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Rivian Collapse, Potential Brownouts, Highlight The Danger Of Illinois Lawmakers Picking Winners And Losers

Rivian Collapse, Potential Brownouts, Highlight The Danger Of Illinois Lawmakers Picking Winners And Losers By Ted Dabrowski and John Klinger of Wirepoints Electric car-maker Rivian’s stock price collapse is a clear example of why Illinois politicians have no business trying to pick industry winners and losers. And so are the warnings of potential brownouts in downstate Illinois.  Start with companies. Back in November 2021, Gov. J.B. Pritzker signed the “Reimagining Electric Vehicles in Illinois Act,” a green energy bill that provided a series of subsidies and tax breaks to electric vehicle and parts manufacturers. The law was quite clear in its intentions: “It is the intent of the General Assembly that Illinois should lead the nation in the production of electric vehicles. The General Assembly finds that, through investments in electric vehicle manufacturing, Illinois will be on the forefront of emerging technologies that are currently transforming the auto manufacturing industry.” Lawmakers were counting on Illinois becoming an EV manufacturing powerhouse emerging around the Rivian plant in Normal, Illinois, as well as improved prospects for the Ford factory in South Chicago and the Stellantis plant near Rockford. Rivian’s stock price grew rapidly, jumping 120% in the short time between the company going public (IPO price was $78) and the day before the bill was signed. On November 15, 2021, Rivian’s stock price hit a peak of $172. It’s been all downhill from there. Today the carmaker’s stock price is down to just over $20, a drop of nearly 90 percent. The automaker’s slide had a number of causes, starting with the fact that Rivian is a startup and all the risks that entails. There have been manufacturing issues, skyrocketing material costs and supply-chain problems. Not to mention the fact that the company lost out on even more potential subsidies when the federal Build Back Better bill died.  And then there’s all the bad news related to Ford. Last November, Rivian and Ford terminated a partnership to jointly develop a vehicle. More recently, Ford elected to dump 8 million shares of Rivian. On top of that, Ford manufactures the F-150 Lightning, a direct competitor to Rivian’s vehicles. That’s not to say Rivian can’t one day be a market leader. Anything can happen. But the point is nobody knows – certainly not government bureaucrats. Pritzker and other Illinois lawmakers shouldn’t be gambling with taxpayer dollars based on an ideological whim. Now to industries. Pritzker and his supermajorities have also bet the ranch on renewable energy, primarily wind and solar. Goodbye to all carbon-based energy – and even nuclear. Under the green energy omnibus package the legislature passed last year, Illinois will have to have 50% of its electricity production from renewable sources by 2040 and 100% from clean energy sources by 2050. Sen. Don Harmon (D-Oak Park), called the bill “the most aggressive, most progressive climate bill in the nation.” Reaching those goals will be exceptionally difficult and expensive. And according to the industry experts Wirepoints talked to, there’s no real plan for how to get there. In fact, Wirepoints FOIA’d the governor’s office for his plan to achieve “100% from clean energy sources by 2050.” We never got one. The omnibus bill was simply the culmination of politicians’ long war on carbon-based energy – and coal in particular. Illinoisans may soon be dealing with the consequences of that war. Solar and wind have not kept pace with the capacity lost as fossil fuel plants have been shut down. In fact, Melville Nickerson with NRG Energy warned during a recent Illinois House committee hearing of “the potential for rolling blackouts in central and southern Illinois” this summer. Again, it’s hard to know how all this will play out. But once again, it’s Illinois bureaucrats making another bet, not only with taxpayer dollars, but with Illinoisans’ quality of life. Tyler Durden Fri, 05/13/2022 - 17:00.....»»

Category: personnelSource: nytMay 13th, 2022

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

Fractious Markets & Inflation Fears

Fractious Markets & Inflation Fears Authored by Bill Blain via MorningPorridge.com, “Full fathom five my father lies…” Fraxious markets as stocks wobble, fears rise, energy prices spike; what’s to worry about? Preparing for inflation would be one thing – but being ready for opportunity is another! Running into an old chum at Waterloo Station this morning we shared quick notes on markets – our conclusion is… “fraxious”. Excellent… There are certainly plenty of reasons to… be concerned. Yesterday’s tumble in tech stocks, Facebook being singled out for a particular gubbing later today in Washington, the ongoing weakness in stocks as buyers absorb the news out China (Evergrande is not the only property firm being crushed), oil prices hitting a seven year high with no sign of downside, and even as the US continues to flirt with a potential default the week after next, Democrat leaders are gunning for the Fed. And let’s add a bit of climate panic as extraordinary rains blocked London roads – it’s the end of the world… again. Knightsbridge is flooded! Unheard of! Fraxious markets? We love them…! When all around are running scared, starting to panic, losing their heads, liquidity has dried up, Harrods is sodden, and further downside seems inevitable… that’s when opportunity is screaming out! As the fears escalate, remind yourself:  Markets are never as bad as you fear, but seldom as good as you hope. The trick is picking the winners and losers… This morning’s John Authors column on Bloomberg makes a fascinating observation: its only in the UK we’re getting really worried about stagflation. He quotes the current energy fears, the deepening logistical crisis, the lack of Europeans to drive our lorries, and concludes its no wonder the Brits are convinced we face galloping inflation and a crushing recession. The only thing that’s booming in the UK is fear! It’s a fascinating perspective. He might be right. I’m very aware, from doing US podcast guest slots and chatting to US clients that there is a global concern about “stagflationary headwinds”. In the UK the stagflationary gale is very tangible. It affects our mood. At the moment… the classic “We’re doooomed Captain Mainwaring…” vibe dominates our thinking. Let’s get honest. The imminent collapse of everything in the UK is massively over-hyped, which is probably due to the ruling Conservative Party having their conference this week. The easiest way not to panic about the UK is to not read any UK newspapers or watch the BBC. There is nothing guaranteed to make the nervous more nervy than our media battering ministers with leading questions. (Generally I like UK media – especially when they are fulfilling their proper role of goading and riling self-important politicians. It’s the hours of endless wokery and faux concern that’s so annoying.) What we need to do is recognise reality. There is a new spike in gas prices underway this morning as the scrabble for winter fuel continues. One of my colleagues sagely pointed out the price of oil has reached a seven year high, but supply is still far below demand. He pointed out the number of drilling rigs looking for oil is less than half the level it was in 2014 when Oil last skirted with $80. He pointed out demand for petrol is rising – because people haven’t been sharing cars due to the pandemic. The only area where demand for oil is below pre-pandemic levels is Jetoil – airlines have still not recovered. Shipping lanes are at their busiest in decades! The reality is energy prices are not in a temporary state of shortage – demand will consistently outstrip supply across most energy products through the coming winter and as economies recover. Oil production is still 40% below pre-pandemic peaks. So, let’s stop worrying if energy inflation is real or transient, and figure what we are going to do now it’s here. It was oil prices that triggered the massive stagflation of the 1970s, and this time oil is further constrained by ESG and Climate Change. When inflation strikes: Conventional wisdom says buy linkers. Tick. Conventional wisdom says buy real assets. I love the story of a German businessman taking a wheelbarrow load of cash to the bank. He turned away for a second, and someone nicked the wheelbarrow, leaving the cash on the pavement. Conventional wisdom says bonds are not a great option under inflation – but, hey, you get your principal back… how much less its worth in relative terms is the question. Corporate debt, Junk and EM is going to lose – returns will be selective. Conventional wisdom is be selective on equities… Consumer incomes take time to catch up inflation, so demand for goods and services will fall. But, real non-financial correlated assets are in demand. There will always be some bugger wanting to drink Chateau Lafitte with coke… Inflation is as destructive to companies as it is to people. Demand becomes increasingly less stable and difficult to predict. Many companies which loaded up high debt levels will see that debt inflated away – but Zombie companies which have only survived due to ridiculously low interest rates will struggle with higher rates – at last freeing up the market niches they’ve been blocking. Conventional wisdom says Gold is a good inflation hedge – which is not necessarily proven, but over time looks to hold. Unconventional wisdom includes crypto. As I am sitting in our London office writing this one of our nippers (the very smart, clever young people running our funds, and running rings round our prehistoric thinking) has just suggested cryptos must be a good inflation hedge. If he thinks so… My view remains Cryptos are nothing to with hedging inflation – they are speculative pixelated-bollchocks based entirely on the premise there will be a greater fool to buy them.  (That said – I am thinking about a crypto-currency based on a real asset – which I will explain when I’ve got my head around the concept.) Tyler Durden Tue, 10/05/2021 - 08:34.....»»

Category: blogSource: zerohedgeOct 5th, 2021

The 46 best fantasy books to escape into this summer, from the classics to new highly anticipated sequels

Whether you like fantasy books with a dash of drama, historical fiction, romance, or science fiction, these novels are sure to become favorites. Prices are accurate at the time of publication.When you buy through our links, Insider may earn an affiliate commission. Learn more.Whether you like fantasy books with a dash of drama, historical fiction, romance, or science fiction, these novels are sure to become favorites.Amazon; Alyssa Powell/Insider Fantasy books are delightfully filled with magic, creatures, and new worlds. This list ranges from classic fantasy novels to exciting new releases. We looked at bestsellers, award-winners, and reader recommendations to find the best fantasy books. Fantasy books are a blissful escape from reality into worlds of magical creatures, mythological heroes, and folklore come to life. They are where we can discover new worlds where heroes and heroines face brutal beasts, travel across distant lands, and unearth forgotten kingdoms. From epic high fantasy to magical realism, the fantasy genre is expansive. Fantasy can include countless different types of magic, characters, and adventurous pursuits and many of these novels intertwine with other genres, especially science fiction and romance. To compile this list of best fantasy books, we looked at all-time fantasy bestsellers, award-winners, and new releases about which readers are raving. So whether you're looking to find a magical first fantasy read or delve deeper into a sub-genre you already love, here are some of the best fantasy novels to read this summer. The 46 best classic and new fantasy books to read in 2022:A historical fantasy retelling of an ancient Indian epicAmazon"Kaikeyi" by Vaishnavi Patel, available at Amazon and Bookshop, from $16.54For fans of "Circe," "Kaikeyi" is the historical fantasy tale of a young woman who discovers her magic while looking for deeper answers in the texts she once read with her mother. When Kaikeyi transforms into a warrior and a favored, feminist queen, darkness from her past resurfaces and the world she has built clashes with the destiny the gods once chose for her family, forcing Kaikeyi to face the consequences of resistance and the legacy she may leave behind. A new exciting fantasy sequelAmazon"Fevered Star" by Rebecca Roanhorse, available at Amazon and Bookshop, from $23.49"Fevered Star" is the highly anticipated sequel to "Black Sun," and continues as sea captain Xiala finds new allies with the war in the heavens affecting the Earth. Meanwhile, avatars Serapio and Naranpa must continue to fight for free will despite the wave of destiny and prophecy they face in this fantasy novel loved for its unique cast of characters and incredible world-building. The first epic fantasy novel in an upcoming trilogyAmazon"The Woven Kingdom" by Tahereh Mafi, available at Amazon and Bookshop, from $12.99"This Woven Kingdom" intertwines fantastical Persian mythology and rich romance in the first novel of an upcoming fantasy trilogy about Alizeh, the long-lost heir to the kingdom for which she works as a servant. Kamran, the crown prince, has heard the prophecies his kingdom is destined to face but couldn't imagine the strange servant girl would be the one to uproot everything he's ever known. The most classic fantasy you can getAmazon"The Hobbit" by J. R. R. Tolkien, available on Amazon and Bookshop, from $10.37An introduction to the mystical world of "The Lord of the Rings," "The Hobbit" is one of the most charming adventure fantasies in history. It's the timeless story of Bilbo Baggins meeting Gandalf as they set out to raid the treasure guarded by a dragon — indisputably a classic fantasy novel, and a must-read for any fantasy lover. A fantastical retelling of Chinese mythologyAmazon"Daughter of the Moon Goddess" by Sue Lynn Tan, available at Amazon and Bookshop, from $16.19Inspired by the legend of Chang'e, the Chinese moon goddess, "Daughter of the Moon Goodess" follows Xingyin as her existence is discovered by the feared Celestial emperor and she must flee her home and leave her mother behind. In this mythological retelling, Xingyin must learn archery and magic in the very empire that once exiled her mother and challenge the Celestial Emperor with her life, loves, and the fate of the entire realm at stake. A steamy fantasy retelling of "Beauty and the Beast"Amazon"A Court of Thorns and Roses" by Sarah J. Maas, available at Amazon and Bookshop, from $14.49In this wildly popular series, Feyre is brought to a magical kingdom on the crime of killing a faerie where both she and the secrets of her captor are closely guarded. This series is known for its careful pacing, beautiful romance, and nightmarish fantasy creatures. The final book was just released, so now you can binge-read straight to the end. A historical fantasy that you won’t soon forgetAmazon"The Invisible Life of Addie LaRue" by V.E. Schwab, available at Amazon and Bookshop, from $16.19In 1714, Addie LaRue accidentally prays to the gods that answer after dark and curses herself to a life in which she cannot be remembered. This book spans 300 years as Addie lives without a trace until one day, she meets a boy who remembers her name. Contrary to the premise, Addie's story is one that stays with you long after you finish this book. This was my favorite book of 2020 and remains in my top five of all time. A fantasy book that begins with "It was a dark and stormy night"Amazon"A Wrinkle in Time" by Madeleine L'Engle, available on Amazon and Bookshop, from $5.35This is one of the few books from my childhood that has stood the test of time and remained on my bookshelf to this day. Meg Murry — along with her mother and brother — rushes downstairs in the middle of the night to find a strange visitor in the kitchen, launching an adventure through space and time to save Meg's father and the world. I was whisked away by the magic in this story, along with so many other readers. A fantasy story that will take you to a new worldAmazon"The Lion, The Witch, and The Wardrobe" by C.S. Lewis, available at Amazon and Bookshop, from $7.64Though chronologically second, this was the first "Chronicles of Narnia" book to be published and therefore should be read first. It tells the story of three siblings who step through the door of a wardrobe and find themselves in the magical land of Narnia, enchanted by the evil White Witch. They team up with a lion and join the battle to save Narnia. C.S. Lewis wrote: "Some day, you will be old enough to start reading fairy tales again," and that resonates with so many readers who pick this book up and hold it close to their hearts forever.A fantasy series that's quickly become a modern classicAmazon"A Game of Thrones" series by George R. R. Martin, available at Amazon and Bookshop, from $26.93The "Game of Thrones" series is hailed as an undeniable classic even though it was just published in 2005. The entire series is iconic. It's about families caught in a never-ending war over who rules over the seven kingdoms. In these books, the good guys don't always win and the heroes don't always live. There are highly complicated characters, tons of subplots, and every kind of conflict imaginable. A powerful and diverse fantasy with contemporary issuesAmaozon"Legendborn" by Tracy Deonn, available at Amazon and Bookshop, $16.29"Legendborn" has quickly become a favorite amongst fantasy readers since it was published in September 2020. It weaves issues of grief, racism, and oppression with Arthurian-inspired magic. Bree enrolls in a college program for gifted high schoolers after an accident that left her mother dead. When an attempt to wipe Bree's memory after she witnesses a magical attack fails, her own magic and memories begin to return to her and leave her wondering if her mother's death was truly an accident. An enchanting, magical fantasy adventureBookshop"The Girl Who Fell Beneath the Sea" by Axie Oh, available at Amazon and Bookshop, from $16.99Mina's homeland has been devastated by storms for generations so every year, a maiden is sacrificed to the sea in the hopes the Sea God will take a true bride and end the villages' suffering. When Shim Cheong, her brother's beloved, is chosen for the next sacrifice, Mina throws herself into the sea in her place and is swept into the Spirit Realm where she seeks to wake the Sea God, confront him — and save her homeland before her time in the realm runs out. A feminist fairy tale classicAmazon"Ella Enchanted" by Gail Carson Levine, available at Amazon and Bookshop, $7.35Whether or not you've seen the hilarious Anne Hathaway movie, this is one to pick up. It's the story of Ella, enchanted as an infant with the "gift" of obedience. It quickly turns into a curse as Ella can't help but do what she's told no matter who orders her or how silly (or dangerous) the order may be. When Ella finds she might be in danger, she sets out to undo the curse and ends up on an adventure with ogres, elves, even the classic pumpkin carriage. I thought this book was just as amusing as the movie and I probably read it a dozen times as a teen. A deadly fantasy tale of three royal sistersAmazon"Three Dark Crowns" series by Kendare Blake, available at Amazon and Bookshop from $14.99In every royal generation on the island of Fennbirn, a set of triplets is born. They are each equal heirs to the throne and possess one of three magics: control of the elements, affinity to nature and animals, or immunity to poison. When the girls turn sixteen, the fight for the crown begins and will only end once only one queen remains. In this dark series about strong women, the tension and twists build with each novel until the action-packed and intensely satisfying ending. The magic in these books is easy to understand and really entertaining to read. I loved seeing this sisterhood grow and change over the four books.A bloody fantasy epic of warrior womenAmazon"The Gilded Ones" by Namina Forna, available at Amazon and Bookshop, from $15.39Deka is already different from the rest of her village, but when she bleeds gold — the mark of a demon girl — during a ceremony, she faces consequences worse than death. She is soon offered a choice: to stay and face her fate or leave and fight in an army of girls like her. This story moves swiftly with a mix of dystopian fantasy, horror, and a touch of romance. It can be quite violent at times, as demon girls suffer death after gruesome death. If you've ever been hesitant about picking up YA fantasy, this is one that won't disappoint. A dark fantasy that's perfect for a rainy dayAmazon"Neverwhere" by Neil Gaiman, available at Amazon and Bookshop, from $13.29While you are probably more familiar with "Coraline," "Neverwhere" is a Neil Gaiman book that just can't be passed over. On the streets of London, Richard Mayhew stops to help a bleeding girl and ends up in Neverwhere — a dark version of London where monsters lurk in the shadows. After finishing this, you'll ask yourself why you haven't read more of his novels. Gaiman also has a series on MasterClass that deconstructs his storytelling yet somehow adds more magic to every book. A classic fantasy novel full of magicAmazon"A Wizard of Earthsea" by Ursula K. Le Guin, available at Amazon and Bookshop, from $6.79When Ged was young, he was the reckless Sparrowhawk. Now he's grown into the most powerful sorcerer in Earthsea, but he must face the consequences of the power-hungry actions of his younger self. This book (and the entire six-book series) continues to enchant fantasy readers 50 years after its first publication. Through graceful writing and impeccable character development, Le Guin challenges us to know and embrace our true selves.A high seas pirate adventure storyAmazon"Fable" by Adrienne Young, available at Amazon and Bookshop, from $14.69Fable is a trader, a fighter, and a survivor. Four years ago, she watched her mother drown in a ruthless storm and her father abandon her on an island of thieves. Relying on the skills her mother taught her, Fable enlists West to help her confront her father and demand a place on his crew. When she finally makes it off the island, Fable learns how much more dangerous her father's work has become and finds that the island may have been the safest place for her after all. This is a gritty story with a strong feminist lead and (thankfully) a sequel that was just released.A fantasy series where light and dark magic exist in parallel worldsAmazon"A Darker Shade of Magic" by V.E. Schwab, available at Amazon and Bookshop, from $8.99Kell is a smuggler and one of the last magicians able to travel between parallel Londons: red, white, grey, and (long ago) black. After being robbed and then saved by Delilah Bard, the two set out on an adventure to save themselves and the worlds through which they travel. Schwab is a masterful world-builder and you will absolutely travel right along with this pair. Because of this series, I have become a sucker for a parallel universe trope. The fantasy story of a forced marriage between a witch and a witch hunterAmazon"Serpent & Dove" by Shelby Mahurin, available at Amazon and Bookshop, from $10.59In Belterra, witches are feared and burned at the stake by ruthless witch hunters. For two years, Louise hid her magic to stay alive until one mistake set in motion a story of impossible choices, an enemies-to-lover romance, and a tangled battle between right and wrong. With how compelling the writing is, you'd never guess it is a debut novel. I bought this one just for the gorgeous cover and had no idea how extraordinary it would be.A criminal account of a steampunk band of anti-heroesAmazon"Six of Crows" by Leigh Bardugo, available at Amazon and Bookshop, from $7.99Kaz is a professional criminal, offered an alluring heist that he can't pass up, but he can't pull off alone. This story is completely brilliant, gritty, and a little messy. With six main characters, "Six of Crows" is a fast-paced heist, a story that leaves you constantly surprised as you'll never fully know any one character's intentions due to its third-person point of view.The fantastical tale of a magical unicornAmazon"The Last Unicorn" by Peter S. Beagle, available at Amazon and Bookshop, from $13.99This is a beautiful fairy tale with poems and songs set throughout the pages. In this book, a unicorn who lives alone in a forest protected from death decides to find what happened to the others. Helped by a magician and a spinster, the unicorn sets out on a journey of love and destiny, faced with an evil king who aims to rid the world of the final unicorn. The life lessons woven throughout this book are bittersweet, but also real and honest. A cherished chronicle of magical children and guarded secretsAmazon"The House in the Cerulean Sea" by T.J Klune, available at Amazon and Bookshop, from $15.29This is one of the few books I refer to as "beautiful." Linus Baker is a quiet caseworker for the Department of Magical Youth — and has just been charged with investigating a highly secretive case that requires him to travel to an island where six dangerous magical orphans (including the actual son of Satan) live under the care of Arthur Parnassus. This book is all about family, filled with comforting magic as you come to care for fictional characters. Plus, reading about a child who is trying to be a good kid while also being the literal Anti-Christ is absolutely hysterical and was the highlight of this book for me.A dark, horror-fantasy book about occult magicAmazon"Ninth House" by Leigh Bardugo, available at Amazon and Bookshop, from $16.55Alex Stern is recovering in the hospital after surviving an unsolved homicide when she's mysteriously offered a full ride at Yale University. The only catch: she has to monitor the activities of the school's secret societies that practice dark magic. Alex, a high school dropout from LA, has no idea why she's been chosen but by the time she finds out, she'll be in too deep. This book won the Goodreads Choice Awards "Best Fantasy" category in 2019 and it absolutely lives up to the hype. It's intense, bloody, and powerful as dangerous magic weaves itself into an everyday school setting. A truly fun Greek mythology storyAmazon"The Lightning Thief" by Rick Riordan, available at Amazon and Bookshop, from $5.98Deeply loved, the Percy Jackson books are just as regarded as "The Hunger Games" or "Divergent." Percy has no idea that he is a demigod, son of Poseidon, but he's having trouble in school, unable to focus or control his temper. Percy is sure that his teacher tried to kill him and when his mom finds out, she knows she needs to tell him the truth about where he came from. He goes to a summer camp for demigods and teams up with two friends to reach the Underworld in order to prevent a war between the gods. Percy makes a great hero and it's so easy to root for him as he pushes through his journey, the pages filled with Grade-A characters, action scenes, and monsters. A West-African inspired fantasy world of danger and magicAmazon"Children of Blood and Bone" by Tomi Adeyemi, available at Amazon and Bookshop, from $12.99After a ruthless king left the world without magic and her mother dead, Zélie finds she has only one chance to save her people. On a dangerous journey to restore magic to the land before it is lost forever, Zélie's greatest danger may be herself. Readers agree that the best parts of this book are the characters, who all go on a transformative journey as they fight for peace. This is in TIME's Top 100 Fantasy Books of All Time, which is a huge deal. A captivating vampire fantasy novelAmazon"Crave" by Tracy Wolff, available at Amazon and Bookshop, from $11.51It's easy to draw a comparison between "Crave" and "Twilight," especially since the moment "brooding vampires" is mentioned, everyone's first thought is Edward Cullen. Plus, the cover looks like it's part of Stephanie Meyer's famous saga. But the "Crave" series is more sophisticated and literary while embracing the inherent cringe that now seems to accompany any vampire story. This is an engaging read because it blends nostalgia with something fresh and new. Open this book when you're ready to have fun with reading — the cheesy moody vampire moments are absolutely present amongst turf wars, a gothic academy, and dragons. A dark urban fantasy where people hunt the godsAmazon"Lore" by Alexandra Bracken, available at Amazon and Bookshop, from $14.99Greek mythology meets "The Hunger Games" in this world where every seven years, nine Greek gods are forced to walk the earth as mortals, hunted by those eager to steal divine power and immortality for themselves. Lore wants to leave this brutality behind when her help is sought out by two opposing participants: a childhood friend she thought long dead and a gravely wounded Athena. The world created in this standalone is thorough and complex. But if you love crazy twists and that "just one more chapter" feeling, you should give this a shot.An iconic fantasy book that checks every boxAmazon"The Princess Bride" by William Goldman, available at Amazon and Bookshop, from $10.11"The Princess Bride" is a modern classic that has something for everyone: action, beasts, true love, and a whole lot of fighting. A beautiful girl, Buttercup, and her farm boy, Westley, have fallen madly in love. Westley sets off to claim his fortune so he can marry her before he's ambushed by pirates. Thinking he's dead, Buttercup marries an evil prince as Westley plans to return to her. It's riddled with narration from the author that really adds to the passion and humor of this book.A 200-years-later fantasy sequel to "Cinderella"Amazon"Cinderella is Dead" by Kalynn Bayron, available at Amazon and Bookshop, from $15.63200 years after Cinderella found her prince, girls are required to appear at the annual ball where men select their wives. If a girl is not selected, she is never heard from again. Sophia would much rather marry her love, Erin, so she flees the ball where she runs into Constance, the last known descendant of Cinderella. Together, they decide to bring down the king once and for all. This book gathered attention for its Black and queer lead characters that have no intention of waiting for a night in shining armor to save them. It's a story of bravery, anger, and fighting for love.A fantasy that's all about booksAmazon"Inkheart" by Cornelia Funke, available at Amazon and Bookshop, from $9.29Meggie's father is reading to her from a book called "Inkheart" one night when an evil stranger from her father's past knocks on their door. When Meggie's dad is kidnapped, she has to learn to control the magic to change the story that's taken over her life, creating a world that she's only read about in books. It's a story about magic, for sure, but also about the unwavering bond between Meggie and her father — a truly heartwarming love that you'll feel as a reader.  A darker collection of fairy talesAmazon"The Complete Grimm's Fairy Tales" by Jacob and Wilhelm Grimm, available at Amazon and Bookshop, from $4.95The German brothers who wrote this book aimed to collect stories exactly how they were told. This led to a collection of fairy tales that we all know and love, minus the obligatory "happily ever afters." It has all the classics like "Cinderella" and "Rapunzel" that haven't been softened or brightly colored for younger audiences. This is great for anyone who loves the feeling of discovering all the secrets behind the stories or movies we loved when we were young.A fantasy re-telling of "Romeo and Juliet," set in 1920s ShanghaiAmazon"These Violent Delights" by Chloe Gong, available at Amazon and Bookshop, from $14.99In 1926, a blood feud has left the city starkly divided, Juliette the heir to the Scarlet Gang and Roma the heir to the White Flowers. They were each other's first love, separated by their families and long ago (but not forgotten) betrayal. Now, as a mysterious illness is causing the people to claw their own throats out, Roma and Juliette must put aside their differences to save their city. This one features a river monster, a serious amount of blood and gore, and nods to the original "Romeo and Juliet" throughout. A fantastical tapestry of legends and rivalriesAmazon"The Priory of the Orange Tree" by Samantha Shannon, available at Amazon and Bookshop, from $16.24Told from four points of view, Queen Sabran IX must conceive a daughter, for the legends say that as long as a queen rules, the monster beneath the sea will sleep. But as the assassins close in, the eastern and western kingdoms of Virtudom refuse to unite, even against an ancient and monumental threat that could kill them all. This is 800 pages of high fantasy, charged by dragons, queer representation, and a large cast of characters — but don't worry, you can find a glossary and character list in the back to help you keep it all straight. It's been hailed as "A feminist successor to 'The Lord of the Rings'" and decidedly embraces that praise.A fantasy novel hailed for its romanceAmazon"From Blood and Ash" by Jennifer L. Armentrout, available at Amazon and Bookshop, from $13.67While this absolutely falls into the fantasy genre, it actually won the Goodreads Choice Awards for "Best Romance" in 2020. Poppy is the Maiden, chosen to fulfill a destiny that has never been fully explained to her, living the life of a recluse and awaiting to ascend to prove she is worthy to the gods and can protect her land from the curse. When she can't stand it anymore, she sneaks away from the kingdom and meets Hawke, spurring a desperate secret romance. The beginning of the first book is slow, but the momentum builds quickly. It ends on a huge cliffhanger but the second one has already been released and the third is out on April 20, 2021. A classic Arthurian taleAmazon"The Sword in the Stone" by T. H. White, available on Amazon and Bookshop, from $15.50Before the famous King Arthur, there was a boy named Wart, a wizard named Merlin, and a sword stuck in a stone. In this story, Merlin helps Wart learn valuable coming-of-age lessons as he grows up. It feels both medieval and modern, with an emotional ending as Wart finally faces the sword. If you loved the Disney movie, you should still read this, since they're very different. The witchy prequel to “Practical Magic”Amazon"The Rules of Magic" by Alice Hoffman, available at Amazon and Bookshop, from $10.30Franny, Bridget, and Vincent are growing up in the 1950s, aware that they are different but held under strict parental rules to keep them safe and away from magic. When they visit their Aunt Isabelle in Massachusetts where their family name holds great history, the Owens siblings learn to embrace their magical sides. You don't need to have read "Practical Magic" to love this story of sibling love and finding your identity. The book is simply delightful and the whole thing feels like a cool autumn in Salem. A fantasy series that you'll hold close long after the final bookAmazon"Throne of Glass" series by Sarah J. Maas, available at Amazon and Bookshop, from $6.59This entire eight-book series has insanely high reviews, with a ton of fantasy readers picking up anything Sarah J. Maas writes. It follows Celaena Sardothien, an assassin who is offered a chance to serve as the King's Champion and earn her freedom after serving in a camp for her crimes. Celaena is drawn into a series of battles and a deeply woven conspiracy, discovering secrets about the kingdom and herself. This is an epic, powerful, and brilliant journey that might just become your new favorite series.The first in a new "Shadowhunter" seriesAmazon"Chain of Gold" by Cassandra Clare, available at Amazon and Bookshop, from $12.49Cordelia is a Shadowhunter, a warrior who has trained all her life to battle demons. On a mission to prove her father's innocence, she travels to London where she meets James, a childhood friend. She's whisked into his secret and dazzling life when a series of demon attacks hit London. These new monsters seem impossible to kill as they hide in plain sight and close off the city. The characters are what drives this book and if you've read other "Shadowhunter" novels by Cassandra Clare, you'll love getting to know family members you've heard about before. A portal fantasy that all begins with a girl finding magic in a bookAmazon"The Ten Thousand Doors of January" by Alix E Harrow, available at Amazon and Bookshop, from $14.99While serving as the ward to a wealthy man, January finds a strange book that tells a story of secret doors, adventure, and danger. As she reads, January is taken on an imaginative journey of discovery as a book she thought was fiction elaborately bends her reality. It's a portal story of love and enchanting adventure, a book about a book that will mercilessly break your heart but gracefully put it back together. A wintery fairytale story, loosely based on “Rumpelstiltskin”Amazon"Spinning Silver" by Naomi Novik, available at Amazon and Bookshop, from $10.99Miryem quickly earns a reputation for being able to spin silver to gold after setting out to save her family from poverty, capturing the attention of the Ice King. This is a woven story of three women, three mothers, and three marriages. Naomi Novik does an incredible job of helping you follow each story, creating some amazingly strong female protagonists. This is not your typical fairytale, but it's still full of whimsical writing, familial bonds, and tons of charm.  A deep-sea fantasy journey with seven kinds of magicAmazon"All The Stars and Teeth" by Adalyn Grace, available at Amazon and Bookshop, from $9.89In a kingdom where you can choose your magic, Amora knows that to be queen, she must master the dangerous but fickle soul magic. When her demonstration fails, Amora flees and strikes a deal with a pirate: she will help him reclaim his magic if he can help her prove that she's fit to rule. "All the Stars and Teeth" is an epic adventure-driven fantasy featuring mermaids, sea monsters, and a kingdom in danger. A fantasy book that will pull you in from the first lineAmazon"A Curse So Dark and Lonely" by Brigid Kemmerer, available at Amazon and Bookshop, from $9.89Set in the parallel land of Emberfall, a cursed Prince Rhen has become a destructive, murderous monster. Harper, a regular girl with cerebral palsy, was mistakenly kidnapped and is now the prince's only hope. Yes, this is the second "Beauty and the Beast" retelling in this roundup but they are both so different and so loved. Readers come for the complexity of Rhen and Harper and stay for the snarky, hysterical bickering between the two.A fantasy story of a darkly magical school where you graduate or dieAmazon"A Deadly Education" by Naomi Novik, available at Amazon and Bookshop, from $17.41At Scholomance, magically gifted students must survive to graduate — and failure means death. There are no teachers, no breaks, and only two rules: don't walk the halls alone, and beware of the monsters that lurk everywhere. El has no allies, just incredibly strong dark magic that could save her — but might kill all the other students. El's evolution and hilarity during this story plus Novik's thoughtful world-building and extremely diverse cast of characters are what make this a favorite. A fae-centered high fantasyAmazon"The Cruel Prince" by Holly Black, available at Amazon and Bookshop, from $10.9910 years ago, Jude and her sisters were kidnapped after their parents' murder and taken to the land of Faerie, where they are mortal humans amongst fantastical but cruel creatures. In order to belong, Jude must win a place in the high court which will require her to defy the youngest prince. Holly Black (crowned the supreme Faerie-world writer) creates a world so real, you'll forget its magic. A new fantasy duology of a world of enchanted injusticeAmazon"Spellbreaker" by Charlie N. Holmberg, available at Amazon and Bookshop, $8.49There are two kinds of wizards in the world: those who pay for the power to cast spells and those born with the ability to break them. Elise was born a spellbreaker but her gift is a crime. While on a mission to break the enchantments of aristocrats, Elise is discovered and must strike a bargain with an elite wizard to protect herself. It's a fun fantasy mystery with plenty of twists and danger that are sure to keep you intrigued.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 23rd, 2022

Rabobank: Everything Is Happening Everywhere All At Once

Rabobank: Everything Is Happening Everywhere All At Once By Michael Every of Rabobank Everything Everywhere All At Once Today’s title, referencing a soon-to-be-released movie that looks a superior version of a multiverse of madness than the one starring Dr Strange, nicely sums up our current global situation. Everything is happening everywhere all at once – yet key markets are failing to capture it or aren’t explaining the second or third order implications where they are. US stocks failed to carry over the Friday dead-cat bounce on Monday, with the S&P -0.4% and the NASDAQ -1.2%. Treasury yields correspondingly went down, with the 10-year at 2.88% (-6bps) and the 2-year at 2.54% (-3bps). So did the USD, slightly. However, the real move was in oil, which rose more than 3% regardless on news Shanghai is to reopen slightly. As Bloomberg put it, ‘Bonds Signal Inflation Peaking Even as Commodities Spike,’ adding “Inflation expectations in the US bond market are subsiding despite the recent resurgence in the commodity complex. That aligns well with the perception that the risk of recession is increasing. At some point supply-shock-driven inflation is likely to bring about its own demise via demand destruction, and bond investors look to be signalling we are getting close to a tipping point for broad price gains even if wheat and crude stay elevated.” I always listen to the bond market over the equity and FX markets; or at least I used to when we had a real bond market rather than one where yields are pegged by the BOJ, leaving otherwise silly FX as the only market with common sense. Today, one must add commodities as ones to watch. Oil and wheat are only a small part of CPI. However, you mess with them, and you mess with everything everywhere all at once, directly or via second or third order effects. The same Wall Street which wrongly shouted “transitory!” all the way to 8.5% y-o-y US headline CPI and now-entrenched services-sector inflation, and who have never been to a port or a warehouse, or driven a truck, or a forklift, are now confidently telling us that inflation has peaked. They are correct the US is, as Lloyd Blankfein just put it, at “very, very, very high risk” of a recession. Indeed, US Michigan consumer confidence just collapsed to a near multi-decade low, the complete opposite of what we saw the last time the Fed was hiking like it is now back in 2000 - and about to burst a different tech bubble. However, oil is at $113 and rising despite the slowdown. US retail gasoline just hit a new record high in nominal terms, and even in real terms is not far off the peaks seen around the Arab Spring- or the Iranian Revolution. Those in the know underline that even if more oil were pumped, it would not help because the problem is the structural lack of capacity at refineries, which will take a long, long time to reverse. That feeds into the price of almost *everything*. With a lag, into food – which also leads into the price of everything else given demand is to a large degree inelastic. Unsurprisingly, we hear more warnings of food shortages. This apparently means little to a Wall Street which worries most about which low-carb lunch option to have delivered by the Western equivalent of India’s dabbawalas, as it dresses up the Dickensian DM-meet-EM-in-the-middle I was predicting back in the early 2000s as techno-progress. Until they need to find infant formula, that is. Likewise, as covered in our ‘In Deep Ship’ report, US supply chains remain structurally hampered. Truckers, who face soaring diesel prices, are seeing freight demand slump along with the slowing economy: if this carries on, many will go to the wall, removing a vital cog from the logistics machine when it needs to ramp up again. Rail is overloaded and underfunded. And, as we mentioned in 2021 after listening to people in the relevant industry rather than Wall Street, the International Longshoremen’s Association President, representing the port union on the US East and Gulf coasts, just said that he will “fight tooth and nail” against further marine terminal automation," adding, “Automation does two things: it makes the companies rich and the longshore workers unemployed.” In short, expect strikes to shut down US ports again, meaning nobody gets any of the goods they need regardless of price. One can look at all of this and say that it just ‘means recession’, and so lower bond yields. Yet that is not seeing everything that is happening everywhere all at once. Sri Lanka is officially down to its last day of petrol. It was already going hungry – now it will be immobile. Angry people were already burning down politicians’ houses. Now they seem to be attacking anyone looking wealthy. ‘Oh, that’s just Sri Lanka,’ some say. True. But Iran is seeing food protests; so is Tajikistan. Significantly lower bond yields, when oil and food prices are rising and demand is largely inelastic, and “demand destruction” means hunger, is not something that ‘just happens’ like it could when commodity prices were low. Especially not when it also implies a collapse in the stock market and in housing and soaring unemployment to boot. Yes, such a global risk-off phase may be bullish for core bond yields like the US and Germany – but in many places it is a potential disaster. If Wall Street continues to say commodities don’t matter and inflation has peaked, the likelihood is that we will see dozens more African, Middle Eastern, and Asian countries experiencing exactly the same socio-political destabilisation. Consider that if Wall Street is saying inflation has now peaked, and is pushing bond yields lower, it is taking the Fed’s foot off the gas in terms of financial conditions – naturally, in a self-serving manner that helps prop up asset prices. One arguably needs to look at a matrix of bond yields and commodity prices: If bond yields are rising and so are commodities, the Fed are behind the curve - chaos follows everywhere all at once. If bond yields are falling and so are commodities, the Fed has achieved its goal – alongside a global recession and far lower asset prices. If bond yields are rising and commodities are falling, the Fed is on its way to its goal – but assets fall too. If bond yields are falling and commodities are rising, the Fed is on its way to falling behind the curve – chaos follows everywhere all at once. There is also another angle. To pencil in very low bond yields is to ignore politicians who are not going to ignore the risks of what is going on in Sri Lanka happening to them. There is now no mystery as to how one can raise long-absent final demand: you use fiscal policy. It was always that simple, it’s just that we had had decades of enforced ignorance rammed down our throats by ordoliberals. Yes, you also have to control supply chains to control inflation at the same time – but that won’t stop politicians reaching for stimulus as soon as things turn down. Do you really think that if unemployment, energy, and food all soar, and stocks and housing fall, that politicians will refuse stimulus measures? Yes, the UK government is telling people to cook meals for 30p(!), ride busses all day to keep warm, or to ‘get a job with higher wages’, but this is electoral ricin, and it is rumoured to be considering tax cuts by the summer. Elsewhere in Europe we see energy subsidies, which given supply-side constraints effectively push the burden onto the world’s poorest, creating more Sri Lankas. In short, don’t rely on fiscal policy to be restrained into a downturn. Meanwhile, nominal pay is rising rapidly, and the worse things get, the more people will demand more of it. Yes, real pay is falling for many - but that is an impetus for more pay rises, and will not stop just because Wall Street says ‘inflation has peaked’: not when the alternative is homelessness, hunger, and ‘Sri Lanka’. Yesterday, Microsoft announced it was nearly doubling its wage budget to retain staff. Of course, smaller firms that make up the backbone of the US economy are least-well placed to compete with this trend – which further polarizes between hot and not, winners and losers, and those who eat and those who get eaten. If real wages keep falling, political temperatures will keep rising regardless even if bond yields fall. Also, deglobalisation is happening. As I have repeated regularly, it was never going to be driven by leftist sentiment about the working class vs. the upper class; but as soon as you make it a rightist shift over national security, it can and will. Yesterday, the Wall Street Journal carried an article about the trend for ”friend-shoring”, flagging that Central America is emerging as a new hotspot for textiles. Why not Latin America next, to help escape the gravity of China’s commodity appetite? Today, US logistics magazine Freight Waves carries an op-ed titled ‘Free trade is dead, welcome to ‘Freedom Trade’’, which sounds like the recent UK suggestion of an economic “network of liberty” with the G7 as its “economic NATO”. Indeed, the US Defence Production Act was recently tweaked to also include Canada, UK, and Australia as “domestic” production in regard to EV batteries/rare earths. Japan is seeing its manufacturers come home, and is subsidising them to do so; so is the UK, post-Brexit - without subsidies. Yes, this means higher costs and higher prices. And yet it is happening. True, there are still laggards. The CSIS think-tank argues in ‘US Business Leaders Not Ready for the Next US-China Crisis’, that “The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition,“ and that “corporations need to think about their operating environment the way geostrategists now are.” Indeed, besides a focus on commodities, it is all geostrategy now. You can’t look at your usual market and not at what is going on everywhere else all at once. For example, Turkey is blocking Sweden and Finland’s entry into NATO. Is this a usual attempt to force concessions over the Nordic stance towards Ankara’s bête noire, the PKK, or a genuine geopolitical shift to follow its purchase of Russia’s S-400 anti-aircraft system? Given the pressures all EM are under, and Turkey being a major energy and food importer, as well as reliant on exports to the EU, it is hardly likely to be positive for the struggling TRY, close to its record low of 15.66. Indeed, will soon-to-be-more-weaponized Fed swaplines to help flailing EM be made available to a country going down that geopolitical path? Everything. Everywhere. All at once. Not your usual market metric going up or down a bit. Even in Australia, where the latest RBA minutes noted, “…upstream price pressures were increasingly being passed on to final consumer prices of many goods, as supply chain pressures persisted and demand remained strong. Members noted it was possible that firms' price-setting behaviours were undergoing a change from the pre-pandemic period, with businesses becoming more confident that raising prices would not significantly reduce demand or erode their competitive position.” Then again, the Bank also added: “Housing prices in Australia could also be more sensitive to rising interest rates than assumed, which would be likely to result in lower household wealth and consumption. At the same time, there was also potential for consumer spending in Australia to be stronger than forecast, given that households in aggregate had not begun to draw down on the savings accumulated during the pandemic and the high household saving rate could normalise more quickly than assumed. Another source of domestic uncertainty related to the behaviour of prices and labour costs at unusually low levels of unemployment, given the limited recent historical experience to draw on.” In short, they really don’t know what’s going on. Which ironically puts them in a stronger position than those who think they do - by not looking at everything everywhere all at once. Tyler Durden Tue, 05/17/2022 - 09:50.....»»

Category: blogSource: zerohedgeMay 17th, 2022

Financial War Takes A Nasty Turn

Financial War Takes A Nasty Turn Authored by Alasdair Macleod via GoldMoney.com, The chasm between Eurasia and the Western defence groupings (NATO, Five-eyes, AUKUS etc.) is widening rapidly. While media commentary focuses on the visible side of the conflict in Ukraine, the economic and financial aspects are what really matter. There is an increasing inevitability about it all. China has been riding the inflationist Western tiger for the last forty years and now that it sees the dollar’s debasement accelerating wonders how to get off. Russia perhaps is more advanced in its plans to do without dollars and other Western currencies, hastened by sanctions. Meanwhile, the West is increasingly vulnerable with no apparent alternative to the dollar’s hegemony. By imposing sanctions on Russia, the West has effectively lined up its geopolitical opponents into a common cause against an American dollar-dominated faction. Russia happens to be the world’s largest exporters of energy, commodities, and raw materials. And China is the supplier of semi-manufactured and consumer goods to the world. The consequences of the West’s sanctions ignore this vital point. In this article, we look at the current state of the world’s financial system and assess where it is headed. It summarises the condition of each of the major actors: the West, China, and Russia, and the increasing urgency for the latter two powers to distance themselves from the West’s impending currency, banking, and financial asset crisis. We can begin to see how the financial war will play out. The West and its dollar-based pump-and-dump system The Chinese have viewed the US’s tactics under which she has ensured her hegemony prevails. It has led to a deep-seated distrust in her relationship with America. And this is how she sees US foreign policy in action. Since the end of Bretton Woods in August 1971, for strategic reasons as much as anything else America has successfully continued to dominate the free world. A combination of visible military capability and less visible dollar hegemony defeated the communism of the Soviets and Mao Zedong. Aid to buy off communism in Africa and Latin America was readily available by printing dollars for export, and in the case of Latin America by deploying the US banking system to recycle petrodollars into syndicated loans. In the late seventies, banks in London would receive from Citibank yards-long telexes inviting participation in syndicated loans, typically for $100 million, the purpose of which according to the telex was invariably “to further the purposes of the state.” Latin American borrowing from US commercial banks and other creditors increased dramatically during the 1970s. At the commencement of the decade, total Latin American debt from all sources was $29 billion, but by the end of 1978, that number had skyrocketed to $159 billion. And in early-1982, the debt level reached $327 billion.[i] We all knew that some of it was disappearing into the Swiss bank accounts of military generals and politicians of countries like Argentina. Their loyalty to the capitalist world was being bought and it ended predictably with the Latin American debt crisis. With consumer price inflation raging, the Fed and other major central banks had to increase interest rates in the late seventies, and the bank credit cycle turned against the Latins. Banks sought to curtail their lending commitments and often (such as with floating-rate notes) they were paying higher coupon rates. In August 1982, Mexico was the first to inform the Fed, the US Treasury, and the IMF that it could no longer service its debt. In all, sixteen Latin American countries rescheduled their debts subsequently as well as eleven LDCs in other parts of the world. America assumed the lead in dealing with the problems, acting as “lender of last resort” working with central banks and the IMF. The rump of the problem was covered with Brady Bonds issued between 1990—1991. And as the provider of the currency, it was natural that the Americans gave a pass to their own corporations as part of the recovery process, reorganising investment in production and economic output. So, a Latin American nation would have found that America provided the dollars required to cover the 1970s oil shocks, then withdrew the finance, and ended up controlling swathes of national production. That was the pump and dump cycle which informed Chinese military strategists analysing US foreign policy some twenty years later. In 2014, the Chinese leadership was certain the riots in Hong Kong reflected the work of American intelligence agencies. The following is an extract translated from a speech by Major-General Qiao Liang, a leading strategist for the Peoples’ Liberation Army, addressing the Chinese Communist Party’s Central Committee in 2015: “Since the Diaoyu Islands conflict and the Huangyan Island conflict, incidents have kept popping up around China, including the confrontation over China’s 981 oil rigs with Vietnam and Hong Kong’s “Occupy Central” event. Can they still be viewed as simply accidental? I accompanied General Liu Yazhou, the Political Commissar of the National Defence University, to visit Hong Kong in May 2014. At that time, we heard that the “Occupy Central” movement was being planned and could take place by end of the month. However, it didn’t happen in May, June, July, or August. What happened? What were they waiting for? Let’s look at another timetable: the U.S. Federal Reserve’s exit from the Quantitative Easing (QE) policy. The U.S. said it would stop QE at the beginning of 2014. But it stayed with the QE policy in April, May, June, July, and August. As long as it was in QE, it kept overprinting dollars and the dollar’s price couldn’t go up. Thus, Hong Kong’s “Occupy Central” should not happen either. At the end of September, the Federal Reserve announced the U.S. would exit from QE. The dollar started going up. Then Hong Kong’s “Occupy Central” broke out in early October. Actually, the Diaoyu Islands, Huangyan Island, the 981 rigs, and Hong Kong’s “Occupy Central” movement were all bombs. The successful explosion of any one of them would lead to a regional crisis or a worsened investment environment around China. That would force the withdrawal of a large amount of investment from this region, which would then return to the U.S." For the Chinese, there was and still is no doubt that America was out to destroy China and stood ready to pick up the pieces, just as it had done to Latin America, and South-East Asia in the Asian crisis in 1997. Events since “Occupy Central” will have only confirmed that view and explains why the Chinese dealt with the Hong Kong problem the way they did, when President Trump mounted a second attempt to derail Hong Kong, with the apparent objective to prevent global capital flows entering China through Shanghai Connect. For the Americans the world is slipping out of control. They have had expensive wars in the Middle East, with nothing to show for it other than waves of displaced refugees. For them, Syria was a defeat, even though that was just a proxy war. And finally, they had to give up on Afghanistan. For her opponents, America has lost hegemonic control in Eurasia and if given sufficient push can be removed from the European mainland entirely. Undoubtedly, that is now Russia’s objective. But there are signs that it is now China’s as well, in which case they will have jointly obtained control of the Eurasian land mass. Financial crisis facing the dollar The geopolitics between America and the two great Asian states have been clear for all of us to see. Less obvious has been the crisis facing Western nations. Exacerbated by American-led sanctions against Russia, producer prices and consumer prices are not only rising, but are likely to continue to do so. In particular, the currency and credit inflation of not only the dollar, but also the yen, euro, pound, and other motley fiat currencies have provided the liquidity to drive prices of commodities, producer prices and consumer prices even higher. In the US, reverse repos which absorb excess liquidity currently total nearly $2 trillion. And the higher interest rates go, other things being equal the higher this balance of excess currency no one wants will rise. And rise they will. The strains are most obvious in the yen and the euro, two currencies whose central banks have their interest rates stuck below the zero bound. They refuse to raise them, and their currencies are collapsing instead. But when you see the ECB’s deposit rate at minus 0.5%, producer prices for Germany rising at an annualised rate of over 30%, and consumer prices already rising at 7.5% and sure to go higher, you know they will all go much, much higher. Like the Bank of Japan, the ECB and its national central banks through quantitative easing have assembled substantial portfolios of bonds, which with rising interest rates will generate losses which will drive them rapidly into insolvency. Furthermore, the two most highly leveraged commercial banking systems are the Eurozone’s and Japan’s with assets to equity ratios for the G-SIBs of over twenty times. What this means is that less than a 5% fall in the value of its assets will bankrupt the average G-SIB bank. It is no wonder that foreign depositors in these banking systems are taking fright. Not only are they being robbed through inflation, but they can see the day when the bank which has their deposits might be bailed in. And worse still, any investment in financial assets during a sharply rising interest environment will rapidly lose value. For now, the dollar is seen as a haven from currencies on negative yields. And in the Western world, the dollar as the reserve currency is seen as offering safety. But this safety is an accounting fallacy which supposes that all currency volatility is in the other fiat currencies, and not the dollar. Not only do foreigners already own dollar-denominated financial assets and bank deposits totalling over $33 trillion, but rising bond yields will prick the dollar’s financial asset bubble wiping out much of it. In other words, there are currently winners and losers in currency markets, but everyone will lose in bond and equity markets. Add into the mix counterparty and systemic risks from the Eurozone and Japan, and we can say with increasing certainty that the era of financialisation, which commenced in the 1980s, is ending. This is a very serious situation. Bank credit has become increasingly secured on non-productive assets, whose value is wholly dependent on low and falling interest rates. In turn, through the financial engineering of shadow banks, securities are secured on yet more securities. The $610 trillion of OTC derivatives will only provide protection against risk if the counterparties providing it do not fail. The extent to which real assets are secured on bank credit (i.e., mortgages) will also undermine their values. Clearly, central banks in conjunction with their governments will have no option but to rescue their entire financial systems, which involves yet more central bank credit being provided on even greater scales than seen over covid, supply chain chaos, and the provision of credit to pay for higher food and energy prices. It must be unlimited. We should be in no doubt that this accelerating danger is at the top of the agenda for anyone who understands what is happening — which particularly refers to Russia and China. Russia’s aggressive stance There can be little doubt that Putin’s aggression in Ukraine was triggered by Ukraine’s expressed desire to join NATO and America’s seeming acquiescence. A similar situation had arisen over Georgia, which in 2008 triggered a rapid response from Putin. His objective now is to get America out of Europe’s defence system, which would be the end of NATO. Consider the following: America’s military campaigns on the Eurasian continent have all failed, and Biden’s withdrawal from Afghanistan was the final defeat. The EU is planning its own army. Being an army run by committee it will lack focus and be less of a threat than NATO. This evolution into a NATO replacement should be encouraged. As the largest supplier of energy to the EU, Russia can apply maximum pressure to speed up the political process. The most important commodity for the EU is energy. And through EU policies, which have been to stop producing carbon-based energy and to import it instead, the EU has become dependent on Russian oil, natural gas, and coal. And by emasculating Ukraine’s production, Putin is putting further pressure on the EU with respect to food and fertiliser, which will become increasingly apparent over the course of the summer. For now, the EU is toeing the American line, with Brussels instructing member states to stop importing Russian oil from the end of this year. But already, it is reported that Hungary and Slovakia are prepared to buy Russian oil and pay in roubles. And it is likely that while other EU governments will avoid direct contractual relationships with Russia, ways round the problem indirectly are being pursued. A sticking point for EU governments is having to pay in roubles. Otherwise, the solution is simple: non-Russian, non-EU banks can create a Eurorouble market overnight, creating rouble bank credit as needed. All that such a bank requires is access to rouble liquidity to manage a balance sheet denominated in roubles. The obvious providers of rouble credit are China’s state-controlled megabanks. And we can be reasonably sure that at his meeting with President Xi on 4 February, not only would the intention to invade Ukraine have been discusseded, but the role of China’s banks in providing roubles for the “unfriendlies” (NATO and its supporters) in the event of Western sanctions against Russia will have been as well. The point is that Russia and China have mutual geopolitical objectives, and what might have come as a surprise to the West was most likely agreed between them in advance. The recovery in the rouble from the initial hit to an intraday low of 150 to the dollar has taken it to 64 at the time of writing. There are two factors behind this recovery. The most important is Putin’s announcement that the unfriendlies will have to pay for energy in roubles. But there was a subsidiary announcement that the Russian central bank would be buying gold. Notionally, this was to ensure that Russian banks providing finance to gold mines could gold and other related assets as collateral. But the central bank had stopped buying gold and accumulated the unfriendlies currencies in its reserves instead. This was taken by senior figures in Putin’s administration as evidence that the highly regarded Governor, Elvira Nabiullina, had been captured by the West’s BIS-led banking system. Russia has now realised that foreign exchange reserves which can be blocked by the issuers are valueless as reserves in a crisis, and that there is no point in having them. Only gold, which has no counterparty risk can discharge this role. And it is a lesson not lost on other central banks either, both in Asia and elsewhere. But this sets the rouble onto a different course from the unbacked fiat currencies in the West. This is deliberate, because while rising interest rates will lead to a combined currency, banking, and financial asset crisis in the West, it is a priority of the greatest importance for Russia to protect herself from these developments. A new backing for the rouble Russia is determined to protect herself from a dollar currency collapse. So far as Russia is concerned, this collapse will be reflected in rising dollar prices for her exports. And only last week, one of Putin’s senior advisors, Nikolai Patrushev, confirmed in an interview with Rossiyskaya Gazeta that plans to link the rouble to commodities are now being considered. If this plan goes ahead, the intention must be for the rouble to be considered a commodity substitute on the foreign exchanges, and its protection against a falling dollar will be secured. We are already seeing the rouble trending higher, with it at 64 to the dollar yesterday. Figure 1 below shows its progress, in the dollar-value of a rouble. Keynesians in the West have misread this situation. They think that the Russian economy is weak and will be destabilised by sanctions. That is not true. Furthermore, they would argue that a currency strengthened by insisting that oil and natural gas are paid for in roubles will push the Russian economy into a depression. But that is only a statistical effect and does not capture true economic progress or the lack of it, which cannot be measured. The fact is that the shops in Russia are well stocked, and fuel is freely available, which is not necessarily the case in the West. The advantages for Russia are that as the West’s currencies sink into crisis, the rouble will be protected. Russia will not suffer from the West’s currency crisis, she will still get inflation compensation in commodity prices, and her interest rates will decline while those in the West are soaring. Her balance of trade surplus is already hitting new records. There was a report, attributed to Dmitri Peskov, that the Kremlin is considering linking the rouble to gold and the idea is being discussed with Putin. But that’s probably a rehash of the interview that Nickolai Patrushev recorded with Rossiyskaya Gazeta referred to above, whereby Russia is considering fixing the rouble against a wider range of commodities. At this stage, a pure gold standard for the rouble of some sort would have to take the following into account: History has shown that the Americans and the West’s central banks manipulate gold prices through the paper markets. To fix the rouble against a gold standard would hold it a hostage to fortune in this sense. It would be virtually impossible for the West to manipulate the rouble by intervening in this way across a range of commodities. Over long periods of time the prices of commodities in gold grams are stable. For example, the price of oil since 1950 has fallen by about 30%. The volatility and price rises have been entirely in fiat currencies. The same is true for commodity prices generally, telling us that not only are commodities priced in gold grams generally stable, but a basket of commodities can be regarded as tracking the gold price over time and therefore could be a reasonable substitute for it. If Russia has significant gold bullion quantities in addition to declared reserves, these will have to be declared in conjunction with a gold standard. Imagine a situation where Russia declares and can prove that it has more gold that the US Treasury’s 8,133 tonnes. Those who appear to be in a position to do so assess the true Russian gold position is over 10,000 tonnes. Combined with China’s undeclared gold reserves, such an announcement would be a financial nuclear bomb, destabilising the West. For this reason, Russia’s partner, China, for which exporting semi-manufactured and consumer goods to the West is central to her economy activities, would prefer an approach that does not add to the dollar’s woes directly. The Americans are doing enough to undermine the dollar without a push from Asia’s hegemons. Furthermore, a mechanism for linking the rouble to commodity prices has yet to be devised. The advantage of a gold standard is it is a simple matter for the issuer of a currency to accept notes from the public and to pay out gold coin. And arbitrage between gold and roubles would ensure the link works on the foreign exchanges. This cannot be done with a range of commodities. It will not be enough to simply declare the market value of a commodity basket daily. Almost certainly forex traders will ignore the official value because they have no means of arbitrage. It is likely, therefore, that Russia will take a two-step approach. For now, by insisting on payments in roubles by the unfriendlies domestic Russian prices for commodities, raw materials and foods will be stabilised as the unfriendlies’ currencies fall relative to the rouble. Russia will find that attempts to tie the currency to a basket of currencies is impractical. After the West’s currency, banking, and financial asset crisis has passed then there will be the opportunity to establish a gold standard for the rouble. The Eurasian Economic Union While it is impossible to formally tie a currency which trades on the foreign exchanges to a basket of commodities, the establishment of a virtual currency specifically for trade settlement between jurisdictions is possible. This is the basis of a project being supervised by Sergei Glazyev, whereby such a currency is planned to be used by the member states of the Eurasian Economic Union (EAEU). Glazyev is Russia’s Minister in charge of integration and macroeconomics of the EAEU. While planning to do away with dollars for trade settlements has been in the works for some time, sanctions by the unfriendlies against Russia has brought about a new urgency. We know no detail, other than what was revealed in an interview Glazyev gave recently to a media outlet, The Cradle [ii]. But the desire to do away with dollars for the countries involved has been on the agenda for at least a decade. In October 2020, the original motivation was explained by Victor Dostov, president of the Russian Electronic Money Association: “If I want to transfer money from Russia to Kazakhstan, the payment is made using the dollar. First, the bank or payment system transfers my roubles to dollars, and then transfers them from dollars to tenge. There is a double conversion, with a high percentage taken as commission by American banks.” The new trade currency will be synthetic, presumably price-fixed daily, giving conversion rates into local currencies. Operating rather like the SDR, state banks can create the new currency to provide the liquidity balances for conversion. It is a practical concept, which being relatively advanced in the planning, is probably the reason the Kremlin is considering it as an option for a future rouble. That idea of a commodity basket for the rouble itself is bound to be abandoned, while a successful EAEU trade settlement currency can be extended to both the wider Shanghai Cooperation Organisation and the BRICS members not in the SCO. China’s position We can now say with confidence that at their meeting on 4 February Putin and Xi agreed to the Ukraine invasion. Chinese interests in Ukraine are affected, and the consequences would have had to be discussed. The fact that Russia went ahead with its war on Ukraine makes China complicit, and we must therefore analyse the position from China’s point of view. For some time, America has attacked China’s economy, trying to undermine it. I have already detailed the position over Hong Kong, to which can be added other irritations, such as the arrest of Huawei’s chief financial officer in Canada on American instructions, trade tariffs, and the sheer unpredictability of trade policy during the Trump administration. President Biden and his administration have now been assessed by both Putin and Xi. By 4 February their economic and banking advisors will have made their recommendations. Outsiders can only come to one conclusion, and that is Russia and China decided at that meeting to escalate the financial war on the West. Their position is immensely strong. While Russia is the largest exporter of energy and commodities in the world, China is the largest provider of intermediate and consumer goods. Other than the unfriendlies, nearly all other nations are neutral and will understand that it is not in their interests to side with NATO, the EU, Japan and South Korea. The only missing piece of the jigsaw is China’s commoditisation of the renminbi. Following the Fed’s reduction of its funds rate to the zero bound and its monthly QE increase to $120bn per month, China began to aggressively stockpile commodities and grains. In effect, it was a one-nation crack-up boom, whereby China took the decision to dump dollars. The renminbi rose against the dollar, but by considerably less than the dollar’s loss of purchasing power. This managed exchange rate for the renminbi appears to have been suppressed to relieve China’s exporters from currency pressures, at a time when the Chinese economy was adversely affected first by credit contraction, then by covid and finally by supply chain disruptions. With respect to supply chains, current lockdowns in Shanghai and the logjam of container vessels in the Roads look set to emasculate Western economies with supply chain issues for the rest of the year. All we know is that the authorities are making things worse, but we don’t know whether it is deliberate. It is increasingly difficult to believe that the financial and currency war is not being purposely escalated by the Chinese-Russian partnership. Having attacked Ukraine, the West’s response is undermining their own currencies, and the urgency for China and Russia to protect their currencies and financial systems from the consequences of a fiat currency crisis has become acute. It is the financial war which is going “nuclear”. Talk in the West of the military war escalating towards a physical nuclear war misses this point. China and Russia now realise they must protect themselves from the West’s looming currency and economic crisis as a matter of urgency. To fail to do so would simply ensure the crisis overwhelms them as well. Tyler Durden Fri, 05/06/2022 - 21:00.....»»

Category: dealsSource: nytMay 6th, 2022

3 Solid Funds to Buy on Surging Retail Sales

The retail sector is fast getting back on its feet, which is likely to help funds like FSCPX, FSHOX and FSRPX. The retail sector is bouncing back strongly after taking a major blow during the peak of the pandemic, followed by uneven sales over the past year. This year, so far, has been good, with sales picking up in all the three months, which is a good sign for retailers as they finally breathe easy.Although rising costs have been a worrying factor, people are still willing to spend, thanks to higher personal income and spending. Thus, funds like Fidelity Select Consumer Discretionary Portfolio FSCPX, Fidelity Select Construction & Housing Portfolio FSHOX andFidelity Select Retailing Portfolio FSRPX, are likely to benefit in the near term.Retail Sales SoaringAccording to the latest Mastercard SpendingPulse report, retail sales excluding vehicle sales, increased 8.4% year over year in March. Moreover, sales grew 18% compared to the pre-pandemic period. The report also mentions that sales in March were driven by the services industry.This saw airline travel soaring 44.8% year over year in March, while restaurant sales and hotel bookings jumped 19.1%. This indicates that consumer spending on services is picking up again, which is beneficial to the retail sector.The pandemic had hit the retail sector severely that saw people cutting down on spending on services. However, offices, industries and school are reopening and people spending more on services once again.The jump in spending on services hasn’t hampered spending on goods. Sales of apparel and luxury products climbed 16% and 27.1%, respectively. Department store sales jumped 14%.In-store sales have also increased as people feel more comfortable leaving their homes. In-store sales increased 9.4% in March from the pre-pandemic levels.The jump comes despite rising commodity prices, which has seen inflation figures soar to a 41-year high. Even then, people are not hesitant about spending, which has been driving retail sales. One major reason behind this is a rise in personal income and spending. Personal income rose 0.5% in February, while spending increased 0.2%.3 Best ChoicesWe have, thus, selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. FSCPX invests the majority of its assets in securities of companies typically engaged in production, distribution and marketing of consumer discretionary products. Fidelity Select Consumer Discretionary Portfolio fund invests in both U.S. and non-U.S. issuers.Fidelity Select Consumer Discretionary Portfolio has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 16.3% and 15.5% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76% versus the category average of 0.79%.Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 17.3% and nearly 17.9% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.Fidelity Select Construction & Housing Portfolio fund seeks capital growth. FSHOX invests in common stocks and most of its assets in the designing and construction of residential, commercial and industrial facilities etc.Fidelity Select Construction & Housing Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FSHOX has returned 23.8% and 17.5% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSHOX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 0.79%.Want key mutual fund info delivered straight to your inbox?Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSRPX): Fund Analysis Report Get Your Free (FSCPX): Fund Analysis Report Get Your Free (FSHOX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Category: topSource: zacksApr 14th, 2022

3 Funds to Buy on Soaring Retail Sales

The retail sector has so far done well this year, which is Kiley to help funds like FSCPX,FDFAX and FSRPX. The retail sector was one of the worst hit during the peak of the pandemic and since then has been struggling hard to bounce back. After a roller-coaster ride in 2020, things finally seem to be changing, with retail sales now picking up.However, there are a lot of challenges, with rising prices being one of the biggest. Despite all these, people are still willing to spend as they have more disposable cash in hand now. Thus, funds like Fidelity Select Consumer Discretionary Portfolio FSCPX, Fidelity Select Consumer Staples Portfolio FDFAX and Fidelity Select Retailing Portfolio FSRPX are likely to benefit in the near term.Retail Sales Jump in February          The Commerce Department said on Mar 16 that retail sales jumped 0.3% in February. Although it’s a lot slower than January’s gains of 4.9%, the good thing is that 2022 has started on a positive note for retailers with sales jumping in the first two months of the year.Moreover, the jump comes despite rising costs, which have made many spend cautiously. February’s sales were primarily driven by a 5.3% jump in spending on gasoline as energy costs continued to climb owing to the ongoing Russia-Ukraine war.However, despite rising costs, people are willing to spend, suggesting that the sector is on track for faster recovery. Of the 13 retail sectors, sales grew in seven.Also, the U.S. unemployment rate has hit a low of 3.8%, which shows that people are finally going back to work. This means people are earning more now and are likely to spend in the coming days. Moreover, disposable income has been rising almost throughout the pandemic. Also, household savings hit a new high in 2021, signaling that consumer spending will rise in the next months.3 Best ChoicesWe have, thus, selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. FSCPX invests the majority of its assets in securities of companies typically engaged in production, distribution and marketing of consumer discretionary products. Fidelity Select Consumer Discretionary Portfolio fund invests in both U.S. and non-U.S. issuers.Fidelity Select Consumer Discretionary Portfolio has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 17.4% and 15.8% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76% versus the category average of 0.79%.Fidelity Select Consumer Staples Portfolio fund aims for capital growth. FDFAX invests the majority of its assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 13.9% and 7.8% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.75% versus the category average of 0.76%.Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 19.1% and nearly 18.4% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.Want key mutual fund info delivered straight to your inbox?Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSRPX): Fund Analysis Report Get Your Free (FDFAX): Fund Analysis Report Get Your Free (FSCPX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Category: topSource: zacksMar 18th, 2022

11 Reasons Why This Was Joe Biden"s Worst Week Ever

11 Reasons Why This Was Joe Biden's Worst Week Ever Authored by Michael Snyder via The Economic Collapse blog, Joe Biden has had a lot of bad weeks over the last 12 months, but this week has got to take the cake.  In fact, it is hard to remember the last time that any president had a week that was this bad.  But this wasn’t supposed to happen.  Democrats were promising a return to “normalcy” after the Trump years, but instead virtually everything seems to be going wrong.  No matter where you are on the political spectrum, you should be able to admit that Joe Biden’s presidency is not going very well at all.  At this point, even many Democrats are using the word “failure” to describe Biden, and this is fueling rumors that Hillary Clinton may run again in 2024. Yes, Biden’s presidency has been such a complete and utter disaster that the absolutely unthinkable could actually become a reality. Just when you think that things can’t get any worse, somehow they do.  The following are 11 reasons why this was Joe Biden’s worst week ever… #1 The OSHA Mandate On Thursday, we learned that the U.S. Supreme Court had voted 6 to 3 to strike down Biden’s cherished OSHA vaccine mandate… President Biden urged businesses to bring in vaccine mandates on their own and pushed states to ‘do the right thing’ after the Supreme Court voted 6-3 to block his sweeping rules on private companies in a crushing blow to his pandemic response. The high court did however allow a vaccine mandate for employees at health care facilities receiving federal dollars to go into effect. The OSHA mandate would have covered approximately 80 million American workers, and countless workers all over the country that would have lost their jobs under this mandate are greatly celebrating right now. #2 The Filibuster Biden was desperately hoping that all of the Democrats in the U.S. Senate would agree to kill the filibuster so that he could get the “voting rights bill” through Congress, but Senator Kyrsten Sinema just made it exceedingly clear that she is not willing to do that… First, Arizona Sen. Kyrsten Sinema, a fellow Democrat, announced that although she supports the voting rights bill, she’s not willing to do what it would take to make it happen. The filibuster. I’m talking about killing the filibuster. This came only two days after the president made such an impassioned speech in support of knocking off the filibuster that Republicans essentially called it offensive. And even one Democratic senator said Biden, who pledged a year ago to unite Americans, went too far in the speech. When she was elected, I never imagined that the day would come when I would be thankful for Kyrsten Sinema. But today I am definitely very thankful that she has taken this stand. #3 Inflation This week, it was announced that the inflation rate had hit a 40 year high, and Americans are blaming Biden for this. And as I pointed out in an article that I posted on Wednesday, if inflation was still calculated the way that it was back in 1980, the official rate of inflation in this country would be above 15 percent at this point. #4 Shortages In December, Joe Biden told the nation that the supply chain crisis was over. Of course that was not true, and now store shelves are so empty that “BareShelvesBiden” has been trending on social media throughout this entire week. #5 Joe Biden’s Approval Rating At the beginning of his presidency, Biden actually had very strong approval ratings, but now they just continue to sink lower and lower. As I pointed out yesterday, the seven most recent Quinnipiac polls show a very clear trend… President Biden’s overall approval rating in the last seven Quinnipiac polls: 49%, 46%, 42%, 38%, 37%, 36%, 33%. [ZH: The dead-cat-bounce in Biden's approval is over...] #6 Fauci’s Approval Rating Dr. Fauci was Biden’s handpicked choice to lead the U.S. out of this pandemic, but he has been steadily losing the trust of the American people. According to a NewsNation poll that was just conducted, only 31 percent of all Americans still believe what he is telling us about the pandemic. #7 Omicron During the presidential campaign, Joe Biden repeatedly promised that he would “shut down the virus”, but in recent days the number of COVID cases has soared to all-time record highs in the United States.  At this point things are so bad that even Biden administration officials are admitting that essential services are in danger of totally breaking down… Acting Food and Drug Administration Commissioner Dr. Janet Woodcock gave U.S. lawmakers an ominous warning this week: The nation needs to ensure police, hospital and transportation services don’t break down as the unprecedented wave of omicron infections across the country forces people to call out sick. “It’s hard to process what’s actually happening right now, which is most people are going to get Covid,” Woodcock testified before the Senate health committee on Tuesday. “What we need to do is make sure the hospitals can still function, transportation, other essential services are not disrupted while this happens.” #8 The Lack Of COVID Tests Even CNN and MSNBC have been roasting Biden this week for not having enough COVID tests for the American people. Now the Biden administration is telling us that millions of new tests are on the way, but by the time they arrive the Omicron wave may be over. #9 Russia Foreign policy takes a great deal of finesse, and that is something that Biden’s team is sorely lacking. When I first started warning that Biden was surrounded by the worst foreign policy team in U.S. history, a lot of people thought that I was exaggerating. But now the truth is becoming very clear, and a potential war with Russia that nobody wants is closer than ever… Talks to find a diplomatic solution to the worsening situation between Russia and Ukraine are on the brink of collapse after Thursday’s meeting as a key US ambassador warned ‘the drumbeat of war is sounding loud.’ Secretary of State Antony Blinken hit the airwaves on Thursday morning where he also weighed in on the crisis, claiming the ‘jury is still out’ on whether Russian President Vladimir Putin’s aggressive military buildup on Ukraine’s border will end with an invasion. #10 Kamala Harris Is even Kamala Harris turning against Biden? This week, a reporter asked Harris if the Democrats would have the same presidential ticket in 2024. Normally, that would be a really easy question for any vice-president to answer. But instead of answering “of course”, this is how Harris responded… REPORTER: “Are we going to see the same Democrat ticket in 2024?” HARRIS: “[long pause] I’m sorry but we are thinking about today” Wow. I think that this is another very clear sign that there is far more going on behind the scenes than we are being told. #11 Hillary Clinton Biden is such a failure that some Democrats are already suggesting that Hillary Clinton should be the Democratic nominee in 2024. Seriously. On Wednesday, a pro-Hillary piece authored by two key Democratic operatives named Douglas E. Schoen and Andrew Stein appeared in the Wall Street Journal.  In their article, they listed a number of different reasons why they believe that Hillary would be a good choice for the next election cycle… ‘Several circumstances – President Biden’s low approval rating, doubts over his capacity to run for re-election at 82, Vice President Harris’s unpopularity, and the absence of another strong Democrat to lead the ticket in 2024 – have created a leadership vacuum in the party, which Mrs. Clinton viably could fill,’ they write. So could we actually see a rematch between Hillary Clinton and Donald Trump? Of course we still have three more years of the Biden/Harris administration to get through first, and that won’t be pleasant. Decades of very foolish decisions set the stage for where we are today, and now Biden and his minions have us steamrolling down a highway that doesn’t lead anywhere good. By the time we get to 2024, this country could be completely unrecognizable. Biden’s first year has been absolutely terrible, and the next three years are likely to be even worse. But there is no “exit button” on this ride, and so we are all going to have to endure whatever is coming next. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Fri, 01/14/2022 - 16:20.....»»

Category: blogSource: zerohedgeJan 14th, 2022

How To Double Your Stock Returns In 2022

Stocks are set to soar again in 2022, so this is the time for investors to make big goals for the year ahead. Such as doubling your investment returns! Kevin will help prepare you for all the opportunities to come. The market was on fire last year with all of the major indexes soaring to new all-time highs, with the Dow up 18.7%, the S&P up 26.9%, and the Nasdaq up 21.4%.And it’s easy to see why. Record low interest rates, a record amount of stimulus money, a record amount of pent-up economic demand, and record corporate profits, are ushering in a record economic rebound.That’s why we’re seeing a record rally in the stock market.And why stocks are expected to soar in 2022.So as an investor, you should be handily beating the market right now. If not, now would be a good time to reflect on what you’re doing right in the market, what you’re doing wrong, and what you'd like to do better.This includes patting yourself on the back for your successes.Being honest with yourself for your failures.And setting big goals for what you'd like to accomplish this year.Like doubling your investment returns. (That’s right, double!)Think Big It takes no more mental energy to work on a big goal than it does to work on a small one.But the end results can be enormous.Most people set their sights on small ideas because they don't yet know how they'll achieve them.But in this day and age, somebody has likely accomplished the very thing you've set out to do -- and left a roadmap on how to do it.That goes for the market too.Continued . . .------------------------------------------------------------------------------------------------------Just Released: Zacks' Top 4 Stocks to Skyrocket in Q1 Four Zacks experts have announced their favorite stocks with the best upside for what looks to be an incredible Q1. One is a leading manufacturer developing critical components for self-driving cars, metaverse/virtual reality, and 5G technologies. The stock’s 17.3X forward P/E makes it one of the best value buys in the one of the world’s most in-demand industries.Today, download the private Special Report that names these stocks and spotlights their exceptional gain potential over the next 3 months. There’s no better time to look into these companies. The stock market is in the midst of an historic run and these 4 stocks could be your best profit plays in the first quarter of the new year.See Our “Ultimate” Stocks Now >> ------------------------------------------------------------------------------------------------------Do What Works What we’re seeing right now in both the economy and the market is history in the making.So how do you fully take advantage of this historic opportunity?By focusing in on which stocks should move up the most. That means sticking with tried and true methods that work to find the best ones.For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 26 of the last 32 years with an average annual return of 24.7% per year? That's nearly 2.5 x the S&P. But when doing this year after year, that can add up to a lot more than just two and a half times the returns.And did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!Those two things will give any investor a huge probability of success and put you well on your way to achieving your goals.But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.So the next step is to get that list down to the best 5-10 stocks that you can buy.Proven Profitable Strategies  Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.For example, if your strategy did nothing but lose money year after year, trade after trade, over and over again, there’s no way you'd want to use that strategy to pick stocks with. Why? Because it's proven to pick bad stocks.On the other hand, if your strategy did great year after year, trade after trade, over and over again, you'd of course want to use that strategy to pick stocks with. Why? Because it's proven to pick winning stocks.Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.Stock Picking Secrets of the Pros  One of the best ways to begin picking better stocks and doubling your returns is to see what the pros are doing.Whether you’re a growth investor, or a value investor, prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.This applies to large-caps and small-caps, biotech and high-tech, ETF’s, stocks under $10, stocks about to surprise, even options, and everything in between. Regardless of which one fits your personal style of trade, just be sure you’re following proven profitable methods that work, from experts who have demonstrated their ability to beat the market.The best part about these strategies is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start getting into better stocks on your very next trade.Roadmap to Success As you can see, there’s a clear roadmap to success to help you achieve your goal of doubling your stock returns in 2022, and for years to come. No need to reinvent the wheel. The path has already been created. Now it’s just about doing it. And there’s never been a better time.These truly are historic times for the economy and the market. And historic times bring historic opportunity.So make sure you’re taking full advantage of it.Where to Start in Q1  One of the smartest ways to maximize your gains is to find out what the professionals are doing and consider following along.Here's an easy way to do that: Download our just-released Ultimate Four Special Report. These are 4 stocks hand-picked by our experts. Each has strong fundamentals and exceptional growth potential. They’re ideally suited to soar in current trading conditions.Stock #1: A leading manufacturer developing critical components for self-driving cars, metaverse/virtual reality, and 5G technologies. The stock’s 17.3X forward P/E makes it one of the best value buys in the one of the world’s most in-demand industries.  Stock #2: A large-cap retailer that has skyrocketed +278% since the beginning of the pandemic bounceback. Wall Street firms expect the momentum to continue and keep raising their price targets accordingly.Stock #3: A disruptive medical stock that’s climbed 11X faster than the rest of the industry as the company grabs more and more market share from legacy providers. After posting record-high quarterly revenues and monster earnings growth, this stock is worth looking into right away.Stock #4: A power player in the food industry that has thrived despite labor shortages and other pandemic challenges. The stock is attracting investors for both its value and growth characteristics. With 6 straight earnings beats and increasing estimates, Q1 looks to be another exciting quarter.You can be one of the first to see these promising recommendations when you download this Special Report today. Opportunity ends midnight Sunday, January 9.Look into these elite 4 stocks now >> Thanks and good trading,KevinKevin Matras serves as Executive Vice President of Zacks.com and is responsible for all of its leading products for individual investors. He invites you to download Zacks’ newly released Ultimate Four Special Report. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 5th, 2022

Marijuana Stocks -- What Are You Waiting For?

Marijuana is now a burgeoning $20 billion a year industry that's likely to grow to $90 billion in the next five years or sooner. And we're still in the very early days! Ben Rains outlines the various ways that you can take advantage of this seismic shift. Marijuana transformed at lightning-fast speeds from a mostly underground black market into a dynamic, booming, $20 billion a year industry full of public companies. And the best part about investing in legal marijuana right now is that we are still in the very early days.The legal tides have already changed dramatically in a short time and we are on the verge of a truly seismic shift that will only happen once. Heading into 2022, there are multiple marijuana legalization bills being debated and reworked in Washington, D.C.The U.S. is poised to introduce wide-ranging federal cannabis legalization in the near future, on the back of overwhelming bipartisan support. When this happens, the entire industry will change overnight and current projections that call for global marijuana sales reach to $90 billion by 2026 might look super conservative.¹Legalization is Gaining Steam Only a decade ago, recreational pot was totally illegal in the U.S. By the end of 2021, a total of 18 states and Washington, D.C. had legalized adult-use marijuana. Meanwhile, the number of legal medical cannabis states is fast-approaching 40.On top of that, Canada legalized recreational marijuana in 2018, becoming the first major economy to do so. Since then, Mexico has made a series of legal changes that will soon see it operate a large legal pot market. Across the Atlantic, multiple European countries are prepared to legalize nationally.The tiny European nations of Malta and Luxembourg legalized weed near the end of 2021. More importantly, Germany is reportedly ready to legalize marijuana under its new coalition government in the early months of 2022. Italy and a few other countries are showing solid potential to join the legal ranks in the near future. And with every new market, new marijuana firms are sure to emerge, as the dollars flow.Huge Bipartisan SupportGlobal marijuana sales soared roughly 50% to a whopping $31 billion in 2021, based on some recent data, and the U.S. is by far the largest legal cannabis market. The expansion was driven by continued growth in legacy states such as Colorado and California, alongside a wave of relative newbies ranging from Illinois to Arizona. And more states are set to climb on the legal cannabis train in 2022.More importantly, multiple bills are under debate in Washington to federally legalize marijuana. Furthermore, Republicans, the party traditionally opposed to weed, are in the midst of a dramatic, paradigm-shifting transformation at both the state and national level.Multiple GOP lawmakers are pushing for marijuana legalization in states like Ohio and Pennsylvania. On top of that, the first major Republican-led federal legalization effort was introduced in November. The bill grabbed a huge amount of national media attention and could gain steam as more Republicans come on board.The growing number of federal legalization efforts on both sides of the aisle make sense given mounting public support. A total of 68% of U.S. adults are now in favor of legal marijuana, including 50% of Republicans. This is up from just 50% of the entire country as recently as 2013. And just think how hard it is to find any issue nearly 70% of Americans agree on these days.Continued . . .------------------------------------------------------------------------------------------------------Time to Buy Marijuana Stocks!The floodgates are about to open. After waves of pot legalization at the state level, we’re on the verge of bipartisan legislation at the federal level. Many U.S. marijuana companies can then list on exchanges like NYSE and Nasdaq, and the money will flow.  Global sales were already $20.5 billion back in 2020, and they're expected to skyrocket to $90.4 billion by 2026.Zacks recently closed trades of +39.7%, +94.5%, even +147.0% in as little as 4½ months.² A new stock will be released Monday morning that could rival or surpass these performances.Deadline to gain access to our Marijuana Innovators recommendations is midnight Sunday, December 26.Catch Zacks’ live buys now >>------------------------------------------------------------------------------------------------------Not Your Parents’ Pot Smoking dried marijuana has historically been the most common way to consume weed, and it’s still widely popular. Yet, as cannabis emerged from the shadows, people and companies refined existing methods and invented various novel ways to use the plant. In doing so, they greatly expanded their potential clientele, while also raising price points and margins.Marijuana scientists and industry professionals spent years figuring out how to precisely extract THC and non-psychoactive CBD from cannabis plants. These efforts birthed vaporized offerings, edibles, oils, topical creams, beverages, and other new-age marijuana products.Marijuana edibles have come a long way since the stereotypical pot brownies. Today, they come in all shapes and sizes, from gummies in every imaginable flavor to chocolates, mints, spreads such as butter, and beyond. Meanwhile, consumers can buy THC-infused sodas, teas, and much more.The non-smoking space provides consumers comfortable, effective, and extremely discreet alternatives to traditional pot that allow users to know exactly how much they are consuming. This also grants investors ample growth runway since edibles and other offerings cater to people who want THC, along with those looking for non-psychoactive CBD products, which have exploded in popularity as well.Logic suggests tons of potential recreational users might not want to smoke anything. And some recent growth numbers back that up. Edibles showcased massive expansion in 2020 (the most recent available data) in the largest U.S. recreational market, according to California-based marijuana delivery company Eaze.Edibles ended the year as the #1 category on its platform, grabbing 22% of all sales, with edibles ranked as the most popular product line in San Francisco, Los Angeles, and San Diego ahead of flower and vapes.In fact, marijuana’s evolution beyond smoking joints inspired international alcoholic beverage firms to buy pot companies because of the potential crossover, promotions, and other synergies. On the flip side, the growth of legal marijuana has propelled publicly traded Canadian marijuana growers to expand into alcohol, sports drinks, and other consumer products.Meanwhile, the expansion potential for edibles and non-smoking marijuana products on the medical front is largely untapped. Canada didn’t even legalize cannabis edibles until a year after it first rolled out recreational marijuana in 2018.One of the country’s biggest pure-play pot companies only launched its first medical cannabis edibles in August of 2021. As a whole, the edibles and non-smoking arenas are the logical endgame for the entire medical marijuana world because of the ability to consume precise amounts, while not inhaling smoke.Pure-Play Opportunities  Due to the current legal standing, only Canadian pot growers can list on major U.S. exchanges, with huge American companies left to trade over the counter, if at all. Federal legalization will transform the already-massive industry in the blink of an eye.The move will allow U.S. growers to list on the NYSE and the Nasdaq. This will then prompt billions of dollars to start flowing in from institutional investors and other large money managers who have stayed away because of the legal grey area. Legalization is also sure to spur a wave of major mergers and acquisitions, as companies aim to capture more market share through consolidation.U.S. cannabis growers will add to the already constantly-expanding number of pure-play pot stocks to invest in right now. And the Canadian companies have already completed creative deals that provide them instant access to the U.S. market upon federal legalization.Potential investors should also be excited to know that nearly all of the currently-public pure-play marijuana stocks are trading near all-time lows heading into the new year. The entire industry was beaten down in 2021, along with other former covid high-flyers and growth stocks.The downturn recalibrated countless marijuana stocks to enticing levels, especially considering many are projected to post 100% or higher revenue growth in 2022. And that’s not even taking into account the potential for U.S. legalization and beyond.There will, of course, be winners and losers because pure-play pot stocks operate in a hyper-competitive space akin to other consumer packaged goods where marketing, branding, and packaging are paramount. Luckily, the timing is ideal for investors to cash in on the companies that could become the Coca-Cola or Starbucks of marijuana.Easy Way to Pursue Big Profits At Zacks, we're monitoring political developments very closely as well as tracking individual stocks. We're on the brink of legalizing marijuana on the federal level, and this bipartisan push would open the floodgates. Many U.S. companies could then list on exchanges like NYSE and Nasdaq, and money will flow.The trend is unstoppable. Medicinal marijuana is already legal in 36 states with 18 allowing recreational use. It's already legal in Canada and there's movement in Mexico and throughout Europe.As mentioned earlier, global revenue for legal marijuana is expected to explode from $20.5 billion in 2020 to $90.4 billion by 2026.Plus, most marijuana stocks are still trading at big discounts. For investors, this presents a massive opportunity – what are you waiting for? Our approach to this fast-emerging industry is responsible and vigilant, but we look for aggressive growth. Recently, we closed gains of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months.²Right now you can follow the live buys and sells inside Marijuana Innovators, and be among the first to get in on a new buy that could surpass those performances. I’m posting it Monday morning at 11:05 am ET.Bonus Report: And speaking of industries with explosive growth potential, when you check our marijuana recommendations you are also invited to download Zacks’ new Special Report, One Semiconductor Stock Stands to Gain the Most. From 35 semiconductor stocks, you can get an early look at Zacks’ top pick during today’s chip shortage crisis.We can’t let everyone in on our marijuana portfolio, so your chance to gain access must end at midnight this Sunday, December 26. Sorry, no extensions.See Zacks' Marijuana Innovators Trades and Bonus Semiconductor Report Now >>Happy Investing,Ben RainsEditorBen Rains develops strategies that enable investors to profit from the growing legal market in the U.S. and beyond. He uses his extensive experience and concentrated industry study to direct our unique portfolio service, Zacks Marijuana Innovators.¹ Source for marijuana industry growth estimate: Research and Markets ² The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position.  Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 24th, 2021

Over 3,300 Restaurants Tell Congress They Will Likely Close Without RRF

Over 3,300 Restaurants From All 50 States Fear Permanent Closure This Winter and Urge Congress to Fund Restaurant Grant Program  Q3 2021 hedge fund letters, conferences and more Restaurants to Congressional Leadership: “Time is Up”  86% of Restaurants That Haven’t Received Grant Relief At Risk of Closure if Congress Does Not Replenish RRF **Read the […] Over 3,300 Restaurants From All 50 States Fear Permanent Closure This Winter and Urge Congress to Fund Restaurant Grant Program  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 Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton 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 Restaurants to Congressional Leadership: “Time is Up”  86% of Restaurants That Haven’t Received Grant Relief At Risk of Closure if Congress Does Not Replenish RRF **Read the Letter Here** **Download the Press Conference Recording Here** Restaurants Demand To Replenish The RRF WASHINGTON D.C. – Today, the Independent Restaurant Coalition unveiled a letter signed by over 3,300 restaurants and bars from all 50 states that reported they are in danger of closing if Congress does not replenish the RRF. Over 5,000 people from the restaurant and bar community, including suppliers, signed the letter. These small businesses nationwide are grappling with more than 20 months of accumulated debt, rising food costs, and consumer hesitancy from the Omicron variant. Their applications have languished in the Restaurant Revitalization Fund application portal for nearly 200 days, waiting for Congress to deliver the relief they need. “Congress can prevent thousands of businesses from closing, a massive supply chain disruption, and widespread job loss by replenishing the Restaurant Revitalization Fund immediately,” said Erika Polmar, Executive Director of the Independent Restaurant Coalition. “This impacts constituents in every single state. Our elected officials did not adequately fund this wildly successful grant program and now time is up for thousands of restaurants and bars who applied and did not receive relief. Congress must act swiftly and decisively to refill the Restaurant Revitalization Fund and save small businesses that will soon close in every state.” “Despite a busy summer and fall, we have not even begun to recoup the loss we experienced over the pandemic,” said Lindsay Mescher, Chef/Owner, Greenhouse Cafe in Lebanon, Ohio. “It is extremely unfair that some restaurants got relief and others didn't. By not replenishing these funds, Congress is saying that some restaurants are worth saving and others aren't. These funds would have guaranteed our survival. Senators Portman and Brown need to do what they can to ensure that restaurants and bars like mine have the capital they need to keep our doors open.” “By the end of January, I will permanently close my restaurant if Congress does not refill the Restaurant Revitalization Fund,” said Dwayne Allen, Owner, The Breadfruit & Rum Bar in Phoenix, Arizona. “I have hung onto my restaurant for this long hoping that my government would recognize that this is a time of need for restaurants. Unfortunately, members of Congress picked winners and losers and now our businesses will pay the price. Senator Sinema played an enormous role in providing our industry with the initial $28.6 billion in relief. We know that she is going to fight tooth and nail for neighborhood restaurants on the brink of permanent closure.” The Danger Of Permanent Closure America is home to over 500,000 independent restaurants and bars, which supported 16 million jobs before the pandemic. Just 101,004 restaurants and bars received an RRF grant this year, but nearly 200,000 were left behind in the first round of funding and are in danger of permanent closure. Restaurants and bars lost over $280 billion during the pandemic yet only received $28.6 billion in targeted relief. “Going into March of 2020, my business was debt free. Now, I find myself with over $100,000 in business and personal debt,” said Sara Lund, Owner/Operator, Bodega and The Rest in Salt Lake City, Utah. “After not receiving the Restaurant Revitalization Fund, I had to drain all of my personal savings and put that into the business to keep it afloat and keep my staff employed. Our government asked us to close our doors and help our communities be safe — we all did that. We closed our doors, we changed the way we operated our businesses. For those of us that were left hanging in June, I feel like we deserve a fair playing field. I will close my business if Congress does not replenish the RRF. Senators Romney and Lee need to support this critical legislation — my business will not survive without it.” “So many people are working themselves to the bone just to try and survive. It’s not because anyone is being a poor operator or is making poor decisions. It’s because costs have risen and they have taken on debt,” said Josh James, Director of Operations, Cru LLC in Knoxville, Tennessee. “It’s just made it impossible in an already slim margin of business to keep people employed. Restaurants and bars all around the Volunteer State have weeks, not months, before they shut for good. We need Senators Blackburn and Hagerty to help us by supporting refilling the Restaurant Revitalization Fund — the time is now.” The Independent Restaurant Coalition is advocating for the Restaurant Revitalization Fund Replenishment Act, which would provide an additional $60 billion in funding to the Restaurant Revitalization Fund. The plan is gaining rapid bipartisan support in Congress– at least 223 members of the House of Representatives and 43 members of the Senate have indicated their support for the bill, which was introduced by Sens. Roger Wicker (R-MS) and Kyrsten Sinema (D-AZ) in the Senate and Reps. Earl Blumenauer (D-OR-3) and Brian Fitzpatrick (R-PA-1) in the House. Restaurants and bars are struggling to survive 20 months of debt, rising supplier costs and the Omicron variant threatens to push more restaurants and bars into permanent closure. Over 86% of restaurant and bar owners report they will close without an RRF grant, according to an IRC survey. According to the National Restaurant Association, more than 90,000 restaurants and bars have closed since the beginning of the pandemic. The Omicron variant is already affecting restaurant reservations in cities around the country. Reservations in Baltimore (29%), Chicago (31%), Denver (16%), New Orleans (39%), and New York (40%) are far below their 2019 levels. According an IRC survey, nearly 1 in 5 (18.3%) of restaurant owners reported having their credit scores reduced below 570 during the pandemic — many of these operators cannot take on any more loans including from the remaining SBA programs like EIDL. According to the National Restaurant Association, 60% of adults changed their dining habits due to the Delta variant. The Omicron variant threatens to inflict the same hesitancy amongst diners around the country. The prices of supplies have surged in the last year including beef and veal (57%), grains (55%), eggs (36.7%) and shortening and cooking oil (41.5%). These businesses have a mountain of insurmountable debt that is continuing to build — 51% of restaurants could not pay their September rent. Suppliers are joining together to push for restaurant relief as well. Recently, nearly 30 winemakers, restaurant suppliers and trade groups, including Toast, Baldor Foods, US Foods and DoorDash called on Congress to refill the Restaurant Revitalization Fund (RRF) in a letter sent to Congressional leadership by the Independent Restaurant Coalition (IRC). These organizations, representing many of the five million workers restaurants support through the supply chain, cautioned Members of Congress about the cataclysmic effects allowing restaurants and bars to close would have on their businesses. About The IRC The Independent Restaurant Coalition was formed by chefs and independent restaurant owners across the country who have built a grassroots movement to secure vital protections for the nation’s 500,000 independent restaurants and the more than 11 million restaurant and bar workers impacted by the coronavirus pandemic. Letter To The Congress Dear Speaker Pelosi, Leader McConnell, Leader Schumer and Leader McCarthy; Our industry is grateful to Congress for passing the Restaurant Revitalization Fund earlier this year but neighborhood restaurants still need help — and we can’t wait any longer. Our small businesses are struggling to survive: food and supply costs have skyrocketed, diners are more apprehensive with each new COVID variant, winter weather makes outdoor dining impossible, and we have immense debt after almost two years of business disruption. Many businesses that have managed to scrape by anticipate closing forever in the next few months if they don’t receive a Restaurant Revitalization Fund (RRF) grant. Over 100,000 restaurants and bars received vital protections from the $28.6 billion RRF included in the American Rescue Plan, but 177,000 applicants are still waiting for funding. Over 86% of independent restaurants and bars like ours who didn’t receive grants risk closing permanently without relief. It’s not fair to help some businesses navigate the rising cost of staying in business by helping pay down debts, make necessary repairs and hire workers at competitive rates. The government should not pick winners and losers — this pandemic impacted all of us, and we all deserve a fair shot. That’s why we’re writing to ask that you refill the RRF with additional aid for our industry. A broad, bipartisan majority of lawmakers support bills to get this done in both the House (H.R.3807 and H.R.4568) and the Senate (S.2091 and S.2675). To date, 295 representatives in the House and 51 Senators have signed on in support of refilling the RRF. Time is up for our nation's 500,000 local, independent restaurants and bars, as well as the 16 million people we employ and the millions of farmers, fishermen, beverage distributors, and others up and down the supply chain. Restaurants serve our communities, employ families, and feed our economy. We need your help so we can continue serving you for years to come. Respectfully, Independent Restaurant Coalition Updated on Dec 9, 2021, 4:48 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: valuewalkDec 9th, 2021

Futures Under Water As Tech Selloff Spreads, Yields Spike, Lira Implodes

Futures Under Water As Tech Selloff Spreads, Yields Spike, Lira Implodes US equity futures continued their selloff for the second day as Treasury yields spiked to 1.66%, up almost 4bps on the day, and as the selloff in tech shares spread as traders trimmed bets for a dovish-for-longer Federal Reserve after the renomination of Jerome Powell as its chair. At 8:00am ET, S&P futures were down 2.75 points or -0.05%, with Dow futures flat and Nasdaq futures extended their selloff but were off worst levels, down 41.25 points or 0.25%, after Monday’s last-hour furious rout in technology stocks. As repeatedly covered here in recent weeks, the Turkish currency crisis deepened with the lira weakening past 13 per USD, a drop of more than 10% in one day.  Oil rebounded - as expected - after a panicking Joe Biden, terrified about what soaring gas prices mean for Dems midterm changes, announced that the US, together with several other countries such as China, India and Japan, would tap up to 50 million barrels in strategic reserves, a move which was fully priced in and will now serve to bottom tick the price of oil. In premarket trading, Zoom lost 9% in premarket trading on slowing growth. For some unknown reason, investors have been reducing expectations for a deeper dovish stance by the Fed after Powell was selected for a second term (as if Powell - the man who started purchases of corporate bonds - is somehow hawkish). The chair himself sought to strike a balance in his policy approach saying the central bank would use tools at its disposal to support the economy as well as to prevent inflation from becoming entrenched. “While investors no longer have to wonder about who will be leading the Federal Reserve for the next few years, the next big dilemma the central bank faces is how to normalize monetary policy without upsetting markets,” wrote Robert Schein, chief investment officer at Blanke Schein Wealth Management. Following Powell’s renomination, “the market has unwound hedges against a more ‘dovish’ personnel shift,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note. Not helping was Atlanta Fed President Raphael Bostic who said Monday that the Fed may need to speed up the removal of monetary stimulus and allow for an earlier-than-planned increase in interest rates European stocks dropped with market focusing on potential Covid lockdowns and policy tightening over solid PMI data. Euro Stoxx 50 shed as much as 1.7% with tech, financial services and industrial names the hardest hit. Better-than-forecast PMI numbers out of Europe’s major economies prompted money markets to resume bets that the ECB will hike the deposit rate 10 basis points as soon as December 2022, versus 2023 on Monday. As Goldman notes, the Euro area composite flash PMI increased by 1.6pt to 55.8 in November — strongly ahead of consensus expectations — in a first gain since the post-July moderation. The area-wide gain was broad-based across countries, and sectors. Supply-side issues continued to be widely reported, with input and output price pressures climbing to all-time highs. In the UK, the November flash composite PMI came in broadly as expected, and while input costs rose to a new all-time high, pass-through into output prices appears lower than usual. Forward-looking expectations remain comfortably above historical averages across Europe, although today's data are unlikely to fully reflect the covid containment measures taken in a number of European countries over recent days. Key numbers (the responses were collected between 10 and 19 November (except in the UK, where the survey response window spanned 12-19 November). Euro Area Composite PMI (Nov, Flash): 55.8, GS 53.6, consensus 53.0, last 54.2. Euro Area Manufacturing PMI (Nov, Flash): 58.6, GS 57.7, consensus 57.4, last 58.3. Euro Area Services PMI (Nov, Flash): 56.6, GS 53.9, consensus 53.5, last 54.6. Germany Composite PMI (Nov, Flash): 52.8, GS 52.1, consensus 51.0, last 52.0. France Composite PMI (Nov, Flash): 56.3, GS 54.4, consensus 53.9, last 54.7. UK Composite PMI (Nov, Flash): 57.7, GS 57.7, consensus 57.5, last 57.8. And visually: Earlier in the session, Asian stocks fell toward a three-week low as Jerome Powell’s renomination to head the Federal Reserve boosted U.S. yields, putting downward pressure on the region’s technology shares. The MSCI Asia Pacific Index declined as much as 0.5%, as the reappointment sent Treasury yields higher and buoyed the dollar amid concerns monetary stimulus will be withdrawn faster. Consumer discretionary and communication shares were the biggest drags on Asia’s benchmark, with Tencent and Alibaba slipping on worries over tighter regulations in China. “Powell’s renomination was generally expected by the market,” said Chetan Seth, an Asia-Pacific equity strategist at Nomura. The market’s reaction may be short-lived as traders turn their attention to the Fed’s meeting in December and Covid’s resurgence in Europe, he added. Asia shares have struggled to break higher as the jump in yields weighed on sentiment already damped by a lackluster earnings season and the risk of accelerating inflation. The region’s stock benchmark is down about 1% this year compared with a 16% advance in the MSCI AC World Index. Hong Kong and Taiwan were among the biggest decliners, while Australian and Indian shares bucked the downtrend, helped by miners and energy stocks. India’s benchmark stock index rose, snapping four sessions of declines, boosted by gains in Reliance Industries Ltd.   The S&P BSE Sensex climbed 0.3% to close at 58,664.33 in Mumbai, recovering after falling as much as 1.3% earlier in the session. The NSE Nifty 50 Index gained 0.5%. Of the 30 shares on the Sensex, 21 rose and 9 fell. All but one of the 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of metal stocks.  Reliance Industries Ltd. gained 0.9%, after dropping the most in nearly 10 months on Monday following its decision to scrap a plan to sell a 20% stake in its oil-to-chemicals unit to Saudi Arabian Oil Co. Shares of One 97 Communications Ltd., the parent company for digital payments firm Paytm, climbed 9.9% after two days of relentless selling since its trading debut. In rates, Treasuries dropped, with the two-year rate jumping five basis points, helping to flatten the yield curve. Bunds and Treasuries bear steepened with German 10y yields ~5bps cheaper. Gilts bear flatten, cheapening 1.5bps across the short end. 10Y TSY yields rose as high as 1.67% before reversing some of the move. In FX, the Bloomberg Dollar Spot Index was little changed after earlier advancing to the highest level since September 2020 as markets moved to price in a full quarter-point rate hike by the June Fed meeting, with a good chance of two more by year-end; Treasury yields inched up across the curve apart from the front end. The Japanese yen briefly fell past 115 per dollar for the first time since 2017. The euro advanced after better-than-forecast PMI numbers out of Europe’s major economies prompted money markets to resume bets that the ECB will hike the deposit rate 10 basis points as soon as December 2022, versus 2023 on Monday. Sterling declined versus the dollar and the euro; traders are taking an increasingly negative view on the pound, betting that the decline that’s already left the currency near its lowest this year has further to run New Zealand’s dollar under-performed all G-10 peers as leveraged longs backing a 50 basis-point hike from the central bank were flushed out of the market; sales were mainly seen against the greenback and Aussie. The yuan approached its strongest level against trade partners’ currencies in a sign that traders see a low likelihood of aggressive official intervention. The Turkish lira (see above) crashed to a record low on Tuesday, soaring more than 10% and just shy of 14 vs the USD, a day after President Recep Tayyip Erdogan defended his pursuit of lower interest rates to boost economic growth and job creation. In commodities, crude futures rebounded sharply after Biden announced a coordinated, global SPR release which would see the US exchange up to 32mm barrels, or a negligible amount. Brent spiked back over $80 on the news after trading in the mid-$78s. Spot gold drops ~$8, pushing back below $1,800/oz. Base metals are well supported with LME nickel outperforming. Looking at the day ahead, the main data highlight will be the flash PMIs for November from around the world, and there’s also the Richmond Fed manufacturing index for November. Finally from central banks, we’ll hear from BoE Governor Bailey, Deputy Governor Cunliffe and the BoE’s Haskel, as well as ECB Vice President de Guindos and the ECB’s Makhlouf. Market Snapshot S&P 500 futures down 0.3% to 4,667.75 Brent Futures down 0.9% to $78.95/bbl Gold spot down 0.4% to $1,796.86 U.S. Dollar Index down 0.17% to 96.39     Top Overnight News from Bloomberg The volatility term structures in the major currencies show that next month’s meetings by monetary policy authorities are what matters most. Data galore out of the U.S. by Wednesday’s New York cut off means demand for one-day structures remains intact, yet it’s not enough to bring about term structure inversion as one-week implieds stay below recent cycle highs Lael Brainard, picked to be vice chair of the Federal Reserve, is expected to be a critical defender of its commitment to maximum employment across demographic groups at a time when other U.S. central bankers are more worried by inflation ECB Executive Board member Isabel Schnabel said there’s an increasing threat of inflation taking hold, as she played down the danger that resurgent coronavirus infections might impede the euro zone’s recovery Regarding latest pandemic restrictions, “when it comes to the impact, I would say that while it will surely have a moderating impact on economic activity, the impact on inflation will actually be more ambiguous because it might also reinforce some of the concerns we have around supply bottlenecks,” ECB Governing Council member Klaas Knot says in Bloomberg Television interview with Francine Lacqua European Union countries are pushing for an agreement on how long Covid-19 vaccinations protect people and how to manage booster shots as they try to counter the pandemic’s fourth wave and safeguard free travel Germany’s top health official reiterated a warning that the government can’t exclude any measures, including another lockdown, as it tries to check the latest wave of Covid-19 infections The State Council, China’s cabinet, released three documents in the past several days, outlining measures to help small and medium-sized enterprises weather the downturn: from encouraging local governments to roll out discounts for power usage to organizing internet companies to provide cloud and digital services to SMEs A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed following a similar performance in the US where participants digested President Biden’s decision to nominate Fed Chair Powell for a second term and Fed’s Brainard for the Vice Chair role. This resulted in bear flattening for the US curve and underpinned the greenback, while the major indices were choppy but with late selling heading into the close in which the S&P 500 slipped beneath the 4,700 level and the Nasdaq underperformed as tech suffered the brunt of the higher yields. ASX 200 (+0.8%) was positive with sentiment encouraged after stronger PMI data and M&A developments including BHP’s signing of a binding agreement to merge its oil and gas portfolio with Woodside Petroleum to create a global top 10 independent energy company and the largest listed energy company in Australia, which spurred outperformance for the mining and energy related sectors. KOSPI (-0.5%) was lacklustre and retreated below the 3k level amid broad weakness in tech which was not helped by concerns that South Korea could take another aim at large tech through a platform bill and with the government said to be mulling strengthening social distancing measures. Hang Seng (-1.2%) and Shanghai Comp. (+0.2%) continued to diverge amid a neutral liquidity effort by the PBoC and with the Hong Kong benchmark conforming to the tech woes, while the mainland was kept afloat after the State Council pledged to strengthen assistance to smaller firms and with Global Times noting that China will likely adopt another RRR cut before year-end to cope with an economic slowdown. Finally, Japanese participants were absent from the market as they observed Labor Thanksgiving Day, while yields in Australia were higher as they tracked global counterparts and following a Treasury Indexed bond offering in the long-end. Top Asian News Tiger Global Leads $210 Million Round by India Proptech Unicorn China’s Slowdown Tests Central Bank Amid Debate Over Easing Kuaishou Defies China Crackdown as Revenue Climbs 33% Evergrande Shares Jump in Afternoon Trading as Group Units Rally Major bourses in Europe are lower across the board, but off worst levels (Euro Stoxx 50 -1.1%; Stoxx 600 -1.3%) following on from the mixed APAC performance, but with pandemic restrictions casting a shower over the region. US equity futures are mostly lower but to a lesser extent than European peers, with the YM (+0.1%) the relative outperformer vs the ES (-0.1%), NQ (-0.3%) and RTY (-0.8%). Back to Europe, the morning saw the release of Flash PMIs which failed to spur much action across market given the somewhat stale nature against the backdrop of a worsening COVID situation in Europe. Losses in the UK’s FTSE 100 (-0.1%) are more cushioned vs European counterparts, with heavyweight miners doing the heavy lifting, and as the basic resources sector outpaces and resides as the only sector in the green at the time of writing amid a surge in iron ore prices overnight. Sticking with sectors, there is no clear or overarching theme/bias. Tech resides at the foot of the pile, unaided by the intraday rise in yields. Travel and Leisure also reside towards the bottom of the bunch, but more a function of the “leisure” sub-sector as opposed to the “travel” component, with Evolution Gaming (-3.7%) and Flutter (-3.5%) on the back foot. In terms of individual movers, Thyssenkrupp (-7.0%) tumbles after the Co. announced a secondary offer by Cevian of 43mln shares. Meanwhile, Telecom Italia (-3%) is softer following yesterday’s run, whilst Vivendi (-0.5%) said the current KKR (KKR) offer does not reflect Telecom Italia's value and it has no intention of offloading its 24% stake. Top European News U.K. PMIs Show Record Inflation and ‘Green Light’ for BOE Hike Kremlin Says New U.S. Sanctions on Nord Stream 2 Are ‘Illegal’ ECB’s Knot Says New Lockdowns Won’t Delay Wind-Down of Stimulus Telefonica Drops, Berenberg Cuts on Spain Margin Problems In FX, the Buck had already eased off best levels to relieve some pressure from its rivals, but the Euro also derived encouragement from the fact that a key long term Fib held (just) at 1.1225 before getting a rather unexpected fundamental fillip in the form of stronger than forecast flash Eurozone PMIs plus hawkish-sounding comments from ECB’s Schnabel. Eur/Usd duly rebounded to 1.1275 and the Dollar index retreated to 96.308 from a fresh y-t-d peak of 96.603, while the Yen and Franc also took advantage to varying degrees against the backdrop of deteriorating risk sentiment and in thinner trading volumes for the former due to Japan’s Labor Day Thanksgiving holiday. Usd/Jpy recoiled from 115.15 to 114.49 at one stage and Usd/Chf to 0.9301 from 0.9335 before both pairs bounced with the Greenback and a rebound in US Treasury yields ahead of Markit’s preliminary PMIs and Usd 59 bn 7 year note supply. TRY - Simply no respite for the Lira via another marked pull-back in oil prices on heightened prospects of SPR taps, the aforementioned Buck breather or even a decent correction as Usd/Try extended its meteoric rise beyond 11.5000 and 12.0000 towards 12.5000 irrespective of an ally of Turkish President Erdogan urging a debate on CBRT independence. Instead, the run and capital flight continues as talks with the IMF make no progress and an EU court condemns the country for detaining 400+ judges after the coup, while the President rules out a snap election after recent calls for an earlier vote than the scheduled one in 2023 by the main opposition party. NZD/CAD/GBP/AUD - It remains to be seen whether the RBNZ maintains a 25 bp pace of OCR normalisation overnight, but weak NZ retail activity in Q3 may be a telling factor and is applying more downside pressure on the Kiwi across the board, as Nzd/Usd hovers under 0.6950 and the Aud/Nzd cross tests 1.0425 on relative Aussie strength or resilience gleaned from another spike in iron ore that is helping to keep Aud/Usd above 0.7200. Conversely, the latest downturn in crude is undermining the Loonie and the Pound hardly derived any traction from better than anticipated UK PMIs even though they should provide the BoE more justification to hike rates next month. Usd/Cad has now breached 1.2700 and only stopped a few pips short of 1.2750 before fading ahead of comments from BoC’s Beaudry, while Cable topped out just over 1.3400 awaiting BoE Governor Bailey, whilst Haskel reaffirmed his stance in the transitory inflation camp, although suggested that if the labour market remains tight the Bank Rate will have to rise. SCANDI/EM - Hardly a shock that Brent’s reversal has hit the Nok alongside broader risk-aversion that is also keeping the Sek defensive in advance of the Riksbank, but the Zar is coping well considering Gold’s loss of Usd 1800+/oz status and test of chart support at the 100 DMA only a couple of Bucks off the 200. Similarly, the Cnh and Cny are still resisting general Usd strength and other negatives, with help from China’s State Council pledging to strengthen assistance to smaller firms perhaps. In commodities, WTI and Brent Jan'22 futures remain under pressure with the former back under USD 76/bbl (vs USD 76.59/bbl high) and the latter around USD 79/bbl (vs USD 79.63/bbl high). The WTI contract is also narrowly lagging Brent by some USD 0.30/bbl at the time of writing. Participants are keeping their eyes peeled for reserve releases from the US, potentially in coordination with other nations including China, Japan, and India – with inflation concerns being the common denominator. The move also comes in reaction to OPEC+ flouting calls by large oil consumers, particularly the US, to further open the taps beyond the group’s planned 400k BPD/m hikes. A source cited by Politico caveated that a final decision is yet to be made, and US officials are hoping that the threat of an SPR release would persuade OPEC+ to double their quotas at the Dec 2nd meeting. As it stands, Energy Intel journalist Bakr noted that she has not heard anything from OPEC+ officials about changing production plans, but delegates yesterday suggested that plans may be tweaked. Click here for the full Newsquawk analysis piece. Aside from this, US President Biden is also poised to give a speech on the economy, whilst the weekly Private Inventories will also be released today. Elsewhere, spot gold and have been drifting lower in what is seemingly a function of technical, with the yellow metal dipping under USD 1,800/oz from a USD 1,812/oz current high, with a cluster of DMAs present to the downside including the 100 DMA (around USD 1,793/oz), 200 DMA (around USD 1,791/oz) and 50 DMA (around USD 1,789/oz). Turning to base metals, LME copper holds a positive bias with prices on either side of USD 9,750/t, whilst Dalian iron ore surged overnight - with reports suggesting that steel de-stockpiling accelerated last week, and analysts suggesting that the market is betting on steelmakers in December. US Event Calendar 9:45am: Nov. Markit US Composite PMI, prior 57.6 9:45am: Nov. Markit US Services PMI, est. 59.0, prior 58.7 9:45am: Nov. Markit US Manufacturing PMI, est. 59.1, prior 58.4 10am: Nov. Richmond Fed Index, est. 11, prior 12 DB's Jim Reid concludes the overnight wrap A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detail IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here. Today is the start of a new adventure as I’m doing my first overseas business trip in 20 months. It took me a stressful 2 hours last night to find and fill in various forms, download various apps and figure out how on earth I travel in this new world. Hopefully I’ve got it all correct or I’ll be turned back at the Eurostar gates! The interesting thing about not travelling is that I’ve filled the time doing other work stuff so productivity will suffer. So if I can do a CoTD today it’ll be done on an iPhone whilst racing through the French countryside. Actually finishing this off very early in a long taxi ride on the way to the train reminds me of how car sick I get working on my iPhone! The delights of travel are all coming flooding back. After much anticipation over recent weeks, we finally heard yesterday that President Biden would be nominating Fed Chair Powell for another four-year term at the helm of the central bank. In some ways the decision had been widely expected, and Powell was the favourite in prediction markets all along over recent months. But the Fed’s staff trading issues and reports that Governor Brainard was also being considered had led many to downgrade Powell’s chances, so there was an element of uncertainty going into the decision, even if any policy differences between the two were fairly marginal. In the end however, Biden opted for continuity at the top, with Brainard tapped to become Vice Chair instead. Powell’s nomination will require senate confirmation once again, but this isn’t expected to be an issue, not least with Powell having been confirmed in an 84-13 vote last time around. Further, Senate Banking Committee Chair Brown, viewed as a progressive himself, noted last week there should be no issue confirming Powell despite rumblings from progressive lawmakers. More important to watch out for will be who Biden selects for the remaining positions on the Fed Board of Governors, where there are still 3 vacant seats left to fill, including the position of Vice Chair for Supervision. In a statement released by the White House, it said that Biden intended to make those “beginning in early December”, so even with Powell staying on, there’s actually a reasonable amount of scope for Biden to re-shape the Fed’s leadership. A potential hint about who may be considered, President Biden noted his next appointments will “bring new diversity to the Fed.” President Biden, flanked by Powell and Brainard, held a press conference following the announcement. He noted maintaining the Fed’s independence and leadership stability informed his decision, and that Chair Powell assured the President he would focus on fighting inflation. He was apparently also assured that the Chair would work to combat climate change, perhaps an olive branch to those in his party that wanted a more progressive nominee. Powell and Brainard both followed up with remarks of their own, but didn’t stray from the recent Fed party line. In response to the decision, investors moved to bring forward their timing of the initial rate hike from the Fed, with one now just about priced by the time of their June 2022 meeting, whilst the dollar index (+0.54%) strengthened to a fresh one-year high. This reflects the perception among many investors that Brainard was someone who’d have taken the Fed on a more dovish trajectory. Inflation breakevens fell across the curve as well in response. Indeed the 4-year breakeven, which roughly coincides with the term of the next Fed chair, was down -3.8bps after yesterday’s session, with the bulk of that dive coming immediately after the confirmation of Powell’s nomination. Nevertheless, that decline in breakevens was more than outweighed by a shift higher in real rates that sent nominal yields noticeably higher. By the close, yields on 2yr (+7.8bps) and 5yr (+9.5bps) Treasuries were at their highest levels since the pandemic began, and those on 10yr Treasuries were also up +7.7bps, ending the session at 1.62%. 2yr yields were a full 14.1bps higher than the intra-day lows on Friday after the Austria lockdown news. We had similar bond moves in Europe too, with yields on 10yr bunds (+4.0bps) moving higher throughout the session thanks to a shift in real rates. Another noticeable feature in the US was the latest round of curve flattening, with the 5s30s (-4.4bps) reaching its flattest level (+64.1bps) since the initial market panic over Covid-19 back in March 2020. The S&P 500 took a sharp turn heading into the New York close after trading in positive territory for most of the day, ultimately closing down -0.32%. Sector performance was mixed, energy (+1.81%) and financials (+1.43%) were notable outperformers on climbing oil prices and yields, while big tech companies across different sectors were hit by higher discount rates. The NASDAQ (-1.26%) ended the day lower, having pared back its initial gains that earlier put it on track to reach a record of its own. The other main piece of news yesterday came on the energy front, where it’s been reported that we could have an announcement as soon as today about a release of oil from the US Strategic Petroleum Reserve, potentially as part of a joint announcement with other nations. Oil prices were fairly resilient to the news, with Brent crude (+1.03%) and WTI (+0.85%) still moving higher, although both are down from their recent peaks as speculation of such a move has mounted. This could help put some downward pressure on inflation, but as recent releases have shown, price gains have been broadening out over the last couple of months to a wider swathe of categories, so it remains to be seen how helpful this will prove, and will obviously depend on how much is released along with how the OPEC+ group react. For their part, OPEC+ members noted that the moves from the US and its allies would force them to reconsider their production plans at their meeting next week. Looking ahead now, one of the main highlights today will come from the release of the flash PMIs for November, which will give us an initial indication of how the global economy has fared into the month. As mentioned yesterday, the Euro Area PMIs have been decelerating since the summer, so keep an eye out for how they’re being affected by the latest Covid wave. It’ll also be worth noting what’s happening to price pressures, particularly with inflation running at more than double the ECB’s target right now. Overnight in Asia stocks are trading mixed with Shanghai Composite (+0.43%), CSI (+0.20%), KOSPI (-0.44%) and Hang Seng (-1.01%) diverging, while the Nikkei is closed for Labor Thanksgiving. The flash manufacturing PMI release from Australia (58.5 vs 58.2 previous) came in close to last month while both the composite (55 vs 52.1 previous) and services (55 vs 51.8 previous) accelerated. In Japan the Yen slid past an important level of 115 against the Dollar for the first time in four years after Powell was confirmed. This marks an overall slide of 10% this year making it the worst performer amongst advanced economy currencies. S&P 500 (-0.01%) and DAX futures (-0.31%) are flat to down with Europe seemingly catching up with the weak U.S. close. Before this, in Europe yesterday, equities continued to be subdued, with the STOXX 600 down -0.13% after trading in a tight range, as the continent reacted to another surge in Covid-19 cases. The move by Austria back into lockdown has raised questions as to where might be next, and Bloomberg reported that Chancellor Merkel told CDU officials yesterday that the recent surge was worse than anything seen so far, and that additional restrictions would be required. So the direction of travel all appears to be one way for the time being in terms of European restrictions, and even a number of less-affected countries are still seeing cases move in an upward direction, including France, Italy and the UK. So a key one to watch that’ll have big implications for economies and markets too. Staying on Germany, there was some interesting news on a potential coalition yesterday, with Bloomberg obtaining a preliminary list of cabinet positions that said that FDP leader Christian Lindner would become finance minister, and Green co-leader Robert Habeck would become a “super minister” with responsibility for the economy, climate protection and the energy transition. The report also said that both would become Vice Chancellors, whilst the Greens’ Annalena Baerbock would become foreign minister. It’s worth noting that’s still a preliminary list, and the coalition agreement is yet to be finalised, but it has been widely suggested that the parties are looking to reach a conclusion to the talks this week, so we could hear some more info on this relatively soon. There wasn’t much in the way of data yesterday, though the European Commission’s advance November consumer confidence reading for the Euro Area fell back by more than expected to -6.8 (vs. -5.5 expected), which is the lowest it’s been since April. Over in the US, there was October data that was somewhat more positive however, with existing home sales rising to an annualised rate of 6.34m (vs. 6.20m expected), their highest level in 9 months. Furthermore, the Chicago Fed’s national activity index was up to 0.76 (vs. 0.10 expected). To the day ahead now, and the main data highlight will be the aforementioned flash PMIs for November from around the world, and there’s also the Richmond Fed manufacturing index for November. Finally from central banks, we’ll hear from BoE Governor Bailey, Deputy Governor Cunliffe and the BoE’s Haskel, as well as ECB Vice President de Guindos and the ECB’s Makhlouf. d Tyler Durden Tue, 11/23/2021 - 08:31.....»»

Category: blogSource: zerohedgeNov 23rd, 2021

4 Funds to Scoop Up on Winning Year-End Themes

Year-end brings in the holiday season, spotlighting retail, leisure, travel and video gaming sectors. Thematic investment has helped investors cope with market gyrations and considering the rapidly changing consumer behavior and effects of the coronavirus pandemic, let us discuss three themes that can bear profit for investors as the year approaches an end. As we approach the year-end, and the holiday season knocks at the door, trends like e-commerce, seasonal spending, video games can prove beneficial. Hence, retail, leisure, travel and gaming sectors will continue to be in the limelight. Given the trends, investors can focus on funds like Fidelity Select Retailing Portfolio FSRPX, Fidelity Select Leisure Portfolio FDLSX, Fidelity Select Technology Portfolio FSPTX and Fidelity Select Consumer Discretionary Portfolio FSCPX.The holiday season draws in consumers, specifically the apparel, gifts, toys and leisure stores. Per a Rakuten Intelligence’s prediction, November is expected to be the strongest month for e-commerce and apparel sales in 2021. With coronavirus cases subsiding, vaccination efforts picking up and restrictions being lifted, consumers will not only spend online but also visit brick-and-mortar stores. Sales are expected to jump 30% in the fourth quarter from the same period last year and even cross the pre-pandemic levels.In a separate report, National Retail Federation (NRF) predicts holiday sales growth between 8.5% and 10.5% during November and December from last year, nearing $843.4-$859 billion. Deloitte’s survey also states that this holiday season, an average American family is expected to spend $1,463, a 5% rise from the same period last year, with high-income households driving the uptick. Per the NDP survey, 61% of consumers said they need to revamp wardrobes and make the most of this year’s fall and winter collection of different big and small brands. Hence, their shopping list has a mixed bag of sleepwear, winterwear necessities.Even with the easing of pandemic-related restrictions, the craze for video games is expected to continue. NDP expects fourth-quarter sales of video games to reach $18.9 billion, which suggests a 3% increase from the same period last year. The only concerns for the industry are the unpredictable and insufficient supply of new console hardware. Additionally, the price difference between the PlayStation console and Nintendo Switch lends an edge to the latter in the gaming race. Even with supply-side constraints restricting gains, the gaming content, subscription and mobile gaming space will continue to boost sales.4 Mutual Funds to BuyGiven the current scenario and considering the winning year-end themes, we are shortlisting four funds, including retailers, travel & leisure service and products providers, and toys and video games companies. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging one and three-year returns. Additionally, the minimum initial investment is within $5000.We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Retailing Portfolio fund aims for capital appreciation. This non-diversified fund invests most of its assets in securities of companies that merchandise finished goods and services to individual customers. FSRPX invests in both U.S. and non-U.S. stocks.This Zacks Sector-Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 25.9% and 23.6% in the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Retailing Portfolio has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, below the category average of 0.79%.Fidelity Select Leisure Portfolio fund aims for capital appreciation. The fund invests at least 80% of its assets in companies that design, produce or distribute goods or services in the leisure industries. This non-diversified fund invests in both domestic and foreign stocks.This Zacks Sector-Other product has a history of positive total returns for more than 10 years. Specifically, FDLSX has three and five-year returns of 20.1% and 17.9%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Leisure Portfolio has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, below the category average of 0.79%.Fidelity Select Technology Portfolioaims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements.This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX is a non-diversified fund and has returned 38.1% and 32.1% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Technology Portfolio has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%, below the category average of 1.05%. Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. This non-diversified fund invests most of its assets in common stocks of companies that manufacture and distribute consumer discretionary goods and services. FSCPX invests in both domestic and foreign stocks.This Zacks Sector-Other product has a history of positive total returns for more than 10 years. Specifically, FSCPX has three and five-year returns of 23.8% and 20.5%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Consumer Discretionary Portfolio has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, below the category average of 0.79%.Want key mutual fund info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSRPX): Fund Analysis Report Get Your Free (FDLSX): Fund Analysis Report Get Your Free (FSPTX): Fund Analysis Report Get Your Free (FSCPX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Category: topSource: zacksNov 15th, 2021

Climate Change Boosts Clean Tech Adoption: 3 Fund Picks

The transportation sector is one of the largest contributors to greenhouse gas emissions. Hence, adopting EVs and trucks is the way to combat climate change. Fighting climate change has become one of the popular agendas for governments and businesses globally. Not only has it become the necessity of the hour, it also attracts millions in investment. Per a Deloitte report, the New Climate Economy findings state that low-carbon growth can deliver $26 trillion in economic benefits globally by 2030.The long-term heating of Earth's climate system or global warming is already melting polar ice caps and increasing the sea level. The COP26 climate summit in Glasgow emphasized cutting CO2 emissions to limit global temperature rise to 1.5 Celsius. Almost 200 countries that participated in the summit have been asked to cut down emission and its major impact on day-to-day life. In America, after the more than $1-trillion infrastructure bill, President Joe Biden is also looking forward to implementing a $1.75-trillion investment in the social safety net and climate policy. In his election campaign, climate change and clean energy have been a prime agenda for Biden and he does have expansionary plans. The President envisions America to become a 100% clean energy economy by 2035 and achieve net-zero emission by 2050 to address the issue of climate emergency.The transportation sector is one of the largest contributors to greenhouse gas emissions. Hence, adopting electric cars and trucks is the way to combat climate change. On Nov 3, the Democratic lawmakers unveiled revised social spending and climate provision. This plan would expand an electric vehicle tax credit of up to $12,500 for more expensive cars and propose a lower income cut-off for buyers eligible for the credit. The new proposal also includes a $4,500 tax incentive to purchase an electric vehicle made at a unionized factory.The environmental, social, and governance (ESG) label has now been slapped on several financial assets and instruments but do they genuinely align with sustainable ESG practices? Well, that’s a tricky question for investors to answer. However, it is an attractive investment trend and has drawn massive inflows in recent years. Several mainstream companies like Crispr Therapeutics are adopting genome-editing practices to modify plants to benefit the energy sector (for generating bio-fuel). Some are also working on agriculture in food, using the abundant saltwater.3 Funds to BuyIn an attempt to slow down climate change, electric vehicles, smart-home tools and clean energy sectors are poised to grow. Hence,we have shortlisted three funds poised to grow. These funds flaunt a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Utilities Portfolio FSUTX aims for capital appreciation. This non-diversified fund invests most assets in common stocks of companies, primarily engaged in the utilities industry and generating most of their revenues from utility operations.This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 9.9% and 11.4% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Utilities Portfolio has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%.New Alternatives Fund Class A NALFX aims for long-term capital appreciation, with income being the secondary objective. The fund invests in common stocks of YieldCos, American Depository Receipts, real estate investment trusts and publicly-traded master limited partnerships.This Zacks Sector – Other product has a history of positive total returns for more than 10 years. NALFX has three and five-year return of 32.4% and 19.9%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.New Alternatives Fund Class A has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.96%.Calvert Global Energy Solutions Fund Class A CGAEX aims to track the performance of the Calvert Global Energy Research Index. The fund invests a majority of assets in companies whose main business is sustainable energy solutions. The portfolio consists of companies engaged in facilitating the transition to a more sustainable economy by reducing greenhouse gas emissions and the expanded use of renewable energy sources.This Zacks Sector – Other product has a history of positive total returns for more than 10 years. CGAEX has three and five-year return of 23.8% and 16.8%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.Calvert Global Energy Solutions Fund Class A has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.24%.Want key mutual fund info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> Tech IPOs With Massive Profit Potential In the past few years, many popular platforms and like Uber and Airbnb finally made their way to the public markets. But the biggest paydays came from lesser-known names. For example, electric carmaker X Peng shot up +299.4% in just 2 months. Think of it this way… If you had put $5,000 into XPEV at its IPO in September 2020, you could have cashed out with $19,970 in November. With record amounts of cash flooding into IPOs and a record-setting stock market, this year’s lineup could be even more lucrative.See Zacks Hottest Tech IPOs Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSUTX): Fund Analysis Report Get Your Free (CGAEX): Fund Analysis Report Get Your Free (NALFX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Category: topSource: zacksNov 12th, 2021

Futures Fall, Yields And Dollar Jump Ahead Of Highest CPI In 31 Years

Futures Fall, Yields And Dollar Jump Ahead Of Highest CPI In 31 Years For the third day in a row, early weakness in futures - in this case as a result of China's soaring, record producer price inflation - reversed and spoos rose from session lows but were still down on the session as traders awaited inflation data due later on Wednesday. Treasury yields climbed and the dollar and cryptos rose. At 7:45 a.m. ET, Dow e-minis were down 47 points, or 0.12%, S&P 500 e-minis were down 10.25 points, or 0.22%, and Nasdaq 100 e-minis were down 68 points, or 0.42%. Earlier, China's Shanghai Composite fell as much as 1.7% and the Hang Seng dropped more than 1% after China’s factory inflation soared to a 26-year high. The number came just hours before today's US CPI print is expected to rise 5.8% in October, the highest level since since December 1990, after a 5.4% increase in the previous month. The report comes a day after producer prices data showed a solid rise in October and will be scrutinized for clues on the extent to which manufacturers were passing on higher costs to consumers, whose spending accounts for 70% of the U.S. economy Elevated inflationary pressures “would be the latest test for the Fed’s ‘transitory’ view and challenge the central bank’s stance on policy tightening,” Han Tan, chief market analyst at Exinity Group, said in written comments. “The worry is that such stubborn inflationary pressures could choke the recovery in global demand or hasten policy tightening by major central banks.” On Tuesday, Wall Street's main indexes ended their long streak of record closing highs on Tuesday as Tesla tumbled and as investors booked profits from the recent run-up in gains, especially in the absence of market-moving catalysts. The declines on Wednesday came after data showed Chinese factory gate prices hit a 26-year high in October, while economic advisers to the German government said they expected the current rise in inflation to continue well into 2022. It has been a busy premarket trading session with lots of movers. We start with Coinbase which fell 11% as analysts said the crypto exchange’s quarterly results were well below expectations. DoorDash shares surged as analysts raised price targets on the food-delivery firm after expectation-beating results and purchase of Finnish food-delivery startup Wolt Enterprises Oy.  Here are some other premarket movers today: DoorDash (DASH US) shares surge 19% in U.S. premarket trading, with analysts raising their price targets on the food-delivery firm after expectation-beating results and its biggest ever acquisition Chinese technology stocks listed in the U.S. rise premarket after Tencent reported 3Q profit that exceeded expectations even as revenue missed amid China’s crackdown on the tech industry Tesla (TSLA US) shares inch higher 1.9% in premarket trading, set for a positive open after a 16% slump in two days amid several negative headlines for the stock Stran & Co. (STRN US) shares jump as much as 43% in U.S. premarket trading, recovering ground after a sharp drop following the branding solutions firm’s IPO Society Pass (SOPA US) shares drop as much as 54% in U.S. pre trading hours, after the loyalty tech platform had surged following its IPO in the prior session Upstart Holdings (UPST US) plunged 19% in U.S. premarket trading after the company released 3Q earnings and 4Q forecasts; Piper Sandler ascribes share drop to “elevated investor expectations” and lack of quantification of auto opportunity Poshmark (POSH US) shares sink 29% in U.S. premarket trading with Berenberg (buy) saying the online retail platform’s 3Q results and guidance were disappointing PubMatic (PUBM US) surges 22% in U.S. premarket trading after the company’s 4Q sales forecast topped expectations and it posted 3Q results that Jefferies called “impressive” FuboTV (FUBO US) shares drop 4.3% in U.S. premarket trading as a 3Q results beat for the “sports first” streaming-video platform was overshadowed by higher costs and some weakness on its ad revenue Purple Innovation (PRPL US) slumps 31% after it cut its net revenue forecast for the full year; the guidance missed the average analyst estimate RingCentral (RNG US) rises 22% premarket, a day after the provider of cloud-based communications services forecast 4Q revenue that beat the average analyst estimate Toast (TOST US) slides after reporting financial results that included a net loss that widened compared with the same period last year Turning back to CPI, here is a lenghtier preview courtesy of DB's Jim Reid: I may have just about found it vaguely conceivable at the start of the year that on November 10th we’d see a 5.9% YoY US CPI print and the sixth month above 5%; however, I would certainly not have thought that such a number if it had materialized would be greeted with a collective market “meh” with 10yr Treasury yields 450bps below this rate. A lot is resting on this inflation being transitory. This will be the multi-trillion dollar question for 2022, that’s for sure. Last month saw yet another upside surprise that further undermined the transitory narrative, and, in fact, if you look at the last 7 monthly readings, 5 of them have come in above the median estimate on Bloomberg, with just 1 below and the other in line. In terms of what to expect, our US economists are looking for a reacceleration in the monthly prints, with a +0.47% forecast for the headline measure (+0.6% consensus), and +0.37% for core (+0.4% consensus). Their view is that the main driver is likely to be price pressures in those categories most sensitive to supply shocks, such as new and used vehicles. But they also see some downside risk from Covid-19-sensitive sectors like lodging away and airfares, where prices fell over the late summer as the delta variant slowed the recovery in travel. Look out for rental inflation too – last month we saw owners’ equivalent rent experience its strongest monthly increase since June 2006. It’s a measure that reflects underlying trend inflation, so it is important to monitor moving forward. Many models suggest it will be over 4% for much of next year, which is large given that it makes up around a third of the headline rate and c.40% of core. Shifting back to markets, we next look at Europe, where equities also recovered off opening lows with the Euro Stoxx 50 and DAX recovering to trade flat. FTSE 100 outperformed, rising as much as 0.6%. Sector gains in oil & gas, utilities and insurance names are broadly offset by losses in luxury, tech, household & personal goods and travel. Earlier in the session, Asian equities fell for a second day after data showed China’s monthly factory-gate prices grew at the fastest pace in 26 years. The MSCI Asia Pacific Index slid as much as 0.6% before paring its loss, with materials and IT the biggest drags. The CSI 300 Index slid as much as 1.9% before sharply paring its drop, after China’s producer and consumer price inflation numbers both exceeded forecasts. Commodity prices have soared globally this year amid expectations for a rebound from the pandemic, with energy getting a further boost from a supply crunch. Traders await Wednesday’s U.S. consumer-price report for further clues on monetary policy and economic growth. “Eyes are now closely watching inflation as that is the next market catalyst,” said Justin Tang, head of Asian research at United First Partners. For some Asian companies “the candle is burning on both ends -- with the supply chain crisis as a ceiling on revenues while obligations to expenses and liabilities remain.”  The Hang Seng turned higher in late trading as real estate developers climbed on a report that China’s bond-issuance policies may be loosened, while Tencent led a surge in tech stocks ahead of its earnings report. Vietnam and Taiwan showed small gains, while benchmarks in most other markets fell. Japanese equities fell, following Asian peers lower after China reported worse than expected inflation. Electronics makers and trading houses were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and Tokyo Electron were the largest contributors to a 0.6% drop in the Nikkei 225. The MSCI Asia Pacific Index slid 0.5%, while China’s CSI 300 Index tumbled 1.1% after monthly factory-gate prices in Asia’s largest economy grew at the fastest pace in 26 years. U.S. consumer price data is scheduled to be reported later Wednesday. “Asia is on inflation alert, fearing future costs of inputs from goods sourced from the mainland,” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. “It seems that investors are keen to lower exposure into the U.S. CPI data tonight.” Australian stocks ended lower for a third session as miners tumbled: the S&P/ASX 200 index fell 0.1% to close at 7,423.90 after a volatile session. Miners were the worst performing industry group as iron ore prices dropped, with eight of the 11 subgauges closing lower.  Bluescope was the day’s biggest laggard after iron ore plunged to a fresh 18-month low as debt troubles in China’s real-estate market deal blow after blow to prospects for steel demand. United Malt advanced after a media report said the company could be a takeover target. Australia’s central bank Governor Philip Lowe is anchoring his bet that he won’t need to raise interest rates until 2024 on a view that unemployment needs to be lower to spur wage gains. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,022.46. In FX, the Bloomberg Dollar Spot Index rose as the greenback traded higher against all of its Group-of-10 peers apart from the Canadian dollar. The euro extended an Asia session loss and traded firmly below the $1.16 handle. The pound slipped against a broadly stronger dollar, and edged higher versus the euro before a speech by the BOE’s Tenreyro; market is focused on the outlook for rate hikes and traders are also turning attention back to Brexit risks, with the European Union preparing a package of retaliatory measures in case the U.K. decides to suspend parts of a trade accord. Australia’s dollar fell to a one-month low as a slump in iron ore prices prompted short-term leveraged funds to cut long positions. The kiwi declined after a preliminary New Zealand business confidence index weakened In rates, Treasuries traded weak in the early U.S. session, following a selloff in gilts as U.K. markets start to price a higher terminal rate, bear-steepening the curve. Treasury yields are mostly cheaper by 2bp-3bp across the curve with 10-year around 1.475%; gilts lag by additional 1bp vs Treasuries while bunds outperform. During the Asian session, China’s CPI data beat expectations, adding to downside pressure in front eurodollars. Focal points for U.S. session include October CPI expected to show steep increase in y/y rate and final quarterly refunding auction, a $25b 30-year bond sale. Reduced-size U.S. refunding auctions conclude with $25b 30-year bond vs $27b in previous four; Tuesday’s 10- year sale tailed by 1.2bp after steep gains into the bidding deadline. Wednesday's WI 30-year yield around 1.85% is below 30-year stops since January and ~19bp richer than last month’s, which stopped 1.3bp below the WI level at the bidding deadline. In commodities, Crude futures drift lower: WTI drops 0.5% to trade near $83.70. Brent dips back below $85. Base metals are mixed. LME aluminum is the strongest performer; tin and lead are in negative territory. Spot gold drifts lower, losing $5 to trade near $1,826/oz To the day ahead now, and the main highlight will be the aforementioned CPI release from the US for October. Otherwise, there’ll also be Italian industrial production for September. From central banks, we’ll hear from the ECB’s Elderson and the BoE’s Tenreyro, whilst earnings releases include Disney. Market Snapshot S&P 500 futures down 0.2% to 4,669.75 STOXX Europe 600 little changed at 482.35 MXAP down 0.1% to 198.31 MXAPJ up 0.1% to 648.70 Nikkei down 0.6% to 29,106.78 Topix down 0.5% to 2,007.96 Hang Seng Index up 0.7% to 24,996.14 Shanghai Composite down 0.4% to 3,492.46 Sensex little changed at 60,399.20 Australia S&P/ASX 200 down 0.1% to 7,423.90 Kospi down 1.1% to 2,930.17 Brent Futures little changed at $84.75/bbl Gold spot down 0.3% to $1,825.71 German 10Y yield little changed at -0.29% Euro down 0.2% to $1.1574 U.S. Dollar Index up 0.18% to 94.13 Top Overnight News from Bloomberg The European Central Bank would risk exacerbating inequality if it were to raise interest rates before ceasing asset purchases, according to Executive Board member Isabel Schnabel U.S. President Joe Biden and his Chinese counterpart Xi Jinpingare are scheduled to hold a virtual summit next week, although no specific date has been set, according to people familiar with the matter A lack of top-tier intelligence on Chinese President Xi Jinping’s inner circle is frustrating senior Biden administration officials struggling to get ahead of Beijing’s next steps, according to current and former officials who have reviewed the most sensitive U.S. intelligence reports China’s inflation risks are building as producers pass on higher costs to consumers, reigniting a debate over whether the central bank has scope to ease monetary policy to support a weakening economy and potentially adding to the pressure on global consumer prices The U.K. opposition called for a parliamentary investigation into former Conservative cabinet minister Geoffrey Cox, as the scandal over sleaze and lobbying engulfing Boris Johnson’s ruling party gains momentum A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded negatively after a lacklustre handover from Wall Street where the major indices took a break from recent advances and the S&P 500 snapped an eight-day win streak ahead of looming US inflation data. ASX 200 (-0.1%) was rangebound with early strength in financials gradually offset by losses in the commodity-related sectors and with the improvement in Westpac Consumer Sentiment data doing little to spur risk appetite. Nikkei 225 (-0.6%) was subdued with exporters pressured by unfavourable currency inflows and with the list of biggest movers in the index dominated by companies that recently announced their earnings, although Nissan and NTT Data Corp were among the success stories on improved results including a surprise return to quarterly profit for the automaker. Hang Seng (+0.7%) and Shanghai Comp. (-0.4%) initially underperformed amid ongoing developer default concerns as Evergrande has reportedly failed to pay coupon payments at the end of its 30-day grace period. Rating agencies have also downgraded a couple of developers and Fantasia Holdings shares fell as much as 50% on resumption from a one-month trading halt after it missed bond payments due early last month. Furthermore, tensions continued to brew on the Taiwan Strait after US lawmakers made a surprise visit to Taiwan and with China conducting combat readiness patrols in the area ahead of a potential Biden-Xi virtual meeting that could occur next week, which potentially lifted sentiment, while participants also reflected on the firmer than expected inflation data from China which showed consumer prices registered their fastest increase in more than a year and factory gate prices rose at a fresh record pace. Finally, 10yr JGBs traded marginally higher amid the lacklustre mood in stocks and presence of the BoJ in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities, although gains were capped by resistance ahead of the 152.00 focal point and a pull-back in T-notes. Top Asian News China SOEs Suggest Govt Ease Debt Rules in Property M&A: Cailian Iron Ore Gloom Deepens as China Property Woes Threaten Demand Chinese Developers Surge on Report Bond Rules May be Eased Tencent’s ‘Other Gains’ Unexpectedly Double, Helping Profit Beat European equities (Eurostoxx 50 -0.1%) have traded with little in the way of firm direction as a slew of earnings dictate the state of play amid a lack of fresh macro impulses. The handover from Asia was mostly a downbeat one with focus on firmer than expected CPI and PPI prints out of China and ongoing developer default concerns as Evergrande bond holders have reportedly not received coupon payments by the end of today's Asia-close grace period, in reference to missed coupon payments totalling USD 148.1mln. Stateside, futures are a touch softer (ES -0.2%) after cash markets saw the S&P 500 snap its eight-day winning streak during yesterday’s session. Ahead, the main event for the US will be the CPI release at 13:30GMT whilst the earnings docket continues to slow down with Disney the main standout after-hours. Back to Europe, sectors are mixed with Oil & Gas outperforming peers alongside price action in the crude complex. Banking names saw initial gains trimmed after earnings from Credit Agricole (-1.1%) and ABN AMRO (+1.9%) were unable to provide sustained support for the sector despite the former exceeding profit expectations. The retail sector has been provided a boost by Marks & Spencer (+11.4%) after the Co. reported stellar earnings and raised guidance. Elsewhere in the UK, ITV (+12.0%) sits at the top of the FTSE 100 after printing solid revenue metrics and a bullish revenue outlook. To the downside, Personal and Household goods lag in the wake of earnings from Adidas (-6.0%) which saw the Co.’s performance hampered by factory closures in Vietnam and product boycotts in China. Finally, Alstom (+9.6%) sits at the top of the CAC post-earnings with the Co. stating that supply chain shortages had no material impact on H1 sales. Top European News ECB May Aid Rich If Rates Rise Before QE Ends, Schnabel Says Merkel Advisers Urge ECB Exit Strategy as Price Pressures Rise King Sinks Impala Plan to Create World’s No. 1 Platinum Firm Alstom’s Cash Drain Is Less Than Forecast; Shares Jump In FX, the Greenback remains relatively firm in the run up to US inflation data having turned a corner of sorts on Tuesday, with the index extending beyond 94.000 following its rebound from 93.872 and inching closer to the current 94.380 w-t-d peak, at 94.221, thus far. Interestingly, the Buck has regained momentum irrespective of the benign Treasury (and global) yield backdrop, softer than forecast elements in the PPI release and most Fed officials maintaining a distance between the end of tapering and tightening. However, risk sentiment if wavering to the benefit of the Dollar more than others and the aforementioned CPI readings may be supportive if in line or above consensus. Note, initial claims are also scheduled due to tomorrow’s Veteran’s Day holiday and the final leg of supply comes via Usd 25 bn long bonds. NZD/JPY - Ironically perhaps, the Kiwi is struggling to keep sight of 0.7100 vs its US peer on the very day that COVID-19 restrictions were eased in Auckland, and a further deterioration in NZ business sentiment alongside a fall in the activity outlook may be the catalyst, while the Yen has run into resistance again above 113.00 and is now relying on decent option expiry interest between the round number and 113.05 (1.1 bn) to keep its bull run going. GBP/EUR/AUD/CHF - All softer against the Greenback, as Cable hovers below 1.3550, the Euro pivots 1.1575, Aussie meanders within a range just above 0.7350 amidst favourable Aud/Nzd crossflows and an improvement in Westpac consumer sentiment, and the Franc treads water inside 0.9150-00 parameters. However, Eur/Usd appears to be underpinned by heavier option expiries on the downside than upside rather than ostensibly hawkish ECB promptings from Germany’s Government advisors given 2.1 bn between 1.1575-65 and a further 1.2 bn from 1.1555-50 vs 1.5 bn at the 1.1600 strike. CAD - The Loonie is outperforming or holding up better than other majors near 1.2400 vs its US rival even though WTI has backed off from best levels just shy of Usd 85/brl, but Usd/Cad could still be drawn to expiry interest starting at 1.2450 and stretching some way over 1.2500 in the absence of anything Canadian specific, and pending US inflation data of course. WTI and Brent have been somewhat choppy this morning, but remain within reach of overnight ranges and well within yesterday’s parameters as fresh newsflow has been light; a performance that is similar to the morning’s directionless equity trade. Focus has been on last nights/yesterday's events after the EIA’s STEO release seemingly lessened the likelihood of a SPR release followed by the weekly private inventory report, which printed a headline draw of 2.485M against the expected build of 2.1mln – reaction was minimal. Later today, we get the DoE equivalent for which expectations remain at a headline build of 2.13mln, but the components are expected to post draws of around 1mln. Elsewhere, spot gold and silver are a touch softer on the session with the US Dollar and yields perhaps weighing, though the previous metals have once again not deviated too far from overnight parameters. On copper, prices were hampered by the Chinese inflation data though LME copper has staged a marginal recovery as the session has progressed. US Event Calendar 8:30am: Oct. CPI YoY, est. 5.9%, prior 5.4%; CPI MoM, est. 0.6%, prior 0.4% 8:30am: Oct. CPI Ex Food and Energy YoY, est. 4.3%, prior 4.0%; MoM, est. 0.4%, prior 0.2% 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 269,000 8:30am: Oct. Continuing Claims, est. 2.05m, prior 2.11m 8:30am: Oct. Real Avg Weekly Earnings YoY, prior -0.8% 8:30am: Oct. Real Avg Hourly Earning YoY, prior -0.8% 10am: Sept. Wholesale Trade Sales MoM, prior -1.1%; Wholesale Inventories MoM, est. 1.1%, prior 1.1% 2pm: Oct. Monthly Budget Statement, est. -$179b, prior - $61.5b DB's Jim Reid concludes the overnight wrap After three days in hospital in traction, little Maisie has a 3-hour hip operation this morning. Showing one benefit of the pandemic, she had a zoom call with her class at school yesterday on their big screen where they all got to ask her questions. The best one apparently was one boy who put his hand up and said “will your new wheelchair have an engine?”. I was reading last night about people with Maisie’s condition (perthes) ending up playing international sport as an adult after a long recovery as a kid, including a Danish striker who played in the semi-finals of the Euros this summer and a 132kg American football player. As long as she waits a polite time after her long recovery to beat me at golf then I’ll be very happy. Keeping my mind off things today will undoubtedly be US CPI. Given my inflationary bias views I may have just about found it vaguely conceivable at the start of the year that on November 10th we’d see a 5.9% YoY US CPI print and the sixth month above 5%; however, I would certainly not have thought that such a number if it had materialised would be greeted with a collective market “meh” with 10yr Treasury yields 450bps below this rate. A lot is resting on this inflation being transitory. This will be the multi-trillion dollar question for 2022, that’s for sure. Last month saw yet another upside surprise that further undermined the transitory narrative, and, in fact, if you look at the last 7 monthly readings, 5 of them have come in above the median estimate on Bloomberg, with just 1 below and the other in line. In terms of what to expect, our US economists are looking for a reacceleration in the monthly prints, with a +0.47% forecast for the headline measure (+0.6% consensus), and +0.37% for core (+0.4% consensus). Their view is that the main driver is likely to be price pressures in those categories most sensitive to supply shocks, such as new and used vehicles. But they also see some downside risk from Covid-19-sensitive sectors like lodging away and airfares, where prices fell over the late summer as the delta variant slowed the recovery in travel. Look out for rental inflation too – last month we saw owners’ equivalent rent experience its strongest monthly increase since June 2006. It’s a measure that reflects underlying trend inflation, so it is important to monitor moving forward. Many models suggest it will be over 4% for much of next year, which is large given that it makes up around a third of the headline rate and c.40% of core. Staying with inflation, China’s year-on-year numbers for October surprised on the upside overnight with CPI +1.5% (consensus +1.4%, last month +0.7%), the highest since September 2020. PPI +13.5% (consensus +12.3%) was also at a 26-year high. Asian stocks are trading lower with the KOSPI (-0.86%), Shanghai Composite (-1.20%), CSI (-1.40%), the Nikkei (-0.49%) and Hang Seng (-1.20%) all down after the China numbers. Futures are pointing to a weak start in the US & Europe too with S&P 500 futures (-0.4%) and DAX futures (-0.23%) both down. As investors look forward to today’s number, the long equity advance finally petered out yesterday as the S&P 500 (-0.35%) snapped a run of 8 successive gains. A 9th day in the green would have marked the longest winning streak since November 2004, but in the end it wasn’t to be.It also prevented an 18th up day out of the last 20 for the first time since September 1954.So reset your counters. Instead, we saw a broader risk-off move as equity indices moved lower on both sides of the Atlantic alongside a fresh rally and flattening in sovereign bond yields and curves. So the S&P 500 (-0.35%), the NASDAQ (-0.60%) and Europe’s STOXX 600 (-0.19%) all fell back from their record highs in the previous session although the equal weighted S&P 500 was almost flat (-0.03%) showing that there wasn’t huge breadth to the US weakness. Sector dispersion was tight in the US, with materials (+0.43%) among the leaders again along with the more typically defensive utilities sector (+0.44%). Financials (-0.55%) declined on the flatter curve story but it was discretionary stocks (-1.35%) that took the biggest hit, dragged down by Tesla declining a further -11.99% and now losing c.$200bn of market cap over two days or the equivalent of 8.5 times Ford’s market cap. The VIX index of volatility ticked up another +0.58pts to hit its highest level in nearly 4 weeks, but remains comfortably below the peaks reached during September’s 5% pullback in the S&P. By contrast, Bitcoin proved to be one of the few winners of yesterday as it increased to an all-time high of $67,734, although that was slightly down from its all-time intraday high of $68,513 earlier in the day. Meanwhile, the question of the various Federal Reserve appointments has been occupying increasing attention and impacting bond markets, but in spite of the gossip there’s been no fresh news over the last 24 hours we didn’t already know. Earlier this week, Politico cited two sources with knowledge of the process saying that a decision would be made by Thanksgiving. But for those with longer memories, it was reported by Bloomberg back in August that people familiar with the process were saying that President Biden was likely to make his choice around Labor Day in early September, and over two months have passed since. So we’ll have to see what the real deadline is. Nevertheless, the news from late Monday night in the US that Fed Governor Brainard had been interviewed for the Fed Chair position helped support US Treasuries, thanks to the perception that Brainard would be a more dovish pick. Regardless of whether Powell or Brainard is Chair come this time next year, the Board will likely become more dovish as President Biden replaces outgoing Governors (and fills empty seats should he choose to do so). By the close of trade, 10yr yields were down -5.4bps to 1.44%, and the 30yr yield was down -6.4bps to 1.82%, which was its lowest closing level since mid-September. Another striking thing was that the moves lower in Treasury yields were entirely driven by a fresh decline in real yields, with the 10yr real yield down -7.0bps to -1.20%, marking its lowest closing level since TIPS began trading in 1997. Meanwhile, there was another round of curve flattening yesterday, with the 5s30s slope down -2.8bps to 73.5bps, which is the flattest it’s been since the initial market panic over the pandemic back in March 2020. For Europe it was a similar story as yields fell across the continent, and those on 10yr bunds (-5.5bps), OATs (-5.5bps) and BTPs (-5.3bps) all saw decent moves lower. Ahead of today’s CPI, investors had the PPI numbers to digest yesterday, though there was little market reaction to speak of as they came in almost entirely in line with the consensus. The monthly reading was up by +0.6% in October, which in turn saw the year-on-year measure remain at +8.6%, with both of those in line with expectations. The core measure did come in a touch below, at +0.4% (vs. +0.5% expected), but again that left the yoy reading at +6.8% as expected. One factor that may help on the inflation front over the coming months was a major decline in natural gas prices yesterday, with both European (-8.16%) and US (-8.26%) futures witnessing substantial declines. This wasn’t reflected elsewhere in the energy complex though, with WTI (+2.71%) and Brent crude (+1.62%) oil prices seeing a further rise following reports that the US would not need to release strategic reserves due to the demand outlook, and gold prices (+0.42%) closed at their highest levels since June. There wasn’t a massive amount of other data yesterday, though the ZEW survey from Germany for November saw the expectations reading unexpectedly rise to 31.7 (vs. 20.0 expected), which is the first increase after 5 consecutive monthly declines. However, the current situation measure did fall to 12.5 (vs. 18.3 expected). Finally out of the US, the NFIB’s small business optimism index for October fell to a 7-month low of 98.2 (vs. 99.5 expected). To the day ahead now, and the main highlight will be the aforementioned CPI release from the US for October. Otherwise, there’ll also be Italian industrial production for September. From central banks, we’ll hear from the ECB’s Elderson and the BoE’s Tenreyro, whilst earnings releases include Disney. Tyler Durden Wed, 11/10/2021 - 07:56.....»»

Category: blogSource: zerohedgeNov 10th, 2021

Apis Flagship Fund 3Q21: “The Great SPAC-ulation”

Apis Flagship Fund commentary for the third quarter ended September 2021. Q3 2021 hedge fund letters, conferences and more Dear Partners, Our Flagship Fund was down 1.3% net in Q3 2021. During the past quarter, our longs detracted 4.5% (gross), while our shorts contributed 3.6% (gross). At the end of September, the Fund was approximately […] Apis Flagship Fund commentary for the third quarter ended September 2021. 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 Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton 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 Dear Partners, Our Flagship Fund was down 1.3% net in Q3 2021. During the past quarter, our longs detracted 4.5% (gross), while our shorts contributed 3.6% (gross). At the end of September, the Fund was approximately 51% net long with the portfolio 87% long and 36% short. Performance Overview (Gross Returns) Strong relative performance in September brought overall performance in-line with global indices for the quarter. Long performance was hindered by relative underperformance in smaller capitalization stocks and some underperformance in value relative to growth. Offsetting weakness on the long side, short performance was excellent, aided by the aforementioned small-cap trends and several highly speculative names that have begun to receive scrutiny. Asia was awash with robust performance in Japan, counteracting weakness in the rest of the region. Elsewhere, upside in North America was driven by strong short performance. Still, again this was more than offset in Europe where a couple stock-specific issues and weak markets generally hit our longs there. Shorts were positive across all sectors, especially Consumer names while longs struggled, particularly in the Consumer and Financial sectors. Three of the top 4 long contributors came from Asia with Hansol Chemical adding almost 1% in the quarter, in addition to some Japanese names – BayCurrent Consulting and West Holdings – adding about 75 bps each. BayCurrent has experienced 20%+ growth for several years, with recent years accelerating as companies spend on so-called DX or “digital transformation” projects. Supported in many cases by tax incentives, companies are investing in sorely needed I.T. and BayCurrent provides specialized consulting in this area. Detractors in the quarter include Kambi (noted in our August letter), where we took our medicine. Another name dragging on performance was Cornerstone Building, a U.S. name that has meaningful share in several building products. While sales are not the issue and pricing power is high, Q2 profits proved disappointing as cost inflation could not be passed along to consumers fast enough. Generally, over the last 30 years, we’ve seen price improvements in cyclical areas such as housing provide a boost to margins. However, today’s cost inflation seems more complex than previous cycles, and managers are struggling to raise prices fast enough to keep pace. Short alpha was excellent, with our average short declining more than 10% in the quarter and many stocks falling 30% or more. One fertile area for shorting (no surprise) has been the hundreds of special purpose acquisition companies (SPACs). History suggests most of these companies will do very poorly. Given the unprecedented size and scope of this cycle, we firmly believe this era too will be remarkably bad. We highlight below a few names where the disconnect between value and reality is exceptional. Portfolio Outlook And Positioning Over the quarter, we have reduced net in the Fund roughly 10%, gradually taking exposure down through the quarter. This reflects both what’s working (shorts more than longs) and a recognition that there are macro issues percolating that argue for more caution. Commodity/energy prices are booming (see discussion below), supply chains are a mess, unemployment versus job openings data is difficult to understand, political tensions and dysfunction continue to rise, along with debt/deficits – future economists and social scientists will have some fascinating work to do explaining this period in our history! One simple economic axiom we subscribe to is, “you can’t have inflation without wage inflation.” Previous cyclical upticks in pricing proved fleeting as wages weren’t growing, but this cycle looks different as wage inflation appears everywhere. Quantitative easing is hard to justify, given high inflation and low unemployment but the U.S. Federal Reserve has excused this by saying inflation is “transitory” (would you expect them to admit otherwise?). We’re growing more skeptical as the burden of proof is shifting and can’t help but feel a Jimmy Carter sense of déjà vu. Tapering may be a catalyst, but eventually a Paul Volker-type will be needed to sort this mess out. As always, we remain pragmatic and know to stay in our “stock-picking” lane. Inflation beneficiaries are incredibly cheap and will see some incremental investment while overall gross and net exposures remain on the more modest side of our long-term ranges. Commodity/Energy Supply Constraints and Price Inflation The current commodity spike started a decade ago after prices collapsed following a raging China-led bull market. Everything from copper to coal was in sudden oversupply after significant overinvestment in the early 2000’s. In the decade following 2010, investors sold off their holdings and turned towards far more interesting opportunities, particularly in technology whose index rose 4x while energy was flat. Companies in the commodity markets were starved of capital and, punished with falling stock prices, they shifted their focus to cash flow with religious fervor. Capital for exploration plummeted, exemplified by copper, where 223 discoveries were made between 1990 and 2015, but only one since 2015. Examples like this abound across all the major and minor commodities. But for a few episodes of intermittent shortages, general commodity supply was sufficient pre-2020, and no one noticed the fading reserves as the decade progressed. Then came COVID-19 and the subsequent economic stimulus and recovery. The limited maintenance investment that was made turned to virtually nothing as prices for commodities went from bad to- in the case of oil- negative in 2020. Piling on to this was an intense focus on decarbonization & ESG, which meant that commodities were essentially uninvestable for vast swaths of the investment community. For example, Norway’s $1.4 trillion sovereign wealth fund, ironically built on the back of oil riches from the North Sea, declared it would sell its stock holdings in traditional energy. It is one of just many that have made similar policy changes. At the company level, bankruptcies were already happening pre-COVID, but the negative oil price was the final straw for many more. Drilling activity went from bad to non-existent in the U.S. as companies tried to minimize their cash burn. Similar stories can be told in the coal, gas and metals markets, fertilizers, food crops, and so on. None of this was a particular shock as warnings of shortages have been made for years. Those who tried to warn were met with a shrug and directed to look at the market price for the said commodity, which inevitably was plumbing new lows. Then came the economic recovery in late 2020, and suddenly the commodities needed were no longer available. Today, we see record-high prices, in many cases above the levels reached during the height of China’s import binge a decade+ ago. The potential implications are very, very big. Critically, there are broad macro and geopolitical issues if this price spike sustains or worsens. Look no further than the level of inflation or E.U.-Russia relations. Speculative stocks with long-duration cash flows are already struggling as investors contemplate higher discount rates and slower growth. The critical question is: how long does this last? A few points are worth making – This is global. Consider a supposedly local market like electric power. Prices are spiking by hundreds of percent in China, Japan, Korea, the U.K., the U.S., etc. Coal and natural gas shortages are being reported in India, Brazil, Europe, China, and many other countries. Calls for government intervention abound and will likely further retard these markets. Iron ore from Australia and Brazil cannot meet Chinese demand – remember the mine dam collapse in Brazil; who would want one of these in their country? The global nature of this shortage is evidence that runs counter to the argument that this is simply the result of a governmental policy error. This is happening across all kinds of commodities – we don’t have a shortage in just one thing. The causes vary but range from the closure of nuclear & coal in Europe & Japan, the reckless embrace of renewables, to a new government in Chile that has discouraged copper investment, and near-total closure of access to debt and equity financing. With EV adoption the average home will need a 25-50% increase in electric power which will result in copper shortages (and plenty of other commodities) for the next decade. This breadth of shortage historically only happened during decade-long episodes of price volatility and reordering of investment leadership. This leads us to the final observation – the market is acting like this episode is temporary. Commodity price spikes and crashes happen all the time, and company valuations knowingly incorporate this by appearing cheap when prices are exuberant and expensive when commodity prices crash. This is the market’s way of looking past temporary swings to something more balanced in the future. What is potentially unique about this cycle is the degree to which the market is “looking past this” and the possibility that this lasts a while. On the first point, look no further than the free cash flow yields, which in energy, for example, start at 20% and go up from there. In most cases, this figure is simply based on prices that could be achieved using the futures curve (e.g., companies could lock this return in for years, right now). In coal, there are companies on 50-100% cash flow yields, where the market is indicating to us that this shortage will resolve in months. As for the duration, as always, it’s complicated. While things like shipping congestion, weather disruptions, post-COVID restocking of inventories, etc., are probably transitory, there are other more permanent factors. These include management’s focus on cash flow, ESG hurdles such as permitting, decarbonization, the loss of access to financing, and the transition to renewables. These long-term hurdles are not likely to change. In a recent conversation with a sell-side analyst, we heard story after story of trillion-dollar investment managers, former clients of this analyst, who have formally abandoned energy. With Tesla accounting for 1.7% of the S&P and the entire energy sector, including companies like Exxon and Chevron, at just 2.6%, it could take a while to normalize the imbalance. Investment Highlights - Imdex Limited (ASX:IMD) (Australia – $780mm market cap) One investment that plays upon the commodity price phenomena is IMDEX, which offers products for the mineral drilling value chain. We came across this company through our work on the actual contract drilling companies like Major Drilling and Boart Longyear, which we’ve been familiar with for years. IMDEX provides consumables, tools, and technology to these contract drilling companies, as well as directly to the large miners. It is a “picks and shovels” play on increased metals exploration & development spend, with its products present on 70% of mineral drilling projects globally. These include drilling fluids, drilling and rig alignment technologies, downhole sensors, geological data interpretation software, and in-field sampling and analysis tools. 80% of its revenue is related to exploration spend versus only 20% related to mining production. As we mentioned earlier, exploration spend for many commodities has plummeted in recent years and is just now starting to tick back up to make up for years of underinvestment, in addition to structural growth in certain EV-related metals like cobalt, copper, and lithium. In fact, a recent report from Morgan Stanley shows that mining capex is expected to grow by 26% this year, the strongest growth since 2012. This is bolstered by junior miner equity raisings that are tracking 50-100% above pre-COVID levels, per a Jefferies analysis. IMDEX is well placed not only to benefit from increased mining exploration spend, but it also has some company-specific factors that will drive growth beyond just the cyclical upswing in its end markets. Its revenue from tool rentals and software has increased as a percent of total revenues, which bodes well for margins. Tool rental and software revenue rose to 57% of the total in the fiscal year ended this June, up from 44% four years ago. In turn, gross margins have risen by over 400 basis points, and EBIT margins have increased by almost 700 basis points over the same period. There is still plenty of room to grow the software portion of the business, as only approximately 60% of the top 100 clients are using the cloud-connected platform currently. As more customers use the cloud platform, they will upgrade to rent cloud-connected tools, which provides a revenue (and margin) uplift to IMDEX. The company has also been complementing its organic research & development efforts with selective M&A to expand its offerings. For example, it recently acquired a geological data modeling and 3D visualization software provider. We believe the few analysts that cover IMDEX are underestimating its growth potential. Revenue growth is forecasted at approximately 20% this fiscal year, which looks conservative. The company already reported 41% revenue growth in the first quarter, and activity in specific geographies remains hindered by COVID-19 related restrictions. Growth is forecasted to slow to high single digits next year, which seems too low given the metals supply and demand dynamics noted earlier in our letter, as well as the fact that even after 20-25% growth in 2021, exploration spend will remain nearly 50% below the prior peak seen in 2012. The company has a strong, net cash balance sheet which will enable it to continue to invest in new product development and M&A. We think the current valuation is reasonable at roughly 20x our forecasted FY 6/22 EPS, which is in-line with many capital-intensive heavy mining equipment providers, despite IMDEX having roughly double the margins. If we look at where the stock traded around the prior peak in its end markets in 2011/2012, we see potential for 70-80% upside. "The Great SPAC-ulation" As noted earlier, we feature a sampling of SPACs currently held on the short side. This opportunity has presented itself after a spectacular bubble formed in 2020, as illustrated in the chart below: SPAC #1 This SPAC focuses on auto insurance charged by the mile. As consumers, we certainly see the virtue in this approach. The reality, however, is that the market for this insurance is quite narrow and, more concerning, this SPAC’s competitors are far better financed and distributed. That has been reflected in the significant losses (simply put, their premiums don’t cover their losses) and meaningful reduction in company-guided financial targets. After running from $10 to $20 in Q4 2020 and Q1 2021, the threat of endless losses and capital raises has brought the shares down to just $3. The euphoria that levitated these shares late last year is now replaced by the fear that this may not be an ongoing business. SPAC #2 This $3bn market cap company offers a platform that integrates with mobile games, allowing players to compete for real money. The way it works is that players deposit cash into an account and then bet against each other in the various games that are integrated with the platform. The company typically keeps 15-20% of the total bet, which it shares with game developers, while the winning player receives the rest. In theory, this is an attractive proposition for mobile game developers as it offers an alternative means of monetization beyond the traditional methods such as advertising and in-app purchases. However, a deeper look at the company’s financials reveals a business model with questionable unit economics. At a high level, the company effectively spends $1.15 (and growing) in marketing costs for every $1 it generates in revenue. Nearly half of these marketing costs are in the form of “engagement marketing” which is a fancy way of saying free bonus cash. Furthermore, the company recognizes a portion of this bonus cash as revenue when players eventually bet with it, in effect paying themselves. These expenses as a percentage of revenue have only continued to grow in the business’s brief history as a publicly traded company. While the current cash position should enable the company to keep the treadmill going for several years, we believe this is clearly an unsustainable business model. SPAC #3 This $1.7bn market cap company was originally attempting to build a subscription-based “transportation as a service” using a fleet of stripped-down electric vehicles. But the Founder and CEO quit four months after the SPAC deal closed, followed quickly by the entire management team (CFO, Head of Strategy, Chief Legal Officer, Head of Development, etc.). The SEC opened an investigation the following month and, if this wasn’t enough, the new CEO immediately pivoted strategies from a capital-light, outsourced manufacturing model to a capital-intensive one, bringing manufacturing in-house. They significantly ramped up the expected cash burn and pulled all guidance, which had just been issued a few months prior. There are more than enough red flags to assume this SPAC won’t survive long. SPAC #4 This $1.2bn market cap company is a manufacturer of “Smart Glass” which is an electrified window that can adjust tint to darken or lighten. The theory is that it can reduce building electricity costs (the company claims 10% savings), but the reality is that those savings require 10x the upfront investment. Despite $2bn sunk costs and 15 years of R&D, gross margins remain negative(!) 150%, and cash continues to bleed out at a $200-300 million/year clip, leaving them about 18 months of runway. The SPAC itself removed a problem for Softbank, which had been stuck for years, adding to its ownership in several “down rounds” where V.C. investors add capital at lower and lower valuations. If that’s not enough, the company has delayed filing financial reports and is in violation of exchange rules as the auditing committee investigates disputed warranty accruals. We think this company is unviable and will eventually be worthless. SPAC #5 This $3.4bn market cap company bills themselves as a next-generation Medicare Advantage insurer by leveraging their machine learning platform to improve care and reduce costs, driving profitability and what they have coined their “virtuous growth cycle.” The reality is that this growth comes at the literal cost of the Medical Care Ratio (MCR), the percent of revenue they payout for enrollee care, which ballooned to 107.5% and 111% in the first two quarters of 2021, respectively. Behind the tarnished façade of a company losing more money by virtue of their growth (maybe that’s what they meant?) is a backdrop of alleged related-party transactions to boost sales, failure to disclose a U.S. Department of Justice investigation into inappropriate marketing practices, and an algorithm that seems more geared to find upcoding opportunities (to get a larger payout from CMS per patient) than optimizing patient care. Instead of a business on the path to profitability with a noble ethos, we expect this company to continue to lose money at a rate of $500-$700mm a year well into the future, requiring additional raises and increasingly diluting value to shareholders. As always, we encourage your questions and comments, so please do not hesitate to call our team here at Apis or Will Dombrowski at +1.203.409.6301. Sincerely, Daniel Barker Portfolio Manager & Managing Member Eric Almeraz Director of Research & Managing Member Updated on Oct 19, 2021, 4:03 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 19th, 2021

Futures Rebound As Energy Prices Soar

Futures Rebound As Energy Prices Soar US equity futures and European markets rebounded from a tech rout on Monday that was triggered by fears of soaring energy costs, stagflation, tech overvaluation and escalating Chinese property distress even as Asian shares tracked Monday's broad Wall Street sell-off to weaken for a third straight session. The dollar rose and yields rebounded back ato 1.50% as the rise in oil continued, pushing Brent above $82/bbl. At of 7:15am ET, S&P futures were up 16.25 points, or 0.38%, to 4,307; Dow futs were up 116 points and Nasdaq futures rose 47.25 points as technology shares bounced in Europe. Bitcoin jumped above $50,000 for the first time since Sept 7. The “market correction, initially sparked by tapering expectations and China’s property sector worries, is now being driven by record energy prices as well as lingering political uncertainties in the U.S. about the crucial question of the debt ceiling,” said Pierre Veyret, a technical analyst at ActivTrades. “Markets are likely to stay volatile this week and with no clear direction until there is significant progress on the existing concerns.” Additionally, the recent calm in global markets which hit an all time high as recently as a few weeks ago, has been shattered by a growing wall of worry spanning a debt crisis in China, elevated inflation on the back of commodity supply shocks, fading economic recovery and U.S. political bickering. Meanwhile, investors brace for a tapering of stimulus by the Federal Reserve. Nerves eased on Tuesday, however, led by a tech rebound following Monday's Facebook-led rout, and big bank stocks were higher in premarket trading as 10-year Treasury yields climbed to about 1.5% led again by breakevens as oil not only held onto recent impressive gains - along with most other commodities after a gauge of commodities soared to an all-time record - but Brent rose above $82 . As to the insanity in Europe's gas sector, European natural gas contracts soared on Tuesday to an unprecedented 111.70 euros per megawatt-hour, compared with 15.49 euros in February. The continent is bracing for a winter crunch in energy supply, with German front-month power contracts also jumping to record levels. Global shortages of gas and coal are pushing energy prices higher, disrupting markets from the U.K. to China, as economies emerge from the pandemic. Surging costs are threatening to raise inflation and starting to weigh onindustrial production, with some companies in Europe forced to cut output. “The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter,” trader Energi Danmark wrote in a note Tuesday. “Everything looks set for another week of price climbs.” In U.S. premarket trading, Facebook found dip buyers in premarket trading after a 4.9% plunge on Monday amid an hours-long service disruption. The stock added 1.6% in the early New York session. Lordstown Motors shares declined as much as 4.6% after the electric vehicle automaker was downgraded to underweight by Morgan Stanley, while the PT was also cut to $2 from $8. Uphealth fell after pricing its share offering at a discount. And Facebook was up 1.5% following Monday’s slump after it blamed a global service outage that kept its social media apps offline for much of yesterday on a problem with its network configuration. Here are some other notable premarket movers: Amplify Energy (AMPY US) rises 10% in U.S. premarket trading, paring some of Monday’s 44% plunge tied to an oil spill from a California offshore pipeline operated by the company Comtech Telecom (CMTL US) slid more than 7% Monday postmarket after it reported adjusted earnings below average analyst estimates It is “the period of a multiplicity of shocks percolating through the financial markets leaving them in the fog, with many watching from the sidelines for clarity,” Sebastien Galy, a senior macro strategist at Nordea Invetsment, wrote in a note. The technology subgroup in Europe’s benchmark Stoxx 600 advanced for the first time in eight days. European natural-gas contracts jumped as much as 16% and West Texas Intermediate crude headed for a seven-year high. Earlier in the session, MSCI's broadest index of Asia-Pacific shares outside Japan dropped as much as 1.3%, declining for a third consecutive session. Japan stocks were down 2.5%, South Korea gave up 2% and Australia shed 0.4%. The drop in markets took MSCI's main benchmark to 619.77, the lowest since November 2020 but it pared losses to be down 0.6% in late Asia trade. The index has shed more than 5% this year, with Hong Kong and Japanese markets among the big losers. "Investors are clearly worried about inflation due to supply chain disruptions and the rally in energy prices," said Vasu Menon, executive  director of investment strategy at OCBC Bank.  "We have seen tech stocks outperform value stocks, so if inflation remains a worry, then tech stocks tend to get hit," Menon said. In rates, Treasuries were under pressure with yields near session highs, cheaper by up to 2.5bp across belly of the curve. Yields rose not only on the continued surge in commodities, but about the total chaos over the debt ceiling D-Date which will be hit in two weeks. Gilts lag amid bond auctions, adding to upside pressure on yields, while S&P 500 futures pare about a third of Monday’s 1.3% slide. The RBA kept monetary policy unchanged as expected.  In FX, the dollar rose against most Group-of-10 currencies near a one-year high versus major peers ahead of key U.S. payrolls data due at the end of the week; the pound bucked the trend, advancing for a fourth session. The euro fell 0.25% to $1.1592, while the yen rose 0.29% to $111.18. Leveraged funds sold the kiwi aggressively after a New Zealand business survey showed weak third-quarter economic sentiment.  Sentiment on the euro over the next year reached its most bearish since June 2020 on Friday amid a widening policy divergence between the Federal Reserve and the European Central Bank. In commodities, oil prices reached a three-year high on Monday (and continued higher on Tuesday) after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production. Underscoring the rise in commodity prices, the Refinitiv/CoreCommodity CRB index rose to 233.08 on Monday, the highest in more than six years. U.S. oil rose 1.15% to $78.51 a barrel, a day after hitting its highest since 2014. Brent crude stood at $82.2 after rising to a three-year top. Gold prices eased to $1,757 per ounce, after rising on Monday to the highest since Sept. 23. "OPEC+ may inadvertently cause oil prices to surge even higher, adding to an energy crisis that primarily reflects very tight gas and coal markets," said Commonwealth Bank of Australia's commodities analyst Vivek Dhar. "That potentially threatens the global economic recovery, just as global oil demand growth is picking up as economies re‑open on the back of rising vaccination rates," Dhar said in a note. Traders are now turning their attention to Friday’s nonfarm-payrolls data to gauge the timing of the Fed’s taper. In the latest Fed comments, St. Louis President James Bullard said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation. Australia’s central bank kept its monetary settings unchanged. Looking at the day ahead now, the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Market Snapshot S&P 500 futures up 0.2% to 4,301.00 STOXX Europe 600 up 0.4% to 452.37 MXAP down 0.7% to 192.58 MXAPJ down 0.3% to 626.41 Nikkei down 2.2% to 27,822.12 Topix down 1.3% to 1,947.75 Hang Seng Index up 0.3% to 24,104.15 Shanghai Composite up 0.9% to 3,568.17 Sensex up 0.4% to 59,531.35 Australia S&P/ASX 200 down 0.4% to 7,248.36 Kospi down 1.9% to 2,962.17 Brent Futures up 0.7% to $81.86/bbl Gold spot down 0.6% to $1,758.11 U.S. Dollar Index up 0.15% to 93.92 German 10Y yield fell 1.2 bps to -0.225% Euro down 0.2% to $1.1603 Top Overnight News from Bloomberg China’s heavily leveraged property firms saw their stocks and bonds tumble after a failure by developer Fantasia Holdings Group Co. to repay notes deepened investor concerns about the sector’s outlook A steep surge in inflation in the euro area has started to take its toll on the economy, according to a survey by IHS Markit China will strictly prevent bank and insurance funds from being used in speculating commodities in a push to maintain market order and stabilize prices The Federal Reserve said that its internal watchdog plans to open an investigation into trading activity by senior U.S. central bank officials, following revelations about transactions in 2020 Facebook Inc. blamed a global service outage that kept its social media apps offline for much of Monday on a problem with its network configuration, adding that it found no evidence that user data was compromised during the downtime A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured following the tech sell-off in the US and amid several headwinds for global markets including US-China trade frictions, China's record incursion into Taiwanese airspace and with higher oil prices stoking inflationary concerns. ASX 200 (-0.6%) was dragged lower after the losses in tech rolled over into the region and following somewhat mixed Trade and PMI data releases, but with downside stemmed by resilience in gold miners and the energy sector, after gains in the underlying commodity prices including the rally in oil to a seven-year high. Nikkei 225 (-2.2%) slumped below the 28k level and briefly entered into correction territory as it suffered intraday losses of as much as 3% and with index heavyweights Fast Retailing and SoftBank dominating the list of worst performers, while KOSPI (-1.9%) also fell into a correction with the index at least 10% below the record highs registered earlier this year despite efforts by South Korea’s antitrust regulator to dispel fears of a harsh tech crackdown. Hang Seng (+0.3%) was pressured at the open amid tech woes and default fears after reports that Fantasia Holdings missed payments due yesterday for USD 206mln of bonds, although the Hong Kong benchmark then pared its losses with notable strength seen in Chinese oil majors as they benefit from the rising energy prices. Finally, 10yr JGBs were initially kept afloat by the risk aversion but then reversed course amid the uninspired mood in T-notes and Bund futures, as well as weaker metrics from the 10yr JGB auction which attracted a lower bid to cover despite a decline in accepted prices. Top Asian News Gold Drops After Three-Day Gain as Yields and Dollar Push Higher ‘Kishida Shock’ Hits Japan Markets Wary of Redistribution Plan China Orders Banks to Ramp Up Funding to Boost Coal Output S.Korea’s NPS Could Lose $3.5m From Evergrande Stock Investment European equities (Euro Stoxx 50 +0.9%; Stoxx 600 +0.7%) have extended on the marginal gains seen at the open as indices attempt to claw back some of yesterday’s losses. Incremental macro newsflow since the close has not provided much cause for optimism and therefore it remains to be seen how durable any recovery will be. Overnight, the APAC session was mostly downbeat as the region contended with the negative US lead, ongoing US-China trade frictions, China's record incursion into Taiwanese airspace and higher oil prices stoking inflationary concern. Final PMIs for the Eurozone saw the composite revised very modestly higher to 56.02 from 56.1 with IHS Markit noting “the current economic situation in the eurozone is an unwelcome mix of rising price pressures but slower growth”. Stateside, futures are exhibiting gains of a similar magnitude to their European counterparts with the ES +0.2% and no real discernible theme across the US majors as traders await further progress in Washington. Sectors in Europe are mostly higher with clear outperformance in banking names with JP Morgan bullish on the sector; Credit Agricole sits at the top of the CAC after launching a new EUR 500mln share repurchase scheme. To the downside, laggards include Construction & Materials and Autos. Individual movers include Greggs (+8.7%) at the top of the Stoxx 600 after raising its profit outlook for the FY despite concerns over supply chain disruptions and staffing issues. Elsewhere, Infineon (+2.8%) has provided some support for the IT sector after confirming its FY 21 forecasts and being confident about the FY22 outlook. Finally, Melrose (-2.2%) is a notable laggard after the Co. cautioned on the fallout of the global chip shortage which has prompted a surge in client cancellations. Top European News European Banks Have Upside on Capital Returns, Yields, JPM Says Romania Edges Toward First Rate Hike Since 2018: Decision Guide Romania Approves Partial Compensation for Higher Energy Costs Morgan Stanley Expands Diversity-Focused ‘Shark Tank’ to Europe In FX, the broader Dollar and index remain firmer on the session, with the latter on either side of 94.000 from a 93.804 overnight base, but still within yesterday’s 93.675-94.104 range which marks the first immediate points of support/resistance. State-side, US President Biden spoke with 12 progressive members of Congress in which they agreed to follow through on key priorities, while it was also reported that President Biden told House progressives the spending package needs to be between USD 1.9tln-2.2tln. Biden will meet with moderate House Democrats virtually today. It is also worth keeping an eye on the Fed’s review of trading activities which could lead to a shift in the balance between hawks and doves, following the parting of hawks Rosengren (2022 voter) and Kaplan (2023 voter), who were set to be voters during the projected rate hike period. Ahead, the US ISM Services PMI will likely be the focal point from a state-side data standpoint. EUR, GBP - The EUR and GBP continue to diverge. Sterling extends on earlier gains, seemingly a function of the EUR/GBP cross topping out just before its 50 DMA (0.8546) before taking out yesterday’s 0.8529 low on its way towards 0.8500. The Sterling strength has helped Cable regain 1.3600+ status from a 1.3585 low. EUR/USD meanders around 1.1600 in a relatively narrow 1.1591-1.1622 current intraday band – with yesterday’s low at 1.1586 ahead of the 200 WMA at 1.1572. Europe saw the release of final Services and Composite PMIs, which continue to highlight the theme of rising prices and spillover into demand. AUD, NZD, CAD - he non-US Dollars see mild losses but trade off worst levels as the Dollar recedes and as market sentiment holds an upside bias. The AUD/NZD cross meanwhile remains in focus amid this week’s RBA/RBNZ central bank standoff. The RBA overnight provided no surprises and did not contain any significant new observations, with the currency experiencing choppiness upon the release. The RBNZ, meanwhile, is poised for a 25bps OCR hike at its announcement at 02:00BST/21:00EDT tomorrow. The AUD/NZD cross resides around session lows near 1.0455, whilst OpEx sees some AUD 2.1bln at strike 1.0410. The Loonie sees an underlying bid from crude prices, with USD/CAD back under its 50 DMA at 1.2600 ahead of Canadian trade data. JPY, CHF - The traditional havens are at the foot of the G10 bunch in what is seemingly a risk-influenced move. USD/JPY within a tight 110.88-111.25 band vs yesterday’s 110.50-112.07 range. USD/CHF, meanwhile, has popped above its 21 DMA (0.9250) and trades towards the top of its current 0.9238-70 parameter. In commodities, WTI and Brent front month futures are choppy but ultimately hold an upside bias in the aftermath of the OPEC+ meeting yesterday. Nonetheless, the benchmarks remain near yesterday’s highs which saw Brent Dec test USD 82.00/bbl to the upside. Brent resides around USD 81.50/bbl at the time of writing whilst WTI Nov hovers just under USD 78/bbl. With OPEC out of the way and until the next meeting, traders will be eyeing developments (if any) regarding the Iranian nuclear talks, alongside the electricity situation in China. Furthermore, traders must be cognizant of potential intervention by governments in a bid to control rising energy prices. As a reminder, the White House held talks with Saudi counterparts before the recent OPEC+ meeting and expressed concern on prices. Aside from that, news flow for the complex has been light during the European morning. Elsewhere, precious metals are softer on the day but spot gold and silver trade off worst levels with the yellow metal still holding into USD 1,750/oz-status and spot silver back above USD 22.50/oz. Over to base metals, LME copper remains pressured in what seems to be a continuation of the lacklustre trade seen during APAC hours amid a lack of demand as China remains on holiday. US Trade Calendar 8:30am: Aug. Trade Balance, est. -$70.8b, prior -$70.1b 9:45am: Sept. Markit US Composite PMI, prior 54.5 9:45am: Sept. Markit US Services PMI, est. 54.4, prior 54.4 10am: Sept. ISM Services Index, est. 59.8, prior 61.7 DB's Jim Reid concludes the overnight wrap I’m hoping you all survived without WhatsApp, Instagram and Facebook yesterday after the outage. We actually had to resort to a conversation over dinner last night. It was a bit weird without hearing pings go off every few minutes. Once the conversation dried up we went on Twitter and then watched Netflix so it wasn’t a total disaster for US tech in our household. Oh and I’m writing this on my iPad while looking up a few things on Google. Tech led the sell-off last night that stretched to both equities and bonds. One of the noticeable features of the recent weakness in equities is that bonds have struggled to rally. This hints at technicals being nowhere near as strong as they were in the summer and also a realisation that bonds aren’t a great haven if the sell-off is partly inflation related. By the close of trade yesterday, the S&P 500 had shed another -1.30%, making it the 3rd time in the last 5 sessions that the index has lost more than 1%, with the latest move now taking it -5.21% beneath its all-time closing high back in early September. However, unlike some of the other declines of the last month, which have been quite obviously connected to a particular concern like Evergrande or the impact of higher yields, the latest selloff looks to be coming from a more generalised set of concerns, with those worries given a fresh impetus by yet another rise in energy prices yesterday as oil hit multi-year highs. In turn, that spike in energy prices has led to renewed fears about inflation accelerating even further than current forecasts are implying, with knock-on implications for central banks and the amount of monetary stimulus we can expect over the coming months. We’ll start with those moves in energy given the effects they had elsewhere. Yesterday saw Brent Crude oil prices (+2.50%) close above $81/bbl for the first time in nearly 3 years, and this morning it’s up another +0.42%. On top of that, WTI (+2.29%) oil prices hit a 6-year high of its own at $77.62/bbl, which saw its YTD gains rise above +60%. The latest advance for oil has come as the OPEC+ group agreed yesterday that they’d stick to their planned output hike of +400k barrels per day in November, in spite of some speculation that there could be a larger increase in supply. However, it wasn’t just oil moving higher, with European natural gas prices (+2.07%) taking another leg up after their recent surge, which leaves them just shy of their recent peak last Thursday. And what’s also concerning from an inflationary standpoint is that the moves in commodities were broader than simply energy, with metals including copper (+1.17%) seeing sizeable gains as well. Overall, that meant Bloomberg’s Commodity Spot Index (+1.12%) finally exceeded its 2011 high yesterday, and brings the index’s gains since the post-pandemic low in March 2020 to +94.7%. Against this backdrop, equities took another tumble as the major indices on both sides of the Atlantic moved lower, including the S&P 500 (-1.30%) and Europe’s STOXX 600 (-0.47%). Tech stocks saw the brunt of the declines, with the NASDAQ down -2.14% and the FANG+ index down -3.00%, while Europe’s STOXX Technology Index (-2.39%) fell for a 7th consecutive session. Facebook was one of the bigger laggards yesterday as it fell -4.89% - its worst day since November 2020. The company is dealing with whistleblower allegations that their internal research doesn’t match what executives have been saying about the effect the social media company has on its users. The equal weight S&P 500 was only down -0.63% so the big tech stocks definitely led the way. European equities were less affected than their US counterparts however, having missed out on Friday’s late US equity rally following the European close, with the DAX (-0.79%), the CAC 40 (-0.61%) and the FTSE 100 (-0.23%) all seeing declines of less than 1%. A lower tech weighting probably also helped. Those concerns about stagflation represented further bad news for sovereign bonds yesterday, as investors moved to upgrade their expectations of future inflation. In Europe, 10yr German breakevens were up by +2.0bps to an 8-year high of 1.72%, while their Italian counterparts hit their highest level in over a decade, at 1.63%. Meanwhile in the US, 10yr breakevens were also up +1.3bps to 2.39%. Those moves in inflation expectations supported higher yields, with those on 10yr Treasuries up +1.7bps to 1.479% by the close of trade, as yields on bunds (+1.0bps), OATs (+1.3bps) and BTPs (+1.8bps) similarly moved higher. Overnight in Asia, equities have mostly followed the US lower, with the Nikkei (-2.77%), KOSPI (-1.71%), and Australia’s ASX 200 (-0.74%) all losing ground, though the Hang Seng (+0.20%) has recovered slightly thanks to energy stocks, and S&P 500 futures (+0.13%) are also pointing to a modest recovery. Those declines for the Nikkei and the KOSPI leave them just shy of a 10% correction from their recent peaks. In terms of the latest on Evergrande, there are signs that risks are spreading to other property developers, as China’s Fantasia Holdings missed a repayment worth $205.7m on a bond that matured Monday. Unsurprisingly, the developments are continuing to affect China’s HY dollar bond prices, with a Bloomberg index now down by -14.3% since its high back in May. Elsewhere in Asia, we got confirmation shortly after we went to press yesterday from new Japanese PM Fumio Kishida that there’d be a general election on October 31. Interestingly, that will actually be the 3rd general election in a G7 economy in the space of just six weeks, following the votes in Canada and Germany in late September. Back to the US, and Treasury Secretary Yellen’s estimated deadline to raise the debt ceiling – 18 Oct – is now under 2 weeks away, and during a press conference yesterday President Biden called on Republicans to join with Democrats to raise the debt limit, arguing that over a quarter of the US debt was accumulated during the Trump administration and that it should not be tied to “any new spending being considered. It has nothing to do with my plan for infrastructure or building back better, zero.” Senate Majority Leader Schumer plans to hold a vote this week to lift the debt ceiling, though Republicans are set to block the legislation and are forcing Democrats to use the partisan budget reconciliation process that is currently the vehicle of the Biden “Build Back Better” plan. Whilst time was running out to deal with the debt ceiling, President Biden also met with progressive House Democrats yesterday to discuss the budget reconciliation package and about potentially limiting the scope of the bill that makes up much of the President’s economic agenda. Press Secretary Psaki said that there is a “recognition that this package is going to be smaller than originally proposed,” but that the President is looking to get it across the goal line. Initial estimates could see the final package closer to $2 trillion over 10 years versus the current $3.5 trillion plans. Meanwhile on trade, the Biden administration also announced yesterday that they would hold direct talks with Chinese officials in the coming week seeking to enforce prior commitments and start fresh talks to exclude some goods from US tariffs. US Trade Representative Katherine Tai will meet with Chinese Vice Premier Liu He, and is expected to focus on how to add and adjust to the Trump administration’s most recent deal with the Chinese government rather than starting from scratch. There wasn’t much in the way of data yesterday, though US factory orders in August rose by +1.2% (vs. +1.0% expected), and the previous month’s growth was revised up to +0.7% (vs. +0.4% previously). To the day ahead now, and the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Tyler Durden Tue, 10/05/2021 - 07:45.....»»

Category: blogSource: zerohedgeOct 5th, 2021

Futures Rebound As Yields Drop

Futures Rebound As Yields Drop U.S. index futures rebounded on Tuesday from Monday's stagflation-fear driven rout as an increase in Treasury yields abated and the greenback dropped from a 10 month high while Brent crude dropped from a 3 year high of $80/barrel after API showed a surprise stockpile build across all products. One day after one of Wall Street’s worst selloff of this year which saw the S&P's biggest one-day drop since May, dip buyers made yet another another triumphal return to global markets, with Nasdaq 100 futures climbing 130 points or 0.9% after the tech-heavy index tumbled the most since March on Tuesday as U.S. Treasury yields rose on tapering and stagflationconcerns. S&P 500 futures rose 28 points or 0.6% after the underlying gauge also slumped amid mounting concern over the debt-ceiling impasse in Washington. A key catalyst for today's easing in financial conditions was the 10-year yield shedding four basis points and the five-year rate falling below 1%. In the past five sessions, the 10Y yield rose by a whopping 25 basis point, a fast enough move to trigger VaR shocks across risk parity investors. "We think (10-year treasury yields) are likely to around 1.5% to 1.75%, so they obviously still have room to go," said Daniel Lam, senior cross-asset strategist at Standard Chartered, who added that the rise in yields was driven by the fact that the United States was almost definitely going to start tapering its massive asset purchases by the end of this year, and that this would drive a shift from growth stocks into value names. Shares of FAAMG gigatechs rose between 1% and 1.3% in premarket trading as the surge in yields eased. Oil firms and supermajors like Exxon and Chevron dipped as a rally in crude prices petered out. The S&P energy sector has gained 3.9% so far this week and is on track for its best monthly performance since February. Among stocks, Boeing rose 2.5% after it said 737 MAX test flight for China’s aviation regulator last month was successful and the planemaker hopes a two-year grounding will be lifted this year. Cybersecurity firm Fortinet Inc. led premarket gains among S&P 500 Index companies. Here are some of the other big movers this morning: Micron (MU US) shares down more than 3% in U.S. premarket trading after the chipmaker’s forecast came in well below analyst expectations. Co. was hurt by slowing demand from personal-computer makers Lucid (LCID US) shares rise 9.7% in U.S. premarket trading after the electric-vehicle company said it has started production on its debut consumer car EQT Corp. (EQT US) shares fell 4.8% in Tuesday postmarket trading after co. reports offering by certain shareholders who received shares as a part of its acquisition of Alta Resources Development’s upstream and midstream units PTK Acquisition (PTK US) rises in U.S. premarket trading after the blank-check company’s shareholders approved its combination with the Israel-based semiconductor company Valens Cal-Maine (CALM US) shares rose 4.4% postmarket Tuesday after it reported net sales for the first quarter that beat the average analyst estimate as well as a narrower-than-estimated loss Sherwin-Williams (SHW US) dropped 3.5% in Tuesday postmarket trading after its forecasted adjusted earnings per share for the third quarter missed the average analyst estimate Boeing (BA US) and Spirit Aerosystems (SPR US) climb as much as 3% after being upgraded to outperform by Bernstein on travel finally heading to inflection point The S&P 500 is set to break its seven-month winning streak as fears about non-transitory inflation, China Evergrande’s default, potential higher corporate taxes and a sooner-than expected tapering of monetary support by the Federal Reserve clouded investor sentiment in what is usually a seasonally weak month. Meanwhile, Senate Democrats are seeking a vote Wednesday on a stopgap funding bill to avert a government shutdown, but without a provision to increase the federal debt limit. On Tuesday, Jamie Dimon said a U.S. default would be “potentially catastrophic” event, in other words yet another multibillion bailout for his bank. “Many things are in flux: the pandemic is not over, the supply chain bottlenecks we are seeing are affecting all sorts of prices and we’ll need to see how it plays out because the results are not clear in terms of inflation,” Belita Ong, Dalton Investments chairman, said on Bloomberg Television. Europe’s Stoxx 600 gauge rebounded from a two-month low, rising 0.9% and reversing half of yesterday's losses. Semiconductor-equipment company ASM International posted the biggest increase on the index amid positive comments by analysts on its growth outlook. A sharp rebound during the European session marked a turnaround from the downbeat Asian session, when equities extended losses amid concerns over stagflation and China Evergrande Group’s debt crisis. Sentiment improved as a steady flow of buyers emerged in the Treasury market, ranging from foreign and domestic funds to leveraged accounts.  Here are some of the biggest European movers today: Academedia shares rise as much as 6.9% in Stockholm, the most since June 1, after the company said the number of participants for its higher vocational education has increased 25% y/y. ASM International jumps as much as 7.3%, rebounding from a three-day sell-off, boosted by supportive analyst comments and easing bond yields. GEA Group gains as much as 4.7% after the company published new financial targets through 2026, which Citigroup says are above analysts’ consensus and an encouraging signal. DSV bounces as much as 4.4% as JPMorgan upgrades to overweight, saying the recent pullback in the shares presents an opportunity. Genova Property Group falls as much as 10% in Stockholm trading after the real estate services company placed shares at a discount to the last close. ITM Power drops as much as 6.4% after JPMorgan downgrades to neutral from overweight on relative valuation, with a more mixed near-term outlook making risk/reward seem less compelling. Royal Mail slides as much as 6.2% after UBS cuts its rating to sell from buy, expecting U.K. labor shortages and wage inflation pressures to hurt the parcel service company’s profit margins. Earlier in the session, Asian equities slumped in delayed response to the US rout. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.43% with Australia off 1.5%, and South Korea falling 2.06%. The Hong Kong benchmark shed 1.2% and Chinese blue chips were 1.1% lower. Japan's Nikkei shed 2.35% hurt by the general mood as the country's ruling party votes for a new leader who will almost certainly become the next prime minister ahead of a general election due in weeks.  Also on traders' minds was cash-strapped China Evergrande whose shares rose as much as 12% after it said it plans to sell a 9.99 billion yuan ($1.5 billion) stake it owns in Shengjing Bank. Evergrande is due to make a $47.5 million bond interest payment on its 9.5% March 2024 dollar bond, having missed a similar payment last week, but it said in the stock exchange filing the proceeds of the sale should be used to settle its financial liabilities due to Shengjing Bank. Chinese real estate company Fantasia Holdings Group is struggling to avoid falling deeper into distress, just as the crisis at China Evergrande flags broader risks to other heavily indebted developers. In Japan, the country's PGIF, or Government Pension Investment Fund, the world’s largest pension fund, said it won’t include yuan- denominated Chinese sovereign debt in its portfolio. In rates, as noted above, Treasuries lead global bonds higher, paring large portion of Tuesday’s losses with gains led by intermediates out to long-end of the curve. Treasury yields richer by up to 4bp across long-end of the curve with 10s at around 1.50%, outperforming bunds and gilts both by 2bp; front-end of the curve just marginally richer, flattening 2s10s spread by 3.2bp with 5s30s tighter by 0.5bp. Futures volumes remain elevated amid evidence of dip buyers emerging Tuesday and continuing over Wednesday’s Asia hours. Session highlights include a number of Fed speakers, including Chair Powell.     In FX, the Bloomberg Dollar Spot Index was little changed after earlier advancing, and the dollar slipped versus most of its Group-of-10 peers. The yen was the best G-10 performer as it whipsawed after earlier dropping to 111.68 per dollar, its weakest level since March 2020. The Australian dollar also advanced amid optimism over easing of Covid-related restrictions while the New Zealand dollar was the worst performer amid rising infections. The euro dropped to an 11-month low while the pound touched its weakest level since January against the greenback amid a bout of dollar strength as the London session kicked off. Confidence in the euro-area economy unexpectedly rose in September as consumers turned more optimistic about the outlook and construction companies saw employment prospects improve. The yen climbed from an 18-month low as a decline in stocks around the world helps boost demand for the currency as a haven. Japanese bonds also gained. In commodities, oil prices dropped after touching a near three-year high the day before. Brent crude fell 0.83% to $78.25 per barrel after topping $80 yesterday; WTI dipped 1.09% to $74.47 a barrel. Gold edged higher with the spot price at $1,735.6 an ounce, up 0.1% from the seven-week low hit the day before as higher yields hurt demand for the non interest bearing asset. Base metals are under pressure with LME aluminum and copper lagging. Looking at the day ahead, the biggest highlight will be a policy panel at the ECB forum on central banking featuring ECB President Lagarde, Fed Chair Powell, BoJ Governor Kuroda and BoE Governor Bailey. Other central bank speakers include ECB Vice President de Guindos, the ECB’s Centeno, Stournaras, Makhlouf, Elderson and Lane, as well as the Fed’s Harker, Daly and Bostic. Meanwhile, data releases include UK mortgage approvals for August, the final Euro Area consumer confidence reading for September, and US pending home sales for August. Market Snapshot S&P 500 futures up 0.7% to 4,371.75 STOXX Europe 600 up 0.8% to 455.97 MXAP down 1.2% to 197.38 MXAPJ down 0.7% to 635.17 Nikkei down 2.1% to 29,544.29 Topix down 2.1% to 2,038.29 Hang Seng Index up 0.7% to 24,663.50 Shanghai Composite down 1.8% to 3,536.29 Sensex down 0.4% to 59,445.57 Australia S&P/ASX 200 down 1.1% to 7,196.71 Kospi down 1.2% to 3,060.27 Brent Futures down 0.7% to $78.53/bbl Gold spot up 0.4% to $1,740.79 U.S. Dollar Index little changed at 93.81 German 10Y yield fell 1.1 bps to -0.210% Euro down 0.2% to $1.1664 Top Overnight News from Bloomberg China’s central bank governor said quantitative easing implemented by global peers can be damaging over the long term and vowed to keep policy normal for as long as possible China’s central bank injected liquidity into the financial system for a ninth day in the longest run since December as it sought to meet a surge in seasonal demand for cash China stepped in to buy a stake in a struggling regional bank from China Evergrande Group as it seeks to limit contagion in the financial sector from the embattled property developer The Chinese government is considering raising power prices for industrial consumers to help ease a growing supply crunch Japan’s Government Pension Investment Fund, the world’s largest pension fund, said it won’t include yuan-denominated Chinese sovereign debt in its portfolio. The decision comes as FTSE Russell is set to start adding Chinese debt to its benchmark global bond index, which the GPIF follows, from October Fumio Kishida is set to become Japan’s prime minister, after the ex-foreign minister overcame popular reformer Taro Kono to win leadership of the country’s ruling party, leaving stock traders feeling optimistic ECB Governing Council member Gabriel Makhlouf said policy makers must be ready to respond to persistently higher inflation that could result from lasting supply bottlenecks Inflation accelerated in Spain to the fastest pace in 13 years, evidence of how surging energy costs are feeding through to citizens around the euro-zone economy Sterling-debt sales by corporates exceeded 2020’s annual tally as borrowers rushed to secure ultra-cheap funding costs while they still can. Offerings will top 70 billion pounds ($95 billion) through Wednesday, beating last year’s total sales by at least 600 million pounds, according to data compiled by Bloomberg A more detailed look at global markets courtesy of Newsquawk Asian equity markets were pressured on spillover selling from global peers which saw the S&P 500 suffer its worst day since May after tech losses were magnified as yields climbed and with sentiment also dampened by weak data in the form of US Consumer Confidence and Richmond Fed indexes. ASX 200 (-1.1%) was heavily pressured by tech and with mining-related stocks dragged lower by weakness in underlying commodity prices, with the mood also clouded by reports that Queensland is on alert for a potential lockdown and that Australia will wind down emergency pandemic support payments within weeks. Nikkei 225 (-2.1%) underperformed amid the broad sell-off and as participants awaited the outcome of the LDP leadership vote which saw no candidate win a majority (as expected), triggering a runoff between vaccine minister Kono and former foreign minister Kishida to face off in a second round vote in which Kishida was named the new PM. KOSPI (-1.2%) was heavily pressured by the tech woes and after North Korea confirmed that yesterday’s launch was a new type of hypersonic missile. Hang Seng (+0.7%) and Shanghai Comp. (-1.8%) conformed to the broad risk aversion with tech stocks hit in Hong Kong, although the losses were milder compared to regional peers with Evergrande shares boosted after it sold CNY 10bln of shares in Shengjing Bank that will be used to pay the developer’s debt owed to Shengjing Bank, which is the Co.’s first asset sale amid the current collapse concerns although it still faces another USD 45.2mln in interest payments due today. In addition, the PBoC continued with its liquidity efforts and there was also the absence of Stock Connect flows to Hong Kong with Southbound trading already closed through to the National Holidays. Finally, 10yr JGBs were slightly higher as risk assets took a hit from the tech sell-off and with T-notes finding some reprieve overnight. Furthermore, the BoJ were also in the market for nearly JPY 1tln of JGBs mostly in 3yr-10yr maturities and there were notable comments from Japan’s GPIF that it is to avoid investments in Chinese government bonds due to concerns over China market. Top Asian News L&T Is Said in Talks to Merge Power Unit With Sembcorp India Prosecutors Seek Two Years Jail for Ghosn’s Alleged Accomplice Japan to Start Process to Sell $8.5 Billion Postal Stake Gold Climbs From Seven Week Low as Yields Retreat, Dollar Pauses Bourses in Europe are attempting to claw back some ground lost in the prior session’s global stocks rout (Euro Stoxx 50 +0.9%; Stoxx 600 +0.8%). The upside momentum seen at the cash open has somewhat stabilised amid a lack of news flow and with a busy agenda ahead from a central bank standpoint, with traders also cognizant of potential month-end influence. US equity futures have also been gradually drifting higher since the reopen of electronic trade. As things stand, the NQ (+1.0%) narrowly outperforms the ES (+0.7%), RTY (+0.8%) and YM (+0.6%) following the tech tumble in the prior session, and with yields easing off best levels. Back to European cash, major regional bourses see broad-based gains with no standout performers. Sectors are mostly in the green; Oil & Gas resides at the foot of the bunch as crude prices drift lower and following two consecutive sessions of outperformance. On the flip side, Tech resides among today’s winners in what is seemingly a reversal of yesterday’s sector configuration, although ASML (+1.3%) may be offering some tailwinds after upping its long-term outlook whilst suggesting ASML and its supply chain partners are actively adding and improving capacity to meet this future customer demand – potentially alleviating some concerns in the Auto sector which is outperforming at the time of writing. Retail also stands strong as Next (+3.0%) upped its guidance whilst suggesting the longer-term outlook for the Co. looks more positive than it had been for many years. In terms of individual movers, Unilever (+1.0%) is underpinned by source reports that the Co. has compiled a shortlist of at least four bidders for its PG Tips and Lipton Iced Tea brands for some GBP 4bln. HeidelbergCement (-1.4%) is pressured after acquiring a 45% stake in the software firm Command Alko. Elsewhere, Morrisons (+1.3%) is on the front foot as the takeover of the Co. is to be decided via an auction process as touted earlier in the month. Top European News Makhlouf Says ECB Must Be Ready to Act If Inflation Entrenched ASML to Ride Decade-Long Sales Boom After Chip Supply Crunch Spanish Inflation at 13-Year High in Foretaste of Regional Spike U.K. Mortgage Approvals Fall to 74,453 in Aug. Vs. Est. 73,000 In FX, the yield and risk backdrop is not as constructive for the Dollar directly, but the index has posted another marginal new y-t-d best, at 93.891 compared to 93.805 yesterday with ongoing bullish momentum and the bulk of the US Treasury curve remaining above key or psychological levels, in contrast to other global bond benchmarks. Hence, the Buck is still elevated and on an upward trajectory approaching month end on Thursday, aside from the fact that hedge rebalancing flows are moderately positive and stronger vs the Yen. Indeed, the Euro is the latest domino to fall and slip to a fresh 2021 low around 1.1656, not far from big barriers at 1.1650 and further away from decent option expiry interest at the 1.1700 strike (1 bn), and it may only be a matter of time before Sterling succumbs to the same fate. Cable is currently hovering precariously above 1.3500 and shy of the January 18 base (1.3520) that formed the last pillar of support for the Pound before the trough set a week earlier (circa 1.3451), and ostensibly supportive UK data in the form of BoE mortgage lending and approvals has not provided much relief. AUD/JPY - A rather odd couple in many ways given their contrasting characteristics as a high beta or activity currency vs traditional safe haven, but both are benefiting from an element of corrective trade, consolidation and short covering relative to their US counterpart. Aud/Usd is clinging to 0.7250 in advance of Aussie building approvals on Thursday and Usd/Jpy is retracing from its new 111.68 y-t-d pinnacle amidst the less rampant yield environment and weighing up the implications of ex-Foreign Minister Kishida’s run-off win in the LDP leadership contest and the PM-in-waiting’s pledge to put together a Yen tens of trillion COVID-19 stimulus package before year end. CHF/CAD/NZD - All relatively confined vs their US rival, as the Franc continues to fend off assaults on the 0.9300 level with some impetus from a significant improvement in Swiss investor sentiment, while the Loonie is striving to keep its head above 1.2700 ahead of Canadian ppi data and absent the recent prop of galloping oil prices with WTI back under Usd 75/brl from Usd 76.67 at best on Tuesday. Elsewhere, the Kiwi is pivoting 0.6950 pre-NZ building consents and still being buffeted by strong Aud/Nzd headwinds. SCANDI/EM - Not much purchase for the Sek via upgrades to Swedish GDP and inflation forecast upgrades by NIER as sentiment indices slipped across the board, but some respite for the Try given cheaper crude and an uptick in Turkish economic confidence. Conversely, the Cnh and Cny have not received their customary fillip even though the PBoC added liquidity for the ninth day in a row overnight and China’s currency regulator has tightened control over interbank trade and asked market makers to narrow the bid/ask spread, according to sources. In commodities, WTI and Brent front month futures have been trimming overnight losses in early European trade. Losses overnight were seemingly a function of profit-taking alongside the bearish Private Inventory Report – which showed a surprise build in weekly crude stocks of 4.1mln bbls vs exp. -1.7mln bbls, whilst the headline DoE looks for a draw of 1.652mln bbls. Further, there have been growing calls for OPEC+ to further open the taps beyond the monthly 400k BPD hike, with details also light on the White House’s deliberations with OPEC ahead of the decision-making meeting next week. Despite these calls, it’s worth bearing in mind that OPEC’s latest MOMR stated, “increased risk of COVID-19 cases primarily fuelled by the Delta variant is clouding oil demand prospects going into the final quarter of the year, resulting in downward adjustments to 4Q21 estimates. As a result, 2H21 oil demand has been adjusted slightly lower, partially delaying the oil demand recovery into 1H22.” Brent Dec dipped back under USD 78/bbl (vs low 763.77/bbl) after testing USD 80/bbl yesterday, whilst WTI Nov lost the USD 75/bbl handle (vs low USD 73.37/bbl). Over to metals, spot gold and silver have seen somewhat of divergence as real yields negate some effects of the new YTD peak printed by the Dollar index, whilst spot silver succumbs to the Buck. Over to base metals, LME copper trade is lacklustre as the firmer dollar weighs on the red metal. Shanghai stainless steel meanwhile extended on losses, notching the fourth session of overnight losses with desks citing dampened demand from the Chinese power crunch. US Event Calendar 7am: Sept. MBA Mortgage Applications, prior 4.9% 10am: Aug. Pending Home Sales YoY, est. -13.8%, prior -9.5% 10am: Aug. Pending Home Sales (MoM), est. 1.3%, prior -1.8% Central Bank speakers 9am: Fed’s Harker Discusses Economic Outlook 11:45am: Powell Takes Part in ECB Forum on Central Banking 11:45am: Bailey, Kuroda, Lagarde, Powell on ECB Forum Panel 1pm: Fed’s Daly Gives Speech to UCLA 2pm: Fed’s Bostic Gives Remarks at Chicago Fed Payments DB's Jim Reid concludes the overnight wrap The main story of the last 24 hours has been a big enough rise in yields to cause a major risk-off move, with 10yr Treasury yields up another +5.0bps to 1.537% yesterday, and this morning only seeing a slight -0.3bps pullback to 1.534%. At the intraday peak yesterday, they did climb as high as 1.565% earlier in the session, but this accelerated the risk off and sent yields somewhat lower intraday as a result, which impacted the European bond closes as we’ll see below. All told, US yields closed at their highest level in 3 months and up nearly +24bps since last Wednesday’s close, shortly after the FOMC meeting. That’s the largest 4-day jump in US yields since March 2020, at the outset of the pandemic and shortly after the Fed announced their latest round of QE. This all led to the worst day for the S&P 500 (-2.04%) since mid-May and the worst for the NASDAQ (-2.83%) since mid-March. The S&P 500 is down -4.06% from the highs now – trading just below the Evergrande (remember that?) lows from last week. So the index still has not seen a -5% sell-off on a closing basis for 228 days and counting. If we make it to Halloween it will be a full calendar year. Regardless, the S&P and STOXX 600 remain on track for their worst monthly performances so far this year. Those moves have continued this morning in Asia, where the KOSPI (-2.05%), Nikkei (-1.64%), Hang Seng (-0.60%), and the Shanghai Comp (-1.79%) are all trading lower. The power crisis in China is further dampening sentiment there, and this morning Bloomberg have reported that the government are considering raising prices for industrial users to ease the shortage. Separately, we heard that Evergrande would be selling its stake in a regional bank at 10 billion yuan ($1.55bn) as a step to resolve its debt crisis, and Fitch Ratings also downgraded Evergrande overnight from CC to C. However, US equity futures are pointing to some stabilisation later, with those on the S&P 500 up +0.49%. Running through yesterday’s moves in more depth, 23 of the 24 industry groups in the S&P 500 fell back yesterday with the lone exception being energy stocks (+0.46%), which gained despite the late pullback in oil prices. In fact only 53 S&P constituents gained on the day. The largest losses were in high-growth sectors like semiconductors (-3.82%), media (-3.08%) and software (-3.05%), whilst the FANG+ index was down -2.52% as 9 of the 10 index members lost ground – Alibaba’s +1.47% gain was the sole exception. Over in Europe it was much the same story, with the STOXX 600 (-2.18%) falling to its worst daily performance since July as bourses across the continent fell back, including the German DAX (-2.09%) and France’s CAC 40 (-2.17%). Back to bonds and the rise in 10yr Treasury yields yesterday was primarily led by higher real rates (+2.1bps), which hit a 3-month high of their own, whilst rising inflation breakevens (+2.3bps) also offered support. In turn, higher yields supported the US dollar, which strengthened +0.41% to its highest level since November last year, though precious metals including gold (-0.92%) fell back as investors had less need for the zero-interest safe haven. Over in Europe the sell-off was more muted as bonds rallied into the close before selling off again after. Yields on 10yr bunds (+2.4bps), OATs (+3.0bps) and BTPs (+6.1bps) all moved higher but were well off the peaks for the day. 10yr Gilts closed up +4.2bps but that was -6.6bps off the high print. And staying with the UK, sterling (-1.18%) saw its worst day this year and fell to its lowest level since January 11 as sentiment has increasingly been knocked by the optics of the fuel crisis here. Given this and the hawkish BoE last week many are now talking up the stagflation risk. On the petrol crisis it’s hard to know how much is real and how much is like an old fashion bank run fuelled mostly by wild speculation. Regardless it doesn’t look good to investors for now. All this came against the backdrop of yet further milestones on inflation expectations, as the German 10yr breakeven hit a fresh 8-year high of 1.690%, just as the Euro Area 5y5y forward inflation swap hit a 4-year high of its own at 1.789%. Meanwhile 10yr UK breakevens pulled back some, finishing -6bps lower on the day after initially spiking up nearly +5bps in the opening hours of trading. This highlights the uncertainty as to the implications of a more hawkish BoE last week. As we’ve discussed over recent days, part of the renewed concerns about inflation have come from a fresh spike in energy prices, and yesterday saw Brent crude move above $80/bbl in regards intraday trading for the first time since 2018. Furthermore, natural gas prices continued to hit fresh highs yesterday, with European futures up +2.69% to a fresh high of €78.56 megawatt-hours. That said, oil prices did pare back their gains later in the session as the equity selloff got underway, with Brent crude (-0.55%) and WTI (-0.21%) both closing lower on the day, and this morning they’ve fallen a further -1.49% and -1.54% respectively. Yesterday, Fed Chair Powell and his predecessor Treasury Secretary Yellen appeared jointly before the Senate Banking Committee. The most notable moment came from Senator Warren who criticized Chair Powell for his track record on regulation, saying he was a “dangerous man” and then saying on the record that the she would not support his re-nomination ahead of his term ending in February. Many senators, mostly Republicans, voiced concerns over inflationary pressures, but both Yellen and Powell maintained their stances that the current high level of inflation was temporary and due to the supply chain issues from Covid-19 that they expect to be resolved in time. Lastly, both Powell and Yellen warned the Senators that a potential US default would be “catastrophic” and Treasury Secretary Yellen said in a letter to Congress that the Treasury Department now estimated the US would hit the debt ceiling on October 18. So we’ve got an important few days and weeks coming up. Last night, Senate Majority Leader Schumer tried to pass a vote that would drop the threshold from 60 to a simple majority to suspend the debt limit, but GOP Senator Cruz amongst others blocked this and went forward with forcing Democrats to use the budget reconciliation measure instead. Some Democrats have pushed back saying that the budget process would take too long and increases the risk of a default. While this is all going on we’re now less than 48 hours from a US government shutdown as it stands, though there seems to be an agreement on the funding measure if it were to be raised as clean bill without the debt ceiling provisions. There is also other business in Washington due tomorrow, with the bipartisan infrastructure bill with $550bn of new spending up for a vote. While the funding bill is the higher short-term priority, there was news yesterday that progressive members of the House of Representatives may try and block the infrastructure bill if it comes up ahead of the budget reconciliation vote. That was according to Congressional Progressive Caucus Chair Jayapal who said “Progressives will vote for both bills, but a majority of our members will only vote for the infrastructure bill after the President’s visionary Build Back Better Act passes.” The infrastructure bill could be tabled once again as there is no real urgency to get it voted on until the more pressing debt ceiling and funding bill issues are resolved. Democratic leadership is trying to thread a needle and the key sticking point appears to be if the moderate and progressive wing can agree on the budget quickly enough to beat the clock on the US defaulting on its debt. Shifting back to central bankers, ECB President Lagarde warned against withdrawing stimulus too rapidly as a response to inflationary pressures. She contested that there are “no signs that this increase in inflation is becoming broad-based across the economy,” and continued that the “key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term.” Similar to her US counterpart, Lagarde cited higher energy prices and supply-chain breakdowns as the root cause for the current high inflation data and argued these would recede in due time. The ECB continues to strike a more dovish tone than the Fed and BoE. Speaking of inflation, DB’s chief European economist, Mark Wall, has just put out a podcast where he discusses the ECB, inflation and the value of a flexible asset purchase programme. He and his team have a baseline assumption that the ECB will double the pace of their asset purchases to €40bn per month to smooth the exit from the Pandemic Emergency Purchase Programme, but the upward momentum in the inflation outlook and the latest uncertainty from recent supply shocks puts a premium on policy flexibility. You can listen to the podcast "Focus Europe: Podcast: ECB, inflation and the value of a flexible APP" here. In Germany, there weren’t a great deal of developments regarding the election and coalition negotiations yesterday, but NTV reported that CSU leader Markus Söder had told a regional group meeting of the party that he expected the next government would be a traffic-light coalition of the SPD, the Greens and the FDP. Speaking to reporters later in the day, he went onto say that the SPD’s Olaf Scholz had the best chance of becoming chancellor, and that the SPD had the right to begin coalition negotiations. Running through yesterday’s data, the Conference Board’s consumer confidence reading in the US for September fell to 109.3 (vs. 115.0 expected), which marks the third consecutive decline in the reading and the lowest it’s been since February. Meanwhile house prices continued to rise, with the FHFA’s house price index for July up +1.4% (vs. +1.5% expected), just as the S&P CoreLogic Case-Shiller index saw a record +19.7% increase in July as well. To the day ahead now, and the biggest highlight will be a policy panel at the ECB forum on central banking featuring ECB President Lagarde, Fed Chair Powell, BoJ Governor Kuroda and BoE Governor Bailey. Other central bank speakers include ECB Vice President de Guindos, the ECB’s Centeno, Stournaras, Makhlouf, Elderson and Lane, as well as the Fed’s Harker, Daly and Bostic. Meanwhile, data releases include UK mortgage approvals for August, the final Euro Area consumer confidence reading for September, and US pending home sales for August. Tyler Durden Wed, 09/29/2021 - 07:42.....»»

Category: blogSource: zerohedgeSep 29th, 2021

Blain: The Threat Board Is Looking Busy

Blain: The Threat Board Is Looking Busy Authored by Bill Blain via MorningPorridge.com, “Many people have speculated that if we knew exactly why the bowl of petunias had thought that we would know a lot more about the nature of the Universe than we do now.” Markets are never as bad as you fear, but never as good as you hope. The Threat Board has seldom looked so complex: we can try to predict outcomes, but its notoriously difficult. The list of potential ignition points seems to be expanding exponentially: Energy Prices, Oil, Inflation, Stagflation, Supply Chains, Recession, China, Politics, Consumer Sentiment, Business Confidence, Property Markets, Liquidity, Bond Yields, Stock Prices.. you name it and someone is worrying about it. Relax. Calm. Breathe Deep. Looking at the Threat Board this morning, the list is getting long – and worrisome. There seem to be so many dangers points about. It’s pretty easy to identify each of the multiple threats – just listen to too much BBC and read the financial press. The trick is being able to put them together in a coherent explanation of where they are likely to take markets. It’s the linkages, contagion vectors and consequences of how the burgeoning threats inter-react that are so difficult to fathom – which maybe explains why I’m so fascinated by the new Apple TV dramatization of Issac Asimov’s Foundation Trilogy. (I first read it back in the 1970s… I didn’t get it.) Asimov’s Foundation books are more about political economy and sociology than “we-come-in-peace/shoot-to-kill” science fiction: A very clever mathematician innovates a new science based on the analysis of statistics to predict the future action of humanity’s vast Galactic Empire – concluding it’s about to crumble and fall into a new dark age. Ever since Adam Smith wrote The Theory of Moral Sentiments and The Wealth of Nations, economists have always been looking for the General Theory of Everything to explain how society works, and how to manage it. However carefully we try to winnow the data, connect the dots, and refine the inputs, the answer is usually 42. Let’s look at the Threat Board Dinnae Fash I’m not actually that bothered – “fashed” as we might say back home – by the multiple threats of imminent market collapse this morning: spiking bond yields, falling stock markets, surging oil prices and rising inflation. Yada, yada, yada… I’m just thinking here we go again… Instead, I shall make a strong cup of tea and prepare to surf the coming storm – if it arrives, secure in my view the global economy and markets are a self-regulating almost living thang with a perverse sense of balance – when markets explode they throw up as many opportunities as they destroy. So… don’t worry about imminent disaster and downside destruction in stocks – go figure how to play the upside which is sure to follow. Oil and Energy Prices and ESG As oil hits $80, is it a surprise oil prices are spiking higher? The supply/demand imbalance across energy markets is extreme – triggered by pre-winter demand, the realisation supplies are insecure, and a growing sense of market distortion. It’s usually a distortion that creates market outages. So, congratulations to the ESG obsessed millennials now sitting in CIO roles who’ve refused to fund a sensible transition programme from fossil energy to renewables. The result of their blanket ban on any fossil investments is a long-term supply/demand imbalance and higher prices in the least bad fossil fuel; Gas – which in turn pushes Energy companies down the list to the stage where coal looks like a cost-efficient compromise to meet spiking energy demands! We’re seeing the downstream effects in China, where a scarcity of even coal is driving energy prices higher in an already wobbling economy. We’re seeing it in Europe… Perhaps the US may do better. Energy prices are likely to remain elevated for years as we try to balance the climate change imperative against the need for energy during the transition period. Problem is lots of talking heads have made a career out of climate change (which is real) and will take time to accept the implications of no oil today are worse than higher temperatures tomorrow. Don’t expect COP26 to announce more sensible transition policies. Rising energy prices have clear consequences; increasing inflation, supply chain disruption and rising social tensions triggering populist politics. Climate Change Global Climate Change will be long-term destabilising – and we’re likely to see climate instability and flash events become increasingly common. I rather suspect COVID-19 was a dress-rehearsal for what’s to come in terms of even larger emergency government fiscal and monetary policy responses. The need for government spending to ameliorate climate change will undo any efforts to scale back govt debt. That creates all kinds of danger – not least being confidence in fiat money and government.  Interest Rates and Taper More immediately, as the Bank of England warns interest rates may rise this year, and the Fed gives mixed messages, bond yields are spiking higher in reaction to rising rates, imminent taper and the growing sense that inflation/stagflation is increasingly inevitable. It’s the beginning of a distortion unwind, but it’s also going to accelerate the transfer of the accumulated inflation of the last 12 years in financial assets back into the real economy. Liquidity There are a deal of additional risks – not the least being bond market illiquidity as massively overvalued corporate bond markets go “offered only”, and even in Treasuries where some recent worrying signs highlight a lack of oomph behind dealers. The central banks have become de-facto buyers of last resort – there is zero marketing making capacity from banks. Just like the stock market, which famously has 27 grand double doors saying “Welcome”, the bond market has a very small, dimly lit corridor leading to the only exit sign. (But do remember – when all around are losing their heads and hitting any bid in a falling bond market, that’s the time be thinking of buying good bonds at distressed prices! In crisis, the market overreacts on the downside.) Global Property The links between rising rates, economic slowdowns, and consumer confidence will be felt most strongly in the housing markets. Around the globe housing prices are “toppy”. Add in a degree of government policy to address income-inequality through taxation policy to make rentals less attractive and force the sale of housing units, and we could be looking at a major housing stumble. Typically, a housing crash corrects fairly swiftly, but is about the most damaging factor to hit consumer confidence. Global Stocks As rates rise and it becomes clearer cheap bond markets driving down risk returns have fuelled the last 12 years of stock market upside, there is rising imbalance risk. There are market metrics showing stocks to be fundamentally fairly priced, but stock prices are as vulnerable to market uncertainty as any asset class. Supply Chain Breakdown Apparently, I only got it partially right yesterday when I said the shortage of Lorry (HGV) Drivers here in the UK is due to it being a crap, badly paid job. The UK is short 100,000 drivers. It hasn’t helped that the Driver Vehicle Licensing Authority (DVLA) has been sitting on 40,000 HGV licence applications, stopped HGV driver tests, and even went on strike over Covid safety measures through the pandemic. With a large proportion of UK lorry drivers in their 50s and 60s and due to retire, the shortage of drivers is a long-term issue, that’s not going to be fixed by 3 month temp visas for foreign drivers.    Consumer Confidence Read the headlines and its everything from global auto-chains, tech, steel and chemicals that are in short-supply and triggering knock on-shortages.  If consumers can’t consume – as I wrote yesterday their insecurities are rising, inflation is testing them, and confidence is declining – and companies can’t sell – go figure the likelihood of recession versus recovery. Politics Apparently German Politics don’t matter – Europe will remain stable no matter how long it takes a coalition to be agreed. We’ve got French elections next year and I’m told anyone but Macron is the likely result. And here in the UK Boris can do absolutely nothing wrong because the opposition Labour Party (disclosure: I support them) is determined to shoot itself in the foot whenever an opportunity to do so presents itself. Who cares? The USA is a much larger concern. Gridlock is nailed on. The chances of a US default look low, but it could occur if the GOP continues to block legislation to raise the debt ceiling, while economy recovery could be held back years if the Dems can’t get the act together to move forward on the infrastructure programme. While both parties remain convinced the only way for America to move forward is by destroying the other, then the prospects for US economic leadership will remain depressed. Global Growth & China Are people paying attention to the IMF’s views on Global Growth? Apparently Janet Yellen won’t take a call from IMF head Kristalina Georgieva after accusations she manipulated the World Bank’s “Doing Business Report” to improve China’s standing. Its noise, but a distraction from the reality China’s growth could take a pasting after Evergrande. A slowdown in China will trigger a substantial global recession wave.  Inflation/Stagflation Do I even need to mention it…? If feels like Winter is Coming and the Wildlings are over the wall… Tyler Durden Tue, 09/28/2021 - 08:10.....»»

Category: blogSource: zerohedgeSep 28th, 2021

Futures Rise On Taper, Evergrande Optimism

Futures Rise On Taper, Evergrande Optimism US index futures jumped overnight even as the Fed confirmed that a November tapering was now guaranteed and would be completed by mid-2022 with one rate hike now on deck, while maintaining the possibility to extend stimulus if necessitated by the economy. Sentiment got an additional boost from a strong showing of Evergrande stock - which closed up 17% - during the Chinese session, which peaked just after Bloomberg reported that China told Evergrande to avoid a near-term dollar bond default and which suggested that the "government wants to avoid an imminent collapse of the developer" however that quickly reversed when the WSJ reported, just one hour later, that China was making preparations for Evergrande's demise, and although that hammered stocks, the report explicitly noted that a worst-case scenario for Evergrande would mean a partial or full nationalization as "local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion." In other words, both reports are bullish: either foreign creditors are made whole (no default) as per BBG or the situation deteriorates and Evergrande is nationalized ("SOEs step in") as per WSJ. According to Bloomberg, confidence is building that markets can ride out a pullback in Fed stimulus, unlike 2013 when the taper tantrum triggered large losses in bonds and equities. "Investors are betting that the economic and profit recovery will be strong enough to outweigh a reduction in asset purchases, while ultra-low rates will continue to support riskier assets even as concerns linger about contagion from China’s real-estate woes." That's one view: the other is that the Fed has so broken the market's discounting ability we won't know just how bad tapering will get until it actually begins. “The Fed has got to be pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock Inc., said on Bloomberg Television. “This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.” Then there is the question of Evergrande: “With regards to Evergrande, all those people who are waiting for a Lehman moment in China will probably have to wait another turn,” said Ken Peng, an investment strategist at Citi Private Bank Asia Pacific. “So I wouldn’t treat this as completely bad, but there are definitely a lot of risks on the horizon.” In any case, today's action is a continuation of the best day in two months for both the Dow and the S&P which staged a strong recovery from two-month lows hit earlier in the week, and as of 745am ET, S&P 500 E-minis were up 25.25 points, or 0.6%, Dow E-minis were up 202 points, or 0.59%, while Nasdaq 100 E-minis were up 92.0 points, or 0.60%. In the premarket, electric vehicle startup Lucid Group rose 3.1% in U.S. premarket trading. PAVmed (PVM US) jumps 11% after its Lucid Diagnostics unit announced plans to list on the Global Market of the Nasdaq Stock Market.  Here are some of the biggest movers today: U.S.-listed Chinese stocks rise in premarket trading as fears of contagion from China Evergrande Group’s debt crisis ease. Blackberry (BB US) shares rise 8.7% in premarket after co.’s 2Q adjusted revenue beat the average of analysts’ estimates Eargo (EAR US) falls 57% in Thursday premarket after the hearing aid company revealed it was the target of a Justice Department criminal probe and withdrew its forecasts for the year Amplitude Healthcare Acquisition (AMHC US) doubled in U.S. premarket trading after the SPAC’s shareholders approved the previously announced business combination with Jasper Therapeutics Steelcase (SCS US) fell 4.8% Wednesday postmarket after the office products company reported revenue for the second quarter that missed the average analyst estimate Vertex Energy Inc. (VTNR US) gained 2.1% premarket after saying the planned acquisition of a refinery in Mobile, Alabama from Royal DutVTNR US Equitych Shell Plc is on schedule Synlogic (SYBX US) shares declined 9.7% premarket after it launched a stock offering launched without disclosing a size HB Fuller (FUL US) climbed 2.7% in postmarket trading after third quarter sales beat even the highest analyst estimate Europe's Stoxx 600 index rose 0.9%, lifted by carmakers, tech stocks and utilities, which helped it recover losses sparked earlier in the week by concerns about Evergrande and China’s crackdown on its property sector. The gauge held its gain after surveys of purchasing managers showed business activity in the euro area lost momentum and slowed broadly in September after demand peaked over the summer and supply-chain bottlenecks hurt services and manufacturers. Euro Area Composite PMI (September, Flash): 56.1, consensus 58.5, last 59.0. Euro Area Manufacturing PMI (September, Flash): 58.7, consensus 60.3, last 61.4. Euro Area Services PMI (September, Flash): 56.3, consensus 58.5, last 59.0. Germany Composite PMI (September, Flash): 55.3, consensus 59.2, last 60.0. France Composite PMI (September, Flash): 55.1, consensus 55.7, last 55.9. UK Composite PMI (September, Flash): 54.1, consensus 54.6, last 54.8. Commenting on Europe's PMIs, Goldman said that the Euro area composite PMI declined by 2.9pt to 56.1 in September, well below consensus expectations. The softening was broad-based across countries but primarily led by Germany. The peripheral composite flash PMI also weakened significantly in September but remain very high by historical standards (-2.4pt to 57.5). Across sectors, the September composite decline was also broad-based, with manufacturing output softening (-3.3pt to 55.6) to a similar extent as services (-2.7pt to 56.3). Supply-side issues and upward cost and price pressures continued to be widely reported. Expectations of future output growth declined by less than spot output on the back of delta variant worries and supply issues, remaining far above historically average levels. Earlier in the session, Asian stocks rose for the first time in four sessions, as Hong Kong helped lead a rally on hopes that troubled property firm China Evergrande Group will make progress on debt repayment. The MSCI Asia Pacific Index climbed as much as 0.5%, with Tencent and Meituan providing the biggest boosts. The Hang Seng jumped as much as 2.5%, led by real estate stocks as Evergrande surged more than 30%. Hong Kong shares later pared their gains. Asian markets were also cheered by gains in U.S. stocks overnight even as the Federal Reserve said it may begin scaling back stimulus this year. A $17 billion net liquidity injection from the People’s Bank of China also provided a lift, while the Fed and Bank of Japan downplayed Evergrande risks in comments accompanying policy decisions Wednesday. Evergrande’s stock closed 18% higher in Hong Kong, in a delayed reaction to news a unit of the developer had negotiated interest payments on yuan notes. A coupon payment on its 2022 dollar bond is due on Thursday “Investors are perhaps reassessing the tail risk of a disorderly fallout from Evergrande’s credit issues,” said Chetan Seth, a strategist at Nomura. “However, I am not sure if the fundamental issue around its sustainable deleveraging has been addressed. I suspect markets will likely remain quite volatile until we have some definite direction from authorities on the eventual resolution of Evergrande’s debt problems.” Stocks rose in most markets, with Australia, Taiwan, Singapore and India also among the day’s big winners. South Korea’s benchmark was the lone decliner, while Japan was closed for a holiday In rates, Treasuries were off session lows, with the 10Y trading a 1.34%, but remained under pressure in early U.S. session led by intermediate sectors, where 5Y yield touched highest since July 2. Wednesday’s dramatic yield-curve flattening move unleashed by Fed communications continued, compressing 5s30s spread to 93.8bp, lowest since May 2020. UK 10-year yield climbed 3.4bp to session high 0.833% following BOE rate decision (7-2 vote to keep bond-buying target unchanged); bunds outperformed slightly. Peripheral spreads tighten with long-end Italy outperforming. In FX, the Bloomberg Dollar Spot Index reversed an earlier gain and dropped 0.3% as the dollar weakened against all of its Group-of-10 peers apart from the yen amid a more positive sentiment. CAD, NOK and SEK are the strongest performers in G-10, JPY the laggard.  The euro and the pound briefly pared gains after weaker-than-forecast German and British PMIs. The pound rebounded from an eight-month low amid a return of global risk appetite as investors assessed whether the Bank of England will follow the Federal Reserve’s hawkish tone later Thursday. The yield differential between 10-year German and Italian debt narrowed to its tightest since April. Norway’s krone advanced after Norges Bank raised its policy rate in line with expectations and signaled a faster pace of tightening over the coming years. The franc whipsawed as the Swiss National Bank kept its policy rate and deposit rate at record lows, as expected, and reiterated its pledge to wage currency market interventions. The yen fell as a unit of China Evergrande said it had reached an agreement with bond holders over an interest payment, reducing demand for haven assets. Turkey’s lira slumped toa record low against the dollar after the central bank unexpectedly cut interest rates. In commodities, crude futures drifted lower after a rangebound Asia session. WTI was 0.25% lower, trading near $72; Brent dips into the red, so far holding above $76. Spot gold adds $3.5, gentle reversing Asia’s losses to trade near $1,771/oz. Base metals are well bid with LME aluminum leading gains. Bitcoin steadied just below $44,000. Looking at the day ahead, we get the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Market Snapshot S&P 500 futures up 0.7% to 4,413.75 STOXX Europe 600 up 1.1% to 468.32 MXAP up 0.5% to 200.57 MXAPJ up 0.9% to 645.76 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 1.2% to 24,510.98 Shanghai Composite up 0.4% to 3,642.22 Sensex up 1.4% to 59,728.37 Australia S&P/ASX 200 up 1.0% to 7,370.22 Kospi down 0.4% to 3,127.58 German 10Y yield fell 5.6 bps to -0.306% Euro up 0.4% to $1.1728 Brent Futures up 0.3% to $76.39/bbl Gold spot up 0.0% to $1,768.25 U.S. Dollar Index down 0.33% to 93.16 Top Overnight News from Bloomberg Financial regulators in Beijing issued a broad set of instructions to China Evergrande Group, telling the embattled developer to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds China’s central bank net-injected the most short- term liquidity in eight months into the financial system, with markets roiled by concerns over China Evergrande Group’s debt crisis Europe’s worst energy crisis in decades could drag deep into the cold months as Russia is unlikely to boost shipments until at least November Business activity in the euro area “markedly” lost momentum in September after demand peaked over the summer and supply chain bottlenecks hurt both services and manufacturers. Surveys of purchasing managers by IHS Markit showed growth in both sectors slowing more than expected, bringing overall activity to a five-month low. Input costs, meanwhile, surged to the highest in 21 years, according to the report The U.K. private sector had its weakest month since the height of the winter lockdown and inflation pressures escalated in September, adding to evidence that the recovery is running into significant headwinds, IHS Markit said The U.K.’s record- breaking debut green bond sale has given debt chief Robert Stheeman conviction on the benefits of an environmental borrowing program. The 10 billion-pound ($13.7 billion) deal this week was the biggest-ever ethical bond sale and the country is already planning another offering next month A more detailed look at global markets courtesy of Newsquaw Asian equity markets traded mostly positive as the region took its cue from the gains in US with the improved global sentiment spurred by some easing of Evergrande concerns and with stocks also unfazed by the marginally more hawkish than anticipated FOMC announcement (detailed above). ASX 200 (+1.0%) was underpinned by outperformance in the commodity-related sectors and strength in defensives, which have more than atoned for the losses in tech and financials, as well as helped markets overlook the record daily COVID-19 infections in Victoria state. Hang Seng (+0.7%) and Shanghai Comp. (+0.6%) were also positive after another respectable liquidity operation by the PBoC and with some relief in Evergrande shares which saw early gains of more than 30% after recent reports suggested a potential restructuring by China’s government and with the Co. Chairman noting that the top priority is to help wealth investors redeem their products, although the majority of the Evergrande gains were then pared and unit China Evergrande New Energy Vehicle fully retraced the initial double-digit advances. KOSPI (-0.5%) was the laggard as it played catch up to the recent losses on its first trading day of the week and amid concerns that COVID cases could surge following the holiday period, while Japanese markets were closed in observance of the Autumnal Equinox Day. China Pumps $17 Billion Into System Amid Evergrande Concerns China Stocks From Property to Tech Jump on Evergrande Respite Philippines Holds Key Rate to Spur Growth Amid Higher Prices Taiwan’s Trade Deal Application Sets Up Showdown With China Top Asian News European equities (Stoxx 600 +0.9%) trade on the front-foot and have extended gains since the cash open with the Stoxx 600 now higher on the week after Monday’s heavy losses. From a macro perspective, price action in Europe has been undeterred by a slowdown in Eurozone PMIs which saw the composite metric slip to 56.1 from 59.0 (exp. 58.5) with IHS Markit noting “an unwelcome combination of sharply slower economic growth and steeply rising prices.” Instead, stocks in the region have taken the cue from a firmer US and Asia-Pac handover with performance in Chinese markets aided by further liquidity injections by the PBoC. Some positivity has also been observed on the Evergrande front amid mounting expectations of a potential restructuring at the company. That said, at the time of writing, it remains unclear what the company’s intentions are for repaying its USD 83.5mln onshore coupon payment. Note, ING highlights that “missing that payment today would still leave a 30-day grace period before this is registered as a default”. The most recent reports via WSJ indicate that Chinese authorities are asking local governments to begin preparations for the potential downfall of Evergrande; however, the article highlights that this is a last resort and Beijing is reluctant to step in. Nonetheless, this article has taken the shine off the mornings risk appetite, though we do remain firmer on the session. Stateside, as the dust settles on yesterday’s FOMC announcement, futures are firmer with outperformance in the RTY (+0.8% vs. ES +0.7%). Sectors in Europe are higher across the board with outperformance in Tech and Autos with the latter aided by gains in Faurecia (+4.6%) who sit at the top of the Stoxx 600 after making an unsurprising cut to its guidance, which will at least provide some clarity on the Co.’s near-term future; in sympathy, Valeo (+6.6) is also a notable gainer in the region. To the downside, Entain (+2.6%) sit at the foot of the Stoxx 600 after recent strong gains with the latest newsflow surrounding the Co. noting that MGM Resorts is considering different methods to acquire control of the BetMGM online gambling business JV, following the DraftKings offer for Entain, according to sources. The agreement between Entain and MGM gives MGM the ability to block any deal with competing businesses; MGM officials believe this grants the leverage to take full control of BetMGM without spending much. Top European News BOE Confronts Rising Prices, Slower Growth: Decision Guide La Banque Postale Eyes Retail, Asset Management M&A in Europe Activist Bluebell Raises Pressure on Glaxo CEO Walmsley Norway Delivers Rate Lift-Off With Next Hike Set for December In FX, not much bang for the Buck even though the FOMC matched the most hawkish market expectations and Fed chair Powell arguably went further by concluding in the post-meeting press conference that substantial progress on the lagging labour front is all but done. Hence, assuming the economy remains on course, tapering could start as soon as November and be completed my the middle of 2022, though he continued to play down tightening prospects irrespective of the more hawkish trajectory implied by the latest SEP dot plots that are now skewed towards at least one hike next year and a cumulative seven over the forecast horizon. However, the Greenback only managed to grind out marginally higher highs overnight, with the index reaching 93.526 vs 93.517 at best yesterday before retreating quite sharply and quickly to 93.138 in advance of jobless claims and Markit’s flash PMIs. CAD/NZD/AUD - The Loonie is leading the comeback charge in major circles and only partially assisted by WTI keeping a firm bid mostly beyond Usd 72/brl, and Usd/Cad may remain contained within 1.2796-50 ahead of Canadian retail sales given decent option expiry interest nearby and protecting the downside (1 bn between 1.2650-65 and 2.7 bn from 1.2620-00). Meanwhile, the Kiwi has secured a firmer grip on the 0.7000 handle to test 0.7050 pre-NZ trade and the Aussie is looking much more comfortable beyond 0.7250 amidst signs of improvement in the flash PMIs, albeit with the services and composite headline indices still some way short of the 50.0 mark. NOK/GBP/EUR/CHF - All firmer, and the Norwegian Crown outperforming following confirmation of the start of rate normalisation by the Norges Bank that also underscored another 25 bp hike in December and further tightening via a loftier rate path. Eur/Nok encountered some support around 10.1000 for a while, but is now below, while the Pound has rebounded against the Dollar and Euro in the run up to the BoE at midday. Cable is back up around 1.3770 and Eur/Gbp circa 0.8580 as Eur/Usd hovers in the low 1.1700 area eyeing multiple and a couple of huge option expiries (at the 1.1700 strike in 4.1 bn, 1.1730 in 1 bn, 1.1745-55 totalling 2.7 bn and 1.8 bn from 1.1790-1.1800). Note, Eurozone and UK flash PMIs did not live up to their name, but hardly impacted. Elsewhere, the Franc is lagging either side of 0.9250 vs the Buck and 1.0835 against the Euro on the back of a dovish SNB Quarterly Review that retained a high Chf valuation and necessity to maintain NIRP, with only minor change in the ordering of the language surrounding intervention. JPY - The Yen is struggling to keep its head afloat of 110.00 vs the Greenback as Treasury yields rebound and risk sentiment remains bullish pre-Japanese CPI and in thinner trading conditions due to the Autumn Equinox holiday. In commodities, WTI and Brent have been choppy throughout the morning in-spite of the broadly constructive risk appetite. Benchmarks spent much of the morning in proximity to the unchanged mark but the most recent Evergrande developments, via WSJ, have dampened sentiment and sent WTI and Brent back into negative territory for the session and printing incremental fresh lows at the time of publication. Back to crude, newsflow has once again centred around energy ministry commentary with Iraq making clear that oil exports will continue to increase. Elsewhere, gas remains at the forefront of focus particularly in the UK/Europe but developments today have been somewhat incremental. On the subject, Citi writes that Asia and Europe Nat. Gas prices could reach USD 100/MMBtu of USD 580/BOE in the winter, under their tail-risk scenario. For metals, its very much a case of more of the same with base-metals supportive, albeit off-best given Evergrande, after a robust APAC session post-FOMC. Given the gas issues, desks highlight that some companies are being forced to suspend/reduce production of items such as steel in Asian/European markets, a narrative that could become pertinent for broader prices if the situation continues. Elsewhere, spot gold and silver are both modestly firmer but remain well within the range of yesterday’s session and are yet to recovery from the pressure seen in wake of the FOMC. US Event Calendar 8:30am: Sept. Initial Jobless Claims, est. 320,000, prior 332,000; Continuing Claims, est. 2.6m, prior 2.67m 8:30am: Aug. Chicago Fed Nat Activity Index, est. 0.50, prior 0.53 9:45am: Sept. Markit US Composite PMI, prior 55.4 9:45am: Sept. Markit US Services PMI, est. 54.9, prior 55.1 9:45am: Sept. Markit US Manufacturing PMI, est. 61.0, prior 61.1 11am: Sept. Kansas City Fed Manf. Activity, est. 25, prior 29 12pm: 2Q US Household Change in Net Wor, prior $5t DB's Jim Reid concludes the overnight wrap My wife was at a parents event at school last night so I had to read three lots of bedtime stories just as the Fed were announcing their policy decision. Peppa Pig, Biff and Kipper, and somebody called Wonder Kid were interspersed with Powell’s press conference live on my phone. It’s fair to say the kids weren’t that impressed by the dot plot and just wanted to join them up. The twins (just turned 4) got their first reading book homework this week and it was a bit sad that one of them was deemed ready to have one with words whereas the other one only pictures. The latter was very upset and cried that his brother had words and he didn’t. That should create even more competitive tension! Back to the dots and yesterday’s Fed meeting was on the hawkish side in terms of the dots and also in terms of Powell’s confidence that the taper could be complete by mid-2022. Powell said that the Fed could begin tapering bond purchases as soon as the November FOMC meeting, in line with our US economists’ forecasts. He left some room for uncertainty, saying they would taper only “If the economy continues to progress broadly in line with expectations, and also the overall situation is appropriate for this.” However he made clear that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff.” The quarterly “dot plot” showed that the 18 FOMC officials were split on whether to start raising rates next year or not. In June, the median dot indicated no rate increases until 2023, but now 6 members see a 25bps raise next year and 3 members see two such hikes. Their inflation forecasts were also revised up and DB’s Matt Luzzetti writes in his FOMC review (link here) that “If inflation is at or below the Fed's current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022.” Markets took the overall meeting very much in its stride with the biggest impact probably being a yield curve flattening even if US 10yr Treasury yields traded in just over a 4bp range yesterday and finishing -2.2bps lower at 1.301%. The 5y30y curve flattened -6.7bps to 95.6bps, its flattest level since August 2020, while the 2y10y curve was -4.2bps flatter. So the market seems to believe the more hawkish the Fed gets the more likely they’ll control inflation and/or choke the recovery. The puzzle is that even if the dots are correct, real Fed funds should still be negative and very accommodative historically for all of the forecasting period. As such the market has a very dim view of the ability of the economy to withstand rate hikes or alternatively that the QE technicals are overpowering everything at the moment. In equities, the S&P 500 was up nearly +1.0% 15 minutes prior to the Fed, and then rallied a further 0.5% in the immediate aftermath before a late dip look it back to +0.95%. The late dip meant that the S&P still has not seen a 1% up day since July 23. The index’s rise was driven by cyclicals in particular with energy (+3.17%), semiconductors (-2.20%), and banks (+2.13%) leading the way. Asian markets are mostly trading higher this morning with the Hang Seng (+0.69%), Shanghai Comp (+0.58%), ASX (+1.03%) and India’s Nifty (+0.81%) all up. The Kospi (-0.36%) is trading lower though and is still catching up from the early week holidays. Japan’s markets are closed for a holiday today. Futures on the S&P 500 are up +0.25% while those on the Stoxx 50 are up +0.49%. There is no new news on the Evergrande debt crisis however markets participants are likely to pay attention to whether the group is able to make interest rate payment on its 5 year dollar note today after the group had said yesterday that it resolved a domestic bond coupon by negotiations which was also due today. As we highlighted in our CoTD flash poll conducted earlier this week, market participants are not too worried about a wider fallout from the Evergrande crisis and even the Hang Seng Properties index is up +3.93% this morning and is largely back at the levels before the big Monday sell-off of -6.69%. Overnight we have received flash PMIs for Australia which improved as parts of the country have eased the coronavirus restrictions. The services reading came in at 44.9 (vs. 42.9 last month) and the manufacturing print was even stronger at 57.3 (vs. 52.0 last month). Japan’s flash PMIs will be out tomorrow due to today’s holiday. Ahead of the Fed, markets had continued to rebound from their declines earlier in the week, with Europe’s STOXX 600 gaining +0.99% to narrowly put the index in positive territory for the week. This continues the theme of a relative outperformance among European equities compared to the US, with the STOXX 600 having outpaced the S&P 500 for 5 consecutive sessions now, though obviously by a slim margin yesterday. Sovereign bonds in Europe also posted gains, with yields on 10yr bunds (-0.7bps), OATs (-1.0bps) and BTPs (-3.2bps) all moving lower. Furthermore, there was another tightening in peripheral spreads, with the gap in Italian 10yr yields over bunds falling to 98.8bps yesterday, less than half a basis point away from its tightest level since early April. Moving to fiscal and with Democrats seemingly unable to pass the $3.5 trillion Biden budget plan by Monday, when the House is set to vote on the bipartisan infrastructure bill, Republican leadership is calling on their members to vote against the bipartisan bill in hopes of delaying the process further. While the there is still a high likelihood the measure will eventually get passed, time is becoming a factor. Congress now has just over a week to get a government funding bill through both chambers of congress as well as raise the debt ceiling by next month. Republicans have told Democrats to do the latter in a partisan manner and include it in the reconciliation process which could mean that a significant portion of the Biden economic agenda – mostly encapsulated in the $3.5 trillion over 10 year budget – may have to be cut down to get the entire Democratic caucus on board. Looking ahead, an event to watch out for today will be the Bank of England’s policy decision at 12:00 London time, where our economists write (link here) that they expect no change in the policy settings. However, they do expect a reaffirmation of the BoE’s updated forward guidance that some tightening will be needed over the next few years to keep inflation in check, even if it’s too early to expect a further hawkish pivot at this stage. Staying on the UK, two further energy suppliers (Avro Energy and Green Supplier) ceased trading yesterday amidst the surge in gas prices, with the two supplying 2.9% of domestic customers between them. We have actually seen a modest fall in European natural gas prices over the last couple of days, with the benchmark future down -4.81% since its close on Monday, although it’s worth noting that still leaves them up +75.90% since the start of August alone. There wasn’t much data to speak of yesterday, though US existing home sales fell to an annualised rate of 5.88 in August (vs. 5.89m expected). Separately, the European Commission’s advance consumer confidence reading for the Euro Area unexpectedly rose to -4.0 in September (vs. -5.9 expected). To the day ahead now, the data highlights include the September flash PMIs from around the world, while in the US there’s the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Tyler Durden Thu, 09/23/2021 - 08:13.....»»

Category: blogSource: zerohedgeSep 23rd, 2021