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Inflation Showdown and Earnings Extravaganza: The Financial Circus is in Town!

Market participants are suiting up in their best financial armor, preparing for the release of key inflation data that’s about to drop like a bombshell. But that’s not all; the third-quarter earnings season is also making a grand entrance, with the stage set for some major players to steal the limelight.

Hold onto your wallets because Friday marks the unofficial start of the earnings season, and it’s a star-studded affair. Big banks like Citigroup, JPMorgan Chase, and Wells Fargo are taking center stage, ready to spill the beans on their financial escapades. Not to be outdone, heavyweights like BlackRock, UnitedHealth Group, and PNC Financial Services Group are all stepping into the earnings ring with their own tales of profit and loss.

But wait, there’s more! Throughout the week, a lineup of other companies, including PepsiCo, Delta Air Lines, Domino’s Pizza, Fastenal, and Walgreens Boots Alliance, will also be revealing their financial secrets. It’s like a game of financial poker where everyone’s showing their cards, hoping for a winning hand.

And if that’s not enough excitement for you, there are investor meetings in the mix too. Adobe and HP Inc are hosting their own gatherings, ready to dazzle investors with their visions of the future. Even Hormel Foods is getting in on the action, planning a grand investor day. Get your popcorn ready; this week is going to be a financial rollercoaster!

But hold onto your hats because on the economic front, the Bureau of Labor Statistics is about to drop the latest inflation bomb. They’re predicting a 0.3% rise in both headline and core CPI for September, compared to the post-pandemic peak figures from last year. And that’s not all; the Federal Open Market Committee is revealing their top-secret meeting minutes on the same day. It’s like a financial spy novel unfolding right before our eyes.

But the data extravaganza doesn’t stop there. The Bureau of Labor Statistics is also serving up the producer price index with core PPI expected to rise by 2.3%. It’s like a gourmet meal for data-hungry investors.

And don’t forget the National Federation of Independent Business’s Small Business Optimism Index and the University of Michigan’s Consumer Sentiment index. It’s like a mood ring for the economy, and investors are watching closely to see which color it turns.

As the curtain rises on this action-packed week, year-ahead inflation expectations take center stage. Investors are like detectives, carefully dissecting every data point and corporate earnings report, searching for clues about the financial future. It’s a financial spectacle you won’t want to miss!

U.S. stocks slip, oil surges on Middle East violence

U.S. stock futures slipped in Asia on Monday as the military conflict in the Middle East boosted oil and Treasuries, while the sizzling September U.S. jobs report raised the rate stakes for inflation figures later in the week.

A holiday in Japan made for thin conditions but the early bid was for bonds and the safe harbours of Japanese yen and gold, with the euro the main loser.

“The risk is higher oil prices, a slump in equities, and a surge in volatility that supports the dollar and yen, and undermine ‘risk’ currencies,” said analysts at CBA in a note.

“A response by Iran in the Straits of Hormuz is the wild-card for oil supply and currency reaction.”

Israel pounded the Palestinian enclave of Gaza on Sunday, killing hundreds of people in retaliation for one of the bloodiest attacks in its history when Islamist group Hamas killed 700 Israelis and abducted dozens more.

The danger of disruptions to supply was enough to see Brent jump $2.93 to $87.51 a barrel, while U.S. crude climbed $3.04 to $85.83 per barrel. [O/R]

Gold was also in demand, rising 0.8% to $1,848 an ounce. [GOL/]

In currency markets, the yen was the main gainer though moves were modest overall. The euro dipped 0.3% to 157.44 yen, while the dollar dipped 0.1% to 149.14 yen. The euro also eased 0.3% on the dollar to $1.0556. [FRX/]

The cautious mood was a balm for sovereign bonds after recent heavy selling and 10-year Treasury futures rose a sizable 18 ticks. Yields were indicated around 4.71% compared to 4.81% on Friday.

Any sustained rally in oil prices would act as a tax on consumers and add to inflationary pressures, which weighed on equities as S&P 500 futures shed 0.8% and Nasdaq futures lost 0.7%.

While Tokyo was closed, Nikkei futures were trading down 0.7% and near where the cash market ended on Friday.

The news from the Middle East could also sour the start of corporate earnings season with 12 S&P 500 companies reporting this week including JP Morgan, Citi, and Wells Fargo.

The strength of the U.S. jobs report had fed expectations that interest rates would have to stay high for longer, with another major test looming from data on September consumer prices.

Median forecasts are for 0.3% gain in both the headline and core measures, which should see the annual pace of inflation slow a touch.

Minutes of the last Federal Reserve meeting are due this week and should help gauge how serious members were about keeping rates up, or even hiking again.

Early Monday, markets seemed to think developments in the Middle East would lean against further Fed hikes, and perhaps hasten a policy easing next year.

Fed fund futures now implied an 86% chance rates would stay on hold in November, and had around 75 basis points of cuts priced in for 2024.

China also returns from holiday this week with a deluge of data including consumer and producer inflation, trade, credit and lending growth.


Levi’s Sales Tango with Expectations, but CFO Dons Optimistic Dancing Shoes

In a classic fashion twist, Levi Strauss & Co. (LEVI) has had to adjust its full-year sales outlook after its third-quarter performance did a dance that almost hit the mark. The apparel juggernaut blamed this near-miss on some serious hurdles in its wholesale channels, especially those department stores and big box retailers. But fear not, for Levi’s CFO, Harmit Singh, brought a ray of sartorial sunshine into the mix. He waltzed in, pointing out that while consumers might be feeling a bit of financial tango, they’re still charmed by trusted brands that offer a unique experience, a sprinkle of innovation, and some wallet-friendly value.

In a world where retail is a dance floor, Singh’s message was clear: Levi’s remains “cautiously optimistic.” It’s like they’re swapping out their regular shoes for a pair of dancing heels, ready to sashay through the challenges and embrace resilient consumer demand with fresh, innovative ideas. So, the music plays on for Levi’s, and the audience is left eagerly awaiting the next twist and turn in this fashionable performance.

Bristol-Myers Squibb Goes on a $4.8 Billion Shopping Spree for Mirati Therapeutics: Cash, Debt

Bristol-Myers Squibb has decided to go shopping in the world of pharmaceuticals, picking up Mirati Therapeutics for a cool $4.8 billion. They’re throwing around $58 per share in cash, making it rain for the shareholders. But wait, there’s more! They’re financing this fancy purchase with a mix of cash and debt, because even big pharma needs a little credit sometimes.

Now, here’s the twist in the tale: Bristol-Myers Squibb expects this transaction to put a little dent in their non-GAAP earnings per share, roughly 35 cents per share in the first year. It’s like buying a shiny new sports car – it looks great, but it might cost you a bit more at the gas pump.

But fear not, Mirati shareholders! You won’t be left empty-handed. For each share you hold, you get a special treat – a Contingent Value Right. It’s like the golden ticket to Willy Wonka’s chocolate factory, potentially worth $12.00 per share in cash. Now that’s a sweet deal!

And let’s not forget the star of the show – Mirati’s lung cancer drug, Krazati, got the nod from the U.S. health regulator. So, Bristol-Myers Squibb is not just buying a company; they’re getting their hands on a potentially game-changing drug. Looks like they’re making moves in the world of cancer treatment.

Investing is like a thrilling roller coaster ride for your money, but with a financial safety net. It’s where you put your hard-earned cash to work, allowing it to do the heavy lifting while you sit back and sip your latte. Sure, there are ups and downs, just like on that roller coaster, but if you buckle up and ride it out, you might just end up with a wallet that’s heavier than when you started. So, whether you’re a Wall Street wizard or just a regular Joe with a 401(k), remember: Investing is like playing chess with your dollars, and with a bit of strategy and a pinch of patience, you can checkmate your financial goals.