Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
Nike warns of margin pressure; Evergrande silence spooks
Peter Garnry
Chief Investment Strategist
Summary: Nike has done well during the pandemic and last night's Q1 results were overall also good, but at the margin the company warns about margin pressure from higher freight prices and rising input costs, on top of longer delivery times. On the positive side, Nike Direct showed strong performance with revenue up 25% in constant-currency terms. Evergrande is back haunting investors as the Chinese real estate developer has remained silent leaving bondholders and investors guessing whether the company paid its bond coupon yesterday.
Nike has seen a phenomenal rebound in its business from the lows during the pandemic. Revenue in Q1 (ending 31 August) was $12.3bn vs est. $12.5bn up 16% y/y and gross margin was 0.2%-points better than expected at 46.5%. EPS was $1.16 vs est. $1.12 up 22% y/y. However, shares traded 4% lower in extended trading as comments on the conference call about shipping times from Asia to North America had doubled to 80 days and all of its footwear factories in Vietnam were currently closed due to Covid-19 restrictions and were not expected to reopen until October.
The significantly lower inventory level of Nike is evident of these supply chain issues and company also warned that higher ocean freight surcharges would eat to margins. On the positive side, Nike’s direct-to-consumer channel grew revenue 25% on a constant-currency basis, which is key for Nike’s future margin expansion. The message from Nike was an echo of FedEx indicating that the Q3 earnings season could very well be all about margin pressure and could become a net positive for technology companies that operate under fewer constraints in the physical.
After yesterday’s rally in global equities the risk-off mood has returned with investors getting spooked by the silence from Evergrande which saw its shares tumble 12% in today’s session. Given how fragile the situation is around Evergrande and the wider real estate developer industry, it is incomprehensible why Evergrande, after announcing an agreed coupon payment due yesterday, has failed to update the market on a successful payment on its bonds. It leaves investors wondering whether the developer actually has the money and maybe is in a much more distressed liquidity situation than previously thought.
In terms of risk to sentiment, our view is still that the Chinese real estate developer situation can be solved by a transfer of risk from the private sector to the government balance sheet. We are much more worried about the unfolding energy shock in Europe, with rapidly rising electricity prices eating into household disposable income and margins of industry, and rising natural gas prices shutting down fertilizer plants. A food and energy crisis has the seeds to do much more damage, so this is a key risk to monitor for Europe going into the winter months.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)