Stock Markets
Column-Mighty dollar shares in Fed’s heavy lifting: McGeever
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
By Jamie McGeever
ORLANDO, Florida (Reuters) – If Federal Reserve officials want U.S. financial conditions to tighten enough to cool the economy and inflation without triggering a deep recession, they’re getting a strong helping hand right now from the dollar.
The dollar is at a six-month high and has surged 5.5% since mid-July. That rip higher has been fueled by a rise in U.S. bond yields that has made the dollar much more appealing relative to other currencies.
Since the hit a 15-month low and embarked on its current upswing on July 14, Goldman Sachs’ U.S. financial conditions index has risen 52 basis points.
The trade-weighted FX rate has been the biggest single component of that, accounting for 22 bps, even more than the 21 bps contribution from the jump in long rates which has probably grabbed more media and market attention.
It is a small sample size, but the exchange rate is becoming an increasingly important factor tightening U.S. financial conditions.
The Fed will probably welcome this from a macro level, although there is a debate to be had about how much a stronger exchange rate can cool inflation that is largely domestically generated in services and housing.
But continued dollar appreciation could tighten financial conditions further without the Fed having to raise rates again.
The dollar’s momentum seems justified – U.S. economic data refuses to roll over, the rest of the world appears more fragile than the U.S., the dollar’s rate and yield advantage remains wide, and market positioning is still underweight.
Against that backdrop, HSBC’s currency strategy team on Thursday flipped their dollar view, and now see it marching even higher.
“The dollar has been making a comeback lately but we see more upside ahead. We change our view and now see the dollar strengthening into 2024,” they wrote.
HSBC JOINS DOLLAR BULLS
In the near term, speculative positioning is still weighted against the dollar despite the recent shakeout, which means hedge funds have room to cut back their bearish dollar bets even more in the coming weeks.
The last Commodity Futures Trading Commission data show that speculators halved their net short dollar position to $10.9 billion from $21.3 billion in late July. The last time they held a net long dollar position was November.
In periods of sustained dollar strength when the Fed is raising interest rates, the exchange rate’s contribution to tightening U.S. financial conditions is small. But when the dollar is rallying and rates are not rising, its impact is much greater.
In the January-September period last year when the dollar appreciated more than 20% – and the Fed was jacking up interest rates in clips of 75 basis points – Goldman’s U.S. financial conditions index rose around 350 bps.
The trade-weighted FX rate only accounted for around 65 bps of that, less than a quarter of the total and behind rising long rates and falling equities in terms of overall impact.
Of course, the stronger dollar would have fed into the bearish equity narrative as a higher exchange rate shrinks profits accrued from operations overseas.
Conversely, Goldman’s FC rose 90 bps between July 2014 and March 2015, a period in which the dollar appreciated 25% while interest rates remained anchored at the zero lower bound. The dollar accounted for all of the tightening conditions.
The Holy Grail for Fed Chair Jerome Powell and his Federal Open Market Committee colleagues is inflation returning smoothly to target and the economy achieving a ‘soft landing’.
Luck will determine that as much as sound wisdom and good judgment. The full impact of the 525 bps of policy tightening since March last year has probably not been felt although debate continues to swirl around how ‘long and variable’ the lags are.
Fed economists in June launched a financial conditions index called “FCI-G” – Financial Conditions Impulse on Growth – aimed at measuring the impact of conditions on activity and growth.
Over the second half of last year and into this year, the dollar has turned to being a headwind to growth from a tailwind, the authors found. The Fed will be comfortable with that continuing, as long as it doesn’t morph into a storm or worse.
(The opinions expressed here are those of the author, a columnist for Reuters)
In a turbulent market environment, Five9 (NASDAQ:) Inc’s stock has touched a 52-week low, reaching a price level of $28.74. This significant downturn reflects a broader trend for the cloud software company, which has seen its shares plummet by -58.79% over the past year. Investors are closely monitoring Five9’s performance as it navigates through a period of heightened volatility and shifting industry dynamics, which have contributed to the stock’s current valuation at this low point. The company’s efforts to rebound from this position will be under scrutiny in the coming quarters as market participants look for signs of a strategic turnaround or further indications of market pressures.
In other recent news, Five9 Inc . has achieved an annual revenue run rate exceeding $1 billion in Q2, a significant milestone despite lowering its annual revenue guidance by 3.8% due to customer budget constraints. The company’s adjusted EBITDA margin rose to 17% of revenue, contributing to a strong operating cash flow of $126 million. The company also confirmed plans to reduce its global workforce by approximately 7% by the end of 2024, a strategic move projected to cost between $12 million and $15 million.
Five9’s recent acquisition of Acqueon, a firm specializing in proactive outbound omnichannel customer engagement, aims to expand its AI offerings and bolster its growth. This move is in line with the company’s focus on managing expenses and improving profitability, with initiatives like FedRAMP and expansion into India anticipated to improve gross margins.
In their analysis, Piper Sandler maintained an Overweight rating for Five9, with a steady price target of $47.00, while Needham and BTIG both maintained a Buy rating with price targets of $48.00 and $45.00 respectively. These ratings reflect the firms’ confidence in Five9’s strategic positioning and potential for growth, despite the current challenges and workforce reduction.
InvestingPro Insights
Amid the current market conditions, Five9 Inc’s recent performance can be put into perspective with select data from InvestingPro. The company’s market capitalization stands at roughly $2.15 billion, indicating the size and scale of the business amidst its challenges. Despite the stock’s decline, analysts are showing a hint of optimism, with 20 analysts having revised their earnings estimates upwards for the upcoming period. This could signal a potential turnaround in sentiment or underlying business performance.
Importantly, Five9’s liquid assets are reported to surpass short-term obligations, suggesting that the company maintains a degree of financial flexibility to navigate its current difficulties. Furthermore, while the stock is trading near its 52-week low, it’s worth noting that the relative strength index (RSI) suggests the stock is in oversold territory, which can sometimes precede a rebound in share price. Investors looking for comprehensive analysis and additional InvestingPro Tips on Five9 can find more insights, including 14 other tips, at https://www.investing.com/pro/FIVN.
In terms of financial health, the company operates with a moderate level of debt and is expected to become profitable this year, according to analysts’ predictions. These elements may offer some solace to investors considering the stock’s substantial price fall over the last year. For those seeking a deeper dive into Five9’s valuation and future prospects, the InvestingPro platform provides a fair value estimate of $45.04, which is considerably higher than the current trading price, suggesting potential undervaluation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
TD Cowen reiterated its Buy rating on shares of Terns Pharmaceuticals (NASDAQ:TERN), following the company’s investor call. The call was held to manage expectations for the upcoming Phase 1/2 CARDINAL study data for chronic myeloid leukemia (CML). The firm noted the challenges in measuring the efficacy endpoint (EP) due to disease progression and the absence of treatment switch guidelines, which makes major molecular response (MMR) a challenging efficacy endpoint for Phase 1/2 trials.
The interim Phase 1/2 data aims to evaluate descriptive efficacy signals, considering patients’ baseline BCR-ABL levels and treatment history. The analyst highlighted that the once-daily (QD) dosing and the lack of food effect could potentially enhance the quality of life for patients compared to other allosteric tyrosine kinase inhibitors (TKIs).
Terns Pharmaceuticals has been focusing on the development of improved treatment options for CML. The company’s approach to dosing, which does not require food intake, may offer a more convenient alternative for patients, potentially leading to better adherence and outcomes.
The topline data from the 6-month Phase 1/2 CARDINAL study is anticipated to be available in 2025. This data will provide further insights into the treatment’s efficacy and safety, which are critical factors in the ongoing development and potential approval process.
Investors and stakeholders in Terns Pharmaceuticals are expected to closely monitor the progress of the CARDINAL study, as it could have a significant impact on the company’s future prospects and position in the CML treatment landscape.
In other recent news, Terns Pharmaceuticals has experienced significant developments. The biopharmaceutical company reported robust earnings and revenue results, with Mizuho Securities maintaining an Outperform rating on Terns shares, citing strong enthusiasm for the company’s drug, TERN-701, a potential treatment for chronic myeloid leukemia.
The firm expects the first interim Phase 1 CARDINAL study data for TERN-701 in December.
Terns also announced the appointment of Elona Kogan as its new chief legal officer, a move that underscores the company’s strategic development and pipeline advancement.
The company also secured an extension of its office lease in Foster City, California, through 2027, reflecting Terns Pharmaceuticals’ operational stability and long-term planning.
In terms of clinical trials, Terns has made progress in its ongoing Phase 1 study of TERN-701, with interim findings suggesting the drug can be administered once daily with or without food.
This development, coupled with the forthcoming Phase 1 data for another of Terns’ drugs, TERN-601—an oral GLP-1 receptor agonist for obesity—expected next month, underscores the company’s commitment to innovative therapies.
These recent developments, from financial performance to executive appointments and clinical trials, highlight Terns Pharmaceuticals’ ongoing efforts to advance its strategic objectives and deliver on its mission. The company’s activities are closely watched by investors and industry analysts, including those from Mizuho Securities, who continue to support the company’s potential.
InvestingPro Insights
As Terns Pharmaceuticals (NASDAQ:TERN) navigates the complexities of its Phase 1/2 CARDINAL study, investors are keeping a keen eye on the company’s financial health and stock performance. According to InvestingPro, Terns holds more cash than debt, which is a positive signal for financial stability. Additionally, with five analysts revising their earnings upwards for the upcoming period, there is a sense of optimism about the company’s potential performance.
However, it’s important to note that Terns is not currently profitable and has been quickly burning through cash, which may raise concerns about long-term sustainability. The company’s P/E Ratio stands at -5.71, reflecting these profitability challenges. Despite these hurdles, Terns has managed a 1 Year Price Total Return of 45.42%, indicating some investor confidence in the company’s growth prospects. The anticipated fair value from analysts stands at 15 USD, while the InvestingPro Fair Value is calculated at 5.8 USD, highlighting a divergence in valuation perspectives.
For those looking for more in-depth analysis, additional InvestingPro Tips on Terns Pharmaceuticals can be found at https://www.investing.com/pro/TERN, offering a comprehensive look at the company’s financial details and stock performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
PARIS (Reuters) – French President Emmanuel Macron discussed the importance of maintaining support for Ukraine and the need for a ceasefire in Gaza during talks on Friday with German Chancellor Olaf Scholz, said the French presidency.
Regarding Ukraine, the two leaders expressed their determination to support the country “for as long and as intensively as necessary” in its war against Russia, the Elysee said.
Forex2 years agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Forex2 years ago
Unbiased review of Pocket Option broker
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Stock Markets2 years ago
Morgan Stanley: bear market rally to continue
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China
