Market 04/30: Wage growth prolongs inflation

US labor costs rise sharply: wage growth prolongs inflation

Q1/2024 labor costs +1.2% Q/Q - strongest increase in 1 year, exceeding forecast +1% and previous +0.9% Q/Q

• Service sector wage growth +1.2% Q/Q from +0.8% previous quarter

• Federal and local government civilian wages rise sharply: +1.4% Q/Q and +5.0% Y/Y (from +4.7% Y/Y previously)

April consumer confidence drops more than estimated

Conference Board Consumer Confidence Index falls to 97, below estimate of 104 and previous 103.1.

March is the 6th consecutive month with downward revised data

Consumer expectations component also declines, nearing the lowest level in summer 2022

Stock rise expectations also decline but remain anchored at historically high levels

US Treasury expected to borrow USD 243 billion in Q2 - up +USD 41 billion from January forecast

Treasury expected to borrow 243 billion USD in Q2, 41 billion USD higher than January estimate

• Estimated cash balance to be at 750 billion USD at end of June.

Forecast for Q3:

• Expected to borrow 847 billion USD in Q3

• Cash balance to be at 850 billion USD at end of September.

US home prices in February rise for 13th consecutive month

Home prices in 20 largest US cities rise for 13th consecutive month in February, +0.61% M/M and +7.29% Y/Y (above +6.7% Y/Y estimate)

Although Case-Shiller data has a lag, with interest rates remaining above 7%, home prices are unlikely to continue rising

Y/Y increase in existing home prices recovers and accelerates to +6.4% Y/Y, while CPI rent prices hold at +6% Y/Y

Earnings results: Paramount, PayPal, McDonald’s, Coca-Cola, Logitech, HSBC, Eli Lilly

1. Paramount

• Revenue: 7.69 billion USD, +6% Y/Y

  • TV Media: revenue 5.2 billion USD, +1% Y/Y, benefiting from Super Bowl LVIII

  • Direct-to-customer: revenue 1.88 billion USD, +24% Y/Y due to Paramount+ growth

• Adjusted EPS: 0.62 USD

• Cash flow from operations: 260 million USD

2. PayPal

• Transaction volume: +14% Y/Y to 404 billion USD

• Regularly active accounts -1% Y/Y to 427 million

• Value per trade +13% Y/Y to 60

• Revenue +9% Y/Y to 7.7 billion USD (above expectations by 180 million USD)

• Non-GAAP EPS: 1.4 USD (above expectations by 0.18 USD)

• Q2 FY24 revenue guidance +7% Y/Y

3. McDonald’s

• Revenue +5% Y/Y to 6.2 billion USD (in line with estimates)

• Non-GAAP EPS: 2.7 USD (below estimates by 0.03 USD)

• Dividend +10% Y/Y to 1.67 USD

4. Coca-Cola

• Revenue: 11.3 billion USD, +3% Y/Y, with organic revenue +11% Y/Y

• Coca can volume: +1% Y/Y

  • Developed markets: stable

  • Emerging markets: single-digit growth

• Operating profit: 2.1 billion USD, -36% Y/Y

• GAAP EPS: +3% Y/Y to 0.74 USD

5. Logitech

• Revenue +5% Y/Y to 1.01 billion USD, above expectations of 956.9 million USD

  • Keyboards & Combos: +15% Y/Y to 216.2 million USD

  • Gaming: +7% Y/Y to 273.5 million USD

• Non-GAAP EPS +98% Y/Y to 99 cents

6. HSBC

• Revenue: 20.8 billion USD, +3% Y/Y, above forecast of 16.94 billion USD

• Net interest margin: down to 1.63% from 1.69% last year

• EPS: 0.54 USD

7. Lilly’s

• Revenue: 8.77 billion USD, +26% Y/Y

• Non-GAAP EPS: +59% Y/Y to 2.58 USD

• Operating income: +68% Y/Y to 2.51 USD

Other news

1. Chicago April PMI down to 37.9, below estimate of 45 & prior 41.4

2. Market pricing 16% chance of at least 1 rate hike in 2024, and record high ~38% chance of no rate cuts this year

3. Walmart Health closing 51 centers, ending virtual care services

4. Eurozone April inflation steady at +2.4% y/y - core inflation down to +2.7% y/y (from 2.9% prior month)

   —> reinforces ECB rate cut likelihood this summer.

5. New Series I Treasury bond rate is 4.28% for the next 6 months, down from 5.27% in Nov 2023 period and slightly lower than 4.3% from May 2023.

   • Details on: Series I here.