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LCD TV panel prices to rebound in 1Q21 or 2Q21, says AUO president

Better-than-expected TV sales during China's Double 11 online shopping festival signals that global demand for TVs is beginning to pick up, and LCD TV panel prices will rebound in the first or second quarter of 2022, acording to Frank Ko, president and COO Frank Ko at panel maker AU Optronics (AUO)......»»

Category: topSource: digitimesNov 25th, 2021

It"s already too late for Biden"s economy to save Democrats in the 2022 midterms

Experts see inflation cooling and unemployment dropping next year, but history suggests Republicans will still take control of the House — at least. U.S. President Joe Biden delivers remarks on the economy during a visit to Cuyahoga Community College in Cleveland, Ohio, U.S., May 27, 2021.Evelyn Hockstein/Reuters The economy is set to boom in 2022, but it'll be too late to help Democrats in the midterms. History shows parties in power typically lose seats in the House, even if the economy is thriving. Once Americans endure high inflation and unemployment, "it often takes a full two years for voters to notice" when the country heals, one expert said. The forecasts are pouring in, and they predict Biden will lead the US to a even stronger economy than the one in place before COVID wrecked it.Too bad that won't help his party in the upcoming 2022 midterms, not if all recent political history is any indication.The biggest factors currently suppressing a booming Biden economy are expected to fade in a matter of months. The Delta wave appears to be a speed bump for the recovery, not the major disruption many feared. The red-hot inflation weighing on Americans could cool "by the second or third quarter" of 2022, Federal Reserve Chair Jerome Powell said earlier in November. Economists see strong job growth lasting into the new year. And the supply-chain crisis seems to have already peaked, with rates for overseas shipping now falling for eight weeks straight.Biden's approval rating is in the tank despite the temporary nature of these problems, and it's threatening to drag down Democratic candidates across the country. Americans' confidence in the economy is the lowest that it's been since the depths of the Great Recession. Astoundingly, they feel worse now than they did during the depths of lockdown in March and April 2020. For the public to regain faith in Democrats' handling of the recovery, improvements need to come fast. The Biden administration is pouring its hopes into the new infrastructure law and the Build Back Better Act to diminish inflation. But many of their provisions will take years to implement and will do little to alleviate inflation in the short term."The BBB and infrastructure bill are both great long-term for the resilience of the economy and then investments in productivity," Rep. Don Beyer of Virginia, a member of the tax-writing House Ways and Means panel, told Insider. "But in the short run there really is a shortage of tools for a government, whether it's a president or a Congress, to go fix supply chain problems.""The best thing we can do is explain why inflation is where it is," Beyer said. "And have reasonable expectations or about when it may start to taper."But voters don't tend to demonstrate patience with rising prices eating into their paychecks. If they'd wait a little longer, they'd see a starkly different economy, according to Jefferies analysts led by Aneta Markowska. The bank sees inflation cooling to 2.5%, less than half the annual rate seen in October. Unemployment will dip to a record-low 3%, and the supply-chain crisis will abate. Gross domestic product will climb at an annual pace of 5.1% through the year, just slightly slowing from the stimulus-fueled surge of 5.5% in 2021. By all measures, Jefferies sees a boom on the horizon. Yet voters' past behavior suggests they'll ignore it the same way they're shrugging off the recovery taking place today. Precedent favors Republicans in 2022 — even if the US is thrivingHistory suggests Democrats' chances at a midterms rebound have already gone up in smoke. Insider analysis shows little correlation between a strong economy and a party's ability to maintain control of the government.!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r.....»»

Category: topSource: businessinsiderNov 20th, 2021

Futures Fade Rally With Congress Set To Avert Government Shutdown

Futures Fade Rally With Congress Set To Avert Government Shutdown US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China's official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged. All the three major indexes are set for a monthly drop, with the benchmark S&P 500 on track to break its seven-month winning streak as worries about persistent inflation, the fallout from China Evergrande’s potential default and political wrangling over the debt ceiling rattled sentiment. The index was, however, on course to mark its sixth straight quarterly gain, albeit its smallest, since March 2020’s drop. The rate-sensitive FAANG stocks have lost about $415 billion in value this month after the Federal Reserve’s hawkish shift on monetary policy sparked a rally in Treasury yields and prompted investors to move into energy, banks and small-cap sectors that stand to benefit the most from an economic revival. Among individual stocks, oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members. Virgin Galactic shares surged 9.7% in premarket trading after the U.S. aviation regulator gave the company a green-light to resume flights to the brink of space. Perrigo climbed 14% after reporting a settlement in a tax dispute with Ireland.  U.S.-listed Macau casino operators may get a boost Thursday after Macau Chief Executive Ho Iat Seng said the region will strive to resume quarantine-free travel to Zhuhai by Oct. 1, the start of the Golden Week holiday, if the Covid-19 situation in Macau is stable. Here are some of the other biggest U.S. movers today: Retail investor favorites Farmmi (FAMI US) and Camber Energy (CEI US) both rise in U.S. premarket trading, continuing their strong recent runs on high volumes Virgin Galactic (SPCE US) shares rise 8.9% in U.S. premarket trading after the U.S. aviation regulator gave co. a green-light to resume flights to the brink of space Perrigo (PRGO US) rises 15% in U.S. premarket trading after reporting a settlement in a tax dispute with Ireland. The stock was raised to buy from hold at Jefferies over the “very favorable” resolution Landec (LNDC US) shares fell 17% in Wednesday postmarket trading after fiscal 1Q revenue and adjusted loss per share miss consensus estimates Affimed (AFMD US) rises 4.3% in Wednesday postmarket trading after Stifel analyst Bradley Canino initiates at a buy with a $12 price target, implying the stock may more than double over the next year Herman Miller (MLHR US) up ~2.8% in Wednesday postmarket trading after the office furnishings maker posts fiscal 1Q net sales that beat the consensus estimate Orion Group Holdings (ORN US) shares surged as much as 43% in Wednesday extended trading after the company disclosed two contract awards for its Marine segment totaling nearly $200m Kaival Brands (KAVL US) fell 18% Wednesday postmarket after offering shares, warrants via Maxim An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering. “Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.” Still, president Joe Biden’s agenda remains at risk of being derailed by divisions among his own Democrats, as moderates voiced anger on Wednesday at the idea of delaying a $1 trillion infrastructure bill ahead of a critical vote to avert a government shutdown. The big overnight economic news came from China whose September NBS manufacturing PMI fell to 49.6 from 50.1 in August, the first contraction since Feb 2020, likely due to the production cuts caused by energy constraints. Both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreased in September. The NBS non-manufacturing PMI rebounded to 53.2 in September from 47.5 in August on a recovery of services activities as COVID restrictions eased. However, the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month: expect far worse number in the months ahead unless China manages to contain its energy crisis. Europe’s Stoxx 600 Index advanced 0.3%, trimming a monthly loss but fading an earlier gain of 0.9%, led by gains in basic resources companies as iron ore climbed, with the CAC and FTSE 100 outperforming at the margin. Technology stocks, battered earlier this week, also extended their rebound.  Miners, oil & gas and media are the strongest sectors; utility and industrial names lag. European natural gas and power markets hit fresh record highs as supply constraints persist. Perrigo jumped 13.8% after the drugmaker agreed to settle with Irish tax authorities over a 2018 issue by paying $1.90 billion in taxes Asian stocks were poised to cap their first quarterly loss since March 2020 as Chinese technology names fell and as investors remained wary over a recent rise in U.S. Treasury yields.  The MSCI Asia Pacific Index is set to end the September quarter with a loss of more than 5%, snapping a winning streak of five straight quarters. A combination of higher yields, Beijing’s corporate crackdown and worry over slowing economic growth in Asia’s biggest economy have hurt sentiment, bringing the market down following a brief rally in late August.  The Asian benchmark rose less than 0.1% after posting its worst single-day drop in six weeks on Wednesday. Consumer discretionary and communication services groups fell, while financials advanced. The Hang Seng Tech Index ended 1.3% lower as Beijing announced new curbs on the sector, while higher yields hurt sentiment toward growth stocks.  “Because there’s growing worry over U.S. inflation, we need to keep an eye on the potential risks, globally,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “Also, there’s the Evergrande issue. The market is in a wait-and-see mode now, with a focus on whether the group will be able to make future interest rate payments.”  Benchmarks in Thailand and Malaysia were the biggest losers, while Indonesia and Australia outperformed. Japan’s Topix and the Nikkei 225 Stock Average slipped for a fourth day as investors weighed Fumio Kishida’s election victory as the new ruling party leader. Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors braced for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup survey said a 20% pullback in stocks is more likely than a 20% rally. In rates, Treasuries were slightly cheaper across the curve, off session lows as stock futures pare gains. 10-year TSY yields were around 1.53%, cheaper by 1.2bp on the day vs 2.3bp for U.K. 10-year; MPC-dated OIS rates price in ~65bps of BOE hikes by December 2022. Gilts lead the selloff, with U.K. curve bear-steepening as BOE rate-hike expectations continue to ramp up. Host of Fed speakers are in focus during U.S. session, while month-end extension may serve to underpin long-end of the curve.   A gauge of the dollar’s strength headed for its first drop in five days as Treasury yields steadied after a recent rise, and amid quarter-end flows. The Bloomberg Dollar Spot Index fell as the dollar steady or weaker against most of its Group-of-10 peers. The euro hovered around $1.16 and the pound was steady while Gilts inched lower, underperforming Bunds and Treasuries. Money markets now see around 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That means they’re betting the key rate will rise to 0.75% next year from 0.1% currently. The Australian dollar led gains after it rose off its lowest level since August 23 amid exporter month-end demand and as iron ore buyers locked in purchases ahead of a week-long holiday in China. Norway’s krone was the worst G-10 performer and slipped a fifth day versus the dollar, its longest loosing streak in a year. In commodities, oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading. European gas prices meanwhile hit a new all time high. Looking at the day ahead, one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Market Snapshot S&P 500 futures up 0.7% to 4,379.00 STOXX Europe 600 up 0.6% to 457.59 MXAP little changed at 196.85 MXAPJ up 0.3% to 635.71 Nikkei down 0.3% to 29,452.66 Topix down 0.4% to 2,030.16 Hang Seng Index down 0.4% to 24,575.64 Shanghai Composite up 0.9% to 3,568.17 Sensex down 0.3% to 59,239.76 Australia S&P/ASX 200 up 1.9% to 7,332.16 Kospi up 0.3% to 3,068.82 Brent Futures up 0.4% to $78.98/bbl Gold spot up 0.4% to $1,732.86 U.S. Dollar Index little changed at 94.27 German 10Y yield fell 0.5 bps to -0.212% Euro little changed at $1.1607 Top Overnight News from Bloomberg U.K. gross domestic product rose 5.5% in the second quarter instead of the 4.8% earlier estimated, official figures published Thursday show. The data, which reflected the reopening of stores and the hospitality industry, mean the economy was still 3.3% smaller than it was before the pandemic struck. China has urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some home buyers, another signal that authorities are worried about fallout from the debt crisis at China Evergrande Group. The U.S. currency’s surge is helping the Chinese yuan record its largest gain in eight months on a trade-weighted basis in September. It adds to headwinds for the world’s second- largest economy already slowing due to a resurgence in Covid cases, a power crisis and regulatory curbs. The Swiss National Bank bought foreign exchange worth 5.44 billion francs ($5.8 billion) in the second quarter, part of its long-running policy to alleviate appreciation pressure on the franc   A few members of the Riksbank’s executive board discussed a rate path that could indicate a rate rise at the end of the forecast period, Sweden’s central bank says in minutes from its Sept. 20 meeting French inflation accelerated in September as households in the euro area’s second-largest economy faced a jump in the costs of energy and services. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded somewhat varied with the region indecisive at quarter-end and as participants digested a slew of data releases including mixed Chinese PMI figures. ASX 200 (+1.7%) was underpinned by broad strength across its industries including the top-weighted financials sector and with the large cap miners lifted as iron ore futures surge by double-digit percentages, while the surprise expansion in Building Approvals also helped markets overlook the 51% spike in daily new infections for Victoria state. Nikkei 225 (+0.1%) was subdued for most of the session after disappointing Industrial Production and Retail Sales data which prompted the government to cut its assessment of industrial output which it stated was stalling. The government also warned that factory output could decline for a third consecutive month in September and that October has large downside risk due to uncertainty from auto manufacturing cuts. However, Nikkei 225 then recovered with the index marginally supported by currency flows. Hang Seng (-1.0%) and Shanghai Comp. (+0.4%) diverged heading into the National Day holidays and week-long closure for the mainland with tech names in Hong Kong pressured by ongoing regulatory concerns as China is to tighten regulation of algorithms related to internet information services. Nonetheless, mainland bourses were kept afloat after a further liquidity injection by the PBoC ahead of the Golden Week celebrations and as markets took the latest PMI figures in their strides whereby the official headline Manufacturing PMI disappointed to print its first contraction since February 2020, although Non-Manufacturing PMI and Composite PMI returned to expansionary territory and Caixin Manufacturing PMI topped estimates to print at the 50-benchmark level. Top Asian News S&P Points to Progress as Bondholders Wait: Evergrande Update Bank Linked to Kazakh Leader Buys Kcell Stake After Share Slump Goldman Sachs Names Andy Tai Head of IBD Southeast Asia: Memo What Japan’s Middle-of-the-Road New Leader Means for Markets The upside momentum seen across US and European equity futures overnight stalled, with European cash also drifting from the best seen at the open (Euro Stoxx 50 +0.1%; Stoxx 600 +0.4%). This follows somewhat mixed APAC handover, and as newsflow remains light on month and quarter-end. US equity futures are firmer across the board, but again off best levels, although the RTY (+0.8%) outperforms the ES (+0.4%), YM (+0.4%) and NQ (+0.5%). Back to Europe, the periphery lags vs core markets, whilst the DAX 40 (-0.3%) underperforms within the core market. Sectors in Europe are mostly in the green but do not portray a particular risk bias. Basic Resources top the chart with aid from overnight action in some base metals, particularly iron, in turn aiding the large iron miners BHP (+2.2%), Rio Tinto (+3.4%) and Anglo American (+2.9%). The bottom of the sectors meanwhile consists of Travel & Leisure, Autos & Parts and Industrial Goods & Services, with the former potentially feeling some headwinds from China’s travel restrictions during its upcoming National Day holiday. In terms of M&A, French press reported that CAC-listed Carrefour (-1.3%) is reportedly looking at options for sector consolidation, and talks are said to have taken place with the chain stores Auchan, with peer Casino (Unch) also initially seeing a leg higher in sympathy amid the prospect of sector consolidation. That being said, Carrefour has now reversed its earlier upside with no particular catalyst for the reversal. It is, however, worth keeping in mind that regulatory/competition hurdles cannot be ruled out – as a reminder, earlier this year, France blocked the takeover of Carrefour by Canada’s Alimentation Couche-Tard. In the case of a successful deal, Carrefour will likely be the acquirer as the largest supermarket in France. Sticking with M&A, Eutelsat (+14%) was bolstered at the open amid source reports that French billionaire Patrick Drahi is said to have made an unsolicited takeover offer of EUR 12.10/shr for Eutelsat (vs EUR 10.35 close on Wednesday), whilst the FT reported that this offer was rejected. Top European News European Banks Dangle $26 Billion in Payouts as ECB Cap Ends U.K. Economy Emerged From Lockdown Stronger Than Expected In a First, Uber Joins Drivers in Strike Against Brussels Rules EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links In FX, The non-US Dollars are taking advantage of the Greenback’s loss of momentum, and the Aussie in particular given an unexpected boost from building approvals completely confounding expectations for a fall, while a spike in iron ore prices overnight provided additional incentive amidst somewhat mixed external impulses via Chinese PMIs. Hence, Aud/Usd is leading the chasing pack and back up around 0.7200, Usd/Cad is retreating through 1.2750 and away from decent option expiry interest at 1.2755 and between 1.2750-40 (in 1.3 bn and 1 bn respectively) with some assistance from the latest bounce in crude benchmarks and Nzd/Usd is still trying to tag along, but capped into 0.6900 as the Aud/Nzd cross continues to grind higher and hamper the Kiwi. DXY/GBP/JPY/EUR/CHF - It’s far too early to call time on the Buck’s impressive rally and revival from recent lows, but it has stalled following a midweek extension that propelled the index to the brink of 94.500, at 94.435. The DXY subsequently slipped back to 94.233 and is now meandering around 94.300 having topped out at 94.401 awaiting residual rebalancing flows for the final day of September, Q3 and the half fy that Citi is still classifying as Dollar positive, albeit with tweaks to sd hedges for certain Usd/major pairings. Also ahead, the last US data and survey releases for the month including final Q2 GDP, IJC and Chicago PMI before another raft of Fed speakers. Meanwhile, Sterling has gleaned some much needed support from upward revisions to Q2 UK GDP, a much narrower than forecast current account deficit and upbeat Lloyds business barometer rather than sub-consensus Nationwide house prices to bounce from the low 1.3600 area vs the Greenback and unwind more of its underperformance against the Euro within a 0.8643-12 range. However, the latter is keeping tabs on 1.1600 vs its US peer in wake of firmer German state CPI prints and with the aforementioned Citi model flagging a sub-1 standard deviation for Eur/Usd in contrast to Usd/Jpy that has been elevated to 1.85 from a prelim 1.12. Nevertheless, the Yen is deriving some traction from the calmer yield backdrop rather than disappointing Japanese data in the form of ip and retail sales to contain losses under 112.00, and the Franc is trying to do the same around 0.9350. SCANDI/EM - The tables have been turning and fortunes changing for the Nok and Sek, but the former has now given up all and more its post-Norges Bank hike gains and more as Brent consolidates beneath Usd 80/brl and the foreign currency purchases have been set at the same level for October as the current month. Conversely, the latter has taken heed of a hawkish hue to the latest set of Riksbank minutes and the fact that a few Board members discussed a rate path that could indicate a rise at the end of the forecast period. Elsewhere, the Zar looks underpinned by marginally firmer than anticipated SA ppi and private sector credit, while the Mxn is treading cautiously ahead of Banxico and a widely touted 25 bp hike. In commodities, WTI and Brent futures are choppy but trade with modest gains heading into the US open and in the run-up to Monday’s OPEC+ meeting. The European session thus far has been quiet from a news flow standpoint, but the contracts saw some fleeting upside after breaking above overnight ranges, albeit the momentum did not last long. Eyes turn to OPEC+ commentary heading into the meeting, which is expected to be another smooth affair, according to Argus sources. As a reminder, the group is expected to stick to its plan to raise output by 400k BPD despite outside pressure to further open the taps in a bid to control prices. Elsewhere, as a mild proxy for Chinese demand, China’s Sinopec noted that all LNG receiving terminals are to be operated at full capacity. WTI trades on either side of USD 75/bbl (vs low USD 74.54/bbl), while its Brent counterpart remains north of USD 78/bbl (vs low USD 77.66/bbl). Turning to metals, spot gold and silver continue to consolidate after yesterday’s Dollar induced losses, with the former finding some support around the USD 1,725/oz mark and the latter establishing a floor around USD 21.50/oz. Over to base metals, Dalian iron ore futures rose to three-week highs amid pre-holiday Chinese demand and after Fortescue Metals Group halted mining operations at a Pilbara project. Conversely, LME copper is on a softer footing as the Buck holds onto recent gains. US Event Calendar 8:30am: 2Q PCE Core QoQ, est. 6.1%, prior 6.1% 8:30am: 2Q GDP Price Index, est. 6.1%, prior 6.1% 8:30am: 2Q Personal Consumption, est. 11.9%, prior 11.9% 8:30am: Sept. Continuing Claims, est. 2.79m, prior 2.85m 8:30am: 2Q GDP Annualized QoQ, est. 6.6%, prior 6.6% 8:30am: Sept. Initial Jobless Claims, est. 330,000, prior 351,000 9:45am: Sept. MNI Chicago PMI, est. 65.0, prior 66.8 Central Bank speakers 10am: Fed’s Williams Discusses the Fed’s Pandemic Response 10am: Powell and Yellen Appear Before House Finance Panel 11am: Fed’s Bostic Discusses Economic Mobility 11:30am: Fed’s Harker Discusses Sustainable Assets and Financial... 12:30pm: Fed’s Evans Discusses Economic Outlook 1:05pm: Fed’s Bullard Makes Opening Remarks at Book Launch 2:30pm: Fed’s Daly Speaks at Women and Leadership Event Government Calendar 10am ET: Treasury Secretary Yellen, Fed Chair Powell appear at a House Financial Services Committee hearing on the Treasury, Fed’s pandemic response 10:30am ET: Senate begins voting process for continuing resolution that extends U.S. government funding to December 3 10:30am ET: Senate Commerce subcommittee holds hearing on Facebook, Instagram’s influence on kids with Antigone Davis, Director, Global Head of Safety, Facebook 10:45am ET: House Speaker Nancy Pelosi holds weekly press briefing DB's Jim Reid concludes the overnight wrap I’ll be getting my stitches out of my knee today and will have a chance to grill the surgeon who I think told me I’ll probably soon need a knee replacement. I say think as it was all a bit of a medicated blur post the operation 2 weeks ago. These have been a painfully slow 2 weeks of no weight bearing with another 4 to go and perhaps all to no avail. As you can imagine I’ve done no housework, can’t fend much for myself, or been able to control the kids much over this period. I’m not sure if having bad knees are grounds for divorce but I’m going to further put it to the test over the next month. In sickness and in health I plea. Like me, markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours following their latest selloff, with equities bouncing back a bit and sovereign bond yields taking a breather from their recent relentless climb. It did feel that we hit yield levels on Tuesday that started to hurt risk enough that some flight to quality money recycled back into bonds. So the next leg higher in yields (which I think will happen) might be met with more risk off resistance, and counter rallies. The latest moves came amidst relatively dovish and supportive comments from central bank governors at the ECB’s forum yesterday, but sentiment was dampened somewhat as uncertainty abounds over a potential US government shutdown and breaching of the debt ceiling, after both houses of Congress could not agree on a plan to extend government funding. Overnight, there have been signs of progress on the shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3, with the Senate set to vote on the measure this morning.However, we’re still no closer to resolving the debt ceiling issue (where the latest estimates from the Treasury Department point to October 18 as the deadline), and tensions within the Democratic party between moderates and progressives are threatening to sink both the $550bn bipartisan infrastructure bill and the $3.5tn reconciliation package, which together contain much of President Biden’s economic agenda. We could see some developments on that soon however, as Speaker Pelosi said yesterday that the House was set to vote on the infrastructure bill today. Assuming the vote goes ahead later, this will be very interesting since a number of progressive Democrats have said that they don’t want to pass the infrastructure bill without the reconciliation bill (which contains the administration’s other priorities on social programs). This is because they fear that with the infrastructure bill passed (which moderates are keen on), the moderates could then scale back the spending in the reconciliation bill, and by holding out on passing the infrastructure bill, this gives them leverage on reconciliation. House Speaker Pelosi and Majority Leader Schumer were in the Oval Office with President Biden yesterday, and a White House statement said that Biden spoke on the phone with lawmakers and engagement would continue into today. So an important day for Biden’s agenda. Against this backdrop, risk assets made a tentative recovery yesterday, with the S&P 500 up +0.16% and Europe’s STOXX 600 up +0.59%. However, unless we get a big surge in either index today, both indices remain on track for their worst monthly performances so far this year, even if they’re still in positive territory for Q3 as a whole. Looking elsewhere, tech stocks had appeared set to pare back some of the previous day’s losses, but a late fade left the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have offered investors poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%). Similarly, while they initially staged a recovery, small caps in the Russell 2000 (-0.20%) continued to struggle. One asset that remained on trend was the US dollar. The greenback continued its climb yesterday, with the dollar index increasing +0.61% to close at its highest level in over a year, exceeding its closing high from last November. Over in sovereign bond markets, the partial rebound saw yields on 10yr Treasuries down -2.1bps at 1.517%, marking their first move lower in a week. And there was much the same pattern in Europe as well, where yields on 10yr bunds (-1.4bps), OATs (-1.3bps) and BTPs (-3.1bps) all moved lower as well. One continued underperformer were UK gilts (+0.3bps), and yesterday we saw the spread between 10yr gilt and bund yields widen to its biggest gap in over 2 years, at 120bps. Staying on the UK, the pound (-0.81%) continued to slump yesterday, hitting its lowest level against the dollar since last December, which comes as the country has continued to face major issues over its energy supply. Yesterday actually saw natural gas prices take another leg higher in both the UK (+10.09%) and Europe (+10.24%), and the UK regulator said that three smaller suppliers (who supply fewer than 1% of domestic customers between them) had gone out of business. This energy/inflation/BoE conundrum is confusing the life out of Sterling 10 year breakevens. They rose +18bps from Monday morning to Tuesday lunchtime but then entirely reversed the move into last night’s close. This is an exaggerated version of how the world’s financial markets are puzzling over whether breakevens should go up because of energy or go down because of the demand destruction and central bank response. Central bankers were in no mood to panic yesterday though as we saw Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appear on a policy panel at the ECB’s forum on central banking. There was much to discuss but the central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.” Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.40%), and the Hang Seng (-1.08%) both losing ground, whereas the Kospi (+0.41%) and the Shanghai Composite (+0.30%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected), marking its lowest level since the height of the Covid crisis in February 2020. The non-manufacturing PMI held up better however, at a stronger 53.2 (vs. 49.8 expected), although new orders were beneath 50 for a 4th consecutive month. Elsewhere, futures on the S&P 500 (+0.50%) and those on European indices are pointing to a higher start later on, as markets continue to stabilise after their slump earlier in the week. Staying on Asia, shortly after we went to press yesterday, former Japanese foreign minister Fumio Kishida was elected as leader of the governing Liberal Democratic Party, and is set to become the country’s next Prime Minister. The Japanese Diet will hold a vote on Monday to elect Kishida as the new PM, after which he’ll announce a new cabinet, and attention will very soon turn to the upcoming general election, which is due to take place by the end of November. Our Chief Japan economist has written more on Kishida’s victory and his economic policy (link here), but he notes that on fiscal policy, Kishida’s plans to redistribute income echo the shift towards a greater role for government in the US and elsewhere. There wasn’t a massive amount of data yesterday, though Spain’s CPI reading for September rose to an above-expected +4.0% (vs. 3.5% expected), so it will be interesting to see if something similar happens with today’s releases from Germany, France and Italy, ahead of the Euro Area release tomorrow. Otherwise, UK mortgage approvals came in at 74.5k in August (vs. 73.0k expected), and the European Commission’s economic sentiment indicator for the Euro Area rose to 117.8 in September (vs. 117.0 expected). To the day ahead now, and one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Tyler Durden Thu, 09/30/2021 - 07:49.....»»

Category: blogSource: zerohedgeSep 30th, 2021

U.S. Household Net Worth Increased 17.6% Between 2016 and 2019

American households got a bit richer between 2016 and 2019, according to a new report released on Dec. 2 by the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA). The RIHA study “The Distribution of Wealth in America Since 2016” found that the median net worth of U.S. households increased by 17.6% in […] The post U.S. Household Net Worth Increased 17.6% Between 2016 and 2019 appeared first on RISMedia. American households got a bit richer between 2016 and 2019, according to a new report released on Dec. 2 by the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA). The RIHA study “The Distribution of Wealth in America Since 2016” found that the median net worth of U.S. households increased by 17.6% in those three years, marking the highest amount since the Great Recession. Data from the Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) was used to study the distribution of household wealth, its main components and how the evolution of household wealth has affected different wealth classes in the three-year window. The breakdown: The average net worth of Americans increased by 1.9%during those three years, from $733,000 to $747,000. The average net worth of the typical household—the family in the middle class— increased from $103,000 to $127,000 between 2016 to 2019. The increase is the highest since 2007. The median net worth of every racial and ethnic category also increased, with the most significant increases coming from Black and Hispanic households. The takeaway: “After nearly a decade of rising inequality during the Great Recession and its aftermath, the distribution of wealth in the United States became somewhat more equal between 2016 and 2019. Americans became richer, with middle-class households on the receiving end of a bigger slice of the wealth gains,” said Dr. John C. Weicher, author of the report and director for the Center for Housing and Financial Markets at the Hudson Institute. He added that the increase in homeownership and the steady rise in home values and the stock market drove the increase in middle-class wealth. “Thankfully, the quick rebound in the labor market and the unprecedented policy response have mostly kept households afloat during the COVID-19 pandemic, and the strong housing market and stock market have boosted overall wealth,” Weicher said. “Homeownership is the primary source of wealth accumulation for most middle-class households, and the final years of the 2010s saw an increase in the homeownership rate at a time of steady-rising home values,” said Edward Seiler, RIHA executive director and MBA’s associate vice president of Housing Economics, in a statement. “Fast-forward to 2021, and the significant demand for home-buying amidst low inventory levels have further fueled gains in home prices and most homeowners’ equity. However, there are still wealth disparities by race. Among middle-wealth households, white households have higher homeownership rates and have more home equity.” You can find the study here. Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com. The post U.S. Household Net Worth Increased 17.6% Between 2016 and 2019 appeared first on RISMedia......»»

Category: realestateSource: rismediaDec 3rd, 2021

Futures Flat Ahead Of Taper Accelerating Payrolls

Futures Flat Ahead Of Taper Accelerating Payrolls U.S. equity futures are flat, rebounding from an overnight slide following news that 5 "mild" Omicron cases were found in New York, and European stocks wavered at the end of a volatile week as traders waited for the latest jobs data to assess the likely pace of Federal Reserve tightening and accelerated tapering. Emini S&P futures traded in a narrow range, and were up 2 points or 0.04%, Nasdaq futures were flat,while Dow Jones futures were up 8 points. The dollar edged higher, along with the euro after ECB President Christine Lagarde said inflation will decline in 2022. Crude advanced after OPEC+ left the door open to changing the plan to raise output at short notice. S&P 500 and Nasdaq 100 contracts fluctuated after dip-buyers Thursday fueled the S&P 500’s best climb since mid-October, a sign that some of the worst fears about the omicron virus strain are dissipating. That said, concerns about omicron are overshadowing economic news for now with “a lot of noise and very little meaningful information,” said Geir Lode, head of global equities at Federated Hermes in London. “The prospect of a faster monetary policy tightening could -- and should probably -- lead to a clear market reaction,” he said. “It is also another argument for why we assume value stocks outperform growth stocks. At the moment, however, investors’ attention is elsewhere.” In the latest U.S. data, jobless claims remained low, suggesting additional progress in the labor market. Traders are awaiting today's big event - the November payrolls numbers, which could shape expectations for the pace of Fed policy tightening (full preview here). Bloomberg Economics expects a strong report, while the median estimate in a Bloomberg survey of economists predicts an increase of 550,000. “Assuming the omicron news remains less end-of-the-world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “That may nip the equity rally in the bud, while the dollar and U.S. yields could resume rising.” In premarket trading, Didi Global Inc. jumped more than 14% in U.S. premarket trading before reversing all gains, after the Chinese ride-hailing giant said it began preparations to withdraw from U.S. stock exchanges. U.S. antitrust officials sued to block chipmaker Nvidia’s proposed $40 billion takeover of Arm, saying the deal would hobble innovation and competition. Elon Musk’s offloading of Tesla Inc. shares surpassed the $10 billion mark as he sold stock in the electric-car maker for the fourth consecutive week. Here are some of the other biggest U.S. movers today: DocuSign (DOCU US) plunges 32% in premarket trading as the e-signature company’s quarterly revenue forecast missed analysts’ estimates. JPMorgan and Piper Sandler cut ratings. Marvell Technology (MRVL US) shares rise 18% in premarket after the semiconductor company’s fourth-quarter forecast beat analyst estimates; Morgan Stanley notes “an exceptional quarter” with surprising outperformance from enterprise networking, strength in 5G and in cloud. Asana (ASAN US) shares slump 14% in premarket trading after results, with KeyBanc cutting the software firm’s price target on a reset in the stock’s valuation. Piper Sandler said that slight deceleration in revenue and billings growth could disappoint some investors. Zillow Group (ZG US) shares rise 8.8% in premarket after the online real-estate company announced a $750 million share repurchase program and said it has made “significant progress” on Zillow Offers inventory wind- down. Stitch Fix (SFIX US) jumped in premarket after Morgan Stanley raised its rating to equal-weight from underweight. Smartsheet (SMAR US) rose in postmarket trading after the software company boosted its revenue forecast for the full year; the guidance beat the average analyst estimate. National Beverage Corp. (FIZZ US) gained in postmarket trading after the drinks company announced a special dividend of $3 a share. Ollie’s Bargain (OLLI US) plunged 21% in U.S. premarket trading on Friday, after the company’s quarterly results and forecast disappointed, hurt by supply-chain troubles. Smith & Wesson Brands (SWBI US) stock fell 15% in postmarket trading after adjusted earnings per share for the second quarter missed the average analyst estimate. In Europe, the Stoxx Europe 600 Index slipped as much as 0.2% before turning green with mining companies and carmakers underperforming and energy and utility stocks rising. Swedish Orphan Biovitrum AB fell as much as 26% after private-equity firm Advent International and Singapore wealth fund GIC abandoned their $7.6 billion bid to buy the drugmaker. Volatility across assets remains elevated, reflecting the Fed’s shift toward tighter monetary settings and uncertainty about how the omicron outbreak will affect global reopening. The hope is that vaccines will remain effective or can be adjusted to cope. New York state identified at least five cases of omicron, which is continuing its worldwide spread, while the latest research shows the risk of reinfection with the new variant is three times higher than for others. “The environment in markets is changing,” Steven Wieting, chief investment strategist at Citigroup Private Bank, said on Bloomberg Television. “Monetary policy, fiscal policy are all losing steam. It doesn’t mean a down market. But it’s not going to be like the rebound, the sharp recovery that we had for almost every asset in the past year.” Earlier in the session, Asian stocks held gains from the past two days as travel and consumer shares rallied after their U.S. peers rebounded and a report said Merck & Co. is seeking to obtain approval of its Covid-19 pill in Japan. The MSCI Asia Pacific Index was little changed after climbing as much as 0.3%, with Japan among the region’s best performers. South Korea’s benchmark had its biggest three-day advance since February, boosted by financial shares. Still, Asian stocks headed for a weekly loss as U.S. regulators moved a step closer to boot Chinese firms off American stock exchanges. The Hang Seng Tech Index slid as much as 2.7% to a new all time low, as Tencent Holdings and Alibaba Group Holding fell after Didi Global Inc. began preparations to withdraw its U.S. listing.  “While the risks of delisting have already been brought up previously, a step closer towards a final mandate seems to serve as a reminder for the regulatory risks in Chinese stocks,” said Jun Rong Yeap, a market strategist at IG Asia Pte. Asian stocks remain stuck near a one-year low, as the delisting issue damped sentiment already hurt by omicron and the Fed’s hawkish pivot. A U.S. payrolls report later today could give further clues on the pace of tightening Japanese equities rose, paring their weekly loss, helped by gains in economically sensitive names. Electronics makers reversed an early loss to become the biggest boost to the Topix, which gained 1.6%. Automakers and banks also gained, while reopening plays tracked a rebound in U.S. peers. Daikin and Recruit were the largest contributors to a 1% gain in the Nikkei 225, which erased a morning decline of as much as 0.6%. The Topix still dropped 1.4% on the week, extending the previous week’s 2.9% slide, amid concerns over the omicron coronavirus variant. Despite some profit-taking in tech stocks in the morning session, “the medium and long-term outlooks for these names continue to be really good,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “The spread of the omicron variant doesn’t mean an across-the-board selloff for Japanese stocks.” India’s benchmark equity index recorded a weekly advance, partly recovering from a sharp sell-off triggered by uncertainty around the new Covid variant, with investors focusing on the central bank’s monetary policy meeting from Monday.  The S&P BSE Sensex fell 1.3% to 57,696.46, but gained 1% for the week after declining for two weeks. The NSE Nifty 50 Index dropped 1.2%, the biggest one-day decline since Nov. 26. All but three of the 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of energy companies. “The focus seems to be shifting from premium Indian equities to relatively cheaper markets,” Shrikant Chouhan, head of retail equity search at Kotak Securities said in a note. The cautious mood in India was heightened by the “unenthusiastic” response to the IPO of Paytm, which was also the biggest public share sale in the country, and a resurgence of Covid concerns across Europe, he added.  Investors also focused on the country’s economic outlook, which is showing signs of improvement. Major data releases this week -- from economic expansion to tax collection -- showed robust growth. “Strong domestic indicators are playing a key role in driving the market amid negative global cues,” said Mohit Nigam, a fund manager with Hem Securities. But any further spread of the omicron strain in India may cap local equity gains, he said. Two cases of the new variant have been detected so far in the country. The market’s attention will shift to the Reserve Bank of India’s policy announcement on Dec. 8, after a three-day meeting from Monday. The panel is expected to leave record low interest rates unchanged as inflation remains within its target range. The economy faces new risks from the omicron variant after expanding 8.4% in the three months through September. Reliance Industries contributed the most to the Sensex’s decline, falling 3%. Out of 30 shares in the index, 26 fell and 4 gained. Australia stocks posted a fourth week of losses amid the Omicron threat even as the S&P/ASX 200 index rose 0.2% to close at 7,241.20, boosted by banks and miners. That trimmed the benchmark’s loss for the week to 0.5%, its fourth-straight weekly decline.  Corporate Travel was among the top performers, rising for a second session. TPG Telecom led the laggards, tumbling after media reports that founder David Teoh entered into an agreement to sell about 53.1 million shares in a block trade.  In New Zealand, the S&P/NZX 50 index was little changed at 12,676.50. In FX, the Bloomberg Dollar Spot Index advanced and the greenback was higher against all of its Group-of-10 peers, with risk-sensitive Scandinavian and Antipodean currencies the worst performers. Turkish lira swings back to gain against the USD after central bank intervention for the 2nd time in 3 days. The pound weakened and gilt yields fell after Bank of England policy maker Michael Saunders urged caution on monetary tightening due to the potential effects of the omicron variant on the economy. The euro fell below $1.13 and some traders are starting to use option plays to express the view that the currency may extend its drop in coming month, yet recover in the latter part of 2022. The Aussie dropped for a fourth day amid concern U.S. payroll data due Friday may add to divergence between RBA and Fed monetary policy. Australia’s sale of 2024 bonds saw yields drop below those in the secondary market by the most on record. The yen weakened for a second day as the prospects for a faster pace of Fed tapering fans speculation of portfolio outflows from Japan. In rates, Treasury yields ticked lower, erasing some of Tuesday jump after Fed officials laid out the case for a faster removal of policy support amid high inflation.  Treasurys followed gilts during European morning, when Bank of England’s Saunders said the omicron variant is a key consideration for the December MPC decision which in turn lowered odds of a December BOE rate hike. Treasury yields are richer by up to 1.5bp across 10-year sector which trades around 1.43%; gilts outperform by ~1bp as BOE rate- hike premium for the December meeting was pared following Saunders comments. Shorter-term Treasury yields inched up, and the 2-year yield touched the highest in a week Friday’s U.S. session features a raft of data headed by the November jobs report due 8:30am ET where the median estimate is 550k while Bloomberg whisper number is 564k; October NFP change was 531k Crude futures extend Asia’s modest gains advanced after OPEC+ proceeded with an output hike but left room for quick adjustments due to a cloudy outlook, making shorting difficult. WTI added on ~2.5% to trade near $68.20, roughly near the middle of the week’s range. Brent recovers near $71.50. Spot gold fades a small push higher to trade near $1,770/oz. Most base metals are well supported with LME aluminum and zinc outperforming.  Looking at the day ahead, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Market Snapshot S&P 500 futures little changed at 4,574.25 STOXX Europe 600 up 0.2% to 466.43 MXAP little changed at 192.06 MXAPJ down 0.5% to 625.64 Nikkei up 1.0% to 28,029.57 Topix up 1.6% to 1,957.86 Hang Seng Index little changed at 23,766.69 Shanghai Composite up 0.9% to 3,607.43 Sensex down 1.3% to 57,692.90 Australia S&P/ASX 200 up 0.2% to 7,241.17 Kospi up 0.8% to 2,968.33 Brent Futures up 3.3% to $71.97/bbl Gold spot down 0.1% to $1,767.28 U.S. Dollar Index up 0.14% to 96.29 German 10Y yield little changed at -0.37% Euro down 0.1% to $1.1286 Top Overnight News from Bloomberg “I see an inflation profile which looks like a hump” and “we know how painful it is,” ECB President Christine Lagarde says at event Friday. She also said that “when the conditions of our forward guidance are satisfied, we won’t be hesitant to act” and that an interest rate increase in 2022 is very unlikely The betting window is open in the fixed-income market as hedge funds and other traders hunt for mispriced risk heading into 2022 -- whether it’s predictions for accelerating inflation or rising interest rates The U.K. Municipal Bonds Agency aims to sell the first ethical bonds on behalf of local governments early next year. The body, set up to help U.K. councils access capital markets, is looking to issue a couple of sustainable bonds in the first quarter of 2022, according to officials advising on the sales. It expects to follow that with a pooled ethical bond to raise money for a group of different local authorities Low- income countries indebted to Chinese commercial and policy banks could buy specially-created Chinese government bonds and then use these as collateral to support the sale of new yuan debt, Zhou Chengjun, head of the People’s Bank of China’s finance research institute, wrote in an article published in the ChinaBond Magazine Chinese tech shares briefly touched their record lows in Hong Kong, as Didi Global Inc.’s announcement to start U.S. delisting and rising scrutiny on mainland firms traded there dealt a further blow to already soured sentiment The yuan is set to weaken for the first time in three years in 2022, as capital inflows are expected to slow amid a shrinking yield gap between China and the U.S., a Bloomberg survey shows Turkish inflation accelerated for a sixth month in November to the highest level in three years, driven by a slump in the lira that continues to cloud consumer price outlook A more detailed look at global markets courtesy of Newsquawk Asian equities eventually traded mostly higher following the cyclical-led rebound in the US, but with the mood in the region tentative as Omicron uncertainty lingered after further cases of the new variant were reported stateside and with the latest NFP data drawing near. ASX 200 (+0.2%) lacked direction as resilience in cyclicals was offset by underperformance in defensives and amid ongoing COVID-19 concerns which prompted the Western Australian government to widen its state border closure to include South Australia. Nikkei 225 (+1.0%) was initially subdued amid recent currency inflows and with SoftBank among the worst performers amid several negative headlines including the FTC suing to block the Nvidia acquisition of Arm from SoftBank, while the Japanese conglomerate also suffered from its exposure in “super app” Grab which tumbled 20% in its New York debut and with Didi to start delisting from the NYSE in favour of a Hong Kong listing, although the index eventually recovered losses in latter half of trade. Hang Seng (-0.1%) and Shanghai Comp. (+0.9%) were varied with US-listed Chinese companies pressured as the US SEC moved closer to delisting Chinese ADRs for failing to comply with disclosure requirements, while the mood across developers was also glum with Kaisa shares at a record low after its bond exchange offer to avert a default was rejected by bondholders and China Aoyuan Property Group slumped by double-digit percentages following its warning of an inability to repay USD 651.2mln of debt due to a liquidity crunch. Furthermore, participants digested the latest Caixin Services and Composite PMI data which slowed from the prior month, but both remained in expansion territory and with reports that advisors are to recommend lowering China’s economic growth target to 5.0%-5.5% or above 5%, fanning hopes for looser policy. Finally, 10yr JGBs gained and made another incursion above 152.00 with prices supported amid the cautious mood in Japan and with the BoJ also present in the market today for a total of JPY 1.05tln of JGBs heavily concentrated in 1yr-5yr maturities. Top Asian News Astra Said to Sink Advent’s $7.6 Billion Buyout of Biotech Sobi BOJ Is Said to See Omicron as Potential Reason to Keep Covid Aid Kaisa Swap Rejected, Developer Bonds Slide: Evergrande Update Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL The positivity seen heading into the European open dissipated as the session went underway, with the region seeing more of a mixed configuration in cash markets (Euro Stoxx 50 -0.1%; Stoxx 600 Unch) – with no clear drivers in the run-up to the US jobs report. The release will be carefully watching measures of labour market slack to gauge the progress towards the Fed's 'three tests' for rate hikes, whilst the Fed appears almost certain to announce a quickening in the pace of asset purchase tapering at its December meeting (Full NFP preview available in the Newsquawk Research Suite). The recent downside in Europe also seeps into the US futures, with the RTY (-0.2%), NQ (-0.2%) and ES (-0.3%) posting broad-based losses as things stand. Sectors have shifted from the earlier firm cyclical layout to one of a more defensive nature, with Healthcare, Food & Beverages, and Personal & Household Goods making their way up the ranks. Travel & Leisure still sits in the green but largely owed to sector heavyweight Evolution (+6.3%) as the group is to acquire its own shares in Nasdaq Stockholm. Oil & Gas sits as the current winner as crude markets claw back a bulk of this week's losses. On the flip side, Basic Resources are hit as iron ore tumbled overnight. In terms of individual movers, Dassault Aviation (+8.0%) shares soared after France signed a deal with the UAE worth some EUR 17bln. Allianz (+1.0%) stays in the green after entering a reinsurance agreement with Resolution Life and affiliates of Sixth Street for its US fixed index annuity portfolio, with the transaction to unlock USD 4.1bln in value. Top European News U.K. Nov. Composite PMI 57.6 vs Flash Reading 57.7 The Chance of a BOE Rate Hike This Month Has Fallen: BofA’s Wood AP Moller Holding Agrees to Buy Diagnostics Company Unilabs Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL In FX, it’s debatable whether this month’s US jobs data will carry as much weight as normal given that Fed rhetoric in the run up to the pre-FOMC blackout period has effectively signalled a faster pace of tapering and the likelihood of more hawkishly aligned dot plots. However, the latest BLS report could be influential in terms of shaping the tightening path once QE has been withdrawn, as markets continue to monitor unfolding COVID-19 developments with the main focus on vaccine efficacy against the new Omicron variant. In the meantime, Buck bulls have resurfaced to lift the index more firmly back above 96.000 and towards loftier levels seen earlier this week within a 96.075-324 range, eyeing Monday’s 96.448 peak ahead of the semi-psychological 96.500 mark and then the w-t-d best at 96.647 set the day after. Back to Friday’s agenda, Fed’s Bullard is due to speak and the services ISM rounds off the week. AUD/NZD - The high betas are bearing the brunt of Greenback gains, but also bearish technical forces as the Aussie and Kiwi both lose sight of key chart and simple round number levels that were keeping them afloat or declines relatively contained at least. Aud/Usd is now probing 0.7050 and a Fib retracement just above, while Nzd/Usd is hovering around 0.6775 as the Aud/Nzd cross holds in the low 1.0400 zone. JPY/CAD/CHF/GBP/EUR - All softer vs their US counterpart, with the Yen looking towards 113.50 for support with added protection from option expiry interest up to 113.60 in 1.1 bn, while the Loonie is relying on WTI to maintain recovery momentum before Canada and the US go head-to-head in the employment stakes. Usd/Cad is meandering in the low 1.2800 area as the crude benchmark regains Usd 68+/brl status from a sub-Usd 66.50 base and even deeper trough below Usd 62.50 in knee-jerk response to OPEC+ sticking to its output plan yesterday. Elsewhere, the Franc continues to straddle 0.9200, Sterling has retreated from 1.3300+ terrain again post-fractionally softer than forecast final UK services and composite PMIs, whilst a less hawkish speech from BoE hawk Saunders took Cable to a session low of 1.3255 and a 15bps Dec hike pricing fell from 51% to 26%. The Euro has also reversed from recent highs beyond 1.1300 amidst rather mixed Eurozone readings and pretty routine ECB rhetoric from President Lagarde plus GC members Knot, de Cos and de Guindos. In commodities, WTI and Brent front month futures continue to nurse losses seen earlier this week, with the post-OPEC downside completely erased alongside some more. To recap, oil contracts were under pressure from compounding COVID headlines at the start of the week and in the run-up to OPEC+ whereby ministers opted to keep production plans despite the Omicron variant and the recent SPR releases. Delving deeper into these themes, desks suggest that a dominant Omicron variant could actually be positive if the strain turns out to be milder than some of its predecessors – with the jury still out but initial reports from India and South Africa suggesting so. Regarding OPEC+, some oil traders suggest the move to maintain plans was more of a political strategy as opposed to an attempt to balance markets, with journalists also suggesting that tensions with the US have simmered down and the prospect of further SPR releases have significantly declined. Further, it's also worth bearing in mind that due to maintenance and underinvestment, the real output hike from OPEC+ producers will likely be under the 400k BPD. In terms of Iranian developments, updates have been less constructive, with sources suggesting that Iran is holding a tougher stance than during the June talks. Negotiations will break today and resume next week. Crude contracts are modestly lower on the week and well-off worst levels, with Brent Feb now back around USD 71.50/bbl (65.72-77.02 weekly range), while WTI Jan resides around USD north of USD 68/bbl (62.43-72.93/bbl). Elsewhere, spot gold and silver vary, with the former finding some overnight support around USD 1,766/oz as risk sentiment erred lower, whilst the cluster of DMAs remain around the USD 1,790-91/oz region. In terms of base metals, LME copper is flat on either side of USD 9,500/t. Overnight, Dalian iron ore futures fell amid a decline in mill demand, whilst China's steel hub Tangshan city is to launch a second-level pollution alert from December 3-10th, the local government said – providing further headwinds for iron demand. US Event Calendar 8:30am: Nov. Change in Nonfarm Payrolls, est. 550,000, prior 531,000 Nov. Change in Private Payrolls, est. 525,000, prior 604,000 Nov. Change in Manufact. Payrolls, est. 45,000, prior 60,000 8:30am: Nov. Unemployment Rate, est. 4.5%, prior 4.6% Nov. Underemployment Rate, prior 8.3% Nov. Labor Force Participation Rate, est. 61.7%, prior 61.6% 8:30am: Nov. Average Hourly Earnings YoY, est. 5.0%, prior 4.9% Nov. Average Hourly Earnings MoM, est. 0.4%, prior 0.4% Nov. Average Weekly Hours All Emplo, est. 34.7, prior 34.7 9:45am: Nov. Markit US Composite PMI, prior 56.5 Nov. Markit US Services PMI, est. 57.0, prior 57.0 10am: Oct. Factory Orders, est. 0.5%, prior 0.2% Oct. Factory Orders Ex Trans, est. 0.6%, prior 0.7% Oct. Durable Goods Orders, est. -0.5%, prior -0.5% Oct. Cap Goods Ship Nondef Ex Air, prior 0.3% Oct. Cap Goods Orders Nondef Ex Air, prior 0.6% 10am: Nov. ISM Services Index, est. 65.0, prior 66.7 DB's Jim Reid concludes the overnight wrap I got great news yesterday. It was the school Xmas Fayre last weekend and at one stall we had to guess the weight of the school duck that lives in their pond. I spent a long time analysing it outside and was trying to mentally compare it to the weights of my various dumbbells at home. I learnt yesterday that I’d won. My prize? A rubber duck for the bath. In more trivial news I also learnt I was voted no.1 analyst in four categories of the Global Institutional Investor Fixed Income Analyst awards for 2021. So many thanks for all who voted. It is very much appreciated. However in terms of physical mementoes of my achievements yesterday, all I actually have to show for it is a brown rubber duck. Guessing the weight of a duck is a walk in the park at the moment compared to predicting markets. Indeed it’s been a wild week. If you’ve managed to time all the various swings you can surely only have done it via a time machine. If you have done so without one though I will happily hand over my prized rubber duck. By the close of trade, the S&P 500 (+1.42%) had begun to recover following its worst 2-day performance in over a year. The VIX index of volatility ticked back down beneath the 30 mark again, but finished above 25 for the fourth day in five for the first time since December of last year. Meanwhile Oil plunged and then soared on OPEC+ news and curves continued to flatten as 2yr yields got back close to their pre-Omicron levels after a near 20bps round journey over the last week. I’m glad I’m a research analyst not a day trader, and that’s before we get to today’s payrolls print. We’ll start with Omicron, where yesterday predictably saw a number of new countries report confirmed cases for the first time, as well as a second case in the United States during market hours, this one with roots in New York City, which reported more than 11,300 new cases yesterday, the highest daily count since January. After the market closed, an additional five cases were identified in New York, which sent futures over -0.5% lower at the time. They are back to flat as we type possibly helped by a late deal and vote in Congress to fund the US government through to February 18th and avert a shutdown at midnight tonight. Back to the virus and governments continued to ramp up their defence measures, with Germany yesterday announcing a range of fresh restrictions as they grapple with the latest wave, including a requirement that you must either be vaccinated or have recovered from Covid in order to get into restaurants or non-essential stores. There’s also set to be a parliamentary vote on mandatory vaccinations, and incoming Chancellor Scholz said that he expected it to pass. In the US, President Biden announced new measures to fight the impending winter wave and spreading Omicron variant, including tighter testing guidelines for international visitors, wider availability of at home tests, whilst accelerating efforts to get the rest of the world vaccinated. Over in South Africa, the daily case count rose further yesterday, with 11,535 reported, up from 8,561 the previous day and 4,373 the day before that. So definitely one to keep an eye on as we look for clues about what this could mean for the world more broadly. That said, we’re still yet to get the all-important information on how much less or more deadly this might be, as well as how effective vaccines still are and the extent to which it is more transmissible relative to other variants. Back to markets, and the revival in risk appetite led to a fresh selloff in US Treasuries, with the 2yr yield up +6.7bps, and the 10yr yield up +3.7bps. Nevertheless, as mentioned at the top, the latest round of curve flattening has sent the 2s10s slope to its flattest since before the Georgia Senate seat runoff gave Democrats control of Congress. It’s now at just +82.0bps, whilst the 5s30s slope is now at flattest since March 2020, at +55.0bps. So a warning sign for those who believe in the yield curve as a recessionary indicator, albeit with some way to go before that flashes red. In Europe there was also a modest curve flattening, but yields moved lower across the board, with those on 10yr bunds (-2.6bps), OATs (-3.2bps) and BTPs (-5.6bps) all down by the close. Over in equities, there was a decent rebound in the US following the recent selloff, with the S&P 500 (+1.42%) posting a solid gain. It was a very broad-based advance, with over 90% of the index’s members moving higher for the first time since mid-October. Every S&P sector increased, which was enough to compensate for the noticeable lag in mega-cap shares, with the FANG index gaining just +0.15%. The STOXX 600 decreased -1.15%, though that reflected the fact Europe closed ahead of the big reversal in sentiment the previous session. Aside from Omicron, one of the other biggest stories yesterday was the decision by the OPEC+ group to continue with their production hike, which will add a further +400k barrels/day to global supply in January. The news initially sent oil prices sharply lower, with Brent crude falling to an intraday low beneath $66/bbl, before recovering to end the day back at $69.67/bl in light of the group saying that they could adjust their plans “pending further developments of the pandemic”, with the ability to “make immediate adjustments if required”. Even with the bounceback yesterday however, oil has been one of the worst-performing assets over recent weeks, with Brent hitting an intraday high of $86.7/bbl in late-October, followed by a November that marked its worst monthly performance since the pandemic began. Overnight in Asia stocks are trading mostly higher with the KOSPI (+0.86%), Shanghai Composite (+0.58%), CSI (+0.35%) and the Nikkei (+0.29%) up but with the Hang Seng (-0.74%) under pressure amid the ongoing regulatory clampdown in technology from China as Didi prepares to delist on US markets. Looking forward now, the main highlight on today’s calendar is the US jobs report for November, which comes less than two weeks’ away from the Fed’s meeting where they’ll decide on the pace of tapering. In terms of what to expect, our US economists are looking for nonfarm payrolls to grow by +600k, which would be the fastest pace of job growth since July, and that in turn would take the unemployment rate down to a post-pandemic low of 4.4%. Ahead of that, we had another decent weekly claims report (albeit that took place after the jobs report survey period), with the number for the week through November 26 coming in at a stronger-than-expected 222k (vs. 240k expected). The previous week’s number was also revised down -5k, sending the 4-week moving average down to its own post-pandemic low of 238.75k. Looking at yesterday’s other data releases, the Euro Area unemployment rate fell to a post-pandemic low of 7.3% in October, in line with expectations. However producer price inflation shot up even faster than anticipated to +21.9% (vs. 19.0% expected). To the day ahead now, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Tyler Durden Fri, 12/03/2021 - 07:55.....»»

Category: blogSource: zerohedgeDec 3rd, 2021

In Act Of Sheer Panic, Turkey Central Bank Intervenes To Prop Up Lira, Fails

In Act Of Sheer Panic, Turkey Central Bank Intervenes To Prop Up Lira, Fails With the lira having lost 40% of its value in just the past 3 weeks (and down almost 50% YTD), now that the market finally realizes just how insane Erdogan has been all along with his intention to keep cutting rates until the mid-2023 Turkish elections... ... and foreign investors pulling their capital from Turkey in a show of defiance to the Erdogan regime - they may return if and when a new, more sensible ruler emerges - overnight the Turkish central bank intervened in the foreign exchange market for the first time in seven years, and in an act of sheer desperation, fought to shore up the plunging lira. The Turkish Central Bank (TCMB) said in a statement that it took action due to “unhealthy price formations” in the lira, which has been in freefall since President Recep Tayyip Erdogan renewed his push for lower interest rates. Needless to say, the price formation is "unhealthy" only to the Erdogan regime, the entrenched Turkish state, and Erdogan's puppet central bank, and quite healthy to short sellers who have long been warning that Turkey is doomed to collapse under the Erdogan dictatorship, and only a currency collapse and hyperinflation has any hope of dislodging Turkey's batshit insane ruler. Indeed, in recent days we have seen sporadic protests against the currency collapse and soaring prices, and Erdogan is scrambling to intercept these before they spread to the rest of the population. Unfortunately for Erdogan, as Japan, the UK and so many other central banks have demonstrated with their failed intervention attempts, all the TCMB is achieving is blowing through its dollar reserves and ensuring that the currency collapse will come even faster and will be even more acute when it hits. Sure enough, while the lira initially surged against the dollar after the announcement, climbing as much as 8.5%, it later pared gains. A subsequent intervention by the central bank had a far smaller impact and was quickly faded by the market. Bottom line: after spending hundreds of millions or even billions, the lira is almost back where it was and every incremental attempt to punish lira shorts and send the lira higher will lead to an even faster collapse in the doomed currency which will not rebound as long as i) Erdogan is president or ii) until Erodgan capitulates and admits that his bizarre economy experiment has been a failure (which won't happen). Meanwhile, perhaps unaware of the endgame, Erdogan said that the central bank “can make the necessary intervention if that’s needed,” speaking to a group of reporters on Wednesday after addressing his party’s lawmakers in parliament. The intervention which took place in both spot and futures markets marks a new episode in Erdogan’s latest policy pivot according to Bloomberg. It follows after his latest pledge on Tuesday to keep lowering interest rates until elections in 2023. The Turkish leader also effectively doomed the currency saying that the country will no longer try to attract “hot money” by offering high interest rates and a strong lira. In Erdogan’s base scenario, cheaper money will boost manufacturing and create jobs while inflation eventually stabilizes. That said, the central bank's surprise - and desperate - decision to sell more from its dwindling foreign assets shows policymakers are turning less comfortable with the lira’s rising volatility than the Turkish president. It “reflects how serious the situation is,” said Piotr Matys, an analyst at InTouch Capital. “But it’s likely to prove insufficient. Turkey doesn’t have sufficient FX reserves to sell substantial amount of dollars on a regular basis.” As Bloomberg reminds us, the last intervention took place in January 2014, when the central bank sold $3.1 billion in spot markets. The move failed to stabilize the lira and less than a week later, Turkey was forced to more than double its benchmark interest rate to 10% in an emergency meeting. Expect a similar outcome, only this time Erdogan won't concede defeat and won't hike rates, which is why we repeat that our fair value for the USDTRY is 20, and potentially much more once local banks start defaulting on foreign-denominated debt. Bloomberg also admits that the country faces a very different set of circumstances now. Governor Sahap Kavcioglu is the fourth central bank chief since Erdogan was sworn in with expanded executive powers in 2018, which included being able to fire and replace bank governors. Kavcioglu has repeatedly changed his forward guidance in recent months to make room for rate cuts while inflation kept climbing. Since September, the central bank slashed the one-week repo rate by 4 percentage points to 15%. Looking ahead, the question traders should ask is how long can Turkey buy the currency some respite from the relentless selling. The answer, as BBG's Ven Ram notes, comes down to the size of the war chest and how willing the central bank is to run down those assets. While the Turkish central bank’s gross reserves add up to $128.5 billion, with $60.5 billion coming from the bank’s swap deals. with some $40 billion in gold (at least in theory; we have a strong suspicion Erdogan and his cronies have long ago sold or syphoned off Turkey's gold and all that number represents is an empty placeholder). However,  when swaps and other liabilities such as required reserves are stripped, Turkey’s net reserves stand at -$35 billion! Yes, negative. While the bank has predictably said on many occasions that its gross reserves - the total amount at its disposal at the time - are more important than net reserves, the FX swaps will promptly collapse once counterparties realize they are on the hook for billions in losses as the Turkish economy implodes and unwind the swaps. As such, expect attention to turn to the massive negative number of true net foreign assets. Separately, Ram also notes that the central bank’s intervention this morning is significant if only for the signaling it sends. During a previous episode of similar stress in the lira back in 2018, there was no reported intervention. In other words, the policy makers may be telling the markets that their strategy to ward off any speculation on the currency will take a different tack this time. And while, in 2018, the central bank took the benchmark rate to 24% from 8% in a short span to arrest the decline in the lira, this time rate hikes are off the table and instead the central bank will burn through its remaining reserves instead before the TRY truly collapses. Erdogan said on Tuesday that old policies based on “false” premises would result in higher inequalities, while leaving Turkey at the mercy of foreign money barons. “The high interest-rate policy imposed on us is not a new phenomenon,” he said. “It is a model that destroys domestic production and makes structural inflation permanent by increasing production costs. We are ending this spiral.” We very much doubt Erdogan is ending "this spiral" but we are absolutely certain that he is now starting Turkey's "hyperinflation spiral." Tyler Durden Wed, 12/01/2021 - 09:05.....»»

Category: blogSource: zerohedgeDec 1st, 2021

Risk Cracks After Moderna CEO Comments Spark Global Stock Rout

Risk Cracks After Moderna CEO Comments Spark Global Stock Rout Ask a drug dealer if methadone helps cure a cocaine addition and - shockingly - you will hear that the answer is "hell no", after all an affirmative response would mean the fixer needs to get a real job. Just as shocking was the "admission" of Moderna CEO, Stéphane Bancel, who in the latest stop on his media whirlwind tour of the past 48 hours gave the FT an interview in which he predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of coronavirus and warned it would take months before pharmaceutical companies could manufacture new variant-specific jabs at scale. “There is no world, I think, where [the effectiveness] is the same level . . . we had with [the] Delta [variant],” Bancel told the Financial Times, claiming that the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa suggested that the current crop of vaccines may need to be modified next year. Here, the self-serving CEO whose sell-mode was fully engaged - after all what else would the maker of a vaccine for covid say than "yes, the world will need more of my product" - completely ignored the earlier comments from Barry Schoub, chairman of South Afruca's Ministerial Advisory Committee on Vaccines, who over the weekend said that the large number of mutations found in the omicron variant appears to destabilize the virus, which might make it less “fit” than the dominant delta strain. As such, it would be a far less virulent strain... but of course that would also reduce the need for Moderna's mRNA therapy and so Bancel failed to mention it. What is grotesque is that the Moderna CEO’s comments on existing vaccines’ effectiveness against the omicron variant is “old news so should be a fade,” says Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities in Singapore. Indeed as Bloomberg notes, Bancel reiterated comments made by Moderna’s Chief Medical Officer Paul Burton during the weekend. Alas, the last thing algos care about is nuance and/or reading between the lines, and so moments after Bancel's interview hit, markets hit risk off mode on Tuesday, and yesterday’s bounce in markets immediately reversed amid fresh worries about the efficacy of currently available vaccines with U.S. equity futures dropping along with stocks in Europe. Bonds gained as investors sought havens. After dropping as much as 1.2%, S&P futures pared losses to -0.7%, down 37 points just above 4,600. Dow Eminis were down 339 points or 1% and Nasdaq was down -0.8%. Adding to concerns is Fed Chair Jerome Powell who today will speak, alongside Janet Yellen, at the Senate Banking Committee in congressional oversight hearings related to pandemic stimulus. Last night Powell made a dovish pivot saying the new variant poses downside risks to employment and growth while adding to uncertainty about inflation. Powell's comments dragged yields lower and hit bank stocks overnight. “The market’s reaction to reports such as Moderna’s suggest the ball is still very much in the court of proving that this will not escalate,” said Patrick Bennett, head of macro strategy for Asia at Canadian Imperial Bank of Commerce in Hong Kong. “Until that time, mode is to sell recoveries in risk and not to try and pick the extent of the selloff” U.S. airline and cruiseliner stocks dropped in premarket trading Tuesday, after vaccine maker Moderna’s top executives reiterated that the omicron variant of the coronavirus may require new vaccines. Most U.S. airline stocks were down: Alaska Air -5%, United -3.2%, American -3%, Spirit -2.7%, Delta -2.6%, JetBlue -2.6%, Southwest -1.7%. Here are some other notable movers today: U.S. banks decline in premarket trading following comments from Federal Reserve Chair Jerome Powell that may push back bets on when the central bank will raise rates. Citigroup (C US) -2.4%, JPMorgan (JPM US) -2.2%, Morgan Stanley (MS US) -2.6% Vaccine manufacturers mixed in U.S. premarket trading after rallying in recent days and following further comments from Moderna about treating the new omicron Covid-19 variant. Pfizer (PFE US) +1.6%, Novavax  (NVAS US) +1.3%, Moderna (MRNA US) -3.8% U.S. airline and cruiseliner stocks dropped in premarket trading Tuesday, after vaccine maker Moderna’s top executives reiterated that the omicron variant of the coronavirus may require new vaccines. Alaska Air (ALK US) -5%, United (UAL US) -3.2%, American (AAL US) -3% Krystal Biotech (KRYS US) jumped 4.3% in postmarket trading on Monday, extending gains after a 122% jump during the regular session. The company is offering $200m of shares via Goldman Sachs, BofA, Cowen, William Blair, according to a postmarket statement MEI Pharma (MEIP US) gained 8% postmarket after the cancer-treatment company said it will hold a webcast Tuesday to report on data from the ongoing Phase 2 Tidal study evaluating zandelisib in patients with relapsed or refractory follicular lymphoma Intuit (INTU US) declined 3.4% postmarket after holder Dan Kurzius, co-founder of Mailchimp, offered the stake via Goldman Sachs In Europe, the Stoxx 600 index fell to almost a seven-week low. Cyclical sectors including retail, travel and carmakers were among the biggest decliners, while energy stocks tumbled as crude oil headed for the worst monthly loss this year; every industry sector fell led by travel stocks. Earlier in the session, the Asia Pacific Index dropped 0.6% while the Hang Seng China Enterprises Index lost 1.5% to finish at its weakest level since May 2016. Asian stocks erased early gains to head for a third day of losses on fresh concerns that existing Covid-19 vaccines will be less effective at tackling the omicron variant. The MSCI Asia Pacific Index extended its fall to nearly 1% after having risen as much as 0.8% earlier on Tuesday. The current crop of vaccines may need to be modified next year, Moderna Chief Executive Officer Stephane Bancel said in an interview with the Financial Times, adding that it may take months before pharmaceutical firms can manufacture new variant-specific jabs at scale. U.S. futures also reversed gains. Property and consumer staples were the worst-performing sectors on the regional benchmark. Key gauges in Hong Kong and South Korea were the biggest losers in Asia, with the Kospi index erasing all of its gains for this year. The Hang Seng China Enterprises Index lost 1.5% to finish at its weakest level since May 2016. The fresh bout of selling offset early optimism spurred by data showing China’s factory sentiment improved in November. “With the slower vaccination rate and more limited health-care capacity in the region, uncertainty from the new omicron variant may seem to bring about higher economic risks for the region at a time where it is shifting towards further reopening,” said Jun Rong Yeap, a market strategist at IG Asia Pte. Asia’s stock benchmark is now down 3.5% for the month, set for its worst performance since July, as nervousness remains over the U.S. Federal Reserve’s tapering schedule and the potential economic impact of the omicron variant. “Moderna is one of the primary mRNA vaccines out there, so the risk-off sentiment is justified,” said Kelvin Wong, an analyst at CMC Markets (Singapore) Pte. Liquidity is thinner going into the end of the year, so investors are “thinking it’s wise to take some money off the table,” he added Japanese equities fell, reversing an earlier gain to cap their third-straight daily loss, after a report cast doubt on hopes for a quick answer to the omicron variant of the coronavirus. Telecoms and electronics makers were the biggest drags on the Topix, which dropped 1%, erasing an earlier gain of as much as 1.5%. Fast Retailing and SoftBank Group were the largest contributors to a 1.6% loss in the Nikkei 225. The yen strengthened about 0.4% against the dollar, reversing an earlier loss. Japanese stocks advanced earlier in the day, following U.S. peers higher as a relative sense of calm returned to global markets. Tokyo share gains reversed quickly in late afternoon trading after a Financial Times report that Moderna’s Chief Executive Officer Stephane Bancel said a new vaccine may be needed to fight omicron. “The report of Moderna CEO’s remarks has bolstered an overall movement toward taking off risk,” said SMBC Trust Bank analyst Masahiro Yamaguchi. “Market participants will probably be analyzing information on vaccines and the new virus variant for the next couple of weeks, so shares will likely continue to fluctuate on these headlines.” In FX, the dollar dropped alongside commodity-linked currencies while the yen and gold climbed and bitcoin surged as safe havens were bid. The yen swung to a gain after Moderna Inc.’s chief executive Stephane Bancel was quoted by the Financial Times saying existing vaccines may not be effective enough to tackle the omicron variant. Commodity-linked currencies including the Aussie, kiwi and Norwegian krone all declined, underperforming the dollar In rates, treasuries held gains after flight-to-quality rally extended during Asia session and European morning, when bunds and gilts also benefited from haven flows. Stocks fell after Moderna CEO predicted waning vaccine efficacy. Intermediates lead gains, with yields richer by nearly 6bp across 7-year sector; 10-year Treasuries are richer by 5.6bp at 1.443%, vs 2.5bp for German 10-year, 4.7bp for U.K. Long-end may draw support from potential for month-end buying; Bloomberg Treasury index rebalancing was projected to extend duration by 0.11yr as of Nov. 22. Expectations of month-end flows may support the market, and Fed Chair Powell is slated to testify to a Senate panel.       In commodities, crude futures are off their late-Asia lows but remain in the red. WTI trades close to $68.30, stalling near Friday’s lows; Brent is off over 2.5% near $71.50. Spot gold rises ~$11 near $1,796/oz. Base metals are mixed: LME zinc outperforms, rising as much as 1.6%.  To the day ahead now, and the main central bank highlight will be Fed Chair Powell’s appearance before the Senate Banking Committee, alongside Treasury Secretary Yellen. In addition, we’ll hear from Fed Vice Chair Clarida, the Fed’s Williams, the ECB’s Villeroy and de Cos, and the BoE’s Mann. On the data side, we’ll get the flash November CPI reading for the Euro Area today, as well as the readings from France and Italy. In addition, there’s data on German unemployment for November, Canadian GDP for Q3, whilst in the US there’s the Conference Board’s consumer confidence measure for November, the FHFA house price index for September, and the MNI Chicago PMI for November. Market Snapshot S&P 500 futures down 1.2% to 4,595.00 STOXX Europe 600 down 1.4% to 460.47 MXAP down 0.5% to 190.51 MXAPJ down 0.6% to 620.60 Nikkei down 1.6% to 27,821.76 Topix down 1.0% to 1,928.35 Hang Seng Index down 1.6% to 23,475.26 Shanghai Composite little changed at 3,563.89 Sensex down 0.2% to 57,122.74 Australia S&P/ASX 200 up 0.2% to 7,255.97 Kospi down 2.4% to 2,839.01 German 10Y yield little changed at -0.36% Euro up 0.6% to $1.1362 Brent Futures down 3.0% to $71.26/bbl Brent Futures down 3.0% to $71.26/bbl Gold spot up 0.7% to $1,796.41 U.S. Dollar Index down 0.65% to 95.72 Top Overnight News from Bloomberg Euro-area inflation surged to a record for the era of the single currency and exceeded all forecasts, adding to the European Central Bank’s challenge before a crucial meeting next month on the future of monetary stimulus. If the drop in government bond yields on Friday signaled how skittish markets were, fresh declines are leaving them looking no less nervous. One of Germany’s most prominent economists is urging the European Central Bank to be more transparent in outlining its exit from unprecedented monetary stimulus and argues that ruling out an end to negative interest rates next year may be a mistake. The Hong Kong dollar fell into the weak half of its trading band for the first time since December 2019 as the emergence of a new coronavirus variant hurt appetite for risk assets. A more detailed look at global markets courtesy of Newsquawk Asian equities traded mixed with early momentum seen following the rebound on Wall Street where risk assets recovered from Friday’s heavy selling pressure as liquidity conditions normalized post-Thanksgiving and after some of the Omicron fears abated given the mild nature in cases so far, while participants also digested a slew of data releases including better than expected Chinese Manufacturing PMI. However, markets were later spooked following comments from Moderna's CEO that existing vaccines will be much less effective against the Omicron variant. ASX 200 (+0.2%) was underpinned by early strength across its sectors aside from utilities and with gold miners also hampered by the recent lacklustre mood in the precious metal which failed to reclaim the USD 1800/oz level but remained in proximity for another attempt. In addition, disappointing Building Approvals and inline Net Exports Contribution data had little impact on sentiment ahead of tomorrow’s Q3 GDP release, although the index then faded most its gains after the comments from Moderna's CEO, while Nikkei 225 (-1.6%) was initially lifted by the recent rebound in USD/JPY but then slumped amid the broad risk aversion late in the session. Hang Seng (-1.6%) and Shanghai Comp. (Unch) were varied in which the mainland was kept afloat for most the session after a surprise expansion in Chinese Manufacturing PMI and a mild liquidity injection by the PBoC, with a central bank-backed publication also suggesting that recent open market operations demonstrates an ample liquidity goal, although Hong Kong underperformed on tech and property losses and with casino names pressured again as shares in junket operator Suncity slumped 37% on reopen from a trading halt in its first opportunity to react to the arrest of its Chairman. Finally, 10yr JGBs were initially contained following early momentum in stocks and somewhat inconclusive 2yr JGB auction which showed better results from the prior, albeit at just a marginal improvement, but then was underpinned on a haven bid after fears of the Omicron variant later resurfaced. Top Asian News China’s Biggest Crypto Exchange Picks Singapore as Asia Base SoftBank-Backed Snapdeal Targets $250 Million IPO in 2022 Omicron Reaches Nations From U.K. to Japan in Widening Spread Slump in China Gas Shows Spreading Impact of Property Slowdown Major European bourses are on the backfoot (Euro Stoxx 50 -1.5%; Stoxx 600 -1.5%) as COVID fears again take the spotlight on month-end. APAC markets were firmer for a large part of the overnight session, but thereafter the risk-off trigger was attributed to comments from Moderna's CEO suggesting that existing vaccines will be much less effective against the Omicron COVID strain. On this, some caveats worth keeping in mind - the commentary on the potential need for a vaccine does come from a vaccine maker, who could benefit from further global inoculation, whilst data on the new variant remains sparse. Meanwhile, WSJ reported Regeneron's and Eli Lilly's COVID antiviral cocktails had lost efficacy vs the Omicron variant - however, the extent to which will need to be subject to further testing. Furthermore, producers appear to be confident that they will be able to adjust their products to accommodate the new variant, albeit the timeline for mass production will not be immediate. Nonetheless, the sullied sentiment has persisted throughout the European morning and has also seeped into US equity futures: the cyclically bias RTY (-1.7%) lags the ES (-1.0%) and YM (-1.3%), whilst the tech-laden NQ (-0.5%) is cushioned by the slump in yields. Back to Europe, broad-based losses are seen across the majors. Sectors tilt defensive but to a lesser extent than seen at the European cash open. Travel & Leisure, Oil & Gas, and Retail all sit at the bottom of the bunch amid the potential implications of the new COVID variant. Tech benefits from the yield play, which subsequently weighs on the Banking sector. The retail sector is also weighed on by Spanish giant Inditex (-4.3%) following a CEO reshuffle. In terms of other movers, Glencore (-0.9%) is softer after Activist investor Bluebell Capital Partners called on the Co. to spin off its coal business and divest non-core assets. In a letter seen by the FT, Glencore was also asked to improve corporate governance. In terms of equity commentary, analysts at JPM suggest investors should take a more nuanced view on reopening as the bank expects post-COVID normalisation to gradually asset itself over the course of 2022. The bank highlights hawkish central bank policy shifts as the main risk to their outlook. Thus, the analysts see European equities outperforming the US, whilst China is seen outpacing EMs. JPM targets S&P 500 at 5,050 (closed at 4,655.27 yesterday) by the end of 2022 with EPS at USD 240 – marking a 14% increase in annual EPS. Top European News Omicron Reaches Nations From U.K. to Japan in Widening Spread ECB Bosses Lack Full Diplomatic Immunity, EU’s Top Court Says Adler Keeps Investors Waiting for Answers on Fraud Claims European Gas Prices Surge Above 100 Euros With Eyes on Russia In FX, the Greenback may well have been grounded amidst rebalancing flows on the final trading day of November, as bank models are flagging a net sell signal, albeit relatively weak aside from vs the Yen per Cit’s index, but renewed Omicron concerns stoked by Moderna’s CEO casting considerable doubt about the efficacy of current vaccines against the new SA strain have pushed the Buck back down in any case. Indeed, the index has now retreated further from its 2021 apex set less than a week ago and through 96.000 to 95.662, with only the Loonie and Swedish Krona underperforming within the basket, and the Antipodean Dollars plus Norwegian Crown in wider G10 circles. Looking at individual pairings, Usd/Jpy has reversed from the high 113.00 area and breached a Fib just below the round number on the way down to circa 112.68 for a marginal new m-t-d low, while Eur/Usd is back above 1.1350 having scaled a Fib at 1.1290 and both have left decent option expiries some distance behind in the process (1.6 bn at 113.80 and 1.3 bn between 1.1250-55 respectively). Elsewhere, Usd/Chf is eyeing 0.9175 irrespective of a slightly weaker than forecast Swiss KoF indicator and Cable has bounced firmly from the low 1.3300 zone towards 1.3375 awaiting commentary from BoE’s Mann. NZD/AUD/CAD - As noted above, the tables have turned for the Kiwi, Aussie and Loonie along with risk sentiment in general, and Nzd/Usd is now pivoting 0.6800 with little help from a deterioration in NBNZ business confidence or a decline in the activity outlook. Similarly, Aud/Usd has been undermined by much weaker than forecast building approvals and a smaller than anticipated current account surplus, but mostly keeping hold of the 0.7100 handle ahead of Q3 GDP and Usd/Cad has shot up from around 1.2730 to top 1.2800 at one stage in advance of Canadian growth data for the prior quarter and month of September as oil recoils (WTI to an even deeper trough only cents off Usd 67/brl). Back down under, 1 bn option expiry interest at 1.0470 in Aud/Nzd could well come into play given that the cross is currently hovering near the base of a 1.0483-39 range. SCANDI/EM - The aforementioned downturn in risk appetite after Monday’s brief revival has hit the Sek and Nok hard, but the latter is also bearing the brunt of Brent’s latest collapse to the brink of Usd 70/brl at worst, while also taking on board that the Norges Bank plans to refrain from foreign currency selling through December having stopped midway through this month. The Rub is also feeling the adverse effect of weaker crude prices and ongoing geopolitical angst to the extent that hawkish CBR rhetoric alluding to aggressive tightening next month is hardly keeping it propped, but the Cnh and Cny continue to defy the odds or gravity in wake of a surprise pop back above 50.0 in China’s official manufacturing PMI. Conversely, the Zar is struggling to contain losses sub-16.0000 vs the Usd on SA virus-related factors even though Gold is approaching Usd 1800/oz again, while the Try is striving to stay within sight of 13.0000 following a slender miss in Turkish Q3 y/y GDP. In commodities, WTI and Brent front month futures are once again under pressure amid the aforementioned COVID jitters threatening the demand side of the equation, albeit the market remains in a state of uncertainty given how little is known about the new variant ahead of the OPEC+ confab. It is still unclear at this point in time which route OPEC+ members will opt for, but seemingly the feasible options on the table are 1) a pause in output hikes, 2) a smaller output hike, 3) maintaining current output hikes. Energy journalists have suggested the group will likely be influenced by oil price action, but nonetheless, the findings of the JTC and JMMC will be closely watched for the group's updated forecasts against the backdrop of COVID and the recently coordinated SPR releases from net oil consumers – a move which the US pledged to repeat if needed. Elsewhere, Iranian nuclear talks were reportedly somewhat constructive – according to the Russian delegate – with working groups set to meet today and tomorrow regarding the sanctions on Iran. This sentiment, however, was not reciprocated by Western sources (cited by WSJ), which suggested there was no clarity yet on whether the teams were ready for serious negotiations and serious concessions. WTI Jan resides around session lows near USD 67.50/bbl (vs high USD 71.22/bbl), while Brent Feb dipped under USD 71/bbl (vs high USD 84.56/bb). Over to metals, spot gold remains underpinned in European trade by the cluster of DMA's under USD 1,800/oz – including the 100 (USD 1,792/oz), 200 (USD 1,791/oz) and 50 (1,790/oz). Turning to base metals, LME copper is modestly softer around the USD 9,500/t mark, whilst Dalian iron ore futures meanwhile rose over 6% overnight, with traders citing increasing Chinese demand. US Event Calendar 9am: 3Q House Price Purchase Index QoQ, prior 4.9% 9am: Sept. FHFA House Price Index MoM, est. 1.2%, prior 1.0% 9am: Sept. Case Shiller Composite-20 YoY, est. 19.30%, prior 19.66%; S&P/CS 20 City MoM SA, est. 1.20%, prior 1.17% 9:45am: Nov. MNI Chicago PMI, est. 67.0, prior 68.4 10am: Nov. Conf. Board Consumer Confidenc, est. 111.0, prior 113.8 10am: Nov. Conf. Board Present Situation, prior 147.4 10am: Nov. Conf. Board Expectations, prior 91.3 Central Banks 10am: Powell, Yellen Testify Before Senate Panel on CARES Act Relief 10:30am: Fed’s Williams gives remarks at NY Fed food- insecurity event 1pm: Fed’s Clarida Discusses Fed Independence DB's Jim Reid concludes the overnight wrap Just as we go to print markets are reacting negatively to an interview with the Moderna CEO in the FT that has just landed where he said that with regards to Omicron, “There is no world, I think, where (the effectiveness) is the same level... we had with Delta…… I think it’s going to be a material drop (efficacy). I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to . . . are like ‘this is not going to be good’.”” This is not really new news relative to the last 3-4 days given what we know about the new mutation but the market is picking up on the explicit comments. In response S&P futures have gone from slightly up to down just over -0.5% and Treasury yields immediately dipped -4bps to 1.46%. The Nikkei has erased gains and is down around -1% and the Hang Seng is c.-1.8%. This is breaking news so check your screens after you read this. In China the official November PMI data came in stronger than expected with the Manufacturing PMI at 50.1 (49.7 consensus vs 49.2 previous) and the non-manufacturing PMI at 52.3 (51.5 consensus vs 52.4 previous). The negative headlines above as we go to print followed a market recovery yesterday as investors hoped that the Omicron variant wouldn’t prove as bad as initially feared. In reality, the evidence is still incredibly limited on this question, and nothing from the Moderna CEO overnight changes that. However the more positive sentiment was also evident from the results of our flash poll in yesterday’s EMR where we had 1569 responses so very many thanks. The poll showed that just 10% thought it would still be the biggest topic in financial markets by the end of the year, with 30% instead thinking it’ll largely be forgotten about. The other 60% thought it would still be an issue but only of moderate importance. So if that’s correct and our respondents are a fair reflection of broader market sentiment, then it points to some big downside risks ahead if we get notable bad news on the variant. For the record I would have been with the majority with tendencies towards the largely forgotten about answer. So I will be as off-side as much as most of you on the variant downside risk scenario. When I did a similar poll on Evergrande 2 and a half months ago, only 8% thought it would be significantly impacting markets a month later with 78% in aggregate thinking limited mention/impact, and 15% thinking it would have no impact. So broadly similar responses and back then the 15% were most correct although the next 78% weren’t far off. In terms of the latest developments yesterday, we’re still waiting to find out some of the key pieces of information about this new strain, including how effective vaccines still are, and about the extent of any increased risk of transmission, hospitalisation and death. Nevertheless, countries around the world are continuing to ramp up their own responses as they await this information. President Biden laid out the US strategy for tackling Omicron in a public address yesterday, underscoring the variant was a cause for concern rather than panic. He noted travel bans from certain jurisdictions would remain in place to buy authorities time to evaluate the variant, but did not anticipate that further travel bans or domestic lockdowns would be implemented, instead urging citizens to get vaccinated or a booster shot. Over in Europe, Bloomberg reported that EU leaders were discussing whether to have a virtual summit on Friday about the issue, and Poland moved to toughen up their own domestic restrictions, with a 50% capacity limit on restaurants, hotels, gyms and cinemas. In Germany, Chancellor Merkel and Vice Chancellor Scholz will be meeting with state premiers today, whilst the UK government’s vaccination committee recommended that every adult be eligible for a booster shot, rather than just the over-40s at present. Boosters have done a tremendous job in dramatically reducing cases in the elder cohort in the UK in recent weeks so one by product of Omicron is that it may accelerate protection in a wider age group everywhere. Assuming vaccines have some impact on Omicron this could be a positive development, especially if symptoms are less bad. Markets recovered somewhat yesterday, with the S&P 500 gaining +1.32% to recover a large portion of Friday’s loss. The index was driven by mega-cap tech names, with the Nasdaq up +1.88% and small cap stocks underperforming, with the Russell 2000 down -0.18%, so the market wasn’t completely pricing out omicron risks by any means. Nevertheless, Covid-specific names performed how you would expect given the improved sentiment; stay-at-home trades that outperformed Friday fell, including Zoom (-0.56%), Peloton (-4.35%), and HelloFresh (-0.8%), while Moderna (+11.80%) was the biggest winner following the weekend news that a reformulated vaccine could be available in early 2022. Elsewhere, Twitter (-2.74%) initially gained after it was announced CEO and co-founder Jack Dorsey would be stepping down, but trended lower throughout the rest of the day. The broader moves put the index back in positive territory for the month as we hit November’s last trading day today. Europe saw its own bounceback too, with the STOXX 600 up +0.69%. Over in rates, the partial unwind of Friday’s moves was even smaller, with yields on 10yr Treasuries moving up +2.6bps to 1.50%, driven predominantly by real rates, as inflation breakevens were a touch narrower across the curve. One part of the curve that didn’t retrace Friday’s move was the short end, where markets continued to push Fed rate hikes back ever so slightly, with the first full hike now being priced for September (though contracts as early as May still price some meaningful probability of Fed hikes). We may see some further movements today as well, with Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony. The bond moves were more muted in Europe though, with yields on 10yr bunds (+2.0bps), OATs (+1.0bps) and BTPs (+0.4bps) only seeing a modest increase. Crude oil prices also didn’t bounce back with as much rigor as equities. Brent gained +0.99% while WTI futures increased +2.64%. They are back down -1 to -1.5% this morning. Elsewhere in DC, Senator Joe Manchin noted that Democrats could raise the debt ceiling on their own through the reconciliation process, but indicated a preference for the increase not to be included in the build back better bill, for which his support still seems lukewarm. We’re approaching crucial deadlines on the debt ceiling and financing the federal government, so these headlines should become more commonplace over the coming days. There were some further developments on the inflation front yesterday as Germany reported that inflation had risen to +6.0% in November (vs. +5.5% expected) on the EU-harmonised measure, and up from +4.6% in October. The German national measure also rose to +5.2% (vs. +5.0% expected), which was the highest since 1992. Speaking of Germany, Bloomberg reported that the shortlist for the Bundesbank presidency had been narrowed down to 4 candidates, which included Isabel Schnabel of the ECB’s Executive Board, and Joachim Nagel, who’s currently the Deputy Head of the Banking Department at the Bank for International Settlements. Today we’ll likely get some further headlines on inflation as the flash estimate for the entire Euro Area comes out, as well as the numbers for France and Italy. There wasn’t much in the way of other data yesterday, though UK mortgage approvals fell to 67.2k in October (vs. 70.0k expected), which is their lowest level since June 2020. Separately, US pending home sales were up +7.5% in October (vs. +1.0% expected), whilst the Dallas Fed’s manufacturing activity index for November unexpectedly fell to 11.8 (vs. 15.0 expected). Finally, the European Commission’s economic sentiment indicator for the Euro Area dipped to 117.5 in November as expected, its weakest level in 6 months. To the day ahead now, and the main central bank highlight will be Fed Chair Powell’s appearance before the Senate Banking Committee, alongside Treasury Secretary Yellen. In addition, we’ll hear from Fed Vice Chair Clarida, the Fed’s Williams, the ECB’s Villeroy and de Cos, and the BoE’s Mann. On the data side, we’ll get the flash November CPI reading for the Euro Area today, as well as the readings from France and Italy. In addition, there’s data on German unemployment for November, Canadian GDP for Q3, whilst in the US there’s the Conference Board’s consumer confidence measure for November, the FHFA house price index for September, and the MNI Chicago PMI for November. Tyler Durden Tue, 11/30/2021 - 07:50.....»»

Category: blogSource: zerohedgeNov 30th, 2021

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases As expected over the weekend, and as we first noted shortly after electronic markets reopened for trading on Sunday, S&P futures have maintained their overnight gains and have rebounded 0.7% while Nasdaq contracts jumped as much as 1.3% after risk sentiment stabilized following Friday’s carnage and as investors settled in for a few weeks of uncertainty on whether the Omicron variant would derail economic recoveries and the tightening plans of some central banks. Japan led declines in the Asian equity session (which was catching down to Friday's US losses) after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.  Oil prices bounced $3 a barrel to recoup some of Friday's rout, while the safe haven yen, Swiss franc and 10Y Treasury took a breather after its run higher. Moderna shares jumped as much as 12% in pre-market trading after Chief Medical Officer Paul Burton said he suspects the new omicron coronavirus variant may elude current vaccines, and if so, a reformulated shot could be available early in the new year. Which he would obviously say as his company makes money from making vaccines, even if they are not very efficient. Here are some of the other notable premarket movers today: BioNTech (BNTX US) advanced 5% after it said it’s starting with the first steps of developing a new adapted vaccine, according to statement sent by text. Merck & Co. (MRK US) declined 1.6% after it was downgraded to neutral from buy at Citi, which also opens a negative catalyst watch, with “high probability” the drugmaker will abandon development of its HIV treatment. A selection of small biotechs rise again in U.S. premarket trading amid discussion of the companies in StockTwits and after these names outperformed during Friday’s market rout. Palatin Tech (PTN US) +37%, Biofrontera (BFRI US) +22%, 180 Life Sciences (ATNF US) +19%. Bonds gave back some of their gains, with Treasury futures were down 11 ticks. Like other safe havens, the market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks. Needless to say, Omicron is all anyone can talk about: on one hand, authorities have already orchestrated a lot of global panic: Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, even though the South African doctor who discovered the strain and treated cases said symptoms of Omicron were so far mild. The new variant of concern was found as far afield as Canada and Australia as more countries such as Japan imposed travel restriction to try to seal themselves off. Summarizing the fearmongering dynamic observed, overnight South African health experts - including those who discovered the Omicron variant, said it appears to cause mild symptoms, while the Chinese lapdog organization, WHO, said the variant’s risk is “extremely high”. Investors are trying to work out if the omicron flareup will a relatively brief scare that markets rebound from, or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: South African scientists suggested it’s presenting with mild symptoms so far, though it appears to be more transmissible, but the World Health Organization warned it could fuel future surges of Covid-19 with severe consequences. "There is a lot we don't know about Omicron, but markets have been forced to reassess the global growth outlook until we know more," said Rodrigo Catril, a market strategist at NAB. "Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery." "Despite the irresistible pull of buying-the-dip on tenuous early information on omicron, we are just one negative omicron headline away from going back to where we started,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “Expect plenty of headline-driven whipsaw price action this week.” The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday. “We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market.” European stocks rallied their worst drop in more than a year on Friday, with travel and energy stocks leading the advance. The Stoxx 600 rose 0.9% while FTSE 100 futures gain more than 1%, aided by a report that Reliance may bid for BT Group which jumped as much as 9.5% following a report that India’s Reliance Industries may offer to buy U.K. phone company, though it pared the gain after Reliance denied it’s considering a bid. European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant Japanese shares lead Asian indexes lower after Premier Kishida announces entry ban of all new foreign visitors. Hong Kong’s benchmark Hang Seng Index closed down 0.9% at the lowest level since October 2020, led by Galaxy Entertainment and Meituan. The index followed regional peers lower amid worries about the new Covid variant Omicron. Amid the big movers, Galaxy Entertainment was down 5.4% after police arrested Macau’s junket king, while Meituan falls 7.1% after reporting earnings. In FX, currency markets are stabilizing as the week kicks off yet investors are betting on the possibility of further volatility. The South African rand climbed against the greenback though most emerging-market peers declined along with developing-nation stocks. Turkey’s lira slumped more than 2% after a report at the weekend that President Recep Tayyip Erdogan ordered a probe into foreign currency trades. The Swiss franc, euro and yen retreat while loonie and Aussie top G-10 leaderboard after WTI crude futures rally more than 4%. The Bloomberg Dollar Spot Index hovered after Friday’s drop, and the greenback traded mixed against its Group-of-10 peers; commodity currencies led gains. The euro slipped back below $1.13 and Bunds sold off, yet outperformed Treasuries. The pound was steady against the dollar and rallied against the euro. Australian sovereign bonds pared an opening jump as Treasuries trimmed Friday’s spike amid continuing uncertainty over the fallout from the omicron variant. The Aussie rallied with oil and iron ore. The yen erased an earlier decline as a government announcement on planned border closures starting Tuesday spurred a drop in local equities. The rand strengthens as South African health experts call omicron variant “mild.” In rates, Treasuries were cheaper by 4bp-7bp across the curve in belly-led losses, reversing a portion of Friday’s sharp safe-haven rally as potential economic impact of omicron coronavirus strain continues to be assessed. The Treasury curve bear- steepened and the benchmark 10-year Treasury yield jumped as much as 7 basis points to 1.54%; that unwound some of Friday’s 16 basis-point plunge -- the steepest since March 2020.  Focal points include month-end on Tuesday, November jobs report Friday, and Fed Chair Powell is scheduled to speak Monday afternoon. Treasuries broadly steady since yields gapped higher when Asia session began, leaving 10-year around 1.54%, cheaper by almost 7bp on the day; front-end outperformance steepens 2s10s by ~3bp. Long-end may draw support from potential for month-end buying; Bloomberg Treasury index rebalancing was projected to extend duration by 0.11yr as of Nov. 22 In commodities, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday. "The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December," wrote analyst at ANZ in a note. "Such headwinds are the reason it's been only gradually raising output in recent months, despite demand rebounding strongly." Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24. Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce . SGX iron ore rises almost 8% to recoup Friday’s losses. Bitcoin rallied after falling below $54,000 on Friday. Looking at today's calendar, we get October pending home sales, and November Dallas Fed manufacturing activity. We also get a bunch of Fed speakers including Williams, Powell making remarks at the New York Fed innovation event, Fed’s Hassan moderating a panel and Fed’s Bowman discussing central bank and indigenous economies. Market Snapshot S&P 500 futures up 0.6% to 4,625.00 MXAP down 0.9% to 191.79 MXAPJ down 0.4% to 625.06 Nikkei down 1.6% to 28,283.92 Topix down 1.8% to 1,948.48 Hang Seng Index down 0.9% to 23,852.24 Shanghai Composite little changed at 3,562.70 Sensex up 0.4% to 57,307.46 Australia S&P/ASX 200 down 0.5% to 7,239.82 Kospi down 0.9% to 2,909.32 STOXX Europe 600 up 0.7% to 467.47 German 10Y yield little changed at -0.31% Euro down 0.3% to $1.1283 Brent Futures up 3.8% to $75.49/bbl Gold spot up 0.3% to $1,797.11 U.S. Dollar Index up 0.13% to 96.22 Top Overnight News from Bloomberg The omicron variant of Covid-19, first identified in South Africa, has been detected in locations from Australia to the U.K. and Canada, showing the difficulties of curtailing new strains While health experts in South Africa, where omicron was first detected, said it appeared to cause only mild symptoms, the Geneva-based WHO assessed the variant’s risk as “extremely high” and called on member states to test widely. Understanding the new strain will take several days or weeks, the agency said All travelers arriving in the U.K. starting at 4 a.m. on Nov. 30 must take a PCR coronavirus test on or before the second day of their stay and isolate until they receive a negative result. Face coverings will again be mandatory in shops and other indoor settings and on public transport. Booster shots may also be approved for more age groups within days, according to Health Secretary Sajid Javid The economic effects of the successive waves of the Covid pandemic have been less and less damaging, Bank of France Governor Francois Villeroy de Galhau says Italian bonds advance for a third day, as investors shrug off new coronavirus developments over the weekend and stock futures advance, while bunds are little changed ahead of German inflation numbers and a raft of ECB speakers including President Christine Lagarde A European Commission sentiment index fell to 117.5 in November from 118.6 the previous month, data released Monday showed Spanish inflation accelerated to the fastest in nearly three decades in November on rising food prices, underscoring the lingering consequences of supply-chain bottlenecks across Europe. Consumer prices jumped 5.6% Energy prices in Europe surged on Monday after weather forecasts showed colder temperatures for the next two weeks that will lift demand for heating ECB Executive Board member Isabel Schnabel took to the airwaves to reassure her fellow Germans that inflation will slow again, hours before data set to show the fastest pace of price increases since the early 1990s Russia’s ambassador to Washington said more than 50 diplomats and their family members will have to leave the U.S. by mid-2022, in the latest sign of tensions between the former Cold War enemies China sent the biggest sortie of warplanes toward Taiwan in more than seven weeks after a U.S. lawmaker defied a Chinese demand that she abandon a trip to the island A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling (S&P 500 -2.3%) as all focus remained on the Omicron variant after several countries announced restrictions and their first cases of the new variant, although markets took solace from reports that all cases so far from South Africa have been mild. Furthermore, NIH Director Collins was optimistic that current vaccines are likely to protect against the Omicron variant but also noted it was too early to know the answers, while Goldman Sachs doesn’t think the new variant is a sufficient reason to adjust its portfolio citing comments from South Africa’s NICD that the mutation is unlikely to be more malicious and existing vaccines will most likely remain effective at preventing hospitalizations and deaths. ASX 200 (-0.5%) is subdued after Australia registered its first cases of the Omicron variant which involved two people that arrived in Sydney from southern Africa and with the government reviewing its border reopening plans. Nikkei 225 (-1.6%) whipsawed whereby it initially slumped at the open due to the virus fears and currency-related headwinds but then recouped its losses and briefly returned flat as the mood gradually improved, before succumbing to a bout of late selling, and with mixed Retail Sales data adding to the indecision. Hang Seng (-1.0%) and Shanghai Comp. (Unch) weakened with Meituan the worst performer in Hong Kong after posting a quarterly loss and with casino names pressured by a crackdown in which police detained Suncity Group CEO and others after admitting to accusations including illegal cross border gambling. However, the losses in the mainland were cushioned after firm Industrial Profits data over the weekend and with local press noting expectations for China to adopt a more proactive macro policy next year. Finally, 10yr JGBs shrugged off the pullback seen in T-note and Bund futures, with price action kept afloat amid the cautious mood in stocks and the BoJ’s presence in the market for over JPY 900bln of JGBs mostly concentrated in 3yr-10yr maturities. Top Asian News Hong Kong Stocks Slide to 13-Month Low on Fresh Virus Woes Li Auto Loss Narrows as EV Maker Rides Out Supply-Chain Snarls Singapore Adds to Its Gold Pile for the First Time in Decades China Growth Stocks Look Like Havens as Markets Confront Omicron Bourses in Europe are experiencing a mild broad-based rebound (Euro Stoxx 50 +1.0%; Stoxx 600 +0.9%) following Friday's hefty COVID-induced losses. Desks over the weekend have been framing Friday's losses as somewhat overstretched in holiday-thinned liquidity, given how little is known about the Omicron variant itself. The strain will likely remain the market theme as scientists and policymakers factor in this new variant, whilst data from this point forth – including Friday's US labour market report - will likely be passed off as somewhat stale, and headline risk will likely be abundant. Thus far, symptoms from Omicron are seemingly milder than some of its predecessors, although governments and central banks will likely continue to express caution in this period of uncertainty. Back to price action, the momentum of the rebound has lost steam; US equity futures have also been drifting lower since the European cash open – with the RTY (+0.9%) was the laggard in early European trade vs the ES (+0.8%), NQ (+1.0%) and YM (+0.7%). European cash bourses have also been waning off best levels but remain in positive territory. Sectors are mostly in the green, but the breadth of the market has narrowed since the cash open. Travel & Leisure retains the top spot in what seems to be more a reversal of Friday's exaggerated underperformance as opposed to a fundamentally driven rebound – with more nations announcing travel restrictions to stem the spread of the variant. Oil & Gas has also trimmed some of Friday's losses as oil prices see a modest rebound relative to Friday's slump. On the other end of the spectrum, Healthcare sees mild losses as COVID-related names take a mild breather, although Moderna (+9.1% pre-market) gains ahead of the US open after its Chief Medical Officer suggested a new vaccine for the variant could be ready early next year. Meanwhile, Autos & Parts reside as the current laggard amid several bearish updates, including a Y/Y drop in German car exports - due to the chip shortage and supply bottlenecks – factors which the Daimler Truck CEO suggested will lead to billions of Euros in losses. Furthermore, auto supbt.aplier provider Faurecia (-5.9%) trades at the foot of the Stoxx 600 after slashing guidance – again a function of the chip shortage. In terms of Monday M&A, BT (+4.7%) shares opened higher by almost 10% following source reports in Indian press suggesting Reliance Industries is gearing up for a takeover approach of BT – reports that were subsequently rebuffed. Top European News U.K. Mortgage Approvals Fall to 67,199 in Oct. Vs. Est. 70,000 Johnson Matthey Rises on Report of Battery Talks With Tata Gazprom Reports Record Third-Quarter Profit Amid Gas Surge Omicron’s Spread Fuels Search for Answers as WHO Sounds Warning In FX, the Buck has bounced from Friday’s pullback lows on a mixture of short covering, consolidation and a somewhat more hopeful prognosis of SA’s new coronavirus strand compared to very early perceptions prompted by reports that the latest mutation would be even worse than the Delta variant. In DXY terms, a base above 96.000 is forming within a 93.366-144 band amidst a rebound in US Treasury yields and re-steepening along the curve following comments from Fed’s Bostic indicating a willingness to back faster QE tapering. Ahead, pending home sales and Dallas Fed business manufacturing along with more Fed rhetoric from Williams and chair Powell on the eve of month end. AUD/CAD/NZD - No surprise to see the high beta and risk sensitive currencies take advantage of the somewhat calmer conditions plus a recovery in crude and other commodities that were decimated by the prospect of depressed demand due to the aforementioned Omicron outbreak. The Aussie is back over 0.7150 vs its US counterpart, the Loonie has pared back losses from sub-1.2750 with assistance from WTI’s recovery to top Usd 72/brl vs a Usd 67.40 trough on November 26 and the Kiwi is hovering above 0.6800 even though RBNZ chief economist Ha has warned that a pause in OCR tightening could occur if the fresh COVID-19 wave proves to be a ‘game-changer’. JPY/EUR - The major laggards as sentiment stabilses, with the Yen midway between 112.99-113.88 parameters and hardly helped by mixed Japanese retail sales data, while the Euro has retreated below 1.1300 where 1.7 bn option expiry interest resides and a key Fib level just under the round number irrespective of strong German state inflation reports and encouraging pan Eurozone sentiment indicators, as more nations batten down the hatches to stem the spread of SA’s virus that has shown up in parts of the bloc. GBP/CHF - Both narrowly divergent vs the Dollar, as Cable retains 1.3300+ status against the backdrop of retreating Gilt and Short Sterling futures even though UK consumer credit, mortgage lending and approvals are rather conflicting, while the Franc pivots 0.9250 and meanders from 1.0426 to 1.0453 against the Euro after the latest weekly update on Swiss bank sight deposits showing no sign of official intervention. However, Usd/Chf may veer towards 1.1 bn option expiries at the 0.9275 strike if risk appetite continues to improve ahead of KoF on Tuesday and monthly reserves data. SCANDI/EM - Although Brent has bounced to the benefit of the Nok, Sek outperformance has ensued in wake of an upgrade to final Swedish Q3 GDP, while the Cnh and Cny are deriving support via a rise in Chinese industrial profits on a y/y basis and the Zar is breathing a sigh of relief on the aforementioned ‘better’ virus updates/assessments from SA on balance. Conversely, the Try is back under pressure post-a deterioration in Turkish economic sentiment vs smaller trade deficit as investors look forward to CPI at the end of the week. Meanwhile, Turkish President Erdogan provides no reprieve for the Lira as he once again defending his unorthodox view that higher interest rates lead to higher inflation. In commodities, WTI and Brent front-month futures consolidate following an overnight rebound – with WTI Jan back on a USD 71/bbl handle and Brent Feb just under USD 75/bbl – albeit still some way off from Friday's best levels which saw the former's high above USD 78/bbl and the latter's best north of USD 81/bbl. The week is packed with risks to the oil complex, including the resumption of Iranian nuclear talks (slated at 13:00GMT/08:00EST today) and the OPEC+ monthly confab. In terms of the former, little is expected in terms of progress unless the US agrees to adhere to Tehran's demand – which at this point seems unlikely. Tehran continues to seek the removal of US sanctions alongside assurances that the US will not withdraw from the deal. "The assertion that the US must 'change its approach if it wants progress' sets a challenging tone", Citi's analysts said, and the bank also expects parties to demand full access to Iranian nuclear facilities for verification of compliance. Further, the IAEA Chief met with Iranian officials last week; although concrete progress was sparse, the overall tone of the meeting was one of progress. "We remain of the opinion that additional Iranian supplies are unlikely to reach the market before the second half of 2022 at the earliest," Citi said. Meanwhile, reports suggested the US and allies have been debating a "Plan B" if talks were to collapse. NBC News – citing European diplomats, former US officials and experts – suggested that options included: 1) a skinny nuclear deal, 2) ramp up sanctions, 3) Launching operations to sabotage Iranian nuclear advances, 4) Military strikes, 5) persuading China to halt Iranian oil imports, albeit Iran and China recently signed a 25yr deal. Over to OPEC+, a rescheduling (in light of the Omicron variant) sees the OPEC and JTC meeting now on the 1st December, followed by the JMMC and OPEC+ on the 2nd. Sources on Friday suggested that members are leaning towards a pause in the planned monthly output, although Russian Deputy PM Novak hit the wires today and suggested there is no need for urgent measures in the oil market. Markets will likely be tested, and expectations massaged with several sources heading into the meeting later this week. Elsewhere, spot gold trades sideways just under the USD 1,800/oz and above a cluster of DMAs, including the 50 (1,790.60/oz), 200 (1,791.30/oz) and 100 (1,792.80/oz) awaiting the next catalyst. Over to base metals, LME copper recoups some of Friday's lost ground, with traders also citing the underlying demand emanating from the EV revolution. US Event Calendar 10am: Oct. Pending Home Sales YoY, prior -7.2% 10am: Oct. Pending Home Sales (MoM), est. 0.8%, prior -2.3% 10:30am: Nov. Dallas Fed Manf. Activity, est. 17.0, prior 14.6 Central Bank speakers: 3pm: Fed’s Williams gives opening remarks at NY Innovation Center 3:05pm: Powell Makes Opening Remarks at New York Fed Innovation Event 3:15pm: Fed’s Hassan moderates panel introducing NY Innovation Center 5:05pm: Fed’s Bowman Discusses Central bank and Indigenous Economies DB's Jim Reid concludes the overnight wrap Last night Henry in my team put out a Q&A looking at what we know about Omicron (link here) as many risk assets put in their worst performance of the year on Friday after it exploded into view. The main reason for the widespread concern is the incredibly high number of mutations, with 32 on the spike protein specifically, which is the part of the virus that allows it to enter human cells. That’s much more than we’ve seen for previous variants, and raises the prospect it could be a more transmissible version of the virus, although scientists are still assessing this. South Africa is clearly where it has been discovered (not necessarily originated from) and where it has been spreading most. The fact that’s it’s become the dominant strain there in just two weeks hints at its higher level of contagiousness. However the read through to elsewhere is tough as the country has only fully vaccinated 24% of its population, relative to at least 68% in most of the larger developed countries bar the US which languishes at 58%. It could still prove less deadly (as virus variants over time mostly are) but if it is more contagious that could offset this and it could still cause similar healthcare issues, especially if vaccines are less protective. On the other hand the South African doctor who first alerted authorities to the unusual symptoms that have now been found to have been caused by Omicron, was on numerous media platforms over the weekend suggesting that the patients she has seen with it were exhausted but generally had mild symptoms. However she also said her patients were from a healthy cohort so we can’t relax too much on this. However as South African cases rise we will get a lot of clues from hospitalisation data even if only 6% of the country is over 65s. My personal view is that we’ll get a lot of information quite quickly around how bad this variant is. The reports over the weekend that numerous cases of Omicron have already been discovered around the world, suggests it’s probably more widespread than people think already. So we will likely soon learn whether these patients present with more severe illness and we’ll also learn of their vaccination status before any official study is out. The only caveat would be that until elderly patients have been exposed in enough scale we won’t be able to rule out the more negative scenarios. Before all that the level of restrictions have been significantly ramped up over the weekend in many countries. Henry discusses this in his note but one very significant one is that ALL travellers coming into (or back to) the UK will have to self isolate until they get a negative PCR test. This sort of thing will dramatically reduce travel, especially short business trips. Overnight Japan have effectively banned ALL foreign visitors. I appreciate its dangerous to be positive on covid at the moment but you only have to look at the UK for signs that boosters are doing a great job. Cases in the elderly population continue to collapse as the roll out progresses well and overall deaths have dropped nearly 20% over the last week to 121 (7-day average) - a tenth of where they were at the peak even though cases have recently been 80-90% of their peak levels. If Europe are just lagging the UK on boosters rather than anything more structural, most countries should be able to control the current wave all things being equal. However Omicron could make things less equal but it would be a huge surprise if vaccines made no impact. Stocks in Asia are trading cautiously but remember that the US and Europe sold off more aggressively after Asia closed on Friday. So the lack of major damage is insightful. The Nikkei (-0.02%), Shanghai Composite (-0.14%), CSI (-0.22%), KOSPI (-0.47%) and Hang Seng (-0.68%) are only slightly lower. Treasury yields, oil, and equity futures are all rising in Asia. US treasury yields are up 4-6bps across the curve, Oil is c.+4.5% higher, while the ZAR is +1.31%. Equity futures are trading higher with the S&P 500 (+0.71%) and DAX (+0.84%) futures in the green. In terms of looking ahead, we may be heading into December this week but there’s still an incredibly eventful period ahead on the market calendar even outside of Omicron. We have payrolls on Friday which could still have a big impact on what the Fed do at their important December 15 FOMC and especially on whether they accelerate the taper. Wednesday (Manufacturing) and Friday (Services) see the latest global PMIs which will as ever be closely watched even if people will suggest that the latest virus surge and now Omicron variant may make it backward looking. Elsewhere in the Euro Area, we’ll get the flash CPI estimate for November tomorrow (France and Italy on the same day with Germany today), and we’ll hear from Fed Chair Powell as he testifies (with Mrs Yellen) before congressional committees tomorrow and Wednesday. There’s lots of other Fed speakers this week (ahead of their blackout from this coming weekend) and last week there was a definite shift towards a faster taper bias, even amongst the doves on the committee with Daly being the most important potential convert. Fed speakers this week might though have to balance the emergence of the new variant with the obvious point that without it the Fed is a fair bit behind the curve. Importantly but lurking in the background, Friday is also the US funding deadline before another government shutdown. History would suggest a tense last minute deal but it’s tough to predict. Recapping last week now and the emergence of the new variant reshaped the whole week even if ahead of this, continued case growth across Europe prompted renewed lockdown measures and travel bans across the continent. Risk sentiment clearly plummeted on Friday. The S&P 500 fell -2.27%, the biggest drop since October 2020, while the Stoxx 600 fell -3.67%, the biggest one-day decline since the original Covid-induced risk off in March 2020. The S&P 500 was -2.20% lower last week, while the Stoxx 600 was down -4.53% on the week. 10yr treasury, bund, and gilt yields declined -16.1bps, -8.7bps, and -14.5bps, undoing the inflation and policy response-driven selloff from earlier in the week. The drop in 10yr treasury and gilt yields were the biggest one-day declines since the original Covid-driven rally in March 2020, while the drop in bund yields was the largest since April 2020. 10yr treasury, bund, and gilt yields ended the week -7.3bps lower, +0.7bps higher, and -5.4bps lower, respectively. Measures of inflation compensation declined due to the anticipated hit to global demand, with 10yr breakevens in the US and Germany -6.8bps and -8.8bps lower Friday, along with Brent and WTI futures declining -11.55% and -13.06%, respectively. Investors pushed back the anticipated timing of rate hikes. As it stands, the first full Fed hike is just about priced for July, and 2 hikes are priced for 2022. This follows a hawkish tone from even the most dovish FOMC members and the November FOMC minutes last week. The prevailing sentiment was the FOMC was preparing to accelerate their asset purchase taper at the December meeting to enable inflation-fighting rate hikes earlier in 2022. Understanding the impact of the new variant will be crucial for interpreting the Fed’s reaction function, though. The impact may not be so obvious; while a new variant would certainly hurt global demand and portend more policy accommodation, it will also likely prompt more virus-avoiding behaviour in the labour market, preventing workers from returning to pre-Covid levels. Whether the Fed decides to accommodate these sidelined workers for longer, or to re-think what constitutes full employment in a Covid world should inform your view on whether they accelerate tapering in December. It feels like a lifetime ago but last week also saw President Biden nominate Chair Powell to head the Fed for another term, and for Governor Brainard to serve as Vice Chair. The announcement led to a selloff in rates as the more dovish Brainard did not land the head job. In Germany, the center-left SPD, Greens, and liberal FDP agreed to a full coalition deal. The traffic-light coalition agreed to restore the debt break in 2023, after being suspended during the pandemic, and to raise the minimum wage to €12 per hour. The SPD’s Olaf Scholz will assume the Chancellorship. The US, China, India, Japan, South Korea, and UK announced releases of strategic petroleum reserves. Oil prices were higher following the announcement, in part because releases were smaller than anticipated but, as mentioned, prices dropped precipitously on Friday on the global demand impact of the new Covid variant. The ECB released the minutes of the October Governing Council meeting, where officials stressed the need to maintain optionality in their policy setting. They acknowledged growing upside risks to inflation but stressed the importance of not overreacting in setting policy as they see how inflation scenarios might unfold. Tyler Durden Mon, 11/29/2021 - 08:01.....»»

Category: dealsSource: nytNov 29th, 2021

Frenzies and Bidding Wars: Leaders Share Tactics to Win in the Post-Pandemic Market

After a year that relied heavily on Facetime rather than actual face time, real estate professionals are wondering what they should expect in 2022’s post-pandemic market. As market dynamics continue to shift, leading brokers shared how they’ve been planning for the future at RISMedia’s 26th Annual Power Broker Forum, held during the REALTORS® Conference & […] The post Frenzies and Bidding Wars: Leaders Share Tactics to Win in the Post-Pandemic Market appeared first on RISMedia. After a year that relied heavily on Facetime rather than actual face time, real estate professionals are wondering what they should expect in 2022’s post-pandemic market. As market dynamics continue to shift, leading brokers shared how they’ve been planning for the future at RISMedia’s 26th Annual Power Broker Forum, held during the REALTORS® Conference & Expo last week. The forum was moderated by John Featherston, founder, president, and CEO of RISMedia, Inc., and York Baur, CEO of MoxiWorks. From L to R:  John Featherston, Founder President & CEO, RISMedia; Cindy Ariosa, senior vice president, regional manager, Long & Foster Real Estate Inc.; Allan Dalton, senior vice president of Research and Development, Berkshire Hathaway HomeServices, HomeServices of America; Helen Hanna Casey, CEO, Howard Hanna Real Estate Services; and Anthony Lamacchia, broker/owner & CEO, Lamacchia Realty, Inc. The panel of experts included Cindy Ariosa, senior vice president, regional manager, Long & Foster Real Estate Inc.; Helen Hanna Casey, CEO, Howard Hanna Real Estate Services; Allan Dalton, senior vice president of Research and Development, Berkshire Hathaway HomeServices, HomeServices of America; and Anthony Lamacchia, broker/owner & CEO, Lamacchia Realty, Inc. “You’ll notice if you stop by our booth that we have a t-shirt that says ‘information is currency,’ and it is,” Featherston kicked off the forum. “That phrase reigns true in our industry now more than ever. It’s the information that our consumers are looking for that you have and that you present that keeps you in the forefront of their minds and keeps them coming back to you, the skilled real estate professionals that help them through their real estate goals and objectives.” From rethinking office space to implementing the right technology to addressing the new needs of today’s buyers and sellers, each panelist discussed their market expectations as 2022 nears. After a year of uncanny market conditions fueled by the coronavirus pandemic and government intervention, Dalton indicated that a market correction was imminent. However, he also noted that there was a more pressing question that needed to be addressed. From L to R: John Featherston, Cindy Ariosa and Allan Dalton “I never seem to hear much discussion about where our industry is going to take the market,” Dalton said, noting that instead of trying to predict the future of the market, agents should focus more on how they are guiding clients through shifting tides. In preparation for 2022, Hanna Casey suggested that agents and brokers start expanding their data tracking beyond typical “real estate numbers.” From L to R: Helen Hanna Casey and Anthony Lamacchia “We have a bigger problem in this country, and it’s not pricing,” Hanna Casey said, pointing out declining numbers of marriage, birth rates and household formation specifically as potential factors in market shifts slated for years to come. “I think we are going to be okay in the sense that we are still going to have a shortage, and as long as there is a shortage, there will be a demand, but if you look over a five-year period, I think we have to be doing something,” Hanna Casey added. This year, a slowdown in people willing to list contributed to the strained supply and buyer frenzy that drove prices sky-high during the summer. With a dearth of inventory slated to carry over into next year, Lamacchia forecasted “bidding wars and frenzies from coast to coast” to hit the market as early as this winter. Anthony Lamacchia “What I am hopeful of is that now that people are vaccinated, sellers and many would-be sellers are willing to list their homes faster than this past year,” Lamacchia said. However, he also warned agents not to view slowing sales as a detriment to the market. “Once we get to the winter and inventory is down, you’re going to see bidding wars go wildly again, but I’m hoping that we come out of it quicker by spring,” said Lamacchia. The increase in aging homeowners choosing to stay in place hasn’t done any favors regarding closing the supply-demand gap. However, Ariosa was optimistic for the coming year as new development of housing and apartments in Baltimore—and nationwide—could likely incentivize older people to list their houses. “I think they’re scared that they have nowhere to go, which is why they don’t want to get out of their house,” said Ariosa, suggesting that new units could be a boon for the market. The conversation then focused on what each panelist has done to take advantage of the shifting market in 2022. “Markets are great until they are not and as has been noted, none of us have a crystal ball – at least one that works – and so we’ve alluded to how you prepare for changes in the market, but I’m curious what have you already started to do over these last six months for further preparation to take advantage of things as they are but also with an eye towards how they might change beyond 2022,” said Baur. Both Ariosa and Hanna Casey have focused on sprucing up their customer and agent experience. Cindy Ariosa Ariosa noted that Long & Foster had expanded its client-facing services to improve its “one-stop-shop” offering along with its ancillary services. “We’re trying to create customers for life with this experience,” said Ariosa. “We’re very excited, and we think that’s going to help the experience. Everybody wants a good experience.” Hanna Casey said that increased training at her company has been a silver lining to the pandemic, noting that the brokerage recently introduced new marketing and technology products to assist their agents along with improved training opportunities. “Today, they are able to meet the consumer needs better than they could before, and what we found was that we, perhaps, were not doing enough training internally, and so we continue with that training,” Hanna Casey added. Rather than focusing on the shiny new tech options inundating the industry, Hanna Casey suggested that her family’s firm has doubled down on the tech solutions they’ve been using and building around them. Baur also weighed in on the topic, stating, “The best technology is the one you use, and the other is it’s still about relationships.” “We have to quit trying to over-apply technology to replace humans instead of applying it to help humans be better and particularly be better around relationships,” Baur added. Among the challenges that lie ahead in the industry—of which there are plenty—Dalton indicated that real estate professionals need to change their approach surrounding their databases and social media strategies. York Baur, CEO of MoxiWorks Dalton opined that there needs to be a greater focus on converting databases into client bases for agents. “Doctors, lawyers, and financial planners are focused on client bases while we’re focusing on databases,” he said. Dalton went on to state, “the industry is settling on paying tariffs on the buying side, and the only way they are going to preempt the listing side disruption is converting their database.” He also critiqued the overall approach to social media marketing. “A lot of agents are mimicking high school kids on TikTok, and they are not bringing value to the marketplace, and they are not engaged in social media marketing,” he said. According to Dalton, a significant threat facing the market is the decline in how consumers value real estate agents. “We don’t have an image problem, but when it comes to value, we do,” Dalton said, suggesting that most consumers perceive a real estate transaction as a “fee-inflated event which they have to subsidize in order to promulgate an inefficient industry.” “The fact that a homeowner can live in a town for ten years and then when they decide to move, they call a complete stranger is a colossal indictment to the industry,” Dalton continued. “These are very serious damaging issues to perceived value when people say artificial intelligence will transcend human reasoning.” Lamacchia echoed similar sentiments, stating, “it’s somewhat of an embarrassment of our industry that some people are going to financial advisors and lawyers for real estate advice before REALTORS®, but it’s our fault.” He indicated that he has been training agents on how to guide apprehensive sellers who want to sell and buy, which play a role in the lull of listings during the pandemic. “If even half the REALTORS® out there knew how to properly explain to a seller that ‘you can do this,’ you wouldn’t see inventory go as low as it does in the winter and stay that low as long,” Lamacchia added. Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com. The post Frenzies and Bidding Wars: Leaders Share Tactics to Win in the Post-Pandemic Market appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 17th, 2021

A central banker on the bizarre economy sounds like Spider-Man in the multiverse, saying he needs a few months "to see where reality is"

October's 30-year-high inflation has central bankers sounding like Marvel characters. Richmond Fed President Thomas Barkin sees multiple realities. Richmond Fed President Thomas Barkin (L), and Tom Holland as Spider-Man (R).REUTERS/Ann Saphir and Sony Pictures Releasing It will take time to see what the post-crisis economy will look like, Richmond Fed President Thomas Barkin said on Yahoo Finance. He said he needs a few months "to see where reality is" as the Fed walks a tightrope between reining in pandemic aid and cooling down inflation. Pulling back support too quickly risks a slower recovery, but moving too late risks permanently higher inflation. The multiverse is all the rage. Just ask Spider-Man and Dr. Strange from the Marvel Cinematic Universe — or Thomas Barkin, president of the Federal Reserve Bank of Richmond.The pandemic recovery has been uncertain from the start, but that murkiness is more intense than ever. Inflation has held at decade highs for longer than expected. A global supply-chain crisis shows few signs of easing. Hiring has picked up, but elevated COVID cases could stifle the rebound.There are seemingly infinite paths forward, and policymakers are struggling to time their actions, with pressure most intense at the Federal Reserve. The central bank is tasked with keeping inflation in check, and it signaled in November it would soon start reining in its pandemic-era aid. Pulling back support too slowly could solidify inflation at dangerously high levels, but moving too quickly could harm the still-recovering economy. That's led some officials to ponder different realities. Some see price growth die down as expected, but others see the US sliding into an inflationary crisis. With possibilities abound, the central bank should be patient, Barkin said."It's helpful to have some time to see where reality is in this economy," Barkin told Yahoo Finance's Brian Cheung in an interview published Monday. "If the need to act is there, we'll do what we need to do."The remarks hark to fresh humility in the Fed's ranks. The central bank has long expected pandemic-era inflation to be "transitory," meaning it will eventually die down. Yet the Delta wave and supply-chain tangle has left Americans' massive demand crashing into limited supply. Bottlenecks in the economy were "larger and longer than anticipated" and prompted Fed officials to shift their inflation-rate forecasts higher, Chair Jerome Powell said in September.Policymakers still expect price growth to die down relatively soon. Powell said earlier in November that he sees supply issues abating and inflation "moving down by the second or third quarter."Barkin shared a similar outlook. Supply problems will likely last "well into next year," but plenty of signs point to softer inflation later in 2022, he said. Surveys show Americans still expecting price growth to cool in the medium- to long-term. Businesses are sending the same signals, and that bodes well for avoiding an inflationary spiral, Barkin said."Even today, as they see higher costs and they're pushing into prices, they're not talking about this being something that's going to last year-over-year-over-year," he added.Near-term turbulence remains. October inflation data showed price growth accelerating across nearly all categories, signaling stronger inflation was fueled by more than just a couple sectors.Such broad price growth echoes the inflation crisis of the 1970s. But with so many unusual trends shaping the economy, it would be wrong to conclude that today's inflation is the new normal, Barkin said."We've got to get to the other side of this before you really know whether these things are persistent or not," he added.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 16th, 2021

How to start investing and building wealth with just $5, according to experts

During a Master Your Money virtual panel, investing experts said it's important to understand your finances and goals before getting into the market. Business InsiderInsider Investing experts Dominique Broadway and Ryan Viktorin joined Insider's Master Your Money virtual panel. They discussed how to invest smart and build wealth while managing risk and protecting assets. Both experts recommended understanding your overall finances and developing clear goals first. This article is part of series focused on millennial financial empowerment called Master Your Money. Investing and wealth-building are more accessible than ever, thanks to online brokerages, micro-investing apps, robo-advisors, crypto exchanges, and other investment options.These platforms typically make it easy to set up new accounts, keep up with stock prices and market news, and trade on the go. But if you've never invested, you might be overwhelmed by the vast range of investment choices and account types at your disposal.At a recent virtual panel entitled "How to Invest Smart & Build Wealth" — part of our Master Your Money series presented by Fidelity — experts Dominique Broadway, founder of Finances Demystified, and Ryan Viktorin, financial planner, vice president, and financial consultant at Fidelity, explored different ways to invest intelligently, both for beginners and experienced investors.You don't need millions (or even thousands) to start investing"One of the biggest myths, and I'm sure Dominique would agree, is that 'I have to have a ton of money to start investing,'" Viktorin said during the event. "And it's just not true."She emphasized the importance of simply starting, adding that you can build wealth without being "wealthy." Broadway seconded Viktorin's points and explained that many platforms allow newcomers to both start with smaller amounts and utilize additional educational resources if they need to."You can literally start investing with as little as $5," Broadway said. "I'm really excited that now people are realizing that you don't need hundreds of thousands of dollars to actually start investing."Viktorin and Broadway also debunked two other stock market myths:You need a lot of money to get help investing: Similar to the myth that you need a lot of money to start investing, another myth is that help is ridiculously expensive. "You don't have to do it alone," Viktorin said. "You can, and that's awesome, but you don't have to." And that's a huge change in the industry, she added, which is great. Robo-advisors are great for beginners, and there are many apps that offer members support from financial advisors.You have to know everything about the stock market before you get started: "Don't feel like you have to understand every single thing about fundamental analysis, technical analysis, reading charts, and all these different things to actually start investing," Broadway said. "You can keep it super simple and be able to go ahead and jump in and possibly see good returns over time."Understand the risk of investments before you purchase themIf you're not planning to use an automated investing account or financial advisor (although you can still research the investments you have for either of these options), it's crucial to thoroughly assess the securities you're eyeing. And this isn't something that just applies to beginner investors; it also applies to experienced and advanced traders.Viktorin added that a few common mistakes investors make are not having a clear expectation of the risk behind a certain investment or portfolio, not keeping the "big picture" in mind, and panic selling. "The only way you have lost that investment is if you sell it," Viktorin said.And regardless of the wealth-building vehicle you choose — whether it's an individual retirement account (IRA), employer-sponsored retirement plan, or banking app that rounds up spare change from your purchases and invests it — your risk tolerance isn't something that's set in stone. It may fluctuate as you age or make more or less money.Don't stop investing after you've bought your first sharesIt can be exciting to have your first few shares under your belt, but what you do after you purchase your first investments is even more important than the action of buying them."You've bought your first year of something that maybe you like or believe in," Broadway said. "My recommendation is just keep going."She stressed the importance of contributing to your investment accounts consistently by setting a contribution schedule (e.g. weekly, monthly, etc.) to deposit funds from your bank accounts into your investments.Make sure you understand your financial situation before you get startedIf you're almost ready to begin building wealth but aren't sure which steps to take right now, Viktorin and Broadway shared two actionable items:1. Organize your finances by mapping out your assets and liabilities.2. Figure out your investing goals and which vehicles you'd like to utilize to reach them. "Have an understanding of what you have," Viktorin said. It could be the income you're earning versus your expenses and what can you save."Do you have any debt?" Broadway said. "Do you have any investments? Do you have 401(k)s offered through your job? You can't create a goal of where you want to be if you don't know where you currently are."Read the original article on Business Insider.....»»

Category: dealsSource: nytNov 15th, 2021

Rabo: The Fed Is Getting Flattened, Whatever Happens Now

Rabo: The Fed Is Getting Flattened, Whatever Happens Now By Michael Every of Rabobank "How much worse could I make it?" The Atlantic, in an article titled: ‘Populism Always Sounds Great in the Abstract’, bewails “A New Jersey truck driver defeated the state Senate president, but politics needs people who know what they’re doing,” adding the witty line: “I love the David and Goliath stories of politics, but only if David isn’t also a Philistine.” Ed Durr, who’s $153 home-made social-media-free campaign strategy just beat a political warhorse responded: “How much worse could I make it?” Without being partisan, it’s a question worth asking. Which of the brilliant minds at the Fed, White House, or in Wall Street had a 6.2% y/y US inflation print penciled in for October, the highest since December 1990, and, given base effects into end-year, the possibility we close 2021 close to 7%, the highest since June 1982: that’s so far back it was five years before even Biden first ran for president. “Bueller? Bueller?” That’s right – nobody. This is not just about lumber, or used cars, or energy, or food. Inflation is evident across a broad spectrum of goods; yes, with energy prices high, it will spread; into food, for sure; with supply-chains still strained, it will spread if demand does not fall; and in so-far-restrained services, the next big shock will be from rising rents, where demand is inelastic. This hurts - like the deleted MSNBC tweet telling us ‘inflation is good’. Did you get a 7% pay rise this year? Atlanta Fed wage growth data says those who stick with their jobs are seeing pay rises of 3.5% y/y; those who switch are getting 5.4%. Churn, baby, churn: and who fills the lower-paid positions left behind? Post-Virginia and New jersey, the White House realizes just saying “transitory” does not play well with voters, and President Biden has pledged that "Inflation hurts Americans (sic) pocketbooks, and reversing this trend is a top priority for me.” How, though? There is the infrastructure bill, but it will take years to kick in. Given the White House just rejected an appeal by US solar panel producers to impose tariffs on imports, it would also appear less Building Back will be done in the US, and more strain placed on ports. The bill also doesn’t address warehouse space, underpaid truckers, absent chassis, or structural monopolies in logistics that ensure high profitability and low resilience. As Matt Stoller underlines, “The consolidation of power over supply chains in the hands of Wall Street, and the thinning out of how we make and produce things over forty years in the name of efficiency, has made our economy much less resilient to shocks.” Moreover, Freightwaves notes just 16 companies - all outside the US - control 80% of global liner shipping, container production, and box-leasing capacity. Their economic power is growing, and they have no incentive to bring prices down. July’s White House executive order to tackle cartels only applies domestically. Perhaps oil will be released from the strategic reserve given President Biden’s view that this is the core problem - which will not add to US refining capacity or help supply chains or lower rents. And the planned $1.75 trillion Build Back Better bill puts more money in Americans’ pockets - which even Citadel is now saying would cement inflation by increasing demand when supply is constrained. Childcare is a ‘good thing’: but it is not transportation infrastructure. The message for the Fed from the yield curve, pre-CPI, was that merely jawboning was a policy error prompting bull curve flattening. An inflation print that suggests the Fed may be behind the curve saw US yields surge --2s up 10bp, 10s up 10bp, 30s up 12bp at their intraday peak, and TIPS 10-year break-evens topping 2.70%-- and bear curve flattening. In short, the Fed is getting flattened whatever happens now - and the US dollar is getting pumped. What are the FOMC going to do – hike? Jawbone? Write articles in The Atlantic? Indeed, the outlook continues to confound those in charge who failed to notice that pre-Covid the global economy was already heading for a recession - our 2020 outlook back in late 2019 was titled “Titanic”. There still appears to be painfully little dot-joining going on, just spurious dot-plotting. Meanwhile, in China Evergrande walked right up to the edge of default before making an interest payment. Word now seems to be the PBOC will help “good” developers sell bonds to Chinese banks to refinance their CNY debts (at lower interest rates, despite soaring credit risk). At the same time, the PBOC took the rare step of announcing mortgage lending picked up in October to CNY348bn (USD54bn) vs. CNY247bn (USD38bn) in September despite the controls in place. That’s the tactical picture. The strategic one is a Wall Street Journal article claims Beijing aims for a “controlled implosion of the real-estate giant, selling off some assets while limiting damage to home buyers and businesses.” Less attention is allegedly being paid to foreign investors - but just enough not to let faith collapse completely. The meta picture is what China’s growth model looks like once property speculation is excised, not just in 2022, but from here on out. For that, we will need to pay attention to the CCP’s Sixth Plenum that wraps up today. The US and China have announced a joint declaration to cooperate on climate change. Which is nice. They signed the same document back on 12 November, 2014. When US CPI was just 1.6% y/y. Which year is the following from? “The United States of America and the People’s Republic of China have a critical role to play in combating global climate change, one of the greatest threats facing humanity. The seriousness of the challenge calls upon the two sides to work constructively together for the common good.” Aussie jobs data were their usual random walk at -46.3K vs. an expected rise of 50K despite a decline in the participation rate. Full-time employment sank -40.4k and part-time -5.9K, and unemployment rose from 4.8% to 5.2%. Further volatility for a bond market expecting the RBA to be wrong on saying it won’t hike in 2022, backed up by the US CPI print overnight. And in geopolitics, Russia is flying nuclear bombers over Belarus as the border row with Poland blazes on. Donald Tusk has penned a letter stating: “I am addressing you, the leaders of EU Member States with an earnest appeal for full solidarity with Poland and Lithuania in the face of the growing crisis on the border with Belarus. Irrespective of your views regarding migration and your evaluation of the internal situation in Poland, we must, I underline, we must, as a political community, use all available means of pressure in order to contain the escalation of tension on the Eastern border of the Union…There is no more time nor space for hesitation.” He calls for “tough decisions vis-à-vis Minsk,” and warns, “Lack of reaction or postponing will only embolden the provocateurs and their protectors and may lead to dramatic, difficult to predict consequences." But numerous lines in the sand have been crossed already, with no slings proffered in response. “How much worse could I make it?” We shall soon find out. Not just in the US, but globally, aren’t we lucky the ‘Goliaths’ are in charge rather than the philistine “Davids”? By the way, evidence suggests the Philistines were related to bronze-age Greek civilisation, so the linguistic insult hardly fits; and it’s not the Davids whose dignity is now being covered by the smallest of fig leaves. Tyler Durden Thu, 11/11/2021 - 09:29.....»»

Category: blogSource: zerohedgeNov 11th, 2021

Futures Flat As Yields, Dollar Slide On Speculation Demo-Dove Brainard Will Replace Powell

Futures Flat As Yields, Dollar Slide On Speculation Demo-Dove Brainard Will Replace Powell For the second session in a row, S&P 500 futures reversed earlier losses and traded flat after falling as much as 0.3% earlier in the run-up to today's PPI report - the first of a couple of readings on inflation this week - as investors weighed the Federal Reserve’s warning that stock prices are "vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall." US Treasury yields fell and the dollar index slipped for a third consecutive day following a late Monday report that Joe Biden interviewed uber-dove and Hillary Clinton fan Lael Brainard for the central bank’s top job, although prediction markets were not impressed. European stocks advanced for a ninth day, the longest streak since June while Asian shares drifted. Some more stats from DB's Jim Reid There wasn’t an awful lot of newsflow for investors yesterday as they looked forward to tomorrow’s US CPI release, but the astonishing equity advance showed no signs of relenting just yet, with the S&P 500 (+0.09%) up for an 8th consecutive session to another record high. For reference, that’s the longest winning streak since April 2019, and if we get a 9th day in the green today, that would mark the longest run of consecutive gains since November 2004, back when George W. Bush had just beaten John Kerry to win a second term. It's also 17 out of 19 days up, which hasn’t happened since December 1971. At 715am S&P futures were up 1 point or 0.02% to 4,965. If, or rather when, the S&P closes green today, it will be up 9 consecutive sessions, the longest such streak since Nov 2004. Nasdaq futures rose another 33.25 points; If the nasdaq index is up today, it will be 12 days in a row, a feat it last achieved in 2009 and which hasn't been topped since 1992. “U.S. indexes continue flirting with all-time high levels following a surprise NFP read, the approval of Biden’s $550 billion spending bill and the discovery of an oral Covid treatment from Pfizer,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “But inflation worries come to overshadow the Monday optimism.” Sysco and DoorDash are among companies reporting earnings. Rivian Automotive is scheduled to price its initial public offering, seeking to raise as much as $10 billion in a listing that could give the producer of electric trucks a fully diluted valuation of more than $70 billion. “The company is seen as the most serious competitor to Tesla in the EV race,” Ozkardeskaya said. “The company will be worth more than Honda and Ferrari." Paypal Holdings fell 4.5% in U.S. premarket trading with analysts saying the payments firm’s full-year guidance was a disappointment and that the shares are likely to remain under pressure near-term despite announcing a new Venmo deal with Amazon, while General Electric surged 11.6% in premarket after the U.S. conglomerate said it would split itself into three companies focused on aviation, healthcare and power. Tesla Inc shares rose 1.4%, rebounding from a nearly 5% fall on Monday after Chief Executive Elon Musk’s Twitter poll proposing to sell a tenth of his holdings garnered 57.9% vote in favor of the sale. The proposal also raised questions about whether Musk may have violated his settlement with the U.S. securities regulator again. Zynga Inc jumped 6.6% after the “FarmVille” creator beat quarterly net bookings estimates, while Tripadvisor Inc fell 7.4% after reporting downbeat quarterly earnings and announcing the departure of Chief Executive Stephen Kaufer. Here are some of the other notable premarket movers today: TripAdvisor (TRIP US) shares fall as much as 7% in U.S. premarket trading with analysts saying the company’s 3Q results and outlook are a disappointment given the travel recovery being seen across the board. Cryptocurrency-exposed stocks rise in U.S. premarket trading on Tuesday, set to extend Monday’s gains after the global crypto market hit the $3 trillion milestone Roblox (RBLX US) shares jump as much as 27% in U.S. premarket trading after the video-game platform firm’s quarterly bookings topped estimates even after the easing of Covid restrictions Naked Brand (NAKD US) shares rise as much as 45% in U.S. premarket trading, after the company said it will acquire commercial EV technology company Cenntro Automotive in a stock-for-stock deal Robinhood Markets (HOOD US) slides 3% in premarket trading after it said personal information of millions of customers was compromised in a data breach last week and that the culprit demanded a payment. Arrival (ARVL US) plunged 19% in extended trading after the electric-vehicle maker says previous long-term forecasts from the merger with the CIIG special purpose acquisition company should no longer be relied upon SmileDirectClub (SDC US) slumps 21% in U.S. premarket trading after its 3Q revenue and 4Q forecast missed the lowest analyst estimates Aterian (ATER US) shares jumped 24% in postmarket trading on Monday, after third-quarter revenue and gross margin topped analysts’ estimates Five9 (FIVN US) shares rose 8.8% in extended trading on Monday, after the software company reported third-quarter results that beat expectations RealReal (REAL US) shares jumped 5.5% in Monday extended trading, after the online marketplace reported third- quarter revenue that beat expectations Invitae (NVTA US) shares tumbled 14% postmarket after the genetics company cut its full- year revenue forecast 3D Systems (DDD US) fell 8.5% postmarket after reporting third-quarter results. The 3D printing firm narrowed its 2021 adjusted gross margin guidance to 41% to 43% from an earlier range of 40% to 44% Data from the Labor Department due at 8:30 a.m. ET is expected to show that its producer price index for final demand rose 0.6% in October, with accelerating inflation and tighter monetary policy becoming a bigger concern for investors than the COVID-19 pandemic. Global equities hovered near all-time highs as investors weigh strong earnings, easing travel curbs and U.S. infrastructure spending against the risk of persistent inflation that may lead to tighter monetary policy.  A better-than-expected earnings season, positive developments around COVID-19 antiviral pills and the loosening of travel curbs have recently helped the market continue its record run. European equities faded small opening losses in otherwise quiet trade, with Euro Stoxx 50 little changed and other major indexes adding ~0.2%. Retailers traded well, insurance and financial services are under pressure but ranges are relatively narrow. Bayer jumped 3% after the German producer of healthcare and agricultural products raised its earnings forecast. In the latest positive development in uranium, Rolls-Royce surged 4.9% after the British engineering company raised an equivalent $617 million to fund the development of small modular nuclear reactors. Investor sentiment in Germany rose unexpectedly in November on expectations that price pressures will ease at the start of next year and growth will pick up in Europe’s largest economy, a survey showed on Tuesday. The ZEW economic research institute said its economic sentiment index increased to 31.7 from 22.3 points in October. A Reuters poll had forecast a fall to 20.0. “Financial market experts are more optimistic about the coming six months,” ZEW President Achim Wambach said in a statement. “For the first quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the euro zone,” Wambach added. A fall in a current conditions index to 12.5 from 21.6 - compared with a consensus forecast for 18.0 - showed investors expected that supply bottlenecks and inflationary pressures would hold back the economy in the current quarter, he said. Supply bottlenecks for raw and preliminary materials have weighed down industrial production here in Germany. Exports fell here for a second consecutive month in September. Asian equities were mixed, struggling to follow a positive lead from Wall Street as traders weighed economic optimism and Covid treatments against virus outbreaks across China. The MSCI Asia Pacific Index was up 0.1% on Tuesday, trimming an earlier 0.4% gain. SoftBank surged 11% after the company said it would buy back as much as 1 trillion yen ($8.8 billion) of its own stock. Wuxi Biologics rebounded from the previous day’s tumble, after the U.K. government said it will add some of China’s shots to approved vaccines for visitors.  Taiwan and the Philippines had the region’s top-performing benchmarks, with those in Japan and Malaysia slipping. While Asian markets attempted to follow increases seen on Wall Street overnight, “paring back of initial gains suggest that several factors including China’s Covid-19 situation and its property sector remain of concern,” said Jun Rong Yeap, market strategist with IG Asia Pte. in Singapore.  Investors are also awaiting news from China on the Communist Party’s meeting this week, its first major convention in more than a year. “The sixth plenum will quite possibly be a manifesto from Xi Jinping as he adopts the mantle of effective leader for life,” said Kyle Rodda, an analyst at IG Markets Ltd. “His agenda and rhetoric will be important, with investors nervous about what comes out about China’s strategic and economic direction.”  Over in Japan, a morning rally in Japanese stocks gave way to profit-taking for a second day, even as SoftBank Group surged on its latest buyback announcement. Electronics and chemical makers were the biggest drags on the Topix, which fell 0.8%, reversing an early 0.7% gain. Fast Retailing was the biggest contributor to a 0.8% decline in the Nikkei 225. The yen was up 0.4% against the dollar, in its forth day of advance. SoftBank jumped more than 10% after it said it will repurchase as much as 1 trillion yen ($8.8 billion) of its stock. Its climb helped drive Japanesestocks higher in early trading, after the S&P 500 rose to a new record high. “Futures were sold after the open as investors moved to book profits with the Nikkei 225 approaching 30,000,” said Hideyuki Ishiguro, a strategist at Nomura Asset Management in Tokyo. “There is a lack of catalysts for further gains, and the stronger yen is also limiting the upside.” Australian stocks edged lower, weighed down by bank. The S&P/ASX 200 index fell 0.2% to close at 7,434.20, with banks contributing the most to its drop. Eight of the benchmark’s 11 subgauges declined, while miners rallied. Inghams tumbled to its lowest price since May 27. Chalice Mining surgend after reporting its maiden Mineral Resource Estimate for the Gonneville Deposit at Julimar. In New Zealand, the S&P/NZX 50 index rose 0.4% to 13,090.58. In rates, USTs bull steepened, returning to Asia’s richest levels after speculation about a dovish change in leadership at the Fed. Treasuries advance across the curve, following wider gains across bunds; a bull-flattening move during Europe session was extended after Netherlands 2038 auction. Gilts long-end also well bid, adding support for Treasuries. Focal points for U.S. session include Fed’s Powell speaking at 9am ET, 10-year note auction at 1pm. Treasury yields were richer by 2bp-3bp across the curve, with curve spreads broadly within 1bp of Monday’s close; bunds outperform by ~1bp in the 10-year sector while long-end gilt yields are ~5bp lower on the day. Long-end Germany outperforms gilts and USTs, richening ~4bps. Peripheral spreads tighten with 10y Bund/BTP near 112bps. In FX, the Bloomberg Dollar Spot Index fell to its lowest level this month and Treasuries rallied following the report that Federal Reserve Governor Lael Brainard was interviewed for the top job at the central bank, with speculation that a Brainard-led Fed would be more dovish than that of current Chair Jerome Powell. The dollar was weaker against most of its Group-of-10 peers while the yen was among the top performers as traders wound back bets on higher global central- bank interest rates; the euro briefly rose above the $1.16 level before erasing gains. JPY tops the leaderboard with USD/JPY remaining sub-113. Cable briefly regains a 1.36-handle. In commodities, Crude futures push higher after a subdued Asia session. WTI adds 0.9% to trade near $82.60, Brent regains a $84-handle. Spot gold is range bound near $1,825/oz. Base metals hold modest gains with LME zinc the marginal outperformer Looking at the day ahead now, and data releases includethe US PPI reading for October, along with that month’s NFIB small business optimism index. Over in Germany, there’s also the ZEW survey for November and the trade balance for September. Central bank speakers include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and PBoC Governor Yi Gang, along with the ECB’s Panetta, Rehn, Knot and Schnabel, the Fed’s Bullard, Daly and Kashkari, and BoE Deputy Governor Broadbent. Market Snapshot S&P 500 futures little changed at 4,693.50 STOXX Europe 600 up 0.1% to 484.28 MXAP little changed at 198.97 MXAPJ up 0.3% to 649.50 Nikkei down 0.8% to 29,285.46 Topix down 0.8% to 2,018.77 Hang Seng Index up 0.2% to 24,813.13 Shanghai Composite up 0.2% to 3,507.00 Sensex down 0.3% to 60,381.61 Australia S&P/ASX 200 down 0.2% to 7,434.20 Kospi little changed at 2,962.46 German 10Y yield little changed at -0.26% Euro little changed at $1.1588 Brent Futures up 0.7% to $83.99/bbl Gold spot up 0.0% to $1,824.68 U.S. Dollar Index little changed at 93.96 Top Overnight News from Bloomberg Just weeks ago, Wall Street analysts and central bankers were quick to assure investors that a collapse by China Evergrande Group wouldn’t be a Lehman moment. Regulators in Beijing said that the crisis would be “contained.” Now that a bond selloff has spread to China’s entire real estate sector and beyond, concern is growing about the potential risk to the global financial system The Federal Reserve warned that fragility in China’s commercial real-estate sector could spread to the U.S. if it deteriorates dramatically, as investor focus turns to China Evergrande Group’s next bond payment deadlines Japan ruling Liberal Democratic Party and coalition partner Komeito agree to give 50,000 yen in cash and 50,000 yen in coupons for every child 18 or younger, Kyodo reports, without attribution Boris Johnson is struggling to repress the U.K. backlash over his defense of a ruling party lawmaker who broke lobbying rules, as his government was openly accused of corruption in Parliament and even typically friendly newspapers took aim at his ruling Conservative Party Bitcoin jumped past $68,000 for the first time to a new all-time high, part of a wider recent rally in the cryptocurrency sector. The climb in cryptocurrencies overall has taken their combined value above $3 trillion. Bitcoin hit its October record following the launch of the first Bitcoin-linked exchange-traded fund for U.S. investors A more detailed look at global markets from Newsquawk Asia-Pac stocks traded indecisively as focus centred on earnings and despite the positive handover from Wall St where the S&P 500 notched an 8th consecutive record close amid a lack of catalysts to derail the momentum in stocks. ASX 200 (-0.2%) began marginally higher amid strength in the tech and mining sectors but with upside eventually reversed by losses in the top-weighted financial industry as NAB shares declined despite posting a 77% jump in FY cash earnings and its FY net more than doubled to AUD 6.4bln, although this was still short of some analysts’ forecasts and the Co. also noted that competitive pressures are expected to continue in FY22. Nikkei 225 (-0.7%) was choppy amid a slew of earnings releases with outperformance in SoftBank following its H1 results in which net income declined by more than 80%, but revenue increased and it confirmed a JPY 1tln share buyback. It was also reported that PM Kishida instructed COVID measures to be compiled this week and economic measures by next Friday, while a government panel recommended tax breaks for companies that increase wages, although Tokyo stocks have failed to benefit with early momentum offset by recent flows into the JPY. Hang Seng (-0.1%) and Shanghai Comp. (+0.2%) lacked firm direction amid mixed developer related headlines with Kaisa Group said to be taking several measures to solve liquidity issues and have pleaded for more time and patience from investors, while China Evergrande reportedly scraped together more cash by offloading a 5.7% stake in HengTen Networks for USD 145mln. Furthermore, the PBoC continued with its liquidity efforts but recent source reports noted that chances of a PBoC rate cut looks slim and that the PBoC is expected to be cautious in easing monetary policy amid stagflation concerns. Finally, 10yr JGBs were flat amid the indecisive mood in stocks and was only briefly supported from the improvement across most metrics at the latest 30yr JGB auction. Top Asian News Gold Rally Pauses as Focus Turns to Upcoming Inflation Data Indonesia Bonds Risk Losing Key Support as Outflows Surge Nissan Raises Profit Outlook Despite Supply Disruptions Fed Warns of Woes Spreading as Deadline Looms: Evergrande Update After a soft open, European equities trade in close proximity to the unchanged mark (Eurostoxx 50 +0.1%) with incremental newsflow relatively light thus far with a mixed German ZEW report unable to shift the dial. The handover from the Asia-Pac session was a mixed one with the region unable to benefit from the positive tailwinds on Wall St. Stateside, futures are near-enough unchanged with participants tentative ahead of tomorrow’s US CPI release which is expected to see Y/Y CPI rise to 5.8% from 5.4%. For the Stoxx 600, UBS’ announced today that its end-2022 target is at 520 which would mark around 8% of upside from current levels. In terms of a regional breakdown, UBS upgraded Italy to overweight from underweight whilst holding Germany and the UK as overweight. Sectors in Europe are a mixed bag with Autos outperforming peers as Renault (+4.6%) sits at the top of the CAC in the wake of Nissan earnings, which the Co. says will have a positive impact on its Q3 earnings. Basic Resources, Retail and Media names are also faring well. To the downside, Insurance names are on a softer footing following earnings from Munich Re (-3.4%) with the Co. warning of further COVID-related losses, whilst results have also hampered the performance of Direct Line (-2.6%). Bayer (+2.6%) is one of the better performers in Germany after beating revenue and EBITDA expectations and guiding FY EPS higher. Associated British Foods (+6.5%) is the best performer in the Stoxx 600 after announcing a special dividend alongside results. Finally, other strong stocks in the UK include Rolls Royce (+5.4%) after confirming it has received funding for small modular nuclear reactors, whilst BT (+2.9%) is seen higher after being upgraded to buy from hold at Berenberg. Top European News UniCredit to Take $1.9 Billion Charge From Yapi Kredi Sale Russia’s Gazprom Says Gas Will Flow Into EU Storage This Month European Gas Prices Slide on Some Signs of Higher Russian Flows Polish Key Rate Hikes Past 1.5% May Be Needed, MPC’s Sura Says In FX, the Yen and Dollar are locked around the 113.00 mark after the former extended its mainly technical rally to around 112.73 before running out of steam, and this has given the Greenback in general some breathing space as the index claws back declines from a slightly deeper 93.872 post-NFP low to retest resistance at the psychological 94.000 level. However, Usd/Jpy and Yen crosses are still trending lower following clear breaches of several key chart supports that will now form upside barriers, such as Fibs in the headline pair spanning 113.20-30, while the Buck and DXY retain a bearish tone following their sharp retracement from a new y-t-d high in the case of the former last Friday. Ahead, US PPI data provides a timely inflation gauge for CPI on Wednesday, while there is another array of Fed speakers and more supply to absorb as Usd 39 bn 10 year notes are up for auction. GBP - Sterling continues to regroup in wake of the BoE shock, with Cable cresting 1.3600 and even Eur/Gbp unwinding gains towards 0.8520 amidst ongoing Brexit angst that could reach another critical stage by the end of this week given reports that the EU is formulating a package of short/medium-term retaliatory measures which might be presented by Sefcovic to Frost on Friday, to dissuade the UK from triggering Article 16, according to Eurasia Group's Rahman. Note, however, the cross may be underpinned by decent option expiry interest at the 0.8500 strike (1 bn), if not mere sentimentality. AUD/NZD - Some reasons for the Aussie to reverse recent underperformance vs the Kiwi down under, as NAB business confidence and conditions both improved markedly in October, while consumer sentiment ticked up as a counterweight to an acceleration in NZ electronic card consumption, with Aud/Usd firmly back on the 0.7400 handle, Aud/Nzd rebounding from sub-1.0350 and Nzd/Usd hovering midway between 0.7148-74 parameters. CAD/EUR/CHF - All narrowly divergent vs their US counterpart, as the Loonie gleans traction from a Usd 1/brl rebound in WTI to bounce through 1.2450 and away from 1.1 bn option expiries at 1.2460 in advance of another speech from BoC Governor Macklem, while the Euro is weighing up a mixed ZEW survey against expectations in close proximity to 1.1600 and also ‘comfortably’ above 1.8 bn expiry interest down at 1.1550. Elsewhere, the Franc is keeping its head afloat of 0.9150 and 1.0600 vs the Euro awaiting remarks from the SNB via Maechler and Moser about the changing FX market and implications for the Swiss Central Bank on Thursday. In commodities, WTI and Brent are firmer this morning though the benchmarks have drifted off earlier highs as we approach the entrance of US participants. At best, Brent has surpassed the USD 84.00/bbl mark, a figure which eluded it yesterday, and WTI has been within reach of the USD 83.00/bbl mark. Fresh newsflow explicitly for the complex has been slim but we are, more so than usual, looking to the EIA STEO due at 17:00GMT/12:00EST today. Heightened attention on this stems from US Energy Secretary Granholm commenting earlier in the week that President Biden may make an announcement in relation to crude and the SPR this week; as such, administration officials will be scrutinising the STEO report. For reference, the OPEC+ MOMR and IEA OMR are due on November 11th and 16th respectively. October’s STEO upgraded world 2021 oil demand growth forecasts by 90k but cut the 2022 view by 150k while highlighting that US crude output is to fall 260k vs prev. 200k fall in 2021. As usual, we do have the Private Inventory report due today as well with expectations set for a headline build of 1.9mln. Moving to metals, spot gold and silver are once again lacklustre and remain comfortably within overnight ranges and the upside seen in the metals at the tail-end of last week means we are circa, for spot gold, USD 30/oz from a cluster of DMAs. Elsewhere, base metals are firmer given the support for industrial names on the US infrastructure bill, but the likes of LME copper remain within familiar ranges. US Event Calendar 8:30am: Oct. PPI Ex Food, Energy, Trade MoM, est. 0.3%, prior 0.1% 8:30am: Oct. PPI Ex Food, Energy, Trade YoY, est. 6.2%, prior 5.9% 8:30am: Oct. PPI Ex Food and Energy YoY, est. 6.8%, prior 6.8% 8:30am: Oct. PPI Final Demand YoY, est. 8.6%, prior 8.6% 8:30am: Oct. PPI Ex Food and Energy MoM, est. 0.5%, prior 0.2% 8:30am: Oct. PPI Final Demand MoM, est. 0.6%, prior 0.5% Central Banks 7:50am: Fed’s Bullard Takes Part in Virtual Event 9am: Powell to Speak at Joint Fed, ECB and BoC Diversity Conference 9am: ECB’s Knot, Fed’s Bullard on UBS Panel 11:35am: Fed’s Daly Speaks at NABE Conference 1:30pm: Fed’s Kashkari Takes Part in Moderated Discussion DB's Jim Reid concludes the overnight wrap Thanks for all your well wishes yesterday. It was very kind to have a few hundred take the time to email. If you missed it, see yesterday’s EMR to understand why my responsibilities have mounted this week. The latest is that I’ve now got two perfect night’s sleep while my wife who is sleeping by my daughter’s side at hospital on a camp bed all week got hardly any the first night. Nurses coming in every hour, lots of machines beeping, it being too hot and no privacy. A look at my WhatsApp this morning shows she was last seen at 3.58am, so I’m worried I’m going to hear about a repeat. Although I will want to know who she’s whatsApping at that time of the night! There wasn’t an awful lot of newsflow for investors yesterday as they looked forward to tomorrow’s US CPI release, but the astonishing equity advance showed no signs of relenting just yet, with the S&P 500 (+0.09%) up for an 8th consecutive session to another record high. For reference, that’s the longest winning streak since April 2019, and if we get a 9th day in the green today, that would mark the longest run of consecutive gains since November 2004, back when George W. Bush had just beaten John Kerry to win a second term. It's also 17 out of 19 days up, which hasn’t happened since December 1971. All these records for various equity indices might seem jarring when you consider that there are still strong inflationary pressures in the pipeline, and with them the prospect of a renewed hawkish shift by central banks. However, the prevalent view among economists (which continues to influence investors) remains that those pressures will prove transitory and we’ll see price pressures diminish as we move through next year, hence enabling a steady lift-off in rates from central banks. Obviously it remains to be seen if that proves correct, but that’s still the prevailing view. And even though Covid-19 cases have begun to rise again in many countries, not least in Europe, the positive news from both Merck and Pfizer about a new pill that reduces hospitalisations and deaths offers societies another tool alongside vaccines to help prevent the overwhelming of healthcare systems going forward. And on top of all that, we’ve had a further dose of optimism from the latest payrolls data on Friday, which saw an above-consensus print along with positive revisions to previous months. With that in mind, it was another day of records across the board yesterday, with the NASDAQ (+0.07%), the Dow Jones (+0.29%), and Europe’s STOXX 600 (+0.04%) all ascending to fresh highs of their own. Cyclicals tended to outperform, and the small-cap Russell 2000 (+0.23%) was yet another index that hit an all-time high. Not even Tesla declining -4.84% after Elon Musk’s weekend Twitter poll over whether he should sell 10% of his stake was enough to derail things. Materials led the pack (+1.23%) with energy (+0.88%) close behind thanks to a fresh boost in commodity prices. By the close of trade, Brent Crude was up another +0.83% to $83.43/bbl, so still beneath its peak from a couple of weeks ago, but very much remaining in the range above $80/bbl that we’ve seen since the start of October. For sovereign bonds, however, the rally from late last week reversed, 5yr US Treasuries increased +6.1bps, bringing them back above last Thursday’s close, while yields on 10yr US Treasuries were up +3.8bps to 1.49%. Both were entirely driven by higher inflation breakevens, as 5yr and 10yr breakevens both increased +7.1bps. 10yr real yields sank -3.4bps to -1.13%, putting them less than 10bps away from their intraday low back in August of -1.220%. Over in Europe, it was much the same story of higher nominal yields thanks to rising inflation expectations, with yields on 10yr bunds (+3.7bps), OATs (+3.6bps) and BTPs (+1.7bps) all ending the session higher. Overnight in Asia stocks are trading in the red with the Shanghai Composite (-0.02%), Hang Seng (-0.07%), CSI (-0.30%), KOSPI (-0.29%) and the Nikkei (-0.66%) all down. In Japan, wages grew at +0.2% year-on-year in September (vs +0.6% consensus) and real wages actually fell -0.6% as prices rose faster. The new Prime Minister Kishida is expected to announce a stimulus package to boost Japan's recovery in an effort to shore up wages. Staying in Asia, strains on global supply chains continue with Bangladeshi truckers continuing their strike from Friday over a 23% hike in diesel prices. Protests are intensifying as diesel shortages have already sent prices upwards of 64% this year. Futures are indicating that the winning streak in the US and Europe might be under threat with S&P 500 futures (-0.25%) and DAX futures (-0.28%) both down. With all eyes on when we might get some news about the various Fed positions, another place opened up on the Board yesterday after Randal Quarles said that he would be resigning his position as a Governor at the end of December. Quarles had also been Vice Chair for Supervision, though his four-year term for that post came to an end last month. Quarles’ departure from the Fed Board means that there’s now another position at the Fed for President Biden to fill, with Jay Powell’s term as chair concluding in February, Vice Chair Clarida’s position on the board concluding at the end of January, and an additional vacant post on the Board on top of those. Staying on the Fed, yesterday we had the latest Survey of Consumer Expectations from the new York Fed, which showed that one-year inflation expectations hit a series high of 5.7%, while the 3-year inflation expectations remained at a joint-series high of 4.2%. Separately, we also heard from Vice Chair Clarida, who reiterated his belief that the necessary conditions “for raising the target range for the federal funds rate will have been met by year-end 2022.” The Fed also released its bi-annual Financial Stability Report after the closing bell last night. Timely, considering the record run equities have been on, the report noted that “asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall.” Other key risks the report mentions include stablecoins, retail-fuelled volatility, and structural vulnerabilities in money market funds. While on structural vulnerabilities, the Inter-Agency Working Group, five key US regulators, also released a progress report on potential Treasury market reforms. There are a number of reforms being considered; what is ultimately adopted will have a sizable impact on the shape of the Treasury market and demand for Treasury securities. To the day ahead now, and data releases includethe US PPI reading for October, along with that month’s NFIB small business optimism index. Over in Germany, there’s also the ZEW survey for November and the trade balance for September. Central bank speakers include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and PBoC Governor Yi Gang, along with the ECB’s Panetta, Rehn, Knot and Schnabel, the Fed’s Bullard, Daly and Kashkari, and BoE Deputy Governor Broadbent. Tyler Durden Tue, 11/09/2021 - 08:08.....»»

Category: personnelSource: nytNov 9th, 2021

Key Events This Week: An "Extremely Important" CPI Print, And Another Shocking JOLT

Key Events This Week: An "Extremely Important" CPI Print, And Another Shocking JOLT As DB's Jim Reid writes in his always entertaining weekly preview this morning, "If you’d have told anyone at the start of the year that annual US CPI would be 5.9% in the penultimate print of the year (as consensus expects on Wednesday) after already spending five months already above 5% then I don’t think you’d have got many predicting that there would be utter calm and buoyancy in the market." That's certainly the case, because while Goldman was - and still is - predicting buoyancy in the market, the bank's inflation forecast has been a total disaster as the following monthly forecast revisions so clearly show - in April, the bank saw year-end headline CPI at 2,77%; it is now 6.31%. In any case, at the start of the year the forecast for the full year was 2%. That said, it is a quieter week ahead after all the fun and games of central banks and payrolls Friday last week. The peak of earnings season is well behind us now, especially in the US with ‘only’ 13 and 76 companies reporting in the S&P 500 and Stoxx 600 respectively. Perhaps the report of most interest on the inflationary side of the debate is the US JOLTS job opening figures on Thursday. According to DB strategist Francis Yared, the quit rate in this report has been acting as if the labor market is already through full employment. So for the Fed and the market to be right on inflation, this needs to come down as covid employment supply shocks ease. This month will be too early for this and will likely still show a very tight labor market for the September survey period. Where NAiRU is, is anyone's guess at the moment but it feels higher than where it was pre-covid. Other data will also provide further clues on inflation pressures this week, in particular the PPI reading tomorrow, as well as the inflation expectations in the University of Michigan’s index on Friday. Finally, China will be releasing their own CPI and PPI inflation figures on Wednesday too. Previewing US CPI in more detail now, last month we had yet another upside surprise, which marked the 5th time in the last 7 months that the month-on-month figure has been above the median estimate on Bloomberg. Furthermore, we saw a number of fresh drivers behind inflation, with food inflation (+0.93%) seeing its biggest monthly increase since April 2020, whilst owners’ equivalent rent (+0.43%) saw its strongest increase since June 2006. These housing gauges are something that Fed officials have signposted as having the potential to provide more durable upward pressure on inflation. The part of inflation that accounts for around 40% of core CPI will be comfortably above 4% yoy next year. The used car component may also pick up again given the 2-3 month lag between actual price rises and it appearing in the CPI, although this spike may wait another month as the lag is not precise. In terms of Wednesday’s print in month on month terms, DB economists are at +0.47% (consensus +0.6%), which would be the strongest monthly reading since July. They think core will print at +0.37% mom (consensus +0.4%). There’ll be less central bank action this week but a potential area to keep an eye on will be any developments on Fed appointments, with Chair Powell’s current four-year term coming to an end in early February. President Biden said last Tuesday that he would announce his nominees “fairly quickly”. The wires (including Bloomberg) reported that both Fed Chair Powell and Governor Brainard met Biden separately at the White House on Thursday. Brainard could be slated for a VP or bank supervision role so tough to read too much into it. Separately, Axios have also reported that the White House is asking Democratic senators to meet with Powell before Thanksgiving. Bear in mind that whoever is nominated would need to be confirmed by the Senate. We don’t have a formal date yet on when this might be announced, but at this point 4, 8 and 12 years’ ago, the decision of who would be nominated for Fed Chair had already been made public. On the US political front, the House passed the $550 billion bi-partisan infrastructure bill late on Friday night, with 13 yes votes from House Republicans and 6 no votes from progressive Democrats. Outlays are slated for the next ten years, and the Congressional Budget Office estimated the bill will add $256 billion to the Federal budget deficit over that time. A vote for the Biden administration’s social and climate spending bill is now slated for after next week’s Congressional break. Biden’s party also had a poor showing in elections last week, losing the Virginia governorship, and seeing the race in New Jersey come down to the wire. Biden carried both states comfortably only a year ago, so much has been made about what this means for Democratic chances to retain their razor thin majority in Congress in next year’s midterm elections. On the earnings front, the highlights include PayPal today, before we hear from Bayer and Porsche tomorrow. Then on Wednesday we’ll get releases from Disney, Allianz, Adidas, Credit Agricole and EDF. Thursday sees Siemens, Merck and ArcelorMittal report, before AstraZeneca and Deutsche Telekom release on Friday. The rest of the day by day calendar is at the end as usual. Remember Thursday is a US holiday. Key Events this week, courtesy of Deutsche Bank: Monday November 8 Data: Japan preliminary September leading index Central Banks: Fed Chair Powell, Vice Chair Clarida and Fed’s Harker, Bowman and Evans, and ECB’s Lane speak Earnings: PayPal Tuesday November 9 Data: Germany November ZEW survey, US October PPI Central Banks: PBoC Governor Yi Gang, ECB President Lagarde, ECB’s Panetta, Rehn, Knot, Schnabel, Fed Chair Powell, Fed’s Bullard, Daly, Kashkari, BoE Governor Bailey, Deputy Governor Broadbent speak Earnings: Bayer, Porsche Wednesday November 10 Data: China October CPI, PPI, Italy September industrial production, US October CPI, weekly initial jobless claims, Japan October PPI (23:50 UK time) Central Banks: ECB’s Elderson speaks Earnings: Disney, Allianz, Adidas, Credit Agricole, EDF Thursday November 11 Data: UK preliminary Q3 GDP Central Banks: ECB publishes Economic Bulletin, ECB’s Schnabel speaks Earnings: Siemens, Merck, ArcelorMittal Other: EU Commission publishes economic forecasts, Veterans Day in the United States Friday November 12 Data: Euro Area September industrial production, US September JOLTS job openings, preliminary November University of Michigan consumer sentiment index Central Banks: Fed’s Williams, ECB’s Lane and BoE’s Haskel speak Earnings: AstraZeneca, Deutsche Telekom Other: UN Climate Change Conference (COP26) concludes in Glasgow Finally, looking at just the US, the key economic data release this week is CPI on Wednesday. There are several scheduled speaking engagements from Fed officials this week, including a panel discussion on monetary policy with Vice Chair Clarida on Monday. Monday, November 8 There are no major economic data releases scheduled. 09:00 AM Fed Vice Chair Clarida (FOMC voter) speaks: Fed Vice Chair Richard Clarida will participate in a discussion on the new Fed and ECB monetary policy frameworks hosted by the Brookings Institution. Prepared text and moderated Q&A are expected. 10:30 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will present opening remarks at a conference on diversity hosted by the Federal Reserve Board. Prepared text is expected. 12:00 PM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will speak at the Economic Club of New York. 12:00 PM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will discuss the housing market at a Women in Housing and Finance event. Prepared text and moderated Q&A are expected. 01:50 PM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will discuss the economy and monetary policy at an automotive supplier conference. Prepared text and Q&A are expected. Tuesday, November 9 06:00 AM NFIB small business optimism, October (consensus 99.3, last 99.1) 08:30 AM PPI final demand, October (GS +0.7%, consensus +0.6%, last +0.5%); PPI ex-food and energy, October (GS +0.6%, consensus +0.5%, last +0.2%); PPI ex-food, energy, and trade, October (GS +0.3%, consensus +0.2%, last +0.1%): We estimate a 0.6% increase in PPI ex-food and energy, and a 0.3% increase in PPI ex-food and energy, and trade, reflecting a continued boost from supply chain bottlenecks, labor shortages, and commodity prices. We estimate that headline PPI increased by 0.7% in October. 09:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will participate in a discussion at a virtual investor conference. 09:00 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will present opening remarks at a conference on diversity and inclusion jointly hosted by the Federal Reserve, European Central Bank, and Bank of Canada. Prepared text is expected. 11:35 AM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will participate in a virtual discussion hosted by the National Association for Business Economics. Moderated Q&A is expected. 01:30 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will speak at a townhall hosted by the University of Wisconsin-Eau Claire. Audience Q&A is expected. Wednesday, November 10 08:30 AM CPI (mom), October (GS +0.68%, consensus +0.5%, last +0.4%); Core CPI (mom), October (GS +0.42%, consensus +0.4%, last +0.2%); CPI (yoy), October (GS +5.98%, consensus +5.8%, last +5.4%); Core CPI (yoy), October (GS +4.39%, consensus +4.3%, last +4.0%): We estimate a 0.42% increase in October core CPI (mom sa), which would boost the year-on-year by 0.4pp to 4.4%. Our forecast reflects a rebound in used car prices and another month of strong gains for new cars and auto parts. We believe supply chain bottlenecks and labor shortages boosted prices in several other categories as well, such household furnishings, recreation, and personal care. We also look for a rebound in hotel prices as Delta fears ebb, and we forecast a sizeable pickup in medical services inflation because the BLS will incorporate newly available annual source data for the health insurance subcategory. We estimate rent +0.40% and OER +0.35%, reflecting the strength in our shelter tracker but a drag from imputed utilities. We estimate a 0.68% increase in headline CPI (mom sa), reflecting higher restaurant, grocery, and energy prices. 08:30 AM Initial jobless claims, week ended November 6 (GS 250k, consensus 265k, last 269k); Continuing jobless claims, week ended October 30 (last 2,105k): We estimate initial jobless claims increased to 250k in the week ended November 6. 10:00 AM Wholesale inventories, September final (consensus +1.1%, last +1.1%)  Thursday, November 11 There are no major economic data releases scheduled. SIFMA recommends bond markets close for Veterans Day Holiday. NYSE will remain open. Friday, November 12 10:00 AM University of Michigan consumer sentiment, November preliminary (GS 72.2, consensus 72.4, last 71.7); We estimate the University of Michigan consumer sentiment index increased by 0.5pt to 72.2 in the preliminary November reading. 10:00 AM JOLTS Job Openings, September (last 10,439k) 12:10 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will give remarks at a conference on “Heterogeneity in Macroeconomics: Implications for Policy” hosted by his bank. Source: DB, Goldman, BofA Tyler Durden Mon, 11/08/2021 - 09:57.....»»

Category: smallbizSource: nytNov 8th, 2021

Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns

Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns One day after US equity futures hit an all time high, rising to a record 4,590, risk sentiment has reversed and overnight index futures fluctuated and stocks in Europe retreated from a near-record on Wednesday after a flare up in U.S.-China tensions, signs of further regulatory crackdowns from Beijing, a decline in commodity prices, renewed concerns about economic growth and a rise in short-dated U.S. Treasury yields doused the equity market rally on Wednesday. At 7:45 a.m. ET, Dow e-minis were up 27 points, or 0.07%, S&P 500 e-minis were down 2.50 points, or -0.06%, and Nasdaq 100 e-minis were down 15.5 points, or 0.09%. Bonds and the dollar gained and bitcoin stumbled. The overnight losses started earlier in Asia, where tech stocks suffered hefty falls after China’s internet watchdog said it planned stricter registration rules for younger net users, while Chinese tech shares slid on concerns about more scrutiny from Washington after the U.S. banned China Telecom’s American business. U.S. futures also turned negative as the bullish mood over Tuesday’s forecast-beating results from Google owner Alphabet and Microsoft started to wane. Shares of energy firms including Exxon and Chevron tracked lower oil prices, while major lenders such as Bank of America slipped on a flattening U.S. yield curve. Microsoft Corp rose 2.1% in premarket trading after it forecast a strong end to the calendar year, thanks to its booming cloud business. Twitter gained 1.4% after the social networking site’s quarterly revenue grew 37% and avoided the brunt of Apple Inc’s privacy changes on advertising that hobbled its rivals. Google owner Alphabet also reported record quarterly profit for the third straight quarter on a surge in ad sales. However, its shares were down 0.6% after rising nearly 59% so far this year. Here are some of the biggest movers today: Microsoft (MSFT US) shares gain 2.2% in premarket after first- quarter results that analysts said were very strong across the board, showing scale and justifying the valuation of the software giant. Alphabet (GOOGL US) rises 1.3% after 3Q earnings earned a mostly positive reception from analysts, with at least three raising their price targets on the Google parent. Twitter (TWTR US) adds 2% amid resilient third-quarter sales at the social media company as it weathers Apple’s new limits on consumer data collection. Enphase Energy (ENPH US) gains 13% after its 3Q results and 4Q forecasts beat estimates. Analysts await more clarity on supply chain constraints. Robinhood (HOOD US) slumps 12% as some analysts cut price targets after the retail brokerage reported 3Q revenue that missed estimates and flagged further weakness in 4Q. Visa (V US) falls 2.4% as analysts flag a disappointing outlook from the payments company. Texas Instruments (TXN US) declined 4% after a forecast that may disappoint some investors who are concerned about a potential slowdown in demand for electronic components. Watch peers for a readacross. Angion (ANGN US) plunges 55% after company said a kidney transplant drug failed to meet primary end points in a phase three trial. European partner Vifor (VIFN SW) slips 6%. “While some prominent earnings misses have clouded the picture, the reality is that on aggregate, the reporting season so far has been very solid,” said Max Kettner, a multi-assets strategist at HCBC Holdings Plc. “Everyone, literally everyone, in the market right now is worried about supply-chain constraints, higher input costs and the like, so headwinds from this side are now very well reflected in near-term earnings expectations.” Concern over more tension between Beijing and Washington also weighed on markets after the U.S. Federal Communications Commission voted to revoke the authorization for China Telecom’s U.S. subsidiary to operate in the United States after nearly two decades, citing national security. “We have good U.S. data in earnings which is very reassuring but valuation is very stretched in both the value as well as the growth sector,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “And people are also getting a bit hesitant and are a bit worried because the amount of money that is going through will slow down with the Fed slowly starting to taper - but that is not necessarily a bad thing.” MSCI’s global equity benchmark hovered close to Monday’s seven-week high and is on track for the best month in almost a year. However, European stocks softened, led by a 1.6% drop in mining and resource firms in the Stoxx Europe 600 index as prices of raw materials including aluminum and iron ore fell along with crude oil. Germany’s DAX underperformed after Europe’s biggest economy cut its 2021 growth forecast, citing the lingering effects of the pandemic and a supply squeeze. Bund yields dropped along with those on other European bonds. Bank shares also slipped, with Deutsche Bank down more than 5% despite forecast-beating earnings. Europe's Stoxx 600 dropped about 0.3%, weighed down the most by miners and energy firms. FTSE 100 and DAX both down similar amounts. Here are some of Wednesday’s major earnings and corporate news from Europe Deutsche Bank AG dropped more than 6% after disappointing earnings, while Banco Santander SA declined despite a bullish outlook. Heineken NV fell after reporting a drop in demand for beer. BASF SE slipped after flagging dwindling returns on its core suite of chemical products as sputtering global supply catches up with demand. GlaxoSmithKline Plc rose after improving its profit outlook. Dutch semiconductor equipment maker ASM International NV advanced after revenue forecasts beat analyst estimates. Puma SE gained after raising full-year profit forecasts. Temenos AG surged as much as 16% after Bloomberg reported EQT AB is exploring an acquisition of the Swiss banking software specialist. Earlier in the session, the MSCI Asia Pacific Index was down 0.4% in late afternoon trading, paring an earlier drop of 0.7%, with Tencent, Alibaba and Meituan the biggest drags. Asian equities fell as risk-off sentiment fueled by renewed concerns over Evergrande’s debt woes and an escalation in China-U.S. tensions drove losses in Chinese tech giants. Benchmarks in Hong China and China led declines around the region. The Hang Seng Tech Index plunged as much as 3.9%, the most in over five weeks after Washington moved to ban U.S. business by China Telecom, following previous similar measures against Chinese tech firms including Huawei. Meanwhile, Secretary of State Antony Blinken called for a greater role by Taiwan in the United Nations, raising objections from Beijing. Chinese tech stocks have been rattled this year by a crackdown amid President Xi Jinping’s “common prosperity” campaign. There had been signs of a rebound recently, however, as the government signaled it would limit its restrictions. Investor confidence in beaten-down Chinese tech stocks hasn’t been fully restored “so they rush to dump those stocks at any negative news and signs of flow reversal,” said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. “This round of tech rebound has peaked,” he added. Key equity gauges also fell more than 0.5% in Indonesia and South Korea, while Vietnam’s benchmark climbed more than 2%. Japanese equities fell, though they closed off intraday lows, as electronics makers and telecommunications providers drove losses. Auto and chemical makers provided support for the Topix which closed down 0.2%, paring an earlier drop of as much as 0.7%. The Nikkei 225 closed little changed, with a gain in Fast Retailing offsetting a drop in SoftBank Group. Asian stocks were broadly lower, as the U.S. moved to ban China Telecom and amid renewed concern over Evergrande’s debt woes. Meanwhile, Japan Exchange Group said Tokyo Stock Exchange will extend the trading day by 30 minutes in the second half of the fiscal year ending March 2025.  In rates, the 10Y yield is down 1.2bp at 1.595%, trailing steeper declines for U.K. and German counterparts, which outperform by ~3bp as money markets trim expectations for BOE and ECB rate hikes. Long-end Treasuries continued to outperform vs front-end ahead of 5- and 7-year auctions Wednesday and Thursday, as well as month-end rebalancing expected to favor bonds over equities. Long-end yields are lower on the day by ~2bp, front-end yields higher by similar amounts, following selloff in Australia front-end bonds after strong 3Q CPI numbers. 5s30s curve breached 82bp for first time in a year. Gilts flatten further ahead of a revised gilt remit that is expected to report a GBP33b reduction. U.K. 10-year yield falls 5bps to 1.06%, the lowest since Oct. 14, outperforming bunds by ~1bp. In FX, the Japanese yen strengthened ~0.5% against the U.S. dollar, leading G-10 majors and followed by the Swiss franc. All other G-10 peers are red against the dollar, which is up about 0.06%. The fading risk sentiment meanwhile pushed up the safe-haven Japanese yen which rose 0.4% against the U.S. dollar though the greenback in turn held just off a one-week high versus a currency basket. The euro kept gravitating toward the $1.16 handle as overnight plays in the common currency as well as the loonie took the spotlight before the monetary policy meetings by the Bank of Canada and the ECB. The three-month Euro benchmark funding rate fell to -0.556%, matching the record low set on Jan. 6, as excess liquidity hovers near an all-time high seen earlier this month. The pound slipped and the Gilt curve bull-flattened ahead of the U.K. government’s budget announcement. The U.K. is expected to trim gilt sales to GBP33b, according to a Bloomberg survey of analysts at primary dealers. Commodity currencies, led by the krone, fell and the Australian dollar erased an Asia-session gain in European hours. The Aussie earlier rallied while Australian 3-year yield surged as much as 24bps to briefly top 1% after core inflation accelerated back inside RBA’s target, and taking its game of chicken with the bond market to new heights. Kiwi trailed most G-10 peers following a record trade deficit. The Offshore Chinese renminbi fell against the U.S. dollar amid heightened U.S.-China tensions. Currency and bond traders were looking to a slew of central bank meetings over the coming week for guidance. Canada is first up at 1400 GMT on Wednesday while the European Central Bank meets on Thursday, when the Bank of Japan also concludes its two-day meeting. The Fed has all but confirmed it will soon start to whittle back its asset purchases, though has said that shouldn’t signal that rate hikes are imminent. Nevertheless, Fed funds futures are priced for a lift-off in the second half of next year. “We updated our Fed call to show a hike in Q4 2022 and four hikes in 2023,” analysts at NatWest said in a note. “The inflation overshoot has been persistent,” they said. “There is (only) so much the Fed can tolerate before reacting ... it feels inevitable that that conversation will be brought up more and more as we go into next year.” Commodities are in the red. Brent crude down about 1.3% back to $85 a barrel, while WTI slips 1.7% to $83. Base metals drop. LME aluminium, copper, and nickel decline the most. Spot gold down $5 to trade around $1,787/oz.  The crypto space tumbled sharply shortly after the European close, pushing Bitcoin below $59,000 and wiping out much of the ETF launch gains. No changes are expected from Tokyo, but traders are expecting the ECB to push back on market inflation forecasts and are looking for hawkish clues from the Bank of Canada as prices put pressure on rates. Policymakers are facing a steady drip of evidence that there is no let-up from pressure on consumer prices. The latest came from Australia, where data showed core inflation hit a six-year high last quarter, raising the possibility of sooner-than-planned rate increases. The Australian dollar jumped after the data but soon pared the gains. Looking at today's busy calendar, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review. Market Snapshot S&P 500 futures little changed at 4,569.75 STOXX Europe 600 down 0.3% to 474.38 MXAP down 0.4% to 199.65 MXAPJ down 0.8% to 656.34 Nikkei little changed at 29,098.24 Topix down 0.2% to 2,013.81 Hang Seng Index down 1.6% to 25,628.74 Shanghai Composite down 1.0% to 3,562.31 Sensex up 0.2% to 61,468.43 Australia S&P/ASX 200 little changed at 7,448.71 Kospi down 0.8% to 3,025.49 German 10Y yield fell 4 bps to -0.157% Euro little changed at $1.1593 Brent Futures down 1.1% to $85.46/bbl Gold spot down 0.5% to $1,784.14 U.S. Dollar Index little changed at 93.98 Top Overnight News from Bloomberg Chinese authorities told billionaire Hui Ka Yan to use his personal wealth to alleviate China Evergrande Group’s deepening debt crisis, according to people familiar with the matter Germany cut its 2021 growth outlook to 2.6% -- compared with a prediction of 3.5% published at the end of April -- reflecting a scarcity in some raw materials and rising energy prices, particularly for gas, Economy Minister Peter Altmaier said Wednesday in an interview with ARD television China plans to limit the price miners sell thermal coal for as it seeks to ease a power crunch that’s prompted electricity rationing and even caused a blackout in a major city last month The SNB stressed that in light of the highly valued currency and the degree of economic slack, expansive monetary policy needs to be maintained, according to an account of President Thomas Jordan’s meeting with Swiss govt Sweden’s National Debt Office is reducing its bond borrowing in both kronor and foreign currency because central government finances are recovering faster than expected from the pandemic, according to a statement A more detailed look at global markets courtesy of Newsquawk Asian markets adopted a downside bias as sentiment waned following the mild gains on Wall Street, in which the S&P 500 and DJIA eked out record closes after easing off best levels. The US close also saw earnings from behemoths Microsoft, Alphabet and AMD - the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. It’s also worth noting that Berkshire Hathaway Class A shares - the world’s most expensive shares - are quoted +51% after-market (+USD 223,614.00/shr); reasoning currently unclear. Overnight, US equity futures resumed trade flat before a mild divergence became evident between the NQ and RTY, whilst European equity futures' losses were slightly more pronounced. Back to APAC, the ASX 200 (+0.1%) was buoyed by its tech sector amid the post-Microsoft tailwinds from the US, but the sector configuration then turned defensive, whilst Woolworths slumped some 4% after earnings and dragged the Consumer Staples sector with it. The Nikkei 225 (-0.1%) saw losses across most sectors, with Retail, Insurance and Banks towards the bottom. The KOSPI (-0.8%) conformed to the downbeat mood, whilst Hyundai shares were also pressured amid its chip-related commentary. The Hang Seng (-1.6%) and Shanghai Comp (-1.0%) declined despite another substantial CNY 200bln PBoC liquidity injection for a net CNY 100bln. The Hang Seng accelerated losses in the first half-hour of trade with Alibaba, Tencent and Xiaomi among the laggards. Meanwhile. PAX Technology slumped 45% after the FBI raided the Co's Florida officers amid suspicion PAX’s systems may have been involved in cyberattacks on US and EU organizations. Finally, 10yr JGBs were lower amid spillover selling from T-notes and Bund futures, whilst the Aussie 3yr yield topped 1.00% for the first time since 2019 as the trimmed and weighted Australian CPI metrics moved into the RBA's target zone. Top Asian News China Agrees Plan to Cap Key Coal Price to Ease Energy Crisis China Tech Stocks Slump as Tensions With U.S. Spook Investors Top Court Orders Probe Of India’s Alleged Pegasus Use Tokyo Stock Exchange to Extend Trading Day by 30 Minutes European equities (Stoxx 600 -0.3%) are trading moderately lower in a session which has been heavy on earnings and light on macro developments. The APAC session saw more pronounced losses in Chinese bourses (Shanghai Comp -1%, Hang Seng -1.8%) compared to peers despite ongoing liquidity efforts by the PBoC with Hong Kong stocks hampered by losses in Alibaba, Tencent and Xiaomi. Stateside, performance across US index futures were initially firmer before following European peers lower with more recent downside coinciding with the US Senate Finance Committee Chairman unveiling a tax proposal focused on unrealised gains of assets held by billionaires and impose a 23.8% capital gains rate on tradable assets such as stocks; ES -0.1%. The US close saw earnings from behemoths Microsoft, Alphabet and AMD - the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. In the pre-market, upcoming earnings highlights include McDonalds, Boeing, GM, Bristol Myers and FTSE 100-listed GSK. Back to Europe, sectors are mostly lower with Basic Resources and Oil & Gas names at the foot of the leaderboard amid performance in underlying commodity prices. Banking names are also trading on a softer footing following earnings from Deutsche Bank (-5.4%) which saw the Co. report a decline in trading revenues whilst managing to make a profit for the 5th consecutive quarter. Spanish heavyweight Santander (-2.5%) is also acting as a drag on the sector despite reporting a net profit above expectations for Q3 with some desks highlighting softer performance for its US operations. Elsewhere, Sodexo (+5.6%) is the best performer in the Stoxx 600 after strong FY results, whilst Puma (+3.2%) trades on a firmer footing after reporting a beat on Q3 earnings and raising guidance. To the downside, BASF (-1.0%) shares are seen lower despite exceeding expectations for earnings with the Co. cautioning that the impact from higher Nat Gas prices in the first nine months of the year amounted to EUR 600mln costs and a significant increase in costs is expected following the October price hike. Top European News Deutsche Bank Falls; Results Fail to Provide Fresh Catalyst BASF Points to Chemical Price Surge Easing as Supply Increases SNB’s Jordan Stressed Need for Loose Policy in Govt Meeting U.K.’s Sunak Set to Cut Tax on Domestic Flights: The Independent In FX, nearly, but not quite for the index in terms of turning full circle on Tuesday and matching the prior week high as it fell just shy at 94.024 vs 94.174 on October 18, while also narrowly missing 94.000 on a ‘closing’ basis with a last price of 93.956. Moreover, month end rebalancing factors are moderately bearish for the Greenback against G10 rivals, and especially vs the Yen that has a relatively large 1.6 standard deviation and appears to be playing out in the headline pair and Jpy crosses on spot October 29. Indeed, Usd/Jpy has recoiled further from yesterday’s peak circa 114.31 to sub-113.60 before taking cues from the BoJ tomorrow and Japanese retail sales in the run up, but decent option expiry interest between 113.55-50 (1.8 bn) may underpin and support the DXY by default within a narrow 94.008-819 band. More immediately for the Buck in particular and peers indirectly, US durable goods, advance trade, wholesale and retail inventories. CHF/AUD - Also firmer vs their US counterpart, as the Franc clambers back above 0.9200 irrespective of a deterioration in Swiss investor sentiment and the growing chance that the SNB could be prompted to respond to a retreat in Eur/Chf from 1.0700+ to 1.0637 or so. Elsewhere, the Aussie has pared some of its post-core inflation inspired gains, but is holding close to 0.7500 and still outpacing its Antipodean neighbour as Aud/Nzd hovers around 1.0500. NZD/CAD/GBP - A downturn in overall risk sentiment and the aforementioned cross headwinds are weighing on the Kiwi that has slipped under 0.7150 vs its US namesake, and it’s a similar tale for Sterling that failed to retain 1.3800+ status or breach 0.8400 against the Euro before the latest reports about France preparing retaliatory measures against the UK over the fishing rights dispute. On top of that, Eur/Gbp tides are turning into month end and the usual RHS flows seen into and around fixings, while the Pound may also be acknowledging a pull-back in Brent prices in advance of the Budget, like the Loonie in respect of WTI ahead of the BoC, with Usd/Cad back above 1.2400 compared to 1.2350 at one stage on Tuesday and a tad lower in the prior session. Note, the break-even via implied volatility indicates a 58 pip move on the policy meeting that comes with a new MPR and press conference from Governor Macklem. EUR - Notwithstanding several gyrations and deviations of late, the Euro seems largely anchored to the 1.1600 mark vs the Dollar and yet more option expiries at the strike (1.5 bn today) may well be a contributing factor as the clock continues to tick down Thursday’s ECB convene that is seen as a dead rubber event in passing ahead of the big one in December - check out the Research Suite for a preview and other global Central Bank confabs scheduled this week. SCANDI/EM - Hardly a surprise to see the Nok recoil alongside crude prices, but the Sek is holding up relatively well in wake of an uptick in Swedish household lending and a big swing in trade balance from deficit to surplus. Conversely, the Try’s stoic revival mission has been derailed to an extent by dip in Turkish economic confidence offsetting a narrower trade shortfall, the Rub and Mxn are also feeling the adverse effects of oil’s retracement, the Zar is tracking Gold’s reversal through 200 and 100 DMAs, and the Cny/Cnh have been ruffled by the latest US-China angst, this time on the telecoms front. Last, but not least, the Brl anticipates a minimum 100 bp SELIC rate hike from the BCB, if not 125 bp as some hawkish forecasts suggest. In commodities, a softer start to the session for WTI and Brent seemingly stemming from the cautiously downbeat tone portrayed by broader risk and continuing to take impetus from last night’s Private Inventory report. For reference, the benchmarks are currently lower in excess of USD 1/bbl and WTI Dec’21 has been within touching distance of the USD 83.00/bbl figure, though is yet to test the level. Returning to yesterday’s crude report which printed an above consensus build of 2.318M for the headline print while the gasoline and distillate components were unexpectedly bearish, posting modest builds against expected sizeable draws. Looking ahead, the EIA release is expected to post a headline build. Aside from this, crude specific newsflow has been limited ahead of next week’s OPEC+ gathering though Iran remains on the radar given the latest release of constructive commentary on nuclear discussions. Albeit, we are still awaiting details on a return to full Vienna discussions. Moving to metals, spot gold and silver are softer on the session in a continuation of action seen around this time during yesterday’s session; metals pressured in wake of a choppy, but ultimately firmer, dollar. Elsewhere, China has reportedly agreed to set a price cap for thermal coal sales and comes as part of the ongoing crackdown by China on the commodity which spurred Zhengzhou thermal coal futures to hit limit-down overnight. US Event Calendar 8:30am: Sept. Durable Goods Orders, est. -1.1%, prior 1.8%; 8:30am: Durables Less Transportation, est. 0.4%, prior 0.3% Sept. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.6% Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.8% 8:30am: Sept. Retail Inventories MoM, est. 0.2%, prior 0.1%; Wholesale Inventories MoM, est. 1.0%, prior 1.2% 8:30am: Sept. Advance Goods Trade Balance, est. -$88.3b, prior -$87.6b, revised -$88.2b DB's Jim Reid concludes the overnight wrap It’s day 42 out of 42 on crutches without any weight bearing on my left leg. Over that period I’ve been hopping, crawling, sliding, and using the crutches as a pole vault amongst other various forms of self transportation. So sadly today is the last day I get waited on. When I wake up tomorrow I’ll try to walk again and fend for myself. Equities threw away their crutches a couple of weeks ago and haven’t looked back. US Earnings have helped and while they aren’t as good as the headline beats suggest, due to big unwinding of reserves for loan loss provisions at the banks, they are notably better than some of the stagflationary gloom stories that dominated in the weeks ahead of this season. A reminder that our equity guys did their state of play on earnings a couple of days back here. Big tech was always going to be the swing factor between a slightly better than normal level of beats and a more aggressive one. Last night Alphabet, Microsoft, and Twitter all reported after hour. Alphabet and Microsoft beat on both sales and earnings, while Twitter’s revenue just missed expectations but traded higher after hours. Of the 41 S&P 500 companies that reported yesterday, 33 beat estimates. For the earnings season to date, 166 S&P companies have reported, with 139 beating earnings estimates. Prior to this, markets continued to stay in their “new normal” of record or cyclical high equity prices and multi-year breakeven highs. Positive surprises for earnings on both sides of the Atlantic helped yesterday as did strong US consumer confidence numbers. Starting with the US, along with strong earnings, a number of positive surprises in an array of economic data yesterday did just enough to push the S&P 500 (+0.18%) and the DJIA (+0.04%) to new record highs, while the Nasdaq (+0.06%) fell short of beating its record set on September 30th. The FAANG Index lagged on the day, dropping -0.33%, but managed new all-time highs intraday. On the other side of the Atlantic, European equities notched solid gains as well, with most major European markets finishing well in the green territory, lifting the STOXX 600 by +0.75% - a fraction below its record high. All index sectors but energy (-0.29%) finished higher on the back of strong earnings early in the session, particularly from UBS and Novartis. Taking a closer look at the aforementioned economic data, October US consumer confidence came in at 113.8 versus 108.0 expected, while the Richmond Fed Manufacturing index rose to 12, beating expectations of 5. In housing, new home sales for September (800k) surpassed estimates (756k) by a decent margin, whereas the August FHFA House Price Index came in at +1.0% versus +1.5% expected. There were further signs of a tight US jobs market as the labour market differential in the Conference Board index improved to 45.0, the best reading since 2000. Similar to Monday, breakevens climbed as real yields fell in the US and Germany. Nominal 10-year Treasuries were -2.3bps lower, while breakevens increased +2.6bps to 2.69%, still just a hair beneath all-time highs for the series. 10-year bunds declined -0.3bps while the breakeven widened +3.0bps. Breakevens took a breather in the UK, narrowing -8.6bps, whilst 10-year gilts were -3.0 bps lower. In Asia, most major indices are down this morning. The Nikkei 225 (-0.61%), KOSPI (-0.92%), Hang Seng (-1.58%) and Shanghai Composite (-0.92%) are all trading lower. Sentiment soured after the real estate saga continued with Chinese authorities asking companies to get ready to repay offshore bonds, while also urging Evergrande’s founder to employ his own wealth to aid the struggling developer. Additionally, in geopolitics, the US Federal Communications Commission banned China Telecom (Americas) Corp. from operating in the US on the back of national security concerns. Data releases from Asia continued to support the inflationary narrative amid rising commodity prices as we saw a +16.3% YoY growth in China’s industrial profits in September, up from +10.1% a month earlier. Meanwhile, Australia’s trimmed mean CPI (+2.1%) came in above expectations (+1.8%), sending the 3y yield higher by +14.5bps. The S&P 500 mini futures (0.00%) is broadly unchanged with the 10y Treasury at 1.622 (+1.4bps). In commodities, oil futures were mostly mixed yesterday, but both WTI (+1.06%) and Brent (+0.48%) managed to rise by the European close, as Saudi Aramco said earlier in the session that oil output capacity is declining rapidly across the world. On the other hand, European weather forecasts that pointed at lower temperatures starting next week did little to propel natural gas prices, which declined both in the region (-0.33%) and in the US (-0.27%). Briefly taking a look at the virus news, The FDA’s vaccines advisory committee voted 17-0 to back jabs for kids ages 5-11. The dose for the younger cohort amounts to one third of the current one given to those over the age of 12, which means that it could be more quickly distributed if the demand is there. The agency will give its final ruling soon, which is expected to follow the panel’s recommendation, and then the shots could be distributed within weeks to schools, pediatricians, and pharmacies. Elsewhere, Singapore will allow fully vaccinated travelers from Australia and Switzerland to enter without quarantine from November 8. In terms of upcoming data releases today, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review. Tyler Durden Wed, 10/27/2021 - 07:53.....»»

Category: blogSource: zerohedgeOct 27th, 2021

Green Energy: A Bubble In Unrealistic Expectations

Green Energy: A Bubble In Unrealistic Expectations Authored by David Hay via Everegreen Gavekal blog, “You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.” - Vladimir Putin (someone with whom this author rarely agrees) “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” – John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related) Introduction This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.”  This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies. It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production.  Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.  What we are currently seeing in Europe is a vivid example of this dilemma.  While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction. Summary BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary. Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity. To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting. Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil. It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure.  Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays. I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal. In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined. China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future. About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles. Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.  The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket. This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices. Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area. The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen. It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy. If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.  Green energy: A bubble in unrealistic expectations? As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition.  Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.  However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company.  Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021.  The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).  This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him.  First, though, I will avoid any discussion of whether humanity is the leading cause of global warming.  For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur.  (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.) The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship.  Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe.  Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation.  But the facts are shocking…  Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling.  As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended.  Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases.  As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing.  (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.) Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down.  (CO2 is used both for stunning animals prior to slaughter and also in food packaging.)  Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.  *ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt. With the winter of 2021 approaching, British households are being told they may need to ration heat.  There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe.  Weather forecasters are indicating that’s a distinct possibility.   In Spain, consumers are paying 40% more for electricity compared to the prior year.  The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.  Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil.  This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come. In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well.  China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives.  The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost.  LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year.  China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications. In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves.  Several Indian power plants are close to exhausting their coal supplies as power usage rips higher. Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom.  But these days, I’m not so sure; in fact, I’m downright dubious.  After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.  It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat.  The last time prices were this high there were three times as many working rigs.  It is the same story with oil production.  Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade.  In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage.  (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.) Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world.  However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?  There is also tremendous pressure from Wall Street on these companies to be ESG compliant.  This means reducing their carbon footprint.  That’s tough to do while expanding their volume of oil and gas.  Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production.  They would much rather see them buy back stock and pay out lush dividends.  The companies are embracing that message.  One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel. As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company!  Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued.  How stunningly?  A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%. In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield.  Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent. *Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business.  Many market professionals consider it more meaningful than earnings.  Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources.  Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.  Most oil wells see their production taper off at just 4% or 5% per year.  But with shale, that decline rate is 80% after only two years.  (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)  As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even.  (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019).  Please recall that total US oil production in 2008 was only around 5 million bpd.  Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities.  Again, this is merely to stay steady-state, much less grow.  The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021.  In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet!  With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.  *Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.  Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street.  Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook).  Here’s what he wrote late this summer:  “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”  My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta).  A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level.  This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year.  Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd.  Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end.  Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen.  This supply deficit is very likely to become more acute as the calendar flips to 2022. In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year.  This is an unprecedented development.  However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article:  “Energy companies are in a bind.  The old solution would be to invest more in raising gas production.  But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.” The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.”  (Emphasis mine)  To which I say, precisely!  Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies.  One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley.  Its title asked the provocative question:  “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”  While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%.   Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.  Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined.  Where demand hasn’t gone horizontal is in the developing world which includes China.  As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted. Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production.  Once again, think where oil prices would be today without America’s shale oil boom. This is unlikely to change over the next decade.  By 2031, there are an estimated one billion Asian consumers moving up into the middle class.  History is clear that more income means more energy consumption.  Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role.  Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.  Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell.  Please be aware that China has become the world’s largest market for EVs—by far.  Despite that, the above chart vividly displays an immense increase in oil demand.  Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):  “(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC).  The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’  Say again?  If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?” China's voracious power appetite increase has been true with all of its energy sources.  On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal.  In 2020, China added three times more coal-based power generation than all other countries combined.  This was the equivalent of an additional coal planet each week.  Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source.  (A gigawatt can power a city with a population of roughly 700,000.) Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned.  Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world.  (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.) The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2.  (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)  Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia.  This is a separate issue from N20 which is a colorless gas.  As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting.  (Source:  “Weathering Climate Change” by Hugh Ross) Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge.  Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost.  Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted). Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).  Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand).  In other words, crude imports amount to almost three-quarter of its needs.  At $80 oil, this totals $880 million per day or approximately $320 billion per year.  Imagine what China’s trade surplus would look like without its oil import bill! Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature.  China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil. Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil.  It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.     However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting.  This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing. As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant.  The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.” As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe.  Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs.  He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades.  By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur.  (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.) Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical.  This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition. Moreover, EVs are very semiconductor intensive.  With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier.  It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).  In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid.  Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.”  The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California.  However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion. Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible.  Even now, blackouts and brownouts are becoming increasingly common.  Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country.  In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.  *NIMBY stands for Not In My Back Yard. While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way.  Unreliable and increasingly expensive energy is likely to intensify that trend.  Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch.  More and more people, seem to be scratching California off their list of livable venues.  Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch.  The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way.  (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)  California has always seemed to lead social trends in this country, as it is doing again with its green energy transition.  The objective is noble though, extremely ambitious, especially the timeline.  As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower.  It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.  Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions.  This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion.  Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates. Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion.  Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light.  Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them.  For perspective, the total, already terrifying, level of US federal debt is $28 trillion. Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high.  Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.  As Gavekal’s Didier Darcet wrote in mid-August:  ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient)  “The bet is very risky, and if it fails, what next?  The modern economy would not withstand expensive energy, or worse, lack of energy.”  While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”).  This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades.  What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict). Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years.  If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come.  Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution).  If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode. Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy.  But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.  The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard.  France is a generally left-leaning country.  Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month. *MMT stands for Modern Monetary Theory.  It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints.  If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press.  This is what is happening today in the US.  Many economists consider this highly inflationary. The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas.  The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic.  (Oil tankers are a significant source of emissions.)  This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex).  Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs. Further, one of my other big fears is that the West is engaging in unilateral energy disarmament.  Russia and China are likely the major beneficiaries of this dangerous scenario.  Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe.  Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).  The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer).  Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.  Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).  In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald.  For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2.  The US government opposed its approval on security grounds but the Biden administration has dropped its opposition.  It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.  Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America?  In my mind, it seems not only possible but probable.  In fact, I believe it is naïve not to come that conclusion.  After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis? *Per former NATO Secretary General, Anders Fogh Rasumssen:  Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”. Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”.  This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm.  Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”.   Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.  Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed.  Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet. Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion.  In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down.  In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy. Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production.  In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports.  (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April.  Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.) Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises.  America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon. Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.  If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about.  This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s.  On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now - even before winter sets in.  When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select? Tyler Durden Tue, 10/26/2021 - 19:30.....»»

Category: worldSource: nytOct 26th, 2021

China Widens Property-Tax Trials With Levy on Home Owners

Property prices in China have skyrocketed to unaffordable levels since private home ownership was introduced in 1998 China’s State Council will expand property-tax reform trials to more areas and start taxing residential property owners, official news agency Xinhua reported. The plan, approved by the National People’s Congress Standing Committee, China’s top legislative body, is designed to guide rational property buying and will last for five years, according to the report. The locations and number of areas where the trials will be undertaken were not specified. Property prices in China have skyrocketed to unaffordable levels since private home ownership was introduced in 1998, and the government has faced an ongoing battle to control speculators. Authorities started property tax trials in 2011 in Shanghai and Chongqing, levying annual charges on second or high-priced homes. [time-brightcove not-tgx=”true”] READ: Why China Could Be Serious About a Property Tax Now: QuickTake Residences owned by individuals are currently not subject to taxes, according to a law imposed in 1986, while there is an annual tax on commercial properties. Local governments earn income from developers mainly through land sales, collecting a total of 8.4 trillion yuan ($1.3 trillion) last year. Industry experts say details of the plan are unclear so far. “We don’t know yet what the differences will be in this plan than in the current trials in Shanghai and Chongqing, but it’s likely to have something new,” said Liu Yuan, vice president for property research at Centaline Group. “The government may not want to make all the details public immediately for the sake of expectation management. But I think this aims at hedging the ongoing property-market supportive measures so home prices won’t rebound again.” China’s new-home prices fell for the first time in six years and sales plunged 16.9% in September from a year earlier, as the country’s second-largest real estate developer, Evergrande Group, plunged into a debt crisis, which led to a property slowdown nationwide. The country recently loosened restrictions on home loans at some of its largest banks, Bloomberg reported on Oct. 15. (Adds analysis from an industry research firm starting in the fifth paragraph.) –With assistance from Jacob Gu. © 2021 Bloomberg L.P......»»

Category: topSource: timeOct 23rd, 2021

Why Whitney Tilson Bought SandRidge Energy

Whitney Tilson’s email to investors discussing why he bought SandRidge Energy Inc. (NYSE:SD). Q3 2021 hedge fund letters, conferences and more Whitney’s Investment In SandRidge Energy 1) In Friday’s e-mail, I disclosed that I’d recently sold 80% of the shares I owned in my personal account in SandRidge Energy (SD). It’s one of my most successful […] Whitney Tilson’s email to investors discussing why he bought SandRidge Energy Inc. (NYSE:SD). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Whitney's Investment In SandRidge Energy 1) In Friday's e-mail, I disclosed that I'd recently sold 80% of the shares I owned in my personal account in SandRidge Energy (SD). It's one of my most successful investments ever, with a 553% gain in less than 18 months – almost 10 times the 56% return of the S&P 500 Index. I made the purchase almost immediately after reading this write-up on Value Investors Club – because it was that compelling. (It was posted anonymously; I only learned last week that the author was an old friend of mine, Harris Kupperman, president of the hedge fund Praetorian Capital Management.) Today, I'd like to highlight what was so compelling about this investment opportunity... The first thing I could see by the stock chart, which looked like this on April 27, 2020, the day I first learned about this stock (and purchased it): Over the previous three years, the stock had fallen by a staggering 97% before more than doubling over the past month to the $1.95 price – which was when I bought it. When you see stock charts like this, you're rarely looking at a typical stock but rather one with the characteristics of an option – meaning that the range of outcomes is very wide and likely bimodal. In other words, there's a good chance that stocks like this will go to zero – but if the company survives, there can be many extreme upside scenarios: a double, a five-bagger, a 10-bagger, etc. Unlike a stable blue-chip company such as Berkshire Hathaway Inc. (NYSE:BRK.B), in which the 80% range of outcomes is, I'd estimate, that the stock compounds at somewhere between 3% and 13% annually over the next five years. You need to do an expected-value analysis of a stock like SandRidge. Expected-Value Table Though I didn't actually write down an expected-value table like this before I invested in SandRidge, here's what it might have looked like: Stock Performance Over the Next 18 Months Odds of This Happening -100% 30% -50% 20% 0% 10% +50% 10% +100% 10% +250% 10% +500% 10% If you multiply the two numbers in each row and add them up, you get an expected value of 0-10+0+5+10+25+50=80%. Even though I assumed that there was a 30% chance that I'd lose all of my money plus another 20% chance of losing half, my expected value was nevertheless an 80% return in 18 months. That's pretty darn attractive, isn't it? However, this type of analysis is very sensitive to all of the estimates, and it's easy to fall into the GIGO trap: garbage in, garbage out. The key variables when investing in any option are price relative to upside potential and duration. Kupperman made a compelling case for both with SandRidge. Regarding the former, Kupperman argued: Investing in SandRidge gives you the ability to purchase a Class B office building in Oklahoma City for roughly the current enterprise value. You also get access to 7.7-8.6 MMBOE [million barrels of oil equivalent] of 2020 production (45% liquids) almost for free... SandRidge is very leveraged to natural gas, [and] there are a bunch of assets that may have no bid today but likely more than cover the EV [enterprise value] under many scenarios, giving you a free look at a natural gas recovery... Finally, Carl Icahn has a cost basis of $17. Eighteen months ago, he turned down a take-out at $13... The duration of the option is just as important as the upside. A rebound in natural gas prices in, say, six months wouldn't help SandRidge shareholders if the company filed for bankruptcy a month later. Kupperman addressed this as well: I am bullish [on] natural gas and think oil eventually recovers. I want to play that recovery, but most options out there involve a lot of financial leverage with a severe risk of permanent impairment if I get it wrong on timing. If my timing is wrong and gas kicks along at $2.25 and oil at $15, SandRidge muddles forward as a perpetual call option for a few years (due to the balance sheet strength), meanwhile everyone else melts away, and eventually, energy prices recover as there are no producers left. You cannot say that many other companies can survive a long downturn in energy prices, except the large integrated majors, but those guys don't have the same sort of upside that SandRidge does... I want to underscore what Kupperman wrote: "I am bullish [on] natural gas and think oil eventually recovers. I want to play that recovery..." In other words, an investment in SandRidge in late April last year wasn't primarily a bet on the company, its CEO, or the value of its headquarters building. That's why I was able to move so quickly: I didn't need to do any research on these things. No, this was a bet that the price of natural gas and, to a lesser extent, oil would recover. Was that a reasonable bet? I think so. Here's what the price charts looked like at the time: You can see from these charts that natural gas prices were at a level only seen a few times in the previous two decades, and oil was experiencing an even more infrequent sell-off. Importantly, you can see from these charts that whenever the prices of both commodities had reached such low levels in the past, they had always rebounded quickly. Reversion to the mean is a powerful phenomenon, especially when talking about commodities. Capacity can be rapidly removed if prices are too low, thereby correcting the supply-demand imbalance. The demand for natural gas and oil was depressed due to the pandemic that shut down much of the world. But as my readers will recall, I became very optimistic starting in March 2020 that we would get a handle on the pandemic. This made me very bullish on stocks in general – and SandRidge was a leveraged way to play this. In summary, for all of these reasons, I was quickly able to determine that SandRidge was one of the most mispriced options I'd ever seen – and I acted accordingly, buying 25,000 shares at $1.95. I'll continue my analysis of SandRidge tomorrow, discussing the portfolio management aspects of this investment... Best regards, Whitney Updated on Oct 18, 2021, 3:26 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 18th, 2021

After Rapid-Fire "Blame Putin" Headlines, European Commission Quietly Affirms Russia Is Not Manipulating Gas Market

After Rapid-Fire "Blame Putin" Headlines, European Commission Quietly Affirms Russia Is Not Manipulating Gas Market Putin earlier this week batted down as "utter nonsense" widespread accusations among Western media pundits that Europe's energy crisis is due to the Kremlin using gas as a 'geopolitical weapon'.  It now appears the European Commission is quietly agreeing with him. This as Nord Stream 2, which Washington has long battled to stop, is awaiting final approval from German regulators begore going online. As the Economist summarized of the ongoing accusations: "Russia is responding to a view gaining currency in European capitals that Gazprom, the state-controlled energy goliath that is the continent’s biggest supplier, has been stoking the continent’s energy crisis by withholding exports of natural gas. European parliamentarians are demanding that Gazprom be investigated for not shipping more gas, allegedly as a ploy to secure final regulatory approval for the controversial Nord Stream 2 pipeline designed to ship Russian gas to Germany." Image via New York Times A somewhat exasperated Kremlin spokesman Dmitry Peskov last week noted Gazprom has fulfilled its current obligations to the maximum extent possible under existing contracts: "Nothing can be delivered beyond the contracts. How? For free? It is a matter of negotiating with Gazprom," he said. Of course, the somewhat sensational headline-grabbing accusations are what dominated press reports for much of the week, with new Friday comments from the European Commission getting buried. Vice President of the European Commission Frans Timmermans indicated there's no reason to believe Russia is manipulating the market.  Timmermans bluntly said the following in an interview with Bulgarian broadcaster bTV: "Russia is fulfilling its gas supply contracts." He added that "we have no reason to believe it is putting pressure on the market or manipulating it." The top level Europe Commission official pointed to global nature of the problem of rising gas and energy prices, saying "the demand for gas at the global level is huge, including there." Frans Timmermans. Source: Council of the European Union The illuminating remarks from EU authorities themselves, once again demonstrating the ease of the "blame Russia first" narrative (and worry about hunting down evidence later), come two days after Putin spoke before Russia's annual Energy Week. "Higher gas prices in Europe are a consequence of a deficit of energy and not vice versa and that’s why we should not deal in blame shifting, this is what our partners are trying to do," Putin said during the panel conversation. The statement, from Frans Timmermans, the Commission’s deputy head, contradicts weeks of hysterical US/UK media coverage which alleged Russia was withholding gas in order to "weaponise" energy supplies. For example... pic.twitter.com/nMPQE228v9 — Bryan MacDonald (@27khv) October 15, 2021 He invoked Europe's green agenda as playing a big part in its energy costs soaring just ahead of winter: "You see the problem does not consist in us, it consists in the European side, because, first, we know that the wind farms did not work during summer because of the weather, everyone knows that." Putin said something similar to the latest assessment from Frans Timmermans. The Russian president added: "Moreover, the Europeans did not pump enough gas into their underground gas facilities... and the supplies to Europe have decreased from other regions of the world." Tyler Durden Sat, 10/16/2021 - 11:00.....»»

Category: blogSource: zerohedgeOct 16th, 2021

Putin: $100 Oil Is "Quite Possible"

Putin: $100 Oil Is "Quite Possible" Authored by Tsvetana Paraskova via OilPrice.com, It is "quite possible" that the WTI Crude oil prices reach $100 per barrel in light of growing global demand for energy commodities, Russian President Vladimir Putin said on a CNBC panel at the Russian Energy Week on Wednesday. Asked by CNBC’s Hadley Gamble whether the US benchmark could hit $100 a barrel, Putin replied "That is quite possible." However, Russia and its allies in the OPEC+ oil producer group want a stable oil market without any shock spikes in prices, Putin said. "Russia and our partners and OPEC + group, I would say we are doing everything possible to make sure the oil market stabilizes," Putin said, according to a translation. "We are trying not to allow any shock peaks in prices. We certainly do not want to have that — it is not in our interests," the Russian president added. The OPEC+ group decided last week to stick to their planned 400,000 barrels per day (bpd) increase in collective production in November, despite calls from oil importing nations to add more supply and despite an expected additional demand from a gas-to-oil switch due to record high natural gas prices in Europe and Asia. Oil prices could hit $100 in case of a colder winter, some analysts and investment banks have said in recent weeks. Record-high natural gas prices are forcing some utilities to switch to oil derivatives instead, boosting demand for crude. Surging natural gas prices, a cold winter, and reopening of international airline travel could push oil prices to $100 per barrel and trigger the next economic crisis, Bank of America said in early October. Recovering global oil demand could send oil prices to $100 a barrel at some point at the end of 2022, despite COVID challenges to demand this coming winter, according to one of the world’s largest independent oil traders, Trafigura. Tyler Durden Thu, 10/14/2021 - 06:30.....»»

Category: blogSource: zerohedgeOct 14th, 2021

Putin Blasts Accusations Russia Is Weaponizing Natural Gas As "Politically Motivated Blather" 

Putin Blasts Accusations Russia Is Weaponizing Natural Gas As "Politically Motivated Blather"  In Wednesday remarks aimed at Western press, President Vladimir Putin shot down accusations that Russia weaponizing its supplies of natural gas in order to pressure German regulators to quickly approve switching on the taps for the recently completed Nord Stream 2 pipeline.  He dismissed recent reports accusing the Kremlin of withholding gas supplies to Europe as "politically motivated blather with nothing to support it". The statements were given to CNBC in Moscow as part of the annual Russian Energy Week major industry event, with Putin bluntly saying in response, "We are not using any weapons."  The Russian leader added that "Even during the hardest parts of the Cold War Russia regularly has fulfilled its contractual obligations and supplies gas to Europe," according to the US news network's translation.  Via kremlin.ru Last week as Nord Stream 2 critics led by US officials alleged that the Russia-to-Germany pipeline will essentially hold Europe's energy needs hostage to Russian geopolitical whims, Putin instead pointed to Europe's ongoing energy market "hysteria" and crisis as being fundamentally a result of the 'green transition' coupled with corresponding low investment in the extraction industries. In the Wednesday remarks he re-emphasized that there's "nothing to support it [the idea] that we use energy as a kind of weapon," but instead the reality is that Russia is busy "expanding its supplies to Europe." In support of this statement he alluded to state-run Gazprom actually increasing its natural gas flow to Europe by 15% over the first nine months of this year. He added that Russia stands ready to increase its supply if that's what Europe needs and asks for. "Higher gas prices in Europe are a consequence of a deficit of energy and not vice versa and that’s why we should not deal in blame shifting, this is what our partners are trying to do," Putin said during the panel conversation. He again invoked Europe's green agenda as playing a big part in its energy costs soaring just ahead of winter: "You see the problem does not consist in us, it consists in the European side, because, first, we know that the wind farms did not work during summer because of the weather, everyone knows that. Moreover, the Europeans did not pump enough gas into their underground gas facilities... and the supplies to Europe have decreased from other regions of the world." On oil, elsewhere in the conversation he noted that OPEC+ "is doing everything to ensure that the oil market is completely stabilized. We do not allow sharp price spikes and it is not in our interests." "The market has stabilized, but we have not yet reached the pre- crisis production level of 11 million barrels a day. And our position is to increase production in accordance with the growing needs of the market," the Russian president said. And then there was this exchange during the panel conversation: When asked whether oil could reach $100 a barrel, Putin said it’s "quite possible"... "We do not seek to restrain production in such a way that prices skyrocket, as it happens in the gas market. We favor smooth and balanced movement." Gazprom too has been on the defensive in the face of the widespread natural gas restriction accusations coming out of Europe, particularly after last week gas supplies through Belarus to the EU were cut by 70%, according to the company's data. And supplies via Poland too were slashed: "The new figures come after supplies via the Yamal pipeline, which runs from Russia via Belarus to Poland, fell by half last week," EU Observer wrote. "Analysts, such as US investment bank Goldman Sachs, have said the Yamal cuts could lead to higher gas prices in winter," the report added.  But Kremlin spokesman Dmitry Peskov recently fired back that Gazprom has fulfilled its current obligations to the maximum extent possible under existing contracts: "Nothing can be delivered beyond the contracts. How? For free? It is a matter of negotiating with Gazprom," he said. Tyler Durden Wed, 10/13/2021 - 23:05.....»»

Category: blogSource: zerohedgeOct 13th, 2021