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[Markets] US STOCKS-Wall Street climbs on boost from financials, tech stocks U.S. stock indexes broadly rose on Friday, with technology and financial shares providing the biggest boost as investors bet on what is expected to be the fastest economic growth since 1984. The S&P 500 and the Dow were set to end a choppy week higher as an end-of-quarter rebalancing of investment portfolios led to alternating boost from stocks that stand to benefit from a re-opening economy, and beaten-down technology shares. Published:3/26/2021 9:58:43 AM
[Markets] Dow Rallies As Treasury Yields Jump; Boeing At New Buy Point, While Tesla Slides The Dow Jones Industrial Average rallied more than 150 points early Friday, as Treasury yields jumped. EV giant Tesla briefly reversed higher. Published:3/26/2021 9:29:52 AM
[Markets] Stocks open higher as Wall Street aims for back-to-back gains U.S. stocks opened slightly higher Friday as investors balanced concerns around rising bond yields against the broader reflationary hopes that have spurred major equity benchmarks to new heights this year. The S&P 500 added 0.4% to 3,925. The Dow Jones Industrial Average rose 150 points, or 0.5%, to 32,770. The Nasdaq Composite was up 0.2% to 13,005. Investors got a key read of household finances on Friday, with consumer spending sinking 1% in February, the most since the onset of the pandemic last year. WeWork is set to take itself public in a $9 billion merger with a black-check company, according to a Wall Street Journal report. Published:3/26/2021 8:55:01 AM
[Markets] Dow erases early losses to close up 200 points Dow erases early losses to close up 200 points Published:3/25/2021 3:19:45 PM
[Markets] Stocks Dump'n'Pump; Dollar Gains Amid Bitcoin, Bond Pain Stocks Dump'n'Pump; Dollar Gains Amid Bitcoin, Bond Pain

Thanks to yet another big short-squeeze that began shortly ahead of the EU close. This was the biggest short-squeeze since late January.

Source: Bloomberg

Small Caps went from down over 1.5% ahead of the EU close to up over 2.5%. Nasdaq ended lower as late day selling pressure hit...

Before today, the last six days have seen the market has dropped in the last hour.

S&P and Dow are back to unch on the week, Nasdaq remains red and Small Caps still down over 4.3%.

Value outperformed Growth today but both ripped off the EU close...

Source: Bloomberg

Many of the major indices found support at key technical levels.

The S&P broke its 50DMA and ripped back above it...

Nasdaq found support off its 100DMA...

GME exploded higher today, up a shocking 50% plus and erasing all of yesterday's losses...

The VIX term structure remains unusually steep...

A really ugly 7Y auction today (with a huge tail) sent yields spiking higher...

Source: Bloomberg

...and that was after an early flash crash - in prices - for the ultra bond futs contract...

Source: Bloomberg

...but by the close the curve was very mixed with the short-end lower (2Y -1bps) and long-end up over 3bps...

Source: Bloomberg

The dollar continued to surge from the post-FOMC plunge lows, now back near early March highs...

Source: Bloomberg

The Polish Zloty fell to its weakest against the Euro since early 2009...

Source: Bloomberg

Bitcoin plunged back near $50k today...

Source: Bloomberg

Precious metals were flat today despite dollar gains as crude and copper pushed lower...

Source: Bloomberg

Oil erased all of yesterday's supposed Suez blockage spike with WTI back below $58...

Silver saw a big tumble intraday and ripped back around the same time as the ultra bond flash crashed...

Gold and the Ultra bond both fell at exactly the same time...

Finally we note that the massive divergence between bond and stock performance this quarter will likely mean some notable rebalance flows in the next few trading days, as we have detailed previously.

Source: Bloomberg

Tyler Durden Thu, 03/25/2021 - 16:00
Published:3/25/2021 3:19:45 PM
[Markets] Dow Jones, Nasdaq Erase Losses As Stocks Rise Into The Close The Dow Jones Industrial Average rose over 100 points in today's stock market, while the major indexes all traded higher off their lows of the day. Published:3/25/2021 2:51:14 PM
[Markets] Dow Jones Rallies Amid Biden's First Press Conference; Warren Buffett Stock Surges The Dow Jones rallied in mixed action as President Joe Biden held his first formal press conference since taking office. Warren Buffett stock RH rallied. Published:3/25/2021 12:50:07 PM
[Markets] Dow, Tech Stocks Tumble As Bitcoin Dives; Nike Slides On China Boycott Threat And Tesla Skids The Dow Jones Industrial Average fell 250 points Thursday, as Bitcoin dived. EV giant Tesla stock slashed losses, while Nike tumbled 5%. Published:3/25/2021 11:18:16 AM
[Markets] Futures, Yields Slide As Month-End Jitters Spread Futures, Yields Slide As Month-End Jitters Spread

US equity futures faded a modest overnight rebound on Thursday, ahead of data that is expected to show a small drop in weekly jobless claims after last week's surprise spike, while the tech-heavy Nasdaq looked set to stabilize after its latest 2% rollercoaster drop in the previous session. The dollar and 10Y yields were unchanged from Thursday's close, while oil turned lower after a rally spurred by the blockage of the Suez Canal fizzled. It wasn't clear what was the reason for the persistent late - and as of today, early - selloff, but increasingly many are speculating that the month-end rebalance by pensions is winning the battle, if not the war, against the quant buying we noted in "Month-End Set For Epic Clash Between Forced Pension Selling And Quant Buying."

At 730 a.m. ET, Dow e-minis were up 27 points, or 0.09%, S&P 500 e-minis were flat, and Nasdaq 100 e-minis were up 24 points, or 0.18%.

Among some early movers, shares of Nike fell 3.6% as the company risked a boycott in China over its practice of not sourcing cotton from the contentious Xinjiang region. Carnival Corp. rose from its worst three-day slump since November on prospects for the return of cruise-line operations. U.S.-listed shares of Baidu Inc, Alibaba Group Holding Ltd and JD.Com Inc were subdued after the U.S. securities regulator adopted measures that would kick foreign companies off stock exchanges if they do not comply with U.S. auditing standards.

Nasdaq 100 futures turned red after rising earlier, after a Wednesday rout which saw investors pile into energy names and dump growth stocks, as investors are mulling which sectors of the stock market are best-placed to benefit from faster growth, while monitoring the risks of higher inflation. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell laid out their positive assessments of the recovery with reminders that it still has a long way to go in a second day of Congressional testimony.

“The reflation trade will have further legs to run,” Lale Akoner, BNY Mellon Investment Management senior market strategist, said on Bloomberg TV. “We do see higher inflationary pressures building, higher interest rates and softer dollar to continue.”

Europe's Stoxx 600 index rebounded from a sharp drop at the open, and were last trading down -0.2% as concern over lockdown extensions and vaccine hiccups are keeping cyclical stocks on the back foot, with energy firms and banks among the biggest contributors to the slight loss on the Stoxx Europe 600 index. European travel stocks fall, with the Stoxx 600 Travel & Leisure index down as much as 1%, amid news on possible U.K. restrictions, U.S. cruising and an update from tour operator TUI. Carnival slides as much as 5.9% as U.S. regulators dampen hopes of a quicker resumption of cruising; TUI declines 3.7% as company reduces its summer capacity plan. Airlines were also weak as U.K. warns it may need to impose border restrictions on some European countries: British Airways-owner IAG down 2.4% at 10am U.K. time, Easyjet -1.7%, Ryanair -1.5%; Lufthansa -3.2%. Finally, U.K. pub stocks slumped as Prime Minister Boris Johnson says venues may choose to require proof of vaccination from customers: Marston’s -2.2%, Fuller Smith & Turner -1.2%, Wetherspoon -0.7%.

European Union leaders are expected to lay out plans for reopening their economies at a video conference summit later in the day. 

Earlier in the session, Asian stocks enjoyed their first advance in five sessions as investors snapped up cyclical stocks, with industrials and financials driving the advance in the MSCI Asia Pacific Index. Japanese shares were the biggest gainers, as the Topix rose more than 1% for its first gain of the week after Kuroda made some soothing noises on the BOJ buying ETFs. Banks and electronics makers boosted the nation’s shares, with Keyence contributing most to the benchmark’s gain after Goldman gave a bullish view of the factory automation sector. Philippine stocks rallied for a third day, ahead of the nation’s central bank’s decision after market close to keep its policy rates unchanged. India’s Sensex led losses among key regional gauges, amid renewed worries over a resurgence of coronavirus cases in the country. Hong Kong indexes underperformed, weighed down by tech stocks after U.S. regulators revived delisting threats, and Tencent’s earnings were seen as disappointing.

Japanese stocks notched their first gain of the week, as electronics makers and banks drove gains in the Topix. All sectors on the benchmark gauge gained on Thursday. Fast Retailing and Fanuc were the biggest contributors to the advance in the Nikkei 225 Stock Average, which ended a four-day losing streak. Equities climbed even after Japan said North Korea fired two ballistic missiles on Thursday, in breach of United Nations resolutions. The rise also defied a tech-driven rout in U.S. stocks Wednesday. Commodities-related stocks were strong after a ship grounded in the Suez Canal, blocking a key oil supply route. Biopharmaceutical company AnGes surged 15% after it confirmed the safety of a Covid-19 treatment candidate in a study. SoftBank Group slumped after reports of a U.S. Securities and Exchange Commission investigation into its trading activities, which the company said it had no knowledge of.

The Bank of Japan bought 71.3 billion yen ($655 million) of exchange-traded funds under its market-support program Wednesday, marking an increase from the 51.3 billion yen worth it had purchased in daily actions so far this year. The BOJ has said it will stop buying exchange-traded funds tracking the Nikkei 225 and purchase only Topix-linked funds from April 1. “The BOJ adjusting its ETF purchase program isn’t really a reason to sell-off, because by buying Topix-tracking ETFs, they’re still buying stocks that are on the Nikkei 225 too,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “That said, it’s unclear in what circumstances they will buy. It’s a little too soon to tell.” Summary

Emerging Market equities extended their longest losing streak since September, threatening to wipe out all of this year’s gains. MSCI’s developing-nation stock index dropped for a fifth day, led by declines from India to Brazil and China. Currencies also slid, with the Turkish lira heading for its worst four-day rout since August 2018. Meantime, the risk premium for emerging-market sovereign bonds narrowed to 353 basis points over U.S. Treasuries, according to data compiled by JPMorgan Chase & Co. Traders are taking a cautious approach to developing-nation assets as the dollar rebounds, oil prices weaken and U.S. Treasury yields tick ever higher. The market meltdown in Turkey is only adding to the volatility. “It doesn’t seem emerging markets can catch a break,” said Omotunde Lawal, the head of emerging-market corporate debt at Barings U.K. in London. “I think the direction of travel will be virus data determinant from here. We could see spreads widen a bit more, but not a cataclysmic widening.”

In a notable overnight development, Reuters reported that the SEC started an inquiry into the the blank-check company frenzy that’s gripping Wall Street.

In rates, Treasuries were back to within a basis point of Wednesday’s closing levels after paring losses incurred during Asia session amid choppiness in Chinese stocks. 10-year yield little changed at ~1.61% with bunds and gilts outperforming by 2bp-3bp; bunds are on track for a fifth straight advance, longest streak since October. Bunds led the move off the lows during European morning, outperforming Treasuries, where dealers are braced for 7-year note auction along with more Fedspeak. The $62b 7-year auction at 1pm ET concludes this week’s auction cycle, in which 2- and 5-year sales were well received. WI 7-year yield around 1.285% is above auction stops since January 2020 and ~9bp cheaper than last month’s, which tailed by more than 4bp.

In FX, the dollar drifted in a narrow range as Treasuries snapped a three-day run of gains before a sale of seven-year bonds. Commodity currencies such as the Australian and New Zealand dollars rose as risk appetite improved with gains in regional stocks. USD/JPY climbed as much as 0.4% on demand from Japanese importers amid Gotobi day flows and leveraged buying, traders said.

“Yield- sensitive JPY bears are watching over U.S. data today and the seven-year U.S. Treasury auction as a new rise in yields could see USD/JPY popping the top on new highs and making a run at the critical chart and psychological level of 110,” said Steen Jakobsen, chief investment officer at Saxo Bank

Exporters purchased the Aussie at lower levels for hedging obligations into the month- and quarter-end, according to a trader.

“Both Aussie and the dollar-yen pair are well-bid as risk sentiment improved as regional stocks are broadly higher,” said Takuya Kanda, general manager at Research Institute Ltd. in Tokyo. “The Aussie has been sold recently and market players are buying it back to adjust their sell positions.”

In commodities, WTI and Brent futures started the session on a softer footing and are hovering just off worst levels, following on from Asia’s overnight lead where oil slid. Fundamental factors for the fragility in prices could be derived down to fresh COVID lockdowns which are restoring concerns over demand for oil products. Adding to the ever-rising European infection rates, is the growing COVID rates in developing economies such as Brazil, and India, where on Wednesday the latter reported its highest one-day tally of new infections and deaths whilst finding a new “double mutant” variant. Despite the ongoing concerns over global demand, over in the supply side, the Suez Canal is still blocked which is potentially blocking 10 tankers carrying 13 million barrels of oil and hence the global supply of the commodity.

Elsewhere, Bitcoin fell as much as 4.7%, to the lowest in about two weeks. The fifth-day decline in the cryptocurrency is its longest stretch this year.

Looking at today's key events Investors will be looking at the seven-year Treasury note auction today to gauge the direction of bond yields. President Joe Biden will host his first formal news conference Thursday. Expected data include unemployment claims and GDP. Darden Restaurants is among companies reporting earnings

Market Snapshot

  • S&P 500 futures up 0.1% to 3,886.00
  • MXAP up 0.2% to 202.69
  • MXAPJ down 0.1% to 669.89
  • Nikkei up 1.1% to 28,729.88
  • Topix up 1.4% to 1,955.55
  • Hang Seng Index little changed at 27,899.61
  • Shanghai Composite down 0.1% to 3,363.59
  • Sensex down 0.8% to 48,772.06
  • Australia S&P/ASX 200 up 0.2% to 6,790.56
  • Kospi up 0.4% to 3,008.33
  • Brent futures down 1.2% to $63.64/bbl
  • Gold spot down 0.1% to $1,733.39
  • U.S. Dollar Index up 0.2% to 92.68
  • SXXP Index little changed at 423.31
  • German 10Y yield down 1 bp -0.37%
  • Euro little changed at $1.1816

Top Overnight News from Bloomberg

  • AstraZeneca Plc reported a slightly lower efficacy rate for its Covid-19 vaccine after the results of an American clinical trial were criticized as outdated, raising further questions over the embattled shot and potentially delaying its approval in the U.S.
  • An elite team is tackling the monumental challenge of freeing the massive container vessel that’s blocking the Suez Canal, as a backlog of ships continued to build up for a third day in what is arguably the world’s most important waterway.
  • The Swiss National Bank softened its language on the need to intervene in currency markets to protect the economy, while insisting the franc is still “highly valued.”
  • The U.K. economy could see a “rip roaring” recovery even if consumers spend just a bit of the additional savings they accumulated during the Covid crisis, according to Bank of England Chief Economist Andy Haldane.
  • Turkey’s sovereign wealth fund pulled off one more deal in the closing days before President Recep Tayyip Erdogan jolted investors by ousting the central bank’s governor.

A quick look at global markets courtesy of Newsquawk

Asian equity markets were choppy as the region attempted to shrug-off the weak handover from Wall St where risk appetite was sapped amid further chatter of tax hikes in which both Treasury Secretary Yellen and Democratic Senator Manchin voiced their support for corporate tax increases. In addition, month- and quarter-end flows were also being touted as a potential factor coming into prominence while the declines were led by underperformance in small caps and tech which escalated to an initial bloodbath among Hong Kong-listed tech giants. Nonetheless, ASX 200 (+0.2%) was kept afloat for most of the session by resilience in defensive sectors and after officials including RBA Deputy Governor Debelle continued to speak highly of the domestic economy. Nikkei 225 (+1.2%) coat tailed on favourable currency flows with exporters cheering USD/JPY’s attempt to reclaim the 109.00 handle and the KOSPI (+0.4%) swung between gains and losses following news that North Korea fired another two missiles which Japan suggested may have been ballistic missiles and would therefore be in violation of UN resolutions, although South Korea later referred to them as short-range projectiles. Hang Seng (-0.1%) and Shanghai Comp. (-0.1%) were pressured at the open with a slump seen in the large tech names including Alibaba, Xiaomi, and Tencent following the US tech rout and amid delisting fears after the SEC recently adopted measures which could boot foreign companies off US exchanges if they do not comply with auditing standards. This dragged all components of the Hang Seng TECH Index into the red at early trade, while the recent China Q1 Beige Book was also tepid in which it noted that the service sector improved only marginally which is a sign consumption remains weak and a reason to remain cautious, although Chinese markets eventually rebounded from most the earlier losses. Finally, 10yr JGBs were softer amid a pullback in USTs and with demand sapped as Japanese stocks outperformed their regional peers, while the 40yr JGB auction provided some mild support as the results showed a relatively stable b/c and higher accepted prices.

Top Asian News

  • Philippines Holds Rates as Recovery Concerns Trump Inflation
  • Turkish Wealth Fund Clinched Loan Deal in Last Days of Agbal Era
  • Amazon’s Clean Energy Provider in Singapore Said to Weigh IPO
  • Samsung Unveils Next-Gen Memory for Data-Hungry AI and Computers

European stocks see somewhat of a choppy session within tight ranges (Euro Stoxx 50 -0.3%) after a similar tone was observed in APAC hours, with news flow again on the lighter side ahead of a myriad of central bank speakers and heading into month/quarter-end. On that note, BofA estimates that US private pensions will be needing equity-to-bond flows of some USD 88bbln, whilst JPM estimates balanced mutual funds to sell USD 136bln of equities and drop the money into fixed income. US equity futures have been consolidating following yesterday’s declines, with the tech-led NQ (+0.3%) narrowly outperforming. Sectors in Europe, however, portray more of a defensive bias, with a firmer performance seen across Staples, Healthcare, Telecoms, and Utilities, whilst value/cyclical sectors lag. Oil & Gas reside as the laggard amid the overnight decline in oil prices. Travel & Leisure continues to feel jitters over the worsening COVID situation in Europe. Further for the travel sector, the US CDC yesterday ordered the limit on US cruises to stay in effect until November 1st, thus Carnival (-3.8%) shares are plumbing the depths. In terms of individual movers, Adidas (-3.6%) is lower as its peer Nike (-3.5% pre-mkt) is facing backlash in China after they expressed concern about the alleged use of forced Uighur labour in the production of Xinjiang cotton, with H&M (-3.0%) also caught in the crosshairs. AstraZeneca (+0.5%) opened firmer as its amended Phase 3 results showed vaccine efficacy essentially unchanged. Siemens Healthineers (-1.4%) trades lower but trades off worst levels after announcing a share placement at a discounted price of USD 44.10/shr for some EUR 2.34bln.

Top European News

  • Commerzbank Leadership Crisis Deepens as Schmitz Resigns
  • Cineworld Gets New Lending, Eyeing Perilous Path Post- Covid
  • BOE’s Chief Economist Says ‘Rip Roaring’ Recovery Is Possible
  • Boohoo Cuts U.K. Suppliers as Part of Cleanup Efforts

In FX, contrasting fortunes for the Aussie, Kiwi and Yen as the Greenback continues to grind higher, with the Antipodeans deriving some traction from a rebound in APAC bond yields, but the latter losing more of its recent bullish momentum to suggest that Japanese buyers may have completed the bulk of their hedging and positioning for the turn of the month, quarter and financial year. Aud/Usd is keeping in touch with 0.7600 and Nzd/Usd is holding above 0.6950, while the Aud/Nzd cross pivots 1.0900 and Usd/Jpy breaches 109.00 eyeing several peaks that stand in the way of the y-t-d high from March 15 around 109.37. However, even if offers that were said to be sitting circa 109.30 have been withdrawn, the Yen could find solace via decent option expiry interest residing between 109.25-30 (1.5 bn) ahead of the NY cut.

  • USD/EUR/GBP - Notwithstanding the outperformance or resilience noted down under, the Buck remains on a firm footing and in DXY terms building a more solid platform above 92.500 to expose loftier multi-month targets above the 200 DMA, like 92.727, 92.804 and 92.847 dating back to November 19, 23 and 16 respectively. Conversely, the Euro is relying on a combination of option-related bids and sentimentality to maintain 1.1800+ status given 1.5 bn rolling off at the strike, while Sterling seems mainly dependent on chart support below 1.3700 as February 5’s circa 1.3658 low is the only level offering cover into 1.3650 and Fib retracements under the half round number.
  • CAD/CHF - The Loonie has drifted back down after probing 1.2550 vs its US counterpart yesterday in line with slippage in oil prices and the Franc is broadly flat following the SNB’s latest quarterly policy review that left all key policy settings and stances unchanged, as widely expected, but came with CPI upgrades, a relatively positive economic assessment for the 2nd half of 2021 and a change in the level of currency intervention to a willingness as and when required from ‘more’ strongly last December. Usd/Chf is hovering towards the base of a 0.9376-51 range and Eur/Chf nearer 1.1050 than 1.1070.

In commodities, WTI and Brent front month futures have started the session on a softer footing and are hovering just off worst levels, following on from Asia’s overnight lead where oil slid. On this, fundamental factors for the fragility in prices could be derived down to fresh COVID lockdowns which are restoring concerns over demand for oil products. Furthermore, adding to the ever-rising European infection rates, is the growing COVID rates in developing economies such as Brazil, and India, where on Wednesday the latter reported its highest one-day tally of new infections and deaths whilst finding a new “double mutant” variant. Despite the ongoing concerns over global demand, over in the supply side, the Suez Canal is still blocked which is potentially blocking 10 tankers carrying 13 million barrels of oil and hence the global supply of the commodity. Leading on from this, sources state the tanker may not be removed until Sunday which could create further constraints and filter through into oil prices. WTI May trades just above the USD 60.00/bbl handle (vs high 60.86/bbl) whilst its Brent counterpart trades marginally above USD 63.50/bbl (vs high 64.19/bbl). Looking ahead to notable risk events on the table include possible JMMC & OPEC+ source reports ahead of their meeting next week. As a reminder, yesterday OPEC+ sources that expectations are growing OPEC+ will rollover their current supply curbs into May. Reason for caution includes fresh lockdowns around the world alongside rising Iranian exports. However, this may be easier said than done as unanimity is needed for the final decision. Elsewhere, US GDP Final, US Initial Jobless Claims & US President Biden press conference are events to keep an eye on. Separately, spot gold and silver are both softer on the session which could be in the large part down to the stronger Dollar. However, it is worth noting overnight spot silver slipped to a two-week low, but gold inched higher due to the rising cases across Europe prompting some safe-haven flows, but gains were capped due to the Dollar hitting a fresh four-month high. Spot gold remains just above USD 1,730/oz (vs high USD 1,738/oz) and spot silver is marginally below USD 25/oz (vs high USD 25.16). Moving onto base metals, LME copper follows the softer sentiment and resides in the red and trading around USD 8,770/t. Dalian iron ore has risen for a third consecutive session amid an increase in demand and tight global supply, with the supply constraints linked to flooding in top exporter Australia, and the Suez Canal blockade.

US Event Calendar

  • 8:30am: March Initial Jobless Claims, est. 730,000, prior 770,000; Continuing Claims, est. 4m, prior 4.12m
  • 8:30am: 4Q GDP Price Index, est. 2.1%, prior 2.1%; 4Q PCE Core QoQ, est. 1.4%, prior 1.4%
  • 8:30am: 4Q GDP Annualized QoQ, est. 4.1%, prior 4.1%; Personal Consumption, est. 2.4%, prior 2.4%
  • 9:45am: March Langer Consumer Comfort, prior 48.6
  • 11am: March Kansas City Fed Manf. Activity, est. 26, prior 24

Central Bank Speakers

  • 10:10am: Fed’s Clarida Speaks on Outlook for Economy and Monetary...
  • 12pm: Fed’s Bostic Gives Speech to Economic Club of New York
  • 1pm: Fed’s Evans Discuses the Economic Outlook
  • 1pm: ECB’s Schnabel in Fireside Chat at NY Stern Online Series
  • 7pm: Fed’s Daly Discusses Monetary Policy

DB's Jim Reid concludes the overnight wrap

Risk assets gained ground for most of yesterday following the release of strong flash PMI readings, but a late sell-off in US tech created a weak close with the S&P 500 losing -0.55%. US Energy companies (+2.52%) outperformed on the back of higher oil prices, along with other cyclical sectors including industrials (+0.73%), materials (+0.69%) and financials (+0.44%). However, many of the beneficiaries from the stay-at-home trade suffered, as the NSYE FANG+ index of megacap tech stocks fell -3.17%. Stocks such as Peloton (-10.2%), DocuSign (-4.6%) and Zoom (-7.3%) were among the worst performers in tech. There was no clear catalyst for the selloff, but the strong PMI numbers did seem to restart the rotation trade from growth to cyclicals.

The reopening trade also took a bit of a late hit though on news that the CDC is planning a more phased reopening for the cruise line industry this summer rather than a quick restart. This caused cruise operators such as Carnival (-1.7%), Royal Caribbean (-2.8%) and Norwegian Cruise Line (-4.9%) to fall sharply, but other cyclicals also put in their intraday highs just prior to this announcement.

It was all going well for risk with PMIs providing fresh impetus to the reflation trade. They generally came in much stronger than expected and also showed that inflationary pressures remained strong, with numerous price gauges at their highest in years. Looking at the headline numbers, the Euro Area composite PMI rose to an 8-month high of 52.5 (vs. 49.1 expected), which brought an end to a 4-month run when it had been in contractionary territory. Manufacturing in particular was incredibly strong, with the Euro Area manufacturing PMI climbing to an all-time high of 62.4 (vs. 57.6 expected), while services also outpaced expectations at 48.8 (vs. 46.0 expected). Records were being set in Germany too, with their manufacturing PMI at a record 66.6 (vs. 60.5 expected), and with the services number advancing back into expansionary territory at 50.8 (vs. 46.5 expected). German manufacturing input prices rose another 6.2 points to 84.5, just short of their all-time highs of 88.0 from Feb 2011.

Over in the US the numbers were a little more subdued, but the services PMI still rose to 60.0 (vs. 60.1 expected), its highest in more than 6 years, while the manufacturing PMI matched the second fastest level since 2007 of 59.0 (vs. 59.5 expected). The US composite gauge of prices paid and received rose to new records as supply shortages and supply chain issues lead to inflation worries. Input prices exceeded prices charged by double digits for the second time since the data started being tracked in 2009, which suggests there is pressure on margins.

The release of the European numbers shortly after the open proved strongly supportive for equities on the continent, with the STOXX 600 paring back its initial losses (when it hit an intraday low of -0.70%) to close flat (+0.02%) and just off its highs of the day. This was before the bulk of the US sell-off. Meanwhile, 10yr US Treasury yields also moved higher on the back of the releases, though yields then fell back following the CDC guidance for a slower reopening before ending the day down -1.2bps to 1.608%. The move lower was driven by real yields falling back (-2.5bps) even as inflation expectations rose +1.3bps. The 7 year auction today will be a big focus especially since last month’s equivalent saw poor demand and seemed to help further precipitate the sell-off. Ahead of this European yields also moved slightly lower yesterday, with 10yr bunds (-1.2bps), OATs (-1.6bps) and BTPs (-1.1bps) all seeing declines.

In their second day testifying before Congress, Treasury Secretary Yellen and Federal Reserve Chair Powell reaffirmed that while the economy is healing there is a long way still to go. Chair Powell said that the government had avoided the worst outcomes of the pandemic with the aggressive spending policies and low interest rate environment of the past year. Secretary Yellen acknowledged that while it was “appropriate” to expand deficit spending to deal with the effects of the recession, “longer-run, we do have to raise revenue to support permanent spending that we want to do.” On inflation, Chair Powell continues to push back on the narrative that the Fed could find itself behind the curve saying, “the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation… those dynamics haven’t gone away overnight, and won’t.”

Elsewhere in markets, one of the biggest pieces of news over the last 24 hours has been the blockage in the Suez Canal, which has sent oil prices soaring in response, with both Brent Crude (+5.95%) and WTI (+5.92%) seeing their largest daily rises so far this year. That’s still puts them around -7.5% off their peaks from 2 weeks ago. We referenced the blockage briefly yesterday but the issue was caused by the Ever Given container ship running aground, and thus blocking the route through which 12% of global trade passes. For perspective, the ship is 400m long, which puts it somewhere between the height of the Eiffel Tower (324m to the tip) and the Empire State Building (443m to the tip). Work to remove the 200k ton vessel was paused overnight with SMIT Salvage, a Dutch firm that specialises in ship wreckages, being called in to assess the situation. Bloomberg has cited Nick Sloane, the salvage master responsible for refloating the Costa Concordia, the cruise ship that capsized on the coast of Italy in 2012, as saying that the best chance for freeing the ship may not come until Sunday or Monday, when the tide will reach a peak. The current low tide is slowing the work to clear the ship.

Overnight in Asia, markets are mostly trading higher with the Nikkei (+1.14%), Hang Seng (+0.26%), Shanghai Comp (+0.21%) and Kospi (+0.33%) all making gains. Futures on the S&P 500 are up +0.30% and those on the Nasdaq are up +0.28% but European ones are pointing to a weaker open as they try to catch up with yesterday’s late selloff in US equities. 10y USTs are up +1.1bps to 1.622% driven by a rise in real yields. New Zealand’s 10y yields are up +5.5bps and Australia’s +2.6bps while those on 10y JGBs are up +1.4bps. Elsewhere, WTI (-1.77%) and Brent (-1.44%) crude oil prices are giving up some of yesterday’s gains.

In other overnight news, Reuters reported that the US SEC has started an inquiry into the SPAC IPO space by asking for voluntary information. The inquiry which is currently not at the level of a formal investigation is focused on how the underwriter banks are managing the risks involved with the SEC asking for information on deal fees, volumes and internal controls to police deals and asking questions on compliance and reporting. Reuters report also added that the SEC concerns may be centred around due diligence and the heightened risk of insider trading when a SPAC goes public and when it announces an acquisition target.

On the pandemic, yesterday saw the EU announce tougher proposals to restrict vaccine exports, with new regulations that would require member states to consider both reciprocity and proportionality when exporting. In other words, they would have to take into account whether the other country were restricting their own exports of vaccines or raw materials, as well as the virus situation in the export destination country and its vaccination rates. The UK could stand to be one of the major losers, since its own vaccination rollout is significantly ahead of the EU’s, yet it’s reliant on the EU for the import of vaccine doses. EU leaders will be meeting via videoconference later today and tomorrow, where the pandemic and the vaccination rollout are at the top of the agenda, and as it happens, US President Biden is due to join in with the gathering tonight for a discussion on transatlantic relations.

Continuing with vaccines, AstraZeneca reported a slight lower efficacy rate for its vaccine overnight after the results of an American clinical trial were criticised as outdated by the DSMB. The company said in a statement that its shot was 76% effective in its US trial based on the latest data as against the previously stated efficacy rate of 79%. Meanwhile, AZ maintained that its vaccine protected all volunteers against developing severe disease or requiring hospitalisation. The company added that they will now file an application for emergency use authorization in the US and are “preparing for the rollout of millions of doses across America.”

The other big news on the pandemic was that Germany dropped a plan for a 5-day lockdown over Easter, with Chancellor Merkel describing the move as a “mistake”. However, the numbers continued to rise in multiple European countries, with Poland reporting a record number of cases yesterday, whilst Belgium announced schools would shut a week early, and that the limit on outdoor gatherings would go down to 4, from 10 at present. Iceland, viewed as a nation that has handled the pandemic well, also tightened restrictions for the next three weeks as infections rose linked to the UK variant. In the US, three more states (Utah, Idaho and Louisiana) have expanded vaccine eligibility to all adults in the coming weeks in an effort to ensure that all those who want the jab can get it as quickly as possible. Restrictions were relaxed in Colorado, one of the largest states where many curbs on dining and personal gatherings remained in place.

As well as the PMIs, yesterday’s data included the preliminary release of February’s durable goods orders in the US, which unexpectedly fell by -1.1% (vs. +0.5% expected), marking the first monthly decline since April last year. Meanwhile the UK’s CPI inflation reading also fell unexpectedly to +0.4% (vs. +0.8% expected), as core inflation also fell back to +0.9% (vs. +1.4% expected).

To the day ahead now and there are an array of central bank speakers, including ECB President Lagarde and BoE Governor Bailey, along with the ECB’s de Guindos, Weidmann, Villeroy and Schnabel, and the Fed’s Williams, Clarida, Bostic, Evans and Daly. On top of that, the ECB will be releasing their latest Economic Bulletin. The data highlights include the weekly initial jobless claims from the US, along with the third estimate of Q4’s GDP, while in Europe we’ve got the Euro Area’s M3 money supply for February and France’s business confidence for March. Finally, EU leaders will be meeting via videoconference later today.

Tyler Durden Thu, 03/25/2021 - 07:55
Published:3/25/2021 7:17:12 AM
[Markets] The Dow Slipped Only 3 Points Because Oil Prices Lifted Value Stocks The Dow ended nearly flat, lifted by Chevron stock. The S&P 500 and Nasdaq Composite were weighed down by growth stocks. Published:3/24/2021 4:13:13 PM
[Markets] US STOCKS-S&P 500, Dow rise as Powell, Yellen signal confidence in recovery The S&P 500 and the Dow edged higher on Wednesday on rising financial and industrial stocks as Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen expressed optimism about the recovery outlook from the coronavirus pandemic. The remarks by the top two U.S. economic officials mirrored what they told Congress the day before, with Powell saying on Wednesday the most likely case is 2021 will be "a very, very strong year." Wall Street's main indexes have flipped up and down this week as falling bond yields prompted beaten-down technology stocks to rise while energy and financial shares that have rallied this year on growing economic prospects sold off. Published:3/24/2021 2:12:41 PM
[Markets] Dow Jones Rallies As Reopening Plays Flourish; GameStop Sinks As Tech Stocks Flounder The Dow Jones rallied as reopening plays posted good gains. GameStop stock sank. Google stock was bucking a trend, with Alphabet rising. Published:3/24/2021 1:12:20 PM
[Markets] Nasdaq makes its way into positive territory as Dow's gain nears 350 points Nasdaq makes its way into positive territory as Dow's gain nears 350 points Published:3/24/2021 10:42:37 AM
[Markets] Dow Rallies, Tech Stocks Rebound As Yields Bounce; GME Stock Dives On Earnings, While Tesla Reverses Amid Bitcoin News The Dow Jones Industrial Average rallied 200 points Wednesday, as yields firmed. Tesla stock fell amid Bitcoin news, while GME stock dived on earnings. Published:3/24/2021 10:11:44 AM
[Markets] Dow industrials post triple-digit gain at opening bell Dow industrials post triple-digit gain at opening bell Published:3/24/2021 8:40:34 AM
[Markets] Dow industrials positioned for rebound from worst day in three weeks Dow industrials positioned for rebound from worst day in three weeks Published:3/24/2021 7:10:19 AM
[Markets] Futures Rebound Led By Tech With Yields Flat Ahead Of Powell Part 2 Futures Rebound Led By Tech With Yields Flat Ahead Of Powell Part 2

US stock futures rebounded after Tuesday's rout as Intel’s shares surged on plans to expand advanced chip making capacity, while investors looked to business surveys for March and another day of testimonies from Yellen and Powell. Futures on the S&P 500 and Dow Jones also pointed to a rebound in the underlying indexes which dropped Tuesday amid a setback for reopening favorites. Stable bond yields and assurances by Powell on inflation risks has helped allay fears that a growth breakout will force tighter central-bank policy.

At 715 a.m. ET, Dow E-minis were up 135 points, or 0.4%, S&P 500 E-minis were up 18 points, or 0.5% and Nasdaq 100 E-minis were up 108.5 points, or 0.83%.

Overnight highlights: the tech rally helped the FAAMGs rise between 0.6% and 0.7%. Intel shares jumped about 5.7% after it announced plans to spend as much as $20 billion to expand into the foundry business, build two factories in Arizona and open its factories to outside customers. U.S.-listed shares of rival Taiwan Semiconductor dropped 2.6%, while semiconductor equipment makers Lam Research Corp, Applied Materials Inc and ASML Holding gained between 4.4% and 5.7%.

Bitcoin gained about 4% as Tesla Inc chief Elon Musk said the company’s electric vehicles can now be bought using bitcoin and the option will be available outside the United States later this year. Tesla’s shares advanced about 1.6%.

GameStop Corp dropped 13% after the video game retailer said it may sell new shares as the company that led the Reddit rally of “meme stocks” looks to take advantage of a more than 800% surge in its stock price since January.

Energy stocks Exxon Mobil, Chevron, Schlumberger, Occidental Petroleum and Marathon Oil were up between 1% and 4.2%, as crude prices rebounded from a 6% fall in the last session after the Ever Given containership blocked the Suez Canal, snarling global supply chains.

European stocks rose from session lows in early trading, with cyclical stocks including banks and auto firms among the fallers. The Stoxx Europe 600 Index fell 0.1% to 423.14 with 336 members down, 250 up and 14 unchanged.  The Stoxx Europe 600 Travel & Leisure Index rises as much as 1% after the U.K. said it aims to announce plans on the resumption of international flights by April 5. Sector extended gain as Germany drops plan for a five-day Easter lockdown. Here are some of the biggest European movers today:

  • Unite Group shares jump as much as 5.2% with Berenberg upgrading the student accommodation operator to buy from hold, saying it has re-rating potential on expected normalization of operations and long-duration demand tailwinds.
  • The Stoxx Europe 600 Technology Index jumps as much as 2.5% as European chip stocks rallied after Intel said it planned to spend billions on revising manufacturing and creating a new foundry business.
  • Carrefour shares gain as much as 2.4% with Bryan Garnier saying the company’s decision to buy Grupo BIG, Walmart’s former Brazil unit, showed the French grocer was “clearly back in its consolidator role.”
  • Leonardo shares slump as much as 11% as it canceled the IPO in New York of a minority stake in its DRS unit after failing to attract the price it sought. Kepler Cheuvreux said the decision on DRS IPO was “clearly” negative news.

A gauge of Asia-Pacific shares fell the most in about two weeks. Hong Kong equities fell to a 10% correction in five weeks amid the city’s decision to temporarily suspend BioNTech SE vaccines. Asian stocks were set for their fourth daily losses, the longest losing streak since January, as resurgent coronavirus-related concerns sparked broad declines. Financials were the biggest drag on the MSCI Asia Pacific Index, as Treasury yields slumped for a third day. Consumer discretionary stocks also fell as investors eyed rising infections and new lockdowns in Europe and other parts of the world. TSMC and Samsung drove losses in tech shares on Intel’s ambitious plan to create a rival foundry business. Hong Kong’s Hang Seng Index fell 2%, entering a technical correction. Japan’s Topix also shed more than 2%, although the nation’s chip-equipment sector got a boost from the Intel news. China’s benchmark stock gauge extended losses for a second day, closing at a new low for the year after breaching the key 5,000 point threshold. Australia bucked the decline, with its key equity gauge rising about 0.5%.

Japanese stocks fell, with the Topix suffering its steepest drop in a month, as growing virus cases overseas damped investor sentiment and encouraged investors to keep selling shares sensitive to economic prospects. Telecommunications companies and banks were the heaviest drags on the Topix, which declined for a third day. The Nikkei 225 Stock Average slid for a fourth day, its longest slump since Jan. 6. Selling accelerated as investors adjusted positions before Japan’s fiscal year ends this month. “The vaccine was leading the pandemic toward an end, but once again there are outbreaks,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management. “There’s concern whether this will hold back the economic recovery outlook,” he added. “This could impact bank sectors and other cyclical sectors that had been bought on the back of rising yields.” This year’s best-performing sectors dropped. A gauge of shipping stocks tumbled 4.9%, paring its surge this year to 35%. Sub-indexes of energy companies and banks -- also among 2020’s best performers -- fell at least 4% Wednesday. Oil dropped about 6% Tuesday. “It looks like investors are rebalancing ahead of quarter-end, buying bonds and selling off stocks,” said Hajime Sakai, the chief fund manager at Mito Securities Co. “It’s possible investors will bring fresh funds next month when Japan starts a new fiscal year.”

In rates, treasury yields were around 1.625%, little changed on the day, and within 1bp of Tuesday’s closing levels after paring Asia-session gains amid advances for S&P 500 and crude oil futures. Treasuries steadied after advancing following Fed Chair Jerome Powell saying U.S. inflation isn’t expected to get out of control and a sale of two-year notes drew solid demand.  The auction cycle continues with $61b 5-year note sale at 1pm ET, and Fed Chair Powell appears before the Senate Banking Panel at 10am. Gains during Asia session were led by N.Z. bonds, which ripped higher after an RBNZ QE operation received too few offers to meet its target. Bunds trimmed their advance after German manufacturing and services PMI figures for March beat median estimates

“Yields have been tamed in recent sessions,” according to Steen Jakobsen, chief investment officer at Saxo Bank. The auctions “will help determine whether the ‘rising U.S. yields’ narrative can be entirely taken off the frontburner for now,” he wrote in a note.

In FX, the Bloomberg dollar index erased most of its advance as the euro recovered ground, after positive economic data from Europe. Earlier the greenback climbed to a two-week high as turmoil in Turkey’s financial markets and a new wave of virus-related lockdowns fueled haven bids.  New Zealand bonds jumped as investors pared rate- hike bets after the government moved to cool the property market. Leveraged and macro funds sold into early gains in AUD/USD above the 0.7630 level, according to a trader.

In commodities, West Texas Intermediate crude rose more than 3% after a container ship ran aground in the Suez Canal, blocking off traffic in both directions on one of the world’s busiest maritime trade routes. Bitcoin rose after Tesla Inc. Chief Executive Officer Elon Musk tweeted that the firm’s cars can be purchased with the largest cryptocurrency.

Looking at the day ahead, once again we’ll hear from Fed Chair Powell and US Treasury Secretary Yellen as they testify before the Senate Banking Committee. Other Fed speakers today include the Fed’s Barkin, Williams, Daly and Evans, and there’s a pre-recorded speech from ECB President Lagarde on climate change. On the data side, Markit’s flash reading at 9:45 a.m ET is likely to show business activity in the manufacturing and services sectors improved in March from the prior month. We also get the preliminary reading of US durable goods orders for February, and the European Commission’s advance Euro Area consumer confidence reading for March.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,910.50
  • SXXP Index down 0.4% to 421.84
  • MXAP down 1.5% to 203.27
  • MXAPJ down 1.1% to 675.64
  • Nikkei down 2.0% to 28,405.52
  • Topix down 2.2% to 1,928.58
  • Hang Seng Index down 2.0% to 27,918.14
  • Shanghai Composite down 1.3% to 3,367.06
  • Sensex down 1.1% to 49,499.35
  • Australia S&P/ASX 200 up 0.5% to 6,778.77
  • Kospi down 0.3% to 2,996.35
  • Brent futures up 2.7% to $62.40/bbl
  • Gold spot up 0.1% to $1,729.52
  • U.S. Dollar Index up 0.2% to 92.53
  • German 10Y yield down 2 bps to -0.36%
  • Euro down 0.2% to $1.1825

Top Overnight News from Bloomberg

  • A giant container ship could be stuck in the Suez Canal for days, blocking one of the world’s busiest maritime trade routes that’s vital for the movement of everything from oil to consumer goods
  • The International Monetary Fund’s board conveyed broad support for drafting a proposal to create $650 billion in additional reserve assets to help developing economies cope with the pandemic, with an eye on considering a formal plan by June
  • The European Union’s closest neighbors, including countries in the Balkans and those that have special trading relationships with the bloc like Norway and Switzerland, will need authorization to import Covid vaccines from the EU under a proposal to be unveiled on Wednesday
  • Chancellor Angela Merkel dropped plans for a five-day Easter shutdown amid massive criticism in the latest setback for Germany’s pandemic fight

A quick look at global markets courtesy of Newsquawk

Asia-Pac bourses traded mostly lower following the losses seen stateside where cyclicals and value underperformed amid a stronger USD and rise in treasuries, while soft US new home sales data, talk of future tax hikes and a continued slump in oil prices also contributed to the glum mood. The weak handover pressured most regional markets although antipodes bucked the trend helped by softer currencies, with the ASX 200 (+0.5%) also underpinned as strength across most its sectors atoned for the energy-related woes and following the substantive easing of COVID-19 restrictions in New South Wales. Nikkei 225 (-1.9%) was weighed on by currency inflows and as automakers suffered from the ongoing chip shortages, while KOSPI (-0.4%) reflected on geopolitical events after it was confirmed that North Korea resumed its missile tests last weekend and with chipmakers initially dampened by Intel’s plan to invest USD 20bln on new chip plants to challenge Asian dominance of the sector, although Taiwan’s Economy Minister has since suggested that Intel’s investment plan is not a threat to Taiwan’s chipmakers. Hang Seng (-2.4%) and Shanghai Comp. (-1.4%) were subdued in which the former entered correction territory amid ongoing US-China tensions and the BioNTech vaccination suspension in Hong Kong and Macau due to defective vial caps. Furthermore, participants digested a slew of earnings releases and reports noted expectations of tighter scrutiny on Tencent after its founder met with antitrust officials earlier this month, while the Co. along with Xiaomi are scheduled to announce their results today. Finally, 10yr JGBs gained as they tracked the upside in T-notes and with demand spurred by the broad risk aversion, while the Australian 10yr yield saw the steepest decline overnight and fell by 7bps in the aftermath of the 2032 bond auction.

Top Asian News

  • Prestige Wins $1.4 Billion Mumbai Home Project from Bankruptcy
  • Thailand Holds Rate, Cuts GDP Outlook With Tourism Stalled
  • India Likely to Resume Bankruptcy Filings as Halt Expires
  • Deeply Polarized Israel Fails to Anoint a Leader Once Again

European equities opened softer across the board (Euro Stoxx -0.2%) following on from Asia’s mostly negative lead, but Europe has since drifted off worst levels. After the cash open, UK, France, Germany, and the Eurozone all reported notable beats across the board in Flash PMIs for March, although some of this data could be stale given that France and Germany recently renewed COVID-related restrictions. Across the pond, US equity futures are not abiding by the same sentiment and all reside in firmer territory but do not immediately portray much growth/value bias as the RTY (+0.7%) and NQ (+0.8%) are neck and neck at the time of writing, with the latter feeling tailwinds from an overnight pullback in yields coupled with Intel’s (+4.8% pre mkt) update as it upped guidance and undertake a significant expansion of manufacturing capacity with USD 20bln to be spent on chip plants – lifting the likes of ASML (+5.6%) and Infineon (+2.0%) in tandem. Back to Europe, sectors opened firmly in the red featuring an anti-cyclical bias, with Technology (+1.8%) the only sector residing in the green upon market open. This has since stabilised into a mixed and more pro-cyclical picture, with defensives residing towards the bottom. Nonetheless, Auto (-0.5%) remains as a laggard amid the ongoing chip shortage, with Honda extending its suspension of output in certain North American factories due to chip supply issues. In terms of individual movers, dwelling to the downside is Leonardo (-6.0%) which comes after the Co. announced the postponement of its DRS IPO amid adverse market conditions. On the flip side, Carrefour (+2.3%) is supported amid reports the Co. is to acquire Grupo BIG for EUR 1.1bln, which if approved, the Co. would control the number one and three largest food retail names in Brazil.

Top European News

  • German Factories See Record Growth as French Economy Steadies
  • Apax to Acquire $1.8 Billion German Eyewear Firm Rodenstock
  • Commerzbank Sees 2021 Loss on Restructuring, Credit Provisions
  • NatWest Planning Overhaul of its Retail Banking Operations

In FX, The Dollar remains upwardly mobile amidst deteriorating risk sentiment on latest waves of the coronavirus that are forcing many countries to roll-back reopening plans and some to re-enter lockdown or tighten restrictions. However, the DXY has encountered some resistance in chart terms beyond 92.500 and its prior 2021 peak around the 200 DMA (92.604) alongside resilience in the Euro and Pound belatedly following significantly better than expected preliminary PMIs from France, Germany, the bloc as a whole and UK even though the EZ readings could all be downgraded in the final reckoning given fresh pandemic outbreaks since the cut-off point for compiling the flash surveys. Hence, the index has drifted down from best levels within a 92.608-338 band awaiting US durable goods data and Markit’s initial March PMIs before another bunch of Fed speakers and a double helping of supply.

  • CAD/NOK/SEK - A relatively firm rebound in crude prices on the back of Suez canal passage problems caused by a container tanker has helped the Loonie, Norwegian Krona and other commodity currencies pare declines vs the Greenback. Meanwhile, Usd/Cad has also retreated from just over 1.2600 in wake of confirmation from the BoC that several emergency QE lines will be terminated as planned and comments from Deputy Governor Gravelle alluding to scaling down the pace of sovereign bond purchases from an operational standpoint rather than providing fresh guidance for tapering that is widely anticipated to come with the April policy meeting. Back to Scandinavia, Eur/Nok is back under 10.2000 and roughly on a par with Eur/Sek following a squeeze on Nok/Sek back through zero when oil was plummeting.
  • GBP/EUR - Sterling is still sitting at the bottom of the G10 table after significantly softer than forecast UK inflation data, but Cable has regained 1.3700+ status and Eur/Gbp is flattish between 0.8645-10 parameters following the aforementioned PMI beats that have also helped the Euro retain hold of the 1.1800 handle against the Buck.
  • AUD/NZD/JPY/CHF - All now narrowly mixed vs their US counterpart, but not before conceding more ground as the Aussie and Kiwi tumbled below 0.7600 and 0.7000 respectively overnight with no visible support via trade data or PMIs amidst further dovish rhetoric from RBA Assistant Governor Debelle on balance – see posts on the Headline Feed at 10.20GMT and 9.41GMT for details. Conversely, risk aversion is offering the Yen some respite either side of 108.50, while the Franc is still retreating across the board as the clock ticks down to the SNB tomorrow.
  • EM - The Mxn and underperforming Rub are drawing comfort from the recoveries in WTI and Brent, but no joy for the Try from a rise in Turkish consumer sentiment or efforts by President Erdogan to talk the Lira up and persuade his subjects to convert FX and Gold holdings into domestic currency denominated assets. In contrast, softer than anticipated SA CPI has not hampered the Zar irrespective of potential implications for the SARB policy meeting/guidance on Thursday, and the Rand may be content that Gold is holding above Usd 1700/oz quite comfortably.

In commodities, WTI and Brent front month futures are grinding higher in what is seemingly a reversal of the substantial losses seen this week, with WTI and Brent May contracts below USD 59.50/bbl and USD 62.50/bbl respectively. However, putting these numbers into context, the contracts were closer to USD 65/bbl and USD 69/bbl at this time last week. One of the developments that have garnered attention has been the blockade at the Suez Canal in Egypt – which provides the shortest sea link between Asia and Europe. GAC noted that traffic is expected to resume soon as the Suez Canal authority is close to re-floating the ship. Tanker Trackers has estimated that 10mln bbls of Saudi, Russian, US and Omani crude remains parked, Vortexa estimated 13mln bbls, whilst Bloomberg’s Chief Energy Correspondent suggests that the blockade is a problem for refined products but not a major one for crude as it can bypass the canal via two large nearby regional pipes. Nonetheless, market participants are seemingly receiving this as a short-term bullish factor for prices, which also coincides with gains across stocks and blockbuster but outdated EZ Flash PMI metrics. Meanwhile, underlying fundamentals are little changed, with France, Germany and the Netherlands observing stricter COVID-related measures in light of rising cases and slower-than-expected inoculation. That being said, it will be interesting to see what OPEC+ opts to do at its upcoming meeting, with Saudi’s unilateral 1mln BPD production still offline and prices somewhat in a sweet spot and amid fears of rising US market share. Analysts at ING continue to hold a constructive medium-term outlook in the complex, “with inventories set to continue declining as we move through the year. In addition, if for any reason the market continues to weaken as we move towards the end of the month, OPEC+ would likely take action to support the market when they meet on 1 April.” The bank notes that if this weakness persists, then a rollover of current cuts look increasingly likely. Elsewhere spot gold and silver have been trading sideways during APAC and early European hours, but have since drifted towards the top of todays tight intraday ranges of USD 1724-35/oz for the yellow metal and USD 25.00-25.36/oz for silver. In terms of base metals, LME copper is now firmer as the red metal tracks the Buck waning off highs and stocks climbing off lows. Finally, Dalian iron ore futures saw a rebound as it retraced some losses from the Tangshan developments, albeit the front month April contract in Singapore fell almost a percent.

US Event Calendar

  • 8:30am: Feb. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.4%
  • 8:30am: Feb. -Less Transportation, est. 0.5%, prior 1.3%
  • 8:30am: Feb. Durable Goods Orders, est. 0.5%, prior 3.4%
  • 9:45am: March Markit US Services PMI, est. 60.0, prior 59.8; Markit US Manufacturing PMI, est. 59.5, prior 58.6
  • 10am: Revisions: Wholesale inventories

Fed speakers

  • 8:50am: Fed’s Barkin Takes Part in Virtual Discussion
  • 10am: Powell and Yellen Appear Before Senate Banking Panel
  • 1:35pm: Fed’s Williams Takes Part in Moderated Discussion
  • 3pm: Fed’s Daly Discusses Equitable Growth
  • 7pm: Fed’s Evans Discusses the Economic Outlook

DB's Jim Reid concludes the overnight wrap

Markets saw a moderate pullback yesterday as investors absorbed news of the continued rise in Covid cases, which in turn is raising concerns as to whether more restrictions might end up getting imposed over the coming weeks and thus delaying the grand global re-openings. The release of today’s flash PMIs is the next major event even if it will only really tell us how well economies are dealing with current levels of restrictions. The interesting thing about the last few months is that Western economies have held up better than expected over this winter lockdown period but that restrictions are probably likely to go on longer than expected.

Back to yesterday and the appearance of Fed Chair Powell and Treasury Secretary Yellen before the House Financial Services Committee didn’t generate any major headlines (more below) but shortly after they concluded, oil prices saw another leg lower on fears that short-term global demand will suffer if shutdowns spread. The reopening trade in particular took a big hit.

Oil futures fell by roughly 6% for the second time in the last four sessions, with WTI down -6.16% to $57.76/bbl and Brent down -5.93% to $60.79/bbl – their lowest prices in roughly six weeks. This caused energy stocks to fall back on both sides of the Atlantic, but it was travel and leisure stocks that saw some of the worst losses as holiday plans – especially in Europe – are increasingly under threat. Airlines such as Lufthansa (-4.0%), United (-6.8%) and American Airlines (-6.6%) were near the worst performers in their indices, along with cruise lines such as Carnival (-7.8%) and Norwegian Cruise Line (-7.2%). However unlike for most of the last 12 months this did not prompt a rotation into the stay-at-home/tech trade as the NASDAQ fell -1.12% on the day. However, the megacaps outperformed somewhat with the NYFANG index down just -0.30%. European equities missed the worst of the bearishness with the STOXX 600 closing down -0.20%, whereas the S&P 500 fell -0.76%. Investors moved instead into safe havens like sovereign bonds and the US dollar, which rose +0.67% in its best day in nearly three weeks.

Yesterday was also a significant milestone as it marked the one-year anniversary of the Covid-19 lows in global equity markets, back when the S&P 500 closed just over a third beneath its pre-Covid high a month earlier. We’ve come a long way since then however, with the annual change in the S&P at an astonishing +74.78%, making that the biggest rolling 12-month increase in the index since 1936. You can see this in our Chart of the Day yesterday (link here), which we did before last night’s close that actually pushed up the year-on-year number a little higher. That said, yesterday probably marks the peak on this measure since on March 24 last year the S&P rose +9.38%, marking the start of its epic advance to repeated fresh all-time highs.

Looking back at yesterday in more depth, Treasury yields took another turn lower, with 10yr yields down -7.4bps to 1.621%, putting them below their level immediately prior to the Fed meeting last week. As with the previous day, there was a notable flattening of the curve, with 2yr yields closing largely flat (-0.2bps), and it was real rates that again led the bulk of the declines, falling -5.1bps. Over in Europe it was much the same story, with yields on 10yr bunds (-3.0bps), OATS (-3.3bps) and BTPs (-4.5bps) experiencing their own declines and a flattening of their curves.

As discussed at the top Treasury Secretary Yellen and Fed Chair Powell appeared before the House of Representatives Financial Services Committee as part of the Congressional oversight of the pandemic response. Both officials are expected to appear before the Senate Banking Committee later on today in what is likely to be an encore performance. Chair Powell spoke to inflation worries saying that he and his colleagues do believe there will be upward pressure on prices , but “that the effect on inflation will be neither particularly large nor persistent.” He went on to cite that “we have been living in a world of strong disinflationary pressures - around the world really - for a quarter of a century…We don’t think a one-time surge in spending leading to temporary price increases would disrupt that.”

Many of the questions aimed at Treasury Secretary Yellen focused on the recent $1.9 trillion stimulus package, and in particular what state and local governments could do with the hundreds of billions in grants. Yellen pledged to release more details on what levels of tax cuts, rental allowance and other services local governments could administer shortly. On the topic of market valuations, both the current and former Fed Chairs agreed that asset prices could be viewed as high by historical metrics but that banks continue to be highly capitalised, thereby mitigating some of the financial stability risks. Markets were little surprised during the testimony, with both equities and bond markets trading fairly flat while the officials spoke.

Overnight in Asia markets are continuing to trade lower with the Nikkei (-1.92%), Hang Seng (-2.31%), Shanghai Comp (-1.32%) and Kospi (-0.41%) all down. The underperformance of the Hang Seng is due to a temporary pause in BioNTech/ Fosun Pharma vaccinations in Hong Kong as a result of a packaging defect. Both the companies have played down concerns over safety due to this packaging issue. The Hang Seng is now down -10.67% from intraday highs observed on February 18 and has entered correction territory. Futures on the S&P 500 are down -0.05% while those on Nasdaq are up +0.33%. European futures are pointing to a weaker open with those on the Stoxx 50 and Dax down -0.58% and -0.62% respectively. Meanwhile the softening of sovereign bond yields is stretching into a third day with those on 10y USTs down -3.1bps to 1.592% driven by an equivalent drop in 10y real yields. New Zealand’s 10y yields are down -15.7bps after yesterday’s government actions to temper the housing bubble. Australia’s 10y yield is down -7.9bps with 10y JGBs down -1.2bps.

Turning to the first of the flash March PMIs mentioned above, Japan’s manufacturing number rose 0.6pt from last month to 52 while services improved by 0.2pt to 46.5. Japanese PMIs would have likely benefitted by the end of the state of emergency in several prefectures earlier this month. The Tokyo region left such conditions last weekend. Australia’s manufacturing PMI also printed 0.1pt above last month at 57 while the services reading improved to 56.2 from 53.4 last month.

In other news, the Suez Canal, one of the world’s busiest maritime trade routes, was blocked overnight as one of the biggest container ships in operation accidentally ran aground. This could have an impact on movement of oil and consumer goods. Bloomberg reported that this has caused a jam of at least 100 vessels seeking to transit between the Red Sea and Mediterranean.

Turning to the pandemic, Bloomberg reported that the European Commission could outline new rules today that impose tougher export restrictions on vaccines. This comes as the EU not only lag behind in their vaccination rollout relative to the US and the UK, but are also facing a new wave that has led multiple countries to impose fresh restrictions. We’ll see what’s announced, but the report cited a senior EU official saying that exemptions that guarantee supplies to 90 countries could be removed, as could another exemption that offers protection to companies like Pfizer that have met their commitments to Europe. This comes ahead of a summit of EU leaders tomorrow where Covid is expected to top the agenda, but as we mentioned in yesterday’s edition, there isn’t unanimity among the leaders on the merits of export restrictions, and Irish PM Martin has already described the idea as a “retrograde step” and “counterproductive”.

Meanwhile in terms of the row between the UK and the EU over vaccine production, Bloomberg also had a report saying that the EU was only prepared to offer the UK a small fraction of the AstraZeneca output from the Netherlands, citing officials who said that the allocation should be based on relative populations, and that the EU wouldn’t simply accept an equal split. The British pound is trading down -0.32% this morning after yesterday’s -0.81% move lower partly due to vaccine friction. On a separate note, following the release of the US clinical trial results from AstraZeneca, the company said that they were going to publish further data within 48 hours, after the DSMB group of outside experts raised concerns that it could be based on outdated information.

Following the news that Germany would impose a harder lockdown through the Easter holiday, the Netherlands has followed suit with Prime Minister Rutte telling reporters that the nation’s lockdown is extended until April 20. This comes as Norway increased curbs around the Easter holiday and Greece reported their highest daily rise in infections since the start of the pandemic. The US on the other hand continues to reopen the remaining restricted regions of the country with San Francisco opening some offices and outdoor bars. Texas and Georgia – the second and ninth largest states by population – have now made vaccination registration open to all adults, and are among the most populous states to do so.

Overnight, we also got some news on fake vaccines with Reforma reporting that the Russian Direct Investment Fund and Russia’s Health Ministry are preparing an investigation with Mexican authorities after the seizure of fake Sputnik V vaccines on March 17 at an airport in the state of Campeche. This comes after Reforma had reported earlier that more than 1,000 people in Mexico were injected with the false vaccine.

There wasn’t a great deal of data out yesterday, but we did get the UK’s employment figures for January, which indicated that the labour market was past the worst in terms of the pandemic’s effects. The figures showed that payrolled employment had risen by +68k in February compared with the previous month, marking the 3rd consecutive increase. The unemployment rate in the three months to January was at 5.0%, down from 5.1% in the three months to December. Over in the US, new home sales data for February fell by more than expected to an annualised rate of 775k (vs. 870k expected). That was a 9-month low, though severe weather last month was in part to blame.

To the day ahead now, and once again we’ll hear from Fed Chair Powell and US Treasury Secretary Yellen as they testify before the Senate Banking Committee. Other Fed speakers today include the Fed’s Barkin, Williams, Daly and Evans, and there’s a pre-recorded speech from ECB President Lagarde on climate change. On the data side, the flash PMIs for March from around the world will be the highlight, but we’ll also get the UK CPI reading for February, the preliminary reading of US durable goods orders for February, and the European Commission’s advance Euro Area consumer confidence reading for March.

Tyler Durden Wed, 03/24/2021 - 07:53
Published:3/24/2021 7:10:19 AM
[Markets] Dow's down over 300 points as stocks extend losses in late-day trade Dow's down over 300 points as stocks extend losses in late-day trade Published:3/23/2021 3:05:55 PM
[Markets] Dow Jones, Nasdaq Fall As Janet Yellen, Jerome Powell Testify; Large-Cap Tech Stocks Outperform The Dow Jones Industrial Average traded lower in today's stock market as the major indexes all showed declines in afternoon trading. Published:3/23/2021 3:05:55 PM
[Markets] Russell Routed, Crude Crashed, Bonds Bid As Bull Market Turns One Russell Routed, Crude Crashed, Bonds Bid As Bull Market Turns One

"Off the lows" from exactly one year ago, Small Caps are up a stunning 122%...

Source: Bloomberg

As $17 trillion in global liquidity was gushed into "the economy" (by which we mean the shittiest stocks you can think of)...

Source: Bloomberg

But the last two days have been a bloodbath for Small Caps. The S&P is unch, Dow down marginally and Nasdaq up 1.3% (but all were red today)...

Did investors just get over-stuffed with ebulience?

This comes a day after the largest one-day inflow to QQQ since 2000...

Source: Bloomberg

Small Caps plunged back below their 50DMA...

And Nasdaq continues to languish below its 50DMA, unable to break back above it...

While VIX picked up today, it remains shockingly decoupled from rate vol...

Source: Bloomberg

The bloodbathery in stocks sparked a bid for bonds (or maybe the causal link goes the other way?) 30Y yields are down over 10bps on the week...

Source: Bloomberg

Pushing 10Y Yields back below 1.65%, the spike lows from last week's FOMC...

Source: Bloomberg

30Y Breakevens hit their highest since 2014...

Source: Bloomberg

The dollar surged higher today, back to 2 week highs, well above pre-FOMC levels...

Source: Bloomberg

Cryptos were flatish today holding losses for the week...

Source: Bloomberg

Commodities were all sold today as the dollar rallied but copper and crude got hit worst...

Source: Bloomberg

Crude Crashed today as demand fears (European lockdowns) and supply anxiety (floating storage unwinds) slammed WTI back below $60, $59, and $58 to six-week lows (and below its 50DMA) ahead of tonight's API inventory data...

Finally, we note that the last 12 months were the strongest for the S&P 500 since 1936. Just remember what happened in 1937...

Source: Bloomberg

Trade accordingly.

Tyler Durden Tue, 03/23/2021 - 16:00
Published:3/23/2021 3:05:55 PM
[Markets] Dow Jones Dips, But Microsoft, Chevron Show Strength; Adobe Powers Higher Ahead Of Earnings The Dow Jones, S&P 500 and Nasdaq weren't moving much in afternoon trading, despite a lot of damage below the surface. Large-cap techs outperformed. Published:3/23/2021 1:06:06 PM
[Markets] Dow Jones Trims 100-Point Loss Ahead Of Powell Testimony; Microsoft, Netflix Rally The Dow Jones Industrial Average erased most of a 100-point drop ahead of testimony from Fed Chief Jerome Powell and Treasury Secretary Janet Yellen. Published:3/23/2021 11:35:12 AM
[Markets] Dow, Tech Stocks Fall As Powell Calls U.S. Economy 'Much Improved'; Boeing In Buy Range, While Tesla Rallies The Dow Jones Industrial Average fell over 100 points as Fed Chairman Powell called the U.S. economy "much improved." Tesla stock reversed higher. Published:3/23/2021 11:04:19 AM
[Markets] Dow Falls, Tech Stocks Rise As Powell Calls U.S. Economy 'Much Improved'; Boeing In Buy Range, While Tesla Rallies The Dow Jones Industrial Average fell over 100 points as Fed Chairman Powell called the U.S. economy "much improved." Tesla stock reversed higher. Published:3/23/2021 10:34:01 AM
[Markets] Dow Jones Today Dips, Nasdaq Futures Rise Ahead Of Powell/Yellen Hearing; China Stocks Stumble After U.S. Sanctions Tesla inched higher and chip stocks were early leaders, including Intel on the Dow, but stock futures remained tightly mixed. Published:3/23/2021 7:34:03 AM
[Markets] Dow futures ease as market awaits latest from Powell and Yellen Dow futures ease as market awaits latest from Powell and Yellen Published:3/23/2021 6:35:02 AM
[Markets] Dow Jones Futures Fall: Are Tech Stocks Back? 3 Tech Giants Lead Stock Market Rally Dow Jones futures were lower early Tuesday after tech stocks led the stock market rally. Tesla stock surged before slashing gains after getting a 3,000 price target. Published:3/23/2021 5:32:40 AM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – 32715 Pivot Controlling Direction The early price action suggests the direction of the Dow futures contract will likely be determined by trader reaction to 32715. Published:3/23/2021 4:02:00 AM
[Markets] Dow Jones Futures: Are Tech Stocks Back? Applied Materials, Nvidia, Tesla Lead Stock Market Rally Dow Jones futures were little changed late Monday after tech stocks led the stock market rally. Tesla stock surged before slashing gains after getting a 3,000 price target. Published:3/22/2021 4:29:18 PM
[Markets] Dow Jones, Nasdaq Trade At Intraday Highs; These Chip Stocks Form New Bases The Dow Jones traded higher in today's stock market after erasing a 115-point drop. The major indexes rallied near their intraday highs. Published:3/22/2021 2:29:20 PM
[Markets] Dow Jones Up; Tesla Stock Gains As Elon Musk Eases These Fears; Disney, Apple Lead Blue Chips The Dow Jones moved higher as tech stocks rebounded. Tesla stock charged after CEO Elon Musk spoke out. Published:3/22/2021 11:27:42 AM
[Markets] Dow Jones Futures Fall, Tech Futures Climb As Yields Drop; Tesla Jumps On 3,000 Price Target Dow Jones futures were lower, while tech futures jumped as Treasury yields dropped. Tesla stock raced higher on a new 3,000 price target at Ark Invest. Published:3/22/2021 7:59:55 AM
[Markets] Stocks Eye Steady Open; Dollar Gains: Markets Wrap (Bloomberg) -- Asian stocks are poised for a cautious start to the week with investors fretting over rising bond yields and inflation as economic activity picks up. Turkey’s lira tumbled after the central-bank head was replaced.U.S. equity futures dipped. Futures fell in Japan and Australia and were higher in Hong Kong earlier. The Turkish lira slumped as much as 15% in early Asian trading after President Recep Tayyip Erdogan removed the central-bank governor following a bigger-than-expected increase in interest rates. The dollar advanced against most Group-of-10 currencies.The S&P 500 Index edged lower on Friday. The financial sector weighed down the Dow Jones Industrial Average after the Federal Reserve let a capital break for big banks expire. The tech-heavy Nasdaq 100 recovered from Thursday’s slump. Oil slipped after its worst week since October.A heavy slate of Treasury auctions in maturities that have taken a beating recently will keep the bond market on edge this week. Ten-year yields ended last week above 1.7%, at the highest levels in about 14 months.Investor concerns about the possibility of higher interest rates are dominating equity and bond markets. Selling in bonds has propelled yields higher and fueled a rotation out of growth into value shares, on the view that rebounding inflation may force the Fed to tighten monetary policy sooner than its current guidance suggests.Fed Chairman Jerome Powell reiterated in a Wall Street Journal editorial that the central bank will provide aid to the economy “for as long as it takes.”“Clearly, the market is skeptical that the Fed will be able to keep interest rates at current levels for the next three years,” Diana Mousina, senior economist in the multi-asset group at AMP Capital Investors Ltd., said in a note. “We think that nominal bond yields can still shoot higher in the short-term towards 2% and above on inflation concerns. Markets are likely to worry that this move is permanent, rather than temporary.”A central-bank exemption that allowed lenders load up on Treasuries and deposits without setting aside extra capital to cushion losses will lapse March 31. The regulator also said it will soon propose new changes to this supplementary leverage ratio, or SLR.Meanwhile, the European Union is set to block exports of the AstraZeneca Plc vaccine to the U.K. until the drugmaker fulfills its delivery obligations to the bloc. The pound was weaker.These are some key events to watch this week:Fed Chair Powell is first up Monday at the BIS Innovation Summit, a virtual gathering of major central bankers. He speaks alongside Bundesbank’s Jens Weidmann on progressing with the digital age. The ECB’s Christine Lagarde, BOE’s Andrew Bailey and chiefs of Sweden, Canada, Mexico and Brazil all follow.Powell and Treasury Secretary Janet Yellen are expected to make their first joint appearance before the U.S. House Financial Services committee to testify on Fed and Treasury pandemic policies Tuesday.EIA crude oil inventory report on Wednesday.Friday, February U.S. personal income and spending data comes in the wake of $600 stimulus checks but before the latest round of $1,400 payments began hitting Americans’ bank accounts.These are some of the main moves in financial markets:StocksS&P 500 futures fell 0.3% as of 7:15 a.m. in Tokyo. Nasdaq 100 futures fell 0.4%.Nikkei 225 futures fell 0.6% earlier.Australia’s S&P/ASX 200 Index futures dipped 0.2% earlier.Hang Seng Index futures rose 0.4% earlier.CurrenciesThe yen rose 0.1% to 108.83 per dollar.The Bloomberg Dollar Spot Index advanced 0.1%.The euro fell 0.1% to $1.1887.The Australian dollar dropped 0.2% to 77.26 U.S. cents.BondsThe yield on 10-year Treasuries climbed one basis point to 1.72%, the highest in about 14 months.Australia’s 10-year bond yield rose one basis point to 1.82%.CommoditiesWest Texas Intermediate crude fell 0.7% to $61.02 a barrel.Gold was at $1,739.92 an ounce.(Corrects the extent of the Turkish lira’s decline in paragraph two.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/21/2021 6:22:37 PM
[Markets] Dow Jones Pares Losses While Nasdaq Leads The Upside; These Dow Stocks Trade Near Buy Points The Dow Jones traded lower but still rallied off earlier session lows. The indexes all came off their lows as the Nasdaq traded higher. Published:3/19/2021 1:08:35 PM
[Markets] Gold Versus The Stock Market Gold Versus The Stock Market

Authored by Simon Black via,

More than 3,000 years ago in the early 12th century BC, Greco-Roman legend tells us of a mythical pair of monsters located in the Strait of Messina in southern Italy.

The monsters were named Scylla and Charybdis. And both Homer’s Odyssey and Virgil’s Aeneid describe the terror of sailors who came into contact with them.

Scylla was on one side of the Strait, and Charybdis on the other. But because the Strait is so narrow, it was impossible for sailors to avoid both of the monsters, essentially forcing the captain to choose between the lesser of two evils.

In Homer’s narrative, for example, Odysseus is advised that the whirlpools of Charybis could sink his entire ship, while Scylla might only kill a handful of his sailors.

So Odysseus chooses to sail past Scylla: “Better by far to lose six men and keep your ship than lose your entire crew.”

The story is a myth. But the idea of having to choose between two terrible options is very real.

It appears that the Federal Reserve has landed itself in this position.

In its efforts to boost the economy during the pandemic, the Fed slashed interest rates so much that the average 30-year mortgage rate for homebuyers reached an all-time low of 2.65% earlier this year.

Similarly, AAA-rated corporate bond yields reached record low 2.14% last summer.

The US government 10-year Treasury Note dropped to a record low 0.52%.

And the 28-day US government Treasury Bill rate actually turned negative for a brief period– something that has never happened before.

The effects of such cheap rates are obvious.

With corporate borrowing rates so low, the stock market has boomed. With consumers able to borrow money so cheaply, home prices have surged to an all-time high.

Yet in slashing interest rates to record lows, the Fed has essentially sailed right into the Strait of Messina. And they’re about to find themselves stuck between two monsters.

On one side of the Strait is the Inflation Monster, which grows stronger and more menacing with ever dollar the Fed conjures into existence.

Last year the Fed increased the supply of US dollars in the financial system (M2) by 26%– the single largest annual increase since 1943.

The Fed has nearly doubled the size of its balance sheet in the last 12 months alone, and nearly 10x’d its balance sheet since the financial crisis of 2008.

In simple terms, the Fed ‘prints’ money (albeit electronically) and sprinkles it around the financial system.

This is a form of debasement, not much different than how ancient Roman emperors cut corners by reducing the purity of their gold and silver coins.

Historically speaking, debasing the currency eventually causes inflation.

There are famous historical episodes, like Zimbabwe, Venezuela, or the Weimar Republic, where the government’s endless money printing caused hyperinflation.

But there are countless ‘quieter’ examples of inflation– like in Brazil, where inflation is now over 5%, or Turkey, where the annualized inflation rate is about 15%.

15% isn’t exactly hyperinflation. But it does make life pretty uncomfortable, especially when wage growth fails to keep pace. Every year people find themselves poorer and worse off.

Yet the Federal Reserve ignores these countless historic examples, recently claiming to Congress that relentless money printing will not cause inflation.

The Fed’s reasoning is that, because their money printing hasn’t caused inflation yet, it never will. This is pretty dangerous logic, given that rule #1 in finance is ‘past performance is no guarantee of future results.’

But I’ll come back to that in a moment, because on the other side of the Strait is the Market Monster.

Like the Inflation Monster, the Market Monster grows larger with ever dollar the Fed creates. It FEEDS on cheap interest rates.

Look at the US stock market: prior to the pandemic, the Dow Jones Industrial Average reached a record high of just over 29,000 points. Today, the market is more than 10% higher.

And yet–

1. Corporate earnings are DOWN. The average Earnings per Share in the S&P 500 is 30.47% LOWER than prior to the pandemic.

2. Corporate revenue is also down. Yet corporate DEBT is substantially higher.

3. The US economy as measured by GDP is weaker. Consumer spending is still lower than before the pandemic. Unemployment is higher.

4. Government debt is hilariously out of control, and the new ruling party just announced that they want to raise taxes.

Lower profit, lower revenue, higher debt, higher taxes– NONE of these trends should be favorable for stocks. Yet the market is UP, with the average Price/Earnings ratio in the S&P 500 now an incredible 40x.

The Fed knows that the strength of the stock market… along with the real estate and bond markets… is based on cheap interest rates.

They also know that if they raise rates, these markets could suffer a dramatic downturn.

So the Fed has two options to choose from, and neither is good: raise rates and cause markets to crash. Or, don’t raise rates, and risk inflation.

They’ve pretty much already told us they’re choosing inflation.

I’m not suggesting that the US is going to turn into Zimbabwe and suffer terrible hyperinflation.

But inflation levels similar to Brazil or Turkey are definitely possible. It happened before in the 1970s when inflation hit double digits– and stayed that way for years.

And given the Fed’s refusal to acknowledge the slightest chance of inflation (heresy!), it makes sense to consider preparing for the possibility.

I would point out again that gold has a 5,000 year track record of performing well during times of inflation.

It’s also among the few major asset classes that’s NOT currently at a record high.

Unlike the stock market, which has reached an all-time high despite lower earnings and higher debt, gold is down 16% from its peak even though inflation expectations are the highest they’ve been in years.

On that basis, gold looks pretty undervalued.

*  *  *

On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years. That's why we published a new, 50-page long Ultimate Guide on Gold & Silver that you can download here.

Tyler Durden Fri, 03/19/2021 - 12:30
Published:3/19/2021 11:38:18 AM
[Markets] Dow down 250 points as bank stocks slide on Fed decision on capital requirements Dow down 250 points as bank stocks slide on Fed decision on capital requirements Published:3/19/2021 10:07:38 AM
[Markets] Dow Jones Flat As Yields Spike; Apple, Microsoft Fall, Retailer Spikes The Dow Jones rallied even as other indexes fell amid a spike in the 10-year yield. Apple stock and Microsoft stock were the biggest blue chip laggards. Published:3/18/2021 2:32:12 PM
[Markets] The Dow has joined other stock indexes in the red as losses pile up Thursday The Dow has joined other stock indexes in the red as losses pile up Thursday Published:3/18/2021 2:05:47 PM
[Markets] Dow Rallies To Record Highs, Tech Stocks Sell Off As Treasury Yields Spike; Apple, Tesla Tumble The Dow Jones Industrial Average rose 150 points Thursday, while tech stocks dived as Treasury yields spiked. Apple and Tesla stock skidded in morning trade. Published:3/18/2021 11:34:08 AM
[Markets] Dow ekes out gain even as Nasdaq skids 175 points amid bond-yield surge Dow ekes out gain even as Nasdaq skids 175 points amid bond-yield surge Published:3/18/2021 9:02:35 AM
[Markets] Nasdaq Futures Plunge As Bond Rout Sends 10Y Treasury To 1.75% Nasdaq Futures Plunge As Bond Rout Sends 10Y Treasury To 1.75%

It started off well enough, with futures initially continuing their post-FOMC ascent and lifting global markets.

However, It all reversed sharply during the Asian session driven by a sharp spike in the 10Y TSY, which initially jumped following a Nikkei report that the BOJ readied to adjust monetary policy and will look at measures that will allow long-term interest rates to move in "a slightly larger range of about 0.25%, versus 0.2% now" in order to make life easier for financial institutions. The news, which came during the Japanese trading break forced local traders to sell US paper instead.

The selloff then accelerated sharply when Europe opened, and pushed the 10Y as high as 1.75%, a level which BofA two weeks ago said was the "tipping point" for bonds...

... the highest level since Jan 2020, while the 30-year topped 2.5% a level that hasn’t been seen since August 2019

The algos took one look at the fresh surge in yields and dumped risk assets with a focus on high duration "bathwater" tech names, slamming Nasdaq 100 futures 1.7% lower....

... while Emini S&P futs were set to fade the entire post-FOMC move.

While big U.S. banks, that are sensitive to economic outlook, including JPMorgan, Bank of America, Citigroup and Goldman Sachs were among the top gainers in early premarket trade, momentum and growth darling Tesla slumped again in pre-market trading. Other yield-sensitive tech stocks such as the FAAMGs all dropped between 0.8% and 1.7% in premarket trading. Meme stock GME rallied as much as 5% before settling around $216 premarket.

The Dow on Wednesday surpassed 33,000 points for the first time after the Fed projected strongest growth in nearly 40 years as the COVID-19 crisis winds down while forecasting no rate hikes through 2023. While inflation is expected to exceed the Fed’s 2.0% target to 2.4% this year, Fed Chair Jerome Powell views it as a temporary surge that will not change the central bank’s stance. The Federal Reserve’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred betson faster growth and inflation, sending market expectations of price pressures to multi-year highs.

“Rising real rates have created a hostile environment for longer-duration growth factors,” Jonathan White, head of investment strategy at AXA IM Rosenberg Equities, wrote in a note. “Looking ahead we continue to believe the environment should favor value stocks over growth stocks” White added echoing what has now become consensus sentiment across trading desks.

Despite the slump in futures, global stock markets edged higher on Thursday after the U.S. Federal Reserve promised to keep its support in place.

MSCI’s 50-country world index was near record highs after the Fed had lifted Wall Street and Asia overnight and Europe opened with Germany’s DAX at a record high. European automakers, banks and other cyclical stocks led gains. The Stoxx Europe 600 was up 0.3% to 426.37. Here are some of the biggest European movers today:

  • Volkswagen common shares, preference shares and the stock of majority holder Porsche SE all continue the week’s rally, with analysts at Barclays and Bernstein pointing out a growing valuation discrepancy between VW’s common stock and its largest holder, Porsche SE, making the latter an attractive investment.
  • Sartorius Stedim shares rise as much as 9.1% and Sartorius AG jumps as much as 13% after the medical and lab- equipment companies raised their 2021 forecasts, citing increased demand due to the coronavirus pandemic.
  • BMW shares gain as much as 3.9% with Bernstein highlighting the carmaker’s potential to deliver “exciting and scalable e-mobility,” while giving its PT on the stock a big boost.
  • Holmen shares rise as much as 6.3% after Danske Bank upgraded the stock to buy from hold, seeing potential for upside in the share price in the coming year.
  • The Stoxx Europe 600 Media Index jumps as much as 1% to reach its highest intraday level since Feb. 6 2020, recouping all of its pandemic losses. The sector gauge is set for its highest closing level since 2015.
  • Zur Rose shares slumps as much as 9.3% with Barclays saying the online pharmacy firm reported “disappointing margins,” though long-term commentary is “encouraging.”

Asian stocks climbed toward a two-week high while Japan’s Topix jumped past the 2,000 mark for the first time since 1991, becoming the region’s top-performing major equity index this year.  Internet stocks, which were previously hammered by a spike in U.S. Treasury yields, contributed the most to the MSCI Asia Pacific Index’s gain on Thursday. Reflation trades abated, with Commonwealth Bank of Australia and India’s Reliance Industries Ltd. among the heaviest drags on the region’s benchmark. Hong Kong’s Hang Seng Index led advances in Asia, with the gauge up 1.3%, extending its longest streak of gains in a month. Japan’s Nikkei 225 Stock Average pared gains, trading near its highest level in three decades. Key equity gauges in Indonesia and Vietnam rose more than 1%. India stocks extended declines for a fifth day, dragged down by Infosys Ltd.

The U.S. central bank sees the economy growing 6.5% this year, which would be the largest jump since 1984. Inflation is expected to exceed its preferred level of 2% to 2.4%, although it is expected to drop back in subsequent years.

"I don’t know what the Fed can do to stop a rise in yields that is based on stronger fundamentals," said BCA chief global fixed income strategist Rob Robis, pointing to the $1.9 trillion U.S. stimulus package that will drive growth. “The path of least resistance is still towards higher yields,” he said. “The U.S. Treasury market leads the world and every bond market responds.”

As noted above, the move in rates was the highlight of the session with Treasuries extending the bear-steepening move unleashed by Wednesday’s FOMC decision during London morning; intermediate sectors led losses, sending 10-year yields above 1.70% for the first time since January 2020 after Fed policy makers increased their inflation forecast without anticipating a rate increase by 2023, greenlighting a steeper Treasuries curve.

Yields traded near session highs are cheaper by 1.5bp to 9bp across the curve with 10s leading the move, lifting 5s10s30s fly above 10bp for the first time since 2014; 10-year yields topped at 1.742% while 30-year yields approached 2.51%. Treasury 2s10s slope, higher by ~8bp near 160bp, is steepest since 2015, while the 2s10s rose as high as 159bps.

Treasuries underperformed bunds by 6bp, gilts by 3bp in 10-year sector. After the Fed meeting Barclays strategists took profit recommendation to be long the 3-year Treasury while Morgan Stanley positioned for a Treasury 5s30s steepener.

In FX, the Bloomberg Dollar Spot Index swung to a gain and the dollar climbed versus most of its Group-of-10 peers as yields on the benchmark 10-year bond climbed as much as 10 basis points to 1.74%. A 25 basis-point hike by the first quarter in 2023 is still reflected in Eurodollar futures, which are priced off Libor and are a decent proxy for future borrowing costs, suggesting traders haven’t exactly brought their views on the timing that much closer to the central bank’s guidance. The euro retreated from a one-week high of $1.1989 while Norway’s krone rallied to a more than a one- year high of 10.0215 per euro after Norges Bank brought forward the timing of what will probably be the rich world’s first interest rate increase since the pandemic broke out. The pound was steady before a Bank of England policy announcement in which it’s likely to emphasize its high bar for tightening monetary policy, a move to tamp down speculation that a quick recovery will force policy makers to push U.K. borrowing costs higher; U.K. government bonds fell, underperforming bunds.

The Australian dollar rose to a two-week high of $0.7849 after data showed the nation’s economy created more than twice as many jobs as expected in February.. Its New Zealand counterpart lost momentum, however, after the country posted a surprise contraction in fourth-quarter GDP.

Elsewhere, oil slipped after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin traded around $59,000. The dollar ticked higher. Gold dipped 0.3% to $1,737 per ounce.

Another day of central bank action was in store too. The Bank of Japan and Bank of England are both meeting, Norway signalled a possible hike this year and in emerging markets Turkey’s central bank unexpectedly hiked by 200bps after a torrid month for the lira.  The dollar index, which measures the greenback against a basket of its peers, rose as much as 0.4% to 91.671. It had dropped to 91.300 after Wednesday’s Fed meeting.

“Similar to what we’ve seen from the Fed, the Bank of England will talk up their prospects of the economy relative to where we’ve been, but at the same time emphasize that we’re still a long way from full recovery,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

Looking at To the day ahead, and the main highlight will be the Bank of England’s monetary policy decision, along with remarks from ECB President Lagarde and Fed Chair Powell. Other speakers today include ECB Vice President de Guindos and the Executive Board’s Schnabel and Elderson, along with BoE Deputy Governor Cunliffe and Chief Economist Haldane. Finally, data releases from the US include the weekly initial jobless claims, February’s leading index, and March’s Philadelphia Fed business outlook.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,960.50
  • STOXX Europe 600 up 0.3% to 426.22
  • MXAP up 0.8% to 209.99
  • MXAPJ up 0.5% to 696.18
  • Nikkei up 1.0% to 30,216.75
  • Topix up 1.2% to 2,008.51
  • Hang Seng Index up 1.3% to 29,405.72
  • Shanghai Composite up 0.5% to 3,463.07
  • Sensex down 1.2% to 49,219.15
  • Australia S&P/ASX 200 down 0.7% to 6,745.91
  • Kospi up 0.6% to 3,066.01
  • Brent futures down 1.2% to $67.19/bbl
  • Gold spot down 0.4% to $1,737.55
  • U.S. Dollar Index up 0.2% to 91.63
  • German 10Y yield up 2 bps to -0.27%
  • Euro down 0.3% to $1.1948

Top Overnight News from Bloomberg

  • The next round of ultra-cheap loans from the ECB could boost the allure of Italian and Spanish debt. The record levels of spare cash in the euro-area system are set to grow by as much as 300 billion euros ($357 billion) as banks seek funds with extended sweetener terms at Thursday’s ECB liquidity operation, according to Banco Santander SA. That would push overall excess liquidity toward 4 trillion euros
  • The EU is bracing for a decision by its health regulator on whether AstraZeneca Plc’s Covid-19 vaccine is safe to use, a key step in the bloc’s efforts to move past a messy suspension by several countries. The European Medicines Agency, which has consistently backed the shot even amid concerns about the risk of blood clotting, will issue updated guidance on Thursday
  • Beijing is seeking a meeting between Joe Biden and Xi Jinpingnext month if the first high-level U.S.- China talks in Alaska starting Thursday are productive, according to people familiar with the situation

A quick look at global markets courtesy of Newsquawk

The FOMC spurred the S&P 500 and DJIA to fresh record highs and provided a constructive backdrop for the Asia-Pac region. That said, the ASX 200 (-0.7%) failed to take advantage of this with the index dragged amid weakness across tech, financials, healthcare and property, while a blockbuster jobs report did little to spur the risk appetite in Australia. Nikkei 225 (+1.0%) reclaimed the 30k status amid favourable currency flows and as Japan makes final preparations to end the Tokyo state of emergency on Sunday, although the index then pared some of its gains after reports suggesting the BoJ is to widen the yield target band to +/- 25bps and scrap its JPY 6tln target for ETF purchases. Hang Seng (+1.3%) and Shanghai Comp. (+0.5%) were both positive but with gains in the mainland somewhat limited after China lowered the bar on expectations ahead of the US-China meeting in Alaska and stated it will not compromise with the US on sovereignty. It was also reported that the US Commerce Department served subpoenas on multiple Chinese companies that provide information and communications technology or services in the US and the FCC voted to adopt procedures to determine whether to revoke China Unicom’s authority to conduct wireless operations in the US. Finally, 10yr JGBs were initially stable as participants looked ahead to tomorrow’s BoJ conclusion, but then saw a bout of pressure on reopen from the lunch break following the source reports that the BoJ is to widen the yield target band and drop its ETF target which saw prices move lower by around 30 ticks before paring a majority of the losses.

Top Asian News

  • Edelweiss Denies Probe Allegations at Unit After Shares Plunge
  • China Takes Aim at a Booming $7 Billion Market for Dirty Oil
  • Pressure Mounts on Toshiba CEO After Defeat in Landmark Vote
  • Turkey Prosecutor Seeks to Shut Kurdish Party, Draws U.S. Rebuke

European equities opened the session with modest gains across the board (Euro Stoxx 50 +0.4%) and continue to inch higher, following on from APAC’s predominately firmer lead. APAC took its lead from Wall Street after the S&P 500 and DJIA reached fresh record highs following the FOMC’s rate decision and Fed Chair Powell’s press conference. Moreover, US yields saw considerable upside in early European trade, and at the time of writing, sit over 1.73% having had eclipsed 1.7450% at best. Thus, US equity futures have been giving back some of the aforementioned gains and currently all reside softer, with the tech-heavy NQ (-1.1%) the underperformer. Back to Europe, sectors opened mostly in the green with the underperformance in Food & Beverage (-0.4%) persisting throughout early European trade. Banks (+1.2%) are faring well due to the clearly favourable yield environment but they have since pared back a touch. Moreover, the Autos sector (+1.8%) is the clear outperformer which could be in part down to Porsche’s (+5.1%) and Volkswagen’s (+0.4%) earlier upside, with the latter’s Audi division also planning a disruptive entry into the EV market with some 20 EV models set for release by 2025. Note, BaFin said it is keeping an eye on Volkswagen share prices. Leading on from this, in-fitting with the upside seen in these Cos. the DAX (+1.3%) is the notable leading index on the day. Other notable gainers include Sartorious (+9.4%), which is led by the Co. raising its forecasts for FY 2021 and now sees revenue growth of around 35% against the prior forecast of 19-25%. The leading bank this morning is Deutsche Bank (+3.7%), as aside from the favourable economic environment, Board member Campelli stated the Cos. momentum has continued strongly into Q1 and revenues are up 20%. Lastly on the morning’s gainers, Adidas (+0.8%) are firmer after it was announced they are working with Peloton on an exclusive apparel line. Onto the downside, Elekta (-1.4%) are softer after influential bank JP Morgan downgraded the Co. to underweight in a broker move. National Grid (-0.1%) are also residing in the red which could be factored down to the Co. proposing the acquisition of Western Power Distribution for GBP 7.8bln, which would see an outflow of funds.

Top European News

  • Casino Is Said to Weigh Paris IPO for Renewable Arm GreenYellow
  • Danske Bank Faces Long Road Back as Fine Seen Hitting $1 Billion
  • Norges Bank Proves Its Hawk Status as Rate Hike Moves Closer
  • BT Says New Fiber Rules Are Green Light to ‘Build Like Fury’

In FX, the Buck has bounced firmly on the back of the latest rout in bonds that has shunted benchmark Treasury yields up towards and beyond levels that many are flagging as potentially pivotal for overall risk sentiment, and in context of repercussions for other asset classes, like equities. Specifically, the 10 year cash rate is now approaching 1.75% and 30 year briefly breached 2.5% to widen spreads between USTs and global counterparts even further, such as T-note/Bund out to 200 bp. Hence, the DXY has reclaimed 91.500+ status from a 91.300 low, and the Euro is one of the major casualties given its prominent weighting in the index. However, the Greenback still has some way to go before retrieving all its losses in wake of ‘dovish’ Fed dot plots ahead of IJC, the Philly Fed and February’s leading index.

  • NOK/AUD - In stark contrast to unchanged rate guidance from the FOMC (albeit a few more policy-setters leaning towards an earlier start to normalisation), latest projections from the Norges Bank indicate that lift-off may now come at the end of this year compared to mid-2022 previously and the path going forward has been tilted accordingly – see 9.00GMT post on the Headline Feed for more details and links to the March policy statement and MPR. In response, Eur/Nok is back below 10.0500 and has been under 10.0200, but still not quite close enough to test the symbolic 10.0000 mark. Elsewhere, the Aussie is also a G10 outperformer and managing to stay above 0.7800 vs its US rival following a pretty resounding labour report in terms of the key metrics that smashed consensus forecasts, and with the impressive headline payrolls beat all down to full time jobs.
  • CHF/EUR/NZD/JPY - Little independent impetus for the Franc via mixed Swiss trade and producer/import price data as Usd/Chf pivots 0.9250 and Eur/Chf straddles 1.1050 even though the Euro continues to hit technical resistance ahead of 1.2000 vs the US Dollar amidst pandemic waves and vaccine shortages. Moreover, heavy option expiry interest at the 1.2000 strike (1.3 bn) looks almost as overbearing as those at 1.1900 (1.6 bn) that could underpin Eur/Usd. Back down under, the Kiwi has been undermined by much weaker than expected NZ Q4 GDP, leaving Nzd/Usd nearer the base of a 0.7217-69 range and lifting Aud/Nzd through 1.0800.
  • JPY/SEK - The Yen has been volatile between 108.62-109.32 parameters against the Buck post-Fed and pre-BoJ eyeing US-Japanese yield differentials that were diverging further until a Nikkei report hit screens claiming that a new 10 year band for the 10 year JGB could be set at +/- 25 bp. However, Usd/Jpy has returned to the 109.00 axis that has been the focal point for trade of late and is close to the 200 WMA, in keeping with Eur/Sek around 10.1500 after somewhat conflicting Swedish jobs data and findings from a Riksbank survey of large businesses.
  • GBP - Sterling has had another look at key or significant peaks vs the Greenback and Euro circa 1.4000 and 0.8541 respectively, but its fate from a UK standpoint could lie in the hands of the BoE at midday – checkout our preview via the Research Suite or Headline Feed.

In commodities, WTI and Brent front month futures were initially subdued in early European trade as an early spike in yields prompted downside in stocks and a firmer Buck, albeit crude-specific news flow has remained light throughout the session thus far. From a more fundamental standpoint, eyes continue to remain on the OECD inoculation, namely in some of the larger Eurozone countries, amid the temporary halt of the rollout of the AstraZeneca jab due to reports of blood clots, thus providing some headwind to the recovery momentum of the continent. Focus will reside in the European Medicines Agency’s (EMA) report on the matter, slated for around 1500GMT/1100EDT. The EMA could indicate potential groups at risk from the AstraZeneca COVID-19 vaccine, according to the Italian Medicines Agency. Aside from that and barring any major macro headlines, prices are likely to follow the overall risk tone and the Dollar. That being said, energy contracts nursed those earlier losses as US participants entered the fray, with no direct newsflow to influence the rise. WTI May now trades on above of USD 64.50/bbl (vs low USD 63.79/bbl) while its Brent counterpart meanders around USD 68/bbl (vs low 67.07/bbl). Elsewhere, spot gold and silver track the post-FOMC revival of the Dollar, with the former back below USD 1,750/oz (vs high USD 1,755.50/oz), whilst silver holds its head just above USD 26/oz (vs high 26.631/oz). Elsewhere, Chinese ferrous metals were bolstered by the post-FOMC risk sentiment, whereby Dalian iron ore saw a firm performance alongside coking coal, steel rebar, hot rolled coil and shanghai stainless steel futures. However, the base metal complex has been feeling the weight of the yield-related jittery sentiment, with LME copper trading just off session lows after briefly dipping below USD 9,000/t.

US Event Calendar

  • 8:30am: March Initial Jobless Claims, est. 700,000, prior 712,000
  • 8:30am: March Continuing Claims, est. 4.03m, prior 4.14m
  • 8:30am: March Philadelphia Fed Business Outl, est. 23.2, prior 23.1
  • 9:45am: March Langer Consumer Comfort, prior 49.4
  • 10am: Feb. Leading Index, est. 0.3%, prior 0.5%

DB's Jim Reid concludes the overnight wrap

The FOMC was the week’s big event and seemed to deliver on the dovish-goldilocks scenario that markets were hoping for. The heavily-watched dot plot showed the FOMC leaned toward keeping rates unchanged through 2023 despite their upgrades to the economic outlook, with the median dot still showing rates on hold at end-2023, in spite of anticipation that they might show liftoff by that point. Their forecasts now show unemployment failing to 4.5% by the end of this year and 3.5% in 2023, while GDP is expected to expand by +6.5% in 2021, well ahead of December’s estimate of +4.2%. In the ensuing press conference Chair Powell said that “The strong bulk of the committee is not showing a rate increase during this forecast period” – specifically until after 2023, and he added that it was “not yet” the time for them to discuss reducing asset purchases. On the topic of inflation, the FOMC’s forecast saw their preferred measure of inflation spiking to 2.4% in 2021, before slowing to 2% next year. Our US economists have more details on the outcome here, and in response they’ve pushed back their expectations of the first rate hike from Q3 2023 to mid-2024.

The meeting was a small step towards trying to be credible on its average inflation targeting message that Fed officials have been embracing since Jackson Hole. At the moment this is all fine if the Fed’s assumption that any inflation is transitory is proved correct. However if the market doubts the transitory nature of inflation at any point that’s when the fun and games start. We’re not there at the moment however.

Proving this point, risk assets finished the day higher and bond yields fell after a sharp sovereign sell-off prior to the meeting. Starting with equities, the S&P 500 was down -0.57% just ahead of the Fed announcement before rising to flat nearly immediately following the statement’s release. The index then finished up +0.29% at yet another record high, after the press conference went without any hitches. Tech saw an even bigger turnaround as the NASDAQ was down more than -1.4% early in the US session before finishing up +0.40%. The heavily concentrated NYFANG index rose +1.50% on the day and climbed along with US banks (+0.89%) as the majority of the US equity market found a reason to rally. And on top of all this, the VIX index of volatility fell -0.56pts to a fresh 1-year low of 19.23pts.

US Treasuries witnessed a strong bear-steepening before the Fed’s decision with yields on 10yr Treasuries up +6.9bps to a 13-month high of 1.687% ahead of the announcement. They then rallied after the announcement before coming back up slightly to finish +2.5bps higher on the day at 1.643%, though this morning they’re up a further +2.6bps to 1.669%. Real yields drove the bulk of the increase yesterday, with 10yr breakevens up just +0.5bps. US 2yr note yields were flat ahead of the meeting, but ended up -1.4bps lower afterwards as markets reappraised the odds of rate hikes by the end of 2023. That said, even with the median dot showing rates on hold through end-2023, markets are still pricing in a more rapid liftoff than the FOMC are currently indicating, with two hikes priced in by the end of 2023. The decline in 2yr yields saw the 2s10s curve steepen further (+4.4bps) to levels (150.9bps) not seen since August 2015, while the dollar saw a steep drop, falling -0.67% from just prior to the FOMC to end -0.46% lower – the greenback’s worst day since early February.

Overnight in Asia, markets are following Wall Street’s lead with the Nikkei (+0.66%), Hang Seng (+1.51%), Shanghai Comp (+0.55%) and Kospi (+0.83%) all moving higher. Futures on the S&P 500 are trading broadly flat while those on Nasdaq are down -0.07%. Meanwhile, sovereign yields have inched higher with those on Japanese 10y up +1bp following a report from the Nikkei newspaper that the BoJ are likely to widen the trading range around its 10-year bond yield target to 0.25% either side of zero, up from 0.2% at the moment. The news also led to the Nikkei index paring some of its gains and comes ahead of tomorrow’s BoJ policy meeting where the central bank is due to announce the outcome of its policy review. Elsewhere, Australia’s 10yr is up +6.7bps as the country reported a strong February employment report with unemployment rate dropping to 5.8% (vs. 6.3% expected) as the previous month’s figure was also revised down a tenth to 6.3%.

In other news, the Wall Street Journal reported that China would seek a meeting between US President Biden and Chinese President Xi next month if the high-level talks between the two countries that start today in Alaska are productive. The report said that this could be organised around Earth Day on April 22, to indicate the leaders’ commitment to combating climate change.

In advance of the Fed, European equities were fairly steady yesterday but the STOXX 600 fell back -0.45% from its post-pandemic high the previous day. A big out-performer was Volkswagen (+11.04%) which was the strongest performer in the STOXX 600 as it overtook SAP as Germany’s most valuable public company. The moves have come after VW announced their plan to become the world’s leader in electric vehicles earlier this week. Over in rates meanwhile, sovereign bonds sold off across the continent, and by the close of trade, yields on 10yr bunds (+4.5bps), OATs (+4.9bps) and BTPs (+7.1bps) had all risen. This was before the Fed meeting conclusion though.

Bitcoin was up +2.42% yesterday to $57,751, its first daily gain since Saturday when it broke through $60,000 for the first time. On this topic Marion on my team has released the latest in her Future of Payments series yesterday, with the latest edition looking at Bitcoin. The cryptocurrency’s market cap of $1 trillion is making it too important to ignore, and prices could continue to rise as long as asset managers and companies continue to enter the market. Nevertheless, bitcoin transactions and tradability are still limited, and the real debate is whether rising valuations alone will be reason enough for bitcoin to evolve into an asset class, or whether its illiquidity is an obstacle. Click here to read more.

Looking forward now, today marks the much-anticipated verdict from the European Medicines Agency on their review of the AstraZeneca vaccine, following reports of blood clots that have led a number of European countries to suspend the jab. As we mentioned yesterday, it would be a big surprise if they were to withhold approval given the various statements since the start of the week, and the EMA’s statement on Monday said that their view remained that the benefits of the vaccine outweighed the risks.

Staying on the pandemic, there was yet another escalation of tensions between the EU and the UK yesterday after European Commission President von der Leyen refused to rule out using Article 122. If invoked, this would in theory allow the EU to take control of the production and distribution of vaccines, potentially placing export controls on vaccines that had been destined for the UK. The only time it’s previously been used was during the 1970s oil crisis, but von der Leyen said that “I am not ruling out anything for now because we have to make sure that Europeans are vaccinated as soon as possible.”

Speaking of the UK, today will also see the Bank of England’s latest policy decision, which is being announced at 12:00 London time. According to our UK economists (link here), the MPC will likely stick to last month’s script, keeping the policy rate on hold and the pace of asset purchases steady. However, similarly to the Fed, markets have brought forward their expectations for the next BoE rate hike since the last meeting, and now expect an initial hike within the next 2 years. And in another parallel, inflation expectations have also risen, with 10yr UK breakevens at their highest level since September 2008 yesterday, at 3.488%. Recent MPC speak has endorsed market pricing, but our economists expect them to walk a tightrope between talking up the recovery whilst avoiding too hawkish a message that would see an unwarranted tightening in financial conditions.

In the Netherlands, exit polls show that incumbent Prime Minister Rutte was set to return for a fourth term following the general election, with an Ipsos poll indicating his VVD party are set to gain 3 seats to 36 in the new parliament. In second place were the pro-European D66, while Geert Wilders’ PVV fell into third.

Looking at yesterday’s data, US housing starts and building permits fell by more than expected in February as the severe weather affected the data. Housing starts fell to an annualised rate of 1.421m (vs. 1.560m expected), and building permits were down to 1.682m (vs. 1.750m expected), though in both cases they were also coming off their highest rates since 2006 the previous month. Meanwhile in the Euro Area, the final CPI and core CPI readings for February were in line with the earlier flash estimates, at +0.9% and +1.1% respectively.

To the day ahead now, and the main highlight will be the Bank of England’s monetary policy decision, along with remarks from ECB President Lagarde and Fed Chair Powell. Other speakers today include ECB Vice President de Guindos and the Executive Board’s Schnabel and Elderson, along with BoE Deputy Governor Cunliffe and Chief Economist Haldane. Finally, data releases from the US include the weekly initial jobless claims, February’s leading index, and March’s Philadelphia Fed business outlook.


Tyler Durden Thu, 03/18/2021 - 07:44
Published:3/18/2021 7:01:11 AM
[Markets] Asia Stocks Set to Gain on Dovish Fed; Dollar Dips: Markets Wrap (Bloomberg) -- Most Asian stocks looked poised to climb Thursday after U.S. equities and bonds rallied on the Federal Reserve’s projections for rates to remain near-zero through 2023.U.S. equity futures edged up, following a fresh record close for the S&P 500 Index as Fed Chairman Jerome Powell reiterated the central bank’s tolerant stance on inflation and the recent rise in bond yields. Consumer discretionary and industrial sectors led the benchmark index’s gains. The Dow Jones Industrial Average also closed at an all-time high. Futures climbed in Japan and Hong Kong, and were little changed in Australia.Yields on shorter-dated Treasuries eased as the central bank pushed back on the market’s more aggressive rate-hike projections. The 10- and 30-year benchmarks also subsided from intraday peaks that marked their highest levels in over a year. The dollar weakened versus most major peers.Markets were braced for a more hawkish tone from the Fed, given the substantial improvement in the economic outlook since its last set of projections in December. Heightened concerns about inflation risks had driven bond yields sharply higher and spurred a rotation from growth stocks to value shares. While the central bank raised its economic outlook, the renewed emphasis on continued policy support has reassured investors.“The Fed was optimistic on the economic outlook and dovish on policy -- risky asset nirvana,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.Read: Fed Keeps Zero-Rate Outlook, Sees Inflation Bump Short-LivedElsewhere, WTI oil was steady after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin climbed past $58,000.These are some key events this week:Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.StocksS&P 500 futures edged up 0.1% as of 7:03 a.m. in Tokyo. The S&P 500 Index rose 0.3%.Nikkei 225 futures rose 0.4%.Australia’s S&P/ASX 200 Index futures fell 0.5%.Hong Kong’s Hang Seng Index futures rose 0.7%.CurrenciesThe yen traded at 108.83 per dollar.The offshore yuan was at 6.4857 per dollar.The Bloomberg Dollar Spot Index decreased 0.5%.The euro was at $1.1983.BondsThe yield on 10-year Treasuries gained 2 basis points to 1.64%.Australia’s 10-year bond yield added three basis points to 1.75%.CommoditiesWest Texas Intermediate crude was at $64.64 a barrel.Gold rose 0.2% to $1,748.86 an ounce.(The 10-year yield was corrected in an earlier version of this story.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/17/2021 5:58:36 PM
[Markets] Market Extra: Dow scores fastest 1,000-point move in history as it tops 33,000 milestone — here’s what drove it there The Dow Jones Industrial Average closes above 33,000, marking its fastest-ever move through a 1,000-point milestone. But such moves are becoming increasingly less impressive as the numbers get larger.
Published:3/17/2021 5:28:35 PM
[Markets] US STOCKS-S&P 500 and Dow end at record highs after Fed projects stronger economy The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero. It was the first time the Dow closed above 33,000 points. Published:3/17/2021 4:26:27 PM
[Markets] US STOCKS-S&P 500 ends at record high after Fed projects stronger economy The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero. In its statement following its two-day policy meeting, the Federal Reserve projected a rapid jump in U.S. economic growth and inflation this year as the COVID-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come. Published:3/17/2021 3:26:04 PM
[Markets] Dow edges upward and Nasdaq stumbles as Treasury yields rise ahead of Fed news Dow edges upward and Nasdaq stumbles as Treasury yields rise ahead of Fed news Published:3/17/2021 9:54:29 AM
[Markets] Asian Stocks to Open Steady After S&P 500 Slips: Markets Wrap (Bloomberg) -- Asian stocks are set to open steady Wednesday as investors weigh the strength of the economic recovery in anticipation of the Federal Reserve’s policy statement. Benchmark Treasury yields hovered near their highest levels in over a year.U.S. equity futures edged higher. The S&P 500 closed lower after three sessions of record-breaking gains, as the energy and industrials sectors weakened. Apple Inc. and Microsoft Corp. lifted the tech-heavy Nasdaq 100, while the Dow Jones Industrial Average also fell from a record high. Futures were little changed in Japan, fell in Australia and rose in Hong Kong.Treasury 10-year yields fluctuated as the Fed began its two-day policy meeting and a 20-year bond auction drew strong demand. Oil pointed higher after falling the most in a week.With the global economy beating a clearer path out of the pandemic, focus turns to the Fed’s communications on Wednesday. Rates markets are positioned for a hike sooner than the central bank’s current guidance suggests, with rising inflation expectations boosting bond yields and sparking a rotation from growth to value stocks. Seasoned bond investor Bill Gross predicted in a Bloomberg TV interview that inflation will rise to 3% to 4% in the coming months.“We’re inclined not to fight the Fed, at least until wage pressures show up,” Lauren Goodwin, portfolio strategist for New York Life Investments, wrote in a note. “That said, growing uncertainty over the front end of the curve will contribute to market volatility in the coming months.”She expects the 10-year Treasury yield to approach 2% by the end of 2021 and “if rates increase faster than that, we could see some churn in equity markets.”Elsewhere, Bitcoin traded around $56,000, down from a weekend peak above $61,000.These are some key events this week:Fed Chair Jerome Powell will likely reaffirm his steady policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.StocksS&P 500 futures rose 0.2% as of 7:09 a.m. in Tokyo. The S&P 500 Index declined 0.2%. Nasdaq 100 contracts rose 0.2%.Nikkei 225 futures were little changed.Australia’s S&P/ASX 200 Index futures fell 0.4%.Hong Kong’s Hang Seng Index futures rose 0.3% earlier.CurrenciesThe yen strengthened 0.1% to 108.99 per dollar.The offshore yuan traded at 6.5013 per dollar.The Bloomberg Dollar Spot Index was little changedThe euro dipped 0.2% to $1.1906.Bitcoin traded below $56,000.BondsThe yield on 10-year Treasuries rose about one basis point to 1.62%.Australia’s 10-year bond yield rose two basis points to 1.71%.CommoditiesWest Texas Intermediate crude fell 1.1% to $64.67 a barrel.Gold was little changed at $1,731.95 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/16/2021 5:51:22 PM
[Markets] Big-Tech Trumps Small Caps As Inflation Outlook Hits 13-Year High Big-Tech Trumps Small Caps As Inflation Outlook Hits 13-Year High

Ahead of tomorrow's Jay Powell show, 5Y inflation breakevens soared to their highest since 2008...

Source: Bloomberg

The gap between real yields and the growth/value relative-value bet has reached an extreme and retraced somewhat today...

Source: Bloomberg

Will Jay Powell 'cut the rope' tomorrow...

At the cash open, Nasdaq was panic-bid and Small Caps puked. NOTE that at the European close, everything reversed and the market all went lower...

So much for that utter panic buying into yesterday's close. The Dow broke its 7-day win streak today.

This was the biggest Nasdaq outperformance over Small Caps since November 4th.

This move erased last week's relative Small Cap outperformance but was unable to accelerate further...

Source: Bloomberg

Is this the new trend to befriend?

Source: Bloomberg

VIX tumbled back below 20 again today...

Bonds were chaotic today. Dumped across the EU open, and dumped across the EU close, massively bid into the 20Y auction, then puked right back... then bid into the close...

Source: Bloomberg

Real yields dipped a little today, catching down to Gold...

Source: Bloomberg

Ahead of The Fed statement tomorrow, the short-end of the curve is pricing in 122bps (5 rate hikes) between the end of 2022 and the end of 2024...

Source: Bloomberg

Bitcoin extended its losses from yesterday, but bounced back to around $56k intraday...

Source: Bloomberg

Gold clung to unchanged today as copper was the biggest loser. Silver and crude were lower...

Source: Bloomberg

Finally, today's disappointing retail sales, industrial production, and homebuilder confidence data sparked a tumble in the macro surprise index to its weakest since June...

Source: Bloomberg

Tyler Durden Tue, 03/16/2021 - 16:00
Published:3/16/2021 3:21:26 PM
[Markets] U.S. Stocks End at Record Highs; Asia Futures Gain: Markets Wrap (Bloomberg) -- Asian stocks were set to open stronger Tuesday as optimism about the economic recovery drove U.S. shares to a record-high close. Long-term Treasury yields edged lower.Futures pointed higher in Japan, Australia and Hong Kong. The S&P 500 Index gained for a fifth-straight trading session, led by the utilities and real estate sectors. The Dow Jones Industrial Average rose for the seventh session in a row to close at a record. Apple Inc., Tesla Inc. and Facebook Inc. led the tech-heavy Nasdaq 100 higher.Yields on benchmark 10-year U.S. Treasury notes declined from the more than one-year high reached last week. Oil slipped and the dollar ticked higher. Bitcoin eased back from a weekend rally that propelled the cryptocurrency above $61,000.Investors are turning their focus to the Federal Reserve’s message Wednesday, which will include fresh economic projections. A continued lack of concern about the recent rise in long-term borrowing costs could pave the way for higher yields, boost inflation trades and impact the rotation from growth to value stocks.“Markets are now trying to front-run the next phase of the cycle” after recovery, wrote Chris Iggo, chief investment officer for core investments at AXA Investment Managers. “In doing so they have priced in higher inflation and are testing the timing of the beginning of a new rate hiking cycle.”Investors are also considering the potential impact of higher taxes in the U.S. and how that could affect corporate profit growth.Meanwhile on the virus front, more European countries suspended the use of AstraZeneca Plc’s Covid-19 vaccine amid concerns about side effects, delaying the European Union’s inoculation campaign.These are some key events this week:Fed Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.StocksThe S&P 500 Index increased 0.7%.The Nasdaq 100 jumped 1.1%.Nikkei 225 futures rose 0.4%.Australia’s S&P/ASX 200 Index futures rose 0.4%.Hong Kong’s Hang Seng Index futures rose 0.6% earlier.CurrenciesThe yen depreciated 0.1% to 109.14 per dollar.The offshore yuan was at 6.4983 per dollar.The Bloomberg Dollar Spot Index gained 0.1%.The euro decreased 0.2% to $1.1931.BondsThe yield on 10-year Treasuries decreased two basis points to 1.61%.CommoditiesWest Texas Intermediate crude fell 0.4% to $65.34 a barrel.Gold strengthened 0.3% to $1,731.50 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/15/2021 5:15:10 PM
[Markets] US STOCKS-S&P 500 and Dow end session at record highs The S&P 500 and Dow Jones Industrial Average closed at a record highs on Monday, as investors eyed an economic recovery from the coronavirus and awaited cues from the Federal Reserve this week amid caution over rising borrowing costs. Nine of the 11 major S&P sector indexes rose, led by utilities and real estate, each up more than 1%. Published:3/15/2021 3:43:23 PM
[Markets] Dow ends at record high for fourth straight session as stocks bounce back Dow ends at record high for fourth straight session as stocks bounce back Published:3/15/2021 3:18:04 PM
[Markets] Stimmies Send Stocks Soaring, Crypto Pumped'n'Dumped Stimmies Send Stocks Soaring, Crypto Pumped'n'Dumped

Global helicopter drop engaged...

And we previously detailed why stonks and crypto will surge...

“I probably will take about half of it to invest into stocks,” said Iyana Halley, a 28-year-old actor who recently appeared in NBC’s television drama “This Is Us.” The Los Angeles resident remains on the fence about which equities to buy, but has been keeping a close watch on social media and seeking guidance from a friend she trusts.

“I want to see what will make the most sense, where I can get the most out of my money,” Halley said in an interview. “I’m still new to the stock-market world, so trying to figure stuff out.”

Traders are also hoping to figure it out as soon as possible, because the retail buying may come as soon as Monday once the stimulus checks received over the weekend are invested, giving the Nasdaq 100 Index new wind after it fell into a correction earlier this month amid a crash for some of the market’s most speculative names.

The checks “could offer a short-term ‘shot in the arm’ to a market that was otherwise looking run-down and vulnerable to a sell-off,” said Sam Stovall, the chief investment strategist at CFRA Research.

“Stimulus checks will almost certainly drive more retail buying,” said Eric Liu, co-founder of Vanda Research, a firm that tracks retail flows in the U.S. “The social media attention has remained strong.”

Tyler Hopkins, a 26-year-old computer technician for a school district an hour east of Los Angeles, spent about half of his two previous pandemic stimulus payments on stocks including GameStop Corp. and non-fungible tokens. He plans to buy more shares of retail favorites when the latest payment hits his bank account.

"I’ve been buying crypto and stocks for a while now, but the stimmys helped pay some bills and I put the rest of them into investing," Hopkins said.

So while one can debate about the precision, one thing is clear: tens if not hundreds of billions from the latest Biden Bonanza will end up in the market. Yet for all the excitement that the stimulus payments are stirring up among younger traders looking to make a killing, some investment professionals have been wringing their hands. They worry that unsophisticated newbies buying stocks they heard about from memes or online forums like WallStreetBets could take already stretched valuations even higher.

“You could say it’s like gasoline on a fire,” said Kimberly Woody, a senior portfolio manager at GLOBALT Investments. It’s “participation from a lot of folks that really just don’t know what they’re doing.

With stimmies ready to fly out the door (and arriving electronically in Americans' bank accounts into the weekend), cryptos were bid over the weekend. But, some mixed messages from India sparked a reversal, erasing the stimmy-gains.

Source: Bloomberg

China was ugly overnight led by big-techs...

Source: Bloomberg

Europe also saw a wave of selling after a panic-bid open...

Source: Bloomberg

But US Stocks reversed dramatically higher (again) at the European close. We have no idea why everything went panic-bid into the close...more stimmies arriving in bank accounts?

Dow and S&P at record closing highs with Dow up 7 days in a row.

Because nothing say buy stocks like the first major federal tax hike since 1993.

We note that hedgies appeared to be liquidating into the EU close (this is the most-held stocks by hedge funds), but that stopped as EU closed...

Source: Bloomberg

Small Caps played ping-pong all day long after tumbling during the EU session...

GME puked, bounced, then dumped into the close...

ARKK rallied back to fill Friday's opening gap down, but could not hold gains...

Treasury yields were mixed but mostly lower on the day. NOTE that bonds were bid during the EU session...

Source: Bloomberg

5Y Breakevens hit 2.60%, highest since 2008...


Source: Bloomberg

The Dollar ended the day modestly higher...

Source: Bloomberg

As we already mentioned, crypto rollercoastered, but before dropping Bitcoin hit a new record high...

Source: Bloomberg

And Ethereum also reached a record high...

Source: Bloomberg

Silver surged on the day while crude was clobbered (for no news-based reason) while copper and gold trod water...

Source: Bloomberg

Finally, we note that every so quietly, the market is pricing in an ever more hawkish Fed with the odds of a rate-hike by the end of 2022 now nearly 80% (from zero a few weeks ago)...

Source: Bloomberg

Tyler Durden Mon, 03/15/2021 - 16:01
Published:3/15/2021 3:18:03 PM
[Markets] US STOCKS-Dow hits record high as Wall Street rises Wall Street climbed on Monday, with the Dow hitting an intra-day record high, as investors awaited cues from the Federal Reserve this week amid caution over rising borrowing costs spurred by massive fiscal stimulus. The S&P 500 was on track to close at its highest level ever, lifted by a 1.85 rise in Apple. Most of the 11 major S&P sector indexes rose, led by utilities and real estate, both up over 1%. Published:3/15/2021 1:49:19 PM
[Markets] Market Snapshot: Stocks start week with modest rise after record close for Dow, S&P 500 Stock-market benchmarks were slightly higher at the start of Monday's session, putting the Dow Jones Industrial Average and the S&P 500 on track to build on last week's record finish.
Published:3/15/2021 8:41:41 AM
[Markets] Stock Market News for Mar 15, 2021 The Dow and the S&P 500 closed at record highs on Friday as investors poured money into cyclical stocks poised to benefit from the economic recovery this year. Published:3/15/2021 8:12:06 AM
[Markets] S&P Futures, World Stocks Rise With Yields Clinging To 13 Month Highs Ahead Of FOMC S&P Futures, World Stocks Rise With Yields Clinging To 13 Month Highs Ahead Of FOMC

Global shares rose and US equity futures were flat as U.S. bond yields hovered near a 13-month to start the week as bets economic growth will accelerate kept high duration stocks depressed as investors braced for Federal Reserve and other key central bank meetings in the days ahead. The Dow notched five consecutive record highs last week as approval of one of the largest fiscal stimulus in U.S. history and vaccine rollouts fueled demand for economy-linked stocks such as banks, energy, materials at the cost of tech names with lofty valuations.

At 7:40 a.m. ET, Dow E-minis were up 118 points, or 0.36%, Nasdaq 100 E-minis were up 24.75 points, or 0.19% and S&P 500 E-minis were up 5 points, or 0.1%, fading an earlier gain of 3,948 amid caution how the Fed would respond to the stimulus-fueled snapback in economic activity.

American Airlines and Carnival rose in pre-market trading. U.S. Steel advanced after saying it expects earnings to improve on the back of strong market conditions. FAAMG names all rose between 0.1% and 0.6% in early trade. Microsoft stands to receive nearly a quarter of COVID relief funds destined for U.S. cybersecurity defenders, sources told Reuters, angering some lawmakers who don’t want to increase funding for a company whose software was recently at the heart of two big hacks. Eli Lilly and Co dropped 5% premarket as analysts said the company’s mid-stage trial data for its experimental drug to treat Alzheimer’s cast a doubt on the approval timeline.

The MSCI world equity index was slightly higher, rising by 0.1% by 0847 GMT. The $1.9 trillion stimulus bill President Joe Biden signed into law last week and the rollout of COVID-19 vaccinations stoked a bullish mood, but the focus was gradually turning to the outlook for monetary policy.

“The Federal Reserve is expected to rigidly stick to its easing plans, despite (Fed Chair Jerome) Powell & Co likely becoming significantly more upbeat on the outlook,” said AFS analyst Arne Petimezas in Amsterdam. “However, the risks are towards a hawkish surprise. The $1.9 trillion stimulus has been adopted without much ado and the Biden administration has now set its sight on a big figure infrastructure bill,” he added.

The U.S. House of Representatives gave final approval last week to the COVID-19 relief bill, giving Biden his first major victory in office: “This will provide another shot in the arm for a U.S. economy sprinting out of a deep hole (10 million jobs are still missing at present),” said Natixis economist Troy Ludtka in New York. “We see the macro backdrop - stimulus included - as being sufficient to jolt the U.S. economy beyond the 6% growth mark,” he added in a note.

European shares rose 0.7% in morning trading, with travel companies and automakers leading the Stoxx 600 Index to the highest level in a year. Danone, the world’s largest yogurt maker, jumped 5% after announcing it would replace its chairman.

Earlier in the session, Asian stocks dropped as investors sold technology-related names and bought cyclicals. Mainland Chinese shares, however, dropped despite data showing a quickening in industrial output and a rise in retail sales, with bluechip CSI 300 index falling 2.2% on policy tightening worries. Surveillance equipment maker Hikvision lost 3.2% after the U.S. Federal Communications Commission designated the firm, along with four others Chinese companies including Huawei, as posing a threat to national security.

Economically sensitive firms including Hong Kong insurer AIA Group and auto giant Toyota Motor were among the biggest boosts to the MSCI Asia Pacific Index, while Tencent dragged on the measure, falling for a second day amid concerns over Chinese government oversight. Hong Kong stocks advanced, driven by AIA as well as Xiaomi, which jumped after a U.S. court blocked the Defense Department from restricting American investment in the Chinese smartphone giant. China’s stocks declined as persistent liquidity concerns overshadowed data showing the strength of the nation’s economic recovery. Philippine stocks fell the most in Asia, with its key equity index dropping 2.6%, amid escalating daily coronavirus infections.

Japan outperformed most of its regional peers Monday as investors bought cyclical value names while selling technology shares. Banks and automakers were the biggest boosts to the Topix, while electronics makers and telecom providers fell. Fast Retailing supported the blue-chip Nikkei 225 as SoftBank Group slid. E-commerce and telecom firm Rakuten jumped for a second day, after announcing plans to raise 242 billion yen ($2.2 billion) by selling shares to investors including Japan Post and Tencent Holdings. Japan’s high weighting of economically sensitive stocks has helped it outperform this year, with the Topix up 9.1% compared with a 3.6% rise for the Asian benchmark and 5% advance for the S&P 500.

In rates, the yields on 10-year Treasuries hovered near their 13-month high at 1.6266%, just below the peak of 1.64% hit on Friday as investors fear (but BofA disagrees) a $1.9 trillion relief package, which amounts to more than 8% of the country’s GDP, could stoke inflation.

Higher U.S. bond yields saw the dollar rising against other major currencies. The Bloomberg Dollar Spot Index was steady, having climbed as much as 0.3% during Asian hours. Money managers unwound bearish bets on the dollar by a record in the week ended March 9, according to data from the Commodity Futures Trading Commission. The yen dropped to a nine-month low against the greenback. The dollar index rose 0.1%, while the euro slipped 0.2% to $1.1932 from last week’s high of $1.1990 while the dollar hit a nine-month high of 109.36 against the Japanese yen. The British pound slipped 0.3% to $1.3933.  Leveraged funds bought NZD/USD on speculation the acquisition of assets from New Zealand’s Tilt Renewables Ltd. will spur currency inflows, according to an Asia-based FX trader. NZD/USD rose as much as 0.6% to 0.7216, before paring gains. Option-related selling attached to 0.7200 strikes expiring Tuesday was taken out.  AUD/USD declined 0.2% to 0.7749. Bids attached to FX options at 0.7750 strike, worth notional A$1.26b, and expiring March 18 were partially filled.

“Biden’s economic stimulus is approved and expectations for recovery are heightening, raising hopes for March payroll numbers to come out quite strong to keep U.S. yields elevated,” said Takuya Kanda, general manager at Research Institute in Tokyo. That should “maintain the bias for dollar buying,” he said

Bitcoin fell 1.6% from a record high after Reuters reported that India would propose a law banning cryptocurrencies.

In commodities, oil prices rose as data showed China’s economic recovery accelerated at the start of 2021, boosting the energy demand outlook at the world’s largest oil importer. Brent crude gained 0.8% to $69.76 a barrel, while U.S. West Texas Intermediate crude added 0.8% to $66.14.

Looking at the weak ahead, major upcoming event include policy statements due Wednesday from the Federal Reserve and Friday from the Bank of Japan. A strong recovery from the Covid-19 recession is likely to prompt Fed Chair Jerome Powell and his colleagues to lift interest rates in 2023, but that isn’t going to show up in their forecasts this week, a survey showed. For growth stocks to rebound, “Powell will have to make some detailed remarks about how to tamp down yields -- but when the market is this heated, that’s highly unlikely,” said Hajime Sakai, the chief fund manager at Mito Securities Co. “Value stocks are still rising, so it’s not as if the entire market is weighed down.”

Some are worried that rising inflation expectations could prompt the Fed to signal it will start raising rates sooner when it announces its latest economic projections at the end of Federal Open Market Committee meeting on Wednesday. “Following the fiscal stimulus packages it is inevitable that Fed GDP forecasts will be revised up, and some FOMC members might think rates will have to move higher sooner than they anticipated last December,” wrote economists at ANZ. The Bank of England and Bank of Japan also have meetings on Thursday and Friday this week.

Monday's data calendar is quiet, with only the Empire State Manufacturing Survey and TIC data on deck.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,943.25
  • SXXP Index up 0.6% to 425.43
  • MXAP down 0.2% to 207.47
  • MXAPJ down 0.5% to 690.26
  • Nikkei up 0.2% to 29,766.97
  • Topix up 0.9% to 1,968.73
  • Hang Seng Index up 0.3% to 28,833.76
  • Shanghai Composite down 1.0% to 3,419.95
  • Sensex down 1.7% to 49,943.69
  • Australia S&P/ASX 200 little changed at 6,773.01
  • Kospi down 0.3% to 3,045.71
  • Brent futures up 0.6% to $69.65/bbl
  • Gold spot down 0.3% to $1,732.15
  • U.S. Dollar Index little changed at 91.72
  • German 10Y yield down 2 bps to -0.33%
  • Euro down 0.2% to $1.1929

Top Overnight News from Bloomberg

  • China’s economic activity surged in the first two months of the year compared with a year ago, though the figures showed an uneven recovery with strong industrial output fueled by exports but lagging consumer spending. The official data released Monday show unprecedented growth rates of more than 30% for key indicators, largely due to distortions when compared to last year’s shutdowns
  • Bank of England Governor Andrew Bailey said an increase in interest rates in financial markets reflects optimism that the U.K. economy will bounce back shortly
  • The European Commission is planning to begin legal action against the U.K. on Monday over the government’s decision to unilaterally change parts of the Brexit deal relating to Northern Ireland, according to a person with knowledge of the discussions
  • Turkey and Brazil may deliver the Group of 20’s first rate hikes in 2021 this week, potentially lending support to two currencies caught in the crosshairs amid surging U.S. Treasury yields

Quick look at global markets courtesy of NewSquawk

Asian equity markets traded mixed with the region tentative heading into this week's plethora of central bank announcements including from the Fed, BoE and BoJ, while the latest Chinese activity data showed a larger than expected increase in Industrial Production and Retail Sales although the tailwinds from the data were short-lived with the surge largely due to base effects. ASX 200 (+0.1%) was choppy as losses in tech and mining names were counterbalanced by strength in energy and defensives, while Nikkei 225 (+0.2%) was kept afloat after machinery orders showed surprise growth Y/Y and with a decline in hospitalizations for the Tokyo region said to allow the government to plan lifting the state of emergency for the capital region instead of extending it when it expires at the end of this week. Furthermore, Rakuten shares rocketed by around 20% in early trade to hit limit up after news the Co. plans a USD 2.2bln share sale to Walmart, Tencent and Japan Post for stakes of 0.9%, 3.6% and 8.3% respectively. Hang Seng (+0.3%) and Shanghai Comp. (-1.0%) were varied with the Hong Kong benchmark led higher by strength in energy names and with Xiaomi the biggest gainer after a US federal judge ordered a temporary halt on enforcing the US investment ban on the Co. The latest activity numbers from China were also encouraging as Industrial Production (35.1% vs exp. 30.0%) and Retail Sales (33.8% vs exp. 32.0%) topped estimates which helped the mainland bourse briefly pare early losses, although the recovery in the mainland was short-lived and the surges in the figures weren’t much of a surprise given the low base from a year ago when China industrial output suffered its sharpest pace of decline in 30 years due to virus-related shutdowns amid the peak of its COVID-19 outbreak. India's Sensex (-0.8%) fell below the 50k mark following disappointing data on Friday. Finally, 10yr JGBs are rangebound amid the tentative mood in stocks and with yields stable overnight, while the lack of BoJ purchases today also ensured quiet trade.

Top Asian news

  • Hong Kong Gives Vaccine Access to Young Adults as Uptake Slumps
  • Junk-Rated Laos Makes Third Attempt at Dollar Bond Offering
  • Protests Signal a Reckoning in Australia’s Struggle With Sexism
  • Chinese Stocks Slump as Upbeat Data Deepens Liquidity Concerns

European equities have kicked off the new week with modest gains across the majors (Euro Stoxx 50 +0.4%), after the region brushed off the selloff seen in China, with the tone across the markets somewhat tentative awaiting the US entrance - which will be an hour earlier due to the US time shift, with volatility expected heading into the open as Americans receive stimulus checks as part of the USD 1.9tln COVID relief package. US equity futures have nursed the mild losses experienced during APAC hours, with the value/cyclically-driven RTY (+0.6%) modestly outperforming peers. Back to Europe broad-based gains are seen across the majors, whilst the periphery sees the FTSE MIB (+1.1%) the outperforming region as banks are bolstered by price action in BTPs alongside potential sector consolidation following reports that the UniCredit (+0.9%) CEO could consider a merger with Mediobanca (+2.4%) or Generali (+0.4%), but was also mulling tie ups with Monte dei Paschi (+0.5%) or Banco BPM (+1.4%), according to Italian press. Further, the index sees tailwinds from Stellantis (+3.2%) after an "overweight" reaffirming at JPM. Sectors in Europe are mostly in the green with no real risk bias nor a particular growth/value skew. Travel & Leisure reside as the top performers amid the continuing vaccinations efforts, whilst IAG's (+2.0%) British Airways is planning for travelers to be able to register their vaccines status via its app in a bid to make it easier for passengers to prove they are safe to travel. Telecoms are also faring well as BT (+3.2%) props up the sector as Ofcom is set to announce on Thursday that BT's Openreach division will be able to make a "fair return" on its super-fast internet, which will allow the Co. to make a double-digit rate of return on its GBP 12bln investment in full-fibre broadband. Autos are bolstered by the aforementioned Stellantis performance whilst EV makers eye Volkswagen's (+2.8%) battery day event. On the flip side, Oil & Gas have continued declining amid price action in the complex. Banks reside at the foot of the pile amid the lower-yield environment. In terms of individual movers, AstraZeneca (Unch) has largely shrugged off the mixed weekend reports whereby Ireland suspended its rollout of that particular drug amid the blood clot reports in Norway, albeit AstraZeneca released a press statement highlighting there there is no evidence of a link between blood clots and the vaccine. Flutter Entertainment (+7.0%) is firmer as the group confirmed it is weighing plans to spin-off its American FanDuel sports betting brand in a US listing. Danone (+3.6%) was bolstered after the Co's board ousted Faber as Chairman amid activist pressure. Finally, ABN AMRO (-4.5%) trades at the foot of the pile with some pointing to a broadened investigation into the bank by Dutch persecutors.

Top European News

  • Roche to Buy Covid Test Maker GenMark for $1.8 Billion
  • Danone Replaces Chairman After Investors Called for Faber’s Job
  • Merkel’s Party Suffers in Regional Votes as Greens Win Big
  • Europe’s Real Estate Investors Put Their Faith in the Office

In FX, firm oil prices and a wider Norwegian trade surplus are helping the Krona make most of a broadly soft Euro against the backdrop of new lockdowns and tighter COVID-19 restrictions in Italy and elsewhere, not to mention defeat for Germany’s CDU party in regional elections. However, the Swedish Crown has been undermined by considerably softer than expected inflation data that may raise more eyebrows at the Riksbank via some of the more dovish members. Hence, Eur/Nok has breached 10.0500 to the downside and Eur/Sek 10.1700 to the upside even though Eur/Usd has slipped back further from recent almost aligning or twin peaks that also coincide with a key Fib retracement level at 1.1990 to trade under 1.1950.

  • NZD/AUD/USD - The Kiwi has regained 0.7200+ status, albeit marginally and in large part due to Aussie underperformance as Aud/Nzd retreats from just above 1.0800 to test bids/support around 1.0750 in wake of dovish commentary from RBA Governor Lowe that has more than offset positives via stronger than forecast Chinese data and the ongoing dividend conversion by mining companies. Indeed, Aud/Usd is pivoting 0.7750 having topped 0.7800 last Friday despite a general loss of recovery momentum in the Greenback that has nudged the DXY off best levels within a 91.866-537 range. Next up for the Antipodean Dollars, Westpac’s Q1 NZ consumer survey, RBA minutes and a speech by Kent.
  • CAD/GBP - Canadian housing starts and manufacturing sales loom, but the Loonie is still basking in jobs data glory following Friday’s impressive labour report, with extra fuel via the aforementioned bounce in crude. Usd/Cad has reversed from just shy of 1.2500 to probe 1.2450 and Sterling has also survived the potential loss of a round number, at 1.3900 with some assistance from quite unexpected remarks from BoE Governor Bailey just days before Thursday’s MPC event – see 8.11GMT post on the headline feed. Cable is now circa 1.3930, but the Pound more perky vs the Euro eyeing stops on a break of 0.8550 again vs a high of 0.8589 at one stage.
  • CHF/JPY - The Franc and Yen are narrowly mixed against the Buck after latest weekly Swiss bank sight deposits showing an absence of intervention and not as weak as feared Japanese machinery orders, with Usd/Chf hovering just under 0.9300 and Usd/Jpy a similar margin beyond 109.00. Note, the latter remains above key chart resistance in the form of the 200 WMA that comes in at 109.01, but has faded roughly 109.37 overnight.

In commodities, WTI and Brent front month futures started the week on the front foot and were both firmer on the session whilst hovering just of best levels despite APAC’s mixed lead. However, since the session opened and the early-arrival of US counterparts, crude futures have erased those gains and are flat on the session at the time of writing. Oil prices may have seen a rise in price following on from Chinese industrial output data which beat expectations and highlights their economy recovery has accelerated at the start of 2021, although this data has been distorted by a lower base effect and the Chinese Lunar New Year holiday. Moreover, top oil exporter Saudi Arabia has cut the supply of April-loading crude to at least four north-Asian buyers by up to 15% whilst meeting the standard monthly requirements of Indian refiners. In further news, the US overtook Saudi Arabia last month and became the second biggest oil supplier to India. This was potentially due to the lower crude demand in the US and Saudi Arabia’s voluntary 1mln BPD output cut alongside the OPEC+ agreement, although it remains to be see how distorted these figures were by the Texas deep-freeze. Adding some context, analysts note that due to the lower demand within the US, the crude had to go somewhere and with Asia seeing rapid demand recovery and China not taking US oil, because of trade problems, India was the obvious choice which resulted in the increase in supply. Additionally, regarding vaccination progress, the continued progression of the vaccine rollouts and increasing prospects of economic growth adds to the sentiment of rising oil prices. However, it should be noted a few countries have provisionally halted the rollout of the AstraZeneca vaccine with the worry it increases the chances of blood clots. WTI resides around the high-USD 65/bbl handle (vs high USD 66.40/bbl), and Brent trades low/mid USD 69/bbl handle (vs high USD 70.03/bbl). Risk events on the table today include ECB asset purchases and looking ahead to further in the week a plethora of central bank’s speaking. Elsewhere, precious metals have traded the early European hours choppy but are both firmer on the session with XAG (+0.8%) more so than XAU (+0.1%), and awaiting further direction from the upcoming risk events. At the time of writing, spot gold is trading just above the USD 1,728/oz handle and spot silver resides marginally above the 26/oz handle. Onto base metals, China's crude steel output rose 12.9% in the first two months of 2021 Y/Y as the mills expanded production in anticipation of strengthening demand from the construction and manufacturing sectors. That being said, Dalian iron ore futures fell some 6% in overnight trade amid the ongoing pollution curbs China's top steel-making city.

US Event Calendar

  • 8:30am: March Empire Manufacturing, est. 14.5, prior 12.1
  • 4pm: Jan. Total Net TIC Flows, prior -$600m
  • 4pm: Jan. Net Foreign Security Purchases, prior $121b

DB's Jim Reid concludes the overnight wrap

Today marks 52 weeks since I started working from home. Over that period I’ve done 100% of my work from my home office. Well apart from the conference call I did with 1500 people on the line from my boiler cupboard last March as that was the only place I had a landline phone connection at the time as my mobile signal died on me. Although WFH has been good, life has got so boring of late that I actually looked forward to a visit to a local country garden on Saturday. My expectations around what weekends can bring have been scaled back considerably. Roll on two weeks today when golf is back on the menu of legal activities.

It might be a bit dull in my home life at the moment but there is rarely a dull week in markets. Last week saw yet another interesting one with amongst others things, all time highs back for US equities after a month break, huge two-way swings in tech, GameStop back above it’s all time high intra-day on Wednesday, Bitcoin above 60k over the weekend, a $1.9tn stimulus package signed off, an ECB meeting that committed to more aggressive bond buying for a quarter but potentially creating cliff risk down the line, and to wrap things off a +8.8bps climb in 10yr US yields on Friday on speculation of a big block seller in the Asian session. We don’t get uneventful weeks at the moment and I can’t see too many of them going forward either given the huge forces and huge sums of money in markets at the moment.

The most impressive thing about Friday was that even though 10yr US real yields actually climbed +9.9bps, US equities clawed their way back to positive territory (+0.1%) on the day after earlier losses. Tech remained weak (NASDAQ -0.59%, NYFANG -1.65%) but rallied from the lows on Friday. We’ll have a fuller review of last week at the end before the day by day week ahead guide.

On this topic our US equity strategists have upgraded their earnings and equity targets in light of the passing of the US stimulus bill and recent DB US GDP upgrades. They have raised their year end 2021 S&P 500 target to 4100 (20.2x $202) from 3950 previously, and to 465 for the Stoxx 600 (17.2x €27) from 450. From current levels, these imply upside of another 5% for the US and 10% for Europe. Their earnings estimates for US (S&P 500) EPS in 2021 increased from $194 to $202 (+43% yoy) and up to $222 for 2022 (+10% yoy). For Europe (Stoxx 600) they’ve raised 2021 earnings growth from +47% yoy to +59%. Reflecting the fact that multiples are already very high, especially in the US, they think these will fall slightly. See their full note here including all their sector preferences.

With yields backing up aggressively on Friday there is only one place to look this week and that’s the FOMC meeting on Wednesday. We’ll preview it briefly below. The Bank of England (Thursday) and Bank of Japan (Friday) also have meetings. While it’s a lighter data calendar, there are a number of important releases. These include US industrial production and retail sales (tomorrow), Euro Area CPI, and March consumer sentiment surveys from around Europe. There will be fewer earnings releases this week with just 32 companies between the S&P 500 and STOXX 600 reporting.

Overnight in Asia, we have seen China’s Jan-Feb main economic data dump with industrial production printing at +35.1% yoy (vs. 32.2% yoy expected) while retail sales came in at +33.8% yoy (vs. 32% yoy expected). The National Bureau of Statistics noted that average growth in industrial production was +8.1% higher than the same period in 2019 compared with +3.2% for retail sales. Fixed asset investments came in on the softer side with a reading of +35% yoy (vs. +40.9% yoy expected) while the surveyed jobless rate jumped to 5.5% at the end of February (vs. 5.2% in December).

Asian markets are generally trading weaker this morning with the Hang Seng ( -0.04%), CSI (-1.97%), Shanghai Comp (-0.92%), Kospi (-0.21%) and India’s Nifty (-1.09%) all down while the Nikkei (+0.07%) is posting small gains. China’s money market rates rose overnight after the PBoC shied away from providing more liquidity into the financial system over and above what is required for that maturing. Overnight repo rate rose by 46bps to 2.24% while seven-day repo rate climbed by 16bps to 2.27%. Sovereign yields continue to rise with those on 10Y USTs up +1bps to 1.636% while those on 10y Australia and New Zealand are up an even larger +8.7bps and +11bps respectively catching up with Friday’s US move. Futures on the S&P 500 are marginally up (+0.05%).

As markets continue to worry about the inflationary pressures, US Treasury Secretary Janet Yellen said over the weekend that US inflation risk remains small and ‘manageable’. We also heard from the ECB Governing Council member Martins Kazaks who said that a “rise in yields will need to be accepted. But it should be gradual to avoid premature tightening.” He also said that “an increase in bond yields will not necessarily mean larger purchases, if we see more of this driven by the strength of the European economy.”

We also got a flavour of what is brewing in German politics over the weekend, with the CDU posting worst results since World War II in two regional election. Support for the CDU slumped by -3.7pp to 23.3% in the western state of Baden-Wuerttemberg compared with the last election in 2016, according to initial projections by public broadcaster ARD. Similarly, the projections for neighbouring Rhineland-Palatinate showed that the support for the CDU dropped by -5.8pp compared with 2016 to 26%. The Greens were the big relative winners on the night. Interesting ahead of Federal elections in the autumn.

Turning to the latest on the pandemic, AstraZeneca said over the weekend that a “careful” review of all available data of the more than 17mn vaccinated people in the European Union and the U.K., shows no evidence of an increased risk of pulmonary embolism, deep vein thrombosis (DVT) or thrombocytopenia. Despite this Ireland became the latest country to temporarily suspend the usage of the AZ vaccine. We also learnt over the weekend that the EU will roll-out J&J vaccine in late April with 200mn doses reaching the EU by the end of summer.

Starting the fuller week ahead preview with the main event of the week now. The FOMC on Wednesday, and the ensuing press conference from Chair Powell, will likely dictate where yields and risk trade for days, if not weeks ahead. In their preview (link here), our US economists highlight that the Committee is likely to update their economic projections with a substantial upward revision to expected growth, a lower unemployment forecasts, and a modestly higher inflation trajectory following the passage of President Biden’s $1.9tn Covid19 relief package. Despite this, Chair Powell is likely to emphasise that significant uncertainties remain and that the recovery has a long way to go, particularly the labour market. Powell is also likely to reiterate that any discussion of tapering is "premature" and that it will likely be "some time" before the Committee can even assess if their goals have been achieved. On the topic of rising yields - US 10yr yields are up around 60bps since the last FOMC meeting in late January - he will likely once again emphasise that the Fed has the tools to deal with issues as they arise and that they would respond to disruptive or persistent tightening of financial conditions as necessary. It’s fair to say it’s a pivotal meeting though.

Meanwhile in the UK, the Bank of England will present their policy decision on Thursday, and much like with the Fed this week and the ECB last week much of the focus will be on how the BOE interprets the recent sharp rise in yields. They are likely to try and strike a similar balance between the market pricing in an improving outlook and not wanting financial conditions to tighten excessively. The market is not expecting a change to either the policy rate or asset purchases.

The final major central bank decision comes from the Bank of Japan on Friday, where our economist (link here) believe it will adjust its present policy framework after the release of the results of its ongoing policy assessment. They see the meeting as more unpredictable following Governor Kuroda’s comments on 5 March, but they believe the bank will consider more effective equity ETF purchasing along with measures to alleviate the adverse side effects of its negative interest rate policy. The week will also see monetary policy decisions from the central banks of Russia, Brazil, Norway and Turkey. Russia is set to keep rates steady, but could hint at tightening financial conditions. On the other hand, Brazil is expected to start a tightening cycle.

Last week risk markets bounced back even as global bond yields largely continued their climb. The S&P 500 gained +2.64% on the week (+0.10% Friday), and rose to a record high for the first time since mid-February on Thursday. Small caps also rose to all-time highs while outperforming strongly as the Russell 2000 gained +7.32% over the five days. Tech stocks recovered as well with the NASDAQ composite up +3.09% over the course of the week, though large cap techs stocks continue to lag their cyclical peers, with NYFANG index rising just +2.03% after an up and down week. Bank stocks on both sides of the Atlantic continued to rise with US Banks rising +4.04% while their European counterparts gained +2.06%. The STOXX 600 outperformed US stocks overall, with the index up +3.52% (-0.26% Friday) with the German DAX (+4.18%), French CAC (+4.56%) and Spanish IBEX (+4.32%) notably outperforming.

US 10yr yields finished the week +5.9bps higher (+8.8bps Friday) at 1.625% - its highest closing level since mid-February of last year. It was the sixth weekly rise in yields, which is the longest streak since Jan/Feb 2018. The move on the long end of the curve saw the 2y10y yield curve steepen another +5.0bps to 147.4bps, its steepest level since September 2015. Meanwhile UK gilts rose +6.6bps to 0.82% 10y bund yields initially fell -5.3bps to three week lows just after the initial ECB revised PEPP announcement but they ended the week down just -0.4bps overall.

In terms of data releases, Friday was a busy day as Germany’s CPI showed prices rose +0.7% MoM and +1.3% YoY in February, both in line with estimates. Meanwhile the UK’s January industrial production numbers came in below expectations, falling -1.5% MoM (vs. -1.0% est) and -4.9% YoY (vs. -4.4% est), highlighting the effects of the most recent lockdown. Even so the UK’s January monthly GDP did not fall as far as feared, coming in at -2.9% (vs. -4.9% est). The Euro Area’s January industrial production rose +0.8% (vs. +0.5% est). In the US, February PPI ex Food and Energy MoM was in-line with estimates at +0.2%, well behind the previous month’s +1.2% rise. March’s Michigan Sentiment survey showed a rebound back to 83.0 (vs. 78.5 est) from 76.8 – its highest level since the start of the pandemic.

Tyler Durden Mon, 03/15/2021 - 07:59
Published:3/15/2021 7:10:35 AM
[Markets] Lessons From 1943 Lessons From 1943

Submitted by Nicholas Colas of DataTrek Research

Until the Internet 1.0 bubble came along in the late 1990s, the strongest post-Great Depression continuous bull market in US equities was during World War II. From 1942 – 1945 the S&P 500 returned a total of 141 percent. And, unlike the 1995 – 1999 period (+248 percent), US equities didn’t give back much of their gains in subsequent years. It simply treaded water from 1946 – 1948 before going on another tear from 1949 – 1952 (+126 percent).

I (Nick) recently picked up a February 1943 copy of The Magazine of Wall Street (the pre-eminent capital markets magazine of the time) on eBay, thinking that there might be some useful analogies between then and now. If nothing else, I reasoned, US expenditures on World War II and the Pandemic Recession are roughly the same: $5 trillion in current dollars.

For this week’s Story Time Thursday, here are some comparisons to consider:

#1: First, the obligatory Tolstoy-esque “every bull market is the same” idea from the lead paragraph of an article titled “Market in a Decisive Phase”:

“There is an old saying that nothing succeeds like success. At times, that is true of the stock market. Good news from the war fronts is very helpful, but that is not the main thing that is attracting bulls to the market. At last many people – who had no notion of buying when values were considerably more attractive than now – are convinced that ‘there’s gold in them thar hills’. What has convinced them? Answer: Rising prices and big volume. It seems that to make money, all you have to do is buy almost any low priced stock. Word of this is evidently getting around.”

And from later in the article:

“From the bottom of the market in the spring of 1942 this publication’s index of 100 lowest priced stocks has now advanced about 51 percent, compared with (a) rise of 32 percent in our index of 100 highest priced stocks, and about 37 percent in the Dow industrial average.”

And this “seemingly torn from today’s (2021) headlines” snippet:

“Undoubtedly the demand for ‘cats and dogs’ is coming in increasing degree from lower-income people who have not before been interested in the stock market.”

And the article’s closing shot:

“Scrambles to get on board never endure; and, while they provide hay for nimble traders, they represent the worst time, rather than the best time, for buying by longer-pull investors.”

Also worth noting: the SEC conducted some studies about the market’s retail investor-driven frothiness in early 1943, but decided to leave things be.

Takeaway: over the rest of 1943 (i.e., after this article’s publication) US equities rallied another +18 percent and went on to post a +19 percent advance in 1944 and were up +36 percent in 1945. No need to dwell on the similarities expressed in this piece to today’s market narrative… The author missed what effect massive fiscal spending would have on consumer spending (despite rationing), corporate profits (despite high taxes) and the effect a fully employed workforce would have on interest in investing (with not much else to spend money on).

#2: Inflation was an issue during World War II because of supply shortages, but as an article titled “Wisest Investment Policy in This Period of Inflation” explained:

“It should be noted that the majority of economists, both here and in England, agree that the greatest potentiality of a radical inflation will confront us in the early peacetime years.

The reasoning is that in the transition to peace the purchasing power of consumers will be at a high level, the supply of civilian goods will be inadequate for a considerable time, the various psychological inhibitions of war-time will have vanished, rationing will be relaxed or ended under political pressure, the total consumer ‘inventory’ of clothing and a great variety of durable goods will be badly depleted or worn down, (so) there will be a scramble to buy and prices will rise.”

Takeaway: inflation was, in fact, much higher after World War II than during the conflict itself. The Consumer Price Index went from 2-3 percent annual increases to 20 percent in 1947. As for analogies to today, the setup is very different from the one described above. Yes, there is likely to be strong growth in consumer spending over the balance of the year. But no, we have no meaningful supply shortages in places (and they are places, not “things”) where they are most likely to spend.

#3: Even in February 1943, with +2 more years to go in World War II, investors were already thinking about which companies were “war plays” and which would do better under an eventual peace. The descriptions used then are very similar to 2020’s “pandemic plays” like businesses that enable work-from-home and “reopening trades” like travel and leisure. The Magazine of Wall Street even gave companies a “War Rating” and a “Peace Rating”, ranging from A (High Grade) to D (Marginal).

While there’s not a single A rating for either environment in the edition I have, there were several companies rated “B” for both war and peacetime investment potential:

  • General Electric: “Production almost all for war work. Normal demand, plus secular growth, should provide company with full quota of peacetime business”.
  • Deere & Co: “War output sustaining operations. Company ranks second in field, and is noted for close controls of costs and careful credit policies. Should obtain full quota of peace time business.”
  • IBM: “War work increasing, but equipment leasing (chief revenue source) continues ample. Dominant position assures good peace time business.”

Takeaway: frankly, the 1943 version of this construct strikes me as far more useful than the one markets have used over the last year. There are not “reopening stocks” or “pandemic stocks”. There are stocks of companies with talented managements and strong competitive advantages, and then there’s the rest. It’s hard not to see Big Tech as the GEs, Deere’s and IBM’s of the current age, even with their regulatory overhangs.

Final thought: for me, reading the 1943 market commentary was a stark reminder of “don’t overthink things if you want to make decent returns”. Everything about why US stocks would compound at 27 percent annually over the next 2 years after 1943 was perfectly visible in the basic narrative of heavy government spending and the relative certainty of an Allied victory in World War II. That feels exactly analogous to today, and if one is a fan of “history repeats” this may be the most sensible reason to stay long risk assets out there. Yes, the World War II US equity rally ran out of steam in 1946 (down 8 percent). Are we really in a post-pandemic period now? It doesn’t really feel that way, and today’s new highs say as much

Tyler Durden Sun, 03/14/2021 - 15:30
Published:3/14/2021 2:42:01 PM
[Markets] One Year On: Visualizing Key Events In The COVID-19 Timeline One Year On: Visualizing Key Events In The COVID-19 Timeline

It’s been a long and eventful year since COVID-19 was officially declared a global pandemic by the World Health Organization (WHO) on March 11, 2020.

The tangible and intangible costs of COVID-19 have been severe. In this visual COVID-19 timeline, Visual Capitalist's Iman Ghosh delves into some significant milestones that have occurred around the world.

December 2019-February 2020 - Pre-Pandemic COVID-19 Timeline

The origin story actually begins at the turn of the new year, as events began bubbling under the surface in Wuhan, China. The first coronavirus cluster was reported on December 31, 2019, with initial exposures linked to the Huanan Seafood Market.

In the new year, the first coronavirus cases began filtering outside of China, to Thailand and the U.S.—causing the WHO to declare a public health emergency of international concern. As the death toll ticked up to over 200, it was clear that this was no ordinary virus.

All dates in the graphic are based on when events occurred rather than when they were widely reported.

In February 2020, the novel coronavirus was finally named COVID-19. In addition, the Diamond Princess cruise ship was linked to 624 confirmed cases in late February—the highest case cluster outside of China at the time. The ship captured international headlines when it was refused port in a number of countries, casting COVID-19 into the spotlight.

This month also marked a significant turning point. Dr. Li Wenliang, a Chinese doctor, had tried to draw global attention to the severity of China’s outbreak before he passed of COVID-19 on February 7, 2020.

"If the officials had disclosed information about the epidemic earlier I think it would have been a lot better […] There should be more openness and transparency."

- Dr. Li, in a NYT interview a few days before his passing

Italy and Iran then grew significantly as global hotspots of COVID-19. The U.S. reported its first death due to COVID-19—however, it was only discovered in April that there were in fact two prior deaths due to the virus in the country.

On March 11, 2020, WHO made a critical decision. As the virus began to transcend borders and claim thousands of lives, it announced that the COVID-19 outbreak had officially become a deadly global pandemic.

In the year that followed, the virus was relentless in spreading around the world. How have cumulative case counts and death tolls evolved since the beginning?

Let’s explore key events in the COVID-19 timeline that took place over the course of the past year.

365 Days of the Pandemic

The initial impacts of the pandemic were felt swiftly, and progressively became worse. Within the first three months, the world paid a high human and economic toll.

March-May 2020 - Whiplash for the World

Following the WHO announcement, numerous sporting events were cancelled, from the NBA and NHL 2019-2020 seasons to the UEFA Euro men’s soccer championship. Even the Tokyo Summer Olympics were postponed for a year.

In late March 2020, the U.S. surpassed China to become the hardest-hit country by COVID-19. In terms of overall case numbers, it remains the global epicenter of the pandemic today, followed by India and Brazil.

The stock market took a severe hit, with a crash rivaling other recessions and significant financial crises. For example, here’s how the Dow Jones Index Average dropped in March alone:

Stock markets re-entered a bull market in April, but the damage had already been done. The S&P 500, for example, would only return to pre-pandemic levels in August.

The onset of the pandemic led to additional economic chaos. The price of oil flipped negative in April, and over 10 million Americans lost their jobs in the sudden downturn.

To help prop up the economy, the U.S. unveiled the $2 trillion CARES Act, the largest economic stimulus package in history—near 10% of national gross domestic product.

Multiple countries locked down their borders to the rest of the world, from the European Union to India. These travel bans and reduced mobility affected not just airline revenues, but temporarily had a noticeable effect on carbon emissions too.

In addition, two world leaders—UK’s Prime Minister Boris Johnson and Russia’s President Mikhail Mishustin—contracted COVID-19.

June-November 2020 - A Deadly Surge

Numbers kept rising over the next six months, following the shifting geography of COVID-19 into densely populated regions such as Africa, South Asia, and the Middle East. In a controversial move, Brazil stopped making its COVID-19 case data public starting June 7, 2020.

Global deaths due to COVID-19 surpassed half a million at the end of June—and jumped to over 1 million by the end of September. Another heartbreaking record was set in mid-October when global cases leapt up by 1 million in just three days.

Former U.S. President Donald Trump, Brazil’s President Jair Bolsonaro, and Poland’s President Andrzej Duda were among many more world leaders to test positive for COVID-19.

December 2020-March 2021 - Vaccines Bring Hope

At the very end of 2020, some optimism for things going back to normal was restored when Moderna announced the very first vaccine candidate, followed by Pfizer/BioNTech.

However, more alarm was raised as reports of a faster-spreading, more infectious strain of COVID-19 emerged from the UK. Two more variants have also since been discovered:

*Note: P.1 was first detected in Japan but traced back to Brazil

In January 2021, WHO organized an international scientific consultation around these variants. The good news? Existing and emerging vaccines will still potentially provide adequate protection against these variants.

In March 2021, the U.S. Congress approved President Biden’s $1.9 trillion pandemic relief bill. Some details of the money breakdown include:

  • Up to $1,400-per-person stimulus payments for 90% of households
  • $350 billion in state and local aid
  • $8.5 billion to rural hospitals and healthcare providers

The rest is expected to go towards safely reopening K-12 schools, assisting hard-hit small businesses, extending food stamp benefits, vaccine R&D and distribution, and more.

An End in Sight for the COVID-19 Timeline?

With the global vaccine rollout now underway, many more key vaccine producers, from AstraZeneca/Oxford University to Johnson & Johnson, have joined in the fight to return life to normal.

Although there have been deep losses due to COVID-19, many hope that we’ll learn from the lessons of this past year, and emerge stronger than ever.

"We have come so far, we have suffered so much and we have lost so many. We cannot, we must not squander the progress we have made… Science, solutions and solidarity remain our guide. There are no short-cuts."

- Dr. Tedros Adhanom Ghebreyesus, Director-General of WHO

Tyler Durden Sat, 03/13/2021 - 16:00
Published:3/13/2021 3:03:37 PM
[Markets] Inflation Watch: Beware The Ides Of March Inflation Watch: Beware The Ides Of March

Authored by Alasdair Macleod via,

President Biden has now had his $1.9 trillion stimulus package passed into law, and it will not be the last in the current fiscal year. Covid is not over and is sure to resurge with new variants next winter.

But even assuming that is not the case, we still have to contend with the aftermath of the pre-covid conditions, whereby banks had run out of balance sheet capacity combined with trade tariffs predominantly aimed at China. These conditions were a doppelganger for late-1929, and between 8 February and 20 March the S&P500 index faithfully tracked a similar course to that of October 1929.

As far as possible, this article quantifies inflationary financing of government spending from March to September last year, and already sees evidence on the CBO’s own figures of that exceptional covid response being exceeded in the first half of the current fiscal year just ending. It points to something which no one has really foreseen, that the rate of monetary inflation has increased beyond the banking system’s capacity to accommodate it.

Even if the US manages to emerge from lockdowns in the coming months, the legacy of the turn in the credit cycle, trade tariffs and supply chain disruption threatens a full-scale depression. There can be no doubt monetary inflation will accelerate, and we are beginning to see the consequences in rising bond yields.


It is nearly a year since the Fed on 23 March 2020 responded to stock market pressures and cut its funds rate to the zero bound and followed that three days later by increasing quantitative easing to $120bn every month. A further $300bn credit was to be directed at businesses, employers and consumers. The Primary Market Corporate Credit Facility and the Secondary Market Corporate Credit Facility allowed the Fed to directly support corporate bond prices for large employers. And the Term Asset-Backed Securities Loan Facility would enable the issuance of asset backed securities financing credit cards, student loans and auto loans. Credit was to be made available to municipalities through two further programmes.

And so on. Officially, the Fed was responding to the coronavirus in its role of ensuring market stability. Its emphasis on supporting businesses that otherwise would lay off employees reflected its mandate to target the highest level of employment consistent with its inflation mandate. Just in case the expansion of money led to a rise in consumer prices, last August the Fed changed the inflation target from 2% to an average of 2%, allowing itself the leeway not to change monetary policy if the target was breached.

Far more importantly, without the March stimulus the S&P500 was collapsing along with other non-fixed interest financial assets and commodity prices. If there is one thing that scares the living daylights out of the Fed, it is deflation. And that was what it suddenly faced.

A crisis in the repo market the previous September had alerted us to the inability of the banking system to further expand bank credit to support economic activity. Initially, investors paid little attention, but by early February 2020 the stock market began a sudden collapse, with the S&P losing 32% by the ides of March. For a central bank which believed in the wealth effect of rising stock prices it was vital to stave off a self-feeding 1929-style collapse in investor confidence. That was the existential threat at that time, and it had followed President Trump’s attempt to repatriate American manufacturing from China by way of imposing import tariffs on Chinese goods.

Essentially, financial and economic conditions were heading for a repeat of the Wall Street crash of 1929 which led into the 1930s depression. At that time, bank credit had expanded in the roaring twenties on top of Benjamin Strong’s monetary expansion, fuelling a stock market bubble of historic proportions. The trigger for its bursting was the Smoot Hawley Tariff Act, which was passed by the Senate in a debate between 23—29 October 1929. In the process, its scope was increased from the narrower damage limiting coverage expected in financial markets to an all-embracing tariff act, which added over 20% to the existing Fordney-McCumber tariffs of 1921.

It was that month that Wall Street crashed, with 24 October dubbed Black Thursday when the Dow lost 11% on the opening bell. The following week saw Black Monday and Black Tuesday as the falls continued.

In late-2019, the proportions of money and credit expansion relative to tariff impositions differed from 1929. The expansion of both money and credit was far larger, having accumulated over several credit cycles which were not permitted to wash out. Smoot-Hawley was global, while today’s trade tariffs were targeted mainly at the second largest economy after the US and so less extensive. However, the combination was arguably at least as dangerous as that of late-1929.

It cannot be emphasised enough not to rely solely on empirical evidence, but from a theoretical stance to consider the economic destruction from tariffs, and then combine that with the cyclical collapse of bank credit. A moment’s thought about the consequences of such a combination and the subsequent mishandling of the consequences explains much of economic history between the early twenties and the run up to the Second World War. And consequently, it behoves us to regard a similar combination in the run up to today’s events equally seriously.

In February—March 2020 the sudden collapse of stock prices was eerily similar to the September—October 1929 crash both in scale and duration. A crucial difference is that in 1929 the stock market bubble was not deliberately inflated by monetary policies, being simply a side-effect of them. Today, the Fed openly admits to an objective of pumping the stock market through QE to create a wealth effect, necessary, in the opinion of policy makers, to retain confidence in the economy.

In 1929 there was an operational gold standard that meant the depression of economic activity led to falling prices. Today currencies are pure fiat, and the agreed policy is to expand their quantities to prevent prices falling. It will not succeed in preventing a repeat depression, only serving to conceal it. A distinction must be made between the failed interventionist policies of both Hoover and Roosevelt, which hampered the markets’ adjustment and reallocation of all forms of capital, and the monetary effect. Under the gold standard there was a true reflection of the economic consequences of that fateful combination of collapsing credit and trade tariffs. Left alone, the depression would have lasted perhaps eighteen months or so, echoing the depression of 1920-21 — forgotten today, but equally deep.

Today’s interventionism is all-embracing with governments assuming that by taking total control through regulation, inflationary financing and suppression of interest rates the modern economic system will never fail. The February—March 2020 market crash challenged that assumption. The further acceleration of inflationary financing and interest rate suppression under the cover of covid lockdowns was the statists’ response. And it is important to understand in that light what happened subsequently and continues today.

The pandemic— March to September 2020

Of course, the massive monetary expansion set off last March was presented to markets and the public as a response to the covid crisis. The Fed was faced with a number of problems. With swathes of production and consumption simply shut down, every advanced nation faced a sudden collapse in economic activity which was turning out to be the largest ever seen. The dangers of the turn of the credit cycle and trade tariffs collapsing the economy and stock markets were quietly forgotten. In their place there arose an assumption, fostered by the authorities, that covid was and still is the only problem and when lockdowns end everything will return to normal. Even though a V-shaped recovery became U-shaped and then L-shaped, it is still insisted that normality will return.

Meanwhile, in common with those of other nations, the US budget deficit simply exploded. By the end of the fiscal year to end-September 2020, it had risen to $3,142bn, representing 48% of total expenditure. But taking the second half from end-March to end-September, the damage is far worse than that concealed in the annual figures. Figure 1 extracts revenues and outlays for the second half by estimating the changes from what was known by March 2020 and the final outcome. Amounts are in billions.

The deficit between March and September at $$2,595bn was 62% greater than the $1,604bn in revenues. Put another way, only 38% of outlays were covered by revenue and the balance was raised in bond markets. To this must be added the change in the Government’s general account at the Fed, which between March and September increased by $1,262bn.

Not all this finance was directly inflationary, because the savings rate jumped during lockdowns. But during the period, the Fed’s holdings of US Treasuries increased by $1,105bn, which can be taken as a proxy for the Fed’s element of inflationary financing of the budget deficit. That leaves $2,752bn, (i.e. the $2,595bn deficit plus $1,262 on the general account less $1,105bn by the Fed) funded from other sources.

We can assume that some of the $2,752bn balance was funded by insurance and pension funds from a combination of cash flows and replacement of investments bought by the Fed through their banks as part of the QE programme. Direct public participation will account for some of the deficit financing, but the balance is bank credit finance. Acknowledging the importance of bank participation, the Fed suspended the Supplementary Leverage Ratio on 1 April for one year, specifically excluding US Treasury securities held on bank balance sheets and their reserve deposits at the Fed. This would create the leeway for the balance sheet expansion necessary to accommodate the financing of the government deficit by the expansion of bank credit as well as by QE targeted at investing institutions.

In its 1 April statement, the Fed acknowledged that liquidity conditions in Treasury markets had deteriorated rapidly, and what with significant inflows of customer deposits, banks were running out of balance sheet capacity. Six months later, bank credit has expanded by $1,250bn, much of which would have to be contracted if the suspension of the supplementary leverage ratio is discontinued as planned at the end of this month.

We can identify two emerging problems. The first is the lack of balance sheet capacity in the banking system, already noted. The second is that in the fiscal year to September, the US Government was absorbing private sector savings in quantity, making them unavailable for genuine economic investment. Instead, economic policy amounts on the one hand to preserving zombie businesses in the name of preserving employment and on the other suppressing economic progress through capital starvation. Something has to yield, and that is almost certain to result in an even higher rate of monetary inflation.

That is the background to the current fiscal year.

The current fiscal year

So far, in the first half of the current fiscal year, two stimulus plans have been passed: the first was a $900bn package passed at end-December, and the second is the just passed Biden $1.9 trillion package. Before the Biden stimulus package, the Congressional Budget Office had updated its full-year forecast to include a budget deficit of $2.258 trillion. Adding in Biden’s package, which the CBO estimate did not include, takes it to over $4 trillion, against last fiscal year’s $3.132 trillion.

Admittedly, Biden’s package can be expected to be disbursed in the coming months. But for the first half of the current fiscal year to end-March and including the Biden package the deficit commitment amounts to over $3 trillion, which compares with our estimate based on CBO figures of $2.595 for the second half of fiscal 2020. Therefore, the deficit trend is still rising, even on officially sanctioned estimates.

Further stimulus packages between March and September cannot be ruled out, if only because the pandemic has led to ongoing economic dislocation. There is no doubt that the Biden administration is exceptionally sympathetic to financing by inflation. We must also accept that evidence of higher prices for goods and services is being suppressed by CPI methods and that monetary inflation adds to the nominal GDP total. Increasing the money quantity is not just the line of least resistance, but it is being encouraged by statistical corruption and misrepresentation. The wealth transfer from wage earners and savers to pay for it, which is economically destructive, is wholly ignored.

But we keep returning to the bank balance sheet problem. Bank balance sheets have simply run out of capacity to absorb more inflationary financing. Last April, the temporary fix of suspending the supplementary leverage ratio, which penalises banks exceeding mandated levels of the relationship between total balance sheets and underlying equity, was announced by the Fed. That suspension is due to end this month, unless it is renewed. At the time of writing (10 March) there was no sign of an extension.

Elsewhere, I have written of the consequences. Put briefly, unless the SLR suspension is extended the banks will have no option but to turn away deposits, and the only way they can do this is to recover the SLR penalty costs by charging for them. In other words, the commercial banks will introduce negative deposit rates, initially for new deposits and then likely extended to existing customer balances. Since my warning that this is the case, Goldman Sachs’s banking analyst has confirmed the thesis, putting a $2 trillion number on it.

From the Fed’s H8 release (page 5), we can see that Goldman’s $2 trillion estimate appears to be derived independently from the Fed’s records. A precis of the Fed’s estimates of total commercial bank balances are shown in Figure 2.

There are a number of points worth noting, at a time of massive monetary expansion, with an increase over the year to end-February estimated at 46% measured by Austrian money supply:

  • Total assets increased by $1,377 during the period of SLR suspension. If we assume bank balance sheets had very little room for expansion in March 2020 and given the 10.6% reduction in bank equity, Goldman’s estimate of a $2 trillion excess to be clawed back in the absence of an extension to the suspension of SLR looks about right.

  • It is noticeable how banks have shifted assets from the loan business into securitisation, including Treasuries, agency debt and mortgage-backed securities. Picking out the bones of circulating capital provision for non-financials from these figures is an unrewarding activity.

  • The jump in cash assets is notable. The Fed’s footnote states, “Includes vault cash, cash items in course of collection, balances due from depository institutions, and balances due from Federal Reserve banks”. The increase of $921bn to $3,437bn makes cash balances over 15% of their balance sheets. Will this encourage the Fed not to extend the SLR?

  • Large time deposits have already begun to decline. It is not clear if this is the result of a general bank policy to discourage them or for other reasons. Nevertheless, as balance sheets hit constraints this deposit category appears to be the most likely to experience further reductions.

These numbers only reflect the current situation and will increase as the Fed continues its monthly $120bn of QE, and the US Treasury continues its funding programme. Even an extension of the SLR suspension for Treasury holdings and reserve assets at the Fed does not resolve the problem. Unless the extension is explicitly declared by the Fed to be permanent, banks will have to manage their balance sheets on the basis that the SLR will eventually be reinstated.

The balance sheet capacity problem is not going away, which means that banks will have to sell down riskier assets to make way for an increase in their holdings of US Treasuries and increases in their balances at the Fed arising not just from their own activities, but those of their investing institutional customers. This comes at a time when the non-financial economy will face enormous challenges.

Economic outlook for March to September

Pandemic lockdowns will continue after March, not just in the US but in other major jurisdictions as well. The global economy will not be free of covid this year, with the likelihood of a further resurgence with new variants next winter. At this distance, all one can suggest is that at the margin a Democrat administration is likely to favour control over personal freedom at the expense of economic activity.

Time will tell as to whether this concern is justified. Meanwhile, the damage done to leisure, air travel and tourism is substantial. Lockdowns have bankrupted shopping malls and their tenants. Whole industrial sectors have lost bankruptcy-threatening levels of sales due to the retail sector effectively closing in many parts. There have been beneficiaries, particularly online sales. But taken over the whole economy, it has been tantamount to a full-blown depression.

During this crisis, the large majority of salaried employees, who normally live paycheck to paycheck, will have suffered badly. Who can forget the food queues comprised of expensive SUVs, Mercedes and BMWs — all obviously bought on credit — as their spendthrift owners faced the reality of paycheck disruption?

The disbursement of funds by check from the government to these individuals will have helped enormously. But their indiscriminate distribution has led to a significant population minority with more money in their bank accounts than they are accustomed to hold and have been unable to spend. This is reflected in the increase in bank deposits shown in Figure 2 above. Consequently, production has been worse than decimated while inflated money is in the hands of consumers, itching to spend. And those who are unemployed have seen increased unemployment allowances.

The imbalance between hampered production and impatient consumer demand will drive prices higher. And because the effect is at the margin, prices are likely to rise faster than generally expected. To this we can add a further element, and that is the disruption to supply chains which is still causing logistical chaos. And we can also add the effects of a weakening dollar on commodity prices.

As producers try to respond to the unwinding of consumer cash balances, they will find that the constituents vital for production in the forms of raw materials and semi-processed goods will simply be unavailable or promised so at a distant future. The insufficient quantities that are available will reflect these shortages in their prices. And if they are lucky enough to find a way round these difficulties, producers ramping up production will find that the banks will be more intent on calling in loans than providing circulating capital.

Given the way it is constructed, CPI measures of inflation will fail to fully reflect the rises in prices. Food and utilities could even come under price controls — the predictable and last refuge of an inflating government. And it must be understood that a combination of the non-financial economy being flooded with consumption money will jack up nominal GDP, taken by statist planners as evidence of success. Just imagine if modern statistical method had defined the economic conditions in Germany, Austria, Hungary and Poland in the early 1920s. Suppressed evidence of price rises by CPI methods combined with money-pumping would evidence the most dramatic economic recovery. To begin with, they would be hailed as an extraordinary policy success, before an emerging realisation of the true economic condition brought about by monetary inflation. It appears that the US and other nations are embarking on this track of discovery.

But with Keynesian stimulus being seen as the only means for governments to fund their deficits, there is no escape — only escalation. It only takes a basic knowledge of arithmetic to understand that the more you inflate, the more you dilute and the more you have to inflate. Incorporate the wealth destruction factor and the process becomes hyper. The US is already on this monetary course, though very few observers yet realise it.

Pre-covid economic conditions are ignored

Even assuming an unrealistic and rapid return to pre-covid economic conditions, we still have the devastating effects of a collapse in outstanding bank credit, the collapse of banks around the world with insufficient capital to absorb the resulting losses (almost all of them), and the legacy of today’s version of Smoot-Hawley — President Trump’s efforts to close down the Chinese trade.

Supply chains are still in chaos. This is from the New York Times earlier this week:

“Off the coast of Los Angeles, more than two dozen container ships filled with exercise bikes, electronics and other highly sought imports have been idling for as long as two weeks.

In Kansas City, farmers are struggling to ship soybeans to buyers in Asia. In China, furniture destined for North America piles up on factory floors.

Around the planet, the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another.” 

- Chaos strikes global shipping, New York Times, 7 March

The article goes on to say containers are in the wrong place, in African and South American ports, empty and uncollected. The disruption to America’s supply chains is on a scale related to the economy’s gross output, estimated at $37 trillion, with an additional amount for offshore imports and exports. The threat to trade finance is considerable, this week driving Greensill into insolvency – a relatively small player funded by Credit Suisse and investing institutional clients of London-based banks.

The now certain disruption in trade finance is on few commentators’ radar, yet. But with US and other banks lacking balance sheet accommodation and a desire to de-risk their exposure, it is another factor that threatens to grind the global economy to a halt. And what will be the authorities’ response? Inflate or die, or should we now say inflate and die.

Markets have an inconvenient habit of demanding recompense for anticipated inflation and the effect on a currency’s purchasing power. Whatever methods a central bank deploys for denying a currency holder’s recompense, it only succeeds in undermining its ownership; first on the foreign exchanges and then by its own people. Interest rates then rise. In the last few weeks, we have seen the heavily suppressed yields on government bonds begin to rise alarmingly. But that is only the start of it. It will be increasingly expensive for the government to pursue its inflationary funding by having the Fed buy Treasuries at arm’s length for cash. Coupled with the lack of balance sheet space in the banking system, new avenues will have to be devised.

Perhaps the planned digital currency, which bypasses the banks, is an intended solution. Perhaps the Fed will abandon the charade of QE. Perhaps the concept of a trillion-dollar platinum coin will be resuscitated. But they are all variations on the fiat theme and will cut no ice. Pesky foreigners will still want higher interest rates, and the more the Fed lags their expectations, the weaker the currency will be.

Besides exposing the bankruptcy of government finances, rising bond yields will burst the financial bubble inflated by monetary means. When that goes, so will the dollar and all other fiat currencies that fail to take avoiding action. But markets anticipate events, so it will not require events to actually happen. The question as to when a market crisis kills off the Fed’s monetary policies and with them the financing of inflationary spending is the most important consideration facing us today.

For now, the investment establishment believes in three untruths; that the Fed will continue to control markets, that the CPI statistics are a fair reflection of the dollar’s declining purchasing power, and that economic growth is not just a money total. In the foreign exchanges a tipping point will occur when government statistics become questioned and rejected. The fall in the dollar measured against commodities and raw materials will than take on a new dimension.

Yesterday, after seeing his $1.9 trillion stimulus package passed into law, President Biden promised to announce his plans for the future. After digesting these numbers, will markets begin to make a more realistic estimate of effects on the dollar?

Tyler Durden Sat, 03/13/2021 - 09:20
Published:3/13/2021 8:28:51 AM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks rose last week, with both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) achieving record highs thanks to progress on COVID-19 vaccine distribution and the passage of an aggressive economic stimulus package. A few of the market's favorite stocks will report operating results over the next few trading days, including Dow member Nike (NYSE: NKE). Let's take a look at what investors can expect from that report, along with the earnings announcements on the way from FedEx (NYSE: FDX) and Five Below (NASDAQ: FIVE). Published:3/12/2021 5:54:46 PM
[Markets] US STOCKS-U.S. stocks close mixed as Dow notches fifth straight record high The blue-chip Dow powered to its fifth consecutive record high on Friday and the S&P 500 closed slightly higher as investors bought shares that should benefit from a strong reopening of the U.S. economy, an outlook signaled by rising yields in the bond market. The tech-heavy Nasdaq tumbled after rebounding more than 6% over the past three sessions as the rising bond yields revived inflation worries and dulled the appeal of high-growth technology shares. Published:3/12/2021 3:55:43 PM
[Markets] Dow, S&P 500 end at record highs on economic reopening hopes; Nasdaq slides Dow, S&P 500 end at record highs on economic reopening hopes; Nasdaq slides Published:3/12/2021 3:25:32 PM
[Markets] US STOCKS-S&P 500, Nasdaq slip as bond yields rise The S&P 500 slipped on Friday after hitting an all-time high the prior session as rising U.S. bond yields revived inflation worries and dulled the appeal of high-growth technology shares. The tech-heavy Nasdaq tumbled after rebounding more than 6% over the past three sessions, while the blue-chip Dow scaled its fifth consecutive record high. A steady rise in U.S. Treasury yields has raised fears of a sudden tapering of monetary stimulus, pressuring the main U.S. stock indexes in recent weeks. Published:3/12/2021 1:53:51 PM
[Markets] US STOCKS-S&P 500, Nasdaq fall as yields spike The S&P 500 slipped on Friday after hitting an all-time high in the prior session, as a spike in U.S. bond yields revived inflation worries and dented appetite for high-growth stocks. The tech-heavy Nasdaq tumbled 1.3% after rebounding more than 6% over the past three sessions, while the blue-chip Dow, on the other hand, hit its fifth consecutive record high. Published:3/12/2021 11:22:42 AM
[Markets] US STOCKS-S&P 500, Nasdaq weighed down by spike in bond yields The S&P 500 slipped on Friday after hitting an all-time high in the prior session, as a spike in U.S. bond yields revived inflation worries and dented appetite for high-growth stocks. The tech-heavy Nasdaq tumbled 1.1% after rebounding more than 6% over the past three sessions, while the blue-chip Dow, on the other hand, was closing in on its fifth consecutive record high. Published:3/12/2021 9:52:44 AM
[Markets] Dow and S&P 500 stock futures pull back after indexes hit records a day earlier Dow and S&P 500 stock futures pull back after indexes hit records a day earlier Published:3/12/2021 6:57:24 AM
[Markets] 4 Dow Stocks With 24% to 31% Upside, According to Wall Street Over the past month, we've witnessed an extremely rare divergence between the technology-dependent Nasdaq Composite and the iconic Dow Jones Industrial Average (DJINDICES: ^DJI). Whereas the Nasdaq Composite has dipped into official correction territory (down 10.5%, as of March 8), the Dow Jones pressed to a new intraday all-time high on Tuesday, March 9. What might come as even more of a surprise to investors is that, despite hitting an all-time high earlier this week, the Dow Jones Industrial Average is still home to a number of perceived bargains. Published:3/12/2021 5:20:51 AM
[Markets] Stock market news live updates: Stock futures open slightly higher after record-setting rally Stock futures opened slightly higher on Wednesday as investors paused following a record-setting gain for the S&P 500 and Dow. Published:3/11/2021 5:18:08 PM
[Markets] US STOCKS-S&P 500, Dow end at record highs after upbeat jobless claims data The S&P 500 and the Dow closed at all-time highs on Thursday as worries about rising inflation subsided, while a bigger-than-expected fall in weekly jobless claims and the signing of a massive stimulus bill reinforced expectations of a strong economic recovery. Mega-cap stocks Microsoft Corp, Apple Inc, Facebook Inc and Inc led the rally, recouping losses from a recent pullback and helping the benchmark S&P 500 surpass its Feb. 12 close of 3,934.83. Published:3/11/2021 4:17:34 PM
[Markets] US STOCKS-S&P 500, Dow end at record highs after upbeat jobless claims data The S&P 500 and the Dow closed at all-time highs on Thursday as worries about rising inflation subsided, while a bigger-than-expected fall in weekly jobless claims and the signing of a massive stimulus bill reinforced expectations of a strong economic recovery. Mega-cap stocks Microsoft Corp, Apple Inc, Facebook Inc and Inc led the rally, recouping losses from a recent pullback and helping the benchmark S&P 500 surpass its Feb. 12 close of 3,934.83. Published:3/11/2021 3:50:08 PM
[Markets] Bitcoin & Big-Caps Reach Record Highs, Bonds & Dollar Dumped Bitcoin & Big-Caps Reach Record Highs, Bonds & Dollar Dumped

On the heels of Biden's big blowout, the dollar is tumbling...(biggest 3-day slump since the election/vaccines in early Nov)...

Source: Bloomberg

And bitcoin surged back up near $58,000, erasing the losses from its record highs in mid-Feb...

Source: Bloomberg

Did Washington just 'cut the rope' from reality?

Stonks were all bid today with Nasdaq leading the charge as the week's whipsaws continue...NOTE - Nasdaq was panic-bid at the China open, the EU open, and the US open and faded each time...

S&P and The Dow both hit new intraday record highs today.

It's been quite a week for Dow/Nasdaq rotations...

Source: Bloomberg

Small Caps are now up over 11% from Friday's spike lows...

With "Most Shorted" Stocks up over 18% off the Friday lows as the engineered squeeze was unleashed...

Source: Bloomberg

As Bloomberg noted, going all the way back to 1996, there have only been 5 prior days to Tuesday that saw the S&P 500 rally as much as it did and manage to post a net negative number of stocks advancing. Save one day in November last year all of them took place as the dotcom bubble was in the process of popping.

Source: Bloomberg

Amid all the chaos, realized vol for the Nasdaq has soared...

Source: Bloomberg

GME was relatively quiet today ahead of tomorrow's opex...

Even as $800 strike calls dominated activity...

Source: Bloomberg

TSLA surged back above $700...

With the help of Cathie Wood, we're sure...

Unprofitable tech stocks were bid once again...

Source: Bloomberg

Bonds were battered today - despite ECB headlines - amid massive issuance (30Y and Verizon) but the selloff stalled after the 30Y Auction...

Source: Bloomberg

But on the week, yields are still lower, for now (ahead of tomorrow's PPI)...

Source: Bloomberg

Real yields and gold continue to track each other (inversely)...

Source: Bloomberg

Ethereum rallied as Beeple's NFT auction neared its conclusion, back above $1800...

Source: Bloomberg

Gold managed to cling to gains...

Silver is holding its bounce gains off the pre-Reddit-Raiders spike...

And oil rebounded with WTI back above $66...

If Copper and Gold are right, 10Y yields are due for 3%... what are the chances The Fed allows that? And what will happen to tech stocks (and their contagion)? Be careful what you wish for

Source: Bloomberg

Finally, it's been a year since WHO (finally) admitted this shitshow was a pandemic - The Dow is up 38% since then! Bonds & the Dollar are down (in price) and gold is holding gains for now

Source: Bloomberg

And all it took was $17 trillion in global liquidity...

Source: Bloomberg

Tyler Durden Thu, 03/11/2021 - 16:00
Published:3/11/2021 3:17:02 PM
[Markets] Dow, S&P 500 finish at record highs as Biden signs off on new stimulus Dow, S&P 500 finish at record highs as Biden signs off on new stimulus Published:3/11/2021 3:17:02 PM
[Markets] US STOCKS-S&P 500, Dow hit record highs after upbeat jobless claims data The S&P 500 and the Dow hit all-time highs on Thursday as worries about rising inflation subsided, while a bigger-than-expected fall in weekly jobless claims and the signing of a massive stimulus bill reinforced expectations of a strong recovery. Mega-cap stocks Apple Inc, Microsoft Corp, Facebook Inc and Tesla Inc gained between 2.4% and 4%, recouping losses from a recent pullback and helping the benchmark S&P 500 surpass its Feb. 16 peak of 3,950.43. Published:3/11/2021 2:17:59 PM
[Markets] US STOCKS-S&P 500, Dow hit record highs after upbeat jobless claims data The S&P 500 and the Dow indexes hit all-time highs on Thursday as worries about rising inflation subsided, while a bigger-than-expected fall in weekly jobless claims reinforced expectations of a labor market recovery. Mega-cap stocks Apple Inc, Microsoft Corp, Facebook Inc and Tesla Inc gained between 2.2% and 3.6%, recouping losses from a recent pullback and helping the benchmark S&P 500 surpass its Feb. 16 peak of 3,950.43. Published:3/11/2021 11:15:49 AM
[Markets] US STOCKS-Wall Street jumps after upbeat jobless claims data The blue-chip Dow index hit an all-time high for the fourth straight session on Thursday as worries about rising inflation eased, while a bigger-than-expected fall in weekly jobless claims reinforced expectations of a labor market recovery. "The drop in jobless claims is another win for the week, and a solid sign that we're making some strides toward pre-pandemic life," said Mike Loewengart, managing director of investment strategy at E*TRADE Financial. Financial and industrials dipped on Thursday after outperforming other major S&P sectors this year as they are seen benefitting from a reopening economy. Published:3/11/2021 9:47:25 AM
[Markets] Market Snapshot: Dow adds to record run after weekly jobless claims hits 4-month low U.S. stocks trade higher Thursday, with the Dow Jones Industrial Average heading for its fifth straight gain, a day after the blue-chip gauge closed at an all-time high.
Published:3/11/2021 8:51:44 AM
[Markets] Stock market news live updates: Futures extend gains after Dow reaches record high, House passes $1.9T stimulus bill Stock futures pointed to another session of advances, with contracts on the Dow extending the index's record-setting gain after Congress passed another expansive coronavirus relief package. Published:3/11/2021 7:50:11 AM
[Markets] FOREX-Dollar drops to one-week low as inflation fears fade; ECB in focus The dollar index fell to its lowest in a week on Thursday and there was a mild "risk on" tone in currency markets, after U.S. CPI data calmed inflation fears, while attention turned to the European Central Bank's policy meeting. That helped lift world shares to their highest in over a week, with the Dow Jones Industrial average marking a record close, while U.S. Treasury yields eased from their recent spike. At the European Central Bank meeting, policymakers are expected to send a message that they will prevent bond yields from rising further and harming the bloc's economic outlook - although SocGen's Juckes said that, since the rise in yields is led by Treasuries, it is unlikely to be influenced by the ECB. Published:3/11/2021 6:48:20 AM
[Markets] GLOBAL MARKETS-Asia stocks soar as receding inflation worries bolster confidence Asian stocks extended their rebound from a two-month low on Thursday after a report on U.S. consumer prices calmed concerns about inflation and lifted the Dow Jones Industrial Average to a record close. An index of regional stocks excluding Japan rose 1.7%, led by a 2.3% surge in South Korea's Kospi, and was on track for its first three-day advance in three weeks. China's Shanghai Composite rallied 1.9%, helped by strong local lending data, while Japan's Nikkei 225 gained 0.5%. Published:3/11/2021 1:08:32 AM
[Markets] U.S. Index Futures Rise as Treasury Yields Halt Four-Day Climb (Bloomberg) -- U.S. stock index futures rose as the advance in Treasury yields halted and Chinese shares erased losses following a report that the nation’s state-backed funds intervened in the equity market.Contracts on the Nasdaq 100 Index rose 1.3% as of 1:10 p.m. in Tokyo, bouncing from a 2.9% drop on Monday. Futures on the S&P 500 Index gained 0.9%, while those on the Dow Jones Industrial Average added 0.7%. Ten-year Treasury yields fell 2 basis points to 1.57%, snapping a four-day gain.“Longer-term Treasury rates are a bit lower during the APAC session, cooling the breakdown of growth stocks,” said Daniel Dubrovsky, a strategist at DailyFX in San Francisco. “There could be some uptake in bonds as investors take advantage of yields.”Equity indexes in Asia got a boost as Chinese state-backed funds were said to have intervened on Tuesday to alleviate declines in the stock market. The funds stepped in to ensure stability during the government’s key policy meeting in Beijing, according to people familiar with the matter. The CSI 300 Index of stocks erased a loss of as much as 3.2%.On Monday, the Nasdaq 100 Index dropped 2.9% to its lowest since November, as investors fled high-valuation stocks for companies whose fortunes are closely tied to the economic cycle. The S&P 500 ended lower after rising as much as 1%, while the Dow Jones Industrial Average hit an all-time high before settling for a 1% gain.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/8/2021 11:02:57 PM
[Markets] Asia Set for Muted Open After U.S. Tech Tumble: Markets Wrap (Bloomberg) -- Asian stocks looked poised for a muted open after a rotation out of growth stocks drove the Nasdaq 100 Index into a technical correction. Treasury yields rose and the dollar strengthened.The U.S. tech benchmark tumbled almost 3% Tuesday to its lowest close since November, and is now down 11% from an all-time high in February. S&P 500 and Nasdaq 100 futures opened higher. The retreat in high-valuation stocks offset a rise in financial and materials shares, erasing the S&P 500 Index’s earlier gains. The Dow Jones Industrial Average hit an all-time high before settling up 1%. Futures pointed to modest gains in Japan and Hong Kong after Monday’s selloff in Asia. Australia edged higher at the open.Ten-year Treasury yields climbed to just under 1.6% and equivalent real yields also rose. Oil opened little changed after Brent crude pulled back below $70 a barrel. Gold steadied after slumping and Bitcoin traded above $51,000.The risks associated with rising bond yields persist, with the U.S. benchmark trading around a 12-month high amid fears that government aid programs could push the economy into overdrive and stoke inflation. Investors are also questioning whether equity valuations have become excessive, especially in speculative tech shares, and are favoring cheaper cyclical stocks.“There’s definitely a lot of volatility in the market right now and many of the sectors that underperformed last year are rallying -- this is part of a rotation,” said Valerie Grant, senior equities portfolio manager at AllianceBernstein.Here are some key events to watch:Japan GDP is due Tuesday.EIA crude oil inventory report is due WednesdayThe U.S. February consumer price index will offer the latest look at price pressures Wednesday.The European Central Bank holds its monetary policy meeting and President Christine Lagarde is set to do a briefing Thursday.StocksS&P 500 futures rose 0.5% as of 8:06 a.m. in Tokyo. The S&P 500 Index fell 0.5%.Nikkei 225 futures rose 0.1%.Australia’s S&P/ASX 200 Index rose 0.7%.Hong Kong’s Hang Seng Index futures rose 0.7% earlier.CurrenciesThe yen traded at 108.94 per dollar.The offshore yuan was at 6.5516 per dollar.The Bloomberg Dollar Spot Index rose 0.6%.The euro traded at $1.1851.BondsThe yield on 10-year Treasuries rose two basis points to 1.59%.Australia’s 10-year bond yield rose 4 basis points to 1.81%.CommoditiesWest Texas Intermediate crude declined 0.3% to $64.86 a barrel.Gold was at $1,684.54 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/8/2021 5:30:28 PM
[Markets] US STOCKS-Nasdaq hits correction, Dow advances as stimulus bill nears finish line Technology-related shares sold off on Monday in a big downturn that pushed the Nasdaq into a correction and offset stocks that rose on hopes the $1.9 trillion COVID-19 relief bill will spur the U.S. economic recovery. The Dow hit a record intra-day high but the big tech stocks that have led Wall Street to scale successive peaks over the past year fell, with the Nasdaq closing down 2.41%. Published:3/8/2021 4:57:58 PM
[Markets] Dow ends up over 300 points, but Nasdaq tumbles 2.4% amid tech selloff Dow ends up over 300 points, but Nasdaq tumbles 2.4% amid tech selloff Published:3/8/2021 3:27:47 PM
[Markets] Dow Dominates As Tech Wrecks; Bitcoin, Bond Yields, & The Buck Bounce Dow Dominates As Tech Wrecks; Bitcoin, Bond Yields, & The Buck Bounce

For the first time since 1993, the Dow is at a record, while the tech-heavy Nasdaq is down around 10% from its high...

Source: Bloomberg

“It feels like an attitude adjustment for tech and growth stocks,” said  Mike Bailey, director of research at FBB Capital Partners.

“Investors have decided that these Covid winners just got too expensive and now it’s time for a valuation haircut.”

And it was a chaotic day with futures sold in the Asia session after a gap up open, then bid through the European session... then divergent (tech wrecked, rest bid) before everything rolled over. S&P ended red into the close, but Nasdaq was hammered...

Today was The Dow's best performance relative to the Nasdaq since early November (vaccine headline day)...

Source: Bloomberg

Nasdaq pushed down to its 100DMA once again

David Tepper sparked (maybe) some exuberance early on but that didn't last for most of the indices, as the European close was the trigger for change again...

...and it appears the SPAC party is over...

Source: Bloomberg

The momo meltdown accelerate again...

Source: Bloomberg

Or put another way...

TSLA tumbled back below $600 (down over 3.5% intraday for the 5th straight day - the longest such streak since 3/11/20)...

And ARKK was clubbed like a baby seal...

As FANG stocks reversed Friday's panic-bid gains...

Source: Bloomberg

As AAPL dropped back below $2 trillion market cap...

Source: Bloomberg

Oh and GME soared 40%!!

IG Corporate bond yields in the US are now lower than 10Y Treasury yields (unusual but mainly due to the duration differences). However, still quite a milestone...

Source: Bloomberg

Treasury yields were higher on the day but only modestly compared to the recent chaos and the shifts were much more focused in the belly (2Y +2bps, 5Y +6bps, 30Y +1bp)...

Source: Bloomberg

And, as we have noted for a while, and Tepper and Bass confirmed today, TSY yields now offer huge pick up for hedge European and Japanese investors...

Source: Bloomberg

The dollar rallied to its strongest close since early November (vaccine time)

Source: Bloomberg

Cryptos are all higher from Friday after the Biden bailout passed the Senate...

Source: Bloomberg

Ethereum soared after the EIP-1559 approval...

Source: Bloomberg

Bitcoin pushed back above $51,000...

Source: Bloomberg

In a notable change, oil prices slipped lower today after WTI tagged $68 and reversed...

But, it's too late to stop retail pump prices topping $3.000 in the next few weeks...

Source: Bloomberg

Dollar gains helped pushed gold back below $1700...

Finally, for all the fearmongering, it appears the plateau is over as cases, hospiralizations, and deaths leg lower once again...

Source: Bloomberg

As "flu season" ends...

Source: Bloomberg

Tyler Durden Mon, 03/08/2021 - 16:01
Published:3/8/2021 3:07:49 PM
[Markets] US STOCKS-Dow advance as stimulus bill nears finish line The Dow climbed on Monday, led by stocks poised to benefit the most from an economic rebound as the $1.9 trillion COVID-19 relief bill awaited a final Congressional vote this week, and heavyweight tech-related stocks swung between gains and losses. After the legislation won U.S. Senate approval on Saturday, President Joe Biden said he hoped for a quick passage of the revised coronavirus relief package by the Democrat-controlled House of Representatives so he could sign it and send $1,400 direct payments to Americans. U.S. Treasury Secretary Janet Yellen, however, said on Monday the package would fuel a "very strong" U.S. recovery and she did not expect the economy to run too hot because of the increased spending. Published:3/8/2021 2:30:22 PM
[Markets] Nasdaq 100 Has Not Diverged This Much From the Dow Since 1993 (Bloomberg) -- One of the best manifestations of the rotation from formally high-flying growth stocks to value shares can be seen in the divergence of the Nasdaq 100 from the Dow Jones Industrial Average.As the 125-year-old benchmark sets another intraday record, the Nasdaq 100 is slumping toward a level traditionally seen as a correction. It’s the first time since 1993 that the Dow was at a record, while the tech-heavy gauge was this close to a 10% drop from its high.“Investors are feeling better about the recovery and looking to own improving fundamentals within large caps outside of tech and growth where valuations are more reasonable,” said Mike Bailey, director of research at FBB Capital Partners. “The focus on better fundamentals at a reasonable price may be driving the Dow to new highs.”About 90% of the 30-member Dow index traded higher Monday as of 2:40 p.m. in New York, with shares of Walt Disney Co. leading with a more-than 5.7% gain. Visa Inc. added about 4% while Goldman Sachs Group Inc. and Home Depot Inc. each advanced more than 2%. Meanwhile, drops in Apple Inc. and Tesla Inc. weighed on the 36-year-old Nasdaq 100.Shares of other companies that had done well in 2020’s stay-at-home environment, including Microsoft Corp. and Netflix Inc., also dented on the tech-centric Nasdaq 100, as did those whose businesses helped consumers work from home during the pandemic, including Zoom Video Communications Inc., which fell almost 6% and DocuSign Inc., down about 4%.The split-market activity on display is another manifestation of the rotation underway as investors switch into shares of companies whose fortunes are closely tied to the economic cycle. That’s been painful for high-growth, high-valuation tech shares that become less appealing amid bond-market turbulence that’s sent yields on 10-year Treasuries to 1.61%.Earlier: SPAC Froth Turns on Itself With Stocks Plunging 20% in Two WeeksThe rotation is even harsher in once-hot areas like the market for special-purpose acquisition companies, or SPACs, another 2020 craze whose allure has fizzled in recent days. A gauge tracking such firms -- IPOX SPAC Index -- declined about 2% Monday, its fourth down day out of the last five sessions. A popular SPAC by Chamath Palihapitiya -- the Social Capital Hedosophia Holdings Corp. V, or IPOE -- fell as much as 11% at one point Monday.“It feels like an attitude adjustment for tech and growth stocks,” said Bailey. “Investors have decided that these Covid winners just got too expensive and now it’s time for a valuation haircut.”(Adds additional stocks starting in the fourth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:3/8/2021 1:58:44 PM
[Markets] Wall Street rises as tech selloff eases; U.S. Senate passes stimulus bill The S&P 500 and the Dow rose on Monday, led by stocks poised to benefit the most from an economic rebound as the U.S. Senate passed the $1.9 trillion COVID-19 relief package, while heavyweight tech-related stocks clawed back some losses. President Joe Biden said he hoped for a quick passage of the revised bill by the House of Representatives so he could sign it and send $1,400 direct payments to Americans. Prospects of more government spending and faster economic growth have stoked fears of a spike in inflation, sending the benchmark 10-year Treasury yield to near one-year highs. Published:3/8/2021 9:58:59 AM
[Markets] Dow posts early gain but Nasdaq suffers as bond yields unsettle tech investors Dow posts early gain but Nasdaq suffers as bond yields unsettle tech investors Published:3/8/2021 8:56:52 AM
[Markets] Nasdaq Futures Tumbles As Value Surge Makes Europe A Sea Of Green Nasdaq Futures Tumbles As Value Surge Makes Europe A Sea Of Green

US equity futures and global markets jumped higher at the reopen of Asian trading late on Sunday following news of the Senate's passage of the Biden $1.9TN stimulus plan and the spike higher in oil following the Houthi drone attack on Aramco facilities in the Gulf, but have since dipped amid renewed reflationary fears which pushed Treasury yields as high as 1.61% overnight hitting tech stocks with lofty valuations even as value stocks and European markets were broadly in the red. After rising above $71, Brent has since faded gains and was last trading near where it closed Friday at $69. Bitcoin soared as HK-based firm the latest institution to convert cash into Ethereum and Bitcoin.

At 7:10 a.m. ET, Dow e-minis were down 16 points, or 0.07%, S&P 500 e-minis were down 16.5 points, or 0.44%, and Nasdaq 100 e-minis were down 154.25 points, or 1.20%.

Futures tracking the Nasdaq 100 index sank as much as 2%...

... as the passage of a $1.9 trillion COVID-19 relief package by the U.S. Senate lifted bond yields, pressuring richly valued technology stocks and sparking inflation concerns. As a reminder, on Saturday the Senate passed the stimulus package - the biggest in U.S. history - and President Joe Biden said he hoped for quick passage of the revised bill by the House of Representatives so he could sign it and send $1,400 direct payments to Americans. According to JPMorgan, every $1 trillion of fiscal stimulus adds around $4-$5 to companies’ earnings per share, implying 6-7% upside for the remainder of the year.

Analysts expect a sharp acceleration in inflation, stoked in part by the latest spike in oil prices, which on Monday climbed above $70 for the first time since the pandemic began.

“Between reflation, inflation risk and equity valuations, there’s plenty of reasons for the market to be jittery over the bond re-pricing,” said Natixis strategist Florent Pochon. “Equity valuations will of course remain a burning issue in particular for overly rich sectors,” he also said, adding however that sell-offs should be seen as buying opportunities, given that central banks remain “structurally dovish”.

Technology stocks, including Facebook, Apple and fell between 1.3% and 3% after bearing the brunt of the sell-off in the past three weeks on fears of higher interest rates as the benchmark 10-year Treasury yield scaled one-year highs. Tesla which surged as high as $900 in the year since the coronavirus-driven crash in early 2020, lost another 3.4% after closing Friday at $597.95 and was down another 5% in Monday premarket trading.

“Tech stocks are far from having corrected fully (after) their sharp rise, as is the case of Tesla, ... as higher long-term interest rates compete with the dividend sometimes paid by such stocks,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Tech stocks were hit by the latest selloff in Treasury futures, which after sliding during the European session, were off the lows. Early weakness was also spurred by strong China data. Yields were cheaper by up to 3.5bp across 7-year sector as belly of the curve continues to underperform into Treasuries weakness; 10-year yields around 1.59%, cheaper by ~2.5bp vs Friday’s close, with long-end little changed, flattening 5s30s by ~3bp. Belly underperformance extended 2s7s30s fly to cheapest since 2018, 2s7s10s fly to widest since 2017. In Europe, Bunds, gilts outperform Treasuries by 1.8bp and 2.5bp; focus is also on ECB’s weekly PEPP figures at 2:45pm London (9:45am ET). Long-end auctions and February CPI are key events this week.

Banks were among the rare gainers in pre-market trading as the yield on benchmark 10-year Treasuries stood near a 13-month high, while Wall Street’s fear gauge jumped nearly 3 points and was on course for its biggest one-day rise this month.

While US markets were torn between tech weakness and value/small cap strength, Europea was a sea of green, with the Stoxx Europe 600 Index climbing as much as 1.1% as cyclical sectors rally amid rising government bond yields. Banks were the top-performing sector, surging 2.9%, the most in three weeks. Auto stocks +2.1%, insurance +2%. Personal consumer goods are the biggest laggards, falling 0.8%, with utilities down 0.4%.

Unlike Europe, Asian stocks were a sea of red and closed at a two-month low as benchmarks in China and Hong Kong lead declines across the region as Chinese stocks posted their biggest decline in seven months, down 3.5%, on concerns that Chinese officials could tighten policy to rein in lofty valuations.

China’s CSI 300 Index entered a correction on concerns about liquidity conditions and lofty valuations in some recently favored names. Kweichow Moutai and other liquor stocks led the slump, while technology firms also weighed. Hong Kong’s Hang Seng Index fell, with Tencent contributing the most to the measure’s drop. Philippine stocks slid after the nation’s escalating virus infections topped 3,000 for a third day and the central bank governor said inflation may exceed its target in the next few months. Oil-related stocks in the region bucked the trend, advancing after Saudi Arabia said one of its crude facilities came under missile attack on Sunday, sending Brent prices above $70.

Japanese shares fell, erasing a morning advance, as declines in electronics and telecommunications companies offset gains in the bank and pharmaceutical sectors. The Topix and Nikkei 225 Stock Average both reversed gains of more than 1% to close lower. Tech shares dropped along with those of peers in Asia and futures on the Nasdaq 100 as worries over rising U.S. yields tempered appetite for growth stocks. A gauge of bank shares extended its climb into a fourth day, reaching its highest in more than a year amid continued gains in U.S. Treasury yields. “Investors are likely to be wary over the lack of fresh leads that can give local equities an extra boost from current levels,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank. The market is likely to say devoid of direction amid a tussle between dip-buyers and those looking to take profits, she said. Local equities started the day higher after bargain hunters drove a rebound in U.S. stocks Friday.  “On the U.S. stimulus plan, it will surely bolster the economy going forward, but a lot of it has been already priced in,” Sera said.

Emerging-market equities headed for their worst three-day slump since June as rising global bond yields fueled investor anxiety. Stocks from China and the Philippines led global declines, taking the three-day drop for MSCI Inc.’s equity gauge to 4.3%. Saudi Arabian shares defied the move, hovering near their highest in almost six years after the kingdom said it had intercepted an attack on a key oil site. An index of developing-nation currencies fell below its 100-day moving average amid a broad selloff from Mexico to Thailand and South Africa. In Turkey, the lira fell for a fifth day, touching its lowest since December. Traders are maintaining a cautious stance on risk assets amid renewed pressure from rising U.S. Treasury yields. A stronger dollar is also weighing on emerging-market currencies, even as the prospect of further gains in Brent crude has buoyed some oil-sensitive assets. “Until the macro environment clears up a bit, I’m afraid we have still some bumpy road ahead in the short term,” said Patty Cao, an assistant portfolio manager at Jupiter Investment Management Ltd. in London.

U.S. Treasury Secretary Janet Yellen tried to counter inflation concerns by noting the true unemployment rate was nearer 10% and there was still plenty of slack in the labour market. Yet as shown above, yields on U.S. 10-year Treasuries still hit a one-year high of 1.626% in the wake of the data, and stood at 1.594% on Monday. U.S. yields increased a hefty 16 basis points for the week, while German yields actually dipped 4 basis points.

In FX, the Bloomberg Dollar Spot Index advanced as much as 0.5%, to head for a fourth day of gains, as the greenback was higher against most of its Group-of-10 peers; 10-year Treasuries underperformed Bunds, pushing the yield above 1.6%. The euro fell fell to a more than a three-month low of $1.1865 as the diverging trajectory on yields boosted the dollar against the euro, which fell to a three-month low of $1.1891; the pound steadied. Japanese buying of U.K. sovereign bonds swelled to a record in January (but has since likely turmlbed) as Brexit risks waned and progress in Covid-19 vaccinations brightened the outlook. New Zealand dollar led G-10 declines as losses increased in European session; the Aussie outperformed the Kiwi amid support from options and a rally in oil and iron ore.

BofA analyst Athanasios Vamvakidis argued the potent mix of U.S. stimulus, faster reopening and greater consumer firepower was a clear positive for the dollar: “Including the current proposed stimulus package and further upside from a second-half infrastructure bill, total U.S. fiscal support is six times greater than the EU recovery fund,” he said. “The Fed is also supportive with U.S. money supply growing two times faster than the Eurozone.”

In commodities, oil prices were up the highest levels in more than a year after Yemen’s Houthi forces fired drones and missiles at the heart of Saudi Arabia’s oil industry on Sunday, raising concerns about production. Prices had already been supported by a decision by OPEC and its allies not to increase supply in April. As a result, Brent crude temporarily traded above $71 although output appeared to be unaffected after the missiles and drones were intercepted, and Brent then slide back under $70.

The European Central Bank meets on Thursday amid talk it will look at ways to restrain further increases in euro zone yields. Monday's expected data includes wholesale inventories. Stitch Fix is reporting earnings.

Market Snapshot

  • S&P 500 futures down 1% to 3,802.00
  • MXAP down 1.2% to 203.49
  • MXAPJ down 1.5% to 681.02
  • Nikkei down 0.4% to 28,743.25
  • Topix down 0.1% to 1,893.58
  • Hang Seng Index down 1.9% to 28,540.83
  • Shanghai Composite down 2.3% to 3,421.41
  • Sensex little changed at 50,394.63
  • Australia S&P/ASX 200 up 0.4% to 6,739.57
  • Kospi down 1.0% to 2,996.11
  • Brent futures down 0.2% to $69.24/bbl
  • Gold spot down 0.6% to $1,690.58
  • U.S. Dollar Index up 0.3% to 92.28
  • SXXP Index up 0.6% to 411.15
  • German 10Y yield little changed at -0.290%
  • Euro down 0.4% to $1.1868

Top US News from Bloomberg

  • China’s exports surged in the first two months of the year, reflecting strong global demand for manufactured goods and with figures partly skewed by the low base in 2020 when the economy was in lockdown
  • President Joe Biden’s $1.9 trillion package will sail through the House when it takes up the bill on Tuesday, according to Democratic lawmakers and aides, even after proposals progressives championed were scaled back
  • Goldman Sachs Group Inc. is seeing substantial demand for digital assets from institutions as it works to restart its cryptocurrency trading desk
  • Germany will drastically speed up its vaccination campaign in the next few weeks with as many as 10 million weekly inoculations from the end of March, according to Finance Minister Olaf Scholz Deputy Governor Masayoshi Amamiya indicated the Bank of Japan may seek ways to allow more moves in Japan’s bond yields at next week’s policy review even after Governor Haruhiko Kuroda rejected the idea of widening the yield band
  • For Swiss National Bank President Thomas Jordan, the franc’s precipitous drop to a 20-month low against the euro has come at a helpful moment after an open season for attacks on his policiesThe Biden administration is considering withdrawing all troops from Afghanistan by May 1 as it leans on President Ashraf Ghani to accelerate peace talks with the Taliban, including by supporting a proposal for six-nation discussions that include Iran

A quick look at global markets courtesy of Newsquawk

Asian equity markets eventually traded mostly lower as underperformance in tech sapped the early momentum from stimulus progress after the US Senate passed the USD 1.9tln COVID-19 relief bill which includes USD 1,400 of stimulus checks and with the House set to vote on the bill on Tuesday. ASX 200 (+0.4%) rallied at the open with the commodity-related sectors leading the advances, especially gold miners after the precious metal reclaimed the USD 1700/oz level and with M&A speculation driving price action in some of the notable gainers including Myer Holdings which is being eyed by a private equity group and with Pernod Ricard rumoured to be mulling a GBP 5bln bid for Treasury Wine Estates. Nikkei 225 (-0.4%) was indecisive and initially reclaimed the 29k level but then came off intraday highs with upside capped by a choppy currency and tech weakness. Hang Seng (-1.9%) and Shanghai Comp. (-2.3%) were also boosted at the open after strong Chinese trade data which showed February YTD exports surged by 60.6% Y/Y although Chinese markets then gave up their gains with some downplaying the strong data as partly due to low base effects and amid underperformance in tech which suffered in a continuation of the rotation out of the sector and resulted in the Hang Seng Tech Index dropping by more than 5%. Finally, 10yr JGBs declined as they tracked the downside in T-note futures which briefly fell beneath the 132.00 level shortly after the resumption of electronic trade, while the lack of BoJ purchases in the market today also kept demand subdued.

Top Asian News


European cash markets kicked off the week with gains across the board (Euro Stoxx 50 +1.0%) as the region reacted to the late-doors rally on Wall Street on Friday whilst shrugging off a mostly downbeat APAC lead. Since then, major bourses have waned off best levels with the UK's FTSE 100 (+0.1%) the laggard amidst Sterling's resilience to Dollar strength coupled by the reversal in crude prices - thus pressuring index heavyweights Shell (-0.1%) and BP (-0.4%). US equity futures meanwhile have somewhat stabilised in early European trade after drifting lower throughout the overnight session - with the tech-laden NQ futures (-1.5%) back on the boil and the YM (-0.1%) slightly more cushioned. Back to Europe, aside from the aforementioned pullback in oil prices, the broader sectors reflect a pro-cyclical bias, with defensives Healthcare, Utilities and Staples the laggards and in-line with the mass vaccination narrative. However, the top gainers include the likes of yield-sensitive Banks, Autos and Insurance. Onto individual movers, Pearson (+4.9%) is firmer post earnings after suggesting it is launching a strategic review of its international courseware and local publishing businesses. Pernod Ricard (-0.6%) trades softer following reports it is mulling a GBP 5bln bid for Treasury Wine Estates. Finally, Airbus (+2%) is firmer despite an overall downbeat delivery report which highlighted mass cancellations emanating from Norwegian Airlines, with the French aircraft-maker potentially latching onto the reopening narrative.

Top European News


In FX, only a relatively short-lived and shallow pull-back in DXY terms before the Buck bounced across the board to extend gains and the index probed beyond last Friday’s post-NFP peak within a 91.840-92.303 range. Technical analysts are now looking at Fib resistance around 92.450 – 23.6% retracement of the move from 102.97 to 89.20 - ahead of the next half round number as US Treasury yields rebound and the curve re-steepens into supply and the House vote on President Biden’s Usd 1.9 tn relief bill on Tuesday. More immediately, employment trends for February and January wholesale trade.

  • NZD/CHF/AUD - The Kiwi is underperforming in advance of Q4 NZ manufacturing sales, with Nzd/Usd now at risk of losing 0.7100+ status as a high beta, and also not gleaning as much underlying support as the Aussie from Chinese trade data or a firmer PBoC CNY midpoint fix overnight, albeit neither helping the CNH subsequently slipping towards 6.5000 vs the Greenback. Hence, Aud/Usd is now below 0.7650 even though the Aud/Nzd cross remains elevated around 1.0750 in the run up to NAB business confidence, conditions and a speech from RBA Governor Lowe all on Tuesday. Elsewhere, the Franc continues to flounder irrespective of Swiss fundamentals like jobs data or the fact that weekly sight deposit balances indicate no intervention again, with Usd/Chf up near 0.9350 and through the base of a weekly chart formation.
  • EUR/CAD/JPY - All unable to resist latest Greenback advances, as the Euro retreats further below 1.1900, the Loonie tests support/bids at 1.2700 and Yen pivots 108.50 after holding just a few pips above its US payrolls low awaiting a raft of Japanese data including household spending, earnings, Q4 GDP and money supply.
  • GBP - No real reaction to comments from BoE Governor Bailey underlining a reticence towards using NIRP, but Sterling is holding up better than other majors against the backdrop of Dollar strength with some assistance via selling interest in Eur/Gbp following recent retracement or corrective price action. Indeed, Cable is holding above 1.3800 as the cross reverses from circa 0.8622 to almost 0.8580 pre-ECB and UK GDP later this week.

In commodities, WTI and Brent front-month futures have retreated from their overnight highs and have closed the gap seen at the electronic open - with the former back under USD 66.50/bbl (vs high 67.98/bbl) and the latter sub-70/bbl (vs high 71.38/bbl). Prices were bolstered overnight amid reports of further Saudi oil infrastructures being targeted by Houthi militia, but no personnel were injured nor infrastructure damaged. Nonetheless, crude markets at the time saw a pricing of geopolitical risk premia amidst the increasing frequency of these attacks, with other supportive factors including the US COVID bill's passage through the Senate, OPEC's surprise last week and the Chinese trade data overnight. However, since the cash open, prices have been on a downward trajectory as the complex moves in tandem with sentiment whilst being weighed on by a firmer Buck, potentially also prompting some profit-taking. Further, ING suggests that the bullish sentiment in the paper market is not reflected to the same extent in the physical market - "Investors appear to be looking further forward to expectations for a strong demand recovery over the second half of this year", the bank remarks, adding that a significant correction could be on the cards if stronger demand does not materialise. Something else to ponder - some desks suggest that the OPEC+ surprise decision to maintain its production pact last week risks overheating the market and prompting further instability in the future. Also, as economies grasp onto a firmer footing via ramped up mass vaccinations, it begs the question of how long OPEC+ will keep this support, namely with regards to Saudi's excess unilateral cut which was rolled over as a precautionary measure. Elsewhere precious metals bear the brunt of the rising Dollar with spot gold back below USD 1,700/oz (vs high USD 1,714/oz) and spot silver inching closer towards the USD 25/oz mark (vs high USD 26.925/oz). Base metals meanwhile trundle lower, in-fitting with the risk sentiment, with LME copper back under USD 9,000/t (vs high 9,120/t) after shrugging off the Chinese trade balance which was distorted amid lower base effects.

US Event Calendar

  • 10am: Jan. Wholesale Trade Sales MoM, est. 1.0%, prior 1.2%; Wholesale Inventories MoM, est. 1.3%, prior 1.3%

DB's Jim Ried concludes the overnight wrap

Hopefully today marks the starts the slow march to permanent normality here in the U.K. as all schools go back. We have one excited 5 year olds on our hands and two even more excited mid to late 40 year olds. The 3 years olds and Bronte are more nonplussed. From today you can also socialise with one other person outside on perhaps a park bench or for a picnic. I wonder how many park benches were packed this morning at just past midnight.

If you were meeting up with a long lost market friend there would be plenty to talk about at the moment after yet another fascinating week. The market continues to challenge the Fed but with the Fed so far refusing to engage too much with what are increasingly aggressive hiking expectations. The market now prices in a full US hike by early 2023 and nearly three by the end of 2023. As we’ll see in our usual weekly market wrap at the end today, 10yr US treasuries ended the week another 16.1bps higher last week after Brainard and Powell didn’t push too hard against the market and also due to strongish data including a decent payroll report on Friday. Having said that yields did close -6bps off their post payroll highs so it could have been worse for bonds.

On Friday in our CoTD we showed that by the end of February this was the third worst start to the year for 10yr treasury returns in at least 190 years. If yields stay where they are for the rest of March my early calculations are that Q1 will be the second worst in that period only behind 1980. So given the ups and downs of markets and especially inflation over the last two centuries this is a remarkable statistic in my opinion. See the CoTD here and email if you want to get on the daily run.

A reminder also that I published a note on the historic relationship between yields and credit spreads late last week. Basically real yields are more important than nominal and it’s interesting that spreads started drifting this year when real yields started spiking higher from mid-February. See the report here.

The week in Asia has started off on a weaker footing even after a strong start and the fact that US equities (S&P 500 +1.95%) surged on Friday immediately after European markets closed. At that point they were down c.-1%. So a stunning late swing. As we keep on saying it’s a constant push and pull at the moment between epic stimulus/liquidity and fears over rates and inflation. Given this is all happening before most Western economies have even opened up then it’s highly likely we’ll be in this high vol pattern for sometime.

As we type the Nikkei (-0.56%), Hang Seng (-1.53%), Shanghai Comp (-1.23%) and Kospi (-0.99%) are all lower. Futures on the S&P 500 are down -0.35% while those on the Nasdaq are down a greater -1.03%. European futures are pointing to a positive open though as markets on this side of the pond try to catch up with late rally in the US on Friday. Turning to sovereign yields, those on 10y USTs are up +1.5bps to 1.583% but those on Australia (-6.1bps) and New Zealand’s (-4.3bps) 10yrs are down as they are reversing Friday’s move higher after the yield on 10y USTs ended the day largely unchanged. Elsewhere, both WTI ($67.46) and Brent ($70.79) oil prices are up by +2.06% after Saudi Arabia reported an attack on the world’s largest crude terminal although output seems to be unaffected. Brent and WTI are now trading at their highest level since October 2018. It seems that the rise in oil prices and high headline US stimulus number might be stoking some inflation concerns in the Asian session this morning.

In terms of data releases, over the weekend we saw China’s YtD Feb trade data. Exports were up +60.1% yoy (vs.+40.0% yoy expected) while imports stood at +22.2% yoy (vs. +16.0% yoy) bringing the trade balance to $103.25bn (vs. $59.0bn expected). It should be noted that last year China went into a very stringent lockdown in late January 2020 and as a result yoy growth is on a lower base.

The initial positive momentum in Asia was enhanced by the news on Saturday that the Senate has passed Biden’s $1.9tn stimulus bill. However we quickly saw concerns come back over yields and the further oil rise hasn’t helped. The Bill now returns back to the House tomorrow for a final vote before it can be sent back to the President to sign into law. At every step the market keeps on expecting the package to be watered down but it looks set to be every bit as large as Biden originally laid out. If it does make it through the House relatively unscathed then you may see another round of US growth upgrades and probably more concerns about yields and inflation. The battle royale will continue. I spoke with Brett Ryan from our US economics team over the weekend about the size of the package. They had recently factored in $1.6-1.7tn. He pointed out that around $200bn of the cost comes in the 2023-2026 period so the nearer term assumptions won’t be much different from the above consensus numbers outlined in their last update here.

Looking forward now, the highlights this week will be US CPI (Wednesday) and PPI (Friday), the ECB meeting on Thursday and given the pretty sizeable volatility in US rates at the moment the success of a $58bn 3yr auction (tomorrow) and a $38bn 10yr auction (Wednesday) will also be very important. Remember the Fed are now in their blackout period ahead of next week’s FOMC. So there won’t be much support or market damage from them this week.

With regards to the ECB meeting the focus will be all about whether the council feel that the recent rise in bond yields is proportional to the improving global economic prospects or an unwelcoming tightening of financial conditions. Our economists expect them to emphasise their commitment to preserving favourable financing conditions, which encompasses sovereign yields, and its willingness to use the PEPP’s capacity and flexibility. See their preview here for more.

In terms of other releases to look out for this week, there will be industrial production numbers from the Euro Area and its major economies, a final reading of Euro Area GDP, along with February’s preliminary University of Michigan sentiment indicator for the US on Friday. See the day by day week ahead for more at the very end as usual

Finally, earnings season grinds to a crawl with just 3 companies from the S&P 500 and 50 STOXX 600 companies announcing results. The main highlights to look for are Deutsche Post and Continental tomorrow, while Wednesday brings releases from Adidas, Campbell Soup, Oracle, and Industria de Diseno Textil. On Thursday, the market will get results from Assicurazioni Generali, Ulta and then EssilorLuxottica on Friday.

Back to last week and a recap now. All attention was on the continued selloff in US rates which continued to shake equity prices, particularly those of high-growth tech companies. US 10yr yields finished the week nearly +106bps above their record lows from early-August and have now risen above their pre-pandemic lows in 2019. They climbed +16.1bps on the week to 1.566%, their highest level since February of last year and the fifth straight weekly rise in yields. The last time bond sold off for five weeks in a row was January 2018. The move in rates was driven by both inflation expectations (10yr breakevens rose +8.6bps) and real rates (+7.5bps). The move at the long end of the curve saw the 2y10y yield curve steepen another +15.1bps to 142.3bps, the steepest since November 2015. Bond yields elsewhere fell back some with 10Yr Bund yields decreasing -4.2bps to -0.30%, 10yr Gilt yields dropped -6.4bps to 0.76%, and OATs were -3.7bps lower at -0.48%. Some of this differential was due to a late rally in the US the previous Friday that didn’t get factored in to European yields until Monday morning.

The S&P 500 looked set to end the week lower before Friday’s +1.95% rally, which caused the index to finish +0.81% higher on the week. The index was bolstered by cyclicals such as bank (+4.06%) and energy (+9.97%) stocks, the former rallied on higher interest rates and the latter on stronger oil prices. Brent crude rose +4.88% to finish just short of $70/bbl and WTI gained +7.46% to over $66/bbl – the highest closing level since April 2019 – on the back of OPEC+ agreeing to postpone increasing supply for a few months. Tech stocks were the big loser as the NASDAQ was down -2.06% over the course of the week, even as the index rose +1.55% on Friday as equites tried to bounce back. European banks gained +3.76% which helped the STOXX 600 to finish the week up +0.91% (-0.78% Friday before the late US rally) with the French CAC (+1.39%) and FTSE 100 (+2.27%) notably outperforming.

In terms of data from Friday the highlight was the US jobs report for February, which showed nonfarm payrolls increase by far more than expected at +379k (vs. +200k est). This took the headline unemployment rate down to 6.2%, though earlier in the week Fed Chair Powell cautioned that getting the participation rate back up will be just as important to the labour market recovery. The strength of the report saw US rates remain elevated even if we closed c.6bps lower than the peaks post the number. Elsewhere German January factory orders rose +1.4% MoM (vs. +0.5% est.) following December’s -2.2% decline – the first decline since April 2020. On the other hand, Italian retail sales for January fell -3.0% (vs. -0.5% est.) fell -6.8% on a YoY basis.

Tyler Durden Mon, 03/08/2021 - 07:47
Published:3/8/2021 6:55:51 AM
[Markets] Dow finishes volatile session up 570 points; Nasdaq ends up 1.6% Dow finishes volatile session up 570 points; Nasdaq ends up 1.6% Published:3/5/2021 7:10:32 PM
[Markets] Dow up 650 points as March kicks off with stock-market rebound Dow up 650 points as March kicks off with stock-market rebound Published:3/1/2021 9:42:01 AM
[Markets] Jerome 'Von Havenstein': Inflation... Or Bust! Jerome 'Von Havenstein': Inflation... Or Bust!

Authored by MN Gordon via,

This week brought forth new evidence that – to be perfectly frank – we’re all screwed.

On Thursday, the yield on the 10 year Treasury note topped 1.55 percent.  Subsequently, the Dow Jones Industrial Average, after hitting an all-time high on Wednesday, dropped 559 points.  Wall Street must not be listening to Federal Reserve Chairman Jerome Powell.

Earlier in the week, Powell, in testimony to the Senate Banking Committee, confirmed that the central bank would keep the federal funds rate near zero until maximum employment is achieved.  In addition, the Fed, in its recently released semiannual Monetary Policy Report, confirmed it would continue to create credit from thin air to buy $80 billion per month of Treasuries and $40 billion per month of mortgage backed securities (MBS).

What’s more, the Report specified the Fed’s purchases of Treasuries and MBS “…will continue at least at this pace until substantial further progress has been made toward its maximum employment and price stability goals.”  The operative words being, “at least.”

What to make of it…

Central banking is a form of central planning.  And central planning is a form of state control.  And state control, as practiced in the United States, pertains not so much to the economics of producing income; but, rather, the methods for redistributing it.

State control, through inflationism, takes money saved and earned by individuals and covertly redistributes it to the central authority – i.e., Washington.  There it is consumed by ever expanding government social programs and colossal pentagon budgets.  What remains is wasted away by the endless array of bureaucracies and agencies.

Powell, without question, is a man of unyielding principles.  His core beliefs align with the central authority.  They also align with the twelve regional Federal Reserve Banks, which, according to the Ninth Circuit Court of Appeals“are independent, privately owned and locally controlled corporations.”

Hence, Powell endeavors to keep Federal Reserve Banks and their member banks flush with cash and liquidity.  He also endeavors to provide Washington an endless supply of cheap credit.

The point is, the higher interest rates run, the more Powell will intervene in credit markets, via Treasury and MBS purchases, to hold rates down.  The goal of maximum employment is merely a cover for what will be several trillion dollars more in quantitative easing.

Powell, we presume, grasps the importance of history.  He surely knows all fiat money is doomed to failure.  And he surely knows the dollar’s current place in a fiat money’s lifecycle.

Powell, no doubt, recognizes the dollar’s end is nigh.  But what can he really do?  He has a tiger by the tail.  He can’t reverse course.  Like others before him, he must ride it to the bitter end…

The Grandmaster of Monetary Stimulus

Rudolf von Havenstein had been president of the Reichsbank – the German central bank – since 1908.  He knew the workings of central bank debt issuances better than anyone.  He was a central banker’s central banker.  He was good at it.

Thus, when he was called upon by history to deliver a miracle for the Deutches Reich in the aftermath of WWI, he knew exactly what to do.  He’d deliver monetary stimulus.  In fact, he’d already been at it for several years.

On August 4, 1914, at the start of the war to end all wars, the Goldmark – or gold-backed Reichmark – became the unbacked Papermark.  With gold out of the picture, the money supply could be expanded to meet the endless demands of war.

To this end, von Havenstein took public debt from 5.2 billion marks in 1914 to 105.3 billion marks in 1918.  Over this time, he increased the quantity of marks from 5.9 billion to 32.9 billion.  German wholesale prices rose 115 percent.

By the war’s end, Germany’s economy was in shambles.  Industrial production in 1920 had slipped to just 61 percent of the level seen in 1913.  With a weak economy, and under the crushing weight of debt, it was time for von Havenstein to really crank up the money printers.

In truth, he didn’t have much of a choice.  The limits of fiscal and monetary prudence had been crossed when the Goldmark was replaced with the Papermark.  Reversing course now would have brought an immediate economic collapse and societal discord.

Von Havenstein, faced with the choice of post-war depression or inflation, chose what he thought would be the easier softer way.  He considered inflation the lesser of two evils.  Plus it would lighten Germany’s war debt.

Jerome von Havenstein: Inflation Or Bust

Initially, the ill effects of the Reichsbank’s money supply inflation seemed to be limited.  As real, inflation adjusted wages declined, unemployment actually fell to record lows.  But, alas, a real McCoy crack-up boom was underway.

As the value of the Papermark continued to decline wage earners were continually shredded.  To combat the increasing destruction to wage earners the German government introduced mandatory wage indexing.  Upon this government intervention, unemployment immediately soared…running from record lows to record highs within just two years.

At the same time the decline in the Papermark’s purchasing power and external value accelerated until the currency, for all practical purposes, ceased to function as a viable medium of exchange.

Indeed, printing money can be stressful.  But printing extreme amounts of money can be downright terminal.

By the time von Havenstein died in late-November 1923 of a myocardial infarction, the central bank of Germany had printed over 500 quintillion marks.  Moderate inflation transformed to hyperinflation.  One U.S. dollar was worth 4.2 trillion marks by December 1923.

Moreover, the destruction of the mark brought destruction of society…and the rise of national socialism.  The medium-term political repercussions of this economic catastrophe soon engulfed the whole world.

Jerome Powell, like Rudolf von Havenstein, knows exactly what he’s doing.  In fact, he’s told the world what he’s doing.  It’s inflation or bust.

The gold market, which has slumped to below $1,800 per ounce, must think he’s bluffing.  This is a mistake.  If you understand nothing else understand this: Powell’s pursuit of inflation is as serious as a von Havenstein heart attack.

Tyler Durden Sat, 02/27/2021 - 13:30
Published:2/27/2021 12:47:03 PM
[Markets] Stock Market Today: Tech Gets Respite From Recent Selling Treasury yields cooled off Friday, and so did the Dow and S&P 500, while the recently maligned Nasdaq and several of its tech components enjoyed a modest rebound. Published:2/26/2021 7:17:57 PM
[Markets] Dow falls about 475 points Friday to close out losing week and month Dow falls about 475 points Friday to close out losing week and month Published:2/26/2021 3:38:32 PM
[Markets] US STOCKS-Nasdaq finishes higher, tech stocks retrace some losses The tech-heavy Nasdaq index rallied in choppy trading on Friday, even as sentiment remained fragile after the index's worst performance in four months the day before as fears of rising inflation kept U.S. bond yields near a one-year high. The S&P 500 ended little changed, while the Dow index closed lower after earlier dropping to a three-week low. The Dow still posted gains of nearly 4% for the month, as investors bought into cyclical companies set to benefit from an economic reopening. Published:2/26/2021 3:38:32 PM
[Markets] Bonds & Bullion Suffer Worst Month In 5 Years As Commodities & Crypto Soar Bonds & Bullion Suffer Worst Month In 5 Years As Commodities & Crypto Soar

Update: Into the close, bonds were panic-bid with 10Y Yields plunging 14bps - the best day for bonds since March 2020

Source: Bloomberg

And 20Y Yields crashed over 20bps, almost erasing the entire week's losses...

Source: Bloomberg

*  *  *

February saw a massive shift in the market's perception of The Fed's rate-hike trajectory... now pricing in more than 4 rate-hikes between 2022 and 2024...

Source: Bloomberg

Bitcoin surged for the 5th straight month in February, despite some late weakness...

Source: Bloomberg

As bonds and bullion puked (while the dollar trod water)...

Source: Bloomberg

US equities were very mixed in February with Trannies and Small Caps outperforming as Nasdaq lagged (basically breaking even)...

Source: Bloomberg

February ended ugly however, with Nasdaq's worst week since October (down for 2nd week in a row)...

This is the 4th straight week that Small Caps have outperformed Big-Tech, erasing all of the relative outperformance of Nasdaq over Russell 2000 since March...

Source: Bloomberg

The S&P 500, Nasdaq, and Dow all tested their 50DMAs this week...

IPOs and SPACs suffered their biggest weekly loss since March 2020...

Source: Bloomberg

Value outperformed growth in February by the most since March 2001...

Source: Bloomberg

Momentum was down for the 3rd straight week (biggest weekly drop since November) to its lowest close since Jan 2020...

Source: Bloomberg

Bonds bloodbath'd in February...

Source: Bloomberg

...with 5Y thru 30Y up between 35 and 40bps...

Source: Bloomberg

In fact this is the biggest bond bear market since the Taper Tantrum...

With the last week the worst for the belly of the curve since Sept 2019...

Source: Bloomberg

Notably, 10Y Yields pushed significantly lower today, now down over20bps from yesterday's spike highs...

Source: Bloomberg

All of which made us think that many market participants may need some 'honest meditation'...

Corporate bond land was battered also with IG bond prices seeing the worst month since March 2020 (and HY worst week since October 2020)

Source: Bloomberg

Thanks to the surge in the last few days, the Dollar ended February very marginally higher (after bouncing off unch for the year)...

Source: Bloomberg

Bitcoin outperformed its crypto peers in February, up 45%...

Source: Bloomberg

But, Crypto ETFs tumbled to record discounts to spot...

Source: Bloomberg

Gold and Silver's worst week since Nov 2020 as copper managed to cling to gains and crude outperformed...

Source: Bloomberg

But on the month, the reflation/growth commodities roared higher as PMs were pummeled...

Source: Bloomberg

As the surge in real yields weighed on gold...

Source: Bloomberg

Finally - and perhaps most importantly - February saw the biggest monthly plunge in COVID cases, hospitalizations, and deaths since the crisis began...

Source: Bloomberg

Tyler Durden Fri, 02/26/2021 - 16:00
Published:2/26/2021 3:11:38 PM
[Markets] Market Snapshot: Dow down 200-plus points, but holds grip on 31,000 as S&P 500 rebounds off bearish trend line Dow heads lower Friday, stocks extend weekly losses, triggered by a sudden rise in Treasury yields that put the tech-heavy Nasdaq Composite on pace for its worst weekly skid since October.
Published:2/26/2021 12:36:50 PM
[Markets] Dow's down over 600 points in final half-hour of session Dow's down over 600 points in final half-hour of session Published:2/25/2021 3:00:56 PM
[Markets] The Dow is now down more than 500 points as stock losses accelerate Thursday The Dow is now down more than 500 points as stock losses accelerate Thursday Published:2/25/2021 12:28:37 PM
[Markets] Market Snapshot: Dow futures flat and broader market set to slump after jobless claims report Dow futures hover on either side of unchanged Thursday, a day after the blue-chip index ended at an all-time high, with investors parsing weekly data on applications for unemployment benefits.
Published:2/25/2021 7:59:29 AM
[Markets] Tech Tumbles As Yields Surge, Meme Stocks Explode Tech Tumbles As Yields Surge, Meme Stocks Explode

It's not just the surge in meme stocks that is a case of deja vu all over again: the big action this morning is in another closely watched asset - the 10Y - where yields have soared by almost 10bps, rising from 1.38% to a one-year high of 1.46%, rising just 4bps shy of the closely watched 1.50% level which Nomura predicts will spark an equity selloff.

"Inflationary signals, including a surge in commodity prices, are higher than we have seen in years,” said Geir Lode, head of global equities at the international business of Federated Hermes. “The prospect of a sooner-than-expected economic recovery has led to a surge in the U.S. 10-year yield.”

And amid fears that the stock rout will only get worse, Nasdaq futures fell 1% on Thursday, sliding for seven out of the last eight sessions, as investors rotated out of technology-related stocks...

... and into small cap and reflationary shares that will benefit from an economic rebound later in the year. The Russell 2000 index rallied and S&P500 eminis were modestly in the red. At 715 am ET, Dow e-minis were up 5 points, or 0.01%, S&P 500 e-minis were down 12.35 points, or 0.3%, and Nasdaq 100 e-minis were down 123.5 points, or 1%.

Banks such as Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, Wells Fargo and Bank of America Corp were up between 0.6% and 1.2%, tracking a rise in U.S. 10-year Treasury yields. Oil producer Apache Corp gained 1.3% after it reported a smaller-than-expected fourth-quarter loss and raised its spending forecast. Tesla fell as much as 2.7% in premarket trading Thursday after the company told workers it will temporarily halt some production at its car assembly plant in California.

Meanwhile, traders were kept busy after a renewed retail frenzy re-ignited the likes of GameStop, bets on $70 a barrel oil and a decade high in copper prices drove a commodity currency rally and bond yields were still rising too. In a fresh sign of a renewed retail-driven frenzy in equity markets, GameStop shares quadrupled, rising as high as $200 overnight.

The new frenzy puzzled analysts, who had ruled out another short squeeze of the stock which had battered some hedge funds, and fueled more hype after some Twitter users pointed out a cryptic tweet of an ice-cream cone photo from activist investor Ryan Cohen - a major shareholder in GameStop and a board member.

Reddit discussion threads were buzzing again about GameStop on Thursday, with members exhorting others to pile into the stock as the rally gathers steam. “Bought lots more #GME today, let’s keep fighting !!,” wrote one Reddit user Fundssqueezzer, while another user Responsible_Fun6255 said, “Rise of the planet of the ape: GME edition”.

Other “stonks” favored by WallStreetBets retail traders also leapt again, although explanations for the moves were tenuous.  Headphone maker Koss Corp surged 57%, while cannabis company Sundial Growers rose 10%; AMC rose 29%, Express was up 42%, and Koss soared 75%. In Europe, Nokia shares are up 6.2%; the stock was also a Reddit favorite last month

The risky trading strategies employed by some traders on Reddit have drawn the ire of investing legends such as Charlie Munger, long time business partner of Warren Buffett. “It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,” said Munger on Wednesday.

Of course, everyone ignored the warning and GameStop’s U.S.-listed shares soared nearly 104% on Wednesday. The volatility in GME, AMC Entertainment and other stocks led to outages on Reddit and periodic trading halts by the New York Stock Exchange. Robinhood said in a tweet that the NYSE action would impact all brokerages, but that it had not paused trading on the shares.

“It’s a pretty risky play to try and buy now ... what we might (see) at the open of the cash market is some people trying to get in,” said Oriano Lizza, premium sales trader at CMC Markets in Singapore, which does not offer pre- or post-market trade.

In any case, back to global markets where European stocks erased an earlier gain even as most European equities hold in the green. Eurostoxx 50 traded 0.2% higher having gapped up on the open. DAX fades an initial 0.5% gain to trade flat. FTSE 100 and IBEX outperform. Oil & gas, banks and miners are the best performers. Here are some of the biggest European movers today:

  • Nokia shares jump as much as 8.2%, the biggest gainer in the Stoxx Telecom Index, amid fresh interest in meme stocks. Nokia surged 26% last month as the stock became a Reddit trader favorite.
  • Telefonica shares gain as much as 5.7%, the best performer in Spain’s benchmark IBEX 35 index, after results, with Berenberg saying the telecom firm’s 4Q financials were strong.
  • DS Smith surges as much as 14%, the most since 2011, after Bloomberg reported Wednesday night that rival Mondi is exploring a potential takeover.
  • Vestas shares jumps as much as 6.2% after UBS analysts said the outlook for wind-turbine makers is continuing to gain momentum and upgraded the stock to buy.
  • Standard Chartered falls as much as 5.5% in London as the Asia-focused lender’s financial markets unit and progress on cost cutting disappoint at quarterly results.
  • Bayer shares drop as much as 4.5% after what Redburn describes as “messy” 4Q earnings and cautious 2021 dividend expectations, as well as management comments that co. may withdraw from various Roundup settlement agreements if certain eligibility and participation rates are not satisfied.

Earlier in the session, Asian stocks rebounded from their biggest drop in almost three months, bolstered by a rally in technology names. Samsung Electronics, SK Hynix and Taiwan Semiconductor Manufacturing boosted the MSCI Asia Pacific Index after U.S. President Joe Biden said he plans to address shortfalls in chip output that have idled production at some auto plants. SK Hynix hit a 20-year high. Tencent and SoftBank were the other big contributors to the Asian benchmark’s rise. South Korea’s equity benchmark surged 3.5% to lead gains in Asia. Key gauges in Singapore, Malaysia and Taiwan rallied at least 1.5% each. Markets in the Philippines were shut for a local holiday. Stocks in New Zealand bucked the regional trend, with the S&P/NZX 50 index sliding 1.2%. The nation’s government said it will require the central bank to take account of rampant house prices when it sets interest rates, a change that may restrict its ability to run loose monetary policy.

“There are two clear stories now” said CMC Markets senior analyst Michael Hewson. “You have the concerns about rising yields and they are continuing to move higher today, and then you have got an economic recovery story, which is helping lift the more moderately-valued parts of the market.”

Yields on U.S. Treasury bonds have soared recently (and with CTAs the most short in two years, they are likely to rise even more), pressuring technology-related companies as the United States accelerates its coronavirus vaccination program and plans further fiscal spending. Commodities also extended gains, with investors piling into metals that can ride faster growth trends. Copper, as previewed last week, moved closer to a record high set a decade ago and aluminum touched a two-year high.

Yields have blown up despite two days of reassuring remarks by Fed Chairman Jerome Powell who offered reassurance that policy would continue to be supportive and look beyond a temporary pick-up in inflation, especially from a low base. That’s given the bond market enough reason to keep driving yields higher. Powell said on Wednesday that U.S. rates could remain low for years, while ECB board member Isabel Schnabel was out early on Thursday saying it would fight any big increases in inflation-adjusted market rates.

“A too-abrupt increase in real interest rates on the back of improving global growth prospects could jeopardise the economic recovery,” she said. “Therefore, we are monitoring financial market developments closely.”

Despite growing central bank jawboning, bond markets are still not playing ball and are threatening to steamroll over what little credibility central bankers have. Ten-year German Bund yields climbed 3 basis points in early trading. U.S. 10-year Treasury yields blew to one-year highs of 1.46% and on course for the biggest monthly rise since Donald Trump’s 2016 U.S. election victory jolted markets.

In the FX markets, the dollar slumped in early trading to three-year lows as the Fed’s stance, ongoing progress with COVID vaccination programmes and commodity market uplift boosted riskier currencies. However, it has since rebounded back to unchanged. The Australian and Canadian dollars both hit three-year highs of $0.7978 and C$1.2503 per U.S. dollar respectively. The euro touched a one-month high of $1.2183. The safe-haven yen and Swiss franc both weakened.

“It is pretty clear that there is a pretty strong concentration in the commodity currencies,” said Saxo Bank’s John Hardy. “Even with emerging markets you are seeing it to a degree,” he added, pointing to how big energy importers like Turkey’s lira had faded.

In commodities, crude oil climbed to 13-month highs after U.S. government data on Wednesday showed a drop in crude output as a deep freeze in Texas disrupted production last week. Copper prices steadied near $9,500 a tonne in London. It’s now at its highest level in almost a decade and could log its biggest monthly gains in 15 years this month.

Looking at the day ahead, data releases from the US include the second estimate of Q4 GDP, weekly initial jobless claims and the preliminary January durable goods orders reading.  From central banks, we’ll hear from the Fed’s Quarles, Bostic, Bullard and Williams, and the ECB’s De Guindos, Lane and Hernandez de Cos. Earnings releases include Salesforce, American Tower, Moderna and HP, and this afternoon EU leaders will be gathering via videoconference for a European Council meeting. Highlights on the earnings agenda include Salesforce, HP, Etsy and Monster Beverage, all expected after markets close

Market Snapshot

  • S&P 500 futures down 0.1% to 3,917.50
  • Euro up 0.4% to $1.2213
  • Brent Futures up 0.5% to $67.35/bbl
  • MXAP up 1.4% to 215.29
  • MXAPJ up 1.5% to 723.82
  • Nikkei up 1.7% to 30,168.27
  • Topix up 1.2% to 1,926.23
  • Hang Seng Index up 1.2% to 30,074.17
  • Shanghai Composite up 0.6% to 3,585.05
  • Sensex up 0.5% to 51,043.83
  • Australia S&P/ASX 200 up 0.8% to 6,834.03
  • Kospi up 3.5% to 3,099.69
  • Brent Futures up 0.5% to $67.35/bbl
  • Gold spot down 0.8% to $1,790.99
  • U.S. Dollar Index down 0.40% to 89.82

Top Overnight News from Bloomberg

  • Economic confidence in the euro area improved in February, as consumers and businesses grew more optimistic that vaccine rollouts will spark a recovery this year
  • The European Central Bank is keeping a close eye on the euro area’s financing conditions and will use bond purchases to counter any unwarranted tightening, according to chief economist Philip Lane
  • New Zealand’s government will require the central bank to take account of rampant house prices when it sets interest rates, a change that may restrict its ability to run loose monetary policy.
  • Federal Reserve Chair Jerome Powell emphasized his view that the economy has a long way to go in the recovery and signs of prices rising won’t necessarily lead to persistently high inflation
  • Pfizer Inc. and BioNTech SE’s Covid-19 vaccine was overwhelmingly effective against the virus in a study that followed nearly 1.2 million people in Israel, results that public-health experts said show that immunizations could end the pandemic
  • Australia’s central bank found itself overwhelmed by the global reflation trade after it dived back into markets and discovered its biggest bond purchases in 11 months did little to hold down yields
  • New Zealand’s government will require the central bank to take account of rampant house prices when it sets interest rates, a change that may restrict its ability to run loose monetary policy
  • The Bank of Japan’s policy review will likely center on flexible stock-fund buying, bond yield movements and the potency of negative rates
  • Oil held gains after closing at the highest level in more than a year as a slump in U.S. crude production following the cold blast and shrinking European stockpiles tightened the market further

A quick look at global markets courtesy of Newsquawk

European stocks trade mostly firmer (Euro Stoxx 50 +0.1%) with price action somewhat contained in early hours as the region picked up a similarly mixed APAC lead heading into month-end. US equity futures also see a mixed session early-doors, but have waned off best levels seen overnight with the growth-led NQ (-0.6%) once again the laggard in European hours whilst the value-driven RTY (+0.6%) remains propped. The lukewarm tone in the equities markets comes as Fed officials downplayed the sustainability of the expected rise in inflation, whilst yields continue to remain elevated – with French 10yr yield turning positive for the first time since mid-2020. On the topic of rising yields, it’s worth recapping the sectorial correlation relative to a high-yield environment. The top beneficiaries from rising yields (by order) includes Banks, Cyclicals, Value, Insurance, Autos, Basic Resources. The top hit sectors meanwhile (by order) goes as such: Food & Beverage, Defensives, Growth, Healthcare, Real Estate. Meanwhile Technology and Retail see little correlation with rising rates in the context of weekly relative returns, as suggested by Goldman Sachs. This higher-yield playbook is currently portrayed within European sectors, with Banks, Oil & Gas, Basic Resources and Auto’s residing as the winners, whilst Healthcare, Food & Beverage and Chemicals reside on the other end of the spectrum. In terms of individual movers, heavyweight Bayer (-3.5%) pressures the DAX (-0.1%) lower following dismal earnings whereby revenue and Adj. EBIT deteriorated Y/Y whilst a large number of segments reported sales contractions. Other earnings-related movers include Axa (+3%), Telefonica (+2%), AB Foods (+1%), AB InBev (-5%) and Standard Chartered (-5%). Looking at M&A, FTSE-listed DS Smith (+7%) is lifted on reports Mondi (-0.7%) is reportedly considering a bid for DS Smith and has been speaking with advisors on the matter. Finally, heading into the US session, it’s worth mentioning the Reddit darling stocks - GME (+50% pre-mkt) and AMC (+16% pre-mkt) - are seeing another bout of upside after a late-door buying frenzy heading into the close.

Top European News

  • Europe’s Recovery Choices Will Leave It a Year Behind the U.S.
  • Merkel Is Leaving, But the EU Has a New Heavyweight in Draghi
  • Sunak Gives Himself Room to Raise Corporation Tax in U.K. Budget
  • How U.K. and Israel Raced to Global Lead in Covid Vaccination

Asia-Pac stocks rebounded from yesterday’s selldown after the region took impetus from the strong performance on Wall St where sentiment was underpinned by dovish Fed rhetoric and with gains led by energy and financials after oil prices and yields edged higher. ASX 200 (+0.8%) was positive in which energy stocks spearheaded the advances across the commodity-related sectors and with participants occupied by a heavy stream of earnings results including Qantas which surged despite posting a H1 net loss, as it also announced it was on track to deliver billions of cost savings over the next 3 years and is working on the assumption for international travel to resume in October. Nikkei 225 (+1.6%) coat-tailed on favourable currency flows and reclaimed the 30k status, while KOSPI (+2.1%) outperformed post-BoK meeting in which the central bank maintained its 7-day repo rate at 0.50% as expected and suggested the economy is to recover gradually led by solid growth in exports. Hang Seng (+2.1%) and Shanghai Comp. (+1.2%) were also positive in light of the global optimism and with MOFCOM planning to reinforce policy support for foreign trade, although tensions continued to linger after a US Navy warship transited through the Taiwan Strait and with USTR nominee Tai suggesting the US needs a plan for holding China accountable and to compete with its state-run economy. Finally, 10yr JGBs were lower amid gains in stocks which saw prices slip beneath the 151.00 level and as JGB yields extended to multi-year highs with 30yr and 40yr yields reaching the highest since December 2018 and January 2019, respectively, while the presence of the BoJ in the market for nearly JPY 1.3tln of JGBs with up to 10yr maturities failed to support prices.

Top Asian News

  • Hong Kong’s Biggest Builder Sun Hung Kai Posts Higher Profit
  • Hong Kong’s Richest Property Tycoon Said to Plan U.S. SPAC
  • Armenian Premier Warns of Coup as Army Tells Him to Quit
  • Aussie Dollar Breaches 80 U.S. Cents to Reach Three-Year High

In FX, the Euro marginally pipped the Aussie to the post in round number terms, but it was much more even between the single currency and both Antipodean Dollars when it came to percentage gains vs the Greenback before the former accelerated beyond 1.2225. All 3 are gleaning leverage from yield differentials, while Eur/Usd is also benefiting from supportive month end rebalancing flows and what looks like a more concerted technical correction in Eur/Gbp after the midweek bounce from just under 0.8550. Hence, the headline pair has breached recent highs ahead of 1.2200 on the way to circa 1.2235 and applied further pressure on the DXY that is losing touch with 90.000 between 90.144-89.720 parameters following Wednesday’s false break through the 50 DMA. Meanwhile, Aud/Usd has peered over 0.8000 where big barriers reside with impetus from an unexpected rise in Q4 Capex that reversed the prior quarter’s fall precisely, and Nzd/Usd is hovering around 0.7450 having spiked above 0.7460 in wake of NZ Finance Minister Robertson formally announcing changes to the RBNZ’s remit to include house prices. Note, modest declines in NBNZ business sentiment and the activity outlook were largely shrugged off, but looming trade data will likely draw more attention.

  • GBP/CAD - Notwithstanding the aforementioned retracement against the Euro, Sterling has taken advantage of general Dollar weakness to reclaim 1.4150+ status, and the Loonie has notched another milestone with the aid of strong oil prices with Usd/Cad down through 1.2500.
  • CHF/JPY- The Franc and Yen are still lagging due to less attractive costs of carry even though JGBs were flogged overnight in catch-up trade as widely anticipated, as the former languishes below 0.9050 and latter under 106.00 ahead of Tokyo CPI, Japanese ip and retail sales.
  • SCANDI/EM - The Sek is back on a more even keel vs the Nok and Eur amidst bullish rebalancing requirements given an above average standard deviation for the end of February, while Swedish sentiment indices for the current month were firmer across the board. Elsewhere, most EM currencies are reeling on the high yield eroding risk appetite and threatening capital flight scenario.

In commodities, WTI and Brent front-month futures are firmer on the session and hovering around best levels during early European trade. The complex overnight benefited from a mostly upbeat APAC session, whilst sources yesterday highlighted a rift building among OPEC+ members ahead of the meeting next week. One source suggested prices are “definitely high” and more oil is needed to cool the markets – adding that a 500k BPD increase looks to be a good option. Conversely, another source suggested no more relaxations until June given the risk of new variants and setbacks in the battle against COVID. Saudi will have to avoid a rift widening as the Kingdom itself is currently poised to reintroduced the 1mln BPD of oil which was taken offline as a goodwill gesture in January. ING previously suggested “It is unlikely that the group would bring a little over 2.2mln BPD of supply back onto the market, aware that the market would baulk at such a decision”, but the bank highlights that there is room for some sort of easing, contingent on how much output volume Saudi decides to bring back from its own additional cuts. Barclays meanwhile, forecasts 2021 Brent at USD 62/bbl & WTI at USD 58/bbl reflecting their projection of OPEC+ to increase aggregate supply by 1.5mln BPD over Q2 and for Saudi Arabia to reverse the unilateral cut in April. Furthermore, as production in Texas is coming back online - a subsequent reflection in the price of WTI may be noticed as ING states it expects to see further crude oil builds in the weeks ahead. WTI resides mid USD 63/bbl (vs high USD 63.79/bbl) and Brent mid USD 67/bbl (vs high USD 67.70/bbl). Notable tail-risks on the table surrounds month-end factors which may offer volatility, several Fed officials speaking through the session alongside US data which includes Initial Jobless Claims and Q4 PCE prices. Elsewhere, precious metals are mixed on the session, with spot gold trading below the USD 1800/oz handle amid headwinds from rising yields and spot silver nursed earlier losses. As a side note for silver, Reddit retail traders have been driving GME prices higher again so it may be something to just keep an eye on for any potential targeting of silver. Turning to base metals, LME copper has gains of around 0.5% and trades above USD 9,500/t, continuing the narrative as a recovery metal surrounding the reflationary backdrop. More on base metals. Looking further ahead, some suggest aluminium supply in China could be affected by China’s journey to net-zero CO2 emissions by 2060. China Inner Mongolia has seen a series of environmental changes which would inhibit further capacity growth as the region accounts for 9.0% of total Chinese aluminium supply.

US Event Calendar

  • 8:30am: 4Q GDP Annualized QoQ, est. 4.2%, prior 4.0%
  • 8:30am: Feb. Initial Jobless Claims, est. 825,000, prior 861,000; Continuing Claims, est. 4.46m, prior 4.49m;
  • 8:30am: Jan. Durable Goods Orders, est. 1.1%, prior 0.5%
  • 8:30am: Jan. Cap Goods Ship Nondef Ex Air, est. 0.6%, prior 0.7%; Cap Goods Orders Nondef Ex Air, est. 0.8%, prior 0.7%
  • 8:30am: 4Q PCE Core QoQ, est. 1.4%, prior 1.4%; 4Q Personal Consumption, est. 2.5%, prior 2.5%
  • 8:30am: 4Q GDP Price Index, est. 2.0%, prior 2.0%
  • 9:45am: Feb. Bloomberg Consumer Comfort, prior 45.8
  • 10am: Jan. Pending Home Sales YoY, prior 22.8%; Pending Home Sales (MoM), est. 0%, prior -0.3%
  • 11am: Feb. Kansas City Fed Manf. Activity, est. 15, prior 17

DB's Jim Reid concludes the overnight wrap

Risk appetite showed signs of returning to global markets over the last 24 hours as Fed Chair Powell stuck to his reassuring tone and continued to signal that the central bank would keep policy accommodative for some time to come. The remarks led to a sharp turnaround across a number of different asset classes, with the S&P 500 moving from an intraday low of -0.56% shortly after the open to end the session +1.14% higher, which was the strongest daily performance for the index in over 3 weeks. Perhaps the most headline-grabbing comment from Powell was thatit could take more than 3 years before the Fed reached its inflation goal of 2%, helping to reiterate the message that the Fed are in absolutely no rush to pare back on stimulus any time soon, and he reaffirmed his message that the labour market was very far from the Fed’s goal, saying that there was still “a long way to go” before the US got to maximum employment. We should find out more on the Fed’s current thinking on inflation in the next 3 weeks when they release their new Summary of Economic Projections at the March FOMC meeting.

Looking at the moves in more depth, risk assets had their best day for some time thanks to Powell, though it was energy stocks that saw the largest gains thanks to another sizeable rise in oil prices. In fact, both Brent crude (+2.55%) and WTI (+2.51%) climbed to their highest levels in over a year yesterday, at $67.04/bbl and $63.22/bbl respectively, as the combination of tighter supplies and recovering economic demand proved supportive, and they’re holding those levels this morning. Otherwise though, it was cyclical industries that led the advance, with autos (+5.60%), banks (+2.49%) and capital goods (+2.26%) being among the strongest performers in the S&P. Tech stocks recovered their losses too, with the NASDAQ up +0.99%, while over in Europe the STOXX 600 gained +0.46%. The reflation/reopen trade was in full force in Europe as well with the travel & leisure (+1.87%), energy (+1.71%) and basic resources (+1.46%) again leading the charge here.

Even as Powell struck a dovish tone, sovereign bonds continued to lose ground on both sides of the Atlantic, and yields on 10yr Treasuries rose +3.4bps to 1.376%, their highest closing level in a year, and have moved up a further +2.0bps this morning. As with equities though, that was some distance from its intraday high, at which point yields had climbed all the way to 1.434%. The moves were evident across the curve, with 30yr Treasury yields rising +5.2bps yesterday to their own 1-year high, which helped the 5s30s curve reach its steepest level in over 6 years. For Europe it was a similar story, with yields paring back their intraday highs as Powell spoke, though they still closed at levels not seen in months, with yields on 10yr bunds (+1.2bps), OATs (1.4bps) and BTPs (+4.2bps) all moving higher. The moves in turn have proved supportive for bank stocks, with the STOXX Banks index in Europe up a further +1.36% yesterday at its highest level since the pandemic began.

Overnight in Asia, markets have taken Wall Street’s lead with the Nikkei (+1.57%), Hang Seng (+2.15%), Shanghai Comp (+1.07%) and ASX (+0.93%) all rising. Futures on the S&P 500 are also trading +0.25% higher and sovereign bond yields have continued to climb in Asia, with Japan’s 30yr yield (+1.9bps) at its highest level since December 2018, and 10yr yields on Australian (+10.3bps) and New Zealand (+18.4bps) debt seeing sharp moves higher. For New Zealand, the moves have been prompted by a decision to change the RBNZ’s remit to support more sustainable house prices and improve affordability for first time buyers, which has led to expectations that the central bank could tighten more quickly than previously expected. On top of this, the Bank of Korea left their main interest rate unchanged at 0.5% as expected, though they raised their CPI forecast for 2021 by three-tenths to +1.3%.

Staying on central banks, a number of other Fed speakers gave remarks yesterday, though the overall tone didn’t add much to what we already knew. Vice Chair Clarida gave a speech on the economic outlook and monetary policy, where he made the point others have about “the true unemployment rate” being closer to 10% when you factor in declines in the labour force and misclassification. However, he remains “bullish on the economic rebound in the US” and sees inflation reaching around 2% by end of 2021. Separately Governor Brainard noted that transitory inflation was “not the kind of inflation that monetary policy would react to”.

Here in the UK, multiple newspapers have reported that the government are potentially planning for a rise in corporation tax at next week’s budget on Wednesday, with the FT saying that Chancellor Sunak would announce “a sharp rise” in the tax from its current 19%, and that the similar proposed increase in the US from 21% to 28% would offer some cover in terms of competitiveness. Other proposals reported have been a six-month extension to the uplift in Universal Credit mentioned in the Telegraph, as well as a Times report that the holiday on stamp duty (the home purchase tax) would be extended until the end of June. For those wanting more info, our UK economists released their preview of the budget yesterday (link here).

Turning to the pandemic, we got some very positive news yesterday as a large-scale study of almost 1.2m people in Israel showed that 2 doses of the Pfizer/BioNTech vaccine prevented 94% of infections. On top of this, staff at the FDA in the US wrote that the Johnson & Johnson vaccine was safe and effective, which comes ahead of an FDA committee meeting tomorrow where they’ll be discussing whether to give it an emergency use authorization. Unlike the other vaccines authorised in the US (Pfizer/BioNTech and Moderna), the Johnson & Johnson vaccine only requires a single dose, and the company have said that they’ll initially be able to provide 4m shots. Elsewhere, Ghana received the first delivery from the Covax vaccine-sharing initiative, which is seeking to support vaccine distribution in lower-income countries, with 600,000 doses of the AstraZeneca vaccine. When it comes to global restrictions there was a divergent picture however, with France announcing that Dunkirk would go into lockdown over the weekend, while in Switzerland, it was confirmed that shops, museums and outdoor sports and leisure facilities would be open from Monday. Meanwhile Moderna announced plans to study various approaches to vaccine boosters to protect against the variant strains, at the same time as they’re taking steps to ramp up production in the next year. The company has already completed manufacturing and sending doses to researchers for a clinical study around the South African strain.

As we mentioned in yesterday’s edition, it’s now been over a year since the first big pandemic-related selloff for markets as the virus started to hit Western nations. In Jim’s chart of the day yesterday (link here) ), we showed the performance of a number of global assets since this point, and also include the low point over the last 12 months. Commodities have been among the strongest performers, with copper leading the way as it hit its highest level in nearly a decade yesterday, whilst gold, silver and oil have also seen major gains. European equities have been the worst hit however, falling behind other regions as a number of indices still haven’t recovered to their pre-Covid levels.

In terms of yesterday’s data releases, the final German GDP reading for Q4 was revised up to show +0.3% growth quarter-on-quarter (vs. +0.1% initial estimate). Looking at the breakdown, private consumption saw the biggest hit (-3.3% qoq), though the savings rate rose again to 17.7%, which supports the argument from our German economists (link here) that pent-up demand will support the economy in the summer half and potentially add to emerging inflationary pressures. With the more positive end to last year, they’re maintaining their 4% GDP forecast for 2021. The other main data release were the new home sales figures from the US, which rose to a stronger-than-expected annualised rate of 923k in January (vs. 856k expected).

To the day ahead now, and data releases from the US include the second estimate of Q4 GDP, weekly initial jobless claims and the preliminary January durable goods orders reading. Over in Europe, there’s also the final Euro Area consumer confidence reading for February, and the January M3 money supply figure. From central banks, we’ll hear from the Fed’s Quarles, Bostic, Bullard and Williams, and the ECB’s De Guindos, Lane and Hernandez de Cos. Earnings releases include Salesforce, American Tower, Moderna and HP, and this afternoon EU leaders will be gathering via videoconference for a European Council meeting.

Tyler Durden Thu, 02/25/2021 - 07:55
Published:2/25/2021 6:59:22 AM
[Markets] Dow Nears 32,000 as Oil and Commodities Leap, Tech Stocks Resume Slide; GameStop Surges The Dow could top 32,000 for the first time Thursday as oil and commodity prices extend gains amid bets on firm vaccine-related recovery over the second half of the year. Published:2/25/2021 4:55:37 AM
[Markets] GameStop, AMC, Nvidia, Salesforce, Pfizer - 5 Things You Must Know Thursday Stock futures fluctuate and bonds tumble Thursday, a day after the Dow set a record high; GameStop and AMC surge amid more mania around meme stocks; Nvidia lower after earnings; Salesforce and Airbnb report earnings. Published:2/25/2021 4:25:16 AM
[Markets] REFILE-US STOCKS-Wall Street finishes up as Fed's Powell soothes inflation fears Shares on Wall Street ended higher on Wednesday, as a selloff in technology-related stocks eased and a rotation into cyclical shares continued after Federal Reserve Chair Jerome Powell's comments calmed inflation worries. The Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed up. The Dow hit a record high earlier in the session. Published:2/24/2021 4:25:31 PM
[Markets] The Dow is up more than 400 points as it heads toward a record close Wednesday The Dow is up more than 400 points as it heads toward a record close Wednesday Published:2/24/2021 12:52:28 PM
[Markets] Asian stocks open lower on inflation fears The Dow and S&P 500 recouped early losses after Federal Reserve Chair Jerome Powell reiterated in testimony before the Senate Banking Committee that monetary policy would remain accommodative and would not change without advance warning. The tech-heavy Nasdaq index closed down 0.5% as investors sold the big tech stocks that have driven the market rally since last March, and rotated into cyclicals, helping lift the Dow and S&P 500. But Powell's testimony hasn't fully swept away fears of rising inflation as the economies around the world are expected to rebound this year more strongly than was expected just weeks go as vaccines roll out around the world. Published:2/23/2021 7:16:32 PM
[Markets] Dow erases 360-point loss to eke out positive finish after Powell testimony Dow erases 360-point loss to eke out positive finish after Powell testimony Published:2/23/2021 3:48:14 PM
[Markets] US STOCKS-S&P 500 closes higher in late session U-turn Wall Street reversed its losseslate Tuesday, with the S&P 500 and the Dow reclaiming positiveterritory by the close in a tug-of-war between stocks thatthrived amid lockdowns and those that stand to benefit most froma reopening economy. The Nasdaq was the only major U.S. stock index to loseground on the day. Market-leading growth stocks, which thrived amidpandemic-related lockdowns, weighed on stocks for much of theday as investors favored shares that stand to gain most asongoing vaccine deployment allows economic restrictions to belifted. Published:2/23/2021 3:15:55 PM
[Markets] Monday Told a Tale of 2 Stock Markets The stock market was largely down on Monday, although not all of the major market benchmarks reflected those declines. The Dow Jones Industrial Average (DJINDICES: ^DJI) actually gained ground on the day, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) plunged. Energy stocks  were the big winner on Monday, with a key sector benchmark gaining 3.5% on the day. Published:2/22/2021 5:10:30 PM
[Markets] Nasdaq ends down over 2% as tech shares weigh; Dow ekes out gain Nasdaq ends down over 2% as tech shares weigh; Dow ekes out gain Published:2/22/2021 3:40:37 PM
[Markets] US STOCKS-Nasdaq, S&P 500 end lower as U.S. yields rise; Disney lifts Dow The S&P 500 and Nasdaq closedlower on Monday as climbing Treasury yields and prospects ofrising inflation triggered valuation concerns, hitting shares ofhigh-flying growth companies. The Dow industrials ended higher, boosted by a surge in WaltDisney Co shares. U.S. benchmark 10-year Treasury yields were up at 1.37%on Monday. Published:2/22/2021 3:10:29 PM
[Markets] Big Tech, Bitcoin, & The Buck Battered As Commodities Crash-Up Big Tech, Bitcoin, & The Buck Battered As Commodities Crash-Up

Inflationary impulses are showing up everywhere.

Real yields are rising rapidly (with 30Y no longer negative)...

Source: Bloomberg

Breakevens have soared, but we do note that the BE curve implies beyond 5Y will see a disinflationary process...

Source: Bloomberg

Commodities are soaring to the highest since 2013...

Source: Bloomberg

And even gold was on the rise today, back above $1800...

Source: Bloomberg

But, that reflationary rise (the good growthy reflation, not the bad hyperinflationary dollar collapse one, oh no) is having some unintended consequences that Jay Powell and his pals are going to have to deal with soon.

Money markets are hawkishly tightening with expectations for rate-hikes being brought forward...

Source: Bloomberg

... and the rate-hike-trajectory steepening (100bps of tightening from Dec 2022 to Dec 2024 now priced in)...

Source: Bloomberg

The question is - Will Powell "cut the rope" tomorrow?

Spoiler Alert: No!

Boeing weighed on The Dow early amid the terrible events over Denver but that merely sparked a buying panic that sent the stock to new highs!?? WTF! But that stop-run did not last...

On the day however, The Dow managed to hold gains as Big Tech (Nasdaq) was clubbed by a baby seal - 2nd worst day since October (5th down day in a row) - and Small Caps puked along with Nasdaq late on, starting at 1430ET which smells a lot like margin calls...

The Dow massively outperformed the Nasdaq today, erasing all the YTD underperformance...

Source: Bloomberg

Small Caps have also erased all losses relative to big-tech since the March collapse...

Source: Bloomberg

The S&P 500 fell for a fifth straight trading session, its longest losing streak since February of last year, as investors continued to price in stronger growth and faster inflation as the economy recovers (and potentially tighter monetary policy).

Did Gartman do it again?

Energy stocks exploded higher today (upgrades from GS & MS) as tech and utes lagged...

Source: Bloomberg

Tesla was trounced today, thoroughly breaking below the $800 level...

Bonds chopped around like WSB obsession today, but ended higher (and the curve steeper) on the day...

Source: Bloomberg

Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013.

Treasuries are the most attractive to hedged EU and JP traders since 2015...

Source: Bloomberg

The dollar roundtripped on the day and ended lower...

Source: Bloomberg

Thanks to The Fed's jawboning:

  • *Kaplan: Loss of Dollar Reserve Status Would Complicate Govt Borrowing

  • *Kaplan: Dollar Reserve Status Means US Can Finance Large Borrowing

Translation: we will continue doing idiotic things until we lose reserve status

The DXY tested the key 90.0 level today...

Source: Bloomberg

Cryptos were clobbered twice since Friday with this morning's puke more notable... but the buy-the-dip power was strong...

Source: Bloomberg

Bitcoin puked over $10,000 from its highs to its lows before ripping back over $6,000 to $54,000...

Source: Bloomberg

Ethereum also collapsed intraday and bounce back, erasing around half the drop...

Source: Bloomberg

Some highlights from commodity-land.

Copper careened to its highest since 2011...

Source: Bloomberg

Lumber pushed to a new record high...

Source: Bloomberg

Crude bounced back above $60 (WTI) helped by a double upgrade from MS and GS...

Silver surged back above $28...

Gold rallied today, even in the face of rising real yields...

Source: Bloomberg

Silver is at its highest relative to Gold since 2014...

Source: Bloomberg

And finally, if the signals from commodity-land are correctly signaling the growth/reflationary outcome ahead, then 10Y Yields are set to reach 3.00%...

Source: Bloomberg

Which raises dramatic questions about whether The Fed would even allow such a thing? Because Yellen today made it clear, she wouldn't!

Tyler Durden Mon, 02/22/2021 - 16:00
Published:2/22/2021 3:10:29 PM
[Markets] Von Greyerz: How Will It All End? Von Greyerz: How Will It All End?

Authored by Egon von Greyerz via,

Akhlys, the Greek goddess of Misery and Poison, is exerting a major influence on the world currently. And sadly the dosage of misery and poison will increase in coming months and years.

What is now crystal clear is that this excess dose of fake assets and fake liabilities will totally poison the financial system and the world economy.

As Paracelsus, the renowned 16th century Swiss physician said; “all things are poison, it is the dosage that makes it either a poison or a remedy.”

When a world already in trouble was hit by a severe financial crisis in September 2019, the dose of debt was already excessive. But as the Fed and the ECB opened the money spigots fully, they filled the world with poisoned or fake money. The BY team (Biden & Yellen) will now be certain to finish this process with their profligate spending plans.


The financial system has been poisoned for decades by governments’ excess spending and central banks’ prodigal printing of toxic and worthless money.

And now, with Covid, they have the perfect excuse to senselessly create trillions of dollars, euros, yuan or yen. The world doesn’t realise that this money, fabricated by pressing a button, is no different from the Monopoly board game money.

Just look at the balance sheet of the four major central banks – the Fed, ECB, Bank of Japan and the People’s Bank of China.

As the graph above shows, these central banks’ balance sheets have exploded almost 6x since 2006. In 2008-9, their total balance sheet were $9 trillion and now they are $29t.


Business assets are defined as items of value. So how are these “assets of value” created in the financial system?

Firstly the central bank creates toxic money out of thin air. By definition, money that has been fabricated without real labour or production of goods or services must have ZERO value.

Secondly, the central bank purchases “poisoned” assets in the form of debt that cannot and will not ever be repaid. These debts are issued by bankrupt governments and other insolvent debtors who can only repay their debts by issuing more debt.

So this whole corrupt and circular system should be defined as “Poison in – Poison out”.

The poison in is the fabricated fake money which has ZERO value. The poison out are the assets/debts bought with fake money which will all expire worthless.

And it is on this construction of toxic assets and liabilities that the whole financial system rests.

It is totally absurd to swallow that such a system can survive.



We were told that the crisis was over in 2009 and still the balance sheets of these central banks are up more than 3x. Hmmm……

The reason is simple, the Great Financial Crisis in 2006-9 was never solved, the can was just kicked down the road. But this time the can is too big.


And now 12 years later the whole world is drowning in $280 trillion debt – up 3x this century.

The illustration above shows global debt reaching $360 trillion by 2030.

This assumes a simple extrapolation of current trends. In my view, there is a major risk of a hyperinflationary debt explosion in the next 4-9 years to $2 quadrillion or more. Probably it will take a lot less than 9 years.


So how is this massive increase of debt to $2 quadrillion possible? There are at least $1.5 quadrillion of derivatives outstanding today. Derivatives are an incredible gravy train for banks in rising and liquid markets.

But with crashing stock markets and massive pressures in debt markets, there will be little liquidity in derivatives. This will likely lead to central banks printing enough money to buy most of the derivatives of ailing banks. This is what would create $2 quadrillion or more in global debt.


So what is happening to all this debt based money created. Well almost none of it reaches the real economy but instead it stays with the banks and is used by private and institutional investors to buy assets like stocks, bonds and property.

So while there is very little that reaches the ordinary man, the wealthy can take advantage of this massive liquidity to further expand the already epic bubble in asset markets.

The graphs below, showing total US M1 money supply and its velocity, illustrate this perfectly.

As Money Supply surges 5x from $1.3t in 2005 to $6.8t in 2021, the Velocity of Money crashes from 10 to 3. This means that the money printed does not reach the real economy but instead is just used to inflate asset prices.

Since all this money is created out of thin air and is just toxic or worthless, it would have little effect in simulating the real economy.

But investors are under the illusion that this toxic liquidity is actually creating wealth!

No wonder they are under that illusion since global equities have increased in value by $24 trillion since March 2020. That is a staggering 30% of global GDP.

Why should anyone work when by printing money and investing, the world can create 30% of GDP in just 10 months by buying stocks?

Sadly, investors neither see nor worry about that stocks are going up just because they are going up rather than due to rising profits or improving fundamentals.


What they don’t realise it that a global crash is right ahead – a crash that will destroy 90-95% of their illusory wealth.

Since the latest phase of the stock market rise started in the early 1980s, investors have forgotten to take profits. Even though there have been some nasty corrections, investors have been saved by central banks every time. Therefore why should they take profit?

“The market always goes up! So it is always right to be in the market.”

They have forgotten that in 1929-32, the Dow fell by 90% and that it took 25 years to recover. And this time the bubbles of debt and assets are far greater.

So now we have toxic valuations created by toxic money.


The rich are also getting substantially richer which is what creates revolutions. Just take the average chief executive of an S&P 500 company.

He now earns 357x as much as the average worker. Back in the 1960s he earned 20x! And in the mid 1980s it was still only 28x.

The graph below illustrates this phenomenon very clearly.

At the beginning of the 1900s, the top 10% received between 40% and 50% of total income. Then came the Wall Street crash and the 1930s depression, followed by WWII.

The consequences were that between 1940 and 1985, the top 10% went from as high as 50% of total income down to just over 30%.


But then things improved for the top earners again in the mid 1980s. First stock markets started booming. Then, once Greenspan became chairman of the Fed, that was like manna from heaven for investors.

The programme of producing manna money has just got better with every new Fed chief. Tens of trillions of dollars of debt has been created to boost the stock market. But once the 2000s got going, manufacturing money wasn’t sufficient. No, the money had to be free also or even better, you got paid for borrowing money. Well at least banks and central banks do.


Debt bubbles can only end in one way. With imploding debt and crashing asset markets.

But before that there will be a final overdose of poison in the form of massive money printing. This in a last and desperate attempt to solve a debt problem with more debt.

Sadly central bankers never studied Paracelsus theorem that all things are poison if the dose is too high.

They will soon find out……..

As the last overdose of debt hits the world, most currencies will finish their journey to ZERO, leading to hyperinflation.


Many economists and commentators are certain that the world will not see inflation or higher interest rates for years. They can’t see a demand led inflation.

Let’s go back to history again. History helps us to predict the future but very few so called experts understand the significance of history.

Virtually every major debt bubble in history has ended in a currency collapse and hyperinflation. Few understand that hyperinflation is a currency driven event and not demand driven.

With most currencies down 97-99% since Nixon’s fatal decision in 1971 to close the gold window, the world will soon experience the final move to ZERO.

But remember that this move involves a 100% fall of the currencies from today. This is what will lead to hyperinflation. Just study history.

Hyperinflation normally only lasts a short period like 1-3 years. Thereafter the world will experience a deflationary implosion of debt and asset prices. The banking system is unlikely to survive such a collapse.


This scenario is obviously based on assumptions and probabilities. It is also based on history.

No forecast can ever be certain until afterwards. But at that time it will be too late to protect yourself.

What we know today is that risk is at a maximum. We also know that to protect against this uber-risk is not just wise but absolutely critical.

History tells us that in every major economic crisis, physical gold and silver has been the ultimate protection.


Tyler Durden Mon, 02/22/2021 - 05:00
Published:2/22/2021 4:06:15 AM
[Markets] Dow futures nearly 200 points as yield on 10-year Treasury continues to rise Dow futures nearly 200 points as yield on 10-year Treasury continues to rise Published:2/22/2021 3:40:37 AM
[Markets] Bitcoin Breaks Records As Rates Surge & Reddit Stocks Slump, Santelli Rant Remembered Bitcoin Breaks Records As Rates Surge & Reddit Stocks Slump, Santelli Rant Remembered

Today is the anniversary of the pre-COVID peak in US equities (2/19/20). Things have gone just a little bit turbo since then...

Source: Bloomberg

Additionally, 12 years ago today, Rick Santelli unleashed some honest hell on the CNBC audience and unintentionally sparked The Tea Party movement...

"...this is America... how many of you people wanna pay for your neighbor's mortgage who has an extra bathroom and can't pay their bills..."

(fwd to around 1:00 for the real fun and games)

The big headlines this week were made in the three Bs - Bitcoin, Bonds, & Bullion:

The Good - Bitcoin exploded to new record highs this week, topping $55k...

Source: Bloomberg

The Bad - Bonds were battered this week, with the long-end up over 14bps (drastically steepening)...

Source: Bloomberg

And The Ugly - Gold Bullion saw its worst week since Thanksgiving, clubbed like a baby seal to 8-month lows as real yields exploded higher (and spot prices triggered a death cross)...

Source: Bloomberg

After a hopeful return from the long weekend, US stocks were generally lower on the week. Small Caps ripped back higher today, rescuing themselves from being the laggards on the week as Big Tech tumbled but the Dow clung to gains...

That's 4 down-days in a row for the S&P 500

Did Small Caps hit their limit relative to big caps once again?

Source: Bloomberg

It was an ugly week for the original Reddit short-squeeze stocks as the "Game Stopped" hearing faded away...

Source: Bloomberg

BUMBL has stumbled...

TSLA lost $800...

VIX was higher on the week, with a mysterious bid hitting every time it dropped below 20...

Perhaps interesting for those calling for the bond 'rout' to get 'rout'-ier - 10Y and 30Y yields have ripped up to the spike low yields from 2016...

Source: Bloomberg

Real yields soared this week - with 30Y real yields surging by their most since March 2020...

Source: Bloomberg

...back above 0 for the first time since June...

Source: Bloomberg

And 10Y real yields started to fly higher...

Source: Bloomberg

Which is weighing big time on gold...

Source: Bloomberg

The dollar round-tripped on the week to end only marginally higher

Source: Bloomberg

Most major cryptos were higher on the week but Ripple lagged...

Source: Bloomberg

We already noted Bitcoin, but Ethereum also broke to new record highs, testing up towards $2000 for the first time...

Source: Bloomberg

Amid all the carnage in Texas Nat Gas prices roundtripped on the week...

Oil ended the week unchanged after topping $62 (WTI) at its highs...

Gasoline prices ended higher on the week (the 13th weekly rise in the last 16 weeks)...

Silver significantly outperformed gold on the week...

Source: Bloomberg

Finally, Bitcoin's big surge this week has pushed its market cap above $1 trillion... beating TSLA to that mark!

Source: @BiancoResearch

making it the 8th biggest 'asset' in the world...

Source: 8marketcap

"Rat-poison-squared" indeed!

Tyler Durden Fri, 02/19/2021 - 16:01
Published:2/19/2021 3:17:37 PM
[Markets] Futures Rebound As Yields Stabilize, Overheating Fears Fade Futures Rebound As Yields Stabilize, Overheating Fears Fade

US equity futures faded yesterday's weakness and rebounded from overnight lows, as European stocks snapped their longest streak of losses since October as 10Y yields steadied and attention shifted to corporate earnings and economic data away from reflation fears.

Global shares edged up on Friday, reversing three days of losses, as investors clung to hopes of economic recovery ahead, even as German and British 10-year bond yields touched multi-month highs, spurred by bets of global reflation. Oil added to recent losses while the dollar slumped even as sentiment out of China remained muted after another day of liquidity drains from the PBOC.

The MSCI world equity benchmark was 0.2% stronger. On Thursday, Wall Street logged its biggest daily drop in nearly three weeks on a slide in technology-related firms, ahead of today's PMI report. At 715 a.m. ET, Dow e-minis were up 52 points, or 0.172%, S&P 500 e-minis were up 13.5 points, or 0.35%, and Nasdaq 100 e-minis were up 57.25.75 points, or 0.42%. Some of the notable pre-market movers include:

  • Uber fell 2.3% after Britain’s Supreme Court ruled on Friday that a group of Uber drivers are entitled to worker rights such as the minimum wage.
  • Applied Materials rose 5.1% after it forecast second-quarter revenue above market expectations, as demand for its semiconductor manufacturing tools picked up during a global shortage of semiconductors.
  • Roku added 3.8% after it reported quarterly revenue above market expectations, thanks to an influx

Amid strong earnings, progress in vaccination roll-outs and hopes of a $1.9 trillion federal stimulus package, U.S. stock indexes hit record highs at the start of the week but since slumped as fears that surging 10Y yields could lead to a drop in appetite for high duration stocks and hammer stocks if the plunge in 10Ys extended to 1.50% (according to Nomura). Late on Thursday, JPM strategists wrote that the "S&P is -53bps WTD but some of the client conversations seem to indicate a bit more panic than is warranted, potentially induced by the bond market moves this week." As a result of this "panic", the Dow was nearly flat for the week, while the benchmark S&P 500 and the tech-heavy Nasdaq were tracking their first weekly loss this month.

Concerns over higher stock market valuations and a potential snag in inoculation efforts have led to fears of a short-term pullback in equities. As noted last week, BofA expects a more than 10% pullback in stocks which are trading at more than 22 times 12-month forward earnings, the most expensive since the dotcom bubble of the late 1990s.

“It’s kind of odd to think that only a year ago investors were worried about depression and deflation and now they are worried about overheating and inflation,” said Shane Oliver, an economist for AMP.

“The big-picture backdrop of still-low underlying inflation and spare capacity in jobs markets, combined with economic and profit recovery and low interest rates, is a positive one for growth assets, particularly shares,” he said.

Stocks in Europe snapped their longest streak of losses since October with the Stoxx 600 index fluctuating before heading higher for the first time in four days. The Eurostoxx 50 rose 0.5% with France's CAC the marginal outperformer as miners, travel and insurance names rose while healthcare and media are soft. The energy and utilities sub-indexes are the two worst performers in the Stoxx 600 benchmark on a drag from renewable-energy names. The Energy index was down as much as 1.5%, utilities index down as much as 1.1% Solar firm Scatec and wind-turbine maker Vestas among the biggest fallers in the energy index, after Credit Suisse analyst Mark Freshney said in a Feb. 18 note that Vestas now trading close to the broker’s blue-sky valuation on the stock; remains at underperform on valuation grounds. Here are some of the biggest European movers today:

  • Hermes shares surge as much as 8.9% to a record high after the luxury group delivered what Bernstein said was an “outstanding” result given the tough year the luxury sector had.
  • Danone shares gain as much as 4.6%, hitting the highest since September 16, amid expectations of changes to come at the French yogurt maker after CEO and Chairman Emmanuel Faber said the potential split of his role may become a topic in the future and that the group may divest assets.
  • Moncler shares rise as much as 7.6%, hitting a record, with analysts saying the Italian luxury outdoor clothing maker delivered a strong end to 2020 and its full-year results were “significantly” above expectations.
  • BE Semiconductor shares jump as much as 8.7%, the most since April 30, with analysts at Kempen highlighting “blowout” guidance from the chip-equipment maker. Other chip stocks also gain, boosted by readacross from the strong results and outlook from U.S. bellwether Applied Materials.
  • Kingspan shares rise as much as 10% as Jefferies said it expects low-single-digit consensus upgrades for the Irish insulation supplier following a small beat on its FY results.
  • Sinch shares gain as much as 8.8% after analysts raised their price targets on the cloud communication software firm following this week’s deal to buy Inteliquent, which Handelsbanken says looks like a great match.
  • Copper miners continue to rally in line with the metal with Goldman Sachs warning that a “historic” shortage is on the horizon. Poland’s KGHM and Chile-focused Antofagasta are among the top gainers.
  • Renault shares slump as much as 8.5%, the most since July 30, after the carmaker posted a wider net loss than expected, with Jefferies highlighting the impact a global semiconductor shortage may have on the automaker.

The euro strengthened after Germany’s manufacturing PMI climbed more than forecast in February, though composite figures for the common-currency region were less encouraging. The German composite PMI increased by 0.5pt to 51.3 in February, above expectations for a small decline. The lockdown restrictions remained in place through February and have been extended recently (with non-essential shops closed until at least March 7). The composite improvement reflected divergent changes across sectors, with stronger manufacturing output (+3.2pt to 62.2) more than offsetting a weaker services PMI (-0.9 to 45.9). The headline manufacturing PMI was further supported by another lengthening of suppliers' delivery times (which reached a record high[1] of 80), with reports of raw material (often steel) shortages and squeezed transport capacity.

Earlier in the session, Asian stocks dropped for a second day, led by a group of energy names as oil prices slid on the restart of production in Texas. Australia’s S&P/ASX 200 led declines among national benchmarks, pulled lower by commodities-related shares including BHP and Rio Tinto. While energy was the worst-performing sector in the region, chipmaker TSMC was the biggest drag on the MSCI Asia Pacific Index. The benchmark was set for its first weekly drop of the month. The regional gauge pared a decline of as much as 1% to 0.2% in late-afternoon trading, as Chinese and South Korean shares erased earlier losses

Over in Japan, markets also fell, with the Topix capping its first weekly drop since January, as automakers and railways declined. Service-sector firms were also among the biggest contributors to the benchmark’s drop. Automakers fell as production was hampered in Mexico by the shortage of natural gas and in Japan by last weekend’s earthquake. The Nikkei 225 retreated but managed to stay above the 30,000 level it regained earlier this week for the first time since 1990. Semiconductor supply-chain stocks rose after U.S. peer Applied Materials forecast revenue that exceeded analyst estimates.

“It looks like the Nikkei 225 is trying to consolidate its moves around the 30,000 level. There’s a lot of investors, domestically, who continue to hold a bullish view on Japanese equities,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “The fall in U.S. equities against the backdrop of rising yields, is weighing on the market for now.”

India’s stock benchmark fell for a fourth day, capping its worst day in three weeks, as investors sold off equities after the gauge reached a record Monday. The S&P BSE Sensex slipped 0.9% to 50,889.76 at the close, completing its worst week this month. The NSE Nifty 50 Index dropped 0.9%, also down for the week. “The market is in an overbought scenario, and whenever this happens, a four-to-nine-day drop is possible. But I don’t see much downside,” said Vishal Wagh, head of research at Bonanza Portfolio Ltd. “This is just the market at its normal correction, which was overdue after a significant rally post-budget.”

Late on Thursday, Janet Yellen reiterated that the benefits of stimulus will outweigh the costs and she hopes to see progress on the bill in the next two weeks, while she added the Fed has the tools to deal with inflation and she wants to make sure stimulus checks are appropriately targeted. Yellen also stated that details of the infrastructure plan have not yet been provided but noted a tax increase would likely be used to pay for part of Biden's infrastructure package which will be proposed later this year and suggested that the US could return to full employment by next year.

In rates, the 10Y reversed and traded lower after buying in the Asian turned to selling; the 10Y yield was 2bps wider last seen at 1.31%. Japan’s 10-year sovereign bond yield rose to the highest in more than two years Friday, intensifying speculation about the central bank’s next move at an upcoming review.

In FX, the Bloomberg Dollar Spot Index fell a second day as the greenback weakened against all of its Group-of-10 peers. The pound shrugged of data showing that U.K. retail sales fell more than twice as fast as expected in January and surged through $1.40 for the first time in nearly three years as expectations for negative rates faded; Gilts bear steepened, underperforming bunds as pricing for easier monetary policy continued to be unwound. Australia’s dollar climbed against all its Group-of-10 peers after influential Westpac Banking Corp. economist Bill Evans boosted his forecast for the nation’s 10- year bond yield.  The euro strengthened after Germany’s manufacturing PMI climbed more than forecast in February, though composite figures for the common-currency region were less encouraging.

In commodities, oil dropped below $60 a barrel as wells slowly restarted in Texas after being hit by a big freeze. The White House said it would be willing to meet with Iran, potentially paving the way for more crude exports from the Persian Gulf nation.

LME copper rallies over 2% to outperform what is a well bid base metals complex. Elsewhere, gold dropped to a seven-month low on Friday, and futures also declined, deepening gold's worst start to a year in three decades as it fell through a support level that analysts say could portend further losses. Bitcoin had no such concerns as it continued to rise to new all time highs, trading just shy of $53,000.

Looking at the day ahead now, the highlight will be latest flash PMIs from the US. On top of this, we’ll get January data on UK retail sales, German PPI and US existing home sales. From central banks, we’ll hear from the Fed’s Barkin and Rosengren.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,919.75
  • SXXP Index up 0.3% to 413.84
  • MXAP little changed at 218.13
  • MXAPJ little changed at 734.81
  • Nikkei down 0.7% to 30,017.92
  • Topix down 0.7% to 1,928.95
  • Hang Seng Index up 0.2% to 30,644.73
  • Shanghai Composite up 0.6% to 3,696.17
  • Sensex down 1.1% to 50,774.33
  • Australia S&P/ASX 200 down 1.3% to 6,793.79
  • Kospi up 0.7% to 3,107.62
  • Brent futures down 0.7% to $63.49/bbl
  • Gold spot down 0.1% to $1,774.27
  • U.S. Dollar Index down 0.3% to 90.28
  • German 10Y yield up 2 bps to -0.33%
  • Euro up 0.4% to $1.2137

Top Overnight News from Bloomberg

  • The euro should now play a bigger role at the international level and this should be a priority for the euro zone member countries, Bank of France governor Francois Villeroy de Galhau says in an interview with French business daily Les Echos published on Friday
  • Business activity in the euro-area economy shrank for a fourth month in February as services struggled with continued lockdowns and factories ran into increasing supply constraints. A composite gauge for both sectors stood at 48.1, slightly higher than in January but still below the 50 mark that separates expansion from contraction. Services deteriorated at the fastest pace since November, while manufacturing output rose the most in four months
  • Markit said its composite U.K. Purchasing Managers Index rose to 49.8 in February, well above the 42.6 forecast by economists. It’s still below the critical 50 mark that signals expansion. A gauge of services activity climbed to 49.7, while manufacturing rose to 54.9
  • Bitcoin is closing in on a market value of $1 trillion, a surge that’s helping cryptocurrency returns far outstrip the performance of more traditional assets like stocks and gold
  • The pandemic is still making developments uncertain, and the need for expansionary monetary policy and low interest rates will remain for a long time, Sweden’s Riksbank says in minutes from its Feb. 9 meeting

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded initially negatively, though China did pick-up towards the close, following a weak handover from Wall St where major indices declined as markets remained in consolidation mode following discouraging releases. ASX 200 (-1.3%) was dragged lower by underperformance in the commodity-related stocks, especially energy names due to the pullback in oil prices and after Woodside Petroleum was forced to delay talks to sell LNG to China amid ongoing trade frictions, with a miss on Retail Sales adding to the glum mood. Nikkei 225 (-0.7%) retreated beneath the 30k level with large automakers suffering from recent disruptions due to chip supply issues and Toyota also warned its Mexico operations will be impacted by a natgas shortage. Hang Seng (+0.2%) and Shanghai Comp. (+0.6%) were initially uninspired before posting mild gains. Baby-related stocks were underpinned by reports China is considering lifting birth restrictions in the northeast part of the country. The PBoC continued with its liquidity drains and Chinese press reports stated that the central bank may keep its open market operations at a limited scale, although PBoC-affiliated media suggested not to mistake the recent liquidity withdrawal as a policy signal. Finally, 10yr JGBs were subdued after failing to benefit from the widespread risk aversion and despite the presence of the BoJ in the market for nearly JPY 1.2tln of JGBs in 1yr-10yr maturities, while the 10yr JGB yield hovered around 0.10% to reach its highest since November 2018.

Top Asian News

  • Myanmar Protester Shot in Head Dies, First Death Since Coup
  • Honda Appoints Japan R&D Chief Toshihiro Mibe as New CEO
  • China Gives New Details of Deadliest India Clash in Decades
  • Distressed Japan Hotel Chain Unizo Sparks Hedge Fund Battle

European stocks opened the last session of the week with a firmer footing evident across the board (Euro Stoxx 50 +0.5%) following a mixed/softer APAC lead. Meanwhile, US equity futures are trading with mild upside as the RTY outpacing peers and perhaps provides some weight to the reflationary narrative. Back to Europe, bourses did trade mixed during the early cash hours, although the region was lifted into positive territory following the release of regional Flash PMI figures. The FTSE 100 (unch) felt early pressure due to the firm up of the Pound as GBP/USD eclipsed 1.4000 to the upside, with mass vaccination a potential driving force. The UK benchmark then staged a brief recovery following blockbuster UK PMI figures which topped forecasts on all fronts, although the Sterling strength took the helm again. Moving on, sectors in Europe opened predominantly in the green but are currently trading mixed with no indicative risk bias. The Personal & Household goods (+0.7%) sector is an outperformer due to Moncler (+6.8%) and Hermes (+5.5%) reporting stellar earnings. Banking (+0.3%) opened firmer amid higher yields and NatWest (+1.0%) has seen morning gains despite underwhelming earnings metrics as the Co. looks to resumed payments. Oil & Gas (-0.6%) is the laggard which is in-fitting with WTI and Brent price action. On to individual movers, Leonardo (+7.7%) is gaining after reports the Co. is set to raise over EUR 2bln from the listing of its US unit DRS. Porsche (+3.0%) is seeing further upside after yesterday’s news of the potential IPO which would in turn boost VW’s market cap. Sticking with the auto sector, Renault (-5.5%) is dented after they reported sub-par earnings whilst announcing they will not pay a 2020 dividend and warning that the chip shortage is likely to impact 100k vehicles for the year and will likely reach a peak in Q2. The chip shortage news could result in a follow through action for other Autos and be used as a gauge of what is expected by auto-makers going forward. Other notable earnings include Allianz (+1.3%) and Swiss Re (+0.4%).

Top European News

  • U.K. Retail Sales Plunge More Than Expected in January Lockdown
  • Sunak Delays Consideration of U.K. Online Sales Tax to the Fall
  • Danone CEO Faces Mounting Pressure Amid Tough Start to 2021
  • Eni Reports Surprise Quarterly Profit With Recovery in Crude

In FX, a strong end to the week for the Antipodean Dollars and considerably firmer rebounds from lows vs their US counterpart, as Aud/Usd takes a firmer grasp of the 0.7800 handle and Nzd/Usd tags along. The Aussie has shrugged aside somewhat disappointing preliminary consumption figures for January amidst a spike in bond yields, partly in catch up trade, but also on the back of Westpac lifting its 10 year cash rate forecast for end 2021 to 1.9% from 1.5% and a tad more than the US Treasury equivalent to widen the differential marginally (latter now seen at 1.8% vs 1.5% previously). Meanwhile, the Kiwi has revisited 0.7265+ w-t-d peaks by virtue of the fact that the Aud/Nzd cross remains capped below 1.0800 more than anything NZ specific although the output component of Q4 PPI rose 0.4% from -0.3% in the prior quarter.

  • EUR/JPY/DXY - The Euro has also taken advantage of EGB/UST yield divergence, though unlike the Aussie Eur/Usd has extended gains beyond 1.2100 to around 1.2140 with assistance from flash Eurozone PMIs showing ongoing strength in manufacturing to more than offset services sector underperformance. Similarly, the Yen is putting the squeeze on Greenback as the index retreats further from 91.000 through the 21 DMA (90.662), 90.500 and the 50 DMA (90.378) to 90.243, with Usd/Jpy back below 105.50 and the 21 DMA (105.48) in wake of fractionally firmer expected Japanese CPI.
  • CHF/CAD/GBP - Also firmer vs the Buck, as the Franc pivots 0.8950, Loonie hovers around 1.2650 awaiting Canadian retail sales and Pound probes barrier defences at 1.4000 following significant beats in UK PMIs, including services that were so ravaged by the return to lockdown last time. On that note, ONS retail sales data was extremely weak in contrast to public finances, but neither impacted that much.
  • SCANDI/EM/PM - Dovish-leaning Riksbank minutes have not derailed the Sek from its 10.0500 axis against the Eur, but retreating oil prices amidst efforts to restore US crude output after weather enforced shutdowns are undermining the Nok circa 10.2400 in cross terms, Rub and Mxn to varying degrees. However, precious metals are reeling again and cryptos continue to rally, with Gold tripping some stops sub-key support around Usd 1765/oz and Bitcoin posting yet another ATH close to Usd 53k.

In commodities, WTI and Brent Apr’21 futures continue to post losses with the former extending losses below USD 60/bbl (vs high USD 60.16/bbl) whilst the latter dips below USD 63.50/bbl (vs high 63.62/bbl). The complex has waned off lows as the broader risk sentiment picked up following the EZ and UK flash PMI data, although oil prices remain pressured amid some supply-side developments - as the complex carries on unwinding the Texas deep-freeze premium with the oil patch is slowly restarting wells – reflected in the steeper losses in WTI vs Brent. Some geopolitical premium is also potentially unravelling amid reports the Biden admin is willing to negotiate with Iran, with an interim agreement mulled in a bid to build confidence on both sides. Expanding on the first point, Texas produced some 4.6mln BPD of oil according to the latest EIA data, whereby a bulk was shuttered throughout the week. However, as the deep-freeze in the region abates and power is restored, the question now turns to how swiftly operations can fully resume. Oil traders, alongside executives, hope for production to be re-available within days, although warned that a small number may remain shut for longer due to repairs – with the actual timeframe for full restoration still up in the air. Elaborating on the geopolitical factor, markets have been flirting with the prospect of Iranian oil returning to the market amid hopes US will lift some sanctions against the country. Cold water was poured on this earlier in the month after President Biden firmly suggested he will not lift sanctions to get Iran to the negotiating table with regards to its nuclear activity. However, reports overnight via Politico suggested scope for a new deal between the countries, with an interim deal touted as an option to ease tensions between the sides. “A broader deal could possibly include non-nuclear aspects, such as limits on Iran’s ballistic missile program, and have provisions that last longer than the original deal or are permanent”, the report said. This development raises the possibility of Iranian oil returning to the market, albeit it’ll then have to tackle the OPEC+ hurdle in relation to the output cut quotas – likely to be a topic to touch upon in the upcoming JMMC and OPEC+ meetings on Mar 3rd and 4th respectively. Meanwhile, the demand backdrop remains constructive with reports also suggesting that vaccines appear to lower COVID-19 infections and transmissions by 2/3, according to data from Public Health England (set to be published later this month), as disclosed by The Telegraph in which it labels the study as the first to use "real world data”. Elsewhere precious metals are mixed with spot gold resuming its real-yield-driven downside after yesterday testing support at around USD 1,764/oz, whilst the technical “death cross” confirmation earlier in the weak flagged a bearish signal. Spot silver meanwhile is firmer as a function of the softer Dollar. Turning to base metals, Dalian iron ore futures fell overnight amid a significant increase in post-Lunar New Year inventories. Meanwhile, LME copper rallied past USD 8,700/oz on rosy demand prospects, the softer Buck, and mild recovery in stocks. On this note, analysts at GS raised their 3/6/12M copper targets to USD 9,200/t, USD 9,800/t, and USD 10,500/t respectively (from USD 8,500/t, UDF 9,000/t, and USD 10,000/t previously).

US Event Calendar

  • 9:45am: Feb. Markit US Composite PMI, prior 58.7
  • 9:45am: Feb. Markit US Services PMI, est. 58.0, prior 58.3
  • 9:45am: Feb. Markit US Manufacturing PMI, est. 58.8, prior 59.2
  • 10am: Jan. Existing Home Sales MoM, est. -2.4%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

It’s complicated. No, not my relationship status on Facebook from the noughties but financial markets this year. As regular readers will be aware I think the forces that will be unleashed on markets this year will be too big to see perfect calibration. So a much more complicated and higher vol environment than many believe. Ironically the smoothest period will likely be when we’re mostly locked down as we will be for several weeks/a few months longer. After that it gets more interesting with likely very strong growth, inflationary concerns mounting (whether realised or not), and bubbles being more vulnerable to burst. As I mentioned yesterday, I think this week might be a mini dress rehearsal with the spike in yields. Indeed yesterday global equities resumed their decline as concerns continued to rise among investors that higher sovereign bond yields could call a halt on the recent strong rally in risk assets. Indeed, both the S&P 500 (-0.44%) and Europe’s STOXX 600 (-0.82%) lost ground for a 3rd day running, which is the first time that’s happened for either index this year. It was the lowest closing level for the S&P in just over a week, with both higher bond yields (especially real yields yesterday) as well as weak economic data putting pressure on valuations.

In terms of the specifics, tech stocks led the declines once again, with the NASDAQ losing a further -0.72% and the NSYE FANG+ index seeing an even larger -1.07% decline, which marks the biggest 2-day decline for the index (-2.54%) since the end of January. Meanwhile Walmart (-6.48%) had its worst day since March last year after the company said that net sales and earnings per share were both expected to decline in FY22. As mentioned, matters weren’t helped by weaker-than-expected data from the US, where the weekly initial jobless claims for the week through February 13 hit a 4-week high of 861k (vs. 773k expected), and the previous week’s reading was also revised up by +55k. The weekly frequency of this reading means it’s one of the timeliest indicators we get on the state of the economy, and the 4-week moving average has now been stuck between 814k and 857k since mid-December, which raises questions as to the speed of the recovery in the labour market. On top of this, Oil prices reversed after hitting their highest levels in more than a year as the disruption to oil refineries in Texas remains the dominant story. WTI fell -1.01% and Brent retreated -1.35% on the day – the largest one day decline since January 15 for both crude futures. WTI (-1.39%) and Brent (-1.14%) are again trading lower this morning as Texas shale oil production has started to slowly comeback online. Oil prices are also being weighed down by news that the White House is willing to talk to Iran to discuss a “diplomatic way forward” in efforts to return to the nuclear deal, a move which could potentially lead to more crude exports from the nation.

Back to bond yields and the selloff resumed yesterday even though there was a swift turn in US rates just before the European session closed. Yields on 10yr Treasuries were up as much as +4.6bps to 1.316% before coming back in and settling +2.5bps higher on the day at 1.296%. Notably, it was higher real yields rather than inflation expectations which drove the moves, with yields on inflation-protected US debt climbing +6.9bps to move above -0.90% for the first time since November. In contrast 10yr breakevens actually fell -4.5bps to 2.17% - the biggest one day drop since the end of January. It was much the same story in Europe, where a similarly sharp rise in real yields sent bond yields higher, with those on 10yr bunds up +2.2bps at -0.35%, their highest level since June last year, and real yields up +2.2bps to their highest level since November too.

Overnight, Asian markets have taken Wall Street’s lead with the Nikkei (-0.82%), Hang Seng (-0.67%), Shanghai Comp (-0.03), CSI (-0.30%) and Kospi (-0.16%) all trading lower. Futures on the S&P are down -0.21%. In keeping with the theme of rising yields, those on 10yr JGBs have also moved up by +1bp this morning to 0.1%, the highest level since 2018.

Speaking of real yields, the release of the ECB minutes yesterday actually touched on this issue, with Isabel Schnabel’s review of financial markets mentioning that “stock prices could eventually become vulnerable to a rise in real yields globally.” So an indication that policymakers are paying attention to this risk, not least given higher real yields would also threaten the inflation outlook. Another notable line from the minutes was that “it was argued that the fast rebound in growth foreseen in the December staff projections might be too optimistic, with growth in the second quarter of 2021 possibly at risk from extended lockdowns.” So it’ll be very interesting to see how the growth and inflation forecasts are revised in March to take account of this given the extended lockdowns seen in numerous countries.

Staying on Europe, Mario Draghi’s new government in Italy resoundingly won a confidence vote in the lower house yesterday by a 535-56 vote, which comes on the heels of the big victory in the Senate the previous day. However, a notable consequence of the vote has been a split in the Five Star Movement, from which 15 senators were expelled yesterday following their vote against the government. The decision to back Draghi has been contentious in the party given its roots as an anti-establishment force, but a 59% majority of its members voted to support the Draghi government in an online vote last week.

Today’s main highlight for markets will be the release of the flash PMIs from around the world, which will give us an initial indication of how the global economy has been faring into February. Overnight we’ve already had the releases from Japan and Australia, which showed Japan’s manufacturing reading climbing back above 50 to 50.6 (vs. 49.8 last month) despite the extension of a state of emergency in most prefectures including Tokyo. Japan’s services PMI was a touch softer at 45.8 (vs. 46.1 last month). Australia’s manufacturing (at 56.6 vs. 57.2 last month) and services (54.1 vs. 55.6) PMI both printed a bit softer.

Later this morning we’ll get the releases from Europe, where the consensus expectations are pointing towards little change on last month, when the Euro Area composite PMI remained in contractionary territory at 47.8. According to our European economists, based on the historic relationship between mobility and the PMIs, we’re unlikely to see any big changes given that the mobility readings have been pretty flat since the start of the year. It’ll be interesting to keep an eye out on the US later too, since last month their composite PMI (58.7) rose to its highest level since March 2015.

Turning to the pandemic, there were concerning signs that the weather disruption in the US was slowing down the pace of vacinations. Florida Governor DeSantis said that the shipment from Moderna would arrive late, while NYC Mayor de Blasio said that 30-35k appointments had to be held back. Massachusetts announced that they could send the National Guard to receive vaccine shots if the weather continues to disrupt supply chains. In more positive vaccine news out of the US, Bloomberg estimated that the US vaccine supply is expected to double by March. Given statements from Pfizer, Moderna, Johnson & Johnson executives and government officials vaccine supply could rise from 10-15 million per week currently to 20 million in March and 25 million in April and over 30 million in the following months. Elsewhere, in the UK, it was announced that the Northern Ireland lockdown would be extended until April 1, although children aged 4-7 would return to school on March 8. Cases have continued to fall across the UK, with the 7-day average now down to 12,084, the lowest since early October.

Overnight, the UK has said that it will share the “majority” of any future surplus coronavirus vaccines with the Covax program while Novavax has said that it will supply the program with 1.1bn doses. Novavax shares were up +7% in post market trading on the news. President Biden has also pledged that the US will contribute $4bn to Covax and France has said that it will donate 5% of its secured doses to the WHO initiative which aims to distribute vaccines to lower income countries. Meanwhile, reaffirming the high efficacy of a single shot of Pfizer/ BioNTech, the Lancet medical journal published a study overnight that said among health-care workers who received the vaccine, symptomatic infections were reduced by 85% in the 15 to 28 days after the first dose, compared with those who didn’t get a shot.

Looking at yesterday’s other data releases, US housing starts fell to an annualised rate of 1.580m in January (vs. 1.660m expected), though building permits rose to an annualised 1.881m (vs. 1.680m expected), their highest level since 2006. Elsewhere, the European Commission’s advance consumer confidence reading for the Euro Area in February rose to -14.8 (vs. -15.0 expected).

To the day ahead now, and the likely highlight will be the aforementioned release of the flash PMIs from around the world. On top of this, we’ll get January data on UK retail sales, German PPI and US existing home sales. From central banks, we’ll hear from the Fed’s Barkin and Rosengren.


Tyler Durden Fri, 02/19/2021 - 07:59
Published:2/19/2021 7:16:28 AM
[Markets] One Uniqlo Share for $1,000 Sparks Concern Over Nikkei Dominance (Bloomberg) -- Shareholders are cheering the record share price of Fast Retailing Co., the operator of casual fashion giant Uniqlo that’s just become the most valuable apparel retailer in the world.But some other market observers are sounding notes of caution over the stock’s ever-increasing influence on Japan’s Nikkei 225 Stock Average, as technical changes caused by its recent highs raise its already-outsized impact on the blue-chip gauge.A fivefold increase in Fast Retailing’s tick size -- the minimum amount by which the stock can move up or down -- and a surge in its weighting in the index mean the Nikkei’s rise is increasingly intertwined with that of the casual clothing firm, even as Japanese stocks look to test record bubble-era highs. The Nikkei broke the 30,000 barrier this week, returning to that level for first time since 1990.Fast Retailing has risen about 80% in the past 12 months and the price per share broke the 100,000 yen ($946) level on Tuesday, making it the only listed company in Japan to trade at such a value. That triggered a technical change, as under Japan Exchange Group Inc. rules the tick size on stocks trading above 100,000 yen jumps to 50 yen.“Each step gets bigger. Up to 99,999 yen it only moved 10 yen a tick,” said investor Taketsugu Agari. “The Nikkei 225 may become ever-more dominated by moves in Fast Retailing.”In the last six months alone, the apparel maker has contributed more than 1,600 points to the Nikkei 225, single-handedly responsible for nearly a quarter of the index’s 31% gain in that time. The shares briefly touched a record high Friday morning before ending the day 2.4% lower, contributing nearly half of the Nikkei’s 0.7% drop. Junichi Hashimoto, senior quants analyst at Daiwa Securities Co., says that while the tick size is unlikely to be an issue in the short term, it could be a concern over longer periods. “If the price is consistently high, when it falls the impact will be greater, and the volatility could increase,” he said.That’s further compounded by Fast Retailing’s outsized weighting on the index. The Nikkei 225 is a price-weighted gauge, meaning that the arbitrary price of an individual share determines how much of the index a company makes up. At 100,000 yen a share, Fast Retailing is a giant.That weighting stood Thursday at a record 12.8%, higher than the largest weighting on any other developed market benchmark. While Fast Retailing has been the dominant force on the Nikkei 225 for a decade, its proportion on the index has surged along with its share price, forcing passive investors to buy more of the stock as the Nikkei gains.The biggest stock on the Dow Jones Industrial Average, UnitedHealth Group Inc., makes up 6.8% of that price-weighted measure. On Japan’s broader Topix index, Fast Retailing is the 41st largest weighting, making up just 0.5%.That has sparked concern among some such as Takashi Ito, a senior strategist at Nomura Securities Co., who notes that what goes up could also come down -- fast.“If long-term investors change their outlook and decide to cut back on their holdings of Fast Retailing, then the Nikkei 225 could unravel pretty rapidly,” he said.One option to fix this would be a stock split -- the method that drove Apple Inc.’s share of the Dow Jones from around 12% to less than 3% last year, in turn triggering a boost in its share price by making it easier for retail investors to buy in.Apple’s Split to End Dominion of Dow Average’s Biggest Stock But Fast Retailing has long demurred on the idea of splitting its shares. In response to questions from Bloomberg News, the company said that it wasn’t considering a stock split, directing investors to a periodic statement on the appropriateness of the size of its investment units.Still others are less concerned about what’s long been known as an issue with price-weighted measures such as the Nikkei. Makoto Sengoku, a market analyst at Tokai Tokyo Research Institute, argues that criticism of Fast Retailing for skewing the Nikkei 225 “isn’t anything new.”“You also have to give credit to Fast Retailing for having reached this share level,” he said.(Updates with share price in sixth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:2/19/2021 1:13:55 AM
[Markets] GLOBAL MARKETS-Stocks edge higher, bonds sell off as investors bet on recovery The Dow Jones IndustrialAverage notched a record closing high, joining a global marchpropelling stock indexes to record highs on Tuesday, asinvestors bet that COVID-19 vaccinations and U.S. stimulus willdeliver a durable economic recovery after a year of lockdowns. Bitcoin added to the bullish mood, brieflyclimbing above $50,000 for the first time, while prospects of"reflation" - a boost in inflation from extraordinary fiscalstimulus - pushed U.S. Treasury yields higher. U.S. President Joe Biden was traveling to Wisconsin onTuesday to press his case for a $1.9 trillion pandemic reliefbill in the political battleground state that helped secure hisvictory in last year's presidential election. Published:2/16/2021 3:32:22 PM
[Markets] US STOCKS-Stimulus hopes drive Dow to closing peak but interest rate worries loom The Dow Jones IndustrialAverage notched a record closing high on Tuesday as cyclicalsectors gained on the prospect of more fiscal aid to lift theU.S. economy from a coronavirus-driven slump. The Nasdaq, however, dipped as technology stocks movedlower, while concerns over rising interest rates kept thebenchmark S&P 500 little changed. President Joe Biden has pitched a $1.9trillion pandemic relief bill and is pressing Congress to passit in the coming weeks in order to get $1,400 stimulus checks toAmericans and bolster unemployment payments. Published:2/16/2021 3:06:48 PM
[Markets] Bond Bloodbath Sparks Stock Slump; Dollar & Crypto Jump Bond Bloodbath Sparks Stock Slump; Dollar & Crypto Jump

While bonds were making headlines on the business media, the real bloodbath was in Texas power markets with Spot Electricity hitting its $9000 cap..

Source: Bloomberg

But bond investors were really puking today, with 10Y up over 9bps testing 1.30%...

Source: Bloomberg

This is the biggest 3-day spike in yields since the election rebound...

Source: Bloomberg

The 7Y/10Y segment was the worst performer as we suspect swap and mortgage traders stepped into gamma- and delta-hedging...

Source: Bloomberg

As mortgage spreads have blown out the most aggressively since

Source: Bloomberg

Technicals seem to confirm 10Y breaking out also...

Source: Bloomberg

Is the market just full to the brim with fiscal and monetary largesse?

Real yields jumped to their highest since early January, led by gold...

Source: Bloomberg

Bitcoin topped $50k...

Source: Bloomberg

S&P hit the 3950 'Call Wall' and stumbled...

TSLA tumbled back below $800 once again (as perhaps the limits of electrickery were exposed in the southern states' chaos)...

Futures were holding up from yesterday's gains but as Treasury yields surged, something snapped in stock-land. Small Caps and Big Tech were the day's laggards and The Dow led with a green close...

Oil stocks led the way(again) along with financials (steeper curve)...

Source: Bloomberg

Notably the MSCI World index was up for the 12th straight day, its longest streak in 17 years (Nov 2004)...

Source: Bloomberg

Pot stocks managed gains today after a couple of ugly days...

Source: Bloomberg

And the original basket of WSB short-squeeze stocks sold off today ahead of the hearings...

Source: Bloomberg

VIX pushed notably higher today after crashing to a 19 handle on Friday...

As call buying continues to dominate put buying...

Source: Bloomberg

The dollar surged intraday, ramping to run stops from Friday before fading back...

Source: Bloomberg

Spot Gold prices fell back below $1800...

Source: Bloomberg

As the 50- and 200-DMA crossed over in a 'death cross'...

Source: Bloomberg

Nattie prices jumped on the heels of the chaos across the southern states...

And the freezing temps wreaked havoc on Texas oil wells and refineries, sending oil production in the country's largest crude-producing state plunging by more than two million barrels a day due to the storm, which has sent prices surging to $60 a barrel for the first time in a year. ..

Lumber has roared back to record highs on seasonally strong demand, prolonged maintenance, expansion delays, container shortages, and low producer stocks...

Source: Bloomberg

Finally, we note that stocks are the most 'expensive' relative to bonds since 2018 - is there an alternative after all?

Source: Bloomberg

Bye, Sue Herrera!

Tyler Durden Tue, 02/16/2021 - 16:00
Published:2/16/2021 3:06:48 PM
[Markets] "With All Games, There's Always A Loser": CNBC Pushes Convenient GameStop Post-Mortem Narrative "With All Games, There's Always A Loser": CNBC Pushes Convenient GameStop Post-Mortem Narrative

On Squawk Box Monday morning Joe Kernen interviewed financial influencer Haley Sacks (a.k.a. Mrs. Dow Jones) about the GameStop chaos that had ensued over the last couple of weeks. Providing a post-mortem of the frenzy that took place weeks ago, Sacks took the opportunity to blame those who are "gamifying" the market, while a semi-confused Joe Kernen sounded like he was still trying to make sense of the entire situation. 

"Just tell us, were you at that point thinking 'this is great' or 'I'm worried about this'," Kernen asked her.

"I think it was a really exciting time. It was great for ratings for CNBC I'm sure and great for interest in finance but in the same way there's a lack of education, so it was a bit scary because you saw young people taking risks with their money that necessarily didn't make sense."

"I remember at the time on Twitter," Kernen says. "I made one comment that 'this was investing?' because it didn't look like investing at that point. And that caused a huge ruckus. Obviously, going from single digits to four or five hundred - I don't know what that is exactly."

"I guess it's investing," Kernen says. "But I'm not sure that's the way people should be exposed to Graham and Dodd type building wealth for retirement in the stock market."

"Absolutely," Sacks responds. "Gamification is when you apply game mechanics to non-game environments, such as the stock market. Like with all games, there's always a loser. You saw daytrading explode during the pandemic people because were at home and they were bored."

She continues: "In one way, it was great, because it propelled interest into the markets and into financial literacy. But it was also extremely risky. You think about a chess match - would you play chess if you didn't know the rules? Investing is not a game."

But perhaps what Sacks fails to understand is that the problem wasn't that the GameStop crowd didn't know the rules - it was that they knew them too well. As many have documented, not everybody on the r/WallStreetBets forums was just a mindless retail lemming following the crowd. Some users did the work and understood exactly what the consequences could be from many buyers piling into the stock at the same time.

And while that didn't necessarily fit her narrative of "investing isn't a game" that came across in her interview, it's likely that she, Joe Kernen and many other parties still "struggling" to figure out what happened know very well that Wall Street is a game - except it's the institutions that don't want retail to figure that out. And that opacity is not for the greater good of the retail investor. 

Tyler Durden Tue, 02/16/2021 - 14:16
Published:2/16/2021 1:32:24 PM
[Markets] World Stocks Hit Longest Record Streak In 17 Years As Yields Surge; Bitcoin Spikes Over $50,000 World Stocks Hit Longest Record Streak In 17 Years As Yields Surge; Bitcoin Spikes Over $50,000

China may still be closed, and the US is returning from President's Day holiday, but global stock markets haven't missed a beat and on Tuesday the MSCI World index hit a fresh all time high, rising for a 12th straight session - its longest streak of gains in 17 years as optimism over covid vaccines, stimulus and the economic recovery in general swept across markets.

US emini futures also hit record highs on Tuesday as investors piled up into reflationary and economically sensitive stocks such as energy and banks on hopes of more fiscal aid to lift the world’s biggest economy from a coronavirus-driven slump. Dow e-minis were up 200 points, or 0.63%, S&P 500 e-minis were up 21.50 points, or 0.55%, and Nasdaq 100 e-minis were up 67.75 points, or 0.49%.

Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co, Citigroup Inc and Bank of America Corp rose between 1.2% and 1.5% in premarket trading as 10-year U.S. Treasuries touched their highest since late March.

The energy sector was also bid up with oil stocks ExxonMobil Corp, Marathon Oil, Devon Energy Corp and shale-focused player Occidental Petroleum Corp gained between 2.7% and 4.6% after oil prices jumped to a 13-month high. The surge in oil has served as a tailwind for the reflation trade which is powering assets tied to economic growth and price pressure, including commodities and cyclical stocks as Joe Biden pushes ahead with his plan to pump an extra $1.9 trillion in stimulus into the economy. At the same time, investors are riding a wave of speculative euphoria from penny stocks to Bitcoin amid abundant policy support.

“Continued monetary stimulus and bursts of fiscal support maintain a strong foundation for risk assets,” said Seema Shah, chief strategist at Principal Global Investors.

Europe's Stoxx 600 Index erased earlier gains of as much as 0.3% to trade flat with defensive sectors leading losses on sharply higher yields and sentiment was dented heading into cash trade following reports that China is mulling curbs over rare earth metals exports to the US, in a move that could impact US-Sino relations in the early days of the Biden Admin. Consumer products, telecom and media shares are worst performers, while basic resources, energy stocks climb. The European travel and leisure index rose as much as 0.7% in fourth day of gains, amid optimism around Covid-19 vaccine roll-outs and declining infection infection rates. Biggest gainers including tour operator TUI (+5.1%), airline group Ryanair (+3.6%) and hotel operator Accor (+1.1%). SXTP benchmark up 4.8% in four sessions, touches highest level since Feb. 26, 2020. Here are some of the biggest European movers today:

  • Glencore shares rise as much as 4.1%, hitting the highest since May 2019, after the commodities group’s earnings beat estimates, it reinstated its dividend and Citi said the results look “strong.”
  • Kerry Group shares jump as much as 4.5%, the most since Nov. 10, with Jefferies saying volume growth is reassuring and the consumer foods unit has performed well.
  • DSM shares gain as much as 3% to a record with Morgan Stanley saying the Dutch vitamin company’s outlook looks well underpinned by solid fourth-quarter results.
  • Allegro shares rise as much as 3.2% after Goldman Sachs upgraded the Polish e-commerce firm to buy, saying the stock is an an “attractive entry point” following recent weakness.
  • Rotork shares climb as much as 5.8%, hitting a record high, after Jefferies upgraded the engineer to buy

Investor morale in Germany rose beyond even the most optimistic forecast in February on expectations consumption will take off in the coming months, the ZEW economic research institute said on Tuesday, buoying the outlook for Europe’s largest economy. The ZEW said its survey of investors’ economic sentiment surged to 71.2 points from 61.8 the previous month and well above the estimate of a fall to 59.6, surpassing even the highest forecast, of 68.0.

“The financial market experts are optimistic about the future. They are confident that the German economy will be back on the growth track within the next six months,” ZEW President Achim Wambach said in a statement. “Consumption and retail trade in particular are expected to recover significantly, accompanied by higher inflation expectations,” he added.

Earlier in the session, Asian stocks also rose to a fresh record, led by gains in Hong Kong, which resumed trading after Lunar New Year holidays. SoftBank Group climbed to an all-time high and was the biggest contributor to gains in the MSCI Asia Pacific Index. Financials were the biggest boost among industry groups as U.S. Treasury yields rose. Energy was the region’s top-performing sector on elevated oil prices owing to disruptions at refineries in Texas amid a cold snap. All major national benchmarks were in the green. Japanese stocks extended a rally that saw the Nikkei 225 breach the 30,000 level for the first time since 1990 on Monday. Markets in China, Taiwan and Vietnam remained closed for holidays

As noted above, global debt markets extended a selloff as investors shift money to riskier assets. Treasury 10-year yields rose four basis points to touch 1.26% -- the highest since last March -- while the 30-year equivalent pushed above 2.05%. Treasury yields higher by up to 6.5bp across long-end of the curve vs. Friday session close; 10-year yields reach 1.265% and 30-year tops at 2.077% during the selloff, both multi-month highs bringing convexity, gamma hedging flows into play. In Europe, German bunds and U.K. gilts both saw benchmark yields gain five basis points. Latest leg lower led by gilts, which underperform as global yields stretch higher with gains in stocks.

In Europe, fixed income took a breather after Monday’s bear steepening with curves mixed: long end Germany richens ~1bps, Gilts are steady. Cash treasuries bear steepen, playing catch up after Monday’s closure. Peripheral and semi-core spreads tighten to Germany at the margin, with the exception of Italy which widens a touch with focus on syndicated issuance.

In FX, the Bloomberg dollar index dipped into the red slipping through Asia’s lows. Majors were moderately bid with NZD, NOK and SEK topping the G-10 scoreboard. Cable drifted after failing to breach 1.3950 overnight, USD/JPY was offered back toward 105. Turkish lira leads in EMFX, trading lows of 6.91/USD.

In commodities, Brent held near a 13-month high after freezing temperatures crippled the Texas power system and disrupted crude production. Nearly 5 million people across the U.S were plunged into darkness as homes and businesses lost power. Crude futures drifted off best levels with front-month WTI back on a $59-handle. Brent finds support near $63 so far. Gasoline and heating oil fade from best levels as the Texan energy crisis persists.

Natural gas futures for March delivery surged as much as 6.3%. In metals, copper climbed to the highest since 2012 and tin extended a dramatic surge. Citigroup Inc. forecasts copper prices will rally to $10,000 a ton in six to 12 months on a better-than-expected recovery in demand, most notably outside China. Spot gold has a choppy session within Asia’s range trading near $1,824/oz. Base metals are mixed: LME lead lags, copper outperforms

And in keeping with new record highs, Bitcoin did just that rising above $50,000 moments ago.

A flurry of recent announcements indicates the cryptocurrency is winning more mainstream attention, after Tesla Inc.’s purchase catapulted it onto the agenda of corporate treasurers.

Expected data include the U.S. Empire State Manufacturing Survey. Elsewhere this week we get earnings Daimler, Credit Suisse, Deere, Danone and Nestle; Euro-area finance ministers will discuss the bloc’s current economic situation and outlook on Tuesday while the Fed minutes from the January meeting are due Wednesday and U.S. retail sales figures come on Wednesday.

Market Snapshot

  • S&P 500 futures up 0.4% to 3,947.75
  • STOXX Europe 600 little changed at 419.75
  • MXAP up 0.5% to 220.66
  • MXAPJ up 0.4% to 740.84
  • Nikkei up 1.3% to 30,467.75
  • Topix up 0.6% to 1,965.08
  • Hang Seng Index up 1.9% to 30,746.66
  • Shanghai Composite up 1.4% to 3,655.09
  • Sensex down 0.1% to 52,094.46
  • Australia S&P/ASX 200 up 0.7% to 6,917.27
  • Kospi up 0.5% to 3,163.25
  • German 10Y yield little changed at -0.39%
  • Euro up 0.1% to $1.2147
  • Brent futures down 0.4% to $63.04/bbl
  • Gold spot up 0.3% to $1,824.46
  • U.S. Dollar Index down 0.3% to 90.25

Top Overnight News from Bloomberg

  • Already low short-term interest rates are set to sink further, potentially below zero, after the Treasury announced plans earlier this month to reduce the stockpile of cash it amassed at the Fed over the last year
  • U.S. investors return Tuesday from the Presidents’ Day holiday to find the reflation trade in full force and global bond markets in retreat
  • Investors betting Bank of Japan’s review next month will lead to higher bond yields may need to cool their ardor, at least according to an analysis of the language used recently by policy makers
  • China is exploring whether it can hurt U.S. defense contractors by limiting supplies of rare-earth minerals that are critical to the industry, the Financial Times reported

A quick look at global markets courtesy of NewSquawk

Asian equity markets traded higher across the board to extend on Monday’s gains amid a lack of any major changes on the macro front and as trade continued to pick up from the holiday lull caused by the Lunar New Year/Spring Festival holidays in China and Presidents’ Day stateside. ASX 200 (+0.7%) was positive with the index led by cyclicals and with miners encouraged after BHP results in which the mining giant reported an increase in H1 underlying net and revenue, as well as declared a record interim dividend. Big 4 bank NAB was also kept afloat despite flat results with Q1 cash earnings inline with the previous year, although this was still 47% higher than the quarterly average during first 6 months of 2020 and it noted a 96% decline in credit impairment charges. Nikkei 225 (+1.3%) added to its highest levels in more than three decades as exporters cheered a weaker currency and with BoJ Governor Kuroda sticking to the dovish script in which he affirmed that ETF purchases are part of the monetary easing program and that the BoJ will not end nor seek an exit from ETF purchases for the time being. Hang Seng (+1.9%) was jubilant on return from the holiday closures with notable advances in the blue-chip energy stocks as they played catch up to the continued ascent in oil prices and with financials also bolstered by the rising yield environment and due to some expectations HSBC could resume dividends following next week’s board meeting, while IMAX China shares rocketed over 30% after China’s box office revenue reached CNY 5bln during the first 3 days of the Spring Festival holidays. However, some of the gains for the regional bourses and US equity futures were later reversed in late trade after reports that China is mulling curbs on rare earth metals exports, targeting the US defense sector. Finally, 10yr JGBs were lacklustre amid the gains in stocks and follows recent pressure in T-note futures as the US 10yr yield rose higher by as much as 5bps to briefly touch 1.25% and the US 30yr yield extended further above 2.00%, while weaker results at the 5yr JGB auction also dragged the 10yr benchmark to beneath 151.50 and saw its respective yield increase to 8bps which is the highest in almost a year.

Top Asian News

  • Myanmar Shuts Internet Again as Protest Crackdown Continues
  • Saudi Arabia Adds Pressure on Global Firms to Move to Riyadh
  • Kuroda Nudges 2% Inflation Into 2024 or Beyond in Latest Delay

European stocks opened Tuesday’s session with modest gains across the board despite the firmer APAC handover, but sentiment was somewhat tainted heading into cash trade following reports that China is mulling curbs over rare earth metals exports to the US, in a move that could impact US-Sino relations in the early days of the Biden Admin. US equity futures meanwhile trade in positive territory with some outperformance seen in the RTY (+1.0%) as the US waits to play catch-up on its return. Bourses in Europe meanwhile continued to trade sideways during early hours (Euro Stoxx 50 +0.1%) due to the lack of news flow and catalysts, although the sizeable upside surprise in the German ZEW sentiment survey provided the region and overall sentiment with a mild uplift. Sectors are predominantly in the green and portray a cyclical bias with Oil & Gas as the outperformer (+1.3%) as oil prices remain somewhat elevated, on the flip side the defensive Healthcare (-0.3%) and Consumer Staples (-0.1%) are both softer on the session. The sectorial laggard in the session thus far is Media (-0.5%) following Vivendi’s (-2.2%) outperformance yesterday. Cineworld (+6.0%) is the individual outperformer amid reports that they are proposing a vaccine passport to allow them to re-open. Elsewhere, HSBC (+2.7%) is higher after Co. shares rose over 5% in Hong Kong trade with traders attributing it to the resumption of the dividend programme following the board meeting on 23rd February. Meanwhile, cooperate updates from mining giants BHP (+1%) and Glenore (+3%) prop up the Materials sector, with the former declaring a record interim dividend alongside a constructive view on Chinese demand, while the latter topped adj. EBITDA forecasts and recommended a distribution of USD 0.12/shr vs exp. USD 0.06/shr.

Top European News

  • Germany Inc. Has Had It With Merkel’s Go-Slow Reopening Plan
  • Czech Tycoon Said to Tap Banks for IPO of $5 Billion Telecom Arm
  • Brexit Trade Recovers With Fewer Cross-Channel Cargoes Rejected
  • Russia’s Pandemic Winners Drive $10 Billion Share Sale Pipeline

In FX, having been pipped by the Pound on Monday, the Kiwi is now clearly ahead of its major rivals, albeit largely at the expense of ongoing weakness in its US counterpart and Aussie underperformance as opposed to anything NZ specific or supportive. Indeed, as the DXY continues to languish below 90.500 between 90.375-201 parameters, Nzd/Usd has advanced beyond 0.7250, and the Aud/Nzd cross is now eyeing 1.0720 as Aud/Usd retreats from a pop over 0.7800 in wake of dovish RBA minutes befitting the QE extension last Tuesday and guidance indicating no change in rates for at least 3 years. Moreover, news that lockdown in Melbourne may be extended and a downturn in the CNH following reports that China is considering a curb on the export of rare earth metals, aimed at the US defence sector, are also undermining the Aussie to an extent.

  • GBP/EUR - Although Sterling has pared some gains and given up pole position on the G10 grid as noted above, Cable looks more assured on the 1.3900 handle and Eur/Gbp edged closer to 0.8700 before bouncing as the Euro takes its turn to forge further gains vs the Dollar. However, Eur/Usd is still facing formidable technical resistance in the form of the 50 DMA (1.2157) not to mention hefty option expiry interest up at 1.2200 (1.5 bn) if it manages to make a clean upside break with impetus from an upbeat ZEW headline economic sentiment reading and relatively upbeat accompanying comments.
  • CHF/CAD/JPY - The Franc is also firmer against the Buck through 0.8900, but on a par with the Euro just above 1.0800 amidst SNB intervention, while the Loonie extended towards 1.2600 alongside WTI on approach to Usd 61/brl before fading in tandem. Conversely, the Yen remains depressed on risk grounds and BoJ Governor Kuroda stating no intention of ending ETF purchases any time soon, with Usd/Jpy pivoting 105.50 that aligns with the 200 DMA ahead of Japanese machinery orders and trade data.
  • SCANDI/EM/CRYPTO- The Nok has breached 10.2000 vs the Eur, and on top of recent crude-related appreciation the Krona will be relieved to Norwegian oil workers and the SAFE labour union have agreed a pay deal to avoid strike action. Meanwhile, the Sek has finally cracked 10.1000 and is close to pre-Riksbank peaks on the brink of 10.0000 awaiting minutes of the meeting on Friday. Elsewhere, the Try has extended gains beyond 7.0000 in the run up to the CBRT and Zar to just shy of 14.4000 on better prospects of vaccines to combat SA’s coronavirus strain, while Bitcoin still has the bit literally between its teeth and is on the cusp of Usd 50k.

In commodities, WTI and Brent front month futures gave up their mild overnight gains as European cash equity trade went underway with no particular catalyst at the time to entice the price action, albeit a more likely explanation could be the broader sentiment deterioration around this time. Throughout the session, the crude benchmarks have been ebbing lower with WTI further below USD 60/bbl (vs high 60/bbl), whilst its Brent counterpart meanders just north of USD 63/bbl (vs high 63.34/bbl). That being said in the grander scheme, fundamentals keep prices buoyed near recent highs, with short term supply woes emanating from the deep freeze across Texas, prompting the wells and refineries to restrict or close operations. Exxon began shutting its 369k BPD Beaumont and 560k BPD Baytown refineries, whilst Citgo Petroleum said some units at its 167k BPD Corpus Christi oil refinery were shutting. Further, LyondellBasell’s 264k BPD Houston refinery is to operate at minimum production whilst it shut most units at Marathon Petroleum’s 585k BPD Galveston Bay plant. In terms of pipeline impacts, Enbridge said a 585k bpd crude oil pipeline that runs from its terminal to Cushing, Oklahoma (the largest US oil storage hub) was halted because of power outages. Kinder Morgan also reported gas-pipeline capacity constraints in Arkansas, Illinois, Louisiana, New Mexico and Texas. Meanwhile, Norway's SAFE labour union agreed a wage deal for Mongstad Port workers to avert a shutdown of major oil and gas fields. As a reminder, Equinor yesterday warned that a walkout would put more than 600k barrels of daily crude output from the Johan Sverdrup and Troll fields at risk. Barring weather developments in Texas, participants will be keeping and eagle-eye on commentary out of any OPEC+ members, who will be closely watched for any nuances as to what the group could opt to do or propose against the backdrop of mass vaccinations and oil prices back at pre-COVID levels. Moving onto demand, the continued stimulus-lift and vaccine hopes keep prices underpinned, however, it is worth highlighting an S&P Global report yesterday which highlights a notable absence of Chinese demand for Atlantic basin crudes during the February and March cycles, with sources citing the refinery maintenance season in the country. Elsewhere, spot gold and silver are modestly firmer as a function of the softening Dollar, with the former around 1823/oz and contained within recent ranges. Turning to base metals, LME copper trades on a modestly firmer footing with aid derived by the softer Dollar and as mining giant BHP highlighted robust Chinese demand for the base metal.

US Event Calendar

  • 8:30am: Feb. Empire Manufacturing, est. 6.0, prior 3.5
  • 11:10am: Fed’s Bowman Speaks to Community Banking Conference
  • 12:30pm: Fed’s George Discusses Economic Outlook
  • 1pm: Fed’s Kaplan Discusses the Economy
  • 3pm: Fed’s Daly Discusses Economy and Inequality
  • 4pm: Dec. Total Net TIC Flows, prior $214.1b

DB's Jim Reid concludes the overnight wrap

Though it was a quieter session with US markets closed for the Presidents’ Day holiday, the global reflation theme continued apace yesterday, and risk assets showed continued strength across multiple asset classes. In fact the MSCI World Index, which includes a range of developed world equities, rose for an 11th straight session, marking the longest winning streak for the index since January 2018. If it manages to notch a 12th gain today, it’ll become the longest winning run since December 2003, back when Arsenal were on their way to winning the Premier League unbeaten, and before most UK households had internet access. I even had a full head of hair. Actually thinking back I was probably in my long denial phase.

Anyway, whether or not we reach that particular milestone, yesterday saw equity indices set new records around the world thanks to persistent optimism on the vaccine rollout and the chances of fresh stimulus. Here in Europe, the STOXX 600 (+1.32%), the CAC 40 (+1.45%) and the FTSE MIB (+0.83%) all reached their highest levels since the pandemic began, and Germany’s DAX (+0.42%) hit an all-time high. Within the STOXX 600, the leading sectors included energy (+3.98%), communication services (+2.66%) and financials (+2.17%), whilst vaccine hopes sent the STOXX 600 Travel & Leisure index up +2.68% to its own post-pandemic high. In terms of the moves elsewhere, Japan’s Nikkei closed above 30,000 yesterday for the first time since 1990 on the back of stronger-than-expected GDP data and this morning is up a further +1.90%. And in the US, equity futures are pointing towards yet more all-time highs for the major indices, with S&P 500 futures up +0.66%.

Turning to other markets in Asia and rally continues with the Hang Seng (+1.41%) leading the gains as it reopened post holidays. The Kospi (+0.29%), India’s Nifty (+0.51%) and Asx (+0.70%) are also up. In keeping with the reflation trade, yields on 10y USTs are up +2.3bps this morning to 1.234% while the 2s10s curve has steepened by +2bps. Elsewhere, Bitcoin prices are up +2.30% to $49,314 this morning after yesterday -1.35% move lower.

As global equities are soaring to new highs, there are some pretty big ructions in energy markets, thanks to seriously cold weather in the southern United States, which is raising concerns over disruption to global supplies. In Texas, which is currently seeing its coldest temperatures in decades, with areas of the state seeing lower temperatures than Alaska, there were a series of rolling blackouts as a result of high electricity demand, and lower oil production. This has helped send prices up to levels not seen in over a year, with WTI (+1.33%) rising to $60.25/bbl, and Brent Crude (+1.39%) up to $63.30/bbl. Staying on commodities, yesterday saw a number of other inputs reach multi-year highs as well, with copper (often taken as a key industrial bellwether) up a further +0.74% to an 8-year high yesterday, which will add to the questions raging amongst the economics profession on the likelihood of higher inflation ahead.

Given the risk appetite among investors, safe havens didn’t fare so well yesterday and the selloff in sovereign bond markets continued. Treasury markets were closed given the holiday, but yields moved higher across the continent in Europe, with 10yr bund yields climbing +4.6bps to close at their highest level since last June, as 10yr gilt yields (+5.4bps) also closed at their highest level since last March. Both bunds and gilts saw a noticeable steepening in the yield curve too, with the German 2s10s curve at its steepest since June, and the UK 2s10s at its steepest since March. Italian debt moved roughly in line with bunds following Mario Draghi’s installation as Prime Minister on Saturday, and the spread of BTPs over bunds rose just +0.2bps.

In terms of the latest on the coronavirus pandemic, there was some further good news out of the UK as the number of confirmed daily cases fell beneath 10k for the first time since October 2. Prime Minister Johnson is due to announce the roadmap to ease restrictions next Monday, and said that “what we want to see is progress that is cautious but irreversible”. Sterling has benefited from the UK’s successful vaccine rollout, closing above $1.39 yesterday for the first time since April 2018, having also been supported by better-than-expected data releases in the last couple of weeks and the BoE pushing back somewhat on the likely use of negative rates in the coming months. Meanwhile, the EU is reportedly in advanced negotiations with Moderna to buy an additional 150mn doses in a bid to boost its vaccination program. The doses will likely be for the third quarter. Across the other side of Atlantic, the US recorded “just” 53,234 new cases over the past 24 hours, the lowest daily number since October 18, as the holiday wave is subsiding in almost all the states.

There wasn’t a great deal of data out yesterday with the US holiday, though Euro Area industrial production fell by a larger-than-expected -1.6% in December (vs. -0.8% expected). That meant the year-on-year decline deteriorated to -0.8% (vs. -0.6% in November), which is the first time that’s worsened since the height of the pandemic back in April.

Looking to the day ahead, the data highlights include February’s ZEW survey from Germany, the Empire State manufacturing survey from the US, as well as the second estimate of Q4 GDP in the Euro Area. There’ll also be a number of central bank speakers, including the Fed’s Bowman, George, Kaplan and Daly, while earnings releases include CVS Health and AIG.

Tyler Durden Tue, 02/16/2021 - 07:54
Published:2/16/2021 6:57:09 AM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Seeing Rotation into Financials, Energy Dow traders should pay attention to shares of components Apple Inc and Microsoft Corp because they are at the center of the current stock rotation. Published:2/15/2021 9:23:19 PM
[Markets] Luongo: Still Don't Think Bitcoin Is #Winning? You're A Loser! Luongo: Still Don't Think Bitcoin Is #Winning? You're A Loser!

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

Bitcoin is winning. Period. In fact, it may have already won and the people arrayed against it, no matter how powerful, are finally beginning to realize this.

This week saw a slew of major announcements which all point in this direction.

Of course the big news was Elon Musk’s announcement of Tesla Corp. having a $1.5 billion position in bitcoin.

But that news came on the heels of a lot of other news, like VISA saying it was ready to embrace bitcoin to help banks build crypto-payment and trading services.

VISA-backed debit cards have been around for a while now, like BitPay’s offering, but this announcement by VISA is different as it highlights the the futility of fighting the market when the market chooses something better.

And speaking of BitPay the most important announcement of the week, in my opinion, is Apple’s allowing BitPay’s Mastercard to be added to ApplePay wallets. Google and Samsung are next.

Later in the week MasterCard followed VISA now saying it will allow a handful of cryptocurrencies to flow across its network.

Lest I forget that no less than three major pillars of the banking community gave up fighting the bitcoin wave.

  1. Bank of New York Mellon announced custodial services for its institutional clients. They wouldn’t do that if the demand wasn’t there.

  2. J.P. Morgan, which has tried no less than four times in as many weeks to create a psychological break of the latest bull wave (H/T Zerohedge),

  3. Morgan Stanley’s investment arm is now considering taking a position, directly after buying up a ton of MicroStrategy, which is itself a proxy for bitcoin.

But still there is no ‘use-case’ in the words of perma-skeptics like the venerable Peter Schiff who is becoming increasingly desperate to make his case while trashing his bona fides as an Austrian-style economic thinker.

This tweet proves what I said about Schiff last fall.

To deny that Bitcoin has any value is to deny the fact that information is a commodity. And that’s truly facile when, at its essence, that’s all an economy actually is, information. The goods that move can only do so efficiently with good information about their production and distribution.

Price is the value of the information being transacted.

Peter Schiff makes his living getting paid to dispense opinions on markets. His entire life is built on the idea that information concentrated in one man’s mind is worth something to someone else who is ignorant of that information.

That people like Peter Schiff deny this simple process by which something acquires and builds commodity value through time is also irrelevant.

It means that while Peter studied Austrian economics he just didn’t understand it.

But it’s not just Schiff, it’s otherwise really smart people, who I normally respect, making the dumbest arguments imaginable in public.

It must be the hypoxia. It eventually rewires everything. Because Mr. Antifragile himself continues to miss the reasons why humans desire antifragility and expects that to occur on his time schedule not theirs.

So, he falls back on insults defended by dubiously-applicable math rather than admit to the paradigm shift happening in front of his eyes.

Bitcoin’s volatility isn’t as much a bug in its design but a feature of its adoption curve.

Because in any appreciable sense when viewed against other major assets as a function of its US dollar price moves, Bitcoin isn’t really all that volatile.

Weekly Volatility in Real Terms, N=187 weeks.

Bitcoin’s price is volatile, certainly. More volatile than any of the other assets here when comparing the weekly range from low to high versus the standard deviation of that range… call it internal volatility.

But that volatility is a function of it being in a bull market, operating in far less mature trading platforms than these other assets and about twenty other variables that do not apply to Apple, Gold, Silver or the Dow Jones Industrials, making any statistical comparison between them, frankly, puerile.

Mr. Taleb should know comparing statistical data from sets with different boundary conditions is the height of intellectual weak sauce.

And yet, given those caveats, on a week-to-week basis, trading 24/7 without arbitrary halts like the others, bitcoin measured against itself is only slightly more volatile than any of these other assets with higher internal volatility.

It’s an asset rapidly expanding its userbase, it’s acquiring monetary character daily as more of the old monetary system sees the opportunity to make a vig, in VISA and Mastercard’s case, or provide explosive returns for investors looking to hedge against the chaos of a ruling class gone equal parts crazy and moronic.

It’s a growth stock that is just finding the sweet spot of its growth curve as conditions for its value proposition increases daily.

Which brings me to the following observation:

If you are an asset manager today and you saw the brazen display of incompetence, pettiness and cluelessness in Congress and the Senate…

If you are an asset manager today who sees the draconian and willful destruction of the U.K. economy by a Prime Minister who should literally be dragged out of 10 Downing St. by his hair and thrown into the Thames…

If you are an asset manager today and see the ruthless political shenanigans perpetrated on the major economies of Germany, France, Italy and Spain…

… and you aren’t buying the living shit out of bitcoin right now, you should lose all your business!

What argument can you make to pile up more dollar-denominated assets in your client’s portfolios in a world literally drowning in dollars and dollar liabilities, knowing the policy responses will be to create more dollars, undermine the confidence of the system and accelerate a fundamental shift in the monetary system?

Are you really that enamored of Christine Lagarde at the ECB? Jerome Powell at the Fed? Kuroda at the BoJ?

Personnel is policy after all.

Are these the best and brightest the world has to offer us for stewardship of our future as a species?

Or are you finally willing to listen to what your clients are telling you and now have to pile in to save face?

Most of you have already missed the greatest wealth transfer from the rich to the middle class in history but, hey, past results don’t guarantee future returns, right?

The point is that bitcoin, and cryptocurrencies in general, are still assets in their infancy. But as technology anyone with an ounce of intellectual honesty can tell you where this is all headed.

And this week’s mass of announcements is the dam breaking down of adoption. It’s the clearest signal yet that the overreach and arrogance of the political class has reached its limit of power.

We don’t buy it anymore. And the whole system is now accelerating towards a catastrophic crisis of confidence.

Making arguments about historical volatility or intrinsic versus extrinsic value is, at best sophistry, and, at worst, egoism.

Bitcoin’s total addressable market just jumped psychologically by an order of magnitude last week. That’s why it’s winning.

We’re reaching the inflection point that I’ve talked about before. It is the moment when a critical mass of people stop valuing their portfolios in terms of dollars but in terms of bitcoin.

Years ago, before bitcoin, when I was an advocate for the Liberty Dollar, I used to go everywhere with two one-ounce silver rounds in my pocket. And when I walked into a place where I could spend money I would reach in and hold them in my hand for a minute.

I asked myself one simple question each time, “Would I spend these coins to buy that thing.” And more often than not the answer was, “No.”

It was a great exercise in teaching myself fiscal restraint. Today people are doing the same thing with bitcoin. They’ll spend their dollars or euros but they are HODLing their bitcoin because they KNOW it’s more valuable to them than those dollars or euros.

Christine Lagarde called bitcoin, “Funny business money,” in her latest attempt at both wit and to warn us what her plans were.

It failed to impress us on both fronts.

Because Lagarde, like Schiff and Taleb, believe they know what real money is. They think because they have the power (Lagarde) or the pulpit (Schiff and Taleb) that they can define for the market what money is or what it will be in the future.

These aren’t dumb people, but they are being dumb here. Because, at least for Taleb and Schiff they are supposed to know that the market is bigger than any one person or group of people.

Lagarde will learn this lesson in the hardest way imaginable.

Bitcoin will rise to some new, seemingly astronomical high that will be “unthinkable.” Eventually, sentiment will get so out of whack and supply will balance demand.

That will set off a correction of major proportions, think 50-60%, maybe more.

That’s fine. Been there, done that, got the alt-coins to prove it.

I’ll have to fend off the slings and arrows of people who think they’ve won some kind of victory because bitcoin went from $14,000 to $100,000 and corrected back to $50,000 when it was $8,500 at the beginning of 2020.

And I’ll do what I’ve been doing for four years now, calling them losers.

*  *  *

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Tyler Durden Mon, 02/15/2021 - 10:30
Published:2/15/2021 9:49:00 AM
[Markets] The Stock Market's Laggards Will Bounce Back -- but When? The stock market had a late-day rally on Friday, which was enough to send all three major market benchmarks into positive territory. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all reached new record levels, although the Dow had to settle for more modest gains than its broader-market peers. A huge portion of the gains that stock market investors have reaped lately has come from high-growth stocks in areas that have already run up impressively for most of the past year. Published:2/12/2021 5:00:12 PM
[Markets] Dow, S&P 500 and Nasdaq end at record highs, notch weekly gains Dow, S&P 500 and Nasdaq end at record highs, notch weekly gains Published:2/12/2021 3:30:09 PM
[Markets] Treasury Yields Spike As Chaos Reigns At Equity Open, TSLA Tumbles Treasury Yields Spike As Chaos Reigns At Equity Open, TSLA Tumbles

It would appear the machines cannot make their minds up this morning as what was an ugly open for Small Caps and Big Tech is now morphing into a panic bid and aggressive buying in the Dow is now aggressive selling....

The driver of the flip-flop is uncertain but we note that bond yields are spiking significantly...

Source: Bloomberg

And perhaps of most note... TSLA broke below $800...

Somebody call Janet!

Tyler Durden Fri, 02/12/2021 - 09:52
Published:2/12/2021 9:06:28 AM
[Markets] Dow industrials tap brake after hitting an all-time intraday high Dow industrials tap brake after hitting an all-time intraday high Published:2/11/2021 9:21:36 AM
[Markets] US STOCKS-Wall Street rally pauses as big tech loses steam The S&P 500 and the Nasdaqedged slightly lower on Wednesday as big tech stocks slid amidan ongoing rotation of portfolio holdings that gave a boost toenergy shares and kept the overall market near record highs. A change in market leadership is underway with the focus onbig tech easing and sectors such as energy and financialsgaining traction, said David Bahnsen, chief investment officerat The Bahnsen Group in Newport Beach, California. The S&P 500 and Nasdaq both opened at record highs but soondrifted lower, while the Dow set a new peak during the session. Published:2/10/2021 4:16:37 PM
[Markets] Stoner Stocks Soar, Tesla Tumbles, Dollar Dumps, & Gold Jumps Stoner Stocks Soar, Tesla Tumbles, Dollar Dumps, & Gold Jumps

Get higher baby...

Pot stocks caught the eye of Redditors and soared...

Source: Bloomberg

Led by an explosion higher in heavily-shorted TLRY (up around 50% today)...

Source: Bloomberg

Some of the original WSB trades performed well today with GME up over 3% (but they're all still down dramatically from the peak of the debacle)...

Source: Bloomberg

But GME's early ramp faded fast late on...

Source: Bloomberg

But one momo darling got clubbed like a baby seal (for once) as TSLA was trounced, worst day in a month (and dragged the market lower) on the heels of a massive OTM Put option buy and the reverse-gamma created...

Source: Bloomberg

TSLA found support at $800...

Source: Bloomberg

Bear in mind that TSLA's drop today took 45 points off the S&P 500 (and AMZN took 30 off with its drop). BKNG, TYL, and NVDA added over 100pts between them to offset.

We couldn't help think of Leeroy Jenkins spoiling the game for everyone else...

When TSLA got whacked, the machines hit the market with a decent sell program hitting everything...

Source: Bloomberg

Small Caps broke their win-streak today, underperforming the rest of the majors along with Nasdaq 100. The Dow managed to outperform, barely holding on to green on the day...

Source: Bloomberg

Heavily-shorted Biotechs seem to have lost favor with the Reddit crowd...

Source: Bloomberg

And short-watch-penny-stocks also slipped lower...

Source: Bloomberg

Energy stocks - once again - dominated the gains with Consumer Discretionary the laggard...

Source: Bloomberg

Treasury yields were lower across the curve (with the long-end outperforming, 30Y -3bps, 3Y -1bps)...10Y dived quickly today on the weaker than expected core CPI print...

Source: Bloomberg

The Dollar fell for the 4th straight day, almost back to unchanged on the year...

Source: Bloomberg

Cryptos rolled over today with Bitcoin back below $44k briefly...

Source: Bloomberg

Ethereum also slipped lower, finding support at $1700...

Source: Bloomberg

Gold managed to hold on to gains after briefly spiking higher, ironically on disappointing inflation...

Source: Bloomberg

A weak dollar and bigger than expected crude draw sent WTI higher once again...

Source: Bloomberg

Finally, Bitcoin may seem like a risky proposition, but there’s another way to approach it.

In combination with gold, the cryptocurrency is less risky than the broader U.S. equity market, Bloomberg Intelligence’s Mike McGlone writes.

Source: Bloomberg

The 260-day realized volatility on BI’s Gold-Bitcoin 75/25 Index currently sits near its lowest level ever versus the market, “around 20% less than the same risk measure on the S&P 500 and appearing in early recovery days akin to the start of 2016.”

Tyler Durden Wed, 02/10/2021 - 16:00
Published:2/10/2021 3:19:50 PM
[Markets] Market Snapshot: Dow futures up 100 points as investors await inflation data, Powell speech Stock-index futures rise Wednesday, with major benchmarks set to resume a march higher after the Dow Jones Industrial Average and the S&P 500 snapped six-day winning streaks.
Published:2/10/2021 6:44:26 AM
[Markets] 3 Dow Jones Stocks That Will Rise 40% or More -- If Wall Street's Bulls Have It Right Many investors see the Dow 30  as among the most secure and reliable stocks in the market. For them, safer plays like blue-chip Dow stocks seem like a safer bet. In fact, if the most bullish analysts on Wall Street are right about them, the following three stocks could see their share prices post gains of 40% or more in the near future. Published:2/10/2021 12:12:02 AM
[Markets] Market Extra: Is the stock market due for a correction in 2021? Here’s what some experts think A pullback for the Dow Jones Industrial Average and the S&P 500 index on Tuesday halted the longest win streak for stocks in months but a major concern for investors remains: is there a major correction looming ahead?
Published:2/9/2021 6:40:36 PM
[Markets] Best Dow Jones Stocks To Buy And Watch In February 2021: Apple, Nike Near New Buy Points The Dow Jones Industrial Average slid from record highs at the end of January, as the current stock market pullback continues. The best Dow Jones stocks to buy and watch in February 2021 are Apple, Microsoft and Nike. Published:2/9/2021 2:39:43 PM
[Markets] Why You Must Prepare for the Stock Market's Inevitable Slowdown The stock market closed a strong week with a modest gain on Friday, and that was enough to send the S&P 500 and Nasdaq Composite to new all-time record highs. The Dow Jones Industrial Average wasn't quite able to surpass its own record close, but it was still able to put up a solid rise. Published:2/5/2021 7:13:42 PM
[Markets] US STOCKS-S&P 500, Nasdaq post biggest weekly gains since early November U.S. stocks extended their recent rally onFriday and the S&P 500 and Nasdaq indexes scored their biggestweekly percentage gains since the U.S. elections in earlyNovember, boosted by optimism over earnings, stimulus talks andprogress on vaccine rollouts. Both the Dow Jones industrial average and S&P 500 rose for afifth straight session in their longest streak of gains sinceAugust, while the S&P 500 and Nasdaq posted record closing highsfor a second day in a row. Published:2/5/2021 4:14:53 PM
[Markets] Nike and Dow Inc. are top gainers as blue chips maintain 75-point advance Nike and Dow Inc. are top gainers as blue chips maintain 75-point advance Published:2/5/2021 11:11:38 AM
[Markets] Kia Reportedly Prepping Apple Car In U.S., Japanese Auto Stocks Rally On Partnership Speculation Kia Reportedly Prepping Apple Car In U.S., Japanese Auto Stocks Rally On Partnership Speculation

It looks as though the rumors are finally starting to take shape: Kia is apparently preparing to build an Apple car in the United States.

The legacy automaker has reportedly "approached potential partners about a plan to assemble Apple Inc.'s long-awaited electric car in Georgia," according to Dow Jones

The partnership between the two companies could involve a "multibillion-dollar investment", despite the fact that a deal has not yet been finalized. It could also mark the beginning of Apple's official entrance into the auto space. 

Kia shares moved higher in trading this week as the news started to trickle out. The investment reportedly comes as "part of a collaboration on making electric vehicles," according to Bloomberg earlier this week.

Apple plans "to set up production with Kia and build Apple cars at the automaker’s facility in Georgia, U.S.," the report notes. It says the company could sign a deal as quick as February 17 and then aim to introduce vehicles together by 2024. The report also said they have an initial target of 100,000 cars per year - a number that's consistent with previous reports about Apple shopping for an EV partner.

There continues to be speculation about whether or not Apple is engaging with other automakers, as a Friday morning Bloomberg article notes:

Kia Motors Corp. is talking to potential partners about a plan to assemble an Apple-designed car, the Wall Street Journal reported Friday. Separately, the Nikkei newspaper said Apple was in discussions with at least six automakers. Conjecture around Apple’s secretive project to design and sell its own car re-emerged in December after a hiatus of several years, with Kia’s part-owner Hyundai Motor Co. mentioned as a potential partner.

Tatsuo Yoshida, a senior analyst at Bloomberg Intelligence, said that Japanese automakers are usually too busy with their own development, manufacturing, sales and customer service to take on a task like working with Apple. However, Nissan Motor Co. or Mitsubishi Motors Corp. “don’t have much work, and are somewhat idle, so they might sign up,” he said.

That sparked a rally in Japanese automakers heading into Friday:

Previously, we had reported on an ebb and flow of rumors that Apple was working with Hyundai as a partner 

Professional lagging indicator sell side analyst Dan Ives at Wedbush published a note last month noting that "Hyundai could be the first electric-vehicle partnership for Apple" and "that it expects the tech giant to ultimately announce electric-vehicle strategic partnership this year.". 

Ives said Apple has a 35% to 40% change of Apple unveiling their own car by 2024 despite the "Herculean" hurdles involved, including battery technology, financial implications and regulatory red tape. He calls it a "smart" strategic move for Apple and said that a "larger strategic partnership with an established electric-vehicle player..."

Tyler Durden Fri, 02/05/2021 - 10:30
Published:2/5/2021 9:41:54 AM
[Markets] These 2 Under-the-Radar Stocks Were Big Market Winners Thursday Substantial gains for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have some investors looking for new record levels in the near future. Below, we'll look at how Digital Turbine (NASDAQ: APPS) and Lizhi (NASDAQ: LIZI) put up such impressive gains in the stock market on Thursday. Shares of Digital Turbine climbed 20%. Published:2/4/2021 6:38:22 PM
[Markets] US STOCKS-S&P 500, Nasdaq hit record closing highs amid upbeat earnings, data U.S. stocks rose more than 1% on Thursday and the S&P 500 and Nasdaq posted record closing highs after another batch of upbeat earnings and data suggesting the labor market may be stabilizing. The Dow and S&P 500 rose for a fourth straight day, with investor hopes of further progress on a pandemic-relief package also boosting the market. Published:2/4/2021 4:35:40 PM
[Markets] US STOCKS-S&P 500, Nasdaq hit record closing highs amid upbeat earnings, data U.S. stocks rose more than 1% on Thursday and the S&P 500 and Nasdaq posted record closing highs after another batch of upbeat earnings and data suggesting the labor market may be stabilizing. The Dow and S&P 500 rose for a fourth straight day, with investor hopes of further progress on a pandemic-relief package also boosting the market. Published:2/4/2021 3:54:15 PM
[Markets] Dow, S&P 500 extend winning streaks, ending up over 1% Dow, S&P 500 extend winning streaks, ending up over 1% Published:2/4/2021 3:05:11 PM
[Markets] Stock Rally Fizzles Amid Growing Reflation Concerns, Rising Dollar Stock Rally Fizzles Amid Growing Reflation Concerns, Rising Dollar

Global markets were flat, and European stocks and US equity futures unchanged, struggling to eek out a fourth day of gains on Thursday as a rising USD and rising bond yields refocused attention on inflation and normalising economies. At 7:30 a.m. ET, Dow e-minis were up 4 points, S&P 500 e-minis were up 3.75points, or 0.1%, and Nasdaq 100 e-minis were up 40.5 points, or 0.29%.

With the WallStreetBets/Reddit retail short squeeze tumult having eased this week, markets were back in their comfort zone of corporate earnings, economic data and central bank meetings. US stocks closed slightly higher on Wednesday, with Google shares hitting a record high following strong quarterly results. All the three major indexes have bounced back sharply this week as investors monitored talks over the next round of fiscal stimulus and as a recent buying frenzy driven by social media appeared to stall following a bout of market volatility last week. Meme names rose, with GameStop up 3.9%, while AMC added 2.6% in premarket trading ahead of U.S. Treasury Secretary Janet Yellen’s meeting with financial regulators later in the day to discuss the recent market volatility.

Meanwhile, the bogeyman of rising inflation is back as hopes that the COVID pandemic can be brought to heel by extensive vaccination programmes, combined with expectations of unswerving global economic stimulus, has begun to see bond market focus returning to rising debt and possible inflation. The 10Y US yield rose just shy of 1.15% this morning, as traders renew reflation bets amid signs the economic recovery is gathering pace and the imminent passage of $1.9 trillion of pandemic aid by U.S. lawmakers. Friday’s payroll report may provide fresh impetus after the private sector added more jobs than forecast in January.

“These numbers give investors limited reason to fade rates weakness at this stage,” strategists at Mizuho International Plc including Peter Chatwell wrote in a Thursday report. The “momentum” pushing up rates could take the 10-year Treasury benchmark yield to 1.2% and the long-bond to 2% before stalling, they predicted.

In central bank moves, the pound erased a loss as Bank of England policymakers said inflation is expected to rise sharply, while voting to keep the key rate at 0.1% and the bond-buying target unchanged.

“The BoE will maintain a quite cautious tone,” said Silvia Dall’Angelo, a senior economist at fund management firm Federated Hermes, adding it was likely that the bank would talk about negative rates. “But at this stage there is very little appetite to use this measure.”

European stocks erased an earlier gain amid a mixed bag of company results. Deutsche Bank reversed an earlier gain after the German lender reported its first annual profit in six years, and Unilever slumped after margins missed estimates on restructuring charges.

Markets were also softer in Asia where stocks fell overnight, their first decline this week, weighed down by drops in technology companies. MSCI’s ex-Japan Asian-Pacific index fell 0.6%, led by 1.3% and 0.4% drops in South Korea and China. Japan’s Nikkei lost 1% as it ended a three-day winning streak. Rising Chinese short-term interest rates kept risk appetite low, though analysts also noted position adjustments before the Lunar New Year starting next week are likely to play a role too. Higher interest rates have raised worries that Chinese policymakers may be starting to shift to a tighter stance to rein in share prices and property markets.

“There’s persistent speculation that the Chinese authorities may want to tighten its policy,” said Wang Shenshen, senior strategist at Mizuho Securities.

Asian stocks Samsung Electronics was the biggest contributor to the MSCI Asia Pacific Index’s drop, falling after Qualcomm warned it was struggling to meet rebounding demand for chips. TSMC, SK Hynix and Xiaomi were also among the biggest drags. South Korea led declines among national benchmark gauges. Japanese stocks dropped, with losses in personal-care products maker Kao contributing most after it gave guidance that trailed analyst estimates. Sony shares surged to their highest level since 2000 on positive earnings. India bucked the trend as its benchmark stock gauge extended a rally to a record high after the government unveiled a massive annual spending plan.

With no notable fireworks overnight, markets have calmed in the past few days with the Cboe Volatility index slipping to its lowest levels in over a week. As the retail trading frenzy seen last week faded, stock prices of GameStop and other social media favorites have steadied, although cryptocurrency Ethereum has been on a tear ahead of the introduction of futures contracts next week.

In rates, treasuries were narrowly mixed across the curve, yields within 1bp of Wednesday’s closing levels, after paring declines that pushed 30-year above its March 2020 high. Treasury 10-year yields around 1.14% after nearly reaching 1.15% during Asia session, while 30-year took out the March highs, moves that were pared during European morning. Gilt yields shot higher after BOE rate decision, buoying U.S. yields slightly. Germany’s 30-year government bond yield on Thursday was almost back in positive territory for the first time since September. The gap between two- and 10-year U.S. Treasury yields at more than 100 basis points is now the widest in almost three years.

In FX, the dollar hit a near-three-month high versus the Japanese yen of 105.19. The euro lost 0.4% to $1.1989, having already hit a two-month low overnight below 1.20, failing to capitalize on improved sentiment in Italy after former European Central Bank chief Mario Draghi accepted the task of trying to form a new government in the country. The pound rebounded from the biggest decline in three weeks after the BOE cautioned that much higher inflation may be coming, pouring cold water on expectations for negative rates. The yen fell a seventh day versus the dollar, the longest losing streak since 2016.

In commodities, oil continued its ascent with OPEC+ saying it will keep pushing to quickly clear the surplus left behind by the pandemic. Brent approached $60 a barrel after OPEC and its allies extended production cuts. Silver settled further into a calmer trading pattern after the wild ride inspired in part by a retail-investor buying frenzy, while gold headed for the lowest close in two months. Gold fell 1% to $1,810 per ounce.

“OPEC have come in and said they are looking to remove the supply but the main driver is markets are starting to price in demand recovery, especially from emerging markets,” said Legal & General Investment Management’s Justin Onuekwusi.

U.S. companies are on track to post earnings growth for the fourth quarter of 2020, data from Refinitiv showed on Wednesday, which would defy expectations for profits to drop 10% due to the pandemic.

Market Snapshot

  • S&P 500 futures up 0.1% to 3,825.75
  • Stoxx Europe 600 little changed
  • MXAP down 0.6% to 210.99
  • MXAPJ down 0.6% to 712.38
  • Nikkei down 1.1% to 28,341.95
  • Topix down 0.3% to 1,865.12
  • Hang Seng Index down 0.7% to 29,113.50
  • Shanghai Composite down 0.4% to 3,501.86
  • Sensex up 0.8% to 50,678.05
  • Australia S&P/ASX 200 down 0.9% to 6,765.50
  • Kospi down 1.3% to 3,087.55
  • Brent futures up 0.4% to $58.71/bbl
  • Gold spot down 1.1% to $1,814.77
  • U.S. Dollar Index up 0.3% to 91.44
  • German 10Y yield fell 0.6 bps to -0.467%
  • Euro down 0.4% to $1.1988

Top Overnight News from Bloomberg

  • Of the five countries leading the fight against Covid-19, all but one saw their currencies gain versus the dollar in January, according to a Bloomberg study of the 15 biggest economies with publicly available vaccination and infection data
  • The U.K. has passed the peak of its latest wave of the coronavirus pandemic, officials said, as the country reached the milestone of vaccinating 10 million people, about 15% of the population
  • Treasury Secretary Janet Yellen’s plan to oversee a snap meeting of top regulators to discuss recent market volatility signaled the new administration’s focus on consumer financial protection after years of emphasis on deregulation
  • Deutsche Bank AG closed out a bumper year for trading with a result that beat most Wall Street peers, handing Chief Executive Officer Christian Sewing the first annual profit in six years as he leans increasingly on the investment bank

A quick look at global markets courtesy of Newsquawk

Asian equity markets were mostly lower following a flat lead from the US where participants were tentative amid mixed earnings and as focus remained on stimulus plans with some expectations tempered regarding the stimulus amount after President Biden suggested he is willing to limit the eligibility for stimulus checks but won't budge on the size of payments at USD 1,400 and there were also comments from a Biden adviser who speculated that the final stimulus size could be USD 1.3tln. ASX 200 (-0.9%) was dragged lower by underperformance in defensive sectors and with the mood also soured after fresh COVID-19 measures were announced in Victoria state following 3 new infection cases, while mixed trade data showed a decline in Imports which suggested weaker domestic demand. Nikkei 225 (-1.1%) succumbed to negative mood which overshadowed encouraging blue-chip earnings that lifted Hitachi, Nomura Holdings and Sony shares after they all registered profit growth. Hang Seng (-0.8%) and Shanghai Comp. (-0.4%) were choppy after the PBoC opted for 14-day reverse repos in its open market operation for the first time this year ahead of next week’s Lunar New Year holidays, although this still amounted to a net neutral position on the day. Tensions between US and China also lingered after the US State Department noted it is deeply disturbed by allegations of rape and sexual abuse against women at the Uighur camps in Xinjiang and called for China to allow independent investigations, while there were also comments from Commerce Secretary nominee Raimondo that she sees no reason why Chinese companies including Huawei and ZTE should not remain on the blacklist. Nonetheless, there were a few bright spots with Ping An Insurance the biggest gainer in Hong Kong after it topped earnings forecasts and with Alibaba kept afloat after Ant Financial Services reached an agreement with Chinese regulators on a restructuring plan to become a financial holding company, and large oil names were also boosted following recent upside in the underlying commodity price. Finally, 10yr JGBs were subdued after the continued bear-steepening in USTs but with downside stemmed amid losses in stocks, with JGBs also not helped by mixed results at the MOF 30yr auction which registered a larger b/c due to a decline in accepted prices.

Top Asian News

  • Ant and China Banks Are Reining In Joint Loans to Consumers
  • Kuaishou Surges 181% in Hong Kong Gray Market Trading
  • KAZ Minerals Buyout Offer Increased After Investor Pressure

European equities kicked off the session mostly firmer (Eurostoxx 50 +0.1%) in what has been a busy morning of corporate updates across the region. From a macro perspective, focus remains on the progress of vaccinations and subsequent impact on reopening efforts, whilst US stimulus talks have taken an increased focus in recent sessions as the euphoria surrounding last week’s WallStreetBets short squeeze dissipates. Focus for stimulus will in the large-part centre around the overall price tag of the legislation, however, a more nuanced view of the matter will consider what concessions the Biden camp is willing to make (e.g eligibility criteria for stimulus checks) in order to navigate Congressional obstacles presented by the GOP and from within certain parts of his own party. Back to Europe, the modest divergences in the performance of regional indices is largely attributable to corporate updates with the AEX (-0.3%) softer on account of disappointing earnings from Unilever (-4.6%) who sit at the foot of the Stoxx 600 and has prompted underperformance in the Personal & Household Goods sector. Elsewhere, from a sectoral standpoint, telecom names are also lagging peers amid post-earnings losses from Nokia (-2.0%) with the Co. unable to counter some of the retail-led swings in its share price despite a relatively positive report. Additionally for the sector, opening gains in BT (now flat) shares proved to be short-lived. Deutsche Bank (-1.6%) also staged a turnaround despite opening higher to the tune of 3.5% after reporting its first profit since 2014. Further pressure for the banking sector has also been presented by losses in Commerzbank (-2.8%) after the Co. reported a FY20 net loss of EUR 2.9bln and finalised plans for a reduction in 10k full time jobs. Elsewhere in Germany, Bayer (+5.1%) have lent a helping hand to the DAX after striking a USD 2bln agreement to resolve future legal claims over future Roundup cancer claims. Shell (-1.3%) shares are modestly lower on the session after announcing a 71% decline in profits for 2020 as the impact of the pandemic sapped global energy demand.

Top European News

  • Shell Deepens Big Oil’s Disappointment With Earnings Miss
  • Nokia Sees Revenue Drop in 2021 in Fight for Market Share
  • SoftBank- Backed Auto1 Soars in Debut After $2.2 Billion IPO
  • Deutsche Bank’s DWS Rakes in Most Client Cash Since Listing

In FX, The broader Dollar and index continues to gain ground above 91.000 in early European trade after experiencing defensive inflows overnight, whilst notching the current peak just shy of 91.500 as EUR/USD dipped under the 1.2000 mark for the first time this year before trundling lower. Fundamental news-flow has been scarce in the European morning thus far. On the State-side stimulus front, as expected the House voted to pass the budget plan in a bid to fast-tracks President Biden's stimulus proposal, but some see a more moderate final package. Looking ahead for the Dollar, barring any major fundamental catalysts, the BOE is likely to take centre stage in the run-up to the weekly IJCs – although these metrics could be overlooked as it falls outside the survey period for tomorrow’s jobs report. From a technical standpoint, upside levels include the psychological 91.500 mark ahead of the 100 DMA at 91.852, whilst to downside levels see yesterday’s 90.988 low alongside the 21 and 50 DMAs at 90.491 and 90.478 respectively. Over to the single currency, EUR/USD ebbs further sub-1.2000 after earlier tripping some stops below the figure as it inches closer towards the 100 DMA (1.1965) as eyes remain on the Italian political limbo, whilst some also note of increased demand for EUR/USD downside protection via shorted-dated put strikes, with many reportedly at 1.1900. Note, the pair eyes some EUR 1bln in OpEx between 1.2000-05 alongside EUR 2.7bln between 1.2035-50.

  • GBP - Sterling succumbs to the Buck in the run up to the BoE policy announcement (full preview available on the Newsquawk Research Suite) where eyes will be fixated on commentary on the feasibility of NIRP for the banking sector if required, although the immediacy of such policy is likely to be downplayed by the MPC. Meanwhile, markets currently pencil in incremental negative rates for August. Cable has descended from its 1.3683 high, through its 21 DMA (1.3645) to trade sub-1.3600 as keeps its 50 DMA (1.3540) on the radar.
  • AUD, NZD, CAD - The non-US Dollars portray varying degrees of resilience vs the Dollar amid possible impetus/cushioning stemming from the commodities complex. AUD/USD outpaces its peers despite lacklustre trade data overnight, with some also citing a retracement of the RBA-induced downside earlier in the week, although firmer copper and iron ore prices could be underpinning the currency. AUD/USD resides just above 0.7600 after finding mild support at its 50 DMA (0.7614), with clean air seen on either side aside from the psychological figures. The Loonie has dipped probes 1.2800 but the Dollar headwinds have been diminished as crude prices remain elevated. The Kiwi straddles around 0.7200 as the AUD/NZD cross hovers around 1.0600. Technicians will be eyeing the a couple of downside DMAs in the NZD/USD including the 21 DMA (0.7185) and the 50 DMA (0.7140).
  • CHF, JPY - Again another Dollar story with USD/JPY edging further above 105.00 after surpassing this week’s prior high of 105.17 with the 200 DMA 105.57 up ahead. For reference, the pair sees around USD 1.4bln in OpEx at strike 105.00 heading into today’s NY cut. Subsequently, USD/CHF has reclaimed a 0.9000+ handle and topped the 100 DMA (0.9013)

In commodities, WTI and Brent front month futures remain somewhat uneventful as the complex takes a breather following its recent run higher as vaccine hopes and OPEC+ proactivity keep prices elevated. On the OPEC front, the meeting and outcome were as planned and no decision was made for next month's output. The key date to watch would be the March 3-4th confabs as producers re-diagnose the crude market and decide on the next step – although, this risks forming another rift among the producers as higher prices tempt more output whilst the near-term outlook remains clouded. WTI and Brent both reside in tight ranges around USD 56/bbl and USD 58.75/bbl respectively. Elsewhere, spot gold and silver continue to see losses as the firmer Dollar weighs on precious metals. Spot gold hovers just above USD 1800/oz (vs high USD 1834/oz) whilst spot silver trades sub-26.50/oz (vs high. 26.92/oz). Turning to base metals, copper prices were firmer overnight amid US stimulus hopes, with Shanghai copper closing higher by some 1.2%. However, LME copper waned off best levels as the firmer Dollar and indecisive risk tone hampered upside. Meanwhile, Dalian iron ore futures soared around 5% amid tailwinds from Brazil’s Vale stating its 2020 output was subdued.

US Event Calendar

  • 8:30am: Jan. Initial Jobless Claims, est. 830,000, prior 847,000; Continuing Claims, est. 4.7m, prior 4.77m;
  • 8:30am: 4Q Nonfarm Productivity, est. -3.0%, prior 4.6%; Unit Labor Costs, est. 4.0%, prior -6.6%
  • 10am: Dec. Cap Goods Orders Nondef Ex Air, est. 0.6%, prior 0.6%; Cap Goods Ship Nondef Ex Air, prior 0.5%
  • 10am: Dec. Durable Goods Orders, est. 0.2%, prior 0.2%
  • 10am: Dec. Factory Orders Ex Trans, prior 0.8%; Dec. Factory Orders, est. 0.7%, prior 1.0%

DB's Jim Reid concludes the overnight wrap

Following an incredibly strong start to the week, the global rally in risk assets showed signs of waning yesterday, with the S&P 500 ending the session up just +0.10%. However under the surface there was a return of the pro-cyclical trade, which coincided with steepening yield curves, as Energy (+4.27%) and Bank (+1.73%) stocks were among the best performing industries. Even the Reddit stocks seemed to calm down with GameStop moving just +2.68%, after not having a single-digit percentage price move in over a week. While some trades like AMC (+14.2%) still saw outsized moves, others such as Nokia (+3.75%), Blackberry (+3.90%) and Silver (+0.79%) also calmed down. It was a similar story of moderate moves in the other major indices, with the NASDAQ broadly unchanged (-0.02%) and Europe’s STOXX 600 (+0.33%). Oil prices did rise to their highest level since the pandemic started though as Brent crude rose +1.74% to $58.46 and WTI rose +1.70% to $55.69 – which is its highest closing price in just over a year. This came on the back of a communique from the OPEC+ which said that it will keep pushing to quickly clear the oil surplus left behind by the pandemic.

Similar to oil, Italian assets surged after former ECB President Mario Draghi accepted a mandate from President Matteralla to form the next Italian government, an outcome that investors have taken extremely well. By the close, the FTSE MIB had risen +2.09% to far outpace the other European bourses, and the spread of 10yr Italian yields over bunds tightened by -8.9bps to their narrowest level in nearly 5 years. Indeed, that’s the biggest one-day decline in spreads since June, back when the ECB announced a €600bn expansion of their asset purchases. The task now for Draghi will be to win support from enough lawmakers to form a new government, since a government requires a positive vote of confidence in parliament. But according to our European economists (link here) the pressure on politicians to compromise is extremely high following the President’s message, and it would be quite difficult for the parties in the outgoing government to say no to a Draghi government. As a result, they think it’s more likely than not that Draghi is able to get majority support. How long such a government lasts is another question our economists try to answer in their note.

It was a different story outside of southern Europe however, as sovereign bond yields continued to move higher on both sides of the Atlantic, with those on 10yr bunds up +2.5bps to their highest level in nearly 6 months. In the US, Treasury yields also climbed further, with those on 10yr debt rising +4.1bps to 1.137%, as 30yr yields reached their highest level since the pandemic began, at 1.93%. The moves came as President Biden told House Democrats yesterday that he was more concerned that too little would be spent rather than too much when it came to economic relief. Democrats voted to open budget reconciliation measures in both chambers of Congress yesterday, with party leaders again asking for Republican support while signalling that they are willing to pass the majority of the stimulus measures through a party line vote if necessary.

Against this backdrop, the 2s10s yield curve, which is one of our favourite cyclical indicators, steepened further, reaching a 3-year high of 102bps, whilst the 5s20s curve reached its highest level in almost 5 years and the 5s30s steepened to levels last seen in October 2016. Over the past few months when US yields climb near pandemic highs, the question of yield curve control always seems to be raised. Fed Governor Bullard this time fielded the question and responded that the current policy is “in good shape” and that there is no need to adjust, while also saying there was quite a way to go before curtailing asset purchases as well.

Overnight the recent equity rally has unwound a little with the Nikkei (-1.02%), Hang Seng (-1.57%), Shanghai Comp (-1.26%), Kospi (-1.89%) and Asx (-0.87%) all down. Futures on the S&P 500 are down -0.26% as we type while the US dollar index is up +0.11%. Weighing on sentiment a touch are hawkish comments from the US Commerce Secretary nominee Gina Raimondo on restricted Chinese companies. She said that she knows of “no reason” why Huawei, ZTE and other Chinese companies shouldn’t remain on a restricted trade list thus suggesting that the new administration will likely continue with a hard-line stance on China. In other overnight news, the meeting between Treasury Secretary Yellen and US financial regulators will take place today on the recent bout of volatility in the markets.

Data yesterday showed that inflation in the Euro Area in January rose by more than expected, with the flash estimate showing prices were up +0.9% on the previous year (vs +0.6% expected), bringing to an end 5 successive months in which the Euro Area had been in deflationary territory. Core inflation also saw a similarly sharp rise, climbing to +1.4% (vs. +0.9% expected), albeit these jumps were driven by a number of one-off factors like the end of the temporary VAT cut in Germany. That said, in spite of these temporary factors, there were further signs that market expectations of longer-term inflation were also moving higher, with the 5y5y forward inflation swaps for the Euro Area up +6.1bps to 1.38%, their highest level in over a year. On top of this, both German and Italian 10yr breakevens were at a fresh 2-year high.

Speaking of inflation, our chart of the day yesterday (link here ) looked at the massive rise in shipping rates over recent months, with the Shanghai Containerized Freight index at more than triple its levels in May last year, and other freight indices are showing much the same picture. There are a number of reasons why this has happened, from Covid-related disruption, a more rapid bounceback in economic growth, along with the 3 major shipping alliances becoming far more disciplined around capacity. The big question will be whether this portends a larger rise in inflation this year as pent-up demand and excess savings are released. One thing I learnt in compiling the note is that commercial airlines are used for a lot of freight. So if economies increasingly re-open but commercial travel is restricted on fears of virus mutations being imported, then we could have more supply chain issues and more upward pressures on prices.

In terms of the latest on the pandemic, the World Economic Forum announced that they would be moving their annual meeting to August, which had previously been scheduled for late May. Meanwhile in the UK, it was confirmed that the number of people who’d received a first dose of the vaccine had now surpassed 10 million, while the 7-day case average fell to a 7-week low yesterday of 22,395. Israel, who already lead the world in vaccinations per capita, announced they will be widening availability to all people over the age of 16 starting today. Meanwhile in the US, New York City announced that taxi drivers and restaurant workers are now eligible for the jab. This comes just ahead of limited indoor dining reopening later this month. Meanwhile other states in the North-eastern US continue to loosen restrictions with New Jersey expanding their own indoor dining quotas and allowing restaurants to remain open longer as the Governor cited improving hospitalisations and case count data as the reason for the changes.

Moving onto vaccines, AstraZeneca and the University of Oxford said overnight that they have started looking at how to re-engineer their coronavirus vaccine to defeat new mutations. The University of Oxford is also undertaking another trial that will combine vaccines from Pizer/BioNTech and AstraZeneca to see whether two shots of different vaccines produce better or worse results than two doses of the same product. The university will begin recruiting 820 participants over 50 years of age across eight UK sites this week. A successful outcome from the study will help manage supplies better.

Staying on the UK, one of the highlights later today will be the first BoE policy decision of 2021 at 12:00 London time. In terms of what to expect, our UK economists (link here) write that the MPC is likely to deliver a dovish message, and they see the Bank formally including negative rates in its toolkit, which should lower the bar for further rate cuts. However, no policy changes are expected at this stage, with a unanimous vote from the MPC to keep rates unchanged. Beyond this meeting, their base case is that the MPC will stay on hold for the rest of this year, though risks remain from a longer-than-expected lockdown or a disappointing recovery.

Finally on the data front, the final Euro Area composite PMI for January was revised up slightly from the flash reading to 47.8 (vs flash 47.5), while the UK also saw an upward revision to 41.2 (vs. flash 40.6). Over in the US, the ISM services index for January rose to a stronger-than-expected 58.7 (vs. 56.7 expected), which is its strongest level since February 2019. Separately, ahead of tomorrow’s jobs report, the ADP’s report of private payrolls also rose by a much stronger-than-expected +174k in January (vs. +70k expected).

To the day ahead now, and the aforementioned Bank of England decision will be one of the highlights, while the ECB will also be publishing their Economic Bulletin. Other central bank speakers include the ECB’s Hernandez de Cos, along with the Fed’s Kaplan and Daly. Data highlights include the January construction PMIs from the UK and Germany, along with Euro Area retail sales for December. Meanwhile in the US, we’ll get the weekly initial jobless claims and December factory orders. Finally, earnings releases include Gilead, Merck & Co., T-Mobile US, Bristol Myers Squibb, Philip Morris International and Ford.

Tyler Durden Thu, 02/04/2021 - 08:00
Published:2/4/2021 7:05:07 AM
[Markets] US STOCKS-S&P 500, Dow end up for 3rd day as Alphabet jumps, volatility eases The Dow and S&P 500 rose slightly on Wednesday, registering a third straight session of gains, with Alphabet Inc's shares hitting a record high following its strong quarterly results. Alphabet shares ended up 7.3% and provided the biggest boost to the S&P 500. Published:2/3/2021 4:00:39 PM
[Markets] S&P and Nasdaq surrender early gains, join Dow industrials in negative territory S&P and Nasdaq surrender early gains, join Dow industrials in negative territory Published:2/3/2021 9:27:02 AM
[Markets] Market Snapshot: Tech stocks set to rise but Dow futures flat ahead of private-sector jobs report Technology shares are poised to extend gains on Wall Street on Tuesday, but Dow futures pointed to a struggle for the blue-chip index, as investors parsed healthy earnings from some of the country's tech titans, including and Google parent Alphabet in the second-busiest week for earnings of the fourth quarter.
Published:2/3/2021 6:56:04 AM
[Markets] Von Greyerz: Paper Silver Is Toxic Von Greyerz: Paper Silver Is Toxic

Authored by Egon Von Greyerz via,

“All things are poison and nothing is without poison; only the dose makes a thing not poison”.

These words were expressed by the famous Swiss physician and scientist Paracelsus in the 16th century.

This week I will discuss two poisonous areas; a toxic derivatives market in silver and ubiquitous fake silver coins and bars.

But first a few words about the dollar.


The most blatant toxic forgery is carried out by central banks around the world. These banks manufacture $ tens of trillions of fiat paper or electronic entries and then tell the people that it is real money.

If ordinary people would print money, the forgers would go to jail and the money destroyed as it is fake and worthless.

But when central banks print money, no one goes to jail. Instead they tell us that this money has the same value as the money already in circulation.

They might actually be right.

Take the dollar – in real terms it has lost 98% since 1971. So all the dollars circulating are virtually worthless. Thus not much different to freshly printed dollars which are also worthless.


In the next 4 years the BY team (Biden&Yellen) will most probably be the ones who fulfil Voltaire’s prediction in 1729 that “Paper Money Eventually Returns To Its Intrinsic Value – ZERO”.

Like Matt Piepenburg and myself, Voltaire knew he would be right because history has 100s of examples of governments and central banks destroying the currency.

Biden/Yellen don’t really need to do much since the dollar is already down 99% since 1913. So all they will do is to push it down another one percent. But we must remember that this one percent is actually 100% loss of value from today.

From the day the Fed was founded in 1913, the dollar’s demise was already written in the history books. And Biden/Yellen is the perfect team to be the executor of history as they drive the dollar to ZERO within the next 4 years.


Financial markets suffer from the wrong dose of poison. Trading financial instruments in the right dose is essential for efficient markets. But the heavily leveraged markets are extremely toxic and kill the weaker patients. And this is the kind of rigged market where the normal investor and small trader has no chance against big players be they hedge funds or central banks.

We have just seen how the Reddit group Wallstreetbets has taken on the big hedge fund boys. This Reddit forum is where a very great number of smaller traders discuss investments and interesting trades.

Will the Wallstreetbets group succeed in an attack on the massive silver shorts? I will discuss this at the end of the article as well as their chances of success.


Very few have avoided to notice how Wallstreetbets last week attacked Gamestop which was very heavily shorted by the hedge funds. The price went form $19 in early January and settled at $325 last Friday after having reached $350. One trader is said to have made $46 million on a $50,000 bet.

This is real David and Goliath stuff when small traders take on the hedge funds in their own game. Some hedge funds are said to have lost billions of dollars and very few people feel sorry for them. The Schadenfreude (gloating) is very apparent.


Let’s first look at a toxic material that is distributed widely and could flood global markets in the next few years.

I am talking about fake gold and silver that could become a real pest.

Greed clearly drives these unscrupulous “manufacturers” of fake gold and silver bars/coins.

But greed is such a powerful driver that once you discover that people fall for your forgery, the Ponzi scheme grows extremely fast.


We are regularly informed of fake gold and silver bars and coins, mainly coming from China.

Recently an old and trustworthy contact of mine informed me about his experience in buying silver coins from China on a website like the one below. He spent very little money, just to test the authenticity of the coins.

Due to rising metal prices, there are lots of online ads for US silver dollar coins like American Eagles, Peace dollars and Morgan silver dollars. The sellers are mainly in China.

My friend ordered the coins from China and when they finally arrived – low and behold, they were found to contain virtually no silver except for the surface coating. This after thorough testing.

The coins came from Shenzhen in China. My friend reported his findings to local authorities and the Secret Service and the site is now closed. But like a lot of these counterfeiters, they will most certainly pop up in a different name.

To buy US silver coins from China is clearly a red flag already. But since the Chinese are very big buyers of gold and silver, there are a lot of foreign coins on offer and obviously not all are fake.


I had first hand information about a case of fake Chinese gold a few years ago. I was in Sydney and interviewed by Channel 7, an Australian news television channel. The news crew had just come back from China where they visited a Chinese gold factory.

In the factory they covertly filmed the vast offer of gold coins and bars with perfect markings from the major refiners in Switzerland, Australia and elsewhere. They bought $1/2 million worth of bars and coins for $500.

For a layman, there was no chance of telling that the gold was fake.

So these are just two examples of fake gold and silver coming out of China.

These fake bars and coins are sold over the internet, not just from China but anywhere in the world. But they can also be sold directly by rogue traders in any country.

There is less chance that these metals reach the well established chain of integrity between LBMA refiners and reputable sellers and vaults.

But the risk is there and even JP Morgan has reported bars with fake logos in their vaults.


In order to ensure the quality of gold we purchase for our clients, we always buy new bars or coins directly from the Swiss refiners.

If the client sells his gold, we sell it back to the Swiss refiner who melts it down and recasts it. Even if the same gold was sold the previous day by the refiner, they will always refine it again. This totally guarantees the quality of the gold and the integrity of Swiss gold.


The obvious conclusion for buyers of gold and silver is to only deal with sellers of the highest reputation. It is preferable to buy fresh bars and coins but this is not easy to verify for an amateur.

As the price of the precious metals increase, there will be many new gold and silver “factories” popping up in China and many other countries in Asia.

This will create a major supply of fake gold and silver from all parts of the world.

These fake products will be distributed via the internet and also flood the retail market in many countries and be a real poison for buyers of precious metals.

So dealing with reputable companies is a Sine Qua Non!


Finally, we have reached the end of the first month of 2021.

In stocks I have in recent articles indicated that the long term secular top could occur in January. This link shows a very important 50 year Dow chart in my article. The second article has two equally important charts of the Dow/Gold ratio which is about to crash.

Our proprietary cycles forecast in early October that the charts of the weekly Nasdaq 100 and Dow would form important tops in the week Jan 18-22.

So far this forecast is correct. If that is confirmed in the next couple of weeks, we are likely to see the beginning of a major secular bear market with potential dramatic crashes.

Even if the big fall in the Dow and the Dow/Gold ratio will come slightly later, it is virtually guaranteed to happen in the next few months. And that will be the end of a spectacular period of debt, fake money and toxic markets.


The ultimate insurance against a total destruction of your wealth, is obviously physical gold and silver stored outside the financial system.

Bitcoin might be a good speculative investment and might also work as a payment method if central banks don’t ban it. But it has nothing to do with real wealth preservation.

Silver is normally the leading indicator for the precious metals.

Following the spectacular short squeeze in Gamestop by the Reddit group Wallstreetbets, there is now speculation that the same could happen with silver.

Yes, everything is possible. But remember that in the gold and silver markets, against the Reddit players there will be:

  • The BIS (Bank of International Settlement),

  • The Fed, ECB and other central banks

  • Plus the bullion banks

So a lot of fire power to beat compared to the Gamestop opposition.


The silver market is one of the most toxic of all. Heavily manipulated and with bullion banks now being 100 million oz of silver short on Comex and with no liquidity in London, as Alasdair Macleod has pointed out.

Still, even if not in the next week or two, silver will win this game in the medium and long term as the dosage of paper silver shorts is much too big to survive a short squeeze.

I would not be surprised to see the 1980 and 2011 $50 high to be taken out in 2021.

So silver will lead the metals and the gold/silver ratio, now at 67, will initially reach 30 like in 2011. The long term target is likely to be a lot lower, probably 15 or below.

Expect 2021 to be the year when investors wake up to the fact that gold is not a barbarous relic but actually the best wealth protection you can hold and silver the investment of the decade, as I outlined in my October article.

Tyler Durden Wed, 02/03/2021 - 03:30
Published:2/3/2021 2:55:11 AM
[Markets] Dow industrials jump nearly 300 points at Tuesday's opening bell Dow industrials jump nearly 300 points at Tuesday's opening bell Published:2/2/2021 8:55:31 AM
[Markets] All 30 Dow components on the rise in premarket trades Tuesday All 30 Dow components on the rise in premarket trades Tuesday Published:2/2/2021 8:20:35 AM
[Markets] Futures Surge Above 3,800 As Short Squeeze Fizzles; Attention Turns To Stimulus Futures Surge Above 3,800 As Short Squeeze Fizzles; Attention Turns To Stimulus

US equity futures have continued their Monday rally, rising above 3,800 as the collapse in most shorted stocks continued, with European indices firmer following the positive Asian session...

... while silver slid from an eight-year high as the latest short squeeze reversed.

Sectors are broadly in the green though oil & gas is among the laggards as BP's update offsets much of the positivity from crude benchmarks themselves. In top geopolitical news, China top diplomat Yang warned the U.S. not to cross the country’s “red line,” in a pointed speech that pushed back against early moves by President Joe Biden to press Beijing on human rights. The Dollar index continues to make ground above 91.00 this morning pressuring major counterparts but particularly so against the EUR which is also hindered via EUR/GBP action in-spite of firmer than expected GDP data. Overnight, the RBA maintained its key rate at 0.10% as expected but unexpectedly announced it is to extend its QE purchases by AUD $100BN. Looking at today's session highlights include OPEC JTC meeting and speeches from Fed's Kaplan, Williams, Mester, we also get earnings from Amazon, Exxon, Alphabet.

At 07:00 a.m. ET, Dow E-minis were up 247 points, or 0.82%, S&P 500 E-minis were up 32.5 points, or 0.86% and Nasdaq 100 E-minis were up 109.75 points, or 0.84%, building on the previous session’s momentum, as investors anticipated strong results from Amazon and Google-parent Alphabet while also looking for signs of progress on a pandemic-relief package. Alphabet, which will report the cost and operating profit of its Google Cloud business for the first time, added 1.3% premarket, while retail behemoth Inc gained 1.2%. Both companies, which report Q4 earnings after market close, have jumped more than 7% each after strong earnings from rest of the FAANG group last month. Ford added 2% after the U.S. automaker said it will invest $1.05 billion in its South African manufacturing operations, including upgrades to expand production of its Ranger pickup truck. Shares of Exxon Mobil rose 1.5% ahead of its results scheduled before the bell, which are expected to be marred by a charge of up to $20 billion on the value of its natural gas properties.

Meanwhile, the massive short squeeze appears over: “meme” stocks GameStop, AMC and Nokia tumbled between 23% and 30%, while miners Hecla Mining Co and Coeur Mining tracked a fall in spot silver prices. This was offset by buoyant mood in the broader market as President Biden and congressional Democrats signaled they’re intent on a large pandemic relief bill, and there’s clear evidence that the virus case numbers are starting to decline. The U.S. has been administering shots at a faster daily rate than any country in the world, giving about 1.34 million doses a day, according to data gathered by Bloomberg.

“We remain positive on risky assets. A combination of easy monetary and fiscal policy when the recovery is gaining momentum should bode well for them,” said Mohit Kumar, strategist at Jefferies International. “While it is still not clear whether the retail-led volatility is behind us, our view is that the impact should be temporary.”

Global markets were also buoyant: MSCI’s world equity index was 0.4% firmer after posting its strongest day in three months on Monday. European equities rallied from the open; with the Euro Stoxx 50 rising over 1.5% and the Stoxx 600 up 1.1%; the CAC 40 outperformed at the margin. Autos, travel and financial services are the best performers. Miners are the sole sector in the red. Shares in BP lost 3.8% after it plunged to a $5.7 billion loss last year, its first in a decade. The Stoxx 600 Automobiles & Parts index rose as much as 3.1%, the most since Dec. 15, led by gains for parts suppliers and Stellantis after it was initiated with a buy rating at Goldman Sachs. Airbus shares gain as much as 6.6%, the most since November, after Morgan Stanley upgraded the plane manufacturer to overweight on a positive view about its production plans.

Earlier in the session, Asian stocks rose for a second day, following a rally in U.S. peers as concerns eased that the recent turmoil spurred by speculative buying will derail the bull market. MSCI’s index of Asia Pacific stocks outside Japan rose 1.5%, with China’s benchmark CSI300 Index climbing 1.5%, helped by easing concerns about tight liquidity and falling cases of new coronavirus infections. Japan’s Nikkei 225 added 1%. Vietnam, India and Taiwan led gains among national benchmarks. Chipmakers TSMC and Samsung were among the biggest drivers of the MSCI Asia Pacific Index. Hong Kong stocks also advanced, boosted by Tencent after its chairman Pony Ma was praised in state media for his entrepreneurship. India stocks gained more than 2.4%, one day after the nation’s key stock gauges recorded their biggest budget-day gains in at least two decades

Global market are buoyant ahead of negotiations Tuesday between U.S. President Joe Biden and Republican senators on a new COVID support bill. The GOP’s $618bn stimulus plan released early Monday was about a third the size of the President’s proposal. Top Democrats later on Monday filed a joint $1.9 trillion budget measure in a step toward bypassing Republicans.

“If you have the ability to have stimulus compromise it’s going to be very supportive for financial assets in the medium term as it means you will have the ability to have an economic recovery,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners. “The $1.9 trillion was set as a high bar of the possibilities and in a way to get into a negotiation to get something that would be smaller and more efficient.”

In FX, the dollar hovered near a seven-week high, benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in over-crowded dollar-selling positions. The Bloomberg dollar index slipped for the first time in three days while Treasuries extended declines as progress in U.S. coronavirus vaccine rollout bolstered risk appetite across markets. Reports of productive talks on additional U.S. stimulus also boosted sentiment. Against the U.S. dollar, the euro was trading at $1.2078, just above an early December low of $1.2056 hit in the previous session. The Australian dollar pared gains after the country’s central bank said it will extend its quantitative easing programme to buy an additional $100 billion of bonds. The Aussie last stood at $0.7627, nearly flat on the day.  Turkey’s lira firmed more than 1%, extending a rally after the central bank promised tight policy for an extended period last week.

In rates, Treasuries were under pressure led by long-end of the curve amid risk-asset rally in which S&P 500 futures exceeded Monday’s high. Yields cheaper by ~3bp across long-end of the curve, steepening 5s30s by as much as 1.7bp to widest level since November 2016; 10-year yields around 1.11% with gilts lagging by 0.5bp. Thirty-year yield came within 3bp of its YTD high; 5s30s within 2bp of its November 2016 high. Gilts lag following 2026 and 2071 bond sales, with U.S. set to make 1Q refunding announcement Wednesday.

In commodities, silver prices slipped 4.8% to $27.59 per ounce, as investors locked in profits after the precious metal touched a near eight-year peak in the previous session driven by retail investors. Spot gold fell 0.6% Tuesday to $1,847.51 per ounce.

Brent crude was up 1.1% at $56.95 a barrel. WTI gained 1.2% to $54.22 as falling inventories and rising fuel demand due to a massive snow storm in the Northeast United States propped up prices.

Looking ahead, investors will also be paying close attention to earnings, with Inc. and Google parent Alphabet Inc. among companies releasing results on Tuesday.  About 84% of the 186 S&P 500 firms that have reported so far have topped estimates for earnings, well above the 75.5% beat rate for the past four quarters, according to Refinitiv IBES data.









Market Snapshot

  • S&P 500 futures up 0.8% to 3,797.00
  • MXAP up 1.3% to 210.35
  • MXAPJ up 1.5% to 711.19
  • Nikkei up 1.0% to 28,362.17
  • Topix up 0.9% to 1,847.02
  • Hang Seng Index up 1.2% to 29,248.70
  • Shanghai Composite up 0.8% to 3,533.69
  • Sensex up 2.4% to 49,755.65
  • Australia S&P/ASX 200 up 1.5% to 6,762.60
  • Kospi up 1.3% to 3,096.81
  • German 10Y yield rose 3.7 bps to 0.497%
  • Euro little changed at $1.2070
  • Italian 10Y yield fell 4.1 bps to -0.510%
  • Spanish 10Y yield rose 12.6 bps to 0.107%
  • Brent futures up 1.2% to $57.01/bbl
  • Gold spot down 0.7% to $1,847.26
  • U.S. Dollar Index little changed at 90.90

Top Overnight News

  • China’s top diplomat warned the U.S. not to cross the country’s “red line,” in a pointed speech that pushed back against early moves by President Joe Biden to press Beijing on human rights
  • U.K. Prime Minister Boris Johnson’s government is sticking to an election promise not to hike taxes on wages and sales next month, rejecting pressure to increase revenue to tackle the record deficit run-up during the coronavirus pandemic, according to a person familiar with the matter
  • The euro areas GDP declined 0.7% in the fourth quarter, compared with estimates for a 0.9% drop. Germany and Spain both posted surprise economic expansions in reports last week. Italy reported a contraction of 2% earlier on Tuesday
  • A fledgling format for selling bonds that ties margins to a borrower’s progress in doing business in ways that protect the planet is set to boom this year -- but won’t work for everyone, according to a sustainable debt specialist at HSBC Holdings Plc. Companies trying to configure so-called sustainability-linked bonds can run into technical obstacles such as not being able to meet environmental targets before the debt matures
  • After a surge in silver futures to the highest in almost eight years, traders are still trying to solve a mystery: Who penned the Reddit posts that ignited this staggering run-up in prices -- and why were they taken down?

A quick look at global markets courtesy of Newsquawk:


Top Asian News

  • Hong Kong Retail Sales Plummet After New Virus Restrictions
  • Turkey Arrests Dozens of Students Protesting Erdogan’s Pick

European stocks see another session of gains (Euro Stoxx 50 +1.8%) as the optimism seen in APAC hours echoes into Europe, with the regional sentiment also underpinned amid less severe-than-feared EZ Flash GDP figures; following better than expected releases out of France, Germany etc. This has lead to a mild outperformance in the EZ relative to the US - where futures trade with broad-based gains of around 1% - whilst the UK’s FTSE (+0.8%) and Switzerland’s SMI (+0.9%) tail their Euro-peers. Sticking with the FTSE 100, the index is capped by somewhat unfavourable Sterling dynamics whilst bearing the brunt of losses in heavyweight BP (-3.2%) post-earnings, who missed on adj. net expectations but noted that organic capex last year was in-line with guidance. For reference, BP has around a 3% weighting in the FTSE 100. The downside in the crude giant is also reflected in the Energy sector which underperforms; but, with peers underpinned on the performance of crude itself. Broader sectors are all in positive territory and portray a risk-on bias as cyclicals (ex-oil) outpace defensives – with Auto names leading the gains, closely followed by Travel & Leisure and financial services. Basic resources reside among the laggards as base metal prices pull back before the Chinese Spring Festival and as precious metals unwind a lion’s share of yesterday’s gains. In terms of individual movers, Airbus (+6%) shares soar following an upgrade at Morgan Stanley. On the flip side, Fresenius Medical Care (-13.9%) plumbs the depths as the group anticipates a significant negative impact on 2021 net income from accelerated COVID-19 related mortality of dialysis patients. Fresenius SE (-6%) moves lower in sympathy as it owns some 32% of Fresenius Healthcare – with both companies accounting for around 3% of the DAX (+1.25%).

Top European News

  • Euro-Area Economy Shrank Less Than Forecast at End of 2020
  • Insider-Trading Suspects Can Stay Silent, EU Top Court Rules
  • Italian Economy Shrank at End of 2020, Underperforming Peers

In FX, bullish risk sentiment and hefty 1.4 bn option expiry interest at the 0.7600 strike appear to have rescued the Aussie from a steeper decline in wake of an unexpectedly dovish RBA policy meeting where QE was extended pre-emptively beyond April by another Aud 100 bn and guidance on rates indicated no tightening until 2024 at the earliest. However, 1.0600 in Aud/Nzd may not be impenetrable as the Kiwi rebounds from 0.7150 vs the Greenback on the aforementioned positive market tone ahead of NZ jobs data that could rubber stamp the recent removal of NIRP expectations for the RBNZ or rekindle forecasts for further easing this year. Conversely, more hawkish commentary from the CBRT, including the potential for extra front-loaded and decisive tightening if needed to get inflation back on track, gave the Lira sufficient impetus to extend its recovery through 7.2000 and 7.1500 before waning just above 7.1000 awaiting any backlash from Turkish President Erdogan who has reverted to his anti-rate hike standpoint, and as the Dollar rebounds broadly.

  • USD - As noted above, the recovery in high beta rivals and positive market tone sapped some momentum from the Buck that might otherwise have gleaned traction from the relatively pronounced and ongoing loss of attraction in Silver and its fellow precious metals, as Xag/Usd dips under Usd 27.50/oz vs a fraction over Usd 30 at one point yesterday. Nevertheless, the DXY has derived fresh impetus from renewed weakness in the Euro to surpass 91.100 vs 90.805 at one stage and the index has now been up to 91.123 compared to 91.063 late on Monday and an early EU session best of is now hovering midway between peak and 90.805 trough.
  • CAD/GBP - Not quite all change, but the Loonie and Pound have pared a chunk of losses against their US counterpart from sub-1.2850 and circa 1.3660 to reclaim the 1.2700 handle and retest 1.3700 respectively, with the former receiving some support from firmer crude prices and latter via improving pandemic and vaccine developments. Moreover, Sterling seems to have survived spill-over RHS demand in Eur/Gbp, albeit with relative Euro underperformance as the cross reverts to type and eyes 0.8800 to the downside.
  • CHF/EUR/JPY - All choppy vs the Buck, as the Franc hovers within a 0.8979-48 range mindful of latest verbal intervention from SNB chair Jordan, but Euro fails to keep its head above 1.2050 following another hiccup in efforts to form a new Italian Government coalition or get respite from better than feared EZ GDP data and another rise in inflation expectations via the favoured 5 year/5 year long term metric. Meanwhile, the Yen is struggling regroup after the loss of technical support and slip below 105.00 in advance of Japan’s services PMI and an announcement from the PM about COVID-19 restrictions that is anticipated to extend the state of emergency.
  • SCANDI/EM - More Nok outperformance on chart and oil grounds, while the Sek mulls latest dovish Riksbank inferences and EMs beyond the Try are benefiting from the general appetite for risk, with the Czk also acknowledging Czech Q4 GDP defying lowly expectations to a degree.

In commodities, WTI and Brent front month futures trade firmer as the complex tracks gains seen across the stock markets as sentiment remains constructive following the EZ flash GDP figures and heading into the US entrance. The broader environment remains unchanged as participants weigh COVID variants’ impacts against vaccines and OPEC+ supply balancing. On that note, the JTC meeting will take place today ahead of tomorrow’s JMMC confab, with no change expected to current policy given that the producers came to an accord for Q1 in January, whilst fundamentals also remain largely the same since the prior meeting. In terms of commentary, BP expects oil demand to recover this year, but the speed and degree will depend on government policies and individual activity as vaccines are rolled out, “From the oil supply side, limited growth from non-OPEC+ countries coupled with active market management from OPEC+ means that for 2021 we anticipate a normalization of the currently high inventory levels.”, the energy giant says. Looking ahead to today, the weekly Private Inventories after the US close may induce price action ahead of tomorrow’s EIA release – until then, sentiment will likely drive price action barring any major crude catalysts. WTI resides just above USD 54/bbl (vs low USD 54.50/bbl) while its Brent counterpart probes USD 57/bbl (vs low USD 56.20/bbl). Elsewhere, previous metals reverse a bulk of yesterday’s gains, with spot silver losing its shine as it declined from yesterday’s USD 30/oz+ best levels to sub-28/oz in early European trade, with some citing a margin hike by the CME as one of the catalysts. Spot gold meanwhile is slightly more composed on an intraday basis around USD 1850/oz (vs high USD 1862/oz). Base metals meanwhile are trending lower with LME copper eyeing USD 7,750/t to the downside heading into anticipated holiday-induced demand drops as China heads into the Spring Festival.

US Event Calendar

  • Jan. Wards Total Vehicle Sales, est. 16.2m, prior 16.3m
  • 1pm: Fed’s Kaplan Discusses Economy
  • 2pm: Fed’s Mester to Give Remarks on Labor Market

DB's Jim Reid concludes the overnight wrap

It had to happen. Given its now February, and given I’m not going into the concrete jungle that is London at the moment, my hay fever was always just round the corner. Last night I had a bad sneezing fit and very itchy eyes. Since I moved out of London over a decade ago I now get bad hay fever anytime from mid January to early February. It is the strangest thing when it’s so cold outside. It’s been a little delayed this year as I’ve hardly been outside. However those little pollen bits have penetrated my cocoon. Time for the antihistamine.

Whatever medicine the market took over the weekend it worked as after experiencing their worst week since October, global equity markets got February off to a strong start as concerns eased over the broader market impact of retail investors. Indeed by the end of yesterday’s session the S&P 500 gained +1.61%, recovering almost all of Friday’s losses, as tech stocks led the advance with the NASDAQ up +2.55% ahead of earnings releases from Amazon and Alphabet after the US close today. The rally was broad-based with roughly 80% of the S&P 500 gaining on the day and all but two of the 24 S&P industry groups gaining. It was the best day for the S&P since late November and the best day for the tech-concentrated NASDAQ since early January. With the risk-on tone, equity volatility subsided and the VIX index fell -2.85pts to 30.24. The volatility index has now been above 30 for the past 4 sessions though, for the first time since the run up to the US elections.

It was much the same story in Europe too, where the STOXX 600 (+1.24%), the DAX (+1.41%) and the CAC 40 (+1.16%) all moved higher, while other risk assets like Brent crude (+0.84%) and WTI (+2.59%) oil prices also benefited. A reminder though that a weak January for equities does have omens for the rest of the year if 150 years of US equities returns are to be believed. See here for the CoTD on this from yesterday.

Amidst the broader equity rally, many of the Reddit-fuelled trades from last week lost ground yesterday, with GameStop falling -30.77% as investor interest moved elsewhere. Other darlings of the message board managed to battle back as Nokia (+7.24%) and Blackberry (+3.76%) rose after whipsawing between losses and gains. However more of the focus of the WallStreetBets forum was on silver after starting on this trade in the middle of last week. The metal rose +7.65% in its best day since August, having at one point been on track for its best daily performance (+11.4% at the intra-day highs) since 2008. The surge sent the ratio of gold to silver prices down to its lowest level since 2014. Silver miners like Hecla (+28.30%), First Majestic Silver Corp (+22.08%) and Silver One Resources (+30.43%) saw major gains on the back of the move, with traders again targeting heavily shorted names. Overnight silver is down -1.96% after the CME Group hiked trading margins by c.+17.9% on silver futures contracts. The exchange said that the decision was based on “the normal review of market volatility to ensure adequate collateral coverage.” It’s fair to say it’s going to be easier to move the mining stocks than the underlying metal given the relative deepness of the securities.

Overnight in Asia markets have continued to move higher with the Nikkei (+0.85%), Hang Seng (+1.54%), Shanghai Comp (+0.47%) and Kospi (+1.12%) all up. Futures on the S&P 500 are also up +0.53%. Elsewhere, Brent crude oil prices are up +1.03%.

US 10yr yields are +0.7bps overnight following a +1.4bps increase yesterday as President Biden met with 10 Republicans senators about their $618bn stimulus offer, one that is substantially smaller than Biden’s proposal. The President and Senate Republicans agreed to continue talks, though it was unclear whether either side was ready to budge. The ranking Democrat on the Senate Finance Committee, Mr Wyden, called the Republican plan a ‘non-starter’, indicating that it does not do enough. These comments were echoed by Senate Majority leader Schumer, who again said that Democrats would use budget reconciliation if needed. In case the White House and Senate Republicans cannot find a quick resolution to their differences, House Democrats yesterday moved forward with plans to prepare their own relief legislation. This would be a bill that could pass through both chambers of Congress without Republican support, but would be missing some of the original staples of President Biden’s proposal – most notable the $15 minimum wage and repealing a cap on state and local tax deductions.

Back to fixed income and we did see the 5s30s yield curve climb to its steepest level in nearly 5 years, and the dollar index strengthen +0.44% to a 7-week high. Meanwhile in Europe Italian BTPs were the outperformer, with yields down -2.2bps as investors remained unconcerned by the continued government formation process. In terms of the latest, the lower house speaker, Roberto Fico, has until today to report back to President Mattarella following his consultations with the political parties, but things appear to be moving towards a resolution, with the risk of early elections remaining low. Other government bonds such as German 10yr bunds (+0.2bps), French OATs (+0.1bps) and UK gilts (-0.6bps) were little changed on the day.

In the UK, cases of the South African variant were found amongst those who didn’t have any travel links, leading to residents in a number of areas being asked to take tests, irrespective of whether they’re displaying symptoms. In better news however, the number of new daily cases in the country fell below 20,000 for the first time in over 6 weeks, which comes after 4 weeks of lockdown and a month of excellent vaccine rollouts. Yesterday German Chancellor Merkel promised all Germans would be offered a vaccine by the end of the September even if no new vaccines were approved. Meanwhile in the US, a snowstorm in New York City has led to the cancellation of all vaccination appointments both yesterday and today. The 7-day rolling count of new cases in the US fell to its lowest level since mid-November, as the holiday travel bump subsides and various mobility restrictions show their effect. Also yesterday the US announced that more Americans have now received at least one dose of vaccine (26.5mn) than the total number of residents who have tested positive for the virus over the past year (26.3mn). This comes as the country is now averaging just over one million doses per day.

The main data highlight yesterday were the manufacturing PMIs, albeit there weren’t that many surprises given we’d already had the flash readings from the major economies. In terms of the main numbers, both the Euro Area (54.8) and the US (59.2) manufacturing PMIs were revised up a tenth from the flash readings, while the ISM manufacturing reading fell more than expected to 58.7 (vs. 60.0 expected). One notable thing in that release was the prices paid index, which rose to 82.1 in January (vs. 76.0 expected), which is the highest since April 2011. Elsewhere, German retail sales fell by a larger-than-expected -9.6% (vs. -2.0% expected) in December.

To the day ahead now, and data releases include the Q4 GDP figures for the Euro Area and Italy, along with preliminary January CPI from France. Central bank speakers include the ECB’s Hernandez de Cos, as well as the Fed’s Kaplan and Mester. And earnings releases include Amazon, Alphabet, Pfizer, Exxon Mobil, Amgen, UPS and Alibaba.

Tyler Durden Tue, 02/02/2021 - 07:48
Published:2/2/2021 6:51:25 AM
[Markets] Short-Squeeze Stampede Sends Silver Soaring; Stocks Surge Off Overnight Slump Short-Squeeze Stampede Sends Silver Soaring; Stocks Surge Off Overnight Slump

Well, that escalated quickly...

In the early trading, Silver prices were up the most since Lehman, with Spot above $30...

Source: Bloomberg

...but as the way wore on the squeeze faded, but still SLV (the silver ETF) was up almost 14% in the last 3 days - the biggest jump since early August...

Source: Bloomberg

Spot Silver reached its highest since Feb 2013...

Source: Bloomberg

Silver futures also soared, but were slammed when the US cash equity market opened, bouncing back after Europe closed...

Source: Bloomberg

But as the paper prices were suppressed intraday, physical demand remained high and the physical premium hit a record high...

Source: Bloomberg

Silver miners all exploded higher on the squeeze...

Source: Bloomberg

...led by Hecla Mining and First Majestic...

At the same time, Robinhood made various headlines intraday about capital raises and lifting restrictions and that, along with some well-placed estimates of the drop in short-interest, sparked weakness in the 'most shorted' names...

With GameStop falling back below $250 and accelerating lower into the close...

Amid all of this malarkey, the broad market was extremely chaotic to start February, surging (after its worst week since September) from some ugly weakness overnight to one of its best days in recent months. Small Caps and Big Tech surged 4%-plus off overnight lows... The Dow underperformed...

But there was a weak close...

Most-Shorted Stocks were actually flat today, while hedge fund VIP stocks rose...

Source: Bloomberg

The most-crowded stocks stabilized relative to the most-shorted stocks today, but not dramatically...

Source: Bloomberg

VIX fell back to 30 today...

Amid all the chaos in stock-land, bonds were quiet (unch across the curve)... too quiet given the huge AAPL deal in the cards...

Source: Bloomberg

The dollar was bid to its highest since 12/21...

Source: Bloomberg

Bitcoin bounced back today after some weakness over the weekend...

Source: Bloomberg

Despite dollar strength, oil prices rallied with WTI back above $53...

While silver soared, gold was less impressive, managing only modest gains in its recently tight range...

Which pushed the gold/silver ration down to 64x - its lowest since July 2014..

Source: Bloomberg

Finally, where’s this all headed? With an equal-weighted basket of the 50 most-shorted Russell 3000 Index stocks having posted its best month on record - to the detriment of bearish hedge funds - Bloomberg notes that it’s the question on everyone’s mind as February begins.

Source: Bloomberg

“While we may not follow the same pattern this time, the main point is that several big days of degrossing are not always the ‘end’ of the period as degrossing usually persists, but typically in lesser magnitude, for several weeks to months after,” Morgan Stanley’s prime brokerage unit wrote in a note last week.

Tyler Durden Mon, 02/01/2021 - 16:00
Published:2/1/2021 3:19:01 PM
[Markets] Dow finishes up 230 points as stocks shake off GameStop jitters Dow finishes up 230 points as stocks shake off GameStop jitters Published:2/1/2021 3:19:01 PM
[Markets] Morgan Stanley: "This Correction Has Arrived And It's Likely To Get Worse And Feel Bad" Morgan Stanley: "This Correction Has Arrived And It's Likely To Get Worse And Feel Bad"

Last Wednesday, even before the full extent of the r/wallstreetbets short squeeze had emerged, which would culminate with GME soaring above $500, the VIX surging above 30 and the Dow suffering two 600+ point drops, JPMorgan's Marko Kolanovic emerged from winter hibernation to give the suddenly skittish bulls his usual pep talk, dismissing concerns that the short squeeze could impact stocks beyond just the immediate term and concluding that "any market pullback, such as one driven by repositioning by a segment of the long-short community (and related to stocks of insignificant size), is a buying opportunity, in our view."

What we found strange is that just one day later, another JPM analyst, this time Andrew Tyler author of the popular daily "Market Intelligence" recap note, had a far less bullish take, and when rhetorically answering the question "are we there yet" (referring to whether the deleveraging short squeeze is finally over), he said that "put together, in N. America, the 4wk active de-grossing has NOT yet reached even a 1z event and not nearly where things got to last March/April or in prior periods of strong de-grossing. Furthermore, with notional exposures effectively still near highs (and performance negative), it’s likely that gross leverage has gone up for many funds.... the fact that this is NOT occurring due to a broader weakening in the macro backdrop makes it harder to gauge how much further this should go."

Hardly a ringing endorsement of Kolanovic's permabullishness, which is odd coming from a cowker for the Croatian quant.

Then, as we reported in a post that went viral, over the weekend Goldman chief equity strategist David Kostin basically warned that if the squeeze continued, things could get a whole lot worse, point to the dramatic outperformance of retail favorite stocks vs the S&P and hedge fund VIP stocks...

... and  writing that "this week demonstrated that unsustainable excess in one small part of the market has the potential to tip a row of dominoes and create broader turmoil."

This morning, none other than Goldman's biggest competitor on Wall Street, Morgan Stanley, appears to have come to the same conclusion as Goldman, with the bank's chief equity strategist Michael Wilson writing that "oer the last few weeks we suggested a correction was nigh although we didn't have a catalyst. Now we do – positioning and leverage should do the rest."

Yet while that sounds ominous, Wilson couldn't go full bear for obvious reasons, and caveats that "while this correction is likely to get worse and feel bad in the short term, this is not a bubble or like 2000 for many reasons."

Some more details from Wilson, who again takes a victory lap referring to his recent warning of an imminent drawdown in a market gripped by massive euphoria (see "Morgan Stanley Warns "Market Ripe For A Drawdown" As "Risk/Reward Has Deteriorated Materially"), and writes that "after nearly 3 months of an unimpeded run, US equity markets appear to be finally taking a real break. As we have noted over the past few weeks, many of our technical indicators were stretched, leaving markets at risk of a correction at any moment."

He then repeats a warning he had noted previously, saying that "when firmly in a new bull market, corrections are often harder to time due to the lack of obvious fundamental catalysts. After all, earnings revisions and financial conditions remain very supportive of equity markets. Instead, it's usually something unforeseen and in this case it was a combination of things."

The three things that sparked the correction, according to Wilson are the following:

  • "First, while liquidity remains plentiful, there was a case building that we had reached the peak rate of change for this cycle. With the y/y % growth in M1 and M2 running at 72% and 27%, respectively, it's hard to imagine this is going to accelerate further from here. To put those growth in numbers into context, that's twice as fast as we have ever witnessed in history (Exhibit 2). When looking at the very near term it appears that the week of January 11th may end up being the peak for two reasons: 1) the Georgia run off election almost ensures we will get some additional fiscal stimulus even if it comes via the budget reconciliation avenue. This takes the pressure off the Fed to do more. 2) We view the inauguration as a risk event like Y2K that the Fed was likely worried about. Given that it passed without incident much like Y2K, we think the Fed can now back off a bit."

  • "Second, leverage in the financial system has been on the rise since November when the first vaccines were announced. Gross leverage for hedge funds was in the 100th percentile as we entered the year. Meanwhile cash balances at long only funds were near record lows. If that wasn't enough, call buying activity by retail investors has never been higher and margin debt is very elevated as well, So even if M1 and M2 growth is likely to fall materially, it's hard to imagine liquidity going any higher and it wouldn't take much to see it reverse. We just needed a trigger."

This is a similar point made by Goldman's Kostin who said that gross and net exposures "remain close to the highest levels on record" (something which may come as a surprise to Marko Kolanovic who has been claiming the opposite), suggesting that if the squeeze continues, hedge funds are set for much more pain.

Which brings us to the final - and most important - correction catalyst:

  • "Third, the aggressive short squeeze strategies employed by a certain group of investors was the spark. These targeted squeezes forced the leverage to come out of the system starting with hedge fund gross exposures. Initially, it didn't have much of an effect on the major indices but last week that all changed. The forced reduction of gross leverage via short covering led to a reduction in long exposure and net leverage. Major averages traded lower by 3-5% with many stocks down 10% or more."

There is some good news: after some hedge funds suffered tremendous pain (most notably Melvin Half Capital), there was an explosion of deleveraging on Wednesday and Thursday in the levered community, when some desperate hedge funds went so far as raiding the XRT ETF for GME shares, resulting in a record plunge in XRT assets...

... and the result on Monday is that the Short Interest has collapsed as we reported earlier, a precursor to a much steeper drop in GME stock price.

Then again, maybe not: as Wilson ominously notes, "while leverage has been reduced significantly in just a few days, we think it has further to go, particularly if these targeted short squeeze activities persist." Even even if they don't, Wilson says that it's likely that realized volatility remains elevated and that should force further reductions in gross exposures. More importantly, said gross down also raises a question on valuations as the Equity Risk Premium is sensitive to changes in volatility, and consequently, financial conditions.

What this means is that Wilson's positioning remains bullish over the longer-run, but in the near term he sees further pain as the excesses of the past few months have to be flushed away, and as long as hedge fund leverage remains near all time highs, it is likely that even a modest squeeze will lead to further liquidations of most popular long positions.

Finally, Wilson reminds readers that last week he suggested that his favorite trades were also vulnerable to a correction, citing several pair trades namely Cyclicals/Defensives, Small / Large Caps and Equal weight/Market cap weight SPX. Sure enough, last week all three pulled back. So has Wilson capitulated? Yes and no: while he still likes all three in the longer term he thinks "they have more downside before this correction is over. This pain can also be seen in our Fresh Money Buy list which has a definite skew toward these themes."

Wilson's bottom line, "use this correction to add to these themes and ideas but be patient until the leverage readings fall further."

And in a world of infinite liquidity, such deleveraging could take a long time...

Tyler Durden Mon, 02/01/2021 - 15:03
Published:2/1/2021 2:15:31 PM
[Markets] Is Home Depot Stock A Buy Right Now After A Key Upgrade? Here's What Earnings, Charts Show Home Depot is one of the biggest companies in the United States and a stock leader on the Dow Jones industrials, but is Home Depot stock a buy right now? Published:2/1/2021 8:43:44 AM
[Markets] Futures Rebound From Early Rout Despite Continued Surge In Most Shorted Stocks Futures Rebound From Early Rout Despite Continued Surge In Most Shorted Stocks

Unlike previous days when the surge in most shorted stocks - as they are doing this morning - pushed the broader market lower, on Monday bullish sentiment is everywhere, and after sliding as much as 1.5% at the start of trading on Sunday, Emini futures rebounded rising 1% following last week's sharp selloff as a shift in the retail trading frenzy to silver drove up mining stocks and investors awaited manufacturing data later in the day.

At 7am. ET, Dow E-minis were up 233 points, or 0.78% and S&P 500 E-minis were up 37.75 points, or 1.02%. Nasdaq 100 E-minis were up 135.75 points, or 1.05%. The VIX slipped about 2 points on Monday, last seen just above 31, after hitting its highest since October .

Shares of Exxon and Chevron jumped 2% each after the WSJ reported that the chief executives of the two largest U.S. oil producers held preliminary talks in early 2020 to explore a merger, and may resume talks in the future. The most shorted names also jumped, with GameStop and AMC rising on Monday on top of their gains of nearly 400% and 278% respectively last week, when meme stocks dominated news on Wall Street last week, even as Apple, Microsoft and other corporate heavyweights reported record quarterly results. Focus now turns towards quarterly earnings from Inc and Google-owner Alphabet Inc on Tuesday to wrap up results from the so-called FAANG group.

“Markets will concentrate again on the really important developments: ongoing vaccination and therefore brightening outlooks regarding re-openings with increasing activity, paving the way for pent-up demand driving the economic recovery,” said Robert Greil, chief strategist at Merck Finck Privatbankiers.

The big highlight, however, was them move in spot silver which extended Asia’s rally, gaining as much as 11.4% - the biggest one day move since the Monday after Lehman filed for bankruptcy - to trade at $30-handle, the highest price since 2013. The SLV ETF jumped 9% in premarket trading. Silver miners Hecla Mining, Coeur Mining and Wheaton Precious Metals surged between 12% and 21%.

Europe’s Stoxx 600 Index rallied 1%, with miners, tech and retail doing much of the heavy lifting. Oil & gas was the only sector in the red. European-listed silver miners soared, led by Fresnillo, which rises as much as 17%, most since March. KGHM, Poland’s sole producer of copper and silver, jumped as much as 7.1% in Warsaw, most since Jan. 7. The Stoxx 600 basic resources index rises as much as 2.8%, best-performing industry group of the Stoxx Europe 600. Diversified miners also bounced, with Anglo American +3.2%, Glencore +3%, BHP +2.4%, Rio Tinto +1.8%. The mining surge helped boost European sentiment despite a crash in German retail sales, which tumbled 9.6%, the biggest drop since April 1956, on expectations of just a -2.6% drop.

Earlier in the session, the MSCI Asia Pacific Index added 1.7%, the biggest gain in three weeks, following their longest losing streak since September, with equity benchmarks in India, South Korea and Indonesia posting the biggest gains. Indian markets rallied the most since May after the country’s government unveiled a budget that blows out the fiscal deficit wider than expected to revive growth. South Korea’s stock gauge snapped a four-day decline, boosted by Celltrion and Samsung Electronics. Philippines, Indonesia and Hong Kong were among the other major gainers. Information technology and consumer discretionary sectors were the biggest boosts to the MSCI Asia Pacific Index, which rebounded from its worst weekly loss since March. Myanmar’s stock exchange suspended trading, citing a network connection error, as the country’s military declared a state of emergency and seized power for a year. Malaysian markets were closed for a holiday

In rates, Treasuries beyond the 2-year remained under pressure, with long-end of the curve cheaper by ~1.5bp as U.S. stock futures advance after erasing an opening loss. Treasury 10-year yields around 1.08%, cheaper by 1.5bp vs Friday’s close, while 2-year at 0.107% hovers within 1bp of last year’s record low; 2s10s spread is wider by 1.6bp with front-end rates broadly anchored.  Core fixed income in Europe trades a narrow range, with bunds bull flattening slightly. Peripheral spreads tighten to core, with Italy narrowing ~3bps to 112.5bps, outperforming peers.

In FX, the Bloomberg Spot Dollar Index rose a second day after data showed German retail volumes fell 9.6% in December; the pound held steady, outperforming peers as the U.K. makes progress on vaccinations and as money markets push back bets on a BOE rate cut ahead of its meeting Thursday.  Commodity currencies swung back to losses in the European session after recovering from a China PMI-driven slide in Asian trading as sentiment improved. The yuan is poised for its biggest retreat since October after China on Sunday reported that manufacturing purchasing managers’ index fell to 51.3 in January, versus 51.9 a month earlier amid a recent resurgence of Covid-19 cases.

In commodities, naturally the highlight was silver which broke above $30 an ounce as the precious metal took center stage in the retail investor frenzy sweeping through markets. Elsewhere, crude futures drifted off best levels; WTI dips back below $52.50, Brent at $55.50. Base metals trade mixed, with LME nickel outperforming; copper underperforms in second straight day of declines

On the data front, investors awaited to a reading on ISM’s manufacturing index, which is expected to tick lower in January after accelerating to its highest level in nearly 2-1/2 years in December. Focus turns towards quarterly earnings from Inc and Alphabet on Tuesday to wrap up results from the so-called FAANG group.

Market Snapshot

  • S&P 500 futures up 0.9% to 3,739.50
  • MXAP up 1.7% to 207.23
  • MXAPJ up 1.9% to 698.09
  • Nikkei up 1.5% to 28,091.05
  • Topix up 1.2% to 1,829.84
  • Hang Seng Index up 2.2% to 28,892.86
  • Shanghai Composite up 0.6% to 3,505.28
  • Sensex up 5.0% to 48,602.93
  • Australia S&P/ASX 200 up 0.8% to 6,662.96
  • Kospi up 2.7% to 3,056.53
  • Brent futures down 0.8% to $55.41/bbl
  • Gold spot up 0.5% to $1,857.51
  • U.S. Dollar Index up 0.2% to 90.81
  • German 10Y yield rose 2.5 bps to 0.505%
  • Italian 10Y yield rose 1.3 bps to 0.532%
  • Spanish 10Y yield fell 2.0 bps to -0.096%

Top Overnight News from Bloomberg

  • Five-year U.S. Treasuries, which have so far been immune to the bond-market sell-off, are now vulnerable, according to strategists who argue markets may be underpricing the Federal Reserve interest rate hike cycle
  • The Bank of England is preparing to take a significant step into the debate on whether negative interest rates should be used to stimulate the coronavirus- stricken U.K. economy
  • The U.K. will formally request to join an 11-member transpacific trading bloc Monday, with negotiations expected to start later this year
  • German Chancellor Angela Merkel will hold crisis talks with pharmaceutical executives, regional leaders and European Commission officials Monday in a bid to speed up the continent’s stuttering vaccination push
  • Japanese Prime Minister Yoshihide Suga looks set to extend a state of emergency for major metro areas that will inflict more pain on the economy, as he tries to stem the latest wave of Covid-19 cases and reverse a fall in public support
  • Australia only recently started its quantitative-easing program, yet the key question already confronting the central bank is when and how to taper bond purchases given the strong economic recovery
  • Sweden’s economy dodged a contraction last quarter, providing the first glimpse of how its no-lockdown strategy of 2020 affected businesses and consumers throughout the year. GDP grew 0.5% from the previous quarter
  • Myanmar’s military detained Aung San Suu Kyi, declared a state of emergency for a year and voided her party’s landslide November election victory in a setback for the country’s nascent transition to democracy

Courtesy of Amplify markets, here is a 3-minutes snapshot of global markets:

A more detailed recap courtesy of Newsquawk

A positive tone was observed in the Asia-Pac region with most regional bourses in the green and US equity futures also recovered from the early stumble seen at the reopen where there was some residual pressure after Friday's losses on Wall St which were due to month-end flows, recent overvaluation concerns, large hedge fund losses and fears of tighter regulation amid the main street trading frenzy. ASX 200 (+0.8%) initially underperformed amid fresh COVID-19 restrictions in Western Australia including the state capital of Perth which was placed on a snap 5-day lockdown after a quarantine hotel guard tested positive for the UK COVID-19 variant, although the index then recovered alongside the gradually improving mood in the region and with upside led by miners after silver prices surged again on the Reddit short squeeze play. Nikkei 225 (+1.6%) shrugged off early cautiousness and reclaimed the 28K level with newsflow dominated by earnings results, while the KOSPI (+2.7%) was boosted after better-than-expected trade figures which showed Exports jumped by 11.4% Y/Y for January. Hang Seng (+2.1%) and Shanghai Comp. (+0.6%) were kept afloat as China’s overnight repo rate eased from a 5-year high after the PBoC injected liquidity through open market operations, although the mainland lagged as longer-term money market rates began to creep up again and with participants digested the latest Official Manufacturing, Non-Manufacturing and Caixin Manufacturing PMI data which all fell short of estimates but remained in expansion territory. Finally, 10yr JGBs languished after its recent declines and with demand hampered after risk appetite steadily improved, while the BoJ also reduced its purchase intentions for Rinban operations this month in 1yr-3yr and 3yr-5yr maturities.

Top Asian News

  • Nintendo Raises Outlook After Surpassing High Expectations
  • AIA, China Strategic Said Among Bidders for BEA Life Insurer
  • Japan Mulls Extension of Covid Emergency as Economy Sputters
  • China Eases Funding Stress After Worst Cash Squeeze Since 2015

European indices kick the month off on a constructive note with gains across the board (Euro Stoxx 50 +1.5%) as the region picked up a similarly positive APAC baton. State-side futures meanwhile see gains in a similar vein with ES (+1.0%), NQ (+1.1%), RTY (+1.0%) and YM (+0.8%) posting relatively broad-based performance. Fundamental catalysts have been light thus far as participant's head into another earnings-packed week with giants Alphabet and Amazon among some of the highlights. Back to Europe, sectors are mostly higher with the exception of Oil & Gas as crude prices wane off highs, whilst weekend reports via WSJ suggested Exxon (+2.2% premkt) and Chevron’s (+1.7%) CEOs discussed a potential merger – which would form an entity larger than Saudi’s ARAMCO. Elsewhere, the mining sector is faring rather well as the Reddit dash for silver bolsters the precious metal miners Fresnillo (+15.5%) and Polymetal International (7.4%), with optimism also seeping in some base metal miners. In terms of individual movers, Ryanair (-0.6%) is modesty softer after an overall mixed Q3 report which missed on revenue but noted that cash burn has been lowered and recent lockdowns will reduce forecast FY21 traffic to between 26mln and 30mln (previously “up to 35mn”), with more risk towards the lower end of the range. Elsewhere over in the Italian banking sphere, Unicredit (+1.7%) may consider a combination with BMPS (+2.2%) without any political pressure to do so and based on the industrial feasibility and contingent on not too high a social price, with some reports also suggesting the potential for a three-way merger with BPER ( +1.7%).

Top European News

  • Merkel to Convene Crisis Talks Amid Chaotic EU Vaccine Rollout
  • Swedish Economy Dodged Quarterly Decline as Pandemic Worsens
  • Julius Baer Starts New Buybacks as Profit Jumps on Trading
  • U.K. Meets Key Vaccination Milestone, Secures More Supplies

In FX, the Dollar was looking relatively fragile amidst an upturn in risk sentiment to kick off the new month, with the DXY only holding above 90.500 by a whisker before a firm rebound to 90.924 at best, as the Franc fell and Euro came tumbling after, albeit with weakness in other majors also helping the Buck withstand pressure from elsewhere, like precious metals where XAG extended its retail-inspired surge to just over Usd 30/oz at one stage. Usd/Chf failed to breach 0.8900 with the aid of a pick-up in Swiss retail sales or stronger than expected manufacturing PMI and has subsequently rebounded to around 0.8957, as weekly bank sight deposits rise again, while Eur/Usd largely shrugged off mostly better than forecast Eurozone manufacturing PMIs on the way down through 1.2100 and Friday’s 1.2093 session low.

  • GBP - In contrast to all the above, Sterling has made a solid start to February with Cable probing 1.3750 for a 3rd time since last Wednesday, and Eur/Gbp reverting to its downtrend to test stops below prior 2021 lows circa 0.8810. However, this was all before an upward revision to the final UK manufacturing PMI and courtesy of weakness in the Greenback and Euro rather than any real Pound positive aside from some decent developments on the coronavirus front as the number of infections and fatalities slowed over the weekend and the EU relented on the passage of vaccines flowing both ways across the channel.
  • NOK - The other major outperformer, as Eur/Nok pulls back below 10.4000 on the first day of significantly higher Norges Bank daily FX action, eyeing a bounce in crude prices instead of a slowdown in Norway’s manufacturing PMI.
  • JPY/CAD/AUD/NZD - All giving way to their US counterpart’s broad revival, with the Yen testing support and underlying bids ahead of 105.00, Loonie trying to contain losses under 1.2800 in the run up to Markit’s Canadian manufacturing PMI, the final US version and ISM, Aussie pivoting 0.7650 post-softer than anticipated Chinese PMIs and pre-RBA (preview on the Headline Feed at 10.24GMT and in the Research Suite), and Kiwi hovering midway between 0.7203-0.7150 parameters in advance of NZ jobs data on Tuesday.
  • SEK/EM - Somewhat negative impulses for the Sek to digest as its straddles 10.1500 vs the Eur, with Sweden’s manufacturing PMI and Q4 GDP coming in below consensus, but the Try has been boosted Turkey’s manufacturing PMI gathering pace above 50.0 and perhaps President Erdogan’s latest personnel changes in the Finance Ministry via the replacement of 2 deputies, as it approaches 7.2000 against the Usd.

In commodities, Focus since the open has been on spot silver’s upward price action, fuelled by retail flocking into the precious metal and its ETFs as it trends on Reddit’s WallStreetBets. Spot prices have risen from a base around USD 27/oz and briefly eclipsed USD 30/oz to the upside. Furthermore, bullion brokers have started to issue warnings of transaction delays amid the surge in silver demand. That being said, some reports on the blog site caution into money inflows into silver as this helps the long-silver hedge-funds and that participants should not expect a short squeeze as seen in some single stocks. Technicians highlight the next potential point of resistance could be around the USD 30.30-70/oz which marks the 50% fib of the correction during 2011-20. A breach of that could open the door towards USD 33/oz. This surge in silver prices has also provided spot gold with some impetus, albeit to a much milder magnitude – with the yellow metal eyeing its 100 DMA (1876/oz) to the upside as it straddles around its 21 DMA around 1864/oz (vs. low 1847/oz). Base metals are conversely lacklustre amid a firmer Buck and lack of fresh fundamental news flow and underwhelming Chinese PMI data, with LME copper relatively flat intraday just above 7,800/oz. That being said, import premiums of the red metal into China have risen to their highest in over five months amid expected disruptions from Chile. Crude markets meanwhile have kicked off the week on a firmer footing with the ongoing reflationary hopes and OPEC+ flexibility themes keeping prices underpinned, although today’s price action seems to be in conjunction with the current constructive risk tone across markets. WTI resides around USD 52.50/bbl after waning from its 52.69 /bbl high, while its Brent counterpart trades on either side of USD 55.50/bbl in the runup to this week’s JMMC meeting.

US Event Calendar

  • 9:45am: Jan. Markit US Manufacturing PMI, est. 59.1, prior 59.1
  • 10am: Jan. ISM Manufacturing, est. 60.0, prior 60.7, revised 60.5
  • 10am: Dec. Construction Spending MoM, est. 0.8%, prior 0.9%

DB's Jim Reid concludes the overnight wrap

Lockdown is so dull, especially when it was as wet as it was yesterday, that we cleared out an old cupboard and found a big loose change jar, accumulated over several years, and decided to count it as a family. 2 hours and £103.56 later and it’s time to set up a Robinhood account and see if I can rival the 1625% seen from GameStop in January over the coming month. As you’ll see below given that the retail crowd have moved increasingly to silver, maybe melting it down in a few weeks might be the better option.

As it’s now a new month we are just about to publish our monthly performance review. In spite of some wild markets over the past week, January overall has seen a remarkably stable start to the year for most of the assets we normally cover, with just 3 of the 43 assets in our sample seeing a move of more than 5% either way last month. Indeed, that’s the lowest number to see a move of that magnitude since November 2019.

So in the end a fairly quiet January? Far from it.We had a surprise Senate victory for the Democrats, a storming of Capitol Hill, Bitcoin doubling in around 3 weeks, a 360 degrees of Fed views in the tapering debate, vaccine trade war threats from the EU, a few hours where the EU technically imposed a hard border in Ireland before withdrawing it, and last but not least the most incredible last week of the month with GameStop becoming the most famous company in global financial markets for a week. All of this to a soundtrack of increasing covid restrictions around the world. To balance this with hope, the U.K. yesterday announced a remarkable day of vaccinations, with 598k done in one day, almost 1% of the population (1 in every 87 adults in one day). It really is possible to move fast when the supplies are available which should give everyone hope when more and more vaccines come on stream over the coming weeks and months.

Back to markets and in terms of the impact of the r/wallstreetbets movement, my personal view is that when the history books of this pandemic and its impact on financial markets will be written they will have a significant chapter but more as a story of the bubble like tendencies in certain parts of the market rather than the main market event. For me there is little doubt that huge central bank liquidity and government stimulus cheques in the hands of the underemployed/furloughed (through no fault of their own) retail investors will be a big part of this bubble story. I think this movement does create some systemic risks but is perhaps more of a smaller version of the risks associated with some of the eye watering valuations elsewhere in large corners of the technology sector. Retail has in many parts driven such valuations in the last 10 months. If this pops the wider market will have bigger issues than last week.

Looking forward, it’s another big week for data and earnings with the PMIs for January (today and Wednesday) as well as the US jobs report (Friday) the obvious highlights. In terms of a peak week of earnings, Amazon and Alphabet tomorrow are going to see the main macro focus. There’s also the Bank of England’s latest decision on Thursday, along with further political developments in Italy as consultations continue on forming a new government. Expect to hear more about the US stimulus package with the reconciliation process likely starting as a bipartisan approach is probably unlikely to work even if GOP lawmakers have offered a $600bn package over the weekend. Biden will meet with 10 Republican senators today to discuss.

Just on those PMIs, overnight China's Caixin manufacturing PMI has slightly disappointed as it came in at 51.5 (vs. 52.6 expected). Earlier, official Chinese PMIs also showed the same theme with manufacturing printing at 51.3 (vs. 51.6 expected) and services at 52.4 (vs. 55.0 expected). Japan's final manufacturing PMI was at 49.8, +0.1pt better than flash. Manufacturing PMIs for other countries in the region remained relatively stable, with Vietnam at 51.3 (vs. 51.7 last month), Taiwan at 60.2 (vs. 59.4 last month), India at 57.7 (vs. 56.4 last month) and Indonesia at 52.2 (vs. 51.3 last month).

Asian markets have started the week on the front foot with the Nikkei (+1.31%), Hang Seng (+1.94%), Shanghai Comp (+0.42%) and Kospi (+2.20%) all trading up. China's recent liquidity squeeze is also easing as the PBoC injected a net $15bn of funds today. Futures on the S&P 500 are currently trading up +0.53% after reversing an early decline of as much as -1% while yields on 10yr USTs are up +1.4bps to 1.082%. Elsewhere, Brent crude oil prices are up +0.69% on news that OPEC+ estimated that they implemented 99% of their agreed oil supply curbs in January. Silver is also trading up +6.03% on increasing chatter in reddit groups about the commodity while spot gold prices are up +0.75%. Silver started being mentioned in this retail forum last Wednesday and given the weekend momentum has intensified it’ll be fascinating how this plays out in what is a deeper market that single stock equities.

Back to the week ahead and on payrolls our US economists are looking for a +100k increase, which comes off the back of a -140k decline in December, and see the unemployment rate remaining at 6.7%. That decline in nonfarm payrolls in December marked the first time that the US economy had shed jobs since the height of the first wave of the pandemic back in March and April 2020, and it’s worth noting that the number of people in work still remains nearly 10m lower than its prepandemic peak back in February, so there’s still a long way to go before we get back to normality in the labour market. After last week one wonders how many of these unfortunately displaced were part of the r/wallstreetbets crew.

Earnings season continues in full flow over the week ahead, with a further 111 companies from the S&P 500 reporting and 71 Stoxx 600 companies. In terms of the highlights to look out for, today we’ll hear from Thermo Fisher Scientific, then tomorrow we’ll get results from Amazon, Alphabet, Pfizer, Exxon Mobil, Amgen, UPS, BP, Alibaba and Ferrari. Wednesday then brings releases from PayPal, AbbVie, Qualcomm, Novo Nordisk, Siemens, GlaxoSmithKline, Santander, Sony, Biogen, Volvo and Nomura. On Thursday, we’ll hear from Roche, Gilead, Merck & Co., T-Mobile US, Unilever, Royal Dutch Shell, Bristol Myers Squibb, Philip Morris International, Ford and Nokia. Finally on Friday there’s results from Linde, Sanofi and BNP Paribas.

Back to last week now and while a lot of attention was spent on the day-traders squeezing heavily shorted stocks, the overall equity market took a significant step back. The broad-based selloff came as risk sentiment swung negative on a mix of news ranging from poor tech earnings announcements, the new coronavirus variants, delayed vaccine deployments and worries around bubble-like conditions. The S&P 500 fell back -3.31% on the week (-1.93% Friday) while the NASDAQ composite dropped a further -3.49% (-2.00% Friday), in the worst month for the indices since October. This meant that the S&P was down -1.11% in January – the worst opening month to a year since 2016. In the risk off environment, the VIX volatility index rose +11.2pts to 33.1. This was the largest one week spike since June, when the second wave of infections was detected in the US. European equities equally struggled as the STOXX 600 ended the week -3.11% lower (-1.87% Friday) while the FTSE (-4.30%) and IBEX (-3.47%) notably lost ground.

At roughly the midpoint of earnings season – 52% of the S&P has reported – the market has seen a record high number of beats (85%), with the size of those beats roughly in line with last quarter at 17% which is close to the highest on record. This reflects how estimates have continued to lag the macro data, however the market has not necessarily rewarded these beats. Equity positioning was relatively high coming into the earnings season, valuations high and investors may be looking ahead to further lockdowns in the coming quarter and worries over upcoming guidance.

With a risk off sentiment roiling through markets, havens rose on the week. The US dollar rose +0.38% (+0.14% Friday) on the week for its third weekly gain in the last four. US Treasury yields fell under 1.0% midweek for the first time since the Democrats won control of the Senate in early January, with 10yr yields recovering slightly to finish down -2.0bps at 1.066%. 10Yr Bund yields dropped slightly as well, dropping -0.6bps lower to -0.52%, however 10yr Gilt yields rose +1.9bps to 0.33%. With the political realignment of the Italian government becoming clearer, and Prime Minister Conte resigning in order to try and construct a new government, the spread of 10yr Italian BTPs over German bunds tightened -10.2bps to 116bps. Elsewhere in fixed income, high yield spreads widened on both sides of the Atlantic as US HY cash spreads were +9bps wider, while in Europe they widened +11bps.

Data from Friday showed that the economic growth in the Euro Area may be avoiding a deeper recession even as lockdowns persist. Spanish GDP rose +0.4%, well above the -1.4% contraction expected. German GDP similarly surprised to the upside, growing 0.1% QoQ (0.0% expected), while France’s GDP fell just -1.3%, compared to the -4.0% drop expected. German unemployment was also better than expected, falling 41k (+7.5k expected), with the unemployment rate falling to 6.0%. Meanwhile in the US, personal income rose +0.6% (+0.1% expected) as spending fell -0.2% (-0.4% expected) for a second month in a row. The final January reading of the University of Michigan’s consumer sentiment index fell to 79.0 from 80.7pts last month as worsening coronavirus case counts and a potential delay in stimulus weighed on expectations. January MNI Chicago PMI came in at 63.8 (vs 58.5 expected), which was its highest reading since February 2019.

Tyler Durden Mon, 02/01/2021 - 08:33
Published:2/1/2021 7:43:37 AM
[Markets] 5 Dow Stocks With the Highest Short Interest In less than four months, we'll be breaking out a lot of candles and celebrating the 125th birthday for the Dow Jones Industrial Average (DJINDICES: ^DJI). The best guess I can offer that would explain this pessimism is the collective expectation by investors that cloud stocks will pull back significantly after delivering triple-digit gains in 2020. Published:2/1/2021 6:15:01 AM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Primary Objective of Reversal is 30320 The direction of the March E-mini Dow Jones industrial Average the rest of the session on Monday will be determined by trader reaction to 30032. Published:1/31/2021 11:13:45 PM
[Markets] Dow futures reverse early-session losses, turn positive Dow futures reverse early-session losses, turn positive Published:1/31/2021 10:19:26 PM
[World] Futures Movers: U.S. stock futures sink after worst week since October Dow Jones Industrial Average futures slid more than 200 points, or 1%, late Sunday
Published:1/31/2021 5:39:02 PM
[Markets] Tough Close To A Rough Week: Change In Tone Despite Strong Apple, Microsoft Results You could argue that the market spooked itself this week. Now it wasn’t as if there weren’t external reasons for the downturn. Between worries about slow vaccine rollout, weak European economic data, the appearance of the South African variant of the virus here, and a few disappointing earnings reports, it’s easy to find a fundamental story to blame. Still, it feels like the selloff, which accelerated Friday as the S&P 500 Index (SPX) fell nearly 2%, was more of a reaction to internal market developments. Anyone who’s paid attention knows about all the focus on short squeezes that brought fame (and some fortune) to stocks like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC). There’ve been disruptions all over the world, and now the stock market is feeling some disruption and a change of tone. The short squeezes certainly had a lot to do with it. The way people interact with the market is a little different than in the past. There’s also a sense that things in general had come too far, too fast, sending values too high and leading to calls for a little consolidation. Basically, the four main stock indices had rolled along full steam ahead with hardly a break since early November, and that made some people nervous, especially about valuations. The short squeezes seemed to reinforce some investors’ beliefs that it was time for a little profit-taking. It’s a storm of a lot of things coming together that’s leading to a disruption in the market overall. These kinds of disruptions occur every 10 or 12 years and the market has always survived them. People are reassessing their portfolios. Not just individuals, but funds, too. There’s a reassessment of value everywhere. Some of the major stocks leading the downward charge Friday included all the “FAANGs” along with Microsoft Corporation (NASDAQ: MSFT). Apple Inc (NASDAQ: AAPL)—which often has an outsized impact on the overall market due to its huge valuation—is down 8.5% since reaching an all-time high early this week. That’s despite a stellar earnings report. That’s the kind of thing that makes you wonder if we’re seeing some good old-fashioned profit-taking. From a sector standpoint, it looks like a few of the ones that had been doing best on the recent rally have fallen the hardest, including Energy, Info Tech, and Financials. The so-called “defensive” sectors, including Utilities and Health Care, did best on Friday. Bumpy Ride Not Out Of The Ordinary It never feels good to lose money in the market, but it should feel familiar. Major indices generally experience several 5% drops each year and usually at least one 10% decline. The SPX hadn’t had any sort of serious backtracking since September when it fell around 9.6% from its highs. Then it went on a tear, chalking up gains of nearly 18% from the end of October up to its all-time highs earlier this month. Gains were even heavier for the small-cap Russell 2000 Index (RUT), which entered this week trading at about 1.37 times its 200-day moving average, the highest it’s been relative to the 200-day since at least 2000. Hopes for further fiscal stimulus, the Fed’s dovish monetary policy (which it again promised this week to keep that way for the long term), and vaccine progress all helped electrify Wall Street between November and January. Now it feels like maybe things got a little ahead of themselves, considering all the challenges we still face. Europe is running low on vaccines. The U.S. rollout has been slower than expected. The Johnson & Johnson (NYSE: JNJ) vaccine data today looked OK, but not amazing, and none of the vaccines seem to be as effective against this South African variant that has medical experts sounding nervous. Gross domestic product (GDP) growth in Q4 wasn’t quite as good as some people had hoped and moderated from the breakneck pace of Q3. Combine all that with earnings from Facebook, Inc. (NASDAQ: FB) and Tesla Inc (NASDAQ: TSLA) that didn’t blow anyone out of the water, cruise lines once again pushing back their schedules, a bond market that showed new life, rising volatility, and an SPX valuation at historic highs, and it would have been kind of weird not to have some weakness in stocks. Key Levels To Watch Include 30,000 In $DJI And 3700 In SPX Despite this disappointing end to the week, try to keep things in perspective. The SPX is still up 13.5% in the last three months, and remains around 3.5% below this month’s all-time highs. If a market correction is defined as a 10% decline from the high, we’re not even halfway there yet. That might feel reassuring in one sense, but it should also mean caution. There could be more weakness ahead if this downturn is going to become a correction, which can’t be ruled out. The argument against that is there just hasn’t been a lot of interest among investors to really push the market down over the last few months. Every time the SPX dropped to its 20-day moving average since Nov. 1, it met new buyers in what became called a “buy the dip” trade. This week the SPX actually did fall below the 20-day and then tested the 50-day moving average, which was 3715 heading into Friday (see chart below). The question heading into next week is whether any technical support in that area holds, or if selling picks up. Longer-term technical support is in a range between 3633 and 3695, according to research firm CFRA. This is where the “buy the dip” crowd meets a test: Will they still want to buy the dip after the main crunch of earnings season ends and the world continues to stumble trying to fight the pandemic? The two big numbers to watch could be 30,000 in the Dow Jones Industrial Average ($DJI) and 3700 in the SPX. The two indices flirted with those levels late Friday, and the $DJI ultimately closed just below 30,000. If it hops back above there Monday and manages to hold on, that would probably be seen as a technical victory that could promise a little recovery ahead. It’s kind of interesting that all this happened at a time when you could point to some actual positive developments in the background. Microsoft Corporation (NASDAQ: MSFT) and Apple Inc (NASDAQ: AAPL) both reported earnings that are about as solid as it gets and next week brings Alphabet (GOOGL) and, Inc. (NASDAQ: AMZN). Other big names penciled into the earnings lineup next week include PayPal Holdings Inc (NASDAQ: PYPL), Alibaba Group Holding Ltd (NYSE: BABA), United Parcel Service, Inc. (NYSE: UPS), and Peloton Interactive Inc (NASDAQ: PTON). We’ll talk more about those reports and what to look for in them on Monday morning. As these companies report, stimulus traction appears to be growing on Capitol Hill. Media coverage this week suggested Democrats might try to speed the $1.9 trillion legislation through Congress through reconciliation, which wouldn’t necessarily require Republican votes. Whatever you might think of the legislation itself, stimulus generally appears to have helped the stock market over the last few months. Next week we’ll see if it elbows its way back into the headlines in a big way, which has potential to be a helpful force for the market. Volatility Explosion Could Keep Investors Cautious What’s not helpful is the way volatility just exploded this week. On one day, the Cboe Volatility Index (VIX) skyrocketed to 37 from below 22. This isn’t something you often see, and overall the VIX had its biggest upside week since June. Historically, VIX—sometimes called the market’s “fear index”—trades in ranges over periods of time. It spent a lot of time last fall between 25 and 30, and then early this year between 20 and 25. Now it’s back above 30, and that could indicate more concern about possible choppiness and deeper losses straight ahead. One interesting thing now vs. a week ago, however, is that VIX futures have gone from contango (where outer months are higher than the current level) to backwardation, where the current level outweighs future prices. It was also positive to see the major indices bounce off of their lows late in Friday’s session, which could have positive ramifications as the new week starts. The SPX at one point on Friday dipped just below 3700, but didn’t seem to find much selling interest down there. One hallmark of last year’s steep selloff was failure to find buyers late on Fridays who were comfortable holding long positions into the weekend. This sometimes caused late-week selloffs to gain steam. That didn’t appear to be the case Friday, which isn’t a bad thing if you’re hoping for better times ahead. Earnings, stimulus, and vaccination progress all remain key areas to watch as the new week begins. Also, consider closely checking futures market action Sunday night for possible clues about how Monday could open. Despite Headlines, Vaccine Progress Appears Confirmed This Week One more thing: JNJ’s vaccine data today took some of the blame for the market weakness, but most analysts didn’t think the data was actually all that disappointing. As they said, it appears to be more effective than the flu vaccine we all get each fall, and it also seemed effective in preventing severe COVID-19 cases. The data showed it wasn’t as effective as the Pfizer Inc. (NYSE: PFE)/BioNTech SE (NASDAQ: BNTX) and Moderna Inc (NASDAQ: MRNA) vaccines already on the market, but few experts had expected that. JNJ was upbeat about the data and analysts said it’s expected to seek quick regulatory approval. Logistically, the JNJ vaccine has a bunch of advantages because it’s a single-injection product that can be stored at much higher temperatures than products made by the other companies. There was also positive vaccine data from Novavax, Inc. (NASDAQ: NVAX) this week, and its shares jumped more than 60% on Friday. The company is considering filing for U.S. approval, news reports said. Which means in a best-case scenario, the U.S. might soon have four vaccines on the market actively fighting against this horrible pandemic. The U.S. government agreed last year to buy 100 million doses of JNJ’s vaccine. So maybe those are some things to keep in mind if you’re feeling depressed about how this week turned out. CHART OF THE DAY: FINDING NEW SUPPORT. After bouncing off its support of the 20-day moving average (yellow line), the S&P 500 Index (SPX—candlestick) broke below it on Wednesday and has traded below it since then. It’s now moved down to its 50-day moving average (blue line) and closed just a hair below it at 3714.18. It’s too early to tell if this will be the next support level but it’s something to keep an eye on. Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results. TD Ameritrade® commentary for educational purposes only. Member SIPC. Photo by Lloyd Blunk on Unsplash See more from BenzingaClick here for options trades from BenzingaDid Alphabet Sustain The Same Crushing Momentum It Had In Q3?Investors Eye Vaccine Results From JNJ, Novavax Amid Broader Market Uncertainty© 2021 Benzinga does not provide investment advice. All rights reserved. Published:1/29/2021 7:25:33 PM
[Markets] US STOCKS-Wall St drops after J&J vaccine data, GameStop effect weighs U.S. stock indexes dropped, closing out the Friday session with the biggest weekly fall since October, as investors gauged the ramifications of Johnson & Johnson's COVID-19 vaccine trial results, while a standoff between Wall Street hedge funds and small, retail investors added to volatility. Johnson & Johnson fell 3.56% as one of the biggest weights on both the Dow and S&P500 after the drugmaker said its single-dose vaccine was 72% effective in preventing COVID-19 in the United States, with a lower rate of 66% observed globally. Published:1/29/2021 3:56:29 PM
[Markets] Market Snapshot: U.S. stocks skid Friday to book worst week since October, as GameStop ruckus and vaccine news stress market Stocks tumbled Friday, leaving the Dow and S&P 500 with worst monthly loss in 3 months, as volatile trade in a batch of small, heavily shorted companies raised broader bubble concerns in a market already worried about factors that could slow the economic recovery.
Published:1/29/2021 3:56:29 PM
[Markets] U.S. stocks end down roughly 2%, with Dow, S&P 500 turning lower for January U.S. stocks end down roughly 2%, with Dow, S&P 500 turning lower for January Published:1/29/2021 3:25:04 PM
[Markets] US STOCKS-Wall St tumbles after J&J vaccine data, GameStop effect weighs U.S. stock indexes slumped on Friday as investors gauged the efficacy data of Johnson & Johnson's COVID-19 vaccine, while a standoff between Wall Street hedge funds and small, retail investors contributed to volatility. Johnson & Johnson fell 3.67% as one of the biggest weights on both the Dow and S&P500 after the drugmaker said its single-dose vaccine was 72% effective in preventing COVID-19 in the United States, with a lower rate of 66% observed globally. Published:1/29/2021 2:08:19 PM
[Markets] "This Is A Financial Revolution..." "This Is A Financial Revolution..."

Authored by Simon Black via,

At precisely 2:32pm Eastern time on May 6, 2010, the US stock market started to drop.

The decline was sudden, and vicious. Within minutes, more than $1 trillion of market capitalization had vanished, with the Dow Jones Industrial Average losing nearly 10% of its value.

This event became known as the ‘Flash Crash’. And early explanations pointed to the big investment banks and their high-tech trading algorithms, i.e. software that could buy and sell stocks without human involvement.

When the market started its decline that day, banks’ trading algorithms went haywire and started selling everything. This caused the market to decline even further, which triggered the algorithms to sell even more.

The humans were powerless to stop it. There were stories of panicked tech teams at investment banks frantically ripping cables out of the floor trying to shut down the machines.

But the selling went on for 36 minutes… during which time the banks and big funds racked up enormous losses.

For me, however, the Flash Crash was great. I was ‘short’ the stock market at the time, meaning I had bet that the market would decline.

And when the market dropped by more than 1,000 points, I happily cashed in.

But two days later I received an email from my broker explaining that they were CANCELING my trade.

The poor little investment banks had lost money because their fancy algorithms didn’t work. So the exchange was giving them a ‘do over’ at my expense.

Incredible. It hadn’t even been two years at that point since the banks had to be bailed out at taxpayer expense during the Global Financial Crisis of 2008.

Then, 20 months later, the Flash Crash happened. And the banks were simply able to wipe all their losses away.

The lesson is obvious: when we screw up, we pay the price for our mistakes. But when the banks screw up, the whole financial system comes to their rescue.

Plenty of people have made this realization over the years.

If you’ve been following the news, you are probably aware that there are a few stocks right now– most notably GameStop (GME), that have soared to incredible heights in a matter of days, thanks to a zealous group of individual investors on reddit and TikTok.

These aren’t titans of finance; they’re a bunch of little guys, many of whom are also frustrated by the rigged financial system.

A bit of background– GameStop is a company that sells video games. And, for years, almost all of their sales have been from their 5500+ stores around the world.

That business model worked really well… in 2005.

Today, most users download video games online directly from the publishers, or they stream games from Google, Amazon, Apple, or Steam. Going into a store and buying a DVD is a thing of the past, and GameStop’s sales have suffered as a result of this trend.

A handful of hedge funds have been betting that GameStop will go out of business soon, or at least that the stock price will continue to decline.

So these funds shorted the stock in a huge (and dubious) way, selling more shares of the company than were actually in existence.

And a number of small investors saw these questionable short positions and said, ‘Enough is enough. We’re tired of hedge funds exploiting the market.’ So they’ve banded together and bid up the price of GameStop’s stock to absolutely epic levels.

GME’s stock price is up from $17 earlier this month, $347 at yesterday’s close, all from these small investors.

And as a result, the hedge funds who shorted GameStop have extreme losses.

Individual investors are angry; comments on the subreddit r/wallstreetbets really sum this up:

“Hedge Funds have literally taken lives through their greed. It’s time for some long overdue taste of their own medicine.”


“It’s a class war. It’s time we fought back.”


“[Hedge funds: ] This is personal for me, and millions of others. . . I’m making this as painful as I can for you.”


“There is and has been a ruling class whose sole purpose is to retain power. They gaslight us into thinking they know what is best for us. 1% knows better than 99%. This is not [about] stocks, this is a financial revolution. . .”

And they’re right.

Small investors have been fleeced for years. It’s infuriating. People are angry.

And as we saw over and over again throughout 2020, when people become angry enough, they band together, often in loosely organized mobs, and take action.

Oftentimes that action is destructive (or self-destructive), and even irrational.

We watched people burn buildings in the name of combating discrimination, others descend upon the US Capitol, others destroy people’s lives via Twitter, and yet others assaulting their fellow citizens who weren’t wearing masks.

That’s human nature: we do strange things when we’re angry. But it makes us feel better.

GameStop is similar. The business loses tons of money, lost half of its equity last year, and has a net asset value of just $690 million. Yet at yesterday’s close the company was worth $20+ billion.

(So GameStop’s ‘Price/Book’ ratio was roughly 30, while the average Price/Book in the S&P500 is 4.16.)

GameStop is a completely irrational investment. And sure enough, the price has been hammered this morning after the brokerage app RobinHood suspended GME trading.

But as the reddit users say, it’s not about the money. It’s personal. It’s emotional. They’re knowingly engaging in destructive (and self-destructive) behavior. They’re OK losing money– because they’re angry.

This is a sign of the times.

We saw explosive mob anger last year over social issues, political issues, health issues. Now we’re seeing it in the financial system.

The obvious theme here is that people are seriously angry. And it’s not going away. It’s building.

Personally I think a better strategy is to borrow from the 1983 movie War Games: “The only winning move is not to play.”

We have an incredible amount of options at our disposal. Just like I wrote recently about divorcing oneself from Big Tech, no one has to use gmail; you don’t have to play Google’s game.

There are plenty of other secure, cloud-based email services. Same goes for Google Drive, Google search, etc.

Similarly, we have plenty of options when it comes to our investments.

If you think the stock market is rigged, you don’t have to play. Consider alternative investments instead– gold, real estate, private companies, crypto, etc. It may be more productive to NOT play the game rather than take huge risks to fight the system.

Either way, expect the anger to continue building. (Just imagine the fury if inflation starts to rise…)

And this is reason enough to have a Plan B.

*  *  *

On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years. That's why we published a new, 50-page long Ultimate Guide on Gold & Silver that you can download here.

Tyler Durden Fri, 01/29/2021 - 13:50
Published:1/29/2021 12:55:16 PM
[Markets] Stock market can still have 'a boom year,' despite GameStop mania: expert Wharton professor Jeremy Siegel isn't letting fears of a market top on Wall Street shake him from his big call on the Dow for 2021. Published:1/29/2021 12:24:04 PM
[Markets] Peter Schiff: Jerome Powell Is Completely Clueless Peter Schiff: Jerome Powell Is Completely Clueless


The Federal Reserve played the same tune during its first Open Market Committee meeting of the year, but the partygoers on Wall Street didn’t dance. In his podcast, Peter Schiff talked about Jerome Powell’s post-meeting press conference and said the Fed chair is “completely clueless” to the true nature of the problems facing the economy. And so is the mainstream.

The Fed kept interest rates at zero and said it would maintain bond purchases at the current level of $120 billion per month — $80 billion of Treasury bonds and $40 billion of mortgage-backed securities. The FOMC statement repeated its previous messaging, committing to keep this extraordinary monetary policy in place until the economy makes “substantial further progress” toward the central bank’s employment and inflation goals.

During his post-meeting press conference, Jerome Powell said it would take “some time” before the central bank would begin tapering quantitative easing.

In a nutshell, the Fed committed to the status quo and to continuing its “accommodative” monetary policy into the future. But the status quo apparently isn’t good enough for the markets anymore. The addict wants more of the drug.

The Dow Jones plunged 633 points. It was the biggest drop since October. The Nasdaq fell 2.61%. And the S&P 500 dropped over two-and-a-half percent.

Stocks tanked despite what Peter called “the most dovish” Powell press conference he’s ever heard.

It should have been a positive for the market, given how the market responds to easy monetary policy. But the fact that despite this incredible dovish Powell the market not only didn’t recover what it had lost [earlier in the day], but it built on those losses, should be very problematic for the bulls.”

The messaging from the FOMC seemed to indicate the central bankers are more concerned about economic growth than the last time they met and that they are less concerned about inflation. They are talking about inflation in the long-run, but downplaying any short-term risk of inflationary pressure. Peter called this “ridiculous.”

The mere fact that the Federal Reserve is downplaying the risks of inflation lets you know how much greater those risks are now looming, because if the Fed isn’t worried about inflation that means it’s going to get a lot worse, especially since what they are worried about is the economy and they think that the way to stimulate the economy is by creating inflation.”

Powell seems to be basing his optimistic view of inflation on the fact that we haven’t had any significant increase in CPI for so long. But he’s ignoring the fact that the CPI doesn’t really capture the true extent of inflation and a lot of it has been exported to the rest of the world thanks to the dollar’s reserve currency status and America’s ability to run massive trade deficits. He’s also ignoring the fact that the current stimulus campaign is putting a lot more money into the hands of consumers, not just Wall Street investors.

It’s not just about goosing the stock markets anymore. It’s not just about funneling money to Wall Street through the banks. Money is being sent, checks are being put in the mail and sent directly to Americans who are non-productive. They’re not making goods. They’re not providing services. They’re just cashing government checks and the money is coming from the Federal Reserve. So, to ignore that significant change in the character of the policy and to just rest your hat on the fact that ‘well, we didn’t have any problems in the past so we’re not going to have any in the future,’ without recognizing how much different things look now from the past and how much higher the risks have elevated — he’s just oblivious to those inflation risks.”

When asked about the possible connection between the Fed’s monetary policy and crazy stock market valuations, he downplayed the relationship between low interest rates and high asset prices. Peter called this asinine.

How could you deny such an obvious connection? I mean, after all, the Fed’s policy of QE, initial policy, if you go back to Ben Bernanke, why did the Fed slash interest rates and buy bonds? They did it to push up asset prices. That was the goal of the policy. So, if low interest rates don’t push up asset prices, then what was the point of lowering them? … Of course there’s a connection. That’s why the Fed lowered interest rates, to create a phony wealth effect.”

But Powell let the cat out of the bag and tacitly admitted he knows there is a connection between the central bank’s policy and low interest rates when he rhetorically asked, what should we do, raise interest rates?

Basically, that’s what he’s saying. He’s throwing that back out at the reporters, ‘Why are you even asking me this question, because what do you expect me to do about it? It’s not like I can raise rates.’ Which is kind of an admission that the Fed knows there is a big connection between interest rates and asset prices, which is why it can’t raise interest rates because it knows that if it does raise interest rates, asset prices are going to crash. So, what they have to do is pretend there is no connection at all. But because they know there is a connection, they can’t raise rates.”

There’s another reason they can’t raise rates: everybody is levered to the hilt. The economy is built on a giant pile of debt – from the federal government, to corporations, to consumers.

Because everybody has so much debt, nobody can afford higher interest rates.”

Despite Powell’s extremely dovish talk and the Fed’s commitment to maintaining “accommodative” policy, the dollar was stronger. Meanwhile, gold ended the day down about $6.

If anybody understood the significance of this conference, and how completely clueless Powell is to the true nature of these problems and the monetary crisis that we’re heading towards, gold would have been at a record high today. Gold should be up hundreds of dollars an ounce today. It should already be higher. But if it wasn’t, based on this, people should have been buying gold and silver with both hands.”

Tyler Durden Fri, 01/29/2021 - 10:55
Published:1/29/2021 10:09:27 AM
[Markets] Stock Markets Recover; Airlines Gain Altitude Despite Red Ink The stock market rebounded sharply on Thursday from its losses the previous day as investors looked beyond all the short-selling controversy and focused instead on the growing likelihood of additional stimulus for the U.S. economy. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) finished well off their highs, but they still finished with solid gains on Thursday. Today, Southwest Airlines (NYSE: LUV) and American Airlines Group (NASDAQ: AAL) gave their latest reports on how they're faring, and gains for their stocks showed some optimism for the road ahead. Published:1/28/2021 5:18:47 PM
[Markets] Dow industrials end up 300 points following worst selloff in 3 months Dow industrials end up 300 points following worst selloff in 3 months Published:1/28/2021 3:18:16 PM
[Markets] Dow industrials extend intraday gain to 600 points Dow industrials extend intraday gain to 600 points Published:1/28/2021 11:16:46 AM
[Markets] Dow skids over 600 points as Fed's Powell says COVID adds to economy uncertainty Dow skids over 600 points as Fed's Powell says COVID adds to economy uncertainty Published:1/27/2021 2:10:53 PM
[Markets] Panic-buying signs emerge on Wall Street even as Dow risks worst day since Oct. Panic-buying signs emerge on Wall Street even as Dow risks worst day since Oct. Published:1/27/2021 9:39:23 AM
[Markets] Dow industrials skid 500 points early Wednesday Dow industrials skid 500 points early Wednesday Published:1/27/2021 8:57:50 AM
[Markets] French Court Hears Agent Orange Case Against Chemical Corporations, Including Bayer-Monsanto French Court Hears Agent Orange Case Against Chemical Corporations, Including Bayer-Monsanto

Authored by Brett Wilkins via,

A court in France on Monday heard a case brought by a French-Vietnamese woman against over a dozen multinational corporations she accuses of causing grievous harm by selling the defoliant Agent Orange to the United States government, whose use of the deadly chemical during the Vietnam War has killed, maimed, or seriously sickened hundreds of thousands of people to this day. 

Agence France-Presse reports the suit was brought by Tran To Nga, 78, an activist and journalist who was working in Vietnam when she was exposed to Agent Orange. Tran suffers from diabetes and a blood disorder she transmitted to her second daughter; her first daughter died of a heart defect when she was 17 months old. Tran also contracted tuberculosis twice, had cancer, and suffers from an extremely rare insulin allergy. 

Initially, Tran blamed herself for the afflictions that have plagued her and her children. "I asked myself, what have I done to transmit this incurable disease to my children?" she said in a 2015 France 24 interview. 

"Now I know that I am not at fault," she said. "We can identify the culprit of my children's illnesses… It's these dioxins." 

In 2014, Tran sued 14 companies that made or sold Agent Orange, including Monsanto—now owned by the German firm Bayer—and Dow Chemical for their roles in selling the chemical to the U.S. government.

Agent Orange contains TCDD dioxin, a known carcinogen and one of the most toxic chemicals ever invented. In addition to numerous cancers, research has shown that Agent Orange exposure causes severe birth defects, diabetes, spina bifida, cardiovascular, digestive, neurological, respiratory, skin, and other ailments. The U.S. government knew about the dangers of Agent Orange when the John F. Kennedy administration approved Operation Ranch Hand (pdf) in 1961 as part of a growing counterinsurgency operation in Vietnam. 

"When we initiated the herbicide program in the 1960s, we were aware of the potential for damage due to dioxin contamination in the herbicide," Dr. James R. Clary, a former senior scientist at the Chemical Weapons Branch of the U.S. Air Force Armaments Development Laboratory, later admitted.

"We were even aware that the military formulation had a higher dioxin concentration than the civilian version due to the lower cost and speed of manufacture," added Clary. "However, because the material was to be used on the enemy, none of us were overly concerned."

Children are still being born with severe birth defects 50 to 60 years after their grandparents were exposed, Getty Images

The communist Viet Cong insurgency against the oppressive U.S.-backed Ngo Dinh Diem dictatorship was proving more difficult to defeat than anticipated by U.S. planners, who sought novel ways to combat the resistance. In a bid to deny fighters the cover provided by the dense jungle foliage, the U.S. sprayed an estimated 76 million liters (20 million gallons) of Agent Orange over Vietnamese, Laotian, and Cambodian rainforests

Agent Orange was also sprayed over farmland, as U.S. planners sought to eradicate the crops that were feeding Viet Cong and North Vietnamese fighters, their families, and supporters. 

The effects on the people of Vietnam have been devastating. As many as 4.8 million Vietnamese were exposed, with the country's government claiming 400,000 deaths and millions of cancer cases caused by the decade-long spraying. More than 50,000 babies over three generations have suffered severe birth defects, which will continue to affect future generations. 

Soil and water contamination due to Agent Orange continue to sicken and kill to this day. Around 800,000 Vietnamese currently require medical and other assistance due to the lingering effects of exposure. 

Tens of thousands of U.S., South Vietnamese, South Korean, and Australian troops were also exposed to Agent Orange, which has caused serious health problems for many of them, and some of their children

While U.S. victims of Agent Orange were awarded $180 million in a class-action lawsuit in 1984, nearly all attempts by the people of Vietnam to gain desperately needed direct compensation have been rejected by the U.S. government and American courts. This, despite a U.S. promise as part of the 1973 Paris Peace Agreement to pay $3.25 billion over a five-year period, plus an additional $1.5 billion, in reparations to Vietnam. Not a penny was paid.

Vietnamese also watched with great interest as Monsanto was ordered to pay $289 million in damages to an American man who said that its Roundup weed killer caused his cancer

Since 2007, the U.S. Congress has appropriated (pdf) nearly $60 million for dioxin cleanup and related healthcare services in Vietnam as relations between Washington and Hanoi have improved, but victims' advocates say this is nowhere near enough, as some 6,000 children are diagnosed with congenital deformities each year due to Agent Orange

Tran says her lawsuit is meant for these and other victims who have been denied relief over the decades. "I'm not fighting for myself, but for my children and the millions of victims," she told AFP.

Vietnam is not the only place the U.S. has used toxic weapons in recent decades. The firing of depleted uranium rounds in Iraq during the 1991 Gulf War, the 1999 NATO air war against Yugoslavia, and during 2003-2011 Iraq War have been blamed for a rise in birth defects and other often deadly ailments. 

Tyler Durden Wed, 01/27/2021 - 02:00
Published:1/27/2021 1:10:19 AM
[Markets] US STOCKS-S&P, Nasdaq slip from record levels as earnings season gains speed The S&P and Nasdaq slipped on Tuesday from record closing levels as investors digested a batch of corporate earnings results, while an expected policy announcement from the Federal Reserve on Wednesday helped to limit moves. 3M Co climbed 3.26% as one of the biggest boosts on the Dow after it benefited from lower costs and demand for disposable respirator masks, hand sanitizers and safety glasses amid a surge in coronavirus infections. Published:1/26/2021 3:45:06 PM
[Markets] US STOCKS-Wall St edges up as earnings season gains speed U.S. stocks edged up on Tuesday to push the S&P 500 to a new high as investors digested a batch of corporate profit results, including Johnson & Johnson's strong profit forecast and 3M's quarterly profit beat as the pace of earnings season picks up. 3M Co climbed 3.03% as one of the biggest boosts on the Dow after it benefited from lower costs and demand for disposable respirator masks, hand sanitizers and safety glasses amid a surge in coronavirus infections. Published:1/26/2021 2:12:59 PM
[Markets] GLOBAL MARKETS-Stocks rise on earnings boost; U.S. Treasury yields lower Global stocks rose on Tuesday, helped by strong earnings updates in the United States, but U.S. Treasury yields hovered close to three-week lows on concerns about potential roadblocks to President Joe Biden's planned $1.9 trillion stimulus. Strong earnings updates from a slew of companies, including General Electric and Johnson & Johnson, pushed the S&P 500 to a record high. By 10:23 a.m. ET (1523 GMT), the Dow Jones Industrial Average rose 30.53 points, or 0.1%, to 30,990.53, the S&P 500 lost 1.52 points, or 0.04%, to 3,853.84 and the Nasdaq Composite dropped 1.56 points, or 0.01%, to 13,634.43. Published:1/26/2021 10:04:42 AM
[Markets] US STOCKS-S&P 500 scales new high on upbeat corporate earnings U.S. stocks rose on Tuesday with the S&P 500 hitting another record high as positive earnings updates from a slew of companies including Dow components 3M and Johnson & Johnson supported sentiment. Johnson & Johnson rose 3.6% after the drugmaker forecast 2021 profit above estimates and promised data from its widely watched coronavirus vaccine trial soon. "So far earnings have been really strong and the market is looking forward to some of the big tech names starting to report earnings today," said Ross Mayfield, investment strategy analyst at Baird, in Milwaukee. Published:1/26/2021 9:33:46 AM
[Markets] Nasdaq ends at record high as tech shares climb; Dow finishes in the red Nasdaq ends at record high as tech shares climb; Dow finishes in the red Published:1/25/2021 3:26:55 PM
[Markets] Nasdaq surges to record high early Monday with Dow mired in negative territory Nasdaq surges to record high early Monday with Dow mired in negative territory Published:1/25/2021 8:55:40 AM
[World] Market Snapshot: Nasdaq surges to intraday record but Dow skids lower in big tech earnings week Technology-related stocks surge to a record Monday morning but the Dow and broader market lag behind at the start of a busy week of earnings that features results from tech giants Apple Inc., Tesla Inc. and Facebook Inc.
Published:1/25/2021 8:55:40 AM
[Markets] US STOCKS-Dow, S&P close lower as IBM, Intel weigh, coronavirus concerns rise The Dow and S&P 500 ended modestly lower on Friday, dragged down by losses in blue-chip technology stalwarts Intel and IBM following their quarterly results, as hopes for a full economic reopening in the coming months waned. IBM Corp slumped 9.91% and was the top drag on the Dow Jones Industrial Average after it missed estimates for quarterly revenue, hurt by a rare sales decline in its software unit. Published:1/22/2021 4:06:13 PM
[Markets] IBM and Intel are by far the sharpest decliners as Dow sheds 75 points IBM and Intel are by far the sharpest decliners as Dow sheds 75 points Published:1/22/2021 11:38:04 AM
[Markets] US STOCKS-Wall St slips as IBM, Intel falter after results Wall Street's main indexes slipped on Friday after hitting record levels in the prior session, as shares of blue-chip technology stalwarts Intel and IBM tumbled following their quarterly results. IBM Corp slumped 10% and was the top drag on the Dow Jones Industrial Average after it missed estimates for quarterly revenue, hurt by a rare sales decline in its software unit. Intel Corp shed 6.5% as new Chief Executive Officer Pat Gelsinger's post-earnings comments suggested the lack of a strong embrace of outsourcing. Published:1/22/2021 9:43:13 AM
[Markets] GLOBAL MARKETS-Asian markets step back from stimulus-driven record highs Asian shares eased from record highs on Friday as investors took some money off the table after a recent rally that was driven by hopes a massive U.S. economic stimulus plan by incoming President Joe Biden will help temper the COVID-19 impact. The Dow Jones Industrial Average eased a touch, falling into negative territory in the final minutes of trading. Published:1/21/2021 8:31:03 PM
[Markets] US STOCKS-S&P, Nasdaq close at record highs on optimism about Biden stimulus plan The S&P 500 and Nasdaq closed at record highs on Thursday, propelled by optimism about more pandemic relief under the Biden administration to support the economy after data showed a tepid labor market recovery. "We've had a very strong momentum going into this year and coming into the Biden administration... because of prospects of a bigger stimulus check and more spending in general," said Mohannad Aama, managing director at Beam Capital Management LLC in New York. The Dow Jones Industrial Average fell 12.37 points, or 0.04%, to 31,176.01, the S&P 500 gained 1.22 points, or 0.03%, to 3,853.07 and the Nasdaq Composite added 73.67 points, or 0.55%, to 13,530.92. Published:1/21/2021 3:59:47 PM
[Markets] Dow and S&P rejoin Nasdaq on upward path amid first full day of Biden presidency Dow and S&P rejoin Nasdaq on upward path amid first full day of Biden presidency Published:1/21/2021 10:28:29 AM
[Markets] Futures, Global Markets Hit Record High Amid Unstoppable Trader Euphoria Futures, Global Markets Hit Record High Amid Unstoppable Trader Euphoria

Global stocks and US equity futures rose to a fresh record high on - what else - optimism that a firehose of fiscal spending will revive economic growth and bolster corporate earnings, which coupled with more pandemic relief and speedy vaccine rollouts under the new Biden administration would lead to continued risk upside. Investors also sold treasuries and the dollar while awaiting a reading on the weekly jobless claims.

The MSCI World Index touched a record high on Thursday as investors look forward to increased economic support and an expanded federal effort to get shots to more Americans under President Joe Biden. That’s even as several Republican senators expressed misgivings about his $1.9 trillion aid package.

At 7:00 am EST, Dow E-minis were up 72 points, S&P 500 E-minis were up 9.75 points, or 0.25%, hitting an overnight record of 3,859, while Nasdaq 100 E-minis were up 47.5 points, or 0.36%. S&P futures hit a record high higher after the index posted its best first-day reaction to a presidential inauguration since at least 1937. Nasdaq 100 contracts outperformed following a 2% jump on Wednesday. In Europe, tech firms led gains, with the Stoxx 600 Index touching its highest level in 11 months.

United Airlines dropped about 2% in premarket trade after posting a fourth straight quarterly loss due to the COVID-19 pandemic but said it aims to cut about $2 billion of annual costs through 2023. Ford added about 3% after Deutsche Bank raised its price target on the U.S. automaker’s stock, while GM also jumped over 2% to a new record high after Morgan Stanley analyst Adam Jonas said on CNBC the stock is likely to get interest from a wider range of investors going forward. 

Solar stocks also rose in premarket trading after President Biden signed a series of executive orders in his first hours in office focused on combating climate change. Other green energy-related stocks are also catching a bid. Biden signed sweeping actions to combat climate change just hours after taking the oath of office, moving to rejoin the Paris accord and imposing a moratorium on oil leasing in the Arctic National Wildlife Refuge. Solar stocks such as NOVA, FSLR, SEDG, SPWR, CSIQ and ENPH saw premarket gains in U.S.

On the virus front, global fatalities hit a daily record, with a U.K. official comparing some hospitals there to a “war zone.”

"High valuations could find justification in the strong recovery that we expect, while inflation assets remain in the affordable zone,” according to Florian Ielpo, head of macroeconomic research and multi-asset portfolio manager at Unigestion SA. “We therefore see 2021 as a land of investment opportunities."

In Europe, tech firms led gains, with the Stoxx 600 Index touching its highest level in 11 months as investors looked to the European Central Bank for clues on the eurozone’s economic health. The pan-European STOXX 600 index rose 0.5%, hitting new highs since February, with tech, travel & leisure and automakers gaining the most. Tech stocks jumped 1.5%, continuing their rally for a second straight session, led by software maker Sage Group which jumped 4.7% after posting higher quarterly recurring revenue.

The ECB is widely expected to keep its easy money policy unchanged, but hold the door open to further stimulus as the fast-spreading second wave of COVID-19 dims an already weak outlook. The central bank will announce its own policy decisions at 1245 GMT, followed by President Christine Lagarde’s news conference at 1330 GMT.

Earlier in the session, Asian stock benchmark headed for another record close amid a global rally on optimism that U.S. fiscal spending will revive economic growth and boost corporate profits. Tech giants TSMC, Samsung Electronics and SoftBank were the biggest boosts to the MSCI Asia Pacific Index, which saw broad gains among its industry groups. The regional benchmark is already up more than 7% this year. Taiwan’s key equity gauge was among the top gainers in the region after data showed the country’s export orders climbed 10.1% last year to $533.7 billion, an all-time high. India’s S&P BSE Sensex surpassed the 50,000 mark for the first time. The Hang Seng Index rose above the 30,000 level for the first time before dropping in afternoon trading.

Stocks in Tokyo maintained gains after the Bank of Japan left its main policy levers unchanged. Indonesia’s main stock index dipped after the country’s central bank maintained its key interest rate.

China's CSI rose 1.6% despite the emergence of fresh tensions surfaced between U.S. companies and Beijing. China’s three biggest telecommunications firms said they requested a review of the New York Stock Exchange’s decision to delist their shares. Separately, Twitter locked the official account of the Chinese embassy to the U.S., citing a violation of its “dehumanization” policy.

In rates, Treasuries were slightly cheaper across the curve vs Wednesday’s closing levels on futures volume about half the recent average through Asia session and European morning. 10-year yield, steady around 1.085%, broadly keeps pace with slightly weaker German and U.K. cash curves ahead of ECB decision at 7:45am. Session highlights include $15b new-issue auction of 10-year TIPS at 1pm ET and an economic data slate that includes initial jobless claims.

In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against all of its Group-of-10 peers; risk-sensitive currencies, led by the Norwegian krone, advanced and Treasuries consolidated in a narrow range. The euro rose to a session high against the dollar in European trading ahead of the European Central Bank’s decision later, where policy makers are expected to refrain from any changes to their ultra-loose framework.ECB officials will confront a frustrating outlook when they hold their first policy meeting of the year on Thursday, as stricter lockdowns and a slow vaccine rollout across the region threaten to leave the economy jammed up for months on end. Norway’s krone rose to its strongest level since February versus the euro after Norges Bank said it expects to be ready to start raising interest rates as soon as next year, earlier than most of its peers. The pound rose to the highest level against the dollar in over two years, extending its longest winning streak in three weeks and adding to gains spurred by slightly stronger-than-expected inflation data Wednesday. The yen reversed an earlier loss against the dollar after the Bank of Japan held its interest rate and asset buying settings intact. The Australian and New Zealand dollars rose for a third day, buoyed by solid domestic data and gains in global stocks.

A gauge of emerging-market currencies rose for a third day as optimism about additional U.S. stimulus and accommodative monetary policy weakened the dollar. The rand and the lira advanced the most in foreign-exchange markets ahead of interest-rate decisions.

In commodities, West Texas Intermediate crude dipped 0.5% to $53.03 a barrel. Brent crude declined 0.6% to $55.77 a barrel, while gold was little changed at $1,871.64 an ounce. In crypto, Bitcoin tumbled below $33,000. The largest digital asset has trended lower ever since breaking through $40,000 amid growing speculation that the market is in a bubble.

Looking at the day ahead now, and the aforementioned ECB meeting and President Lagarde’s subsequent press conference is likely to be the highlight. Data releases from the US include the weekly initial jobless claims, December’s housing starts and building permits, and the Philadelphia Fed business outlook for January. From Europe, we’ll also get the Euro Area’s advance consumer confidence reading for January. Finally, earnings releases include Intel, Union Pacific and IBM.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,851.25
  • STOXX Europe 600 up 0.4% to 412.55
  • MXAP up 0.8% to 214.73
  • MXAPJ up 0.8% to 724.85
  • Nikkei up 0.8% to 28,756.86
  • Topix up 0.6% to 1,860.64
  • Hang Seng Index down 0.1% to 29,927.76
  • Shanghai Composite up 1.1% to 3,621.26
  • Sensex down 0.2% to 49,681.48
  • Australia S&P/ASX 200 up 0.8% to 6,823.71
  • Kospi up 1.5% to 3,160.84
  • German 10Y yield unchanged at -0.529%
  • Euro up 0.3% to $1.2142
  • Italian 10Y yield rose 3.1 bps to 0.508%
  • Spanish 10Y yield fell 0.5 bps to 0.07%
  • Brent futures down 0.8% to $55.61/bbl
  • Gold spot down 0.1% to $1,869.79
  • U.S. Dollar Index down 0.3% to 90.20

Top Overnight News from Bloomberg

  • Joe Biden began his presidency with a soaring appeal to end America’s “uncivil war” and reset the tone in Washington, delivering an inaugural address that dispensed with a laundry list of policy goals to instead confront the nation’s glaring political divides as the foremost obstacle to moving the country forward
  • President Joe Biden’s proposed $1.9 trillion pandemic relief plan got a skeptical response from two Senate Republicans whose backing he would likely need for quick congressional passage
  • Investors in mainland China are showing unprecedented interest in Hong Kong stocks, powering the city’s fastest rally for a new year in more than three decades
  • Bank of Japan Governor Haruhiko Kuroda looked to keep all his options open for a policy review in March following two critical months that will likely determine whether the pandemic will ease or take a turn for the worse
  • The front-end of major currencies’ term structures gets a boost ahead of upcoming central-bank meetings yet signs grow that volatility may resume its downtrend
  • Italian Prime Minister Giuseppe Conte on Wednesday won lawmakers’ backing for 32 billion euros ($39 billion) of extra spending as he tries consolidate support for what’s now a minority government
  • The Bank of Japan left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency. Japan nominates economics professor Noguchi for BOJ board
  • Bank of England Governor Andrew Bailey said that the U.K. economy is learning to adapt to lockdowns to contain the coronavirus. Speaking in a webinar, the central bank chief said the economy seemed to weather the closure in November better than it did at the start of the pandemic in early 2020
  • Japanese exports gained in December for the first time in just over two years, with China shipments climbing even as the pandemic resurged in other key markets
  • Oil dipped toward $53 a barrel as pessimism over the short-term demand outlook in the world’s two largest economies was tempered by more weakness in the dollar

Quick look at global markets courtesy of newsquawk

Asia-Pac bourses took impetus from the gains on Wall Street, where stocks rallied to all-time highs on Inauguration Day and the Nasdaq outperformed as strong results from Netflix inspired the large tech names. ASX 200 (+0.8%) was lifted from the open with tech stocks inspired by their US peers and the largest-weighted financials sector also notched respectable gains, but upside was capped as participants also reflected on mixed quarterly production updates from Santos, South32 and Woodside Petroleum. Nikkei 225 (+0.7%) traded positively with exporters cheering a predominantly weaker currency and following the trade data which was mostly softer than expected although still showed the first Y/Y growth in Exports (2.0% vs exp. 2.4%) since November 2018. Hang Seng (-0.1%) and Shanghai Comp. (+1.1%) were slightly varied with the former stalling after it breached the 30k milestone to print its highest level since May 2019, while the mainland was kept afloat following another firm liquidity operation by the PBoC and on some hopes of better ties between US and China in the aftermath of the transfer power in Washington D.C. with the Chinese telecom giants even filing requests for a review of the NYSE determination to delist their American depositary shares. However, there were later comments from President Biden's National Security Council spokeswoman who criticized China's sanctions on former Trump administration officials and suggested that President Biden looks forward to a bipartisan effort for the US to out-compete China. Finally, 10yr JGBs were rangebound with price action restrained around the psychological 152.00 level and amid the BoJ policy announcement which provided very little in terms of surprises as the central bank maintained policy settings and downgraded current fiscal year growth estimates as expected, but raised growth forecasts for the years after and extended its deadline for loan schemes encouraging banks to boost lending by 1 year.

Top Asian News

  • Ant Group’s Valuation Seen Dropping to $108 Billion on Crackdown
  • Aramco Omits Carbon Data for Up to Half Its Real Emissions Toll
  • Turkey Weighs End to Banks’ Dividend Freeze on Recovery Hope
  • Tencent-Backed Huohua Siwei Is Said to Pick Banks for U.S. IPO

EU bourses see modest gains across the board (Euro Stoxx 50 +0.4%) after the US-induced optimism in APAC somewhat simmered down ahead of the first ECB policy decision of the year (full preview available in the Research Suite), whilst the UK’s FTSE (-0.1%) modestly lags amid unfavourable Sterling-dynamics. State-side futures meanwhile tread water ahead of the US entrance - with the tech-led NQ once again narrowly leading vs the more value-driven RTY (Unch) and YM (Unch), and with fresh catalysts light throughout the European morning thus far (Note: Intel and IBM are set to report after-market). Broader sectors in Europe do not display a particular risk bias but are mostly firmer with the exception of energy amid price action in the complex, with tech again the outperformer. The sectoral breakdown sees travel & leisure among the winners with the aid of a stabilisation in oil prices and as vaccine rollouts gain traction, albeit the flare-up of new variants could dampen the near-term outlook for the sector as travel restrictions are placed to stem cross-border contamination. The latest in UK press suggest that UK residents reportedly face a ban on entering the EU under a plan by Germany to close down borders and sever transport links with non-EU countries that have virus variants, should member states consider it necessary to protect public health. Elsewhere, financial names see modest and steady gains in the run up the ECB, whilst sources via Il Sole 24 citing rumours from Frankfurt suggested a vast majority of banks will follow the ECB's recommendation on shareholder remuneration. In terms of individual movers, Deutsche Telekom (+0.8%) sees modest gains as the Co. is close to a deal with Cellnex (+4%) to develop European tower infrastructure, according to reports. Meanwhile, Julius Bear (+0.8%) shrugged off reports that proceedings are to be initiated by the Swiss watchdog FINMA against two employees at the firm for anti-money laundering failings.

Top European News

  • U.K. Suffers Deadliest Day With Some Hospitals ‘Like a War Zone’
  • Germany’s Virus Deaths Surpass 50,000 Since the Pandemic Started
  • Norges Bank Still Sees Scope to Start Rate Hikes in a Year
  • Spain’s BBVA to Sell of $848 Million of Bad Loans to KKR

In FX, the Pound seems to have benefited from Wednesday’s pause for breath and pull-back from peaks, as Cable reclaims 1.3700+ status and surpasses prior m-t-d pinnacles to set a new high mark circa 1.3746, with ongoing tailwinds from the Eur/Gbp cross that has resumed its downward trajectory to set fresh sub-0.8850 lows. No fresh or obvious bullish catalyst for Sterling, but the Dollar remains weak overall as the index fails to sustain recovery rallies above 90.500 and the DXY looks increasingly prone to testing the 21 DMA around 90.142, if not 90.000 itself, while the Euro appears unable to take full advantage in the run up to the ECB. Elsewhere, cross flows are also having a bearing on direction and relative performance between the Kiwi and Aussie, with Aud/Nzd back below 1.0800 even though Aud/Usd is consolidating gains above 0.7750 in wake of upbeat jobs data. However, the major factor behind Nzd/Usd’s advance beyond 0.7200 is another less dovish RBNZ outlook, as Westpac revises its forecast for two 25 bp eases in 2021 and now expects the OCR to remain unchanged.

  • EUR/CHF/CAD/JPY - All firmer vs the Greenback, but as alluded to above Eur/Usd has not been able to breach 1.2150 ahead of the ECB (see headline feed at 7.30GMT for our preview of the event) and the Franc has run into more resistance near recent peaks as the DXY holds just above the aforementioned technical level, at 90.176, so far. Similarly, the Loonie is still finding 1.2600 impenetrable following a more optimistic BoC assessment and before Canadian new house prices, while the Yen is pivoting 103.50 pre-Japanese CPI and post-BoJ that stuck to the script including Governor Kuroda pledging more accommodation without hesitation if warranted.
  • NOK/TRY/ZAR - Only marginal and gradual erosion in Eur/Nok on the back of the Norges Bank that matched consensus for no change in the repo rate and effectively delivered a carbon copy of the previous accompanying statement, but in truth the pair was already eyeing the next psychological support or downside target at 10.2500 having cleared 10.3000, and is now edging through 10.2400. Meanwhile, Usd/Try was hovering around 7.4000 heading into the CBRT before the pair extended to the downside after the central bank matched majority expectations for no move in Turkey’s 1-week repo, but maintained until inflation is on a sustainably lower path and price are stable (please refer to the headline for the full release). Finally, Usd/Zar is straddling14.8200 amidst mixed aspirations for the SARB as opinions point to a firm and steady hand from the SA Central Bank..

In commodities, WTI and Brent front month futures are lacklustre in early European trade and remain contained within recent ranges above USD 52/bbl and USD 55/bbl as the reflationary backdrop and OPEC+ support continue to keep prices underpinned in the grander scheme. That being said, upside for the complex has been hampered by yesterday’s delayed release of the weekly Private Inventories – which printed a surprise build of 2.6mln bbl vs exp. -1.2mln bbl, with traders eyeing the weekly EIA report poised to be release tomorrow. From a more macro standpoint, the ongoing concerns about the COVID-19 variants continue to be a grey cloud over investors – with a study (not yet peer-reviewed) suggesting that vaccines could be less effective against the South African variant due to a “mutations that may be resistant to immunity from previous coronavirus infection”, according to Sky News citing the study. Elsewhere, spot gold has slipped a few Bucks from its highs near USD1875/oz, but from a chart perspective still bullish having closed above the 200 DMA and now targeting the 100 DMA (USD 1844 approx) to claim another technical scalp and spot silver is steady just under USD 26/oz in a narrow band. In terms of forecasts, ABN AMRO has reduced it 2021 average gold price forecast to USD 1,771/oz from USD 1,951/oz. The bank also lowered its average silver price forecast for this year to USD 24.6/oz from USD 27.3/oz. Turning to base metals, LME copper ekes mild gains as a softer Buck and as hopes of reflation keeps the red metal supported alongside the backdrop of a robust Chinese economy.

US Event Calendar

  • 8:30am: Housing Starts, est. 1.56m, prior 1.55m; Housing Starts MoM, est. 0.84%, prior 1.2%
  • 8:30am: Building Permits, est. 1.61m, prior 1.64m; Building Permits MoM, est. -1.68%, prior 6.2%
  • 8:30am: Philadelphia Fed Business Outlook, est. 11.8, prior 11.1
  • 8:30am: Initial Jobless Claims, est. 935,000, prior 965,000; Continuing Claims, est. 5.3m, prior 5.27m

DB's Jim Reid concludes the overnight wrap

You probably want to limit how much you listen to me (assuming you haven’t already) as last night I got a homeschooling maths question that was given to my 5 year old daughter wrong. My wife casually showed it to me over dinner before admitting she got it wrong too. So on that basis there’s no genetic hope for our kids. Let’s hope the teachers can bail us out.

The main development yesterday was of course the inauguration of Joe Biden as US President. In his inaugural address, Biden attempted to reset the tone out of Washington calling for an end to the country’s “uncivil war”, saying that, “Politics doesn’t have to be a raging fire destroying everything in its path. Every disagreement doesn’t have to be a cause for total war”. While much of the appeal was aimed at cooling the temperature of national discourse there was also a message to lawmakers of the need to cooperate more as Democrats only hold a slim majority in both chambers of Congress.

However, as we previewed in yesterday’s edition, the main policy developments came through an array of executive orders to reverse various Trump policies. Among them were actions to stop the United States’ withdrawal from the World Health Organization, the re-joining of the Paris climate accord, a federal mask mandate, an end to construction on the border wall, and an end to the travel ban on a number of Muslim-majority countries. Meanwhile on the economic front, there were further support measures, including an extension of the pause on federal student loan repayments and the extension of the federal eviction moratorium.

To mark the start of Biden’s presidency, we looked at the annualised stock market performance of different presidents through time in our chart of the day yesterday (link here), using the S&P 500 on a total return basis. Notably, President Trump actually had the second-strongest annualised performance of any president since the Great Depression, second only to Bill Clinton who presided over the dot com bubble. Furthermore, no Democratic president in our sample going back to 1900 presided over a decline on a total returns basis, so if history’s any guide to the future that bodes well for stock market returns over the Biden presidency. That said, there seemed as much luck as skill as Democratic presidents have managed to avoid a number of the big shocks through history like the Wall Street Crash, the GFC, the pandemic and the 1973 oil shocks which all happened under Republican administrations.

Time will tell where Biden is on this league table, but his first day got off to a strong start as the S&P 500 (+1.39%) advanced to a fresh record high, along with both the NASDAQ (+1.97%) and the small-cap Russell 2000 (+0.44%). Meanwhile yields on 10yr Treasuries fell -0.8bps to 1.080%, having been pretty range-bound since the Georgia runoffs, though breakevens were up another +0.6bps to a fresh 2-year high of 2.12%. Looking at the equity moves in more depth, tech stocks outperformed, with Netflix (+16.85%) being the biggest winner in the S&P following its strong results the previous day, though other big tech firms including Amazon (+4.57%), Alphabet (+5.36%) and Apple (+3.29%) also made sizeable gains as well. US banks (-1.34%) were the only real laggards in a broad-based rally as 22 of the 24 S&P 500 industry groups rose on the day. And over in Europe it was a similar story with 23 of 24 STOXX 600 sectors rising as well with the STOXX 600 (+0.72%), the DAX (+0.77%) and the CAC 40 (+0.53%) all moving higher, as other risk-sensitive assets like oil gained ground.

Asian markets have taken Wall Street’s lead this morning with the Nikkei (+0.85%), Hang Seng (+0.28%), Shanghai Comp (+1.32%) and Kospi (+1.11%) all up. Futures on the S&P 500 are also up a further +0.30% overnight while the US dollar index is down -0.19%.

We have also seen the BoJ monetary policy decision overnight where the central bank left its main policy unchanged. The BoJ took a gloomier view of the current state of the economy but concluded that weaker growth at the end of the current fiscal year and a government stimulus package announced last month will result in a stronger rebound in the year starting April. There was no mention of the policy assessment currently underway, however we may get to hear about it at the BoJ Governor Kuroda’s presser at 6:30am London Time. Meanwhile, the Japanese government has nominated Asahi Noguchi, a Senshu University economics professor with reflationist beliefs, to become one of the Bank of Japan’s nine board members from April. He will replace Makoto Sakurai, a core member of the board who has never dissented from a BoJ decision.

Today’s highlight for markets will be the ECB’s latest monetary policy decision this afternoon, though our European economists (link here) don’t expect any changes to their message following the easing package announced in December, in which the Governing Council extended net purchases under the PEPP until Q1 2022, and the TLTRO discount until Q2 2022. Nevertheless, they also say this doesn’t mean that monetary policy is on auto-pilot, since they need to continuously assess the risks and appropriateness of the policy stance. Indeed, yesterday’s final CPI estimate for the Euro Area in December confirmed the flash reading that showed the Euro Area was in deflationary territory, with prices having fallen by -0.3% over the last year, marking the 5th consecutive month of negative annual price growth.

That said, although the Euro Area remains in deflation for now, market-based inflation expectations have actually been rising in recent weeks. Only yesterday, both the German and Spanish 10yr breakeven rose to their highest level in nearly a year, while Italy’s hit its highest in over 2 years. Furthermore, the 5y5y forward inflation swap for the Euro Area has also been hovering close to a 1-year high, and is currently at 1.33%, a far cry from the low of 0.72% it fell to at the height of pandemic fears last March even if the rise in the US expectations has been much greater. Sovereign bond yields in Europe moved higher too for the most part, with those on 10yr gilts (+1.2bps), OATs (+0.1bps) and BTPs (+3.1bps) all rising, though 10yr bunds outperformed, as yields fell -0.3bps.

On the coronavirus, Switzerland’s government announced that the job furlough program will be extended amidst renewed closures of retail shops and restaurants. The UK’s Chancellor of the Exchequer Sunak is similarly planning to extend fiscal support for jobs as the pandemic-induced lockdown continues to affect businesses. The Government’s £60bn furlough program is set to expire at the end of April, but Sunak is looking to extend the program into the summer at the very least. This comes as the UK again set a sad record for the deadliest day of the pandemic with over 1800 deaths announced yesterday. As mentioned yesterday cases in the UK have been falling since the start of January and deaths will likely follow. On the other hand, Spain saw a record number of new cases yesterday – over 18,500 – as the country has continued to eschew the national shutdowns currently seen in the UK, Germany and France. Even still, Germany announced a new record of daily deaths due to the virus as the government has now increased the measures around mask wearing in the country. Chancellor Merkel yesterday announced that Germans should be wearing surgical masks or N95/FFP-2 masks rather than simple cloth coverings, which is among the most specific face covering mandates anywhere in the world. On the topic of face coverings, the Biden administration in the US made its first move to require face masks on all federal property in the US. The president will be laying out new vaccinations plans as well as more executive actions to combat the virus in the days ahead while also starting to negotiate the $1.9 trillion stimulus bill that the administration released over the last week. Elsewhere, Amazon has offered to help the Biden administration with vaccine distribution saying “we are prepared to leverage our operations, information technology and communications capabilities and expertise to assist your administration’s vaccination efforts. Our scale allows us to make a meaningful impact immediately”. Across the other side of the world, China has imposed a lockdown on some 1.7mn residents of Daxing district. The district has reported cases infected with the virus variant found in the UK. Overall, China has reported over 1300 domestic infections so far this year, indicating that the current outbreak is continuing to swell.

There wasn’t a great deal of data yesterday, though CPI inflation in the UK rose to +0.6% in December (vs. +0.5% expected). Elsewhere, the NAHB housing market index in the US for January fell to 83 (vs. 86 expected), declining for a second successive month.

To the day ahead now, and the aforementioned ECB meeting and President Lagarde’s subsequent press conference is likely to be the highlight. Data releases from the US include the weekly initial jobless claims, December’s housing starts and building permits, and the Philadelphia Fed business outlook for January. From Europe, we’ll also get the Euro Area’s advance consumer confidence reading for January. Finally, earnings releases include Intel, Union Pacific and IBM.

Tyler Durden Thu, 01/21/2021 - 07:46
Published:1/21/2021 6:57:06 AM
[Markets] Stock market news live updates: Stock futures drift near record levels after Inauguration Day Each of the S&P 500, Dow and Nasdaq ended the regular session at record levels, and the S&P 500 posted its best Inauguration Day return since Ronald Reagan’s second inauguration in 1985. Published:1/20/2021 5:31:38 PM
[Markets] Futures Trade Near Record As Nasdaq Jumps On Netflix Blowout Quarter Futures Trade Near Record As Nasdaq Jumps On Netflix Blowout Quarter

S&P futures rose with European stocks on Wednesday, buoyed by earnings and hopes for more stimulus as Joe Biden prepared to take charge as US President at his inauguration, while Netflix soared after reporting a surge of subs in Q4 and saying it will no longer need to borrow billions of dollars to finance its TV shows and movies. The dollar edged lower alongside Treasuries.

At 0700 am ET, Dow E-minis were up 33 points, or 0.11% and S&P 500 E-minis were up 12.5 points, or 0.33%. Nasdaq 100 E-minis were up 104.5 points, or 0.8%. Shares of Netflix surged 13% in premarket trading, helping boost futures tracking the broader Nasdaq 100 index which was up 0.8%, also boosted by chipmaker ASML Holding NV. Procter & Gamble Co. jumped in pre-market trading after boosting its sales and profit outlook on at-home demand. UnitedHealth Group Inc slid 0.3% after the health insurer’s quarterly profit slumped nearly 38%, weighed by costs related to its programs to make COVID-19 testing and treatment more accessible for its customers. Boeing added 1% after Berenberg upgraded the stock to “hold” from “sell”, saying the worst has passed and believes restarting of 737 MAX aircraft deliveries in December marked a turning point towards planemaker’s financial recovery.

Stocks ended higher on Tuesday after Treasury Secretary nominee Janet Yellen urged lawmakers to “act big” to save the coronavirus-ravaged U.S. economy and worry about debt later.  At her confirmation hearing on Tuesday, Yellen said the benefits of a big stimulus package to counter the coronavirus pandemic were greater than the expenses of a higher debt burden.Pandemic relief would take priority over tax increases, she said, calling for corporations and the wealthy - both winners from Republican tax cuts in 2017 - to “pay their fair share”.

Yellen - who could be confirmed as soon as Thursday - said that help for the unemployed and small businesses would provide the “biggest bang for the buck.” She urged lawmakers to act in efforts to rescue an economy battered by the coronavirus. She also said the U.S. is prepared to take on China’s “abusive” trade and economic practices, and that the Biden administration won’t pursue a weak dollar.

“They realised that there is some limits to what monetary policy can do to effect change in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue buying bonds issued by the U.S. Treasury in order to fund the fiscal programs.”

With earnings season ramping up, S&P 500 earnings are expected to rise by 24% in 2021 after falling 15% in 2020, according to Refinitiv data. With stock market valuations sitting close to a 20-year high, investors are hoping corporate results and profit outlooks will help them determine to what degree the valuations are justified.

On the political front, Joe Biden, due to take over as the 46th President of the United States just after noon on Wednesday, will waste little time trying to turn the page on the Trump era, advisers said, signing a raft of 15 executive actions on issues ranging from the pandemic to the economy to climate change.

The MSCI world equity index, which tracks shares in almost 50 countries, was last up 0.1%. In Europe, the Stoxx 600 gained 0.5%, with the DAX and FTSE MIB rising a similar amount. Italy's benchmark FTSE MIB index gained as much as 0.6%, outperforming other major western European markets, after Italian Premier Giuseppe Conte secured the support of 156 senators in a confidence vote on Tuesday.  The FTSE 250 rallied over 1.2%, trading at the week’s best levels. Miners, autos and tech names lead relatively broad-based strength with only utilities in the red.

Earlier in the session, Asian stocks continued to set records with benchmarks surging in Hong Kong and Indonesia. The MSCI Asia Pacific Index was set for its 15th gain in 19 sessions dating back to Christmas.

Chipmaker TSMC and online gaming giant Tencent provided the biggest boosts while Alibaba shares jumped after Jack Ma reappeared after a 3 month absence amid escalating scrutiny over his internet empire. Hong Kong shares extended recent gains, with the Hang Seng Index hovering just under the 30,000-point level as mainland traders continued to flood the market with cash. Indonesia stocks rose as the government readied removing restrictions on foreign investment in the energy, communications and tourism sectors. Financial stocks led gains in Malaysia after the central bank kept its benchmark interest rate unchanged. Japanese stocks fell after signs that their recent rally had become too stretched. Vietnamese shares swung between gains and losses after dropping more than 5% Tuesday, their worst decline since July

In rates, Treasury futures were lower in early U.S. session, yields cheaper vs Tuesday’s close by 1bp-2bp from belly to long end. The 10-year yield is higher by 1.2bp at 1.10% with front-end anchored, steepening 2s10s, 2s5s by around 1bp each; U.K. 10- year keeps pace with German 10-year little changed, outperforming. The Treasury Department plans $24b reopening of 20-year bond at 1pm ET, one hour after presidential inauguration. Fixed income in Europe traded in a narrow range: German curve bear steepens slightly with 30y supply comfortably absorbed. Cash USTs bear steepen, short end recovers after early flattener interest. Long end gilts trade ~2bps cheaper to bunds, with U.K. 5s30s at session steeps. Peripheral bonds are mixed: Italy reverses an early tightening move with 10y BTP/Bund back above 110bps. Italian 10-year bond yields dropped to their lowest since Jan. 11 - before Conte lost his majority - at 0.533%, down 2 basis points on the day.

In FX, the Bloomberg Dollar Spot Index fell a third day following Janet Yellen’s testimony to the Senate Finance Committee, which reinforced expectations of more spending to revive growth. The greenback was lower versus most of its Group-of-10 peers, amid a rally that was led by commodity currencies and the pound, however it traded off the lows. The pound advanced a second day against the dollar, rising to a two year high above 1.37 and benefiting from broad weakness in the greenback; U.K. inflation remained subdued in December, picking up 0.6% from a year earlier, slightly higher than economists’ forecast of 0.5%. Sweden’s krona inched lower after central bank’s first deputy governor Cecilia Skingsley said the bank’s experience of negative policy rates “was on the whole benign.”

“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX.

Emerging-market assets rose after U.S. Treasury Secretary nominee Janet Yellen said that low interest rates offered scope for a large stimulus plan. MSCI Inc.’s index of developing-nation stocks jumped 1% to a new record, with investors shifting their focus to president-elect Joe Biden’s inauguration on Wednesday for hints of more stimulus to fight the pandemic. The South African rand, Mexican peso and Turkish lira -- often seen as barometers of risk appetite -- led developing-nation currency gains as the dollar declined

In commodities, crude futures extended Asia’s gains; WTI rallies 1% to $53.50 before stalling, Brent runs into resistance around $56.50. Spot gold comes off best levels having printed highs of $1,852/oz so far, gaining as the dollar eased following commentary on the U.S. currency, the merits of massive stimulus, and the outlook for trade from President-elect Joe Biden‘s cabinet nominees. Base metals traded well with LME copper rallying over 1%, outperforming after breaching Monday’s highs.

Looking at the day ahead, and the highlight later will be Joe Biden’s inauguration as US President. There are also an array of earnings releases, including Procter & Gamble, UnitedHealth Group, Morgan Stanley and BNY Mellon. Data releases include the December CPI readings from the UK and Canada, as well as the NAHB housing market index for January from the US. Finally from central banks, the Bank of Canada will be deciding on rates, and Bank of England Governor Bailey will be speaking.

Market Snapshot

  • S&P 500 futures up 0.4% to 3,804.00
  • Stoxx Europe 600 up 0.5% to 409.86
  • MXAP up 0.5% to 212.31
  • MXAPJ up 0.9% to 716.00
  • Nikkei down 0.4% to 28,523.26
  • Topix down 0.3% to 1,849.58
  • Hang Seng Index up 1.1% to 29,962.47
  • Shanghai Composite up 0.5% to 3,583.09
  • Sensex up 0.9% to 49,844.40
  • Australia S&P/ASX 200 up 0.4% to 6,770.40
  • Kospi up 0.7% to 3,114.55
  • Brent futures up 0.8% to $56.34/bbl
  • Gold spot up 0.8% to $1,854.49
  • U.S. Dollar Index little changed at 90.45
  • German 10Y yield unchanged at -0.525%
  • Euro down 0.07% to $1.2121
  • Italian 10Y yield fell 4.3 bps to 0.477%
  • Spanish 10Y yield fell 0.3 bps to 0.066%

Top Overnight News from Bloomberg

  • The ECB is buying bonds to limit the differences between yields for the strongest and weakest economies in the euro zone, according to officials familiar with the matter, with one person saying the central bank has specific ideas on what spreads are appropriate. An ECB spokesman declined to comment
  • President-elect Joe Biden plans to begin immediately unwinding President Donald Trump’s policies on immigration, climate and other issues on Wednesday with at least 15 executive actions, including moves to reverse U.S. withdrawals from the Paris Agreement and the World Health Organization, and stop construction of a border wall
  • Pfizer Inc. and BioNTech SE built the case that their Covid-19 vaccine will protect against the new variant of the coronavirus that emerged in the U.K. with results of another lab trial
  • Donald Trump granted clemency to dozens of people on Wednesday, including his former strategist Steve Bannon, the rapper Lil Wayne and former Detroit Mayor Kwame Kilpatrick, in one of his final official acts as president
  • BOE chief economist Andy Haldane, who has been the most publicly optimistic of the central bank’s rate-setting committee, said the economy may be growing quickly enough by the second quarter to absorb the 1 million people who lost their jobs in the coronavirus crisis

A quick look at global markets courtesy of Newsquawk

Asian equity markets were mostly positive as the region partially sustained the momentum from the tech-led gains on Wall St, where participants reflected on earnings results and sentiment was underpinned by stimulus hopes as Treasury Secretary nominee Yellen asserted the need for fiscal support, while she also suggested focus is on providing relief not raising taxes and that although President-elect Biden will tweak the 2017 tax cuts, it would not be a complete repeal. ASX 200 (+0.4%) was higher with gains led by tech after similar outperformance stateside and with miners lifted including BHP which reported higher quarterly iron ore output, record HY iron ore shipments and raised its FY iron ore production guidance. Nikkei 225 (-0.4%) failed to hold on to opening gains with the index pressured by currency effects as the JPY reverses some of the recent outflows and KOSPI (+0.4%) was choppy despite reports policymakers were considering extending the short-selling ban by 3 months and with Kia Motors advancing by around 9% on news that the Co. could build the Apple self-driving car at its Georgia plant. Hang Seng (+1.0%) and Shanghai Comp. (+0.4%) were kept afloat after the PBoC boosted its liquidity efforts and maintained its Loan Prime Rates for a 9th consecutive month as expected, with Alibaba shares also boosted after its founder Jack Ma made his first appearance since October through a video conference which dispelled concerns he may have been detained. However, the upside in Chinese stocks was restricted after comments from US President-elect Biden’s Secretary of State Blinken which suggested the incoming administration is likely to maintain its pressure on China as he noted that the US must ensure it does not import goods made with forced labour from China's Xinjiang and agreed with the White House's determination of 'genocide' regarding China's repression of Uighur Muslims. Finally, 10yr JGBs traded higher following on from the short-covering in USTs and as Japanese stock markets lagged against, with the BoJ also present in the market for nearly JPY 1.3tln of JGBs with 1yr-10yr maturities

Top Asian News

  • As Thailand’s Troubles Grow, the King Moves to Bolster His Image
  • Malaysia Holds Key Rate Amid Lockdown to Curb Virus Surge
  • Turkey Stock Investors Say Rally Not Over, It’s Just Slowing
  • Done With Day Trading, China’s Stock Investors Turn to Funds

European stocks kicked the mid-week session off with respectable gains across the board (Euro Stoxx 50 +0.6%), after the region picked up the baton from a mostly positive APAC session, and as markets brace for a pick-up in earnings and eye the inauguration of President-elect Biden and VP-elect Harris – with sentiment underpinned on stimulus hopes and Europe also supported by prospects of a fruitful relationship with the US. That being said, US equity futures vary in terms of performance, with the tech-led NQ (+0.8%) outperforming vs the value cyclical-driven RTY (-0.1%) – with some citing potential “sell the news” play, albeit the breadth of price action is still somewhat contained. The outperformance in the NQ could also be attributed to tailwinds from post-earnings Netflix (+12% pre-market) whose shares soared after-hours on a strong rise in subscriber growth and the prospect of share buybacks. Meanwhile, State-side earnings today include updates from the likes of UnitedHealth Group (+0.8% pre-market post-earnings) – the largest weighted Dow component with a 7.5% weighting as of yesterday, alongside Procter & Gamble (12:00GMT/ 2.8% DJIA weighting) and Morgan Stanley (12:30GMT). Note - some banks have a tendency to report earlier than expected. Back to Europe, sectors are mostly firmer and portray more of a cyclical bias, with IT the stand-out outperformer amid Netflix’s earnings coupled with numbers from ASML (+4.2%) whereby revenue topped estimates, 2020 dividend increased by 15% and the group also expects “another year of growth driven by strong Logic demand and continued recovery in Memory”. Auto names also reside among the winners in light of an update from Volkswagen (+2%) in which it expects China's overall car market sales to exceed 2019 levels and the Co's own sales will see "substantial growth". On the flip side, Oil & Gas resides towards the bottom of the pile due to a modest pullback in oil prices. In terms of individual movers, Hugo Boss (+5.8%) is bolstered on reports that Fraser Group's (+0.6%) Mike Ashley has increased his stake in Hugo Boss to 15.2% (prev. 5.1%) through stocks and derivatives. Elsewhere, Burberry (+5%) trade with firm gains post earnings, whilst Danone (-1.0%) is pressured after French Finance Minister Le Maire stated that France needs to be vigilant regarding the Co’s situation, referring to the Bluebell Capital Partners’ call for Danone to replace its CEO Faber following what it said has been a period of “disappointing” share price performance.


Top European News

  • ECB Is Capping Bond Yields But Don’t Call It Yield Curve Control
  • Germany Posts Highest Daily Death Toll as Infection Gauge Eases
  • ASML Beats Estimates, Grapples With Chip Supply Shortage
  • Hugo Boss Jumps After Mike Ashley Firm Increases Stake to 15%

In FX, the Dollar continues to retreat on a mixture of broad risk factors and US specifics following confirmation that Treasury Secretary-in-wating Yellen favours bold fiscal stimulus and market forces when it comes to the Greenback’s value, while she also intimated that increased spending should not necessarily raise the tax burden for businesses extortionately (or proportionately). The index is trying to keep tabs on the 90.500 level having declined to 90.272 and hold above support ahead of 90.000 via the 21 DMA that comes in at 90.141 today. Conversely, Sterling is back in the ascendency, and across the board as Cable sets sights on 1.3700+ again and Eur/Gbp tests bids into 0.8850 amidst reports of heavy selling interest after the cross breached 0.8900. Firmer than forecast UK inflation metrics may have prompted some upside, but the Pound’s revival appears more corrective and positional in advance of another speech from BoE Governor Bailey.

  • AUD/CAD/NZD - All extending recent recovery rallies vs their US counterpart, with the Aussie eyeing 0.7150 before top tier data in the form of jobs and retail sales, while the Loonie is pivoting 1.2700 awaiting Canadian CPI and the BoC and Kiwi is close to 0.7150, but losing a bit more ground to its Antipodean peer below 1.0800 towards 1.0850. Note, 1.1 bn option expiry interest in Usd/Cad from 1.2700 to 1.2715 looks more influential than 1 bn expiries in Aud/Usd between 0.7690-0.7700 at this stage.
  • JPY/EUR/CHF - The Yen has eked further gains through 104.00 against the Buck even though risk sentiment remains buoyant and the BoJ is widely expected to stand pat on all policy elements at the end of its 2-day meeting that kicked off today pending the results of a framework review due in March. However, the Euro and Franc seem to be losing momentum after the former failed to sustain gains beyond 1.2150 and latter revisited Tuesday’s best around 0.8865. Indeed, Eur/Usd is now in the low 1.2100 area and Usd/Chf back up near 0.8900, with Eur/Chf hovering just under 1.0800 in wake of Italian PM Conte surviving the 2nd and more challenging Senate confidence vote.
  • SCANDI/EM- Another upturn in oil prices may be fuelling the Nok, but relative Sek underperformance could well be down to tentative signs of divergence in Norges Bank vs Riksbank policy leanings ahead of Thursday non-MPR convene in Norway and after more talk about returning to NIRP in Sweden, this time courtesy of Skingsley. Elsewhere, the Zar is carving climbing further beyond 15.0000 vs the Usd alongside Xau on a break above Usd 1850/oz, with little reaction to in line SA inflation data, while the Mxn has overcome key technical resistance at 19.6600 (200 WMA) on the way to a 19.5900+ peak

In commodities, WTI and Brent futures remain firm in early European trade in a continuation of the upward price action seen overnight on the inauguration day of US President-elect Biden, with some positive omens emanating from reflationary hopes, whilst a weaker Buck also underpins the complex. That being said, the short-term outlook for crude prices remain somewhat clouded amidst the tightening of COVID-related restrictions – with Germany extending its lockdown yesterday and Beijing entering a partial lockdown more recently. That being said, the ramp-up in vaccinations (barring delays) and OPEC+ support help to keep prices elevated. Brent Mar holds its USD 56/bbl status (low USD 55.88/bbl) whilst its WTI counterpart trades around USD 53.50/bbl (vs low USD 53.07/bbl). In terms of forecasts, Goldman Sachs maintained its positive outlook for oil in 2021/2022 and expects demand to recover this year, while Standard Chartered sees WTI averaging USD 49/bbl in 2021 and USD 56/bbl in 2022, while it forecasts Brent to average USD 51/bbl in 2021 and USD 59/bbl in 2022. Elsewhere, spot gold sees constructive gains as the yellow metal made its way above its 200 DMA (c. USD 1845.50/oz) and then the USD 1850/oz psychological mark as it sets its sight on its 50 DMA, 21 DMA and 100 DMA at USD 1859/oz, USD 1875/oz and USD 1883/oz respectively. Some base metals meanwhile remain supported by the reflationary play with LME copper trading on either side of the USD 8,000/t mark. Finally, mining giant BHP forecasts record annual iron ore output of 244-253mln tonnes as it resumed production at the Samarco plant.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 16.7%
  • 10am: NAHB Housing Market Index, est. 86, prior 86

DB's Jim Reid concludes the overnight wrap

After what have been an incredibly eventful 4 years in the US, today marks the end of the Trump presidency as Joe Biden is inaugurated at 12pm EST. With the pandemic still raging and an economic crisis overlaid on top of that, Biden’s presidency will begin with a pretty full in-tray, and the policy measures can be expected to come thick and fast as the new administration aims to hit the ground running. Indeed it’s already been trailed that today will see a number of Executive Orders signed by Biden, including the re-entry of the US into the Paris climate change agreement, the extension of a ban on evictions and foreclosures thanks to the pandemic, a federal mask mandate that will require the wearing of masks in federal buildings and on inter-state travel, as well as the reversal of President Trump’s travel ban on a number of Muslim-majority nations. On top of this, Biden has of course already unveiled a $1.9tn stimulus proposal that’s a first basis for negotiation but one that he wants to pass quickly through Congress, as well targeting 100m vaccinations within his first 100 days in office.

Ahead of all that, risk assets turned higher yesterday and the reflation trade appeared to be back on, thanks to helpful comments from Biden’s nominee for Treasury Secretary Janet Yellen, as well as the Italian government’s survival in a confidence vote. Indeed by the close, US equities had resumed their upward march, with the S&P 500 (+0.81%), the NASDAQ (+1.53%) and the Dow Jones (+0.38%) all moving higher, with growth and cyclical stocks leading the way in the US at the expense of defensives such as consumer staples (-1.33%) and real estate (-0.54%). Energy stocks (+2.08%) were stronger on the back of higher oil prices, while semiconductors (+2.87%) and media (+2.30%) stocks were the other outperformers. After the close, Netflix reported earnings, indicating that it no longer needed to rely on debt to fuel growth. The streaming service also announced that it passed 200 million subscribers and the company’s shares rose +12.3% after the bell. Elsewhere in earnings yesterday, US bank stocks were flat (-0.02%) as Bank of America’s (-0.73%) fourth-quarter sales and trading revenue missed estimates and as Goldman Sachs shares fell -2.28% despite record profits fuelled by equity-underwriting.

Meanwhile Treasuries and the dollar (-0.29%) weakened as investors moved out of traditional havens, with 10yr yields up +0.5bps to 1.089%. 10yr US breakevens hit a fresh 2-year high of 2.11% after 12 days of stalling at the previous post Georgia election highs.

Incoming Treasury Secretary Janet Yellen had her confirmation hearing before the Senate Finance Committee yesterday and laid out her top priorities and concerns in what was a very highly anticipated appearance. The three-hour hearing covered a broad range of important topics. On the incoming administration’s dollar policy, Yellen noted that “the United States does not seek a weaker currency to gain competitive advantage and we should oppose attempts by other countries to do so.” The dollar index slid in the early US morning ahead of Yellen’s remarks before trading rather flat during them. She advocated and defended Democratic initiatives in a way that was unseen during her time as Fed chair. She defended President-elect Biden’s plan to raise the minimum wage to $15 – citing economic literature on the experiment in individual states – as well as tying the threat of climate change to the risks it creates in the financial system.

On China, she said the second largest economy “is clearly our most important strategic competitor,” and that the US needs “to take on China’s abusive, unfair and illegal practices.” Her comments highlight the fact that while Biden may offer a different tone and approach to the US-China relationship than his predecessor, the adversarial nature will continue. Yellen received a quite a few questions on the incoming administration’s tax policy. She emphasised that tax reform would not be an immediate priority, with focus remaining on the economic recovery as we get out of the pandemic. She went on to say that Biden does not intend to reverse the entirety of the 2017 tax cuts, but that eventually parts of that bill will be repealed, and cited that she would work with OCED on what the appropriate corporate tax rate should be. Lastly, when asked about the possibility of a 50yr Treasury bond, Yellen said she would examine the possibility of one and left the door open to super long duration paper.

A quick refresh of our screens this morning shows that Asian markets are mostly trading higher outside of the Nikkei (-0.50%). The Hang Seng (+0.63%), Shanghai Comp (+0.05%) and Kospi (+0.37%) are all posting gains. Futures on the S&P 500 are trading up +0.13% while those on the Nasdaq are up +0.42% on the back of the buoyant earnings from Netflix mentioned above. In Fx, the US dollar index has continued to decline this morning (-0.15%). Elsewhere, spot gold prices are up +0.47% overnight.

In other overnight news, Bloomberg has reported that the ECB is buying bonds to limit the differences between yields for the strongest and weakest economies in the euro zone while adding that the central bank has specific ideas on what spreads are appropriate. This is not new news but confirmation of what market participants already thought was happening. Another piece of news that is doing the rounds this morning is that suggesting outgoing US President Trump is floating the idea of forming a new party with several aides and other people close to him (per Bloomberg). It is said to have a working title of the "Patriot Party." So there is still some room left for substantial shifts in the US political landscape. This could have quite substantial implications if it materialises. Even if such a party captures a small amount of the GOP vote it could dramatically enhance the Democrats subsequent election chances.

Meanwhile in Europe, sentiment was buoyed yesterday by the Italian government’s survival, with the Senate voting 154-140 in the government’s favour – there were 27 absences or abstentions. This means that Prime Minister Conte will be allowed to try and consolidate power. Bloomberg reported yesterday that a group of senators have indicated that they will back him later today. Our economists have put out a Q&A on the implications overnight. See it here for more. Ahead of the vote, the spread of 10yr Italian BTP yields over bunds narrowed by -4.3bps, reflecting investors’ expectations that the government was likely to win the vote. However, the gains for BTPs weren’t seen elsewhere, with yields on 10yr bunds (+0.1bps) and OATs (+0.1bps) both holding steady. In addition, equity indices fell across the continent, with the STOXX 600 (-0.19%), the DAX (-0.24%) and the FTSE 100 (-0.11%) all moving lower on the day.

In terms of the latest on the coronavirus, the German lockdown was extended from the end of January until February 14, amidst rising concern over the spread of new variants. The extension comes along with some tightening of measures as Chancellor Merkel announced closures to non-essential businesses and increased movement restrictions in the hardest hit regions. Merkel also warned of border closures if neighbouring nations can’t coordinate their efforts. Elsewhere, according to their Health Minister, the Netherlands will announce further lockdown measures later today that will last until at least Feb 9, which could include a curfew and a limit on the number of visitors to one’s home. Furthermore, the UK sadly reported a record number of daily Covid-19 deaths, at 1,610, albeit spread over a number of dates. However, the recent reductions in case numbers should mean that deaths should also begin to fall soon, with the number of new cases falling yesterday to a 3-week low of 33,355. Finally in New York City, concern grew over vaccination supply, with Mayor de Blasio saying that the city could have to close vaccination sites if they didn’t get more supply. In our case and fatality table in the pdf we’ve now included Israel so we can track over time if the impressive vaccine roll out there starts to reduce these numbers. Although we mostly track larger countries, Israel will be key to follow with evidence already that it’s making a difference even if it’s top on current case numbers. See below for the vaccine table.

On the data front, there weren’t a great amount of releases yesterday, though the German ZEW survey surprised to the upside, with the expectations reading rising to 61.8 (vs. 59.4 expected), while the current situation reading also eked out a slight increase to -66.4 (vs. -68.3 expected). Elsewhere, the pandemic’s impact was showcased in the number of EU car registrations in 2020, which were down -23.7% compared with the previous year.

To the day ahead, and the highlight later will be Joe Biden’s inauguration as US President. There are also an array of earnings releases, including Procter & Gamble, UnitedHealth Group, Morgan Stanley and BNY Mellon. Data releases include the December CPI readings from the UK and Canada, as well as the NAHB housing market index for January from the US. Finally from central banks, the Bank of Canada will be deciding on rates, and Bank of England Governor Bailey will be speaking.

Tyler Durden Wed, 01/20/2021 - 07:50
Published:1/20/2021 6:58:28 AM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Trade Through 31116 Changes Trend to Up The direction of the March E-mini Dow Jones Industrial Average futures contract over the short-run will be determined by trader reaction to 30827. Published:1/20/2021 3:23:36 AM
[Markets] Stocks open strongly Tuesday, with the Dow gaining 250 points Stocks open strongly Tuesday, with the Dow gaining 250 points Published:1/19/2021 8:54:15 AM
[Markets] The Dow is set to rise more than 200 points at the open of trading Tuesday The Dow is set to rise more than 200 points at the open of trading Tuesday Published:1/19/2021 8:21:14 AM
[Markets] Biden's Banana Republic Biden's Banana Republic

Authored by Egon von Greyerz via,

Donald Trump is probably the luckiest presidential candidate in history to have lost an election. He doesn’t realise it yet as he suffers from a self-inflicted wound in the final moments of his presidency. Nor does Biden yet realise how unlucky he is to have won. But that will soon change as his presidency goes from crisis to crisis in all areas from monetary to fiscal to social and political. Very little will go right during his presidency.

The next four years could easily be four years of hell for Biden (if he stays the course for the whole four years), for the US and thus for the world.


When Trump won the election in November 2016 I wrote an article, dated Nov 18, 2016, called “Trump Will Grow US Debt Exponentially” .

The article also contained the following graph. In the article I predicted that US debt would double by 2025 to $40 trillion and that it would be $28t in January 2021 at the end of the four years.

Well, surprise, surprise, the debt is today $27.77t which can easily be rounded up to $28t.

I am certainly no forecasting genius, nor was the forecast just luck.

No, it was applying the best method that we have all been given but that few apply or understand.

This method is called HISTORY.


US debt had on average doubled every 8 years since Reagan took over in 1981. So as Trump became president in Jan 2017, he inherited a debt of $20t. Easy then to forecast that 8 years later the debt would be $40t. The $28t forecast for Jan 2021 is just the mathematical in-between point between $20t and $40t.

Even worse than the debt explosion is the the lack of tax revenue to finance the escalating and chronic budget deficits. As the graph above shows, debt has grown 31x since 1981 whilst tax revenues have only grown 6x.

The US deficit is currently $3.3t which is virtually equal to total tax revenue of $3.4t. This means that 50% of annual government spending needs to be borrowed.


The US economy now clearly fits the definition of a Banana republic.

A brief description is:

“In political science, the term banana republic describes a politically unstable country with an economy dependent upon the exportation of a limited-resource product, such as bananas or minerals.”

In the case of the US, the product they export is of course dollars printed out of thin air – a wonderful export item since supply is unlimited.

Further description is:

“Typically, a banana republic has a society of extremely stratified social classes, usually a large impoverished working class and a ruling class plutocracy, composed of the business, political, and military elites of that society.”

Like all Banana Republics, the US economy and social structure is now on the way to perdition with virtually nil chance for Biden & Co to reverse the inevitable course of events.


So back to history – History is what has formed us and history doesn’t just rhyme as Mark Twain said but it often repeats itself. The debt explosion is another good example.

If more people studied and understood history, they would not just recognise the utmost importance of what lies behind us but also that history will teach us about what lies in front of us.

But very few scholars and no journalists study history. Instead we are now in an era when both the media and universities worldwide want to erase history and rewrite the history books. This shows us the total lack of understanding of the utmost importance of history in the evolution of the world.

But this is part of the total decadence and denial that we see at the end of major eras or cycles. The current cycle, whether it is just a 300 year cycle or a 2,000 year old cycle is now coming to an end. These changes clearly don’t happen overnight but the first phase of the fall can be dramatic. And that phase is likely to be starting very soon.


So what will Biden and his masters do? Well Biden has already called for $ trillions of further support.

He also said: “If we don’t act now, things are going to get much worse and harder to get out of a hole later.”

Well we always knew that Biden really only had one trick up his sleeve – TO PRINT MORE than any president has done in history. To beat Trump is not hard, he only printed $8t in 4 years!

Let’s just remind ourselves that it took 200 years (1808-2008) to increase the US debt from $65 million to $10 trillion.

When Obama took over in Jan 2009 he inherited a $8t debt. Eight years later he handed over a $20t batten to Trump.

In 8 years Obama printed and borrowed more money than the previous presidents had achieved in the course of 200 years!

So will Biden print more than $10t?


Will he do it in 4 years? Most probably!

As I forecasted in my article in 2016, the debt will be at least $40t in Jan 2025, a $12t increase from today.

But no one should believe that Biden will stop at $40t. The US economy is already leaking like a sieve. And the problems have just started.

The problems in the currently semi-paralysed US economy will escalate at a rapid rate and the Biden team will attempt to plug every hole at all levels from a minimum wage to saving major corporations.

But sadly, Banana Republics don’t survive by printing worthless money.


Still, we mustn’t forget what started the latest phase of problems in the US economy.

It wasn’t Covid back in February 2020. No, that was a mere catalyst. The underlying disaster was a lot deeper. The real problem started back in Aug-Sep 2019. This is when the problems in the financial system became acute and both the ECB and Fed started flooding the system with money. But not real money of course but just worthless paper money created with just pushing a button.

Between the Fed and the ECB just under $8t of “fake” money has been created digitally since Sep 2019. It must obviously be called fake since nobody had to perform any work or produce any goods or services against this money.

It is really scandalous to call it money since it is no different from the Monopoly game money.


The printed $8 trillion at $15 per hour (Biden’s new minimum wage) equals 60 million man hours. But in the modern MMT (Money Market Theory) paradigm, you don’t need to work for the money. Whatever the world needs, central banks and governments can just create out of nothing.

That is until the music stops. And Biden or Harris are the likely conductors who will preside over the music stopping and the whole edifice collapsing.

The wise will obviously find a chair already now because when the music stops there will be no chairs free and all hell will break loose.

By that time debt will not just be in the $trillions or $100s of trillions. No, the printing will have reached $ and EUR quadrillions as not only most collapsing debt will need to be bought by central banks but also derivatives which probably amount to $2 quadrillion or more.

In addition, medical care, social security and unfunded pensions will probably exceed $1 quadrillion globally and add to the demise of the financial system.

Could I be wrong. Maybe. A close friend gave me once a T-shirt with the inscription:

“I AM NOT ALWAYS RIGHT – But I am never wrong”!

The gift must have been a subtle hint – Hmmm

Still, in my humble view I don’t believe that any orderly reset will change the inevitable course of events. So as far as I am concerned, it is not IF but WHEN.

A professional life of over half a century has taught me that even the most evident events can take longer to develop than you think.

But as I see risk at an extreme, now is the time to prepare.


So to finish, let’s have a quick look at where I see markets. I know forecasting is a mug’s game and I am not really interested in how markets move in the short term more than from an observational point of view.

In the next few years it is all about economic survival and wealth preservation rather than worrying about where the Dow or the Dax is going next.


During 2020, I wrote and spoke about a potential Meltup in markets before a crash. The latest article was called “LIFTOFF & COLLAPSE” published in Oct 2020. Well, the liftoff is happening and the Dow is up almost 5,000 points since then and the Dax 2,500 points.

The meltup could go a lot higher like exuberant markets often do before they collapse. But due to the extreme overvaluation base on many criteria, the market could turn at any point.

So whether we see a top in the next few weeks or months is irrelevant. The risk is to the downside. When markets crash it will be long and violent. A 90%+ fall in real terms is likely over 2-5 years.

Therefore it is much more important to safeguard the position now rather than to go for the final 10-25%. Once the market starts falling, it will be virtually impossible to get out for most investors.


Da Boyz were at it again on Friday the 8th at 9.00am European time. Gold was $1,905 at the time and moved down $30 in one move.

According to our sources, a sell order for 1.4 million ounces (43 tonnes) went through Comex with a value of $2.7 billion.

This was most clearly one of the bullion banks acting with the BIS (Bank for International Settlements) in Basel.

No sane trader would ever dump 1.4 million oz of gold in one go in an illiquid market. If he did, he would be fired on the spot.

So this was clear manipulation. The big short position of the bullion banks clearly necessitated a lower gold price.

This is what the chart looks like at that time:

This last move may feel even more frightening since gold came from $1,960 just two days earlier.

But this has no effect on gold’s long term uptrend since 1999. We have seen manipulation before and the quarterly chart below shows what looks like manipulation on a long term basis.


Back in February 2019 I wrote an article about the Gold Maginot Line which had held as a resistance for gold at $1,350 since 2013. I also forecasted that the Maginot line would be broken within the following 3 months which happened.

In the article I questioned if the BIS had been intervening for 6 years. Looking at the quarterly chart below, this seems very likely. Between 2013 and 2018 gold highest quarterly closes were five times within $12 of each other. (2013 – $1,327, 2014 – $1,327, 2016 – $1315, 2018 – $1,325).

It can hardly be a coincidence that gold never had a quarterly close above $1,327 between 2013 and 2018 and stopped between $1,315 and $1,327 at five quarter ends.

Some invisible hand seems to have been at work.

When the current correction finishes which shouldn’t take too long, gold will start the journey to much, much higher levels. Next week I will discuss why Gresham’s law will support gold as it moves on into the $2,000s.

But although it is always interesting to talk about the price of gold, it is really quite meaningless.

Because we must remember that physical gold is held for wealth preservation purposes only. To measure its value in increasingly worthless fiat money serves very little purpose.

The state of the world necessitates holding gold as life insurance.

Whether gold reaches $2,000, $20,000 or $200 trillion has nothing to do with the value of gold but all to do with a bankrupt financial system and worthless fiat currencies.

Tyler Durden Thu, 01/14/2021 - 17:00
Published:1/14/2021 4:13:53 PM
[Markets] GLOBAL MARKETS-Stocks end mostly lower but investors eye U.S. stimulus plan U.S. stocks ended lower on Thursday after the Dow and Nasdaq hit record highs earlier in the session as investors focused on U.S. President-elect Joe Biden's pandemic aid proposal, while the U.S. dollar weakened. MSCI's all-country world index was last trading in barely positive territory but was well off its record-high levels of the session. Published:1/14/2021 3:43:53 PM
[Markets] US STOCKS-Wall Street rises as stimulus hopes counter bleak jobs data Wall Street gained ground on Thursday, with the Dow and Nasdaq briefly touching record highs, as investors' hopes for fresh fiscal stimulus ahead of President-elect Joe Biden's pandemic aid proposal were countered by weakening labor market conditions. The Labor Department's weekly jobless report showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in COVID-19 infections. Published:1/14/2021 1:45:06 PM
[Markets] GLOBAL MARKETS-Stocks rise to records in anticipation of U.S. stimulus plan; yields up World stocks indexes climbed to record levels and U.S. bond yields edged higher on Thursday as investors focused on U.S. President-elect Joe Biden's pandemic aid proposal. On Wall Street, the Dow and Nasdaq rose to record highs, while MSCI's all-country world index also hit an all-time high. Published:1/14/2021 12:13:23 PM
[2020 News] Here are the companies suspending political contributions following the Capitol riots

Here are the companies suspending political contributions following the Capitol riots. Also known as a list of companies conservatives should boycott. Marriott Hallmark Best Buy Blue Cross Blue Sheld Association Amazon Dell Air B & B Dow Chemical Comcast AT & T American Express Verizon Commerce Bank US Chamber of Commerce The Walt Disney Company […]

The post Here are the companies suspending political contributions following the Capitol riots appeared first on IHTM.

Published:1/14/2021 12:13:23 PM
[Markets] US STOCKS-Dow, Nasdaq hit record highs as focus turns to Biden's stimulus speech The Dow and the Nasdaq hit record highs on Thursday in anticipation of President-elect Joe Biden's pandemic aid proposal to jump-start a struggling economy after data highlighted weakening labor market conditions. The Labor Department's weekly jobless report showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in COVID-19 infections. Published:1/14/2021 11:12:32 AM
[Markets] Dow stock futures are higher Thursday as market weighs new Biden stimulus plans Dow stock futures are higher Thursday as market weighs new Biden stimulus plans Published:1/14/2021 7:42:05 AM
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