EU CONSUMER STAPLES: Are the days of drinking over?
Bloomberg is out this afternoon summarising findings from a survey it ran across 3,500 Americans. It saw 2/3 of youths (aged 18-34) now opting for Cannabis over Alcohol at least once a week (see here). FT was out last week highlighting research done by Oxford in conjunction with local issuer Heineken. They surveyed 12,000 adults across UK, USA, Spain, Japan and Brazil and found less optimistic results; "despite rising acceptance of low and non-alcoholic beverages, certain demographics feel societal pressure or are being questioned when choosing alcohol-free options." Still the youngest age group - (Gen-Z; <27yr olds) - had the highest rate of trying low to no alcohol drinks (at 73%).
The growth in zero-alcohol is no secret now; the world's largest brewer, AB-Inbev, reported revenue growth of +2% in Q3 but an impressive +35% in zero-Alcohol (an extreme example, most seeing HSD to LDD growth). It was asked about the falling alcohol consumption per capita in the US (after a Covid peak) - it played it down pointing to still rising $ spend on premiumisation. For credit investors this may be a less extreme but similar dynamic to Tobacco names exposure to cigarettes vs. (pouches & vapes), or a postal co's exposure to mail vs. parcels. Less extreme given we are yet to see the steep falls in volume we face in those two examples.
While we are on Tobacco, the other side of the credit implication is the ESG discount; pouches + vapes (often termed next-gen products) are considered substantially less harmful than smoking with only 'unclear' long-term implications (scientific consensus, national bodies). Meanwhile Alcohol is a known carcinogen/causes cancer. Even after a strong Tobacco rally last year, PM still gives 25bps over AB-Inbev on the 5Y (we consider this gap an ESG discount).
Some are moving faster than others; Carlsberg's £4b acquisition of Britvic will take its non-alcoholic exposure from 19% to 33% of group volumes.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
