation Data
Trade data from around the Pacific should show goods going west from Japan, China and South Korea, and money flowing east, from North America. Updates from the United States, Germany and Britain are also on the calendar.
The focus on the U.S.-China figures has shifted from "trade war" scoreboard back to fundamentals.
Currency markets will watch the trade data closely for signs that China's huge surplus is moderating, which could stall the runaway yuan. The currency hit a three-year high versus the dollar in May, triggering a flurry of jawboning from policymakers.
Meanwhile Chinese producer price data on Wednesday will indicate how much inflation is exported as factories start to pass on higher raw material costs to customers.
(3) On Thursday, the European Central Bank (ECB) Meets
The ECB meets Thursday. It has to find a balance between the need to support the euro zone recovery through emergency stimulus and accepting a brighter outlook means its PEPP scheme may not be needed for much longer.
Dovish comments suggest the ECB will continue buying bonds at a near-current pace. This view has pushed sovereign bonds yields down from May's multi-month highs. The euro is steady, having risen since April.
A modest slowdown in purchases is not ruled out, especially as the quiet summer period approaches. And any signs from ECB chief Christine Lagarde that the taper debate is underway will end the calm in bond markets.
(4) The G7 World Leaders Meet in Cornwall, U.K.
Leaders of the G7 economies are set to meet in the English seaside county of Cornwall, their first face-to-face encounter since COVID-19 struck and the first for U.S. President Joe Biden.
The summit will be a major test of whether cooperation between Washington and the rest of the world has improved since Donald Trump's departure, not least as Biden pushes for agreement on a crucial global tax deal.
Finance ministers meet first on Friday and Saturday in London. Hopes of a breakthrough were boosted after British finance minister Rishi Sunak said a U.S. proposal to focus on the world's 100 biggest firms as part of a tax deal could work.
But considerable detail remains to be agreed upon. The summit will test the G7's ability to prove it can work together on complex topics such as increasing taxes on multinationals enjoying a business boom during the pandemic.
(5) Last Sunday, June 6th, Germany Held Big Regional Vote
Chancellor Angela Merkel's conservatives won a resounding victory in a state election in eastern Germany on Sunday, in a boost to Armin Laschet, who hopes to succeed her in September's national election.
An exit poll from the Saxony-Anhalt election for public broadcaster MDR had the Christian Democrats (CDU) on 36%, up more than 6 points on five years ago, and far ahead of the far-right Alternative for Germany (AfD), who were on 22.5%, slightly down on the previous election.
Laschet, a centrist, was seen as having made an uncertain start to his election campaign and had faced calls to chart a more right-wing course to win back voters disenchanted by 16 years of compromises under Merkel.
"We have won the election," Saxony-Anhalt state premier Reiner Haseloff said after the exit polls came out. "A great majority of our citizens have said we don't want to be associated with the AfD. And for that I'm grateful."
He and other conservatives hailed the result as a tailwind for them ahead of the federal election.
"This will give us a boost for Berlin," national conservative caucus leader Ralph Brinkhaus said. "It is a victory for Armin Laschet."
The results were disappointing for most other parties, with the Greens, who are running a close second to the conservatives nationally, only in the single digits in the regional election. The left-leaning Greens kick off their party conference on June 11 and will formally declare Annalena Baerbock their first-ever chancellor candidate.
Less of a formality will be finalizing the ecologist party's election manifesto — a guide on what might lie ahead for policy in Europe's largest economy.
Zacks #1 Rank (STRONG BUY) Stocks
Oil prices are moving higher. Let's look into the effect through the lens of global oil producers, now on our #1 list.
(1) PetroChina: The largest integrated oil company in Mainland China. This is a $44 a share stock, and the market cap is $80.3B. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks momentum score of B.
(2) Petroleo Brasileiro: The largest integrated energy firm in Brazil. This is a $11.60 a share stock, and the market cap is $75.6B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of A.
(3) Suncor Energy: A Canadian oil sands company. This is a $25.50 a share stock, and the market cap is $44.6B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of D.
These are cheap stocks.
Nobody is interested in trading state-owned, or state-associated companies, I would wager.
Perhaps that is worth a harder look when oil prices are moving higher.
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