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[Markets] Dow Jones Futures Fall 100 Points; Tesla Jumps On Strong Deliveries Dow Jones futures fell 100 points ahead of the stock market open Monday, as Tesla stock jumped after reporting strong deliveries. Published:10/4/2021 7:58:18 AM
[Markets] Goldman On The Biggest Story In The Markets Right Now And 9 Other Observations Goldman On The Biggest Story In The Markets Right Now And 9 Other Observations

By Tony Pasqsuariello, Goldman Sachs' head of Hedge Fund Sales in US Equity Derivatives,

The key story over recent weeks has been a nascent return of the reflation theme. To be sure, price action across the macro complex hasn’t been subtle -- be it higher rates, another charge higher in commodities or the searing outperformance of cyclicals over growth stocks -- yet, this is a different scene from the high velocity days of November through March.

Whereas the franchise dialogue then was characterized by hopes for unbounded fiscal spending, a sincere Fed commitment to the AIT framework and blockbuster payrolls prints ... the recent story line has centered more on the FOMC taking their first clear step towards normalizing policy, energy markets contending with some very serious supply-and-demand issues and positioning/mis-positioning.

That said, where you can find common ground between the two episodes is around the biggest fundamental variable in the markets: the interplay between COVID and global economic activity.

Amidst all the noise and cross-currents and debate around first derivatives vs second derivatives, the fact is this: the global economy is firing on more cylinders today than at any point in the COVID era.

For example, witness the GS Effective Lockdown Index, which trends in the right direction and clearly identifies a recent inflection from the Delta impingement -- taking the index to its easiest level since the early days of the pandemic.

Here’s another framing from long-time colleague Dominic Wilson: “for me the big difference is that last year it was about large, new positives -- now it’s about removal of some downside stuff against a slowing trend so it’s all a bit more tactical. and, the upside tails aren’t really being restored.”

Looking ahead, here’s where I come out, taker of feedback:

  1. Point-to-point, there’s been no better horse in the reflation race than commodities -- and, if the first point in the section below is correct, for medium-term investors, that could well remain the case.
  2. It’s not totally obvious to this stock operator where the bond market goes from here. given the inflation debate, I do think the asymmetry is skewed towards higher rates than lower rates. the house view continues to be 1.60% on 10-year notes at year end, with an ultimate path to 2.50% (link).
  3. Given that point on rates, it’s also not clear to me that you’re supposed to be sliding all of your chips from secular winners to cyclicals; I’d prefer to keep an ongoing balance there, while overtly avoiding the bond proxies. said another way: cyclicals-over-defensives is a clearer axis to me than value-over-growth.
  4. On S&P more broadly, as we approach a very strong seasonal period, I continue to believe the path of least resistance is higher. at the same time, I also suspect we’ll be living with a higher base level of volatility for a while -- with that comes a choppier trading environment where the bulls get paid by adding exposure on dips.
  5. If global central banks are getting out of the bond buying business, one can expect it will happen at different speeds and with different exit strategies. as a crafty client suggested, from a very boring starting point, this should open the door to a better opportunity set in FX trading. note, quietly, DXY has made YTD highs.

Several other quick points, charts:

1. Commodities: another week, another higher high in BCOM, with an eye-popping sequence in the European power markets. In the GIR upgrade to our oil forecast, I found it a little interesting they touched up YE’21 Brent from 80 to 90 ... I found it more interesting that the 2023 bogey moved from 65 to 85 (link).

2. The Fed: from an arguably absurd starting point, last week marked the first step towards a glide path -- if a very long path -- to something resembling policy normalization. I looked back at the ’04-’06 analog: the Fed hiked rates 17 times, they were most perfectly predictable in doing so, and market volatility collapsed along the way. while I imagine they’d be happy with a similar outcome, again my instinct is that analog may not apply all over again.

3. Japan: it’s a big week for the ever pivotal Japanese election cycle, with an outcome that skews as generically market friendly. coupled with a much better outlook for COVID and the reset in global interest rate curves, the bullish house call for Japanese equities still aligns with my instincts: link.

4. China: GIR published an eye opening note on their property market (link). at 20% of GDP and 62% of household wealth, thus totaling $60tr, one can argue it’s the largest asset class in the world (btw, am I the only person who didn’t realize that).

5. From the 2017 market journal, when S&P never traded negative at any point in the year en route to a 22% total return and a 3 Sharpe:

  • i. “maybe someday we’ll look back and be astounded that central banks bought $14tr bonds. or, maybe, they will still be buying.” note that since last March, the big four central banks have bought another ~ $5.5tr.
  • ii. with updates: “in the 20th century, the Dow went from 66 to 11,497 (a gain of 17,320%). in the 21st century, the index is up a further 402%.”
  • iii. with updates: “total returns since the ’04 IPO: Alphabet/Google + 6,312% ... Domino’s Pizza + 7,148%.”
  • iv. “remember, 10% of cumulative alpha per year breaks down to ... 4 bps per trading day.”
  • v. while not for deployment in this email, “data shows there’s a positive correlation between swearing and perceptions of honesty.”

6. When the market is trading at multiples not seen outside of the tech bubble, it’s fair to wonder if one of the big challenges is priced-to-perfection risk? I asked Ben Snider in GIR to zoom in a bit on valuation in the context of the COVID era. the sequence has been interesting: since the market bottomed last March, only 32% of the rally has been driven by earnings … the balance of 68% was re-rating of the multiple. that said, since the vaccine announcements last November, the entirety of the rally has been driven by earnings:

7. This is one of those big picture charts that doesn’t inform your risk taking in the short-term, but perhaps says a lot about the world in a broader sense. With credit to Peter Oppenheimer and team in GIR, this contextualizes just how big US mega cap tech companies are relative to the GDP of various large countries and indices:

8. Following on from there … again with credit to Ben Snider ... this a very simple snapshot of annual total returns in the FAAMG complex post-GFC ... for all of the local turbulence of recent weeks, I still think there’s a lot to like here long-term:

9. To level set positioning in the hedge fund community, this lays out the recent history in both gross exposure (left side) and net exposure (right side). While I am very aware that US households have gone whole-hog into stock market, the professional trading community is, by contrast, relatively sober in current risk taking. As someone put it to me: there’s lots of optimism, but lots of cash ... That’s not how bull markets usually end.

Tyler Durden Sun, 10/03/2021 - 16:55
Published:10/3/2021 4:21:45 PM
[Markets] Dow ends up over 480 points on Friday, but stocks post weekly losses Dow ends up over 480 points on Friday, but stocks post weekly losses Published:10/1/2021 3:36:54 PM
[Markets] Dow Jones Up As Merck Rockets On Covid Pill; Disney Gains On ScarJo Settlement; Biden Makes Infrastructure Move The Dow Jones rose as Merck surged on a new Covid pill. Disney gained on a Scarlett Johansson settlement. Joe Biden moved on infrastructure. Published:10/1/2021 2:43:55 PM
[Markets] Dow Jones Leads Upside, Nasdaq Reverses Higher; These Covid Vaccine Makers Plunge The Dow Jones rallied more than 390 points in today's stock market and traded near its highs of the day. The Nasdaq traded higher as well. Published:10/1/2021 1:04:32 PM
[Markets] US STOCKS-Wall Street rises in choppy trade after Fitch warning The Dow and the S&P 500 oscillated between gains and losses on Friday, as investors weighed a warning from Fitch over the United States' debt ceiling against drugmaker Merck's progress in developing an oral COVID-19 drug. Shares of Merck & Co Inc jumped 9.5% and were the top boost to the Dow after positive trial data for the company's experimental oral drug for COVID-19, molnupiravir. Published:10/1/2021 11:31:00 AM
[Markets] Merck — up 9.5%-plus — is by far the Dow's biggest gainer early Friday Merck — up 9.5%-plus — is by far the Dow's biggest gainer early Friday Published:10/1/2021 10:08:31 AM
[Markets] GLOBAL MARKETS-Stocks under pressure as euro zone inflation hits 13-year high The S&P 500 suffered its worst month since the onset of the pandemic in September, reflecting concerns about COVID-19, inflation fears and budget wrangling in Washington. MSCI's gauge of stocks across the globe shed 0.25%. The Dow Jones Industrial Average rose 108.49 points, or 0.32%, to 33,952.41, the S&P 500 gained 0.49 points, or 0.01%, to 4,308.03 and the Nasdaq Composite dropped 36.94 points, or 0.26%, to 14,411.64. Published:10/1/2021 9:34:16 AM
[Markets] Dow jumps 250 points in upbeat fourth-quarter kickoff Dow jumps 250 points in upbeat fourth-quarter kickoff Published:10/1/2021 9:05:22 AM
[Markets] Dow Jones Falls While Nasdaq Suffers End-Of-Day Sell-Off; These IBD 50 Stocks Are Actionable Now The Dow Jones led the downside in today's stock market and closed down nearly 550 points. The index closed at its lows of the day. Published:9/30/2021 3:57:53 PM
[Markets] Dow finishes down over 500 points Thursday, suffers a monthly loss of 4.3% Dow finishes down over 500 points Thursday, suffers a monthly loss of 4.3% Published:9/30/2021 3:36:05 PM
[Markets] US STOCKS-Wall Street sets course for monthly losses, worst quarter since COVID outbreak The S&P 500 and the Dow were in negative territory, with the blue-chip Dow off about 1%, while the tech-laden Nasdaq was higher on the day. All three major U.S. stock indexes are on track to show their worst quarterly performance since the opening months of 2020, when the COVID-19 pandemic brought the global economy to its knees. The S&P and Nasdaq are set to show modest gains over the July-to-September period, while the Dow appears to be headed for a nominal quarterly loss. Published:9/30/2021 1:53:25 PM
[Markets] US STOCKS-S&P 500, Dow tumble as Wall Street heads for monthly losses The S&P 500 and the Dow tumbled on Thursday as concerns over economic growth and a possible government shutdown saw Wall Street headed for a steep monthly drop, while losses in the Nasdaq were mitigated by major technology stocks. A batch of mixed economic data spurred large swings in the markets, as investors weighed a slight upward revision in second-quarter economic growth against a bigger-than-expected rise in weekly jobless claims. Published:9/30/2021 12:33:07 PM
[Markets] Dow relinquishes morning gain as September’s final trading day continues Dow relinquishes morning gain as September’s final trading day continues Published:9/30/2021 10:26:41 AM
[Markets] GLOBAL MARKETS-Stocks regain ground, dollar maintains strength Global stock markets continued to regain ground Thursday and the dollar stayed close to a one-year high on growing expectations the U.S. Federal Reserve will tighten policy in the coming months. Earlier in the week, global stock markets suffered their worst rout since January. The Dow Jones Industrial Average rose 51.85 points, or 0.15%, to 34,442.57, the S&P 500 gained 16.71 points, or 0.38%, to 4,376.17 and the Nasdaq Composite added 98.06 points, or 0.68%, to 14,610.50. Published:9/30/2021 9:20:22 AM
[Markets] U.S. stock market gains early Thursday as investors aim to close out downbeat September U.S. stocks rise Thursday, as Wall Street aims to wrap up the last trading day of September and the quarter, as investors await another appearance by Federal Reserve Chairman Jerome Powell Treasury Secretary Janet Yellen, who will appear before the House Financial Services Committee. The Dow Jones Industrial Average was up 164 points, or 0.5%, at 34,554, the S&P 500 index was climbing 0.5% to 4,381, while the Nasdaq Composite Index was up 0.7% early in the session. For the month, the Dow was hea Published:9/30/2021 8:59:51 AM
[Markets] Futures Fade Rally With Congress Set To Avert Government Shutdown Futures Fade Rally With Congress Set To Avert Government Shutdown

US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China's official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande

As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged.

All the three major indexes are set for a monthly drop, with the benchmark S&P 500 on track to break its seven-month winning streak as worries about persistent inflation, the fallout from China Evergrande’s potential default and political wrangling over the debt ceiling rattled sentiment. The index was, however, on course to mark its sixth straight quarterly gain, albeit its smallest, since March 2020’s drop. The rate-sensitive FAANG stocks have lost about $415 billion in value this month after the Federal Reserve’s hawkish shift on monetary policy sparked a rally in Treasury yields and prompted investors to move into energy, banks and small-cap sectors that stand to benefit the most from an economic revival.

Among individual stocks, oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members. Virgin Galactic shares surged 9.7% in premarket trading after the U.S. aviation regulator gave the company a green-light to resume flights to the brink of space. Perrigo climbed 14% after reporting a settlement in a tax dispute with Ireland.  U.S.-listed Macau casino operators may get a boost Thursday after Macau Chief Executive Ho Iat Seng said the region will strive to resume quarantine-free travel to Zhuhai by Oct. 1, the start of the Golden Week holiday, if the Covid-19 situation in Macau is stable. Here are some of the other biggest U.S. movers today:

  • Retail investor favorites Farmmi (FAMI US) and Camber Energy (CEI US) both rise in U.S. premarket trading, continuing their strong recent runs on high volumes
  • Virgin Galactic (SPCE US) shares rise 8.9% in U.S. premarket trading after the U.S. aviation regulator gave co. a green-light to resume flights to the brink of space
  • Perrigo (PRGO US) rises 15% in U.S. premarket trading after reporting a settlement in a tax dispute with Ireland. The stock was raised to buy from hold at Jefferies over the “very favorable” resolution
  • Landec (LNDC US) shares fell 17% in Wednesday postmarket trading after fiscal 1Q revenue and adjusted loss per share miss consensus estimates
  • Affimed (AFMD US) rises 4.3% in Wednesday postmarket trading after Stifel analyst Bradley Canino initiates at a buy with a $12 price target, implying the stock may more than double over the next year
  • Herman Miller (MLHR US) up ~2.8% in Wednesday postmarket trading after the office furnishings maker posts fiscal 1Q net sales that beat the consensus estimate
  • Orion Group Holdings (ORN US) shares surged as much as 43% in Wednesday extended trading after the company disclosed two contract awards for its Marine segment totaling nearly $200m
  • Kaival Brands (KAVL US) fell 18% Wednesday postmarket after offering shares, warrants via Maxim

An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering.

“Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.”

Still, president Joe Biden’s agenda remains at risk of being derailed by divisions among his own Democrats, as moderates voiced anger on Wednesday at the idea of delaying a $1 trillion infrastructure bill ahead of a critical vote to avert a government shutdown.

The big overnight economic news came from China whose September NBS manufacturing PMI fell to 49.6 from 50.1 in August, the first contraction since Feb 2020, likely due to the production cuts caused by energy constraints. Both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreased in September. The NBS non-manufacturing PMI rebounded to 53.2 in September from 47.5 in August on a recovery of services activities as COVID restrictions eased. However, the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month: expect far worse number in the months ahead unless China manages to contain its energy crisis.

Europe’s Stoxx 600 Index advanced 0.3%, trimming a monthly loss but fading an earlier gain of 0.9%, led by gains in basic resources companies as iron ore climbed, with the CAC and FTSE 100 outperforming at the margin. Technology stocks, battered earlier this week, also extended their rebound.  Miners, oil & gas and media are the strongest sectors; utility and industrial names lag. European natural gas and power markets hit fresh record highs as supply constraints persist. Perrigo jumped 13.8% after the drugmaker agreed to settle with Irish tax authorities over a 2018 issue by paying $1.90 billion in taxes

Asian stocks were poised to cap their first quarterly loss since March 2020 as Chinese technology names fell and as investors remained wary over a recent rise in U.S. Treasury yields.  The MSCI Asia Pacific Index is set to end the September quarter with a loss of more than 5%, snapping a winning streak of five straight quarters. A combination of higher yields, Beijing’s corporate crackdown and worry over slowing economic growth in Asia’s biggest economy have hurt sentiment, bringing the market down following a brief rally in late August.  The Asian benchmark rose less than 0.1% after posting its worst single-day drop in six weeks on Wednesday. Consumer discretionary and communication services groups fell, while financials advanced. The Hang Seng Tech Index ended 1.3% lower as Beijing announced new curbs on the sector, while higher yields hurt sentiment toward growth stocks. 

“Because there’s growing worry over U.S. inflation, we need to keep an eye on the potential risks, globally,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “Also, there’s the Evergrande issue. The market is in a wait-and-see mode now, with a focus on whether the group will be able to make future interest rate payments.”  Benchmarks in Thailand and Malaysia were the biggest losers, while Indonesia and Australia outperformed. Japan’s Topix and the Nikkei 225 Stock Average slipped for a fourth day as investors weighed Fumio Kishida’s election victory as the new ruling party leader.

Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors braced for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup survey said a 20% pullback in stocks is more likely than a 20% rally.

A gauge of the dollar’s strength headed for its first drop in five days as Treasury yields steadied after a recent rise, and amid quarter-end flows. The Bloomberg Dollar Spot Index fell as the dollar steady or weaker against most of its Group-of-10 peers. The euro hovered around $1.16 and the pound was steady while Gilts inched lower, underperforming Bunds and Treasuries. Money markets now see around 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That means they’re betting the key rate will rise to 0.75% next year from 0.1% currently. The Australian dollar led gains after it rose off its lowest level since August 23 amid exporter month-end demand and as iron ore buyers locked in purchases ahead of a week-long holiday in China. Norway’s krone was the worst G-10 performer and slipped a fifth day versus the dollar, its longest loosing streak in a year.

In commodities, oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading. European gas prices meanwhile hit a new all time high.

 

Looking at the day ahead, one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September.

Market Snapshot

  • S&P 500 futures up 0.7% to 4,379.00
  • STOXX Europe 600 up 0.6% to 457.59
  • MXAP little changed at 196.85
  • MXAPJ up 0.3% to 635.71
  • Nikkei down 0.3% to 29,452.66
  • Topix down 0.4% to 2,030.16
  • Hang Seng Index down 0.4% to 24,575.64
  • Shanghai Composite up 0.9% to 3,568.17
  • Sensex down 0.3% to 59,239.76
  • Australia S&P/ASX 200 up 1.9% to 7,332.16
  • Kospi up 0.3% to 3,068.82
  • Brent Futures up 0.4% to $78.98/bbl
  • Gold spot up 0.4% to $1,732.86
  • U.S. Dollar Index little changed at 94.27
  • German 10Y yield fell 0.5 bps to -0.212%
  • Euro little changed at $1.1607

Top Overnight News from Bloomberg

  • U.K. gross domestic product rose 5.5% in the second quarter instead of the 4.8% earlier estimated, official figures published Thursday show. The data, which reflected the reopening of stores and the hospitality industry, mean the economy was still 3.3% smaller than it was before the pandemic struck.
  • China has urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some home buyers, another signal that authorities are worried about fallout from the debt crisis at China Evergrande Group.
  • The U.S. currency’s surge is helping the Chinese yuan record its largest gain in eight months on a trade-weighted basis in September. It adds to headwinds for the world’s second- largest economy already slowing due to a resurgence in Covid cases, a power crisis and regulatory curbs.
  • The Swiss National Bank bought foreign exchange worth 5.44 billion francs ($5.8 billion) in the second quarter, part of its long-running policy to alleviate appreciation pressure on the franc
  •  
  • A few members of the Riksbank’s executive board discussed a rate path that could indicate a rate rise at the end of the forecast period, Sweden’s central bank says in minutes from its Sept. 20 meeting
  • French inflation accelerated in September as households in the euro area’s second-largest economy faced a jump in the costs of energy and services.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded somewhat varied with the region indecisive at quarter-end and as participants digested a slew of data releases including mixed Chinese PMI figures. ASX 200 (+1.7%) was underpinned by broad strength across its industries including the top-weighted financials sector and with the large cap miners lifted as iron ore futures surge by double-digit percentages, while the surprise expansion in Building Approvals also helped markets overlook the 51% spike in daily new infections for Victoria state. Nikkei 225 (+0.1%) was subdued for most of the session after disappointing Industrial Production and Retail Sales data which prompted the government to cut its assessment of industrial output which it stated was stalling. The government also warned that factory output could decline for a third consecutive month in September and that October has large downside risk due to uncertainty from auto manufacturing cuts. However, Nikkei 225 then recovered with the index marginally supported by currency flows. Hang Seng (-1.0%) and Shanghai Comp. (+0.4%) diverged heading into the National Day holidays and week-long closure for the mainland with tech names in Hong Kong pressured by ongoing regulatory concerns as China is to tighten regulation of algorithms related to internet information services. Nonetheless, mainland bourses were kept afloat after a further liquidity injection by the PBoC ahead of the Golden Week celebrations and as markets took the latest PMI figures in their strides whereby the official headline Manufacturing PMI disappointed to print its first contraction since February 2020, although Non-Manufacturing PMI and Composite PMI returned to expansionary territory and Caixin Manufacturing PMI topped estimates to print at the 50-benchmark level.

Top Asian News

  • S&P Points to Progress as Bondholders Wait: Evergrande Update
  • Bank Linked to Kazakh Leader Buys Kcell Stake After Share Slump
  • Goldman Sachs Names Andy Tai Head of IBD Southeast Asia: Memo
  • What Japan’s Middle-of-the-Road New Leader Means for Markets

The upside momentum seen across US and European equity futures overnight stalled, with European cash also drifting from the best seen at the open (Euro Stoxx 50 +0.1%; Stoxx 600 +0.4%). This follows somewhat mixed APAC handover, and as newsflow remains light on month and quarter-end. US equity futures are firmer across the board, but again off best levels, although the RTY (+0.8%) outperforms the ES (+0.4%), YM (+0.4%) and NQ (+0.5%). Back to Europe, the periphery lags vs core markets, whilst the DAX 40 (-0.3%) underperforms within the core market. Sectors in Europe are mostly in the green but do not portray a particular risk bias. Basic Resources top the chart with aid from overnight action in some base metals, particularly iron, in turn aiding the large iron miners BHP (+2.2%), Rio Tinto (+3.4%) and Anglo American (+2.9%). The bottom of the sectors meanwhile consists of Travel & Leisure, Autos & Parts and Industrial Goods & Services, with the former potentially feeling some headwinds from China’s travel restrictions during its upcoming National Day holiday. In terms of M&A, French press reported that CAC-listed Carrefour (-1.3%) is reportedly looking at options for sector consolidation, and talks are said to have taken place with the chain stores Auchan, with peer Casino (Unch) also initially seeing a leg higher in sympathy amid the prospect of sector consolidation. That being said, Carrefour has now reversed its earlier upside with no particular catalyst for the reversal. It is, however, worth keeping in mind that regulatory/competition hurdles cannot be ruled out – as a reminder, earlier this year, France blocked the takeover of Carrefour by Canada’s Alimentation Couche-Tard. In the case of a successful deal, Carrefour will likely be the acquirer as the largest supermarket in France. Sticking with M&A, Eutelsat (+14%) was bolstered at the open amid source reports that French billionaire Patrick Drahi is said to have made an unsolicited takeover offer of EUR 12.10/shr for Eutelsat (vs EUR 10.35 close on Wednesday), whilst the FT reported that this offer was rejected.

Top European News

  • European Banks Dangle $26 Billion in Payouts as ECB Cap Ends
  • U.K. Economy Emerged From Lockdown Stronger Than Expected
  • In a First, Uber Joins Drivers in Strike Against Brussels Rules
  • EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links

In FX, The non-US Dollars are taking advantage of the Greenback’s loss of momentum, and the Aussie in particular given an unexpected boost from building approvals completely confounding expectations for a fall, while a spike in iron ore prices overnight provided additional incentive amidst somewhat mixed external impulses via Chinese PMIs. Hence, Aud/Usd is leading the chasing pack and back up around 0.7200, Usd/Cad is retreating through 1.2750 and away from decent option expiry interest at 1.2755 and between 1.2750-40 (in 1.3 bn and 1 bn respectively) with some assistance from the latest bounce in crude benchmarks and Nzd/Usd is still trying to tag along, but capped into 0.6900 as the Aud/Nzd cross continues to grind higher and hamper the Kiwi.

  • DXY/GBP/JPY/EUR/CHF - It’s far too early to call time on the Buck’s impressive rally and revival from recent lows, but it has stalled following a midweek extension that propelled the index to the brink of 94.500, at 94.435. The DXY subsequently slipped back to 94.233 and is now meandering around 94.300 having topped out at 94.401 awaiting residual rebalancing flows for the final day of September, Q3 and the half fy that Citi is still classifying as Dollar positive, albeit with tweaks to sd hedges for certain Usd/major pairings. Also ahead, the last US data and survey releases for the month including final Q2 GDP, IJC and Chicago PMI before another raft of Fed speakers. Meanwhile, Sterling has gleaned some much needed support from upward revisions to Q2 UK GDP, a much narrower than forecast current account deficit and upbeat Lloyds business barometer rather than sub-consensus Nationwide house prices to bounce from the low 1.3600 area vs the Greenback and unwind more of its underperformance against the Euro within a 0.8643-12 range. However, the latter is keeping tabs on 1.1600 vs its US peer in wake of firmer German state CPI prints and with the aforementioned Citi model flagging a sub-1 standard deviation for Eur/Usd in contrast to Usd/Jpy that has been elevated to 1.85 from a prelim 1.12. Nevertheless, the Yen is deriving some traction from the calmer yield backdrop rather than disappointing Japanese data in the form of ip and retail sales to contain losses under 112.00, and the Franc is trying to do the same around 0.9350.
  • SCANDI/EM - The tables have been turning and fortunes changing for the Nok and Sek, but the former has now given up all and more its post-Norges Bank hike gains and more as Brent consolidates beneath Usd 80/brl and the foreign currency purchases have been set at the same level for October as the current month. Conversely, the latter has taken heed of a hawkish hue to the latest set of Riksbank minutes and the fact that a few Board members discussed a rate path that could indicate a rise at the end of the forecast period. Elsewhere, the Zar looks underpinned by marginally firmer than anticipated SA ppi and private sector credit, while the Mxn is treading cautiously ahead of Banxico and a widely touted 25 bp hike.

In commodities, WTI and Brent futures are choppy but trade with modest gains heading into the US open and in the run-up to Monday’s OPEC+ meeting. The European session thus far has been quiet from a news flow standpoint, but the contracts saw some fleeting upside after breaking above overnight ranges, albeit the momentum did not last long. Eyes turn to OPEC+ commentary heading into the meeting, which is expected to be another smooth affair, according to Argus sources. As a reminder, the group is expected to stick to its plan to raise output by 400k BPD despite outside pressure to further open the taps in a bid to control prices. Elsewhere, as a mild proxy for Chinese demand, China’s Sinopec noted that all LNG receiving terminals are to be operated at full capacity. WTI trades on either side of USD 75/bbl (vs low USD 74.54/bbl), while its Brent counterpart remains north of USD 78/bbl (vs low USD 77.66/bbl). Turning to metals, spot gold and silver continue to consolidate after yesterday’s Dollar induced losses, with the former finding some support around the USD 1,725/oz mark and the latter establishing a floor around USD 21.50/oz. Over to base metals, Dalian iron ore futures rose to three-week highs amid pre-holiday Chinese demand and after Fortescue Metals Group halted mining operations at a Pilbara project. Conversely, LME copper is on a softer footing as the Buck holds onto recent gains.

US Event Calendar

  • 8:30am: 2Q PCE Core QoQ, est. 6.1%, prior 6.1%
  • 8:30am: 2Q GDP Price Index, est. 6.1%, prior 6.1%
  • 8:30am: 2Q Personal Consumption, est. 11.9%, prior 11.9%
  • 8:30am: Sept. Continuing Claims, est. 2.79m, prior 2.85m
  • 8:30am: 2Q GDP Annualized QoQ, est. 6.6%, prior 6.6%
  • 8:30am: Sept. Initial Jobless Claims, est. 330,000, prior 351,000
  • 9:45am: Sept. MNI Chicago PMI, est. 65.0, prior 66.8

Central Bank speakers

  • 10am: Fed’s Williams Discusses the Fed’s Pandemic Response
  • 10am: Powell and Yellen Appear Before House Finance Panel
  • 11am: Fed’s Bostic Discusses Economic Mobility
  • 11:30am: Fed’s Harker Discusses Sustainable Assets and Financial...
  • 12:30pm: Fed’s Evans Discusses Economic Outlook
  • 1:05pm: Fed’s Bullard Makes Opening Remarks at Book Launch
  • 2:30pm: Fed’s Daly Speaks at Women and Leadership Event

Government Calendar

  • 10am ET: Treasury Secretary Yellen, Fed Chair Powell appear at a House Financial Services Committee hearing on the Treasury, Fed’s pandemic response
  • 10:30am ET: Senate begins voting process for continuing resolution that extends U.S. government funding to December 3
  • 10:30am ET: Senate Commerce subcommittee holds hearing on Facebook, Instagram’s influence on kids with Antigone Davis, Director, Global Head of Safety, Facebook
  • 10:45am ET: House Speaker Nancy Pelosi holds weekly press briefing

DB's Jim Reid concludes the overnight wrap

I’ll be getting my stitches out of my knee today and will have a chance to grill the surgeon who I think told me I’ll probably soon need a knee replacement. I say think as it was all a bit of a medicated blur post the operation 2 weeks ago. These have been a painfully slow 2 weeks of no weight bearing with another 4 to go and perhaps all to no avail. As you can imagine I’ve done no housework, can’t fend much for myself, or been able to control the kids much over this period. I’m not sure if having bad knees are grounds for divorce but I’m going to further put it to the test over the next month. In sickness and in health I plea.

Like me, markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours following their latest selloff, with equities bouncing back a bit and sovereign bond yields taking a breather from their recent relentless climb. It did feel that we hit yield levels on Tuesday that started to hurt risk enough that some flight to quality money recycled back into bonds. So the next leg higher in yields (which I think will happen) might be met with more risk off resistance, and counter rallies.

The latest moves came amidst relatively dovish and supportive comments from central bank governors at the ECB’s forum yesterday, but sentiment was dampened somewhat as uncertainty abounds over a potential US government shutdown and breaching of the debt ceiling, after both houses of Congress could not agree on a plan to extend government funding. Overnight, there have been signs of progress on the shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3, with the Senate set to vote on the measure this morning.However, we’re still no closer to resolving the debt ceiling issue (where the latest estimates from the Treasury Department point to October 18 as the deadline), and tensions within the Democratic party between moderates and progressives are threatening to sink both the $550bn bipartisan infrastructure bill and the $3.5tn reconciliation package, which together contain much of President Biden’s economic agenda.

We could see some developments on that soon however, as Speaker Pelosi said yesterday that the House was set to vote on the infrastructure bill today. Assuming the vote goes ahead later, this will be very interesting since a number of progressive Democrats have said that they don’t want to pass the infrastructure bill without the reconciliation bill (which contains the administration’s other priorities on social programs). This is because they fear that with the infrastructure bill passed (which moderates are keen on), the moderates could then scale back the spending in the reconciliation bill, and by holding out on passing the infrastructure bill, this gives them leverage on reconciliation. House Speaker Pelosi and Majority Leader Schumer were in the Oval Office with President Biden yesterday, and a White House statement said that Biden spoke on the phone with lawmakers and engagement would continue into today. So an important day for Biden’s agenda.

Against this backdrop, risk assets made a tentative recovery yesterday, with the S&P 500 up +0.16% and Europe’s STOXX 600 up +0.59%. However, unless we get a big surge in either index today, both indices remain on track for their worst monthly performances so far this year, even if they’re still in positive territory for Q3 as a whole. Looking elsewhere, tech stocks had appeared set to pare back some of the previous day’s losses, but a late fade left the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have offered investors poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%). Similarly, while they initially staged a recovery, small caps in the Russell 2000 (-0.20%) continued to struggle.

One asset that remained on trend was the US dollar. The greenback continued its climb yesterday, with the dollar index increasing +0.61% to close at its highest level in over a year, exceeding its closing high from last November.

Over in sovereign bond markets, the partial rebound saw yields on 10yr Treasuries down -2.1bps at 1.517%, marking their first move lower in a week. And there was much the same pattern in Europe as well, where yields on 10yr bunds (-1.4bps), OATs (-1.3bps) and BTPs (-3.1bps) all moved lower as well. One continued underperformer were UK gilts (+0.3bps), and yesterday we saw the spread between 10yr gilt and bund yields widen to its biggest gap in over 2 years, at 120bps.

Staying on the UK, the pound (-0.81%) continued to slump yesterday, hitting its lowest level against the dollar since last December, which comes as the country has continued to face major issues over its energy supply. Yesterday actually saw natural gas prices take another leg higher in both the UK (+10.09%) and Europe (+10.24%), and the UK regulator said that three smaller suppliers (who supply fewer than 1% of domestic customers between them) had gone out of business. This energy/inflation/BoE conundrum is confusing the life out of Sterling 10 year breakevens. They rose +18bps from Monday morning to Tuesday lunchtime but then entirely reversed the move into last night’s close. This is an exaggerated version of how the world’s financial markets are puzzling over whether breakevens should go up because of energy or go down because of the demand destruction and central bank response.

Central bankers were in no mood to panic yesterday though as we saw Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appear on a policy panel at the ECB’s forum on central banking. There was much to discuss but the central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.”

Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.40%), and the Hang Seng (-1.08%) both losing ground, whereas the Kospi (+0.41%) and the Shanghai Composite (+0.30%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected), marking its lowest level since the height of the Covid crisis in February 2020. The non-manufacturing PMI held up better however, at a stronger 53.2 (vs. 49.8 expected), although new orders were beneath 50 for a 4th consecutive month. Elsewhere, futures on the S&P 500 (+0.50%) and those on European indices are pointing to a higher start later on, as markets continue to stabilise after their slump earlier in the week.

Staying on Asia, shortly after we went to press yesterday, former Japanese foreign minister Fumio Kishida was elected as leader of the governing Liberal Democratic Party, and is set to become the country’s next Prime Minister. The Japanese Diet will hold a vote on Monday to elect Kishida as the new PM, after which he’ll announce a new cabinet, and attention will very soon turn to the upcoming general election, which is due to take place by the end of November. Our Chief Japan economist has written more on Kishida’s victory and his economic policy (link here), but he notes that on fiscal policy, Kishida’s plans to redistribute income echo the shift towards a greater role for government in the US and elsewhere.

There wasn’t a massive amount of data yesterday, though Spain’s CPI reading for September rose to an above-expected +4.0% (vs. 3.5% expected), so it will be interesting to see if something similar happens with today’s releases from Germany, France and Italy, ahead of the Euro Area release tomorrow. Otherwise, UK mortgage approvals came in at 74.5k in August (vs. 73.0k expected), and the European Commission’s economic sentiment indicator for the Euro Area rose to 117.8 in September (vs. 117.0 expected).

To the day ahead now, and one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September.

Tyler Durden Thu, 09/30/2021 - 07:49
Published:9/30/2021 6:58:08 AM
[Markets] The Market Crash Nobody Thinks Possible Is Coming The Market Crash Nobody Thinks Possible Is Coming

Authored by Charles Hugh Smith via OfTwoMinds blog,

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

The ideal setup for a crash is a consensus that a crash is impossible--in other words, just like the present: sure, there are carefully measured murmurings about a "correction" but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I'm calling for is a rip your face offweeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no "serious person" believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top, Is Anyone Willing to Call the Top of the Everything Bubble? (September 6, 2021), there is no history to support the widespread confidence that the extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the lifespan of a cockroach. We're well past that benchmark into unprecedented insanity. So what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work...)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire. 

As I explained in The Fed Is Fatally Corrupt-- And So Is the Rest of America's Status Quo (September 10, 2021), the Fed is corrupt on multiple levels--thoroughly, completely corrupt, and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

This is finally leaking through the Fed corruption containment vessel as even the lackeys in the billionaire-owned corporate media are now fearful of losing whatever tattered shreds of credibility they still possess by refusing to acknowledge Fed corruption, over-reach and hubris. And so at long last, the Fed no longer walks on water. The Fed's fraudulent travesty of a mockery of a sham scam has finally breached the three-foor thick containment walls and the putrid stench of Fed corruption can no longer be bottled up.

Like any good kleptocratic Politburo, the Fed cashiered the two most indefensible scapegoats to divert attention from the equally corrupt incumbents presiding over the collapse of Fed credibility.

Don't be surprised if the scapegoats are airbrushed out of official photos, per officially approved propaganda.

3. As I detailed in The U.S. Economy In a Nutshell: When Critical Parts Are On "Indefinite Back Order," the Machine Grinds to a Halt and Sorry, Fed, Inflation is Already Embedded, the fuel of the inflation rocket has just ignited and the clueless, corrupt Fed is watching the boost phase in abject, humiliating confusion, as the Fed is now completely powerless, having blown the opportunity to get ahead of the curve by reducing their making billionaires richer "stimulus" a year ago.

Inflation is not just embedded, it's global. 

Natural gas prices could triple in entire regions without even breathing hard, and the costs of other essentials could just as easily triple without breaking a sweat.

Inflation crushes risk-on speculative markets like, well, scurrying cockroaches. 

Squish.

4. The Fed has lost control of yields. We all know that liars reveal their dishonesty via micro-signals, and with this is mind, slow down the video of Fed Politburo speakers, starting with Chairperson Powell. Wealth inequality soaring? It's not our doing! etc.

Oops, the cat is out of the bag: the Fed has lost control of yields. Trust in the Fed's god-like powers is wavering, as punters and players realize the Fed's shuck-and-jive has finally lost its power to wow the greedy and the credulous.

Rising yields crush risk-on speculative markets like, well, scurrying cockroaches. 

Squish.

5. China is not "saving the world" this time. 

As I explained in What's Really Going On in China (September 23, 2021), China has other fish to fry and it isn't bailing out global markets as it did in previous bubble pops. Squish.

6. The rising US dollar is Kryptonite to speculative markets, emerging market debt and risk-on euphoria. 

Sorry about that, but you know what happens next: Squish.

7. The retail bagholders are now all-in. As I noted in Please Don't Pop Our Precious Bubble! (September 8, 2021), the retail punters have finally gone all-in on the "this bubble will never pop" Everything Bubble. As I observed in August, The Smart Money Has Already Sold (August 18, 2021) as the retail bagholders have poured more cash into the Everything Bubble than they did in the past decade or two.

This is of course the most reliable signal that a bubble is about to pop. 

Sorry about that: squish.

8. The buy the dip crowd has been so well-trained that they will provide the necessary buying to keep the cascade from gathering too much momentum. A stairstep down that sucks in buy the dip buyers is ideal for those profiting from the decline. First up: a rally to close the quarter positively to make it appear that every money manager beat the index funds. And so on.

But the net result is still: squish. 

Consequences can be put off for quite some time, but the rot beneath the machinations only amplifies the eventual collapse.

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

*  *  *

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Tyler Durden Thu, 09/30/2021 - 06:30
Published:9/30/2021 5:50:21 AM
[Markets] Market Recap: Wednesday, September 29 Stocks traded mixed on Wednesday, with the S&P 500 and Dow ending higher as Treasury yields steadied near multi-month highs.  Shawn Cruz, TD Ameritrade Senior Market Strategist and Larry Cordisco, Portfolio Manager of the Osterweis Growth & Income Fund joined Yahoo Finance Live to discuss. Published:9/29/2021 3:53:42 PM
[Markets] Dow, S&P 500 finish slightly higher as Nasdaq extends decline Dow, S&P 500 finish slightly higher as Nasdaq extends decline Published:9/29/2021 3:20:12 PM
[Markets] GLOBAL MARKETS-Shares staunch bleed after worst selloff since January Investors sought to stanch the bleeding on Wednesday after world stock markets suffered their worst rout since January and U.S. and European borrowing costs raced to their highest in months. The Dow Jones Industrial Average rose 240.91 points, or 0.7%, to 34,540.9, the S&P 500 gained 27.86 points, or 0.64%, to 4,380.49 and the Nasdaq Composite added 53.10 points, or 0.37%, to 14,599.78. The pan-European STOXX 600 index rose 0.6%, with investors looking past a 2.2% fall in the previous session. Published:9/29/2021 2:23:27 PM
[Markets] US STOCKS-Dow, S&P 500 supported by defensives after bruising selloff Gains in defensive shares and Boeing helped the Dow and the S&P 500 index recover some lost ground on Wednesday after concerns over inflation and rising Treasury yields sparked one of Wall Street's worst selloffs this year. Eight of the 11 major S&P sectors advanced, with healthcare , consumer staples, utilities and real estate rising between 0.7% and 1.6%. Published:9/29/2021 12:22:35 PM
[Markets] Dow Jones Climbs As Boeing, Apple Rally; Nasdaq Leads As Tech Stocks Rebound Key market indexes rebounded early Wednesday, with the Nasdaq leading and the Dow Jones Industrial Average up nearly 200 points. Published:9/29/2021 9:53:03 AM
[Markets] 'Dangerous' Jerome & 'Doomsaying' Janet Spark Bond, Stock, Bullion, & Bitcoin Battering 'Dangerous' Jerome & 'Doomsaying' Janet Spark Bond, Stock, Bullion, & Bitcoin Battering

Fed Chair Jerome Powell (accused of being a "dangerous man" by Sen/ Warren) seemed to hint today that the shift in inflation is not just 'not transitory' but could be 'structural', prompting many to adjust expectations even more hawkishly for Fed action.

Source: Bloomberg

There is now a greater than 50% probability of rate-hike in September 2022...

Source: Bloomberg

Treasury Secretary Janet Yellen began her testimony today by warning of all the worst parts of the bible occurring if Republicans don't vote to increase the debt limit by October 18th (which Democrats can do all on their own but are loathed to be pinned to) - "likely spur major financial collapse". That sent Debt Ceiling anxiety soaring...

Source: Bloomberg

Is it different this time?

hhmm...

Either way, both of the events above helped spike Treasury yields, especially at the long-end...

Source: Bloomberg

And the surge in yields extended the pain for growth stocks relative to value, but as yields really accelerated higher, equity traders got spooked and puked (dumping at the European open and US open). Stocks bounced off their lows around 1430ET (margin call time) but Jeremy Grantham's appearance on CNBC, calling the market a spectacular bubble coincided with another leg lower in the major indices..

This was the S&P worst day since -2.45% on 2/25

All the major indices tested/broke key technical levels today:

  • S&P broke back below 50DMA, testing 100DMA

  • Nasdaq broke back below 50DMA, testing 100DMA

  • Dow broke back below 50DMA and 100DMA

  • Russell 2000 broke back below 50DMA

The relationship between the Russell 2000 and Nasdaq 100 pair has tested in a serious band of resistance...

Growth stocks were clubbed like a baby seal again and while value stocks suffered, the divergence remains...

Source: Bloomberg

Risk Parity Funds are starting to crack amid the surge in both realized and implied vol for stocks and bonds. We are heading for the worst month for risk parity since March 2020...

Source: Bloomberg

FAAMG stocks were FUBAR today, breaking down to their lowest in over 2 months...

Source: Bloomberg

"Most Shorted" Stocks were slammed lower today, erasing all of yesterday's squeeze gains...

Source: Bloomberg

Tech stocks were worst today and Energy best (Financials lagged despite higher rates)...

Source: Bloomberg

The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier.

Source: Bloomberg

Bear in mind that the current move is a 1.4 sigma shift. If it gets to a 2.0 Sigma move, then shit breaks fast...

Cryptos were clubbed like a baby seal too today with Bitcoin sliding back to the weekend's post-China-ban lows at around $40k...

Source: Bloomberg

The dollar soared higher again today, breaking above the August highs to its highest level since Nov 5th...

Source: Bloomberg

Oil prices (WTI) soared to near the July cycle high, as Biden's call to OPEC appears to have failed...

Source: Bloomberg

NatGas had a wild day, soaring over 10% once again at its peak today, before plunging back into the red and then bouncing back towards the close to end higher...

The dollar's gain was gold's loss today as the barbarous relic extended its slide lower...

Copper's recent outperformance of gold continues to suggest that nominal yields have a long way to go to catch up to reality (10Y ~3.00%!)...

Source: Bloomberg

And finally, none of this is helping Biden's approval rating which, after a small bounce post-Afghanistan, is back at its term lows...

Source: Bloomberg

Tyler Durden Tue, 09/28/2021 - 16:01
Published:9/28/2021 3:16:00 PM
[Markets] Nasdaq slides 2.8% as rising Treasury yields hit tech; Dow ends down 570 points Nasdaq slides 2.8% as rising Treasury yields hit tech; Dow ends down 570 points Published:9/28/2021 3:16:00 PM
[Markets] Dow Jones Dives; Schumer Makes Move As Yellen Issues Warning; Microsoft Falls, Tesla Makes Stand The Dow Jones fell hard. Chuck Schumer made a pledge as Janet Yellen issued a debt warning. Microsoft stock fell as Tesla stock fought hard. Published:9/28/2021 2:40:44 PM
[Markets] Dow Jones Drops 530 Points, Tech Dives On Rising Yields; Energy Stocks Show Strength The Dow Jones traded sharply lower in today's stock market while the Nasdaq composite also fell. Tech stocks led on the downside. Published:9/28/2021 1:16:05 PM
[Markets] US STOCKS-Wall St tumbles on weak consumer sentiment, rising bond yields The S&P 500 and the Nasdaq headed for their worst day in four months on Tuesday as weak consumer confidence data deepened concerns over slowing economic growth, while a surge in Treasury yields hit mega-cap technology stocks. At 11:53 a.m. ET, the Dow Jones Industrial Average was down 516.54 points, or 1.48%, at 34,352.83. Published:9/28/2021 11:40:18 AM
[Markets] Dow Jones Dives On Janet Yellen Warning, Stocks Sell Off As Bond Yields Rise The Dow Jones Industrial Average tumbled as stocks sold off amid Treasury Secretary Janet Yellen's default risk warning and bond yields rose. Published:9/28/2021 11:14:09 AM
[Markets] US STOCKS-Wall St tumbles on weak consumer sentiment, rising bond yields Wall Street indexes sharply dropped on Tuesday as weak consumer confidence data deepened concerns over slowing U.S. economic growth, with the Nasdaq down more than 2% as a surge in Treasury yields pressured mega-cap technology stocks. At 10:38 a.m. ET, the Dow Jones Industrial Average was down 361.68 points, or 1.04%, at 34,507.69, the S&P 500 was down 64.66 points, or 1.46%, at 4,378.45, and the Nasdaq Composite was down 321.51 points, or 2.15%, at 14,648.46. U.S. consumer confidence unexpectedly fell to its lowest since February this month, as soaring COVID-19 infections intensified concerns about the economy's near-term prospects. Published:9/28/2021 10:10:15 AM
[Markets] Dow down nearly 400 points as stock decline steepens; Nasdaq at intraday low Dow down nearly 400 points as stock decline steepens; Nasdaq at intraday low Published:9/28/2021 10:10:15 AM
[Markets] US STOCKS-Wall Street falls as surging bond yields hammer tech shares The Nasdaq fell the most among Wall Street indexes on Tuesday as technology heavyweights came under pressure from a surge in bond yields on expectations of higher interest rates and rising inflation. At 9:42 a.m. ET, the Dow Jones Industrial Average was down 88.89 points, or 0.25%, at 34,780.48, the S&P 500 was down 35.36 points, or 0.80%, at 4,407.75, and the Nasdaq Composite was down 209.42 points, or 1.40%, at 14,760.55. Published:9/28/2021 9:08:29 AM
[World] Market Pulse: Dow at risk of snapping 4-session win streak, tech stocks hammered as 10-year Treasury pops above 1.5% U.S. stock benchmarks on Tuesday trade under selling pressure, putting in jeopardy a four-session string of gains for the Dow industrials, as interest-rate sensitive technology stocks were hammered by a rise in yields.
Published:9/28/2021 8:45:04 AM
[Markets] Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80 Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80

For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech "general" refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors.

The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390.

Rising bond yields prompted a shift from growth to cyclical stocks in the United States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields. The premarket selloff was led by semiconductor stocks which tracked similar falls for European peers, as a rising 10-year Treasury yield puts pressure on the tech sector. Applied Materials Inc. led a slump in chip stocks in New York premarket trading while Nvidia was down 2.6%, AMD -2.1%, Applied Materials -2.9%, Micron -1.6%. Meanwhile retail trader favorite meme stock Naked Brand Group, an underwear and swimwear retailer, rises again after having surged 40% in the past two trading sessions after Chairman Justin Davis-Rice said in a letter to shareholders that he believes the company has found a “disruptive” potential acquisition in the clean technology sector. Frequency Electronics also soared after being awarded a contract by the Office of Naval Research to develop an atomic clock. Chinese stocks listed in the U.S. were mixed and semiconductor stocks declined. Here are some of the other notable U.S. movers today:

  • iPower (IPW US) shares rise as much as 61% in U.S. premarket trading after the online hydroponics equipment retailer posted 4Q and FY21 earnings
  • Alibaba (BABA US) rises 2.5% in U.S. premarket trading after the company’s shares listed in Hong Kong rose, adding to the Hang Seng Tech Index’s gains
  • Frequency Electronics (FEIM US) soars 20% in U.S. premarket trading after being awarded a contract by the Office of Naval Research to develop an atomic clock
  • Concentrix (CNXC) jumped 5.9% in Monday after hours trading after setting its first dividend payment and buyback program since being spun off from from Synnex in December
  • Brookdale Senior Living (BKD US) shares fell in extended trading on Monday after announcing a $200 million convertible bond offering
  • Altimmune (ALT US) rose as much as 4.2% in Monday postmarket trading on plans to announce results for an early stage study of ALT-801 in overweight people on Tuesday
  • Ziopharm Oncology (ZIOP US) fell in extended trading after company said it cut about 60 positions, or a more than 50% reduction in personnel, to extend its cash runway into 1H 2023
  • Montrose Environmental Group (MEG US) was down 2.8% Monday postmarket after offering shares via JPMorgan, BofA Securities, William Blair

The main catalyst for the stock selloff was the continued drop in Treasurys which sent the 10-year Treasury rising as high as 1.55% while shorter-dated rates surged toward pre-pandemic levels.

This in turn was driven by the relentless meltup in commodities: overnight Brent roared above $80 a barrel - on its way to Goldman's revised $90 price target - on louder signs that demand is running ahead of supply and depleting inventories as the world finds itself in an unprecedented energy crisis. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed.

Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing.

As Bloomberg notes, traders have begun reassessing valuations amid multiplying global risks, while Fed officials have communicated increasingly hawkish signals in recent days as supply-chain bottlenecks threaten to keep inflation elevated. China’s growth slowdown which saw Goldman lower its q/q Q3 GDP forecast to a flat 0.0%, and a debt crisis in the nation’s property market.have also fueled the risk-off shift.

"Central bankers have set out how they want to normalize monetary policy for some time,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “That process could start soon. The realization of this has the potential to provoke some volatility in rates and equities."

Elsewhere, European stocks also declined with the Stoxx Europe 600 dragged down most by technology shares. Europe’s Stoxx Tech Index drops as much as 2.8% to a five-week low after falling 1.5% on Monday having previously touched its highest level since 2000 earlier in the month. Single-stock downgrades also weighed. Stocks which performed particularly well this year are among the biggest fallers, with chip equipment makers BE Semi -4.6% and ASML -4.4%, and chipmaker Nordic Semi down 4.2%. Among other laggards, Logitech drops as much as 8.5% after being downgraded to underweight at Morgan Stanley.

Earlier in the session, Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares.  The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark.

“The climb in yields led to the selling of growth stocks that have been strong, with investors rotating into names that are sensitive to business cycles - not unlike what happened in U.S. equities,” said Shutaro Yasuda, an analyst at Tokai Tokyo Research Center.  Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance. Australia’s equity benchmark was among the biggest losers in Asia Tuesday, dragged down by losses in mining and healthcare stocks. Still, broad-based gains in oil explorers and refiners helped mitigate the Asian market’s retreat. In South Korea, importers and distributors of liquefied petroleum gas and liquefied natural gas rallied as the price of natural gas jumped.

The future of Evergrande is being forensically scrutinized by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company's wealth management unit. Without making reference to Evergrande, the People's Bank of China (PBOC) said Monday in a statement posted to its website that it would "safeguard the legitimate rights of housing consumers".

Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country's manufacturing sector and associated supply chains. Analysts cautioned the ongoing blackouts could affect the country's listed industrial stocks.

"What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets," Tai Hui, JPMorgan Asset Management's Asian chief market strategist told Reuters. "Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting."

In rates, as noted above, the selloff in Treasuries gathered pace in Asia, early Europe session leaving yields cheaper by 3.5bp to 5.5bp across the curve with 20s and 30s extending above 2% and 10-year through 1.50%. Treasury 10-year yields traded around 1.53%, cheaper by 4.5bp on the day after topping at 1.55%, highest since mid-June; in front- and belly, 2- and 5-year yields remain near cheapest levels in at least 18 months; in 10-year sector, gilts lag by 3bp vs. Treasuries while German yields are narrowly richer. Gilts underperformed further, where long-end yields are cheaper by up to 7.5bp on the day.

Treasury futures volumes over Asia, early European session were at more than twice usual levels, with most activity seen in 10-year note contract; eurodollar futures volumes were also well above recent average. With recent aggressive move higher in yields, threat of convexity hedging has exacerbated moves as rate hike premium continues to filter into the curve after last week’s FOMC. Auctions conclude Tuesday with 7-year note sale, while busy Fed speaker slate includes Fed Chair Powell.

In FX, the Bloomberg dollar index reached the highest level in more than a month as rising energy costs drove up Treasury yields for a fourth session. The dollar gained against all its peers; Japan’s currency slid for a fifth day against the greenback before a speech Tuesday from Fed Chair Jerome Powell who will say inflation is elevated and is likely to remain so in coming months, according to prepared remarks. Treasury two-year yields rose to the highest since March 2020. “Dollar-yen saw the clearest expression of Treasury yield increases and we attributed this divergence to the surge in energy prices,” says Christopher Wong, senior foreign-exchange strategist at Malayan Banking in Singapore. U.S. natural gas futures soared to their highest since February 2014 on concern over tight inventories. Brent oil topped $80 a barrel amid signs demand is outrunning supply. The euro slipped to hit its lowest level since Aug. 20, nearing the year-to-date low of $1.1664. The Treasury yield curve bear steepened; euro curves followed suit, with the yield on U.K. 10-year notes soaring past 1% for the first time since March 2020 on the prospects for Bank of England policy tightening.

In commodities, Crude futures extend Asia’s gains. WTI rises as much as 1.6% to highs of $76.67 before stalling. Brent holds above $80. Spot gold trades around last week’s lows near $1,740/oz. Base metals are mixed: LME aluminum outperforming, rising as much as 1.1%; nickel and copper are in the red.

Looking at the day ahead, one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July.

Market Snapshot

  • S&P 500 futures down 0.7% to 4,403.50
  • STOXX Europe 600 down 1.2% to 456.83
  • MXAP down 0.4% to 200.06
  • MXAPJ down 0.4% to 641.05
  • Nikkei down 0.2% to 30,183.96
  • Topix down 0.3% to 2,081.77
  • Hang Seng Index up 1.2% to 24,500.39
  • Shanghai Composite up 0.5% to 3,602.22
  • Sensex down 1.4% to 59,209.94
  • Australia S&P/ASX 200 down 1.5% to 7,275.55
  • Kospi down 1.1% to 3,097.92
  • Brent Futures up 0.8% to $80.15/bbl
  • Gold spot down 0.4% to $1,742.61
  • U.S. Dollar Index up 0.20% to 93.57
  • German 10Y yield rose 2.7 bps to -0.196%
  • Euro down 0.1% to $1.1681

Top Overnight News from Bloomberg

  • Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy
  • Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories
  • As the dust settles on Germany’s election, control over the finances of Europe’s largest economy could fall to a 42-year-old former tech entrepreneur who wants to lower taxes and tighten spending
  • Wells Fargo agreed to pay $37 million in penalties and forfeiture to settle U.S. claims that it overcharged almost 800 commercial customers that used its foreign exchange services, the latest in a series of scandals at the bank

A more detailed look at global markets courtesy of Newsquawk

Asian equity markets traded mixed following on from a Wall Street lead where value outperformed growth and tech suffered as yields rose. ASX 200 (-1.5%) was the laggard with losses in healthcare, gold miners and tech frontrunning the declines which dragged the index beneath 7300. Nikkei 225 (-0.2%) was lacklustre and briefly approached 30k to the downside but then bounced off worse levels amid a softer currency, while the KOSPI (-1.1%) also declined following a suspected North Korean ballistic missile launch and with a recent South Korean court order to sell seized Mitsubishi Heavy assets as compensation for wartime forced labour, threatening a flare up of tensions between Japan and South Korea. Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were underpinned after the PBoC continued to inject liquidity ahead of the approaching National Day holidays and with Hong Kong led higher by strength in property names after the PBoC stated it will safeguard legitimate rights and interests of housing consumers which also provided Evergrande-related stocks further reprieve from their recent sell-off. Finally, 10yr JGBs retreated on spillover selling from T-notes after yields rose on the back of further Fed taper rhetoric and with prices not helped by the uninspiring 2yr and 5yr auctions stateside, while weaker results at the 40yr JGB auction also provided a headwind for prices.

Top Asian News

  • Top-Performing Global Luxury Stock Seen Cooling After 680% Gain
  • China Power Price Hike Sought Amid Supply Crunch: Energy Update
  • Macau Evacuates Airport Quarantine Hotel After Outbreak
  • Iron Ore Dips Again as China Power Crisis Adds to Steel Curbs

Bourses in Europe extended on the losses seen at the cash open and trade lower across the board (Euro Stoxx 50 -1.7%; Stoxx 600 -1.7%) as sentiment retreated from a mixed APAC handover as month-end looms alongside tier 1 data and a slew of central bank speakers. US equity futures have also succumbed to the mood in Europe alongside the surge in global yields – which takes its toll on the NQ (-1.5%) vs the ES (-0.8%), YM (-0.4%) and RTY (-0.3%). From a more technical standpoint, ESZ1 fell under its 50 DMA (4,431) and tested the 4,400 level to the downside, whilst NQZ1 briefly fell under 15k and the YMZ1 inches towards its 100 DMA (34,489). Back to Europe, the FTSE 100 (-0.4%) sees losses to a lesser extent vs its European peers as energy prices and yields keep the index oil giants and banks supported – with some of the top gainers including Shell (+2.8%), BP (+2.1%). Sectors in Europe are predominantly in the red, but Oil & Gas buck the trend. Sectors also portray more of a defensive bias, whilst the downside sees Tech, Real Estate, and Travel & Leisure at the foot of the bunch, with the former hit by the rise in yields, which sees the US 10yr further above 1.50%, the 20yr above 2.00% and the UK 10yr hitting 1.00% for the first time since March 2020. In terms of individual movers, Smiths Group (+3.8%) is at the top of the Stoxx 600 following encouraging earnings. ING (+0.3%) holds onto gains after sources noted SocGen's (-0.6%) interest in ING's retail banking arm. Finally, chip-maker ASM International (-3.5%) has succumbed to the broader tech weakness despite upping its guidance and announcing capacity expansion by early 2023.

Top European News

  • U.K. 10-Year Yield Rises Past 1% for First Time Since March 2020
  • Goldman’s Petershill Unit Valued at $5.5 Billion in U.K. IPO
  • Go-Ahead Sinks as U.K. Takes Over Southeastern Rail Franchise
  • Hedge Funds and Private Equity Are Targeting European Soccer

In FX, It took a while for the index to breach resistance ahead of 93.500, but when US Treasuries resumed their bear-steepening run and the intensity of the moves in futures and cash picked up pace the break beyond the half round number was relatively quick and decisive. Indeed, the DXY duly surpassed its post-FOMC peak (93.526) and a prior recent high from August 19 (93.587) on the way to reaching 93.619 amidst almost all round Dollar gains, as 5, 10, 20 and 30 year yields all rallied through or further above psychological levels (such as 1%, 1.5% and 2% in the case of the latter two maturities). However, petro and a few other commodity currencies are displaying varying degrees of resilience in the face of general Greenback strength that is compounded by buy signals for September 30 rebalancing on spot month, quarter and half fy end. Ahead, trade data, consumer confidence, more regional Fed surveys, speakers and the 7 year auction.

  • NZD/CHF/JPY/AUD - The Kiwi was already losing altitude above 0.7000 vs its US counterpart and 1.0400 against the Aussie on Monday, so the deeper retreat is hardly surprising to circa 0.6975 and 1.0415 awaiting some independent impetus that may come via NZ building consents tomorrow. Meanwhile, the Franc has recoiled towards 0.9300 in advance of comments from SNB’s Maechler and the Yen continues to suffer on the aforementioned rampant yield and steeper curve trajectory on top of a more pronounced 1+ sd portfolio hedge selling requirement vs the Buck, with Usd/Jpy meandering midway between 110.94-111.42 parameters irrespective of renewed risk aversion due to same bond rout dynamic. Back down under, Aud/Usd has faded from around 0.7311 to the low 0.7260 area, though holding up a bit better in wake of not quite as weak as forecast final retail sales overnight.
  • CAD/EUR/GBP - All softer against their US rival, but the Loonie putting up a decent fight with ongoing help from WTI crude that has now topped Usd 76.50/brl, and Usd/Cad also has decent option expiry interest to keep an eye on given 1.2 bn rolling off at 1.2615 and an even heftier 3 bn at 1.2675 compared to current extremes spanning 1.2693-1.2652. Elsewhere, the Euro has lost its battle to stay afloat of multiple sub-1.1700 lows even though EGBs are tumbling alongside USTs and the same goes for Sterling in relation to the 1.3700 handle irrespective of the 10 year Gilt touching 1% for the first time since March 2020.
  • SCANDI/EM - Brent’s advances on Usd 80 brl have been offset to an extent by soft Norwegian retail sales data, as the Nok pares more of its post-Norges Bank gains, while the Sek looks somewhat caught between stalls following a recovery in Swedish consumption, but big swing in trade balance from surplus to larger deficit. However, the Try is taking no delight from the costlier price of oil or remarks from Turkey’s Deputy Finance Minister contending that interest rates can move lower by reducing the current account and budget deficits, or conceding that Dollarisation is a problem and steps need to be taken to enhance confidence in the Lira. Conversely, the Cnh and Cny are still holding a firm line following another net injection of 2 week funds from the PBoC and the Governor saying that China will lengthen the period for the implementation of normal monetary policy, adding that it has conditions to keep a normal and upward yield curve, as it sees no need to purchase assets at present.

In commodities, WTI and Brent futures have extended on the gains seen during APAC hours, which saw the Brent November contract topping USD 80/bbl, albeit the volume and open interest has migrated to the December contract – which topped out just before the USD 80/bbl mark. WTI November meanwhile advanced past the USD 76/bbl mark to a current peak at USD 76.67/bbl (vs low USD 75.21/bbl). Desks have been attributing the leg higher to tight supply – with the UK fuel situation further deteriorating amid a shortage of drivers coupled with panic buying. It's worth bearing in mind that the demand side of the equation has also seen supportive, with the US announcing the lifting of international travel curbs recently alongside the economic resilience to the Delta variant heading into the winter period. Traders would also be keeping an eye on the electricity situation in China, which in theory would provide tailwinds for diesel demand via generators, although this could be offset by a slowdown in economic activity due to power outages. There has also been growing noise for OPEC+ to hike output beyond the monthly plan of 400k BPD, with some African nations also struggling to ramp up production due to maintenance issues and lack of investments. Ministers recently noted that the plan would be maintained at next week's confab. As a reminder, the OPEC World Oil Outlook is set to be released at 13:30BST/08:30EDT, although the findings may be stale given the recent developments in crude dynamics. Major banks have also provided commentary on Brent following Goldman Sachs' bullish call recently, with Barclays upping its forecast for both benchmarks due to supply deficits, whilst Morgan Stanley maintained its forecast but suggested that the USD 85/bbl Brent scenario clearly exists. MS also noted that oil inventories continue to draw at high rates and suggest that the market is more undersupplied than generally perceived; the analysts see the market undersupplied into 2022 amid its expectation for further OPEC discipline. Nat gas also remains in focus, with prices +11% at one point, whilst Russia's Kremlin said Russia remains the safeguard of natural gas to Europe and Gazprom is ready to discuss new gas supply contracts with increased volumes to meet rising European demand. It's also worth being aware of the increasing likelihood of state intervention at these levels as nations attempt to save or at least cushion consumers and company margins. Elsewhere, precious metals are under pressure as the Buck remains buoyant, with spot gold still under USD 1,750/oz as it inches closer to the 11th August low of USD 1,722/oz. Spot silver remains within recent ranges above USD 22/oz. Overnight Chinese nickel and tin prices extended losses with traders citing subdued demand, whilst coking coal and coke futures leapt on tight supply.

US Event Calendar

  • 8:30am: Aug. Advance Goods Trade Balance, est. -$87.3b, prior -$86.4b, revised -$86.8b
  • 8:30am: Aug. Retail Inventories MoM, est. 0.5%, prior 0.4%; Wholesale Inventories MoM, est. 0.8%, prior 0.6%
  • 9am: July S&P CS Composite-20 YoY, est. 20.00%, prior 19.08%
  • 9am: July S&P/CS 20 City MoM SA, est. 1.70%, prior 1.77%
  • 9am: July FHFA House Price Index MoM, est. 1.5%, prior 1.6%
  • 10am: Sept. Conf. Board Consumer Confidence, est. 115.0, prior 113.8
    • Expectations, prior 91.4
    • Present Situation, prior 147.3
  • 10am: Sept. Richmond Fed Index, est. 10, prior 9

Central Bank Speakers

  • 9am: Fed’s Evans Makes Welcome Remarks at Payments Conference
  • 10am: Powell and Yellen Appear Before Senate Banking Panel
  • 1:40pm: Fed’s Bowman Speaks at Community Bank Event
  • 3pm: Fed’s Bostic Discusses the Economic Outlook
  • 7pm: Fed’s Bullard Discusses U.S. Economy and Monetary Policy

DB's Jim Reid concludes the overnight wrap

What a difference a week makes. You hardly hear the word Evergrande now. We asked in a flash poll last week whether we would still be talking about it in a month or whether it would be a distant memory by then. Maybe we should have narrowed the time frame to a week! We’ve quickly moved on to rate hikes and rising bond yields as the topic de jour. A further rise in the Bloomberg Commodity Spot Index (+1.87%) to a fresh high for the decade helped reinforce the move.

Indeed, sovereign bond yields moved higher once again yesterday amidst a sharp rise in inflation expectations, with those on 10yr Treasury yields rising +3.6bps to 1.487%, their highest level in over 3 months. Meanwhile the 2yr yield rose +0.8bps to 0.278%, its highest level since the pandemic began, which comes on the back of last week’s Fed meeting that prompted investors to price in an initial rate hike from the Fed by the end of 2022.

The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier. We were waiting for the wind to blow in this country to get alternatives back on stream and boy did it blow yesterday but with no impact yet on gas prices. Lower real rates dampened the rise in yields across the continent, though yields on 10yr bunds (+0.5bps), OATs (+0.9bps), BTPs (+1.3bps) and gilts (+2.7bps) had all moved higher by the close of trade.

Those spikes in commodity prices were evident more broadly yesterday, with energy prices in particular seeing a major increase. Brent crude oil prices were up +1.84% to $79.53/bbl, marking their highest closing level since late-2018, and this morning in trading they have now exceeded the $80/bbl mark with a further +0.94% increase. It was much the same story for WTI (+1.99%), which closed at $75.45/bbl, which was its own highest closing level since 2018 too. And those pressures in UK natural gas prices we mentioned above were seen across Europe more broadly, where futures were up +8.92%.

With yields moving higher and inflationary pressures growing stronger, tech stocks struggled significantly yesterday, with the NASDAQ down -0.52%. The megacap tech FANG+ index fell -0.15% on the day, but was initially down as much as -1.7% in early trading. The NASDAQ underperformed the S&P 500, which was only down -0.28%, but that masked significant sectoral divergences, with interest-sensitive growth stocks struggling, just as cyclicals more broadly posted fresh gains. More specifically, energy (+3.43%), bank (+2.29%) and autos (+2.19%) led the S&P, while biotech (-1.65%) and software (-1.39%) shares were among the largest laggards. European equities were also pretty subdued, with the STOXX 600 down -0.19%, though the DAX was up +0.27% following the results of the German election, which removed the tail risk outcome of a more left-wing coalition featuring the SPD, the Greens and Die Linke.

Staying on the political scene, we are now less than 72 hours away from a potential US government shutdown as it stands. As was expected, Republicans in the Senate blocked the House-passed measure to fund the government for another 2 months and raise the debt ceiling for 2 years. While Democrats have not put forward their alternative strategy if Republicans refuse to vote to lift the debt ceiling, their only option would be to attach it to the budget reconciliation plan that currently makes up much of the Biden economic agenda. In an effort to keep all party members on board, Speaker Pelosi moved the vote on the $550bn bipartisan infrastructure bill to Thursday in order to give all sides more time to finish the larger budget bill and pass both together. It is a going to be a very busy Thursday, since Congress will have to also pass the funding bill that day. Republicans and Democrats already agree on a funding bill to keep the government open that does not include the debt ceiling increase so it is just a matter of how exactly the debt ceiling provision goes through without a Republican Senate vote.

Overnight in Asia, equity indices are seeing a mixed performance. On the one hand, most of the region including the Nikkei (-0.24%) and KOSPI (-0.80%) are trading lower as investors begin to price in tighter monetary policy from the Fed. However, the Hang Seng (+1.50%), Shanghai Composite (+0.53%) and CSI (0.38%) have all advanced after the People’s Bank of China said that they would ensure a “healthy property market”. Looking forward, US equity futures are pointing to little change, with those on the S&P 500 down just -0.05%, and 10yr Treasury yields have risen +1.9bps this morning to trade above 1.50% again.

Back to the German election, where the aftermath yesterday saw various party leaders assess the results and stake their claims to participate in a new coalition. As a reminder, the SPD came in first place with 25.7%, but the CDU/CSU weren’t far behind on 24.1%, making it mathematically possible for either to form a government in a coalition with the Greens and the FDP. The SPD’s chancellor candidate, Finance Minister Olaf Scholz, appealed for the Greens and FDP to join him in forming a government, and told the media that he wanted to form a coalition before Christmas. Meanwhile Green co-leader Robert Habeck said that “Of course there is a certain priority for talks with the SPD and the FDP”, but said that this didn’t mean they wouldn’t speak with the CDU/CSU either.

As the SPD were calling for an alliance, the tone sounded more negative from the CDU’s leadership, even though Armin Laschet said that he had not given up on the idea of forming a government. Notably, Laschet said that no party was able to draw a clear mandate from the result, including the SPD, and this echoed remarks from the CSU leader Markus Söder, who said that the conservatives had no mandate to form a government, though they could “make an offer out of a sense of responsibility for the country.” Meanwhile, attention will turn to the FDP and the Greens to see which way they’re leaning when it comes to forming a government. FDP leader Lindner said that he would hold preliminary talks with the Greens, after which they would be open to invitations from either the SPD or the CDU/CSU for further discussions.

Back on the UK, there was an interesting speech from BoE Governor Bailey yesterday, where he echoed the line from the MPC minutes last week, saying that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainable over the medium-term”. However, he also said that their view was that “the price pressures will be transient”, and that “monetary policy will not increase the supply of semi-conductor chips … nor will it produce more HGV drivers.” He then further added that tighter policy “could make things worse in this situation by putting more downward pressure on a weakening recovery of the economy”. So a bit of a mixed message of backing rate hike expectations but warning about its impact on growth.

Over in the US we heard from a host of Fed speakers with Governor Brainard saying that while “employment is still a bit short of the mark” of “substantial further progress”, she expects that the labour market will recover enough to start tapering asset purchases soon. Separately on the inflation debate, Minneapolis Fed President Kashkari argued that this year’s pickup in US inflation has been a byproduct of the supply disruptions associated with Covid and that policy makers should not react to it just yet. He cited the need to get US employment back up as the Fed’s “highest priority”. New York Fed President Williams agreed with his colleague, saying that “this process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede.” And Chicago Fed President Evans is even worried about downside inflation risks, as he is " more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.”

Lastly, news came out yesterday that Boston Fed President Rosengren will retire this week due to health concerns. He was due to step down in June regardless as there is a mandatory retirement age of 65. Dallas Fed President Kaplan also announced his retirement yesterday, which will take effect October 8th. Both officials have drawn scrutiny in recent days stemming from their recent disclosure of trading activity over the last year, though the activity did not violate the Fed’s ethics code even as Fed Chair Powell announced an official review of those rules. The Boston Fed President will be a voting member on the FOMC next year, and the Dallas Fed President in 2023.

Running through yesterday’s data, the preliminary reading for US durable goods orders in August showed growth of +1.8% (vs. +0.7% expected), and the previous month was also revised up to show growth of +0.5% (vs. -0.1% previously). Meanwhile core capital goods orders grew by +0.5% (vs. +0.4% expected), and the previous month’s growth was revised up two-tenths. Finally, the Dallas Fed’s manufacturing activity index for September came in at 4.6 (vs. 11.0 expected) – its lowest reading since July 2020.

To the day ahead now, and one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July.

Tyler Durden Tue, 09/28/2021 - 07:52
Published:9/28/2021 7:05:06 AM
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[Markets] Dow 40000 – A Huge Disappointment Of Promises Dow 40000 – A Huge Disappointment Of Promises

Authored by Lance Roberts via RealInvestmentAdvice.com,

Dow 40000! Yes, it will eventually happen. Such should not be surprising given the massive amounts of global liquidity chasing fewer assets. But while Dow 40,000 will undoubtedly bring out the “Party Hats,” it is also a massive disappointment of the promises made to investors.

Dow Milestones

“Nothing says bull stock market like the Dow Jones Industrial Average (DJIA) crossing another thousand-point barrier. The recent rise above 34K sparked a special interest. The 1,000-point move from 33,000 to 34,000 was the third fastest on record,’ and the Dow’s move was ‘its fourth thousand-point hurdle cleared this year alone.’ – John Tobey

If price acceleration in the market is a sign of investor optimism, this chart should undoubtedly support that view.

There were only three other times in history where the Dow advanced this rapidly:

  • 1999-2000

  • 2017-2018

  • 2019-2020

Unfortunately, each of those periods ended in corrections and outright bear markets.

Maybe it’s just a coincidence.

Maybe “this time is different.”

Or, it could just be that extreme exuberance by investors tends to be a later stage event.

Dow 40,000 Is A Real Disappointment

What most investors tend to forget is the damage done by those market corrections and bear markets.

Here is a good example.

In 2019, CNBC ran an article touting the call of “Billionaire Investor Ron Baron” that the Dow would reach 650,000 in just 50-years. Of course, that was just before the 35% rout in March 2020. However, as noted in the article:

“Speaking from his annual investment conference in New York, Baron predicted the Dow Jones Industrial Average, based on historical moves over decades, will reach 650,000 in 50 years, with an over $500 trillion U.S. economy.”

If we do some quick math, that assumption requires a 6.6% annualized return on both the Dow and the U.S. economy. Such is undoubtedly in line with the economy’s long-term growth trends, and the charts below prove the point.

Of course, those returns are also what financial advisors promise clients who “buy and hold” an index-based portfolio.

Here is the problem.

It’s complete bulls*** on both counts.

Mr. Baron, as noted, was speaking at his “buy and hold” conference, and the tweet grabbed both attention and headlines.

The problem with being “bullish all the time” is that it is also perilous.

Such is particularly the case in late-stage “bull markets,” where seemingly ever-rising prices mask poor investment decisions and excessive portfolio “risk.” As a result, previously lousy investment ideas, products, and strategies tend to resurface in a different form or package. Investment strategies like “buy and hold” and “dollar cost averaging” become popular even though they are guaranteed to leave you well short of your financial objectives in the future.

The Economy No Longer Grows At 6%

Let’s start with the economy.

The economy has not attained an annualized growth rate of 6% since the 1950’s when the U.S. was the manufacturing hub of the entire world. Following WWII, the majority of Europe, and Japan following two nuclear bombs, got devastated. Today, the U.S. is no longer a manufacturing hub but a services provider for ever-lower costs. Services, as compared to manufacturing, have a very low economic multiplier effect. Given $28 Trillion in debt and climbing, attaining a sustainable 6% growth rate is not possible.

The chart below pretty much details the problem.

Many argue the U.S. economy has grown by more than 6% on average over the long term. (This is a true statement) However, it is also a very misleading statement. Average and actual growth are two very different things.

If we go back to 1901 and assume the economy grew at just 6% annualized, lower than Mr. Baron’s 6.6% suggestion, the size of the economy should be approaching $500 Trillion. Not the paltry $19 trillion at the end of 2020.

What happened?

There were many years of low or negative economic growth.

The same factors hold with the Dow.

Dow 650,000

As noted, Mr. Baron suggests the Dow will rise to 650,000 in the next 50-years. So clearly, as a young investor, you should sock all your hard-earned savings into an “index fund” and hang on.

“The stock market is literally the same thing as a high-yield savings account.” – Jim J. (names have been changed to protect the stupid.)

Here’s the thing. 

The financial media states that markets have an average annual return of 8-10%. So, assuming the Dow had compounded at just 5% since 1901, we would already be past 650,000.

But it’s not.

We are just stuck here at a “crappy ole’ 35,000.”

As with economic growth, there is a massive difference between compound returns and average returns. The historical performance of the markets since 1900, including dividends, has averaged a higher rate of return than just 5% annually. Therefore, the Dow should be much closer to 700,000 today than 650,000 in the next 50-years.

Again, it’s not.

Nope…we are just hanging out way down here at 35,000.

Why? Because crashes matter. Such is particularly the case when it comes to your financial goals and investment time horizons.

Why Crashes Matter

Think about it this way.

If “buy and hold” investing worked the way the media suggests, then why are the financial statistics of 80% of Americans so poor?

The three most significant factors are: 

  1. Destruction of capital;

  2. Lack of savings, and;

  3. Time.

While lost capital gain eventually recover, the time lost “getting back to even” cannot be. Unfortunately, we don’t live forever, and time is our ultimate enemy. Such is also why, after two major bear markets, most “boomers” are simply unprepared financially for retirement. 

Who wouldn’t love a world where everyone invests some money, the markets rise 6% annually, and everyone one’s a winner?

Markets Don’t Really Compound

Unfortunately, markets don’t work that way. A vast difference exists between an “index” that benefits from share buybacks, substitutions and market capitalization weighting versus a portfolio invested in actual dollars. Yes, a “buy and hold” portfolio will grow in the financial markets over time, but it DOES NOT compound.

Read this carefully: “Compound returns assume no principal loss, ever.”

To visualize the importance of this statement, the chart below shows $100,000, adjusted for inflation, invested in 2000 versus a 6% annual compound rate of return. The shaded area shows the difference between the portfolio value and the 6% rate of return.

As noted, due to the impact of two bear markets, the investor that started in 2000 is still well short of the rate of return promised. The investor that began in 2007 only just recently achieved their goal. However, a bear market in the future will set them back markedly.

See the problem? If you were 45 in 2000, you didn’t make your retirement goal.

With markets now back to some of the highest valuations on record, forward returns over the next 10-years will be substantially lower than they have been over the past 10-years.

That isn’t being bearish. That is just math.

Throughout history, bull market cycles are only one-half of the “full market” cycle. Such is because during every “bull market” cycle the markets, and economy, build up excesses that are “reverted” during the following “bear market.”

Reversion To The Mean

As Sir Issac Newton once stated:

“What goes up, must come down.” 

Looking beyond the very short-term overly optimistic view of “this time is different,” the coming unwinding of current speculative extremes will occur after completing the current market cycle.

When we look at 10-year trailing returns, there is sufficient historical evidence to suggest total returns will decline towards zero over the next 5-years from 12% annualized currently. (These are trailing 10-year total real returns, not forward)

A decline in the next 3-years of only 30%, the average drawdown during a recession, will likely achieve that goal.

Why will a bear market eventually happen? It is a function of time (length of market cycles), math (valuations,) and physics (price deviations for long-term means.)

When will it happen, and what will cause it? No one knows.

There is one big secret in achieving long-term investment success.

Being “right” in the first half of the market cycle is not as important as being “wrong” during the second half.”

You really should be disappointed in Dow 40,000.

Tyler Durden Mon, 09/27/2021 - 09:51
Published:9/27/2021 9:03:12 AM
[Markets] US STOCKS-Dow, S&P 500 end with gains up after bumpy week, but Nike drags The Dow and S&P 500 edged higher on Friday and ended a turbulent week with slight increases, helped by gains in Tesla and Facebook that offset a tumble by Nike. Athletic wear company Nike's shares fell 6.3% and were the biggest drag on the Dow and the S&P 500 after it delivered a downbeat sales forecast and warned of delays during the holiday shopping season, blaming a supply chain crunch. Published:9/24/2021 4:14:14 PM
[Markets] Dow Jones Gains As Pelosi Hints At Spending Bill Changes; Tesla CEO Elon Musk Touts Chips The Dow Jones struggled. Nancy Pelosi hinted at spending bill changes and Tesla CEO Elon Musk made bullish noises on chips. Snap stock surged. Published:9/24/2021 3:41:46 PM
[Markets] Dow Jones Struggles As Pelosi Hints At Spending Bill Changes; Tesla CEO Elon Musk Touts Chips The Dow Jones struggled. Nancy Pelosi hinted at spending bill changes and Tesla CEO Elon Musk made bullish noises on chips. Snap stock surged. Published:9/24/2021 2:49:53 PM
[Markets] US STOCKS-Wall St near even, dragged by Nike 6% drop after warning The Dow and S&P 500 were little changed in Friday afternoon trading following a two-day rally, with a downbeat sales forecast from Nike offsetting gains in financial and energy shares. The sportswear maker's shares dropped 6.2% and were the biggest drag on the Dow and the S&P 500 after it also warned of delays during the holiday shopping season, blaming a supply chain crunch. Published:9/24/2021 2:13:18 PM
[Markets] Dow Flat As Nike Stock Weighs On The Blue Chip Index; This Tech Jams The Dow traded flat after multiple days of gains. This megacap tech stock is jamming on its breakout. Published:9/24/2021 1:14:00 PM
[Markets] Dow Jones Trims Early Loss Fueled By China, Nike, But This Blue Chip In Buy Range Key market indexes moved off session lows midday Friday, as the Dow Jones Industrial Average erased most of an early 117-point loss. Published:9/24/2021 11:43:51 AM
[Markets] Dow Jones Drops As Evergrande Misses Interest Payment; Bitcoin Tumbles On China Ban The Dow Jones Industrial Average fell 115 points Friday, as China Evergrande missed a key interest payment. Bitcoin dived on a Chinese crackdown. Published:9/24/2021 9:06:49 AM
[Markets] Nasdaq down sharply early Friday as Dow and S&P battle to end week in black Nasdaq down sharply early Friday as Dow and S&P battle to end week in black Published:9/24/2021 9:06:49 AM
[Markets] Nike's share-price decline set to shave 50 points off Dow at Friday open Nike's share-price decline set to shave 50 points off Dow at Friday open Published:9/24/2021 8:36:29 AM
[Markets] Dow Jones Futures Fall As Evergrande Misses Interest Payment; Bitcoin Tumbles On China Ban Dow Jones futures fell 150 points Friday, as China Evergrande missed a key interest payment. Bitcoin dived on a Chinese crackdown. Published:9/24/2021 8:10:07 AM
[Markets] Nike's stock drop would shave more than 50 points off the Dow's price Shares of Nike Inc. sank 5.1% in early trading Friday, enough to pace the Dow Jones Industrial Average's premarket decliners, after the athletic apparel and accessories giant reported fiscal first-quarter profit that topped expectations but revenue that came up short. The stock's implied price decline would shave about 53 points off the price of the Dow, while Dow futures were down 144 points, or 0.4%, ahead of the open. Nike's stock is on track to suffer the biggest one-day decline since June 2 Published:9/24/2021 7:40:50 AM
[Markets] Dow finishes up 500 points as stocks continue 2-day comeback Dow finishes up 500 points as stocks continue 2-day comeback Published:9/23/2021 3:34:18 PM
[Markets] Dow Jones Rallies With China Set For Evergrande Collapse; Microsoft, Nvidia Offer Entries; Meme Stock Surges The Dow Jones gained as U.S. stocks rallied, even as China prepares for the demise of Evergrande. Microsoft and Nvidia offered buy points. Published:9/23/2021 3:34:18 PM
[Markets] Dow Jones Rises Over 570 Points, Leads Market Upside; This Blue Chip Tech Stock Scores Breakout The Dow Jones extended yesterday's rally in today's stock market and led the major equity indexes on the upside. Small caps outperformed. Published:9/23/2021 2:33:15 PM
[Markets] US Equity Indices Surge To Key Technical Levels US Equity Indices Surge To Key Technical Levels

A sudden wave of panic-buying took over the stonk markets this morning after they faded overnight gains.

This sent the majors up to critical technical levels.

The S&P is back at its 50DMA (having bounced off its 100DMA)...

The Dow is back up to its 100DMA...

And Small Caps are back up their 50DMA...

...what happens next?

Tyler Durden Thu, 09/23/2021 - 10:15
Published:9/23/2021 9:33:21 AM
[Markets] Dow Jones Rallies 400 Points As China Prepares For Potential Evergrande Failure; Costco, Nike To Report The Dow Jones Industrial Average rallied 400 points Thursday, as China prepares for the potential failure of property developer Evergrande. Published:9/23/2021 9:06:28 AM
[Markets] Dow Jones Futures Rally As China Prepares For Potential Evergrande Failure; Costco, Nike To Report Dow Jones futures rallied 175 points Thursday, as China prepared for the potential failure of Evergrande. Apple and Tesla rose modestly. Published:9/23/2021 7:39:13 AM
[Markets] Time To Say Goodbye To The Everything Bubble Time To Say Goodbye To The Everything Bubble

Authored by Egon von Greyerz via GoldSwitzerland.com,

Will the autumn of 2021 be the end of the everything bubble?

Are investment markets very soon coming to the end of market insanity?

Since there is very little sanity left in markets or the in the world economy, we have now reached a point where we must accept madness as sanity, as George Bernard Shaw said:

When the world goes mad, one must accept madness as sanity; since sanity is, in the last analysis, nothing but the madness on which the whole world happens to agree.”

George Bernard Shaw

Investment markets today are all about instant gratification and getting rich quick.

“Stocks always go up” and so does property in the everything bubble. Even the normally boring bond market has had a 40 year rise. And then we have the supercharged tech stocks, many of which have gained 1000s of percent in this century

And we mustn’t forget the SPAC stocks (Special Purpose Acquisition Companies) or Blank Cheque Companies where shell companies are used to acquire existing companies to inflate their share price.

None of these things are new of course. During the South Sea Bubble in the 1720s for example, companies were formed and capital raised with just the purpose of “Making Money”.

We mustn’t forget the cryptocurrencies which are now worth valued at $2 trillion. They were just over $1 billion 8 years ago. Is that the bubble of the century like tulip bulbs in the 1600s or is it the money of the future. Well, most readers know or can guess my opinion on this!

VALUE INVESTING & WEALTH PRESERVATION IS FOR “WIMPS”

In a world where everything is based on “get rich quick” neither value investing nor wealth preservation enters the equation. Why worry about preserving your wealth when you could have made 14x your money on the Nasdaq since 2009 or 5,000x your investment on Bitcoin since 2011.

Calling tops is a mug’s game. Some of us who look at risk have been worried about the everything bubble economy for quite a while. To us, since the end of the Great Financial Crisis in 2009, the world economy and asset markets have been an illusion.

It is as if we are watching a virtual reality game in which some people automatically increase their wealth by millions or even billions of dollars every time they pass GO.

But as the rich are getting richer, the masses are just getting poorer and more indebted.

Although we see the wealth that has been acquired by many as an illusion that will soon evaporate, for the ones who have benefited, this is all very real.

Anyone who believes that these gains are real and sustainable will have the shock of a lifetime in coming years. As I showed in a recent article about the End of the US Empire, the wealth of the 400 richest Americans has gone from 2% of GDP to 18% in the last 40 years.

This concentration of wealth is of course spectacular but also very dangerous for the world. Trees can always grow taller but they never grow to heaven!

AT THE END OF AN ERA – FALLS OF 90%

So as Shaw said, we are now in “the madness on which the whole world agrees”.

As I have often stated, I believe that we are at the end of a very major economic cycle. Not only are markets insane, but so are deficits, debts and currency debasements.

But also moral and ethical values have now vanished into thin air and been replaced by lies, deceit and the golden calf.

We are now in a very critical period for the world since excesses of the magnitude we are now seeing must be corrected.

Exponential moves in one direction are always corrected. And the corrections will be of a similar magnitude to the rise but happen much quicker. We are talking about falls of 90% or more in all major asset and debt markets.

Nobody believes such moves are possible with central banks and governments standing by with unlimited money printing combined with new Central Bank Digital Currencies that will save the world.

ILLUSIONS ARE JUST ILLUSIONS

We must understand that illusions cannot rescue the world economy.  This despite whatever concoctions central banks or Schwab (World Economic Forum) and his billionaire cronies come up with.

Virtual illusions in the form of fake money or empty promises can never repay debt, nor can they change the laws of nature.

Clearly all these “evil forces” will use their power to orchestrate fake resets to “save the world” in an attempt to tighten their grip on the world economy and the financial system. But a heavily indebted and fake system can never be reset in an orderly manner.

In my view, any artificial or fake reset will only have a very limited effect. It is just not possible to solve a debt problem with more debt whatever way the PTB (Powers That Be) try to dress it in sheep’s clothing.

So an orderly reset is bound to fail very quickly. A new digital Fiat and thus fake currency will not solve the world’s debt problem.

Writing off the debt is just another illusory act. If you write off the debt, the assets on the opposite side of the balance sheet will also implode in value. And since the debt is leveraging the assets, they will have a very long way to fall.

This is why asset implosions of 90-100% are very likely. Few people believe this to be possible but with debt collapsing so will the bubble assets which are all inflated by worthless debt.

We must remember that the big stock market crash in 1929-32 saw the Dow lose 90% of its value. It then took 25 years for the Dow to get above the 1929 high. And today 92 years after that peak, debts, deficits, and asset bubbles are far greater than at the end of the 1920s.

Below are a number of graphs that all point to the everything bubble.

THE BUFFETT INDICATOR

So there we have it, incontrovertible proof that this is the mother of all bubbles.

But as we have learnt in this century, bubbles can always grow bigger and especially if we are looking at the end of a major super cycle which could be as big (or long) as 2,000 years.

Nevertheless, the evidence keeps mounting of an epic asset bubble. In addition to the charts above that point to illusions never seen before in markets, we have a number of technical indicators that all point to the end of the everything bubble.

In the chart below, the RSI (Relative Strength Index) momentum indicator for example topped in 2017 and the major rise in the Dow since then has not been confirmed by the indicator. This is a very bearish sign albeit not a short term indicator.

Many other technical indicators including Elliott wave or Dow Theory all point to that a top to the everything bubble is imminent. Whether that means a top next week (which is possible), or in the next few months, time will tell. Some important cycle indicators point to potential turns between now and Sep 24.

SURVIVING THE EVERYTHING BUBBLE IS ALL ABOUT PROTECTING FROM RISK

But what is much more important than pinpointing the exact timing of the top is to understand the risk involved.

If, as we believe, we are now at the end of the everything bubble, nobody needs to time it. Investors should understand the upside might be 10% and the downside 90%+.

Who is foolish enough to accept such a risk? Maybe a 10% move up but a more certain 90% fall.

We are talking about a fall in real terms. If we get hyperinflation stocks and other assets can rise in nominal terms but fall in real terms when measured in stable purchasing power, like gold.

Well, that question is easy to answer. The whole investment world which has been spoilt by tens of trillions of dollars of fake money to fuel the Epic Everything Bubble will expect much more of the same in coming months or years.

Yes, much more money will be created but this time it will have very little effect. Instead the dollar, euro, yen etc will accelerate the falls that we have seen since 1913. They have all fallen 98-99% since then and by similar percentages since 1971 when Nixon closed the gold window.

The final 1-2% fall will soon start and take most currencies to their intrinsic value of ZERO. But don’t forget that this final fall is 100% from here.

Remember that measuring your assets in for example dollars is a futile exercise in self indulgence. You are just flattering your investment skills when you measure your performance in a currency that has lost 98% since 1971 and 84% since 2000.

If you use the same method in coming years, your paper wealth might look ok but be worthless in real terms. Just ask anyone who has lived in a hyperinflationary economy like Yugoslavia, Argentina or Venezuela. 

So what is a Sleeping Beauty investment. Not difficult to guess. It is an investment that you can forget about for 100 years and when you wake up, it will have maintained its purchasing power.

GOLD

If we get the expected stock market crash, it is possible that gold and the precious metals continue to correct a bit further like in 2008. As opposed to today, gold had then had a major bull run from $250 in 1999 to $1,000 in 2008. Weak gold hands then needed to get liquidity against a crashing stock market and the everything bubble.

Gold has now been in consolidation for years and there are a lot fewer speculative  investors compared to 2008. Therefore I expect a much smaller and shorter correction, if any.

Coming back to the Sleeping Beauty, there is one investment which you could safely put away and forget about for 100 years. It is of course physical gold, safely stored.

As long as you store gold in a safe place and safe country, you know that it will maintain  its REAL value as it has for 5,000 years.  Yes, there are fluctuations, but gold’s history tells us that it is not just the only money which has survived but also the only money which has maintained real purchasing power. 

Gold today at $1,750 is as UNLOVED AND UNDERVALUED as in 1971 at $35 and in 2000 at $288.

 I will continue to show the chart below until that situation is rectified.

This reminds me of the Roman Senator Cato during the Punic Wars (around 150 BC) who finished every speech in the senate with “Furthermore I consider that Carthage must be destroyed”.

In the end Cato got his way as Carthage was destroyed.

I have no doubt that gold will soon rectify the current undervaluation and reach levels that few can imagine. This is what both technicals and fundamentals are clearly indicating.

Tyler Durden Thu, 09/23/2021 - 06:30
Published:9/23/2021 6:05:36 AM
[Markets] These 2 Fintech Disruptors Made Big Waves Wednesday Investors got just about exactly what they wanted to hear from the Federal Reserve's monetary policy committee, which left interest rates in a range between 0% and 0.25% and signaled a potential time frame for starting to pull back on its quantitative easing program. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) were all up around 1% on the day. Both Robinhood Markets (NASDAQ: HOOD) and SoFi Technologies (NASDAQ: SOFI) have made forays into the fintech arena, and both stocks made big jumps as investors hoped for positive results from their latest initiatives. Published:9/22/2021 5:27:12 PM
[Markets] Dow finishes up nearly 340 points as Fed signals tapering could begin soon Dow finishes up nearly 340 points as Fed signals tapering could begin soon Published:9/22/2021 3:28:24 PM
[Markets] Dow, S&P 500 post best daily gain in 2 months even as Fed says tapering of asset purchases coming soon U.S. stock indexes closed higher Wednesday, with the S&P 500 and the Dow industrials notching their best daily gains in about two months, as Federal Reserve Chairman Jerome Powell signaled the central bank may announce a pullback of its bond purchases in November and could start to raise interest rates in 2022, with both moves largely expected by market participants. Subsiding fears around embattled Chinese property development company Evergrande, which rattled investors on Monday, also helped s Published:9/22/2021 3:28:24 PM
[Markets] Dow Jones Rallies On Evergrande News Ahead Of Fed Decision; FedEx Dives On Earnings The Dow Jones Industrial Average rallied 200 points early Wednesday on Evergrande news ahead of the Fed policy decision. FedEx dived on earnings. Published:9/22/2021 9:04:14 AM
[Markets] Dow industrials stake out 200-point gain early Wednesday Dow industrials stake out 200-point gain early Wednesday Published:9/22/2021 9:04:13 AM
[Markets] Dow Jones Futures Rally On Evergrande News Ahead Of Fed Decision; FedEx Dives On Earnings Dow Jones futures were higher early Wednesday on Evergrande news ahead of the Fed policy decision. FedEx dived on earnings. Published:9/22/2021 7:29:37 AM
[Markets] Dow, S&P 500 suffer 4th straight decline as stocks' turnaround fizzles Dow, S&P 500 suffer 4th straight decline as stocks' turnaround fizzles Published:9/21/2021 6:26:19 PM
[Markets] "Well, That Escalated Quickly..." "Well, That Escalated Quickly..."

Well, that escalated quickly...

US equities suffered their worst day since October (but was saved by a decent late-day ramp off the S&P 100DMA and Dow support). S&P was the least bad on the day followed by the Dow and the Nasdaq, with Small Caps the biggest loser...

The Dow, S&P, and Small Caps were ramped back to practically unchanged from the US cash open...

After being down almost 1000 points, the Dow bounced hard off the July lows...

As Deutsche's Jim Reid noted:

"To be fair I’ve been worried about the over leveraged Chinese property sector for years without anything much happening so it’s hard to know whether this is finally the big one or not."

With the opening crash driving the second biggest selling wave in history...

Source: Bloomberg

Who coulda seen that coming? Well plenty of things were flashing red...

1) the post options expiration “gamma unclench” and “vol expansion window” allows for movement in US Equities (SPX and QQQ $Gamma were both +90%ile just two weeks back, now Dealer Gamma in negative territory vs spot for both)

Source: SpotGamma

2) a US Equities Vol market which has been pricing outright “crash” metrics for months (SPX Skew, Put Skew, iVol vs rVol, Term Structure all upper 95-99%iles),

Source: Bloomberg

3) significant de-risking flow potential from “negative convexity” vol-sensitives (what was +99%ile SPX- and QQQ- options $Delta just ~two weeks ago, 90%ile historical CTA Trend net exposure in DM Equities and 87%ile Vol Control fund US Equities exposure)

4) this week’s FOMC event-risk (higher Fed dot plot will signal faster tightening trajectory for ’23 & ‘24) and Debt Ceiling fears (the T-Bill curve's kink is becoming increasingly extreme and USA sovereign risk is on the rise)...

Source: Bloomberg

5) a poor weekly seasonal slice for global Equities ahead (Sep17-Sep24 median chg ~-0.4% SPX, -0.9% HSCEI, DAX & Eurostoxx, -1.4% for Russell, with clear “Defensives / Duration over Cyclicals” historical sector performance tilts)…

6) a macro scare catalyst to-boot (China real estate “contagion” off Evergrande - mainland closed for holiday, but HSI Real Estate and Financials smashed overnight, while USDCNH moving towards 6.50 with client “Evergrande default” hedges in topside there)...

Source: Bloomberg

And the ultimate risk for Beijing is blowing out...

Source: Bloomberg

and 7) A drawdown is overdue (S&P was down 5% from the highs today, the first time since October)...

Source: Bloomberg

There were a few other divergences...

HY debt has also not been as exuberant in the last few months as The Fed unwound its corporate bond book...

Source: Bloomberg

Dow Transports divergence from Dow Industrials is triggering 'Dow Theorist' warnings signals...

Source: Bloomberg

And breadth has stunk...

Source: Bloomberg

99% of S&P members were lower today - the worst level since June 2020's collapse...

Source: Bloomberg

The Nasdaq closed back below its 50DMA...

S&P broke below its 100DMA...

...and then late-day buying panic rescued it...

Small Caps crashed back below the 200DMA (and closed below it)...

All US equity sectors were in the red today with Energy the hardest hit along with financials. Utes were the least bad horse in the glue factory...

Source: Bloomberg

VIX spiked up near 28 intraday today...

Cryptos were clubbed like a baby seal...

Source: Bloomberg

Bitcoin puked down to the spike lows from Sept 7th and the El Salvador malarkey...

Source: Bloomberg

Still not everything was dumped today.

Bonds were bid across the curve (Asia was closed), with the long-end of yields down around 6bps...

Source: Bloomberg

On Friday, we pointed out that yields had hit a previous resistance...and sure enough, yields plunged...

Source: Bloomberg

The dollar was also bid, safe-haven/liquidity flows, and held at the pre-Jackson-Hole levels...

Source: Bloomberg

Commodities were mixed today with PMs bid and growth-related assets (copper and crude) dumped...

Source: Bloomberg

Finally, you have nothing to fear but fear itself...

Source: Bloomberg

Tyler Durden Mon, 09/20/2021 - 16:01
Published:9/20/2021 3:21:32 PM
[Markets] Dow ends more than 600 points lower as Evergrande fears shake markets Stocks fell sharply Monday, but ended off session lows, as worries about spillover from the potential collapse of China property giant Evergrande shook up global financial markets. Investors were also jittery ahead of the start Tuesday of a two-day meeting of Federal Reserve policy makers. The Dow Jones Industrial Average fell around 614 points, or 1.8%, to close near 33,970 after dropping by more than 970 points at its session low. The S&P 500 fell around 75 points, or 1.7%, to close near 4,358 Published:9/20/2021 3:21:32 PM
[Markets] Dow finishes down 600 points as debt woes for China's Evergrande rattle stocks Dow finishes down 600 points as debt woes for China's Evergrande rattle stocks Published:9/20/2021 3:21:32 PM
[Markets] Stocks are near their lows of the day as the Dow and S&P 500 fall 2.7% Stocks are near their lows of the day as the Dow and S&P 500 fall 2.7% Published:9/20/2021 2:35:24 PM
[Markets] Dow Jones Dives 900 Points Amid China Fears; Nvidia Flashes Sell Signal; Tesla Crashes Lower The Dow Jones crashed lower amid growing China fears. Nvidia stock flashed a sell signal, while Tesla stock hit the skids. Apple stock fell. Published:9/20/2021 2:35:24 PM
[Markets] Dow Jones Futures Dive On China Property Fears; AMD, Apple, Nvidia, Tesla Sell Off Dow Jones futures dived 700 points Monday on China property default fears, as Apple and Tesla stock sold off sharply ahead of the open. Published:9/20/2021 8:38:03 AM
[Markets] All 30 Dow stocks are lower in premarket action All 30 Dow stocks are lower in premarket action Published:9/20/2021 6:11:58 AM
[Markets] Dow futures skid 500 points as China property fears grow U.S. stock futures fell sharply on Monday, with those for the Dow Jones Industrial Average tumbling 500 points, as Hong Kong-listed property companies came under fresh pressure. Investors also were positioning ahead of this week’s Federal Open Market Committee meeting. How are stock futures trading? Published:9/20/2021 4:42:48 AM
[Markets] Dow futures skid over 500 points Dow futures skid over 500 points Published:9/20/2021 4:42:48 AM
[Markets] Dow futures drop 300 points as China property fears grow MARKET SNAPSHOT U.S. stock futures fell sharply on Monday, with those for the Dow Jones Industrial Average tumbling 300 points, as Hong Kong-listed property companies came under fresh pressure. Investors also were positioning ahead of this week’s Federal Open Market Committee meeting. Published:9/20/2021 3:06:43 AM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks dropped for a second straight week last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) shed less than 1%. Earnings season continues with fresh earnings reports from several retailers over the next few trading days. Let's take a closer look at some highly anticipated announcements from this list, by Costco (NASDAQ: COST), Nike (NYSE: NKE), and Stitch Fix (NASDAQ: SFIX). Published:9/19/2021 6:27:22 AM
[Entertainment] Ryan Phillippe Has a Surprising Response to Those Who Think Son Deacon Is His Mini-Me Ryan Phillippe, Deacon PhillippeRyan Phillippe says fans are giving him way too much credit when it comes to son Deacon Phillippe's charming good looks. The Cruel Intentions actor remained humble as ever during an...
Published:9/17/2021 8:48:51 PM
[Markets] Dow Jones, Nasdaq Close Lower, Post Weekly Losses; Auto Retailers Surge To New Highs The Dow Jones Industrial Average fell in today's stock market and closed out this week with a loss. The Nasdaq also traded lower. Published:9/17/2021 4:16:48 PM
[Markets] Stocks Stumble For 2nd Straight Week Amid Debt Ceiling Doubts, FOMC Fears, & Gamma Unclench Stocks Stumble For 2nd Straight Week Amid Debt Ceiling Doubts, FOMC Fears, & Gamma Unclench

The usual avalanche of debt-ceiling fearmongering has begun (which of course will continue until 1 second before the deadline when an agreement will suddenly be found) and that along with anxiety ahead of next week's FOMC and today's gamma unclenching from quad witch expirations did not help dip-buyers save stocks for the week.

Nasdaq was the week's biggest loser and a late-day buying spree into the OpEx pushed Small Caps into the green barely for the week...

Energy stocks massively outperformed on the week while Materials were the big laggards...

Source: Bloomberg

But anxiety remains as Debt Ceiling doubts have created quite the kink in the bills curve...

Source: Bloomberg

And pushed the anxiety proxy to cycle highs...

Source: Bloomberg

Analysts at Eurasia Group, a political risk consultancy, suggested the dangers for investors are significant.

"Republican intransigence over increasing the debt limit and Democratic overconfidence that they will be able to pressure Republicans into doing so is creating unusually high risks of the U.S. crossing into a technical default on its debt sometime in late October," they wrote in a note on Thursday.

"Congress will at some point increase the debt ceiling, but it may require the pressure of a technical default and market sell-off to get there," the Eurasia Group team also said.

"Based on our analysis of the incentive structure of both sides at this time, we see that risk at 20%."

In fact, the market is finally starting to reflect the chance of a technical default - albeit still small - as short-term USA default risk spiked dramatically this week (NOTE in Oct 2015, USA 1Y CDS spiked to 40bps)...

Source: Bloomberg

For now, it seems everyone is just full of Fed liquidity-based optimism...

The S&P 500 fell back below its 50DMA after an initial bounce (something we haven't seen recently on these bounces as we note that ~30% of SPX gamma expired at today's open and 60% of SPY, 35% of QQQ, and a very large set of stock options expired on the close)...

The Dow is back at/below its 100DMA and Small Caps are hovering around their 50DMA.

VIX spiked back above 20 as hedgers piled in ahead of next week's FOMC...

Both Defensives and Cyclicals were lower this week - modest rotation midweek, but by the close, pretty systemic selling...

Source: Bloomberg

The Dollar surged further today, extending the week's gains to erase all losses from Jay Powell's Jackson Hole speech...

Source: Bloomberg

Treasury yields were all higher on the week, led by the belly (5Y +6bps, 30Y +0.5bps)...

Source: Bloomberg

10Y Yields spiked further to a key resistance level this week...

Source: Bloomberg

And 10Y Yields broke back above their 200DMA...

Source: Bloomberg

30Y Yields spiked up to their 50DMA today and found resistance...

Source: Bloomberg

Cryptos were broadly higher on the week with Bitcoin and Ethereum up around 5%. Litecoin ended the week up 4.5% after the Walmart partnership fake news spiked it 35% on Monday...

Source: Bloomberg

Big gains in the dollar this week weighed on 'some' commodities with copper and PMs down but the energy complex rallied with crude up significantly...

Source: Bloomberg

Gold fell back below $1800...

Silver was clubbed like a baby seal back below $23...

WTI rallied back above $72 this week...

And Nattie exploded higher recently, only to tumble today...

Finally, amid all that vol in commodity-land, CPI this week, and today's UMich inflation expectations, Stagflation remains the big worry...

Source: Bloomberg

Get back to work Mr.Powell!

Tyler Durden Fri, 09/17/2021 - 16:00
Published:9/17/2021 3:21:28 PM
[Markets] Stocks post weekly decline as investors await Fed policy meeting Stocks ended lower Friday, capping a losing week for major indexes as investors awaited next week's meeting of Federal Reserve officials, which may bring more clues to the timing of the Fed's plan to eventually taper its monthly asset purchases. The Dow Jones Industrial Average fell around 168 points, or 0.5%, to close near 34,583, while the S&P 500 lost around 41 points, or 0.9%, ending near 4,433. The Nasdaq Composite finished near 15,044, down 138 points, or 0.9%. Friday's losses left the Dow Published:9/17/2021 3:21:28 PM
[Markets] Dow Jones Dips As White House Raises Recession Fears; Elon Musk Praises China Rivals, Tesla Slips; Apple Falls The Dow Jones fell as Apple stock continued to dip. The White House warned of a recession. Tesla CEO Elon Musk praised its China rivals. Published:9/17/2021 2:19:35 PM
[Markets] Dow Dips As White House Raises Recession Fears; Elon Musk Praises Tesla China Rivals, Apple Dips Again The Dow Jones fell as Apple stock continued to dip. The White House warned of a recession. Tesla CEO Elon Musk praised its China rivals. Published:9/17/2021 1:29:38 PM
[Markets] Dow Jones Slides As Apple Sells Off; 4 Top Growth Stocks To Buy And Watch The Dow Jones Industrial Average fell 200 points Friday, as Apple stock sold off below a key support level in today's stock market. Published:9/17/2021 10:48:02 AM
[Markets] Dow Jones Falls As Apple Sells Off; 4 Top Growth Stocks To Buy And Watch The Dow Jones Industrial Average fell 100 points Friday, as Apple stock dropped below a key support level in today's stock market. Published:9/17/2021 9:49:06 AM
[Markets] Stocks open slightly lower, on track for modest weekly gains U.S. stocks opened slightly lower Friday, with major indexes attempting to hold on to modest weekly gains. The Dow Jones Industrial Average was down 29 points, or 0.1%, at 34,723, while the S&P 500 fell 0.2% to 4,466. The Nasdaq Composite was off 0.2% at 15,159. Through Thursday, the Dow was up 0.4%, while the S&P 500 had gained 0.3% and the Nasdaq had advanced 0.4%. Friday marks what's known as "quadruple witching," the simultaneous expiration of stock options, stock-index futures, stock-index Published:9/17/2021 8:48:24 AM
[Markets] TikTok's Army Of 'Finfluencers' Rides 'Meme Stonk' Boom To Riches TikTok's Army Of 'Finfluencers' Rides 'Meme Stonk' Boom To Riches

One of the ancillary features of the meme stonk boom has been the surge in popular 'finfluencers' who have taken to Reddit, YouTube, TikTok, Instagram, Twitter, Discord - the list goes on - to plug stocks, crypto and investment strategies, or, alternatively, break down complex financial topics for novice wannabe financiers.

The OG Internet meme stonk influencer, Keith Gill, made millions of his GME holdings while cranking out videos and commentary on YouTube and Reddit - commentary which recently left his old employer, MassMutual, stuck with a $4MM fine levied by a state regulator for "failing to oversee" Gill and his moonlighting on social media.

The silver lining of this fine is that Gill - as he revealed during testimony before the House Financial Services Committee earlier this year - is already a millionaire several times over. And he quit that job months ago.

But now, a growing army of financial micro-influencers is finding that it's easier to make money through brand deals, paid posts and sponsorships than risking it all on some long-shot stock, as Bloomberg points out in its latest report on the new generation of financial influencers.

Take Austin Hankwitz, the full-time "influencer" who was hired by Betterment, a popular robo-advisor service. After noticing a spike in signups (with 10K new users signing up in a single day), the company traced the surge in interest to Hankwitz's TikTok videos where he was showing users how to retire a millionaire by using the platform.

Once Betterment became aware of his videos, it reached out and brought him on board.

“We were, like, where is this increased activity coming from?” Betterment’s director of communications, Arielle Sobel, said of the sudden increase in customer inquiries. “It was not sponsored by us, so we had no clue.”

Users like Hankwitz are part of a new generation of online "influencers", who have stepped up to fill the enormous financial literacy gap in the US with TikToks and YouTube videos about meme stonks and crypto. And after his partnership with Betterment, more brands came calling, including the crypto startup BlockFi, the social stock-trading app Public, and advisory Fundrise. These companies are throwing thousands of dollars at him just for making posts to his following of nearly half a million. Public even offered him a monthly retainer and equity in the company to replace the Yahoo Finance stock charts he uses with theirs.

And with retail trading activity still climbing following the post-pandemic day trading "revolution", many of these "finfluencers" are now making more money than junior bankers and traders. Hankwitz confirmed he's earning more than $500K per year.

And as these products grow, they will have more capital to throw at influencers.

Betterment isn't the only roboadvisor hiring "influencers". Wealthfront, a rival roboadvisor, has recruited more than a dozen paid "influencers" including Haley Sacks, better known by her social media handle "Mrs. Dow Jones", according to Kate Wauck, the firm’s chief communications officer.

"Quite frankly, they’re just better at telling our story than we are," she said.

Before her social media fame, Sacks worked as an assistant on Letterman and was mostly interested in a career in comedy. But in her social media persona, she used her pop-culture knowledge to help explain complex financial topics to her following (even explaining bitcoin through the prism of Ben Affleck and Jennifer Lopez's rekindled relationship).

One of the influencers profiled by Bloomberg was a former JP Morgan trader named Vivian Tu.

Vivian Tu, 27, a former stocks trader at JP Morgan, believes made her account YourRichBFF blow up as soon as she launched it. She published her first video on Jan. 1, telling TikTokers that if they were looking for an account that would help them learn honest finance literacy tips, hers was it. Overnight, her video got 1 million views and within a week she’d amassed 170,000 followers.

She hasn't quit her day job, instead finding time to dedicate up to 15 hours a week to producing TikTok content, for which she is paid handsomely by her host of followers.

It wasn’t long before financial institutions took notice. Wealthfront, Credit Karma, FinTron Invest, Insurify and Tastyworks are among her approximately 10 sponsors. She has more than half a million followers on TikTok and gets paid anywhere from $3,000 to $4,000 per post. For someone with a full-time job, it’s a huge commitment, she said. Outside of her current full-time day job, she spends anywhere from 10 to 15 hours per week managing her account.

The rise of social media influencers probably couldn't have arrived at a better time for the young workers who make up Wall Street's workforce. This year, young bankers' complaints about burnout at Goldman Sachs and its rivals have made headlines. Now, how much longer until Wall Street's best and brightest are working for themselves, churning out social media content for a host of sponsors. No more missing birthday parties and weddings to work on pitchbooks.

Tyler Durden Fri, 09/17/2021 - 08:37
Published:9/17/2021 7:43:34 AM
[Markets] Futures On Edge As Quad-Watching Set To Wipe Out A Third Of Market Gamma Futures On Edge As Quad-Watching Set To Wipe Out A Third Of Market Gamma

Quad-witching opex Friday has arrived, bringing with it the usual drama of gigantic gamma expiration, including $1.5trillion of SPX index,
$310bln of options on ES futs, $220bln of SPY options, $610bln of other index...

... a surge in market volumes, spike in volatility and now expected rebound in risk assetsWith over a third of market gamma set to expire today - specifically some 35% of SPX, 50% SPY, and 35% of QQQ gamma according to SpotGamma - brace for a bump ride as the absolutely gargantuan S&P pin at 4,500 is about to get much smaller, drastically reducing the market's downside buffer.

What does this mean for markets so far? Well, overnight, stock-index futures dropped again, while European stocks erased gains as investors not only fretted about today's quad-witch volatility, but as steady Treasury yields after strong economic data this week pointed toward more movement out of heavyweight technology stocks while next week's FOMC meeting raised concerns about the coming taper and reduction in stimulus. Quantifying that, S&P 500 E-minis were down 11 points, or 0.25%, at 07:30 am ET; Dow E-minis were down 78 points, or 0.22%, while Nasdaq 100 E-minis were down 40 points, or 0.25%. 10-year TSY yields were slightly higher at 1.3429%, while the dollar was unchanged and cryptos dropped.

In overnight trading, FAANG stocks fell slightly in premarket trading. Losses in major tech stocks had pulled the S&P 500 lower on Thursday, after a jump in bond yields saw investors pivot into sectors most likely to benefit from an economic recovery this year. The retail sales reading came on the heels of data showing steady factory activity and a cooling in inflation, which suggested the U.S. economic recovery was resilient despite a recent rise in cases of the Delta COVID-19 variant. Here are some of the biggest movers today:

  • IronNet (IRNT US) drops 9.4% in U.S. premarket trading, paring some of its 114% rally over the past three sessions driven by retail traders; Other meme stock moves: Offerpad (OPAD US) also sinks after doubling this week, while SmileDirectClub (SDC US) rose 7.5%
  • AbCellera Biologics (ABCL US) soars 16% in premarket trading after it confirmed that the U.S. FDA expanded its emergency authorization to use a Lilly-partnered Covid-19 antibody cocktail for post-exposure prevention of infection or symptomatic disease
  • U.S. Steel (X US) dips 1.7% in premarket trading after reporting results on Thursday evening; European steel stocks traded a tad weaker alongside mining stocks, which were hurt sinking iron prices
  • Las Vegas Sands (LVS US) and Wynn Resorts (WYNN US), battered by a shift in policy in Macau, in focus after Jefferies puts out a bearish note. It cut Las Vegas Sands to hold and slashed Wynn’s PT to Street low.
  • Take-Two Interactive Software (TTWO US) slides 1.7% in premarket after it got downgraded to market perform from outperform at BMO on reduced confidence in previously Street- high earnings estimates
  • Tuesday Morning (TUEM US) rises 3.6% in premarket trading after CEO discloses share purchases on Thursday
  • Diamondback Energy (FANG US) climbs 3.7% in premarket trading after it announced a share buyback plan late on Friday
  • Shares gain about 1.8% postmarket
  • Usana Health (USNA US) fell 2.8% in postmarket trading Thursday after cutting its net sales forecast for the full year

Also overnight, China boosted its injection of short-term cash into the financial system in a sign the authorities are seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis. Still, price swings are almost certain to surge during today's quadruple-witching session, in which a significant number of futures contracts and options expire at the same time, according to Pierre Veyret, technical analyst at ActivTrades. “Most market operators are looking towards the next Fed policy meeting due next week, which should decrease market directionality and increase volatility further,” Veyret said.

Focus now turns to a meeting of the Federal Reserve next week, with investors debating if a swathe of strong economic data this week could spur the bank into shortening its timeline for reducing monetary stimulus.

European shares faded early gains and the Stoxx 600 index traded down -0.1%, erasing a gain of as much as 0.8% as a rally in travel and retail shares was offset by a retreat for basic-resources companies after comments by a European Central Bank council member stoked inflation concerns. ECB Governing Council member Martins Kazaks said the euro area’s inflation outlook may turn out higher than currently anticipated if the coronavirus doesn’t inflict any further shocks. The region’s stabilizing economic recovery, persistent supply bottlenecks and rising expectations all point to possible faster-than-forecast price gains, he said. Maybe he finally got his electric bill?

Commerzbank gained as much as 4.9% after a report that Cerberus Capital would consider raising its stake if the German government was ready to sell its shares. Azelis SA, a distributor of food additives and specialty chemicals, surged in its Brussels trading debut after the biggest Belgian initial public offering since 2007. Anglo American fell 4.2% in London after the miner was downgraded at Morgan Stanley and UBS. European steel stocks traded a tad weaker alongside mining stocks, which were hurt sinking iron prices.

“Investors just should be prepared for the fact that returns are much more likely to be muted over the next five years than what we’ve really benefited and enjoyed over the last five,” Jim McDonald, Northern Trust Bank chief investment strategist, said on Bloomberg Television. That view incorporates the prospect of lower valuations for Chinese firms facing more government involvement, he said.

Earlier in the session, Asian stocks were mixed amid the debt crisis at China Evergrande Group and a short-term cash injection by the central bank to help soothe nerves. Stocks in China and Hong Kong bounced back following four straight days of losses. The MSCI Asia Pacific Index climbed as much as 0.4%. Technology was the best-performing sector on the gauge, led by Tencent and Alibaba Group. Stocks also gained in Japan, with the Topix halting a two-day decline. Friday’s advance helped pare the Asian benchmark’s losses this week to 1.6%. The gauge is still on course to snap a three-week rally, largely due to China-related concerns. Investors remain worried about the regulatory crackdown after Beijing targeted Macau’s casinos this week, with sentiment also hurt by weak economic data and the debt crisis at China Evergrande Group. Focus is also turning to the Federal Reserve’s policy meeting next week, with traders hoping to get more clues about the timeline for paring bond purchases.

You now you have a number of serious risks in China, especially the one around systemic risk with Evergrande,” Frank Benzimra, head of Asia equity strategy at SocGen, said on Bloomberg TV. “We see more upside on the onshore than offshore part of the market. It’s a little bit early for bottom-fishing in the internet space.”

Japanese stocks traded higher in the afternoon session, overcoming early fluctuations, with electronics makers and telecommunications providers driving gains in the Topix. The Topix rose 0.5% to 2,100.17 at the 3 p.m. Tokyo close, while the Nikkei advanced 0.6% to 30,500.05. SoftBank Group contributed the most to the Topix’s gain, increasing 1.8%. Out of 2,184 shares in the index, 1,422 rose and 644 fell, while 118 were unchanged.  More than 4 trillion yen worth of shares traded hands on the first section of the Tokyo Stock Exchange, the most since May.  Running shoes and sportswear maker Asics dropped 3.2% after local broadcaster NHK reported the Tokyo Marathon will be canceled this year due to Tokyo still being under a state of emergency. Asics is one of the sponsors for the race

In rates, yields on the benchmark 10-year notes held around levels touched yesterday, after an unexpectedly strong retail sales reading. Treasuries were steady with the curve slightly steeper, pivoting around an unchanged 7-year sector. Treasury yields remain within a basis point of Thursday’s close, trading slightly richer across long-end of the curve, marginally flattening 2s10s, 5s30s spreads; the 10-year yield at 1.3429% was near top of Thursday’s range, outperforming bunds and gilts by 2.5bp and 1bp respectively and little changed on the week. Bunds underperform over early European session, with futures contract gaining momentum after breaching Thursday’s low. 

In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback was weaker against most of its Group-of-10 peers; commodity currencies led advances after rebounding in the Asian session. The pound was steady against the dollar, but underperformed most of its Group-of-10 peers after U.K. retail sales fell unexpectedly for a fourth month in August, the worst stretch of declines in at least 25 years. Attention turns to the Bank of England’s rate decision next week. Australia’s dollar rose against all its Group-of-10 peers as an absence of further negative news helped restore some confidence in the global recovery. New Zealand’s dollar was sold after the nation extended the suspension of a travel bubble with Australia for eight weeks, a trader said.

In commodities, oil slipped, while gold advanced. An index of commodity prices dipped, but remains in sight of a record hit in 2011, underscoring the inflation concerns rippling across the world economy.

Looking at the day ahead now, the only thing on the US calendar is the University of Michigan’s preliminary consumer sentiment index for September. Otherwise, central bank speakers include the ECB’s Makhlouf.

Market Snapshot

  • S&P 500 futures little changed at 4,476.00
  • STOXX Europe 600 up 0.56% to 468.57
  • MXAP up 0.3% to 203.41
  • MXAPJ up 0.3% to 650.76
  • Nikkei up 0.6% to 30,500.05
  • Topix up 0.5% to 2,100.17
  • Hang Seng Index up 1.0% to 24,920.76
  • Shanghai Composite up 0.2% to 3,613.97
  • Sensex up 0.2% to 59,256.49
  • Australia S&P/ASX 200 down 0.8% to 7,403.72
  • Kospi up 0.3% to 3,140.51
  • Brent Futures down 0.66% to $75.17/bbl
  • Gold spot up 0.5% to $1,762.19
  • U.S. Dollar Index down 0.13% to 92.815
  • German 10Y yield rose 2bps to -0.281%
  • Euro little changed at $1.1782

Top Overnight News from Bloomberg

  • British consumers expect inflation will remain above the Bank of England’s target for at least the next five years, a survey showed, in an indication that attitudes about rising prices are becoming entrenched
  • The Federal Reserve will probably hint at its meeting next week that it is moving toward scaling back monthly asset purchases and make a formal announcement in November, according a Bloomberg survey of economists
  • China boosted its injection of short-term cash into the financial system in a sign the authorities are seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis
  • The European Central Bank dismissed a Financial Times report that chief economist Philip Lane told analysts privately the institution expects to reach its 2% inflation target by 2025
  • “Market interest rates have relaxed in cumulative terms since our monetary policy meeting in June,” ECB Governing Council member Pablo Hernandez de Cos says. “However, this relaxation has been reversed in recent weeks, serving as a reminder that financing conditions remain highly volatile in the context of uncertainty and highly dependent on monetary policy support”
  • U.K. retail sales fell unexpectedly for a fourth month in August, the longest stretch of declines in at least 25 years, raising concerns about the economic recovery as a resurgence of coronavirus cases and supply shortages take a toll

A more detailed look at global markets courtesy of Newsquawk

Asian equity markets traded mixed with the region tentative ahead of several APAC market closures next week, albeit with the mood at a slight improvement from the negative bias stateside, where strong data supported taper calls approaching quad witching hour. The ASX 200 (-0.8%) underperformed with the index pressured by hefty losses in the mining-related sectors after recent declines in underlying commodity prices due to a firmer greenback and Chinese efforts to contain prices through its state reserves. The mood in Australia was also dampened by fears of a backlash from China to the recent AUKUS security pact and with M&A discussions between private equity and Iress failing to reach an agreement which resulted in double-digit percentage losses for shares in the latter. The Nikkei 225 (+0.6%) was positive and tested the 30,500 level with the index getting an uplift from a mostly weaker JPY, but with gains capped by the ongoing COVID outbreak and with the Cabinet Office lowering its overall economic assessment for the first time in four months. The Hang Seng (+1.0%) and the Shanghai Comp. (+0.2%) lacked firm commitment ahead of a four-day weekend in the mainland due to the Mid-Autumn Festival and with some brief support after the PBoC’s liquidity efforts involving a total CNY 100bln injection evenly split between 7-day and 14-day reverse repos. In addition, plenty of focus remained on China Evergrande with its shares severely hit again on default fears and reports that suggested the unlikelihood of a government bailout, although there was some reprieve to affiliate Evergrande Property Services as its shares rose around 8% which seems inconsequential compared to its near-50% decline YTD. Finally, 10yr JGBs were subdued following the spillover selling from USTs and gains in Japanese stocks, with demand also hampered by the lack of BoJ purchases in the market today with the central bank instead offering to buy JPY 75bln in 3yr-5yr corporate bonds from next Friday.

Top Asian News

  • HKEX Proposes SPAC Listing Fundraising to Be at Least HK$1b
  • China Mogul Loses $27 Billion in World’s Biggest Wealth Drop
  • Australia to Trial Home Quarantine for Vaccinated Arrivals
  • China Property, Tech Firms Stage Rebound on Bargain Hunting

Bourses in Europe has conformed to a mixed picture (Euro Stoxx 50 -0.3%; Stoxx 600 -0.3%) after failing to hold into the +1% gains seen at the open for the bellwether index, whilst Euro futures now mostly lower on Quad Witching Day. The FTSE 100 Dec contract fell under 7,000 as the Sep contract expired. US equity futures meanwhile have seen somewhat of a contained divergence before adopting a downside bias, with the RTY narrowly lagging. Back to Europe, the FTSE 100 (-0.1%) is among the straddlers in the region as the Basic Resource sector is once again under pressure – with the biggest losers in the index currently Anglo American (-3.5), Rio Tinto (-2.2%) and BHP (-1.7%) – with the former seeing a downgrade at Morgan Stanley, whilst Glencore (+0.1%) bucks the trend amid an upgrade at the bank. Euro-bourses see broad-based gains. Delving deeper into sectors, Autos and Parts are also on the backfoot amid the ongoing chip shortage. On the flip side, Travel & Leisure leads the gains with reports stating the UK travel red list could be more than halved from its current 62 for the double-jabbed, according to The Times. Turkey is tipped to be among those removed from the list. The UK Transport Minister is today expected to announce the scrapping of the amber list, thus there will only be red and green lists. In terms of individual movers, Commerzbank (+3.3%) holds onto gains after Handelsblatt reported that Cerberus is reportedly considering increasing its stake in the Co. from the current 5% mark via taking on the German state's 15.6% interest in Commerzbank if the German state wishes to sell its holding.

Top European News

  • ECB Says FT Report on Inflation Target Outlook Not Accurate
  • U.K. Retail Sales Fall in Worst Stretch for Shops Since 1996
  • Europe’s Gas Resumes Gains on Concerns Over LNG Plants, Supply
  • How the Pandemic Left British Households $1.2 Trillion Richer

In FX, the Dollar has lost some of its retail sales vigour and Philly Fed fizz amidst signs of stabilisation in US Treasuries, both outright and from a yield curve perspective, while technical traders may also be a bit discouraged by the fact that the DXY did not quite have the legs to at least touch the psychological 93.000 mark when upside momentum was building yesterday. Hence, the index has drifted back down into a comparatively tight 92.639-760 range vs 92.965-467 extremes on Thursday and the Buck has unwound gains vs most major peers bar the Yen that is retreating closer to 110.00 again. Ahead, eyes on preliminary Michigan sentiment to see if the survey echoes upbeat regional vibes for September that kicked off with the Empire State, but also monitoring stocks over Quad Witching.

  • AUD/CAD/NZD - No surprise to see the Aussie strike while the Greenback is waning after its sharp decline on multiple factors this week (dovish RBA rate guidance, ongoing slump in iron ore, poor jobs data and heightened tensions with China), as Aud/Usd reclaims 0.7300+ status and the Aud/Nzd cross also regains some composure on the 1.0300 handle as the Kiwi lags below 0.7100 against its US counterpart in wake of a marked deterioration in NZ manufacturing PMI into contractionary territory. However, the Aussie may find further upside progress capped by decent option expiry interest at the 0.7325 strike (1 bn) or even get drawn back to similar size at the round number (1.1 bn to be precise), and the same goes for the Loonie given expiries between 1.2635-50 (1 bn) and at 1.2700 (1 bn), not to mention the loss of bullish impetus from WTI crude that is consolidating around Usd 72/brl. Nevertheless, Usd/Cad has retreated a bit further from w-t-d peaks to pivot 1.2650 between 1.2708-1.2600 parameters.
  • EUR/CHF/GBP - All marginally firmer vs the Dollar, but unconvincingly and still on course to end the week with net losses as the Euro meanders below 1.1800 and above 1.1750 where hefty option expiries reside (1.2 bn and 1.8 bn trailing down to 1.1745), the Franc straddles 0.9270 and Sterling rotates either side of 1.3800 following disappointing UK retail sales data and a pick-up in inflation expectations via the latest BoE/Kantar Attitudes Survey. Note also, Cable appears contained to an extent by technical levels in the form of the 50 and 21 DMAs that are situated at 1.3803 and 1.3780 respectively today, while Eur/Gbp is flirting with its 50 DMA at 0.8543 after rejecting or respecting 0.8500 on Thursday.
  • JPY - As noted at the outset, the Yen is underperforming having narrowly failed to breach 109.00 and Usd/Jpy now looks intent on testing resistance/offers at the big figure above pending any further repatriation for month, Q3 and Japanese half FY end or another change in chart and fundamental dynamics.
  • SCANDI/EM - The Nok does not look too fazed by the pull-back in Brent as it eyes a Norges Bank hike, but the Rub, Mxn and Zar are on a weaker footing, while the Try has fallen further in advance of September’s CBRT policy meeting as year end inflation projections rise again. Conversely, the Cnh and Cny are on an even keel into a long Chinese holiday weekend with 7 and 14 day liquidity provided by the PBoC.

In commodities, WTI and Brent front month futures have been trimming the gains seen since yesterday’s European close, with the former now threatening a breach of USD 72/bbl to the downside (vs high 72.72/bbl) and the latter just north of USD 75/bbl (vs high 72.78/bbl). News flow has been light, but prices saw crude prices saw leg lower heading into the European cash open, seemingly in tandem with NatGas prices as Europe reacted to Biden’s commentary suggesting that there is evidence that gas prices should be falling and his admin is investigating why that was not the case. Aside from that, crude price action has been dictated by the overall market mood and price action in stocks. Turning to metals, spot gold and silver consolidate following yesterdays deep declines which saw the yellow metal briefly dip under USD 1,750/oz. Base metals meanwhile nurse yesterday’s losses, with, but LME copper remains sub-USD 9,500/t. Base metals, name iron and copper, are on the watch for any retaliation by China on Australia following the AUKUS security pact.

US Event Calendar

  • 10am: Sept. U. of Mich. Sentiment, est. 72.0, prior 70.3; Current Conditions, prior 78.5; Expectations, prior 65.1
  • 10am: Sept. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 2.9%

DB's Jim Reid concludes the overfnight wrap

If someone looks at my browser history over the last 18 hours they will see a stream of entries along the lines of “will my golf be affected if I have to have knee replacement surgery”. I’ve been quite discouraged by some of the articles but have decided to focus on the YouTube clips of 80 year olds with fake knees hitting it as far as I do now. So after having microfracture surgery yesterday I was told the hole in my knee was far bigger than was thought and that I likely have arthritis in some form and will probably need a knee replacement relatively soon. So I’m looking for inspirational stories from my readers today, who may have been through this sort of thing, preferably telling me how I can not only get back on the golf course, but actually have the chance to still get better and better. Only positive answers or lies will be read.

There are a few aching joints in markets at the moment but for now it’s mild and still heavily medicated by prior fiscal and monetary medicine. There is certainly a whiff of stagflation fears in the air though but I would stress that real-time growth is still pretty high but it’s just that expectations are coming down from even higher levels earlier in the summer. Inflation forces have remained almost exclusively firmer over this period notwithstanding a slight miss on US CPI this week at what are still very elevated levels.

Talking of inflation, there was an interesting article in the FT last night saying that the ECB expects the region to reach its 2% inflation target by 2025, which would suggest that the central bank could raise interest rates as soon as 2023. This might get a little traction today but the market will likely think that there’s a lot of water that needs to flow under the bridge before we get to 2023, let alone 2025. However, if a path to such a number does appear in their forecasts soon it will impact ECB messaging going forward which will be important to markets. The Euro rose +0.13% following the article’s release, but still fell -0.42% on the day versus the dollar, which was its worst day in nearly a month. Overnight, the ECB has rejected the accuracy of the FT report as they released a statement saying “The FT story is not accurate”, and that ECB Chief Economist Philip Lane said that he “didn’t say in any conversation with analysts that the euro area will reach 2% inflation soon after the end of the ECB’s projection horizon”.

Confusing the growth picture a little was the stronger US retail sales yesterday which brought forward a little taper risk back into the equation ahead of the Fed meeting next week. This sparked a mini sell off in US yields and left treasuries not far off where they were before the CPI miss on Tuesday.

Running through those themes in more depth, US retail sales unexpectedly rose +0.7% in August (vs. -0.7% expected), whilst the measure excluding autos also jumped +1.8% (vs. unch expected), so a solid outperformance. That said, the release wasn’t quite as strong as the headline figures suggested, since the July retail sales reading was revised down to show a larger -1.8% contraction (vs. -1.1% previously), so a bit less solid than on first inspection. Nevertheless, Treasury yields spiked higher in response, seeing an intraday peak of 1.350%, before falling back to close at 1.338%. The overall move left them up +3.9bps on the previous day, as investors moved to accelerate the likely path of future rate hikes.

The prospect of less monetary stimulus weighed on US equities yesterday with the S&P 500 falling back -0.16% (but comfortably off the lows) after moving between gains and losses for much of the session. Retailing stocks (+0.69%) and consumer services (+0.23%) outperformed on the better-than-expected retail print, while tech stocks also outperformed slightly with the NASDAQ eking out a +0.13% gain. One sector that really outpaced the market was airline stocks, which gained +1.56% - partly on news that the UK will be easing travel restrictions on at least 30 countries currently on the UK’s “red list”. European equities topped their US peers, with the STOXX 600 up +0.44% as bourses across the continent moved higher, but much of that was a catch-up to the previous day’s rally in the US, which took place shortly after the European close.

Amidst the broader selloff, commodities also lost ground for the first time this week, with Bloomberg’s Commodity Spot Index (-1.00%) moving off its high for the decade thanks to a broad decline across the asset class. One decline in particular came from European natural gas prices, which fell by a massive -10.54% as they paused for breath following their blistering run higher. That said, even that decline still leaves them up +9.21% for the week so far, so we’re hardly out of the woods yet on that front. Otherwise, oil prices just about maintained their upward momentum as Brent Crude (+0.28%) saw a moderate daily move, whilst gold (-2.25%) fell to a 1-month low as it experienced its worst daily performance since early-August.

Asian markets are mostly trading higher this morning, with the Nikkei (+0.53%), Hang Seng (+0.47%) and Kospi (+0.15%) all advancing. Chinese bourses are a bit mixed though with the CSI (+0.27%) up, whereas the Shanghai Comp (-0.59%) and Shenzhen Comp (-0.65%) have lost ground, which comes in spite of the PBoC increasing its cash injections into the financial system as risks associated with the debt crisis at the Evergrande Group are dampening sentiment. The injection totalled CNY 90bn of funds, which is the most since February. Outside of Asia, yields on 10y USTs are broadly stable along with futures on the S&P 500 (+0.01%), but those on the Stoxx 50 are up +0.56%.

In Germany, there’s now just a week on Sunday remaining until the federal election, and a fresh round of polls continue to indicate a pretty consistent lead for the centre-left SPD, with Chancellor Merkel’s CDU/CSU bloc trailing behind, and the Greens then in 3rd place. One from YouGov yesterday gave them 25%, ahead of the CDU/CSU on 20% and the Greens on 15%. Then another from Kantar put the SPD on 26%, ahead of the CDU/CSU on 20% and the Greens on 17%. And finally, another came from Infratest dimap that put the SPD on 26%, the CDU/CSU on 22%, and the Greens on 15%. These polls have been remarkably consistent over the last couple of weeks.

Elsewhere in Europe, sovereign bond yields also spiked following the US retail sales release, but they then fell back with yields on 10yr bunds (+0.4bps), OATs (-0.0bps) and BTPs (-0.8bps) all near unchanged by the end of the session. The main exception were gilts, where the short end of the curve saw yields press higher still, with those on 2yr (+2.1bps) and 5yr (+3.7bps) gilts climbing to fresh post-pandemic highs as investors continued to bring forward the timing of potential BoE rate hikes. Meanwhile, 10yr gilt yields rose +3.9bps to 0.817%, their highest level since the start of June and just over +30bps higher than its early-August lows.

Turning to the pandemic, there were further signs of a return to normality after the World Economic Forum said that they planned to return to Davos in person for their annual meeting in January. I certainly missed the uniqueness of the event last year. Separately, the UK’s ONS reported that 93.6% of adults in England were estimated to have Covid antibodies in the week ending August 29, but this was actually down four-tenths on the previous week’s peak of 94.0%. Furthermore, among those in their 70s, the decline in antibodies over recent months is now statistically significant, with the 75-79 age bracket seeing levels fall from a peak of 96.6% in late-May to 90.2% in late-August. Indicators like these can be expected to lead to further calls for boosters for those who were vaccinated some months ago. In the US, boosters could be authorised as soon as next week by federal regulators, especially for those over the age of 65 and other at-risk individuals. The FDA is meeting today to discuss Pfizer’s application for a third shot of its vaccine, with the CDC holding a two-day meeting next week on booster shots in general.

Looking at yesterday’s other data, the weekly initial jobless claims for the week through September 11 rose to 332k (vs. 322k expected), but that didn’t stop the 4-week moving average falling to 335.75k, which is its lowest level since the pandemic began. The claims number will be impacted by recent auto production shutdowns due to the worldwide chip shortage. Otherwise, the Philadelphia Fed’s business outlook for September rose to 30.7 (vs. 19.0 expected).

To the day ahead now, and data highlights include UK retail sales for August, the final Euro Area CPI reading for August, and the University of Michigan’s preliminary consumer sentiment index for September. Otherwise, central bank speakers include the ECB’s Makhlouf.

Tyler Durden Fri, 09/17/2021 - 08:04
Published:9/17/2021 7:15:19 AM
[Markets] Dow, S&P 500 close lower as Nasdaq Composite ekes out back-to-back gains in volatile Thursday action U.S. equity markets on Thursday finished well off session lows, with the Nasdaq Composite booking consecutive gains but the S&P 500 and the Dow notching slight losses, as investors parsed economic reports ahead of a key gathering of policy makers next week. The turbulence in the session, similar to what the market has exhibited over the past week, came even as August retail sales produced an unexpected rise and a measure of activity in the Philadelphia Federal Reserve district that was stronger Published:9/16/2021 3:14:36 PM
[Markets] Dow, S&P 500 finish lower as Nasdaq ekes out gain in volatile session Dow, S&P 500 finish lower as Nasdaq ekes out gain in volatile session Published:9/16/2021 3:14:36 PM
[Markets] Dow Jones, Nasdaq Fall As Unemployment Claims Rise; These Blue Chips Receive Analysts Upgrades The Dow Jones fell in today's stock market and led the downside. The Nasdaq also traded lower as weekly jobless claims jumped. Published:9/16/2021 1:12:11 PM
[Markets] Dow Jones Falls As Jobless Claims Rise, Retail Sales Jump; Apple, Tesla Slide The Dow Jones Industrial Average lost 100 points Thursday, as jobless claims rose and retail sales jumped. Apple and Tesla slid. Published:9/16/2021 10:09:00 AM
[Markets] Just five Dow components in positive territory as triple-digit gain vanishes Just five Dow components in positive territory as triple-digit gain vanishes Published:9/16/2021 9:43:08 AM
[Markets] Dow industrials open higher after unexpected rise in U.S. retail sales Dow industrials open higher after unexpected rise in U.S. retail sales Published:9/16/2021 9:16:51 AM
[Markets] Futures Fall Ahead Of Another Disappointing Retail Sales Number Futures Fall Ahead Of Another Disappointing Retail Sales Number

US equity futures slid, fading Wednesday's torried one-day rally, as investors awaited data on jobless claims and retail sales which are expected to show another decline as US consumers retrench.  European markets were solidly in the green while Asian stocks fell after the ongoing debt crisis at Evergrande - which halted all bond trades for the day - and China's latest push to rein in private industries hurt sentiment. The dollar gained as Treasuries dipped while Bitcoin was little changed as gold and oil fell. S&P 500 E-minis were down 8.75 points, or 0.19% at 730 am ET, Dow E-minis were down 14 points, or 0.04%, while Nasdaq 100 E-minis were down 34.25 points, or 0.22%.

Once again, US-listed Chinese stocks extended losses in the premarket with Beijing’s regulatory overhaul of gambling in Macau coming as the latest source of consternation for a sector already hurt by crackdowns on technology and education services. Casino operators such as Las Vegas Sands, Wynn and MGM Resorts again fell 1-3% before the opening bell, extending this week’s declines following an announcement from Macau officials seeking tighter restrictions on operators. Among other movers, videogame publisher EA rose nearly 2%, as it maintained its guidance despite delaying the launch of its widely anticipated “Battlefield 2042” title by a month. Here are some of the other notable movers today:

  • IronNet (IRNT US) shares rise 34% in U.S. premarket trading, adding to the past two sessions of gains for the stock amid retail-trader touts for the cyber-security company.
  • Electronic Arts (EA US) rises 2.2% in premarket trading, on track to recoup some of Wednesday’s losses after co. confirmed delaying the launch of Battlefield 2042 to Nov. 19, which some analysts said wouldn’t be a surprise.
  • MedAvail Holdings (MDVL US) rose 21% in Wednesday postmarket trading after signing a pact with IMA Medical Group to roll out four new SpotRx locations this year in central Florida
  • Beyond Meat (BYND US) shares off 2.6% in premarket trading after Piper Sandler says retail trends are running below levels needed to support consensus shipment expectations for 3Q21, and potentially 4Q21, downgrading to underweight
  • Travere Therapeutics (TVTX US) slipped 5.4% in extended trading from Wednesday after it reported a joint collaboration and licensing agreement with Vifor Pharma for the commercialization of sparsentan in Europe, Australia and New Zealand
  • Aerie Pharmaceuticals (AERI US) shares dropped 18% in postmarket trading on Wednesday, after a Phase 2b study of the company’s experimental treatment for dry eye disease failed to meet the main goal of the trial
  • Atyr Pharma (LIFE US) slid 7.3% postmarket Wednesday before recovering some ground following a discounted share offering, the move comes on the back of 76% jump in the last one month
  • ION Geophysical Corp. (IO US) shares soared 27% in extended trading after it said its board had initiated a process to evaluate a range of strategic alternatives
  • Ashford Hospitality Trust (AHT US) falls 0.7% in extended trading after the hotel REIT said revenue per available room (RevPAR) fell 11% in August compared to July
  • Carver (CARV US) fell 12% postmarket after registering a mix of securities for potential sale

Wall Street indexes enjoyed strong gains on Wednesday on the back of Microsoft's $60 billion stock buyback, with economically sensitive cyclical stocks benefiting the most from a rally in oil prices and data suggesting that factory activity growth remained steady in the country. Data also showed a dip in import prices, which coupled with a recent reading that showed consumer prices were slowing, implied that inflation had likely peaked and would fall to more manageable levels eventually.

"We have an unusual situation where the overall market is sideways to lower but with a risk-on trend underneath and that's down to signs the Delta variant may be peaking in the U.S., which is driving people into reflation and recovery plays," said Kiran Ganesh, head of cross asset at UBS Global Wealth Management. "At the same time there are concerns about fiscal consolidation and worries about China moving to lockdowns. We'll need 3-4 months of quiet before people start moving back (to buy Chinese stocks). Big tech companies more exposed to social issues - whether property or education - are subject to regulatory risks."

Focus is now on U.S. data on weekly jobless claims and August retail sales, both of which are due at 8:30 AM ET.

"Retail sales figures are expected to have fallen in August," Saxo Bank’s chief investment officer, Steen Jakobsen, wrote in a note to clients. "Although the drop is largely priced in the market, it could still support US Treasuries pushing yields down by a couple of basis points. Yet, we expect yields to remain rangebound between 1.25% and 1.35% until next week’s FOMC meeting."

Europe's STOXX 600 was up 0.8% on the day, reversing all the previous day losses, having fallen 0.8% on Wednesday and gained 0.2% so far this week; FTSE MIB outperforms, rising as much as 1.3%. Travel is the best performing sector, up as much as 3.25%. Miners, utilities and autos underperform. Energy companies also advanced as crude oil hovered near a six-week high. Here are some of the biggest European movers today:

  • Ryanair shares jump as much as 6.7% after it lifted its growth target to 50% over the next five years, planning expansion at European airports
  • CNH shares gain as much as 4.1% after analysts note new details on plan for On-Highway spinoff reported by Il Sole 24 Ore
  • Inditex shares rise as much as 3.6% after Kepler Cheuvreux upgrades stock to buy, citing a V-shaped earnings recovery and rich cash position
  • Acciona shares lose as much 5.6% as Spain announces a gas clawback that risks the legal certainty of renewables development in the country, RBC says in a note
  • Games Workshop shares fall as much as 4% after it said it’s seen pressure on freight costs and currency exchange rates
  • THG shares decline as much as 3.8% after the e-commerce company reported 1H results in which sales and Ebitda both missed consensus estimates

Earlier in the session, Asian stocks dropped, as a sell-off in technology shares across the region more than offset gains in energy names with oil prices hovering near a six-week high. The MSCI Asia Pacific Index dropped as much as 0.8%, with TSMC, Alibaba Group and Keyence being the biggest contributors to the declines. Hong Kong’s Hang Seng Index led losses among the region’s stock gauges, while Japanese equities extended their drop from a peak of more than three decades into a second day. Fear that China Evergrande Group’s debt woes may spill over into Chinese property sector, combined with Beijing’s move to tighten grips on Macau casino operators, has pulled down Asian stocks this week. The real estate sector was the second-worst performer in the region on Thursday as Evergrande’s onshore property unit suspended bond trading for a day. Evergrande Market Fallout Grows as Local Unit Halts Bond Trading “The ongoing issues surrounding Evergrande could be weighing on investor sentiment” and impacting broadly in the region, said Hajime Sakai, chief fund manager at Mito Securities Co. in Tokyo. “It will loom over investors’ minds, especially if the problem bleeds into Chinese real estate market overall.” Asia’s benchmark stock gauge has fallen 1.8% so far this week, on pace to snap a three-week winning streak. It is lagging behind S&P 500, which has gained 0.5% in the same period. Elsewhere, Korean stock benchmark declined 0.7% as tech names like Samsung SDI dragged the Kospi Index. Philippine stocks were the region’s best performer of the day, gaining as virus restrictions were eased in the Manila capital region. Australia’s S&P/ASX 200 Index advanced despite the country’s disappointing employment data.

Japanese stocks declined, erasing earlier gains, as the yen headed for a three-day advance against the dollar.  The Topix fell 0.3% to 2,090.16 at the 3 p.m. close in Tokyo, while the Nikkei 225 slid 0.6% to 30,323.34. Out of 2,184 shares in the index, 891 rose and 1,183 fell, while 110 were unchanged. The yen rose 0.1% to 109.31 per dollar. Stocks also dropped after a finance ministry report showed gains in Japanese exports slowed for a third month in August as a delta-driven wave of the coronavirus weighed on the global trade recovery. “Japanese stocks may be in a corrective mood for a while,” said Hajime Sakai, the chief fund manager at Mito Securities Co. in Tokyo.

In rates, Treasuries were marginally cheaper across the curve following muted price action during Asia and early European sessions. 10-year TSYs yield 1.3124% is ~1bp cheaper vs Wednesday’s close with curves marginally steeper; gilts cheapen further vs Treasuries -- 10-year spread approaching YTD low 51bp -- as Goldman Sachs predicts BOE will lift rates to 1% by end of 2023. Gilts underperformed, in a continuation of Wednesday’s strong U.K. inflation data, while bunds marginally outperform Treasuries.

In FX, the Bloomberg Dollar Spot Index advanced and the dollar was steady or higher against all of its Group-of-10 peers apart from the New Zealand dollar. The kiwi rallied after New Zealand GDP data exceeded all estimates. The economy expanded 2.8% in the second quarter from the first, compared to economists forecast for a 1.1% rise. Overnight indexed swaps are now pricing a 44% probability of a 50-basis-point hike next month, up from around 10% on Wednesday. Australia’s dollar dropped toward a two-week low after jobs data showed that Australian employment dived in August as coronavirus lockdowns in Sydney and Melbourne forced businesses to lay off workers and slash hours.

The yen stayed near a one- month high as a weak risk sentiment supported demand for havens. Bonds fell after a lukewarm 20-year debt sale. The offshore yuan weakened the most in nearly a month as concern on China Evergrande Group’s debt crisis and Beijing’s latest push to rein in private industries hurt market sentiment.

In commodities, iron ore headed for its longest run of losses in more than three years as declining Chinese steel output threatened to push futures back below $100 a ton. WTI is little changed near $72.67, Brent drifts near $75.60. Spot gold trades poorly, dropping ~$12 to the worst levels this week near $1,781/oz. Base metals are also under pressure with LME copper and nickel the worst performers.

Looking at the day ahead now, and data releases include US retail sales for August, the Philadelphia Fed’s business outlook for September, and the weekly initial jobless claims. Otherwise from central banks, we’ll hear from ECB President Lagarde and the ECB’s Rehn.

Market Snapshot

  • S&P 500 futures little changed at 4,483.00
  • STOXX Europe 600 up 0.64% to 466.86
  • MXAP down 0.6% to 203.16
  • MXAPJ down 0.7% to 649.46
  • Nikkei down 0.6% to 30,323.34
  • Topix down 0.3% to 2,090.16
  • Hang Seng Index down 1.5% to 24,667.85
  • Shanghai Composite down 1.3% to 3,607.09
  • Sensex up 0.5% to 59,044.46
  • Australia S&P/ASX 200 up 0.6% to 7,460.21
  • Kospi down 0.7% to 3,130.09
  • Brent Futures down 0.12% to $75.37/bbl
  • Gold spot down 0.53% to $1,784.58
  • U.S. Dollar Index up 0.18% to 92.72
  • German 10Y yield little changed at -0.307%
  • Euro down 0.3% to $1.1775

Top Overnight News from Bloomberg

  • China slammed a move by the U.S. and U.K. to help Australia build nuclear submarines, saying the new partnership will stoke an “arms race” as tensions heat up in Asia-Pacific waters
  • The economic outlook of the euro area is overshadowed by production bottlenecks and the prospect of a worsening pandemic, European Central Bank Governing Council Member Olli Rehn says
  • A new Japanese prime minister due to be installed in the coming weeks is unlikely to change fiscal or other policies sufficiently to force the central bank to amend its monetary settings, a Bloomberg survey showed
  • Rallying energy prices are stoking concerns about a challenging stagflation-like environment for markets of elevated price pressures and a slowing economic recovery
  • Europe’s energy crunch has forced a major fertilizer maker to shut down two U.K. plants, the first sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery
  • Winter blackouts are now a real possibility after a fire took out a key cable that ships electricity to the U.K. from France. Electricity is now so scarce in Britain that any more grid mishaps or unexpected plant outages could leave millions without power
  • About 40% of respondents said their living costs have increased since the onset of the pandemic, according to a YouGov survey of 18,983 people conducted in 17 countries. That proportion was closer to half in the U.K. and U.S., compared to just a fifth of Danes and Swedes
  • An outbreak of Covid-19 inside the Kremlin has sickened dozens of people working close to Vladimir Putin, the Russian president said Thursday, highlighting the scale of the outbreak in one of the country’s most carefully guarded areas
  • India’s monetary policy makers cannot cut interest rates further because of elevated inflation, but there’s a need to keep borrowing costs low and liquidity ample to help the economy as it recovers from the pandemic’s fallout, a central banker said

A more detailed look at global markets courtesy of newsquaw

Asian equity markets traded mostly lower as the region failed to sustain the momentum from Wall St where all major indices finished higher after risk appetite was spurred by stronger than expected NY Fed Manufacturing data and with plenty of attention on a bullish note from JPMorgan which expects the SPX to reach 4,700 by the end of 2021 and surpass 5,000 in 2022 on better-than-expected earnings. The ASX 200 (+0.6%) was led higher by the energy sector following similar outperformance stateside after oil prices surged by more than 3% during the prior session amid the constructive mood across risk assets and recent bullish inventory data, with Australian defence contractor Austal among the biggest gainers in the local benchmark after the US, UK and Australia announced a new security partnership for the Indo-Pacific region in which the US will provide Australia with the capability to deploy nuclear-powered submarines in an effort to counter China. The Nikkei 225 (-0.6%) failed to hold on to early gains with sentiment dampened by recent currency strength and weaker than expected Exports data, while the KOSPI (-0.7%) was pressured following hawkish rhetoric from North Korea concerning the recent missile launch which was from a new railway-borne missile system and reportedly serves as an efficient counter strike weapon to threatening forces. The Hang Seng (-1.5%) and Shanghai Comp. (-1.3%) declined with Hong Kong pressured by underperformance in the property sector and with several casino names extending on yesterday’s slump amid regulatory concerns. Sentiment was also clouded by the recent ‘AUKUS’ partnership to counter China and ongoing Evergrande default woes with Co. shares at decade lows and its onshore bonds suspended after Chinese authorities told lenders not to expect any interest payments due next week and following the credit rating downgrade by S&P due to depleted liquidity. Finally, 10yr JGBs were kept rangebound as headwinds from the selling in USTs were offset by the lacklustre risk appetite in Asia and with demand also sapped by weaker metrics from this month's 20yr JGB auction.

Top Asian News

  • China Has Fully Vaccinated More Than 1 Billion People
  • Credit Suisse Rejigs Asia Investment Bank, Veterans Step Aside
  • Battery- Swapping Startup Gogoro to Go Public in SPAC Merger
  • Evergrande Market Fallout Grows as Local Unit Halts Bond Trading

Stocks in Europe have conformed to a more constructive risk mood (Euro Stoxx 50 +0.7%; Stoxx 600 +0.6%) after experiencing a mixed open, which followed on from a varied APAC session that saw Mainland China and Hong Kong under pressure. US equity futures, meanwhile, have seen a divergence from Europe and trade modestly softer ahead of US retail sales. Back to Europe, bourses experience broad-based gains with marginal underperformance in the FTSE 100 (+0.5%) – weighed on by the underperforming Basic Resources sector (the only sector in the red) as base metals remain pressured. On the flip side, Travel & Leisure stands as the outperformer amid tailwinds from a Ryanair (+6.3%) traffic growth guidance update, alongside reports that UK ministers are to announce that vaccinated travellers will no longer be required to take a COVID test before entering England under new proposals – also supporting the likes of easyJet (+3.3%) and IAG (+2.7%). Banks are bolstered by the higher yield environment whilst Oil & Gas continue to cheer oil prices north of USD 70/bbl. Overall, the sectors do portray somewhat of an anti-defensive bias. In terms of individual movers, Continental (-11%) listed its drive division, Vitesco Technologies, on the Dax 30 today. Vitesco will be listed as an additional value on the Dax for today only, after which it will not be eligible for a regular place in the bourse and will be demoted accordingly. Elsewhere, Thales (+1.3%) and Safran (+2.6%) have shrugged reports that Australia terminated its submarine programme with France.

Top European News

  • Swedish IPO Rush Intensifies With Storskogen’s Listing Plan
  • U.K. Faces Winter Blackouts Risk After Fire Knocks Out Cable
  • Stagflation Fears Cast Longer Shadow on Markets as Energy Surges
  • Atlantic Sapphire Plunges 29% After Fire at Denmark Facility

In FX, bears have been prowling and knocking hard on the door for a while in Eur/Usd following a couple of dead cat bounces, but no material recovery rallies beyond 1.1850 and the pressure has finally told as underlying bids around 1.1800 are filled or pulled. Moreover, the headline pair has breached technical support just shy of the round number in the form of 21 and 50 DMAs that align at 1.1798 today and is now probing new post-ECB lows around 1.1766 amidst almost all round Euro weakness that has pushed Eur/Gbp down towards a double bottom around 0.8510 and Eur/Jpy through 129.00. Conversely, the Buck has regrouped and recharged after another retreat below 92.500 in the index, albeit shallower in wake of Wednesday’s strong NY Fed manufacturing survey that helped to erase post-CPI losses and more. Indeed, the DXY has rebounded further towards Monday’s current w-t-d peak (92.887) to 92.794 and cleared a couple of chart hurdles along the way, including its 50 and 21 DMAs, at 92.635 and 92.694 respectively. Ahead, jobless claims, retail sales and the Philly Fed.

  • CHF - The major casualty or loser in the face of the Greenback revival, as Usd/Chf retests recent 0.9240+ highs, but the Franc is not benefiting from Euro weakness given that the Eur/Chf cross is holding firmly above 1.0850, and this could be a sign of official intervention or simply caution ahead of next Thursday’s Quarterly SNB policy review.
  • AUD/GBP/CAD - All unable to evade the clutches of their US counterpart, and the Aussie also labouring within a 0.7347-09 range in wake of a disappointing jobs report that only beat consensus in unemployment rate terms due to a fall in labour market participation caused by COVID-19 lockdowns. Meanwhile, Sterling is back under the 200 DMA and hovering near 1.3800 irrespective of the aforementioned outperformance against the Euro and another bank revising its BoE rate outlook to forecast an earlier hike on the back of yesterday’s hot UK inflation data (GS now seeing tightening in May 2022). Elsewhere, the Loonie has stalled on approach to 1.2600 alongside a pull-back in crude and now eyeing Canadian housing starts before wholesale trade following similarly frothy CPI prints on Wednesday.
  • NZD/JPY - The Kiwi is bucking the overall trend and still clinging to the 0.7100 handle, while consolidating gains vs its Antipodean peer around 1.0300 with bullish impetus from NZ Q2 GDP surpassing expectations significantly to ensure the domestic economy entered pandemic restrictions on a very solid footing. Conversely, the Yen has broadly overlooked a much wider than anticipated Japanese trade deficit impacted by exports missing the mark by some distance, as Usd/Jpy meanders between 109.46-21 parameters, albeit off midweek lows closer to 109.00.

In commodities, WTI and Brent front month futures are choppy and essentially flat intraday at the time of writing, with the former around USD 72.50/bbl (72.34-99 range) and the latter around USD 75.50/bbl (75.21-87). News flow for the sector has been relatively light, but prices remain elevated near recent highs. The morning saw constructive commentary from Ryanair, which feeds into jet fuel demand. On the flip side, Libya's NOC announced the resumption of crude exports from the Sidra and Ras Lanuf ports following protests. It's also worth being cognizant of potential Chinese intervention at these levels via the release of state reserves, as Chinese PPI last month remained elevated partially on crude prices – and Beijing also pledged continued efforts to stabilise prices if needed. On that note, China announced the release of another batch of copper, aluminium and zinc from state reserves to guide prices gradually lower to a reasonable range. As such, LME metals are mostly lower but off worst levels, although copper remains under USD 9,500/t. Turning to precious metals, spot gold and silver are on the backfoot as they fall victim to the firmer Dollar, with the former losing further ground under USD 1,800/oz (1,796-81 range) and the latter back to levels around USD 23.50/oz (23.96-54 range).

US Event Calendar

  • 8:30am: Sept. Initial Jobless Claims, est. 322,000, prior 310,000
  • 8:30am: Sept. Continuing Claims, est. 2.74m, prior 2.78m
  • 8:30am: Aug. Retail Sales Advance MoM, est. -0.7%, prior -1.1%
  • 8:30am: Aug. Retail Sales Ex Auto MoM, est. 0%, prior -0.4%
  • 8:30am: Aug. Retail Sales Control Group, est. 0%, prior -1.0%
  • 8:30am: Sept. Philadelphia Fed Business Outl, est. 18.9, prior 19.4
  • 9:45am: Sept. Langer Consumer Comfort, prior 57.9
  • 10am: July Business Inventories, est. 0.5%, prior 0.8%
  • 4pm: July Total Net TIC Flows, prior $31.5b

DB's Jim Reid concludes the overnight wrap

It’s my daughter7s 6th birthday today. How am I celebrating? By having major knee surgery and possibly not being back from the hospital in time to see her. It’s been a grave oversight on my behalf dates wise (he has little other operating space over the next few weeks) so I’ll be sweet talking the surgeon this morning to get me near the top of the list to ensure that I’m not late home. It’ll be crutches and no weight bearing for me for the next 6 weeks which again is going to make me very unpopular at home with three hyperactive kids and one wayward dog. In terms of before and after see the front cover of “Fiat, fifty and frail” for how I look now (right) and how I intend to look by November (left).

Markets were also a little bit frail for most of yesterday in European hours but a rally in the US after Europe went home turned the day around. Indeed the S&P 500 (+0.85%) rose by its most in nearly 3 weeks as cyclical industries and technology stocks combined to take the index back to within 1.3% of its all-time highs. Energy stocks were the best performers (+3.81%), which came amidst a further sharp rise in commodities. Indeed by the close of trade, Bloomberg’s Commodity Spot index was up +1.76% at a fresh high for the decade, which just emphasises how there are still inflationary pressures in the pipeline, even if a few specific commodities have moved lower in recent months. Looking at the moves, Brent Crude (+2.53%) rose to $75.46/bbl, having now bounced back by more than $10 since its closing low of $65.18/bbl less than a month ago, whilst WTI (+3.05%) was also up to $72.61/bbl.

Staying on energy, yesterday witnessed even further advances for natural gas prices, with European futures up another +7.52% as they marked their 8th consecutive rise. And there were also growing concerns in the UK as a cable bringing power in from France was knocked out by a fire, which will put it out of action until at least October 13, possibly into 2022 for full capacity. Indeed, I looked at this issue in my chart of the day yesterday (link here), which demonstrates the astonishing surge we’ve seen over recent weeks and months. Tight supplies that haven’t been replenished as much as expected after a cold winter are partly responsible, but there’s also a lack of coal options as increasing numbers of plants are phased out, and Russia has sent less supplies to Europe than expected. We also speculate that this might be a dress rehearsal for ESG issues further down the line.

While we’re on the topic of inflation, there may have been a weaker-than-expected reading from the US on Tuesday, but yesterday saw fresh support for those believing in higher inflation thanks to upside surprises from the UK and Canada. Here in the UK, headline CPI rose to +3.2% (vs. +2.9% expected), which is also above the BoE’s staff estimate of +3.0% back in their August monetary policy report. That saw investors bring forward their expectations for future BoE rate hikes, which in turn sent short-dated gilt yields to their highest levels in over a year. By the close, the 2yr yield (+3.2bps) had hit a post-pandemic high of 0.263%, whilst the 5yr yield (+3.4bps) was similarly at a post-pandemic high of 0.453%. For Canada, with just 4 days left until their federal election on Monday, CPI rose to +4.1% (vs. +3.9% expected), marking the highest reading since 2003.

Given that inflation concerns were resurfacing again, sovereign bonds lost ground on both sides of the Atlantic yesterday, with 10yr US Treasury yields up +1.5bps to 1.299%, mostly thanks to higher inflation breakevens (+1.5bps). Europe saw more prominent moves, with yields on 10yr bunds up +3.4bps to -0.31%, their highest level in 2 months, as German 10yr breakevens rose (+1.6bps) for the ninth time in the last ten sessions and ended just off their 8 year highs. Meanwhile, yields on 10yr OATs (+4.3bps) and BTPs (+5.5bps) also moved higher.

Before the US rally, European indices lost ground as the session went on, as the STOXX 600 (-0.80%) fell to its lowest closing level since late July. Nearly 80% of constituents and every major sector in the index moved lower with the exception of energy, with bourses underperforming their US counterparts across the continent. As mentioned at the top, the S&P 500 (+0.85%) rallied later in the session and turned positive on the week. The rise was led by energy as discussed but other cyclicals such as banks (+1.31%) and capital goods (+1.29%) also rallied. However, the equity gains were broad based as software (+1.21%) and media (+0.78%) caused the NASDAQ (+0.82%) to finish higher for the first time in six sessions.

Sentiment is weak in Asia with the Nikkei (-0.81%), Hang Seng (-1.97%), CSI (-0.75%), Shanghai Comp (-0.68%) and Kospi (-0.66%) all losing ground. There are no new drivers behind the move besides the risks associated with China’s ongoing regulatory crackdown, the recent spike in covid cases there, and the indebtedness of China’s Evergrande group’s which has led to one of its onshore real estate unit suspending bond trading. Futures on the S&P 500 are only a touch lower at -0.08% but those on the Stoxx 50 are up +0.13% as they catch up with yesterday’s late move in US markets.

On the pandemic, Pfizer announced that data from the US and Israel point to waning efficacy of its vaccine over time, and that the additional booster shot was both safe and effective. The data will be submitted to outside advisers to the US FDA on Friday. Overnight, the New England Journal of Medicine published research based on data from short-term analysis in Israel stating that a third dose of the Pfizer/ BioNTech’s Covid vaccine can dramatically reduce rates of Covid-related illness in people 60 and older. The analysis stated that starting 12 days after the extra dose, confirmed infection rates were 11 times lower in the booster group compared with a group that got the standard two doses and added that rates of severe illness were almost 20 times lower in the booster group.

Winding up now and back to yesterday, on the data front, US industrial production rose by +0.4% in August (vs. +0.5% expected), with the Fed estimating that shutdowns related to Hurricane Ida held down the reading by 0.3 percentage points.

To the day ahead now, and data releases include US retail sales for August, the Philadelphia Fed’s business outlook for September, and the weekly initial jobless claims. Otherwise from central banks, we’ll hear from ECB President Lagarde and the ECB’s Rehn.

Tyler Durden Thu, 09/16/2021 - 08:06
Published:9/16/2021 7:14:06 AM
[Markets] Dow finishes up nearly 240 points as stocks bounce back Dow finishes up nearly 240 points as stocks bounce back Published:9/15/2021 3:37:17 PM
[Markets] Dow Jones Rises As Nasdaq Rallies; Tesla Gains Despite Losing This Race; BioNTech Gets Vaccine Boost The Dow Jones moved higher. Tesla stock gained despite being beaten to a new market. BioNTech stock got a Covid vaccine boost. Published:9/15/2021 3:37:16 PM
[Markets] Dow Jones Gains As Nasdaq Rallies; Tesla Gains Despite Losing This Race; BioNTech Gets Vaccine Boost The Dow Jones moved higher. Tesla stock gained despite being beaten to a new market. BioNTech stock got a Covid vaccine boost. Published:9/15/2021 2:37:44 PM
[Markets] Dow Jones, Nasdaq Rise; Energy Stocks In Buy Zones As Oil Moves Higher The Dow Jones Industrial Average rose in today's stock market while the S&P 500 led the upside. Meanwhile, the Nasdaq also traded higher. Published:9/15/2021 1:09:10 PM
[Markets] Dow and S&P battle market turbulence in posting modest gains early Wednesday Dow and S&P battle market turbulence in posting modest gains early Wednesday Published:9/15/2021 9:37:15 AM
[Markets] Dow Jones Advances As Apple Falls To Key Level; Microsoft Jumps On Buyback Plan The Dow Jones Industrial Average briefly rallied 130 points Wednesday, as Apple stock dropped to a key support level in today's stock market. Published:9/15/2021 9:37:15 AM
[Markets] Amazon Raises Average Wage To $18 As It Scrambles To Fill 125,000 Jobs Amazon Raises Average Wage To $18 As It Scrambles To Fill 125,000 Jobs

With millions of Americans still sitting on the sidelines of the labor market, Amazon and Wal-Mart are going head to head in a battle to recruit thousands of additional workers before the holidays. The competition for bodies has gotten so intense that Amazon recently recommended to the contractors who handle the last leg of package delivery (you know, the ones who drive around in those navy blue Amazon-branded trucks?) to stop screening potential drivers for marijuana.

Days after Wal-Mart revealed it would be scrapping its quarterly bonus program in favor of raising wages, Amazon has reportedly one-upped its chief rival by raising its average wage to $18 ahead of a hiring spree that could see it hire another 125K workers before the holidays, according to an exclusive from Reuters.

That $18 average has risen from $17 since May. In some locations, the company is giving signing bonuses of $3,000, said Dave Bozeman, vice president of Amazon Delivery Services- roughly triple what the company offered four months ago.

Bozeman attributed Amazon's latest compensation increase to fierce competition for workers. Amazon did not give exact figures, but said a $1 raise on a $17-per-hour wage would amount to a hike of about 6%. Amazon, now the second-biggest private employer in the US, adopted a $15 an hour minimum wage in 2018, while Walmart recently touted average hourly wages of $16.40. Dow componentWalgreens Boots Alliance said it would raise its minimum to $15 in October.

"It's a tight labor market, and we've seen some of that as the entire industry is seeing," said Bozeman, who spoke in an interview at a delivery station in Tukwila, Washington.

Amazon has tried other incentives, like offering payments toward workers' college tuition and starting wages as high as $22.50 for certain gigs.

While some might be tempting to credit Amazon for following through with Jeff Bezos' outgoing promise of a "better vision" for its employees, the reality is that there are more job openings than workers.

Amazon needs thousands of new workers as the 100 logistics facilities launching this month in the US, on top of more than 250 that opened earlier this year. Workers are also needed to aid in Amazon's long-in-the-works plan to roll out one-day delivery for Prime loyalty club members.

Tyler Durden Wed, 09/15/2021 - 08:29
Published:9/15/2021 7:41:08 AM
[Markets] Futures Fade As Dismal China News Steamrolls Sentiment Futures Fade As Dismal China News Steamrolls Sentiment

While Microsoft did everything it could to halt the recent market drop which has dragged stocks lower on 6 of the past 7 days with its surprising announcement of a record, $60 billion stock buyback, the latest dismal data from China which missed across the board with retail sales, industrial production, fixed investment, property sales and investment all came in worse than expected, with retail sales growing at the slowest pace since August 2020 while industrial output also rose at a weaker pace from July...

... left a sour taste in the market, and left futures trading just barely in the green, higher by 0.1%, while Asia stocks dropped as weak Chinese economic data reinforced worries about slowing growth globally as well as in the world's second-biggest economy amid fraught nerves over a still-dominant pandemic and tapering of central banks' stimulus; European markets lacked direction. S&P 500 E-minis were up 5 points, or 0.11% at 07:20 am ET, Dow E-minis were down 16 points, or 0.04%, while Nasdaq 100 E-minis were up 28 points, or 0.18%. The dollar was steady and oil gained.

Economically sensitive sectors such as energy and financials rose in pre-market trading after largely underperforming their peers in the previous session. Apple rose around 0.5% in premarket trading, after tumbling 1% in the last session on a disappointed response to the unveiling of its Phone 13 and a new iPad mini. U.S.-listed Chinese stocks extended recent losses as weak retail sales data pointed to a possible economic slowdown in the mainland. Casino companies fell in pre-market trading after Chinese officials said they would change regulations to tighten restrictions on operators. Here are some of the biggest movers today:

  • Las Vegas Sands (LVS), MGM Resorts (MGM), Melco Resorts (MLCO), Wynn Resorts (WYNN) fall between 5% and 8% in U.S. premarkettrading after Macau officials said they would change casino regulations to tighten restrictions on operators, including appointing government representatives to “supervise” companies in the world’s biggest gaming hub
  • Apple (AAPL) up 0.5% after its iPhone 13 launch Tuesday. Analysts say the product launch was mostly as expected and lacked anything revolutionary, though the new range should underpin the upgrade cycle for its products
  • Kaival Brands (KAVL) shares sink 30% in U.S. premarket trading after the distributor of Bidi Vapor products cut its sales outlook for the year following an “extremely challenging” 3Q.
  • Skillsoft (SKIL) gained 4.5% in extended trading from Tuesday after the digital learning company boosted its full-year adjusted revenue and bookings outlook
  • MeaTech 3D (MITC) jumped jumped 17% premarket after the producer of cultured meat said its Belgian subsidiary produced over 700 grams of “pure chicken fat biomass” in a single production run
  • DavidsTea (DTEA) tumbled 25% postmarket from Tuesday after the tea retailer said its ecommerce and wholesale sales fell by nearly one-third in its fiscal second quarter.

The S&P 500 sank to a more than three-week low on Tuesday, while the Dow hit a near two-month trough as investors fretted over the potential impact of a tax hike on corporate profits. While signs of slowing inflation have made early tapering by the Federal Reserve seem unlikely, it raised the question of when exactly the bank would begin scaling back its massive pandemic-induced stimulus plan. Tuesday’s weaker than expected US inflation print could be seen as reducing pressure on the Federal Reserve to start pulling back on loose monetary policy, investors remain wary of a range of obstacles. These include the impact of the delta virus variant and rising costs on economic reopening, as well as China’s drive to rein in private industries.

“It is hard to argue at this point that it remains entirely transitory,” Dana D’Auria, Envestnet Inc. co-chief investment officer, said on Bloomberg Television, referring to U.S inflation. “You couple that with that fact that there are still all these supply shocks that we are still working through. I think the markets are going to have to feel the pain.” Going into the year-end, investors will also have to digest debate around the U.S. debt ceiling, President Joe Biden’s tax package, infrastructure spending and Fed tapering, she added.

“There is uncertainty in markets at the moment as investors wait to see what the Federal Reserve will do about tapering their asset purchases, which depends on the state of the labour market and the inflation situation,” said Sean Debow Asia CEO of Eurizon Asset Management.

Elsewhere, a growing debt crisis in China's biggest and most indebted property developer, China Evergrande Group, has raised fears of a possible impact to major lenders whose stocks tumbled on Wednesday, 13 years after the failure of Lehman. And speaking of China, overnight the FT reported that Joe Biden suggested the possibility of an in-person meeting with Xi Jinping during a phone call last week, but the Chinese President snubbed the US president and declined to commit.

"The Asian banks will get hit hard if there's a default, but then there will be a 10-year recovery process. The market's getting a hang of it. The way they've managed the news flow seems quite clever. They haven't let a swathe of bad news at once," said Keith Temperton, sales trader at Forte Securities. Concerns over Evergrande's default have further dented appetite for Chinese stocks, after a series of regulatory moves by Beijing against major technology firms wiped out billions in market value this year.

In Europe, the Stoxx 600 Index was 0.4% lower with British stocks outperforming after U.K. inflation surged more than expected. Travel and retail stocks led the retreat in the Stoxx 600 with H&M falling the most since July after missing sales estimates. Energy shares gained as oil extended an advance. Here are some of the biggest European movers today:

  • Kinepolis shares rise as much as 7.1%, gaining for a third day, after Disney unveiled plans for exclusive theatrical release windows for the remainder of its 2021 slate of films.
  • Swedish Match advances as much as 4.4% after the company said preparations are underway for a separation and a subsequent listing of its cigar business on a major U.S. securities exchange.
  • Maersk gains as much as 2.5% after it agreed to buy a Portuguese startup specializing in logistics for the fashion industry and plans to use its technology more widely.
  • Just Eat drops as much as 4.9% in Amsterdam after rival Deliveroo unveiled a new partnership with Amazon in the U.K.
  • EasyJet falls as much as 4.4% after it said it is addressing a “technical issue” after some users reported being unable to access its website and app
  • Travis Perkins declines as much as 4.9% after BofA Global Research cut its recommendation to neutral from buy.

Earlier in the session, Asian stocks also dropped, hurt by a selloff in Macau casino operators over fears of tighter regulations and declines in Japanese equities. The MSCI Asia Pacific Index fell as much as 1%, extending earlier losses after the release of the Chinese data, while Tokyo's Nikkei shed 0.89%, moving off a more than 31-year closing-high the day before. Sands China, Wynn Macau and Galaxy Entertainment Group all plunged to lead decliners on the gauge Wednesday. Asian markets dropped after reports showed China’s economy took a knock in August; Chinese tech stocks declined again as the government scrutiny on casinos also fueled concerns that Beijing was strengthening its broader regulatory crackdown. The Hong Kong benchmark shed 0.87% dragged down by casino stocks as the gaming hub of Macau begins a consultation ahead of a closely watched rebidding of its multi-billion dollar casinos next year. read more. Shares of Wynn Macau (1128.HK) at one point were down more than 30%.

“China’s continued regulatory crackdown alongside disappointing retail sales and industrial production from the region have significantly contributed in extending yesterday’s losses on stocks,” said Pierre Veyret, technical analyst at ActivTrades. 

China’s banks and property stocks also slid after news that Chinese authorities told major lenders to China Evergrande Group not to expect interest payments due next week. Evergrande’s stock in Hong Kong is down by ~5%. It has already been a tough day for Chinese-related equities with severe pain for Macau casino names and more weakness in the tech sector. The CSI 300 index is heading for a third successive loss and even the Hang Seng could be heading below 25,000.

Japanese shares, which have led gains in Asia this month on expectations of favorable policy changes following Prime Minister Yoshihide Suga’s decision to resign, were among the region’s biggest losers Wednesday and halted a three-day rally and pulling the Nikkei 225 Stock Average down from its highest level since 1990. The Nikkei225  declined 0.5% to 30,511.71 at 3 p.m. in Tokyo, retreating from a 31-year closing high of 30,670.10 reached yesterday. The Nikkei 225’s relative strength index -- a momentum indicator that can act as a gauge of how overbought or oversold an asset is -- had hit the highest since January. 

“Investors have priced in much of expectation for the leadership change and coronavirus infections slowing in the country,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. Sentiment was also impacted by data showing China’s economy weakened further in August, as stringent virus controls curbed consumer spending and travel during the peak summer holiday break

“There will be profit taking on stocks that have kept on rising,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management Co. in Tokyo. “But the downside will likely remain supported by foreigners who are either covering their shorts or adjusting their portfolio allocation in equities to Japan from the U.S.”

The Topix fell 1.1% to 2,096.39. SoftBank Group Corp. contributed the most to the benchmark’s decline, decreasing 5.8%. Out of 2,184 shares in the index, 327 rose and 1,782 fell, while 75 were unchanged. Nikkei Climb Calls to Mind Memories of 1989 Peak: Taking Stock Masahiro Ichikawa, the chief market strategist at Sumitomo Mitsui DS Asset Management Co., pointed out Tuesday that Japanese stocks could retreat as the market appeared to be “overheating”. Once an adjustment is complete, the gains could resume, he said.

In FX, the Bloomberg Dollar Spot Index fell for the first day in four and the greenback weakened against all of its Group-of-10 peers. The yen advanced to its highest level in a month as disappointing China data added to concerns on the global economy. China’s retail-sales growth slumped in August and industrial output rose less than economists forecast after the government imposed stringent measures to contain a Covid outbreak. The euro advanced after earlier hovering around $1.18 handle; the currency is going nowhere fast, at least until the Federal Reserve and the European Central Bank hold their policy meetings in December. Norway’s krone rallied, following a recent pattern of strengthening as European session begins. The pound inched up after U.K. inflation surged more than expected to the strongest pace in more than nine years, prompting investors to anticipate a sharper increase in interest rates in 2022. Consumer prices jumped 3.2% in August from a year ago. Money markets now see an additional quarter-of-a-percentage- point of Bank of England tightening by December 2022, on top of a 15-basis-point hike that was already priced for May. Australian and New Zealand dollars recovered after earlier falling to a session low as the disappointing Chinese data weighed further on global stocks and sentiment.

In rates, 10-year TSY yields traded around 1.27%, richer by 1.7bp on the day and outperforming bunds, gilts each by ~1.2bp; long-end-led gains flatten 2s10s, 5s30s spreads by ~2bp; 5s30s briefly is below 105bp for the first time since August 2020. The curve extended its post-CPI flattening move as long-end yields trade ~3bp richer vs Wednesday’s close as U.S. session begins. European bonds lag, including gilts, which trade heavy across front-end after strong August inflation data. Overnight block trades included weighted FV/WN for $515k/DV01 at 11:39pm (09/14), which appeared consistent with a flattener.

In commodities, oil prices gained on a larger than expected drawdown in crude oil stocks in the United States, with U.S. crude gaining 0.51% to $70.82 a barrel and Brent crude rising 0.46% to $73.94 per barrel.Spot gold was traded at $1802.0374 per ounce off 0.12%, having reached a one week peak of $1,808.50 on the prospects for lower interest rates.

Looking at the day ahead now, and the data highlights include US industrial production for August, the UK and Canadian CPI releases for August, and Euro Area industrial production for July. From central banks, we’ll hear from the ECB’s Schnabel and Lane.

Market Snapshot

  • S&P 500 futures up 0.21% to 4,454.00
  • STOXX Europe 600 little changed at 467.16
  • MXAP down 0.7% to 204.36
  • MXAPJ down 0.7% to 654.43
  • Nikkei down 0.5% to 30,511.71
  • Topix down 1.1% to 2,096.39
  • Hang Seng Index down 1.8% to 25,033.21
  • Shanghai Composite down 0.2% to 3,656.22
  • Sensex up 0.8% to 58,690.09
  • Australia S&P/ASX 200 down 0.3% to 7,417.03
  • Kospi up 0.1% to 3,153.40
  • Brent Futures up 0.77% to $74.17/bbl
  • Gold spot down 0.29% to $1,799.32
  • U.S. Dollar Index little changed at 92.53
  • German 10Y yield rose 0.4 bps to -0.336%
  • Euro up 0.1% to $1.1822

Top Overnight News from Bloomberg

  • China’s economy took a knock in August from stringent virus controls and tight curbs on property, fueling concerns about the global recovery as countries battle to get delta outbreaks under control
  • The greatest challenge facing Europe’s rebounding economy is whether authorities can implement the changes needed to transform its potential, according to European Central Bank President Christine Lagarde
  • President Vladimir Putin has sidelined the last of his independent political opponents, jailing some and driving others into exile, as his ruling party seeks to extend its control in parliamentary elections despite simmering discontent
  • North Korea fired off two ballistic missiles -- its second major test in less than a week of weapons designed to bolster its capability to conduct nuclear strikes against Japan and South Korea

A snapshot of global markets courtesy of Newsquawk

Asia-Pac stocks mostly followed suit to the losses on Wall St where cyclicals underperformed and financials were hit as yields declined in the aftermath of the cooler-than-expected CPI print, with the region also digesting disappointing Chinese activity data. The ASX 200 (-0.3%) was pressured by weakness in financials and the commodity-related sectors including energy following similar underperformance stateside after oil prices whipsawed on Typhoon-related disruptions and details of the upcoming Chinese state reserve selling. Nikkei 225 (-0.5%) also suffered due to recent inflows into the currency and with sentiment not helped by the weaker-than-expected Machinery Orders, while the KOSPI (+0.2%) bucked the trend after the Unemployment Rate fell to a record low in August, and with the index unfazed by a ballistic missile launch from North Korea. The Hang Seng (-1.8%) and the Shanghai Comp. (-0.2%) were dampened following the miss on Chinese Industrial Production and Retail Sales data, but the indices were off worse levels as the poor data spurred calls for easing and with the state bureau also trying to paint the economy in a good light, whereby it suggested that main economic indicators still maintained fairly good growth in August and economic operations are still in recovery. Furthermore, the PBoC announced a CNY 600bln MLF operation to fully rollover this month’s maturities and US President Biden refuted reports that he was turned down by Chinese President Xi during their call last week for a face-to-face meeting. Hefty losses however remained for Hong Kong-listed casino stocks which were down by double-digit percentages as Macau begins gaming law revision and licence consultations. Finally, 10yr JGBs gained with prices helped by the risk aversion and post-CPI bull flattening stateside, while the BoJ were also in the market today for over JPY 1.3tln of JGBs with 1-10yr maturities.

Top Asian News

  • Morgan Stanley, Fitch See Property Risks Spread From Evergrande
  • U.S. Macau Casino Stocks Slump on Tightening Restrictions
  • Gold Holds Advance as Bond Yields Drop After U.S. Inflation Data
  • Iron Ore Slumps as China’s Steel Output Plunges to 17-Month Low

Bourses in Europe have adopted a downside bias (Euro Stoxx 50 -0.1%; Stoxx 600 -0.1%) vs the mixed/uninspiring start seen at the cash open and following on from a mostly downbeat APAC handover. US equity futures have been edging higher in during the morning, but the magnitude of the price action is again contained, with the tech-laden NQ (+0.3%) narrowly outperforming the cyclically induced RTY (+0.1%) in a continuation of the divergence seen post-US CPI. Back to Europe, sectors are mostly negative but one of the few in the green include Oil & Gas – spurred on by the gains across the energy complex, whilst Banks also see some consolidation following yesterday’s hefty yield-induced losses. The downside meanwhile features more cyclical names, such as Retail and Travel & Leisure, in what seems to be a continuation of the value unwind seen post-US CPI yesterday. In terms of individual movers, Deliveroo (+1.4%) holds onto gains following a deal with Amazon, although competitor Just Eat Takeaway (-4.0%) is subsequently hit. Elsewhere, Lagardere (-3.5%) shares fell after Le Point reported that its HQ was raided yesterday in relation to "abuse of power, presentation of inaccurate accounts, dissemination of false or misleading information, abuse of corporate assets and vote buying". Daimler (+0.6%) is supported by commentary from its CFO, who expects Mercedes to return to more normal performance in Q4 and confirmed FY21 profit margin guidance. Meanwhile, the pre-market saw earnings from the likes of Darktrace (+9.0%), Fevertree (+1.5%), Inditex (-1.5%), Mediaset (+1.4%), and Tullow Oil (+6.6%).

Top European News

  • Commerzbank Set to Name Schaufler Retail Head, Replace COO
  • Kepler Cheuvreux Recruits Analysts From Danske, SEB and Swedbank
  • Deutsche Bank’s Sewing Says German Election Needs Growth Agenda
  • LVMH, Kering Drop; China Tightens Controls on Macau Casinos

In FX, the Yen has extended post-US CPI gains vs the Dollar to probe 109.50 irrespective of underwhelming Japanese machinery orders data or a marginal back-up in Treasury yields and curve realignment from flatter levels. Instead, Usd/Jpy and Yen crosses appear to be moving in line with bearish technical impulses and an element of safe-haven positioning amidst several geopolitical developments that could flare up, like North Korea’s latest ballistic missile tests, China testing its air defence forces in Tibet against possible Indian missiles or jets, according to state media cited by SCMP, and Saudi air defenses destroying a drone launched by Yemen's Houthis towards Abha airport, Al Hadath. However, the headline pair may yet find underlying bids into 109.00 and 1.4 bn option expiry interest between 109.60-70 could also sap strength from the Yen ahead of trade data tomorrow. Meanwhile, Sterling is back on a firmer footing in wake of a clean sweep of forecast topping UK inflation metrics, including headline and core CPI eclipsing the upper end of the BoE’s target band, with Cable regaining 1.3800+ status and testing the 200 DMA at 1.3830. Conversely, the Buck’s broad bounce is waning, as the index slips back from 92.683 through 92.500 in the run up to more data (Empire State, import/export prices, ip and cap u).

  • AUD/NZD/EUR/CAD/CHF - All clawing back ground against the Greenback after their flip-flop or knee-jerk advances on Tuesday, with the Aussie forming a base above 0.7300 pre-labour report, the Kiwi creeping over 0.7100 again in time for NZ Q2 GDP, the Euro securing a firmer grip of the 1.1800 handle, the Loonie rebounding from sub-1.2700 before Canadian CPI and Franc continuing its revival from lows some way under 0.9200.
  • SCANDI/EM - Notable Nok outperformance, and aside from the latest Norges Bank regional survey underscoring overwhelming expectations for a hike this month, Brent is offering more traction as it eyes Usd 74.50/brl and also give the Rub a boost. Elsewhere, the Mxn is riding a WTI wave beyond Usd 71/brl after a bigger than anticipated API crude drawdown and the Zar is bouncing, albeit belatedly, as Gold pivots Usd 1800/oz, while the Cnh and Cny have shrugged off disappointing Chinese retail sales and ip on general Usd weakness and relief that the PBoC opted to roll the 1 year MLF in full.

In commodities, WTI and Brent front month futures are once again on a firmer footing, with the contracts extending upside in early European trade in conjunction with the cash open. News flow for the complex has been light to spur the upside, but the strength does come amid a larger-than-expected draw in the weekly Private Inventory data alongside bullish internals ahead of today’s DoEs – with the headline looking for a draw of 3.54mln barrels. The complex this week also saw bullish commentary from both OPEC and the IEA, which could be acting as wind in the sails. Meanwhile, from a COVID standpoint, the booster programme is poised to set off, particularly in the UK, which abates fears of a persistent slowdown in activity by the Delta COVID variant. WTI Oct’ has topped USD 71.50/bbl (vs low 70.65/bbl) whilst Brent Nov’ trades north of USD 74.50/bbl (vs low 73.78/bbl). Meanwhile in terms of gas, Norway’s Equinor is ramping up gas production where possible to meet the European demand and expects fundamentals behind the high European gas prices to continue into autumn and winter. Gas prices have since firmed, +2.4% last for the NG Oct’ contract. Elsewhere spot gold and silver are relatively flag with a mild divergence, spot gold trades on either side of the USD 1,800/oz mark which coincides with its 21 DMA. Several other DMAs reside in close proximity including the 50 DMA (1,798/oz), 200 DMA (1,807/oz), and the 100 DMA (1,815/oz). Turning to base metals. LME copper is firmer and attempts to gain a firmer footing above USD 9,500/t following yesterday’s declines. Meanwhile, the Chilean Copper Commission downgraded its average copper price projection to USD 4.20/lb for 2021 vs prev. USD 4.30/lb, whilst maintaining its 2022 forecast as USD 3.95/lb. Dalian iron ore futures overnight slid to a nine-month low amid compounding demand concerns, according to desks.

US Event Calendar

  • 8:30am: Aug. Import Price Index MoM, est. 0.2%, prior 0.3%; YoY, est. 9.4%, prior 10.2%
  • 8:30am: Aug. Export Price Index YoY, est. 17.0%, prior 17.2%; MoM, est. 0.4%, prior 1.3%
  • 8:30am: Sept. Empire Manufacturing, est. 17.9, prior 18.3
  • 9:15am: Aug. Capacity Utilization, est. 76.4%, prior 76.1%
  • 9:15am: Aug. Manufacturing (SIC) Production, est. 0.4%, prior 1.4%; Industrial Production MoM, est. 0.5%, prior 0.9%

DB's Jim Reid concludes the overnight wrap

xIt had to happen at some point. Yesterday was the first monthly US CPI print that came in below expectations since November last year. That was enough to help spark a notable rally in bonds, especially US treasuries. By the close of trade, the 10yr yield had seen its biggest daily move lower in a month, falling -4.2bps to 1.2836%, with the decline almost entirely driven by a -3.6bps move in inflation breakevens. We were trading near 1.35% before the CPI number so an even bigger intra-day rally. In fact at one point we hit 1.26% so a big move.

Running through the numbers, the month-on-month reading came in at just +0.3% (vs. +0.4% expected), which was also the slowest price growth since January. Used cars and trucks (-1.5%) saw their first decline in 6 months, having helped to propel inflation higher back in Q2, though energy was up +2.0% thanks to an increase in the gasoline index of +2.8%. The monthly increase meant that the year-on-year reading ticked down a tenth to +5.3% as expected, having peaked at +5.39% (to 2 decimal places) back in June. Core inflation saw a larger downside surprise, with a monthly increase of just +0.1% (vs. +0.3% expected), that in turn saw the year-on-year measure fall back to +4.0% (vs. +4.2% expected).

Although the CPI release triggered a round of new narratives that we’ve potentially seen the peak for inflation, another rise in commodity prices yesterday suggested we aren’t out of the woods yet. Indeed, the aggregate Bloomberg Commodity Spot Index was up another +0.18% at a fresh high for the decade, with Brent Crude (+0.12%) oil prices at 6-week highs of their own, though WTI prices dipped later in the session closed broadly unchanged (+0.01%). An area of particular interest that has the potential to create major concerns has been a big rise in European gas prices, with natural gas futures up by another +7.32% yesterday, bringing their gains since the start of August to +63.8%, and up by an astonishing +514% relative to a year ago.

Governments have already been stepping in to deal with the issue, with Spain announcing a windfall tax on utilities and a cap on consumer bills earlier in the week, but the scale of the increases mean we could well see this climb rapidly up the broader news agenda (and not just on the business channels) over the coming days and weeks. Similarly, Italian President Draghi announced that his government is readying public funds to subsidise consumers’ energy bills due to the latest increase in prices. This comes after the government has already spent EUR 1.2bn in the second quarter of this year, which is estimated to have cut the consumer price increase to +9% from an initial +20%. I’m not an expert (you may wonder what I’m actually an expert on) but another reason this is worrying is that demand and prices usually pick up in winter so this surge is coming at a seasonally strange time. These are strange times for inflation as it’s everywhere yet few are too concerned.

Elsewhere in financial markets, prior to the start of trading in the US, S&P 500 equity futures initially rose on the inflation data, but then sold off steadily throughout the day to reverse Monday’s slight gain and end -0.57% and at its lowest level in just over three weeks. Europe’s STOXX 600 (-0.01%) was largely unchanged as it closed before US equities took a second leg lower. Yesterday, the S&P 500 closed -0.32% away from its 50 day moving average, and the index has only closed below that trailing average on one occasion since March 8 (back on June 18). Overall we haven’t seen a correction yet, as many expect (see our survey here or evidence) but we have seen a stalling.

Financials underperformed amidst the decline in bond yields, with the STOXX Banks down -1.07%, as yields on 10yr bunds (-0.9bps), OATs (-1.4bps) and BTPs (-3.9bps) all moved lower. In the US bank stocks (-1.86%) were the worst performing industry group, along with energy (-1.55%). However, more inversely interest rate sensitive growth technology stocks had a better day, with software (+0.26%) and semiconductors (-0.04%) among the better performing industries along with healthcare equipment (+0.16%). Small cap stocks notably underperformed with the Russell 2000 losing -1.38%.

Overnight, the FT has reported that China’s President Xi Jinping was non-committal to a request from US President Joe Biden for a first face-to-face summit between the two at their call last week. While not taking up the offer, Xi said that “the tone and atmosphere of the relationship needed to be improved first". However, President Biden later gave clarification on the FT story saying that it was not true that Xi didn’t want to meet. So some spinning from someone here. Elsewhere, South Korea’s Joint Chiefs of Staff said that North Korea fired two ballistic missiles into waters off the eastern coast of the peninsula overnight. This marks the second major weapons test by North Korea in less than a week and is ratcheting up geopolitical tensions in the region.

Stepping away from politics and looking at the overnight economic data out of China. There was a huge miss on the retail sales front with the August print coming in at +2.5% yoy as against expectations of +7.0% yoy and +8.5% yoy last month. Industrial production (at +5.3% yoy vs. +5.8% yoy expected) also came in below expectations albeit the miss was smaller. YtD Aug fixed investment now stands at +8.9% yoy (vs. +9.0% yoy expected) while the surveyed unemployment rate was stable at 5.1%. The miss on retail sales came as covid-19 restrictions hit consumer spending and travel during the peak summer holiday break and China’s current delta outbreak is continuing to grow in the southeastern province of Fujian, with an additional 51 infections reported. The current outbreak has so far been restricted to the Fujian province but Chinese experts are worried that it may spillover to other parts of the country.

Given the above developments and weak economic data out of China, Asian markets are unsurprisingly trading lower this morning with the Nikkei (-0.37%), Hang Seng (-0.95%), CSI (-0.35%) and Asx (-0.21%) all losing ground. The Shanghai Comp (+0.31%) and Kospi (+0.34%) are trading higher though. Elsewhere, yields on 10y USTs are stable while futures on the S&P 500 are up +0.19%.

Turning to the pandemic, the UK government announced that millions would be offered a booster vaccine from next week, with those eligible getting a booster 6 months after their second dose. Those able to get a booster include all of the over-50s, other adults with underlying health conditions, and health and social care workers. The news on boosters came as Prime Minister Johnson announced the government’s plan to learn to live with the virus. Plan A was to use existing measures such as vaccines, self-isolation and public guidance, but Johnson said they were prepared to use measures in Plan B, which could include the introduction of vaccine passports, a return to legally mandated face coverings in some settings, and potentially a return to work from home advice. In the Netherlands, the government announced that the social distancing rules would be eliminated from September 25th, in what President Rutte called a “symbolic move.” This comes as the nation is expanding the use of covid-19 passports, making them required to enter cinemas, restaurants, and bars. Elsewhere in Russia, President Putin is now in self-isolation after he was exposed to a number of positive cases among his staffers.

On the German election, there are just 11 days to go now, and the polls continue to point to a tight race. One from GMS yesterday showed the centre-left SPD on 25%, just two points ahead of Chancellor Merkel’s CDU/CSU on 23%, with the Greens lagging behind on 16%. However, a separate Forsa poll showed the SPD with a 4-point lead, on 25% relative to the CDU/CSU’s 21%, although the CDU/CSU were up 2 points from the Forsa poll the previous week.

Looking at yesterday’s other data, the number of payroll employees in the UK was up +241k in August, which takes the total back above the pre-pandemic peak in February 2020. Furthermore, the unemployment rate also fell to 4.6% in the three months to July as expected. Over in the US, the NFIB’s small business optimism index for August unexpectedly rose to 100.1 (vs. 99.0 expected).

To the day ahead now, and the data highlights include US industrial production for August, the UK and Canadian CPI releases for August, and Euro Area industrial production for July. From central banks, we’ll hear from the ECB’s Schnabel and Lane.

Tyler Durden Wed, 09/15/2021 - 07:55
Published:9/15/2021 7:01:13 AM
[Markets] Dow Jones Futures Rise As Microsoft Flashes Buy Signal Amid Bearish Market Rally Trend; Chinese Economic Data Weakens Dow Jones futures rose slightly Wednesday morning, along with S&P 500 futures and Nasdaq futures, as weak Chinese economic data offset a late boost from a Microsoft stock buyback. The stock market rally on Tuesday once again opened higher but then faded, continuing a recent bearish trend. Published:9/15/2021 5:33:46 AM
[Markets] Dow Jones Futures: Stock Market Rally Continues Bearish Trend As Apple Unveils iPhone 13 Dow Jones futures were little changed Tuesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally on Tuesday once again opened higher but then faded, continuing a recent bearish trend. Published:9/14/2021 4:05:02 PM
[Markets] Dow ends down nearly 300 points, Nasdaq extends losing streak to fifth day Dow ends down nearly 300 points, Nasdaq extends losing streak to fifth day Published:9/14/2021 3:29:49 PM
[Markets] Dow Jones Falls 325 Points, But Microsoft Stock Stands Tall; Footwear Maker Surges After Investor Day The Dow Jones fell to session lows in afternoon trading Tuesday. Microsoft outperformed, but Apple fell below its 50-day moving average. Published:9/14/2021 2:29:47 PM
[Markets] Dow Jones, Nasdaq Fall As Inflation Cools; Energy Stocks Retreat As Oil Prices Turn Lower The Dow Jones Industrial Average fell in today's stock market and led the downside among the indexes. Meanwhile, the Nasdaq traded lower. Published:9/14/2021 1:24:18 PM
[Markets] US STOCKS-Financials drag Dow, S&P lower as data shows cooling inflation The Dow Jones and S&P 500 indexes fell on Tuesday, dragged down by financial stocks, after data showing a slower-than-expected rise in U.S. inflation led to uncertainty over the U.S. Federal Reserve's timeline to taper monetary stimulus. U.S. stocks have struggled this month as investors worry about the economic recovery amid a surge in cases of COVID-19's Delta variant and the valuation of equities following a lengthy rally. Published:9/14/2021 12:27:35 PM
[Markets] Dow Jones Slides As Inflation Cools, But Still High; Apple Climbs Ahead Of IPhone 13 Debut The Dow Jones Industrial Average reversed lower, as inflation cooled off in August but remained high. The Apple iPhone 13 is set to debut. Published:9/14/2021 10:30:30 AM
[Markets] Dow Jones Reverses As Inflation Cools, But Still High; Apple Climbs Ahead Of IPhone 13 Debut The Dow Jones Industrial Average reversed lower, as inflation cooled off in August but remained high. The Apple iPhone 13 is set to debut. Published:9/14/2021 9:55:50 AM
[Markets] Dow falls 200 points after early tailwind from inflation data dies down Dow falls 200 points after early tailwind from inflation data dies down Published:9/14/2021 9:55:50 AM
[Markets] S&P, Dow Snap Five-Day Skid Ahead of CPI Report S&P, Dow Snap Five-Day Skid Ahead of CPI Report Published:9/14/2021 8:28:15 AM
[Markets] Dow Jones Futures Reverse Lower As Apple iPhone 13 Set To Debut Dow Jones futures were lower early Tuesday following the mixed stock market action. The Apple iPhone 13 is set to debut Tuesday. Published:9/14/2021 7:22:52 AM
[Markets] Dow Jones Futures Rally As Apple iPhone 13 Set To Debut Dow Jones futures were little changed late Monday following the mixed stock market action. The Apple iPhone 13 is set to debut Tuesday. Published:9/13/2021 5:24:23 PM
[Markets] Last-Minute Panic-Bid Saves Stocks From Longest Losing Streak In 19 Months Last-Minute Panic-Bid Saves Stocks From Longest Losing Streak In 19 Months

Thanks to late-day panic-bid, the S&P 500 avoided a sixth straight day of losses - which would have been the worst losing streak since Feb 2020 as the COVID crash was starting to accelerate...

The Dow and Small Caps outperformed while Nasdaq was the biggest loser today.

Did the buyback tsunami get unleashed this afternoon to try and save stocks?

But the actual drawdown is de minimus to say the least!

Source: Bloomberg

In fact, as Bloomberg's Eddie van der Walt points out, in the past year, there have been 10 cumulative declines bigger than the present one, only for the index to bounce back to a record high. In October last year, the S&P 500 fell more than 7.5% over 14 sessions, only to set a new record six days later.

But, Dow Theory is flashing red this time, as Trannies tumble divergently from Industrials...

Source: Bloomberg

As RIA notes, “The general idea is that both averages, over time, should move in tandem, given that the transportation average represents companies responsible for the movement of goods across the country. For that reason, it should serve as a leading indicator.” Many question the value of the theory today due to the tremendous technological progress. However,  the fact of the matter is we still consume goods that must be shipped.

The Dow bounced off its 100DMA...

Defensives and Cyclicals both opened significantly higher only to be dumped together for the rest of the day...

Source: Bloomberg

Treasury yields were lower on the day with the long-end outperforming (30Y -3bps)...

Source: Bloomberg

10Y Yields pushed back down to post-payrolls close levels...

Source: Bloomberg

But while bond yields were lower, anxiety over the debt ceiling debacle are accelerating...

Source: Bloomberg

The dollar chopped around managing to hold modest gains today...

Source: Bloomberg

The big news in crypto-land was the 'fake' pres release that Walmart was partnering with Litecoin which briefly sent cryptos soaring (LTC was up almost 35% at its peak) only for those gains to evaporate as reality struck...

Source: Bloomberg

Bitcoin has had a chaotic last 24 hours after Korean crypto exchange regulatory news (and the WMT headlines) drove swings...

Source: Bloomberg

Gold managed modest gains today, briefly topping $1800 before fading back...

WTI rallied back above $70 (within a tick of $71 intraday)...

Overall, the Bloomberg Commodity Spot Index rallied a fresh 10-year high...

Source: Bloomberg

Finally, if there was ever any doubt, the market's biggest risk is in the contraction of liquidity which stocks have been more sensitive to over the last decade rather than economic and earnings growth.

And don't forget September's seasonality...

Will the opex-bounce save us?

Will it be different this time?

It better be...

Tyler Durden Mon, 09/13/2021 - 16:01
Published:9/13/2021 3:24:55 PM
[Markets] Dow finishes over 260 points higher, snapping 5-day losing streak Dow finishes over 260 points higher, snapping 5-day losing streak Published:9/13/2021 3:24:55 PM
[Markets] US STOCKS-S&P 500 snaps losing streak with tax hikes, inflation data on horizon The S&P 500 closed higher on Monday, ending a five-day losing streak as investors focused on potential corporate tax hikes and upcoming economic data. The Dow Jones Industrial Average also advanced, but the Nasdaq Composite Index ended lower. "There are probably not a lot of positive surprises coming this month," said Liz Young, head of investment strategy at SoFi in New York. Published:9/13/2021 3:24:55 PM
[Markets] US STOCKS-Wall Street mixed as tax hikes, inflation data looms Wall Street stocks wavered on Monday, struggling to regain ground lost in last week's bruising sell-off, but economically sensitive shares rose as investors focused on potential corporate tax hikes and upcoming economic data. The three major U.S. indexes were mixed, with the bellwether S&P 500 index essentially flat as it flirts with the prospect of extending its five-day losing streak. But while the Dow Jones Industrial Average was green, market leading tech and tech-adjacent shares pulled the Nasdaq Composite Index into the red. Published:9/13/2021 2:02:02 PM
[Markets] Dow Jones Rallies To Buck Market Sell-Off; Growth Stocks Slip But Oil Stocks Surge Stocks were mixed midday with the Dow Jones Industrial Average rallying more than 200 points as it tries to halt a five-day losing streak. Published:9/13/2021 11:47:28 AM
[Markets] Early gains put S&P and Dow on track to snap losing streaks; Nasdaq left behind Early gains put S&P and Dow on track to snap losing streaks; Nasdaq left behind Published:9/13/2021 9:49:58 AM
[Markets] Dow Jones Rallies As Apple Rebounds, But Tesla Sells Off; Four Top Growth Stocks To Buy And Watch The Dow Jones Industrial Average rallied 285 points Monday, as Apple rebounded from Friday's sell-off. But Tesla stock sold off. Published:9/13/2021 9:49:57 AM
[Markets] Dow industrials point toward 200-plus-point gain at Monday opening bell Dow industrials point toward 200-plus-point gain at Monday opening bell Published:9/13/2021 8:21:52 AM
[Markets] These 4 Dow Stocks Can Double Your Money in 7 Years (or Less) For more than 125 years, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI) has served as a barometer for the health of the U.S. stock market. Comprised of 30 profitable and time-tested companies, the Dow Jones is the perfect example of how buy-and-hold investing can make investors rich. Over the trailing 50 years, the Dow has averaged an annualized return of about 7.5%. Published:9/13/2021 5:16:03 AM
[Markets] 3 Dow Jones Stocks to Buy Hand Over Fist Right Now Economic uncertainty suggests market volatility may be on the horizon, and that means it could be a good time to focus your investing on high-quality companies rather than more speculative growth plays. The Dow Jones Industrial Average index houses 30 large, highly traded companies that operate across a wide variety of industries, which makes it a strong starting point for investors seeking dependable category leaders. With that in mind, a panel of Motley Fool contributors has identified Apple (NASDAQ: AAPL), Merck (NYSE: MRK), and Caterpillar (NYSE: CAT) as top Dow Jones stocks to buy right now. Published:9/12/2021 6:42:28 AM
[Markets] Dow Jones Dips As Apple Falls On App Store Bombshell; Roblox, EA Stock Jump; AMC Pops The Dow Jones fell as Apple stock dipped on an App Store ruling. Roblox stock and and Electronic Arts popped. AMC stock surged. Published:9/10/2021 3:54:27 PM
[Markets] Stocks close lower to end the week, with the Dow down 270 points Stocks close lower to end the week, with the Dow down 270 points Published:9/10/2021 3:34:03 PM
[Markets] Dow Jones Slips As Indexes Reverse Lower; Antitrust Ruling Hits Apple; Economic Data Points To More Inflation The Dow Jones Industrial Average moved slightly lower in today's stock market, after turning briefly positive in late afternoon trading. Published:9/10/2021 2:54:47 PM
[Markets] Apple's stock takes a dive to pace the Dow's losers after report of unfavorable court decision Shares of Apple Inc. took a 2.8% dive in midday trading Friday, enough to pace the Dow Jones Industrial Average's losers, after a reportedly unfavorable court ruling in the case between the technology behemoth nd Epic Games. The stock was trading up about 0.1% just before the reports of the court's decision surfaced, and had been up as much as 0.9% at an intraday high of $155.48 earlier in the session, then fell as much as 3.5% to a low of $148.70 before bouncing slightly. The stock's $4.25 pric Published:9/10/2021 11:30:13 AM
[Markets] Dow forfeits early gain as Nasdaq and S&P remain on track to halt losing streaks Dow forfeits early gain as Nasdaq and S&P remain on track to halt losing streaks Published:9/10/2021 9:55:33 AM
[Markets] This is what investment research suggests we do amid geopolitical crises The terrorist attacks of Sept. 11, 2001, were the biggest modern shock in the U.S. We were shaken, and in some cases we were changed forever. At its low several days later, after the stock market finally reopened after being closed, the Dow was 17.5% lower. By Oct. 26, six weeks later, the Dow was trading higher than where it closed on Sept. 10. Published:9/10/2021 8:23:14 AM
[Markets] Dow Jones Futures Point To Dow Reclaiming Support; Amazon Ally Affirm Soars On Earnings The Dow fell below its 50-day line Thursday but growth and airline stocks rose. "Buy now, pay later" Affirm surged late on earnings. Published:9/10/2021 5:23:48 AM
[Markets] Dow, S&P 500 set to break string of losses with producer prices on deck Dow futures rise over 200 points as Wall Street looks ready to rebound from days of losses. Investors will get producer price data later. Published:9/10/2021 4:51:46 AM
[Markets] Market Snapshot: Dow, S&P 500 set to break string of losses with producer prices on deck Dow futures rise over 200 points as Wall Street looks ready to rebound from days of losses. Investors will get producer price data later.
Published:9/10/2021 4:51:46 AM
[Markets] Dow Jones Futures: Dow Breaks Support But These Stocks Strong; Amazon Ally Affirm Soars On Earnings The Dow fell below its 50-day line Thursday but growth and airline stocks rose. "Buy now, pay later" Affirm surged late on earnings. Published:9/9/2021 5:23:36 PM
[Markets] Dow Jones Futures: Dow Undercuts Support But Growth Stocks, American Airlines Strong; Amazon-Partner Affirm Signals 'Buy Now' On Earnings The Dow fell below its 50-day line Thursday but growth and airline stocks rose. "Buy now, pay later" Affirm surged late on earnings. Published:9/9/2021 4:14:33 PM
[Markets] Bonds, Bitcoin, & Bullion Bid; Big-Tech & Black Gold Skid Bonds, Bitcoin, & Bullion Bid; Big-Tech & Black Gold Skid

Today was supposed to be a buy the dip day... but that dip-buying effort failed in large part (Small Caps outperformed but suffered a big puke into the close)...

But all the majors remain red from last Friday...

"...as if millions of voices cried out in terror and were suddenly silenced..."

The Dow closed back below its 50DMA for the first time in 2 months...

Small Caps bounced off the 100DMA...

Mega-tech FANG stocks stumbled for a second day...

Source: Bloomberg

The flip-flopping rotation from cyclicals to defensives and back continued with defensives underperforming today...

Source: Bloomberg

Very strong 30Y auction, echoing yesterday's very strong 10Y auction sent yields tumbling, erasing all the post-payrolls losses...

Source: Bloomberg

30Y yields back below 1.90% and 10Y yields fell below 1.30%...

Source: Bloomberg

The dollar reversed its brief rally after tagging the post-J-Hole plunge lows...

Source: Bloomberg

Bitcoin rebounded very modestly after Mastercard headlines, holding above $46k...

Source: Bloomberg

Wild ride in crude oil today, battered by China SPR release headlines, dip-bought, then inventory data and a super strong 30Y auction sent WTI reeling lower again...

Gold was just as choppy today but ended higher - testing back above $1800...

Finally, breadth stinks...

Source: Bloomberg

Tyler Durden Thu, 09/09/2021 - 16:00
Published:9/9/2021 3:26:29 PM
[Markets] Dow, S&P 500 extend losing streaks to fourth day Dow, S&P 500 extend losing streaks to fourth day Published:9/9/2021 3:26:29 PM
[Markets] Dow, S&P 500 mark longest losing skid in 12 weeks as stock market wobbles lower The Dow Jones Industrial Average and the S&P 500 marked a fourth straight loss Thursday, relinquishing earlier gains that had been partly attributed to indications President Joe Biden will expand COVID-19 vaccine mandates for federal workers. Investors sold health-care, consumer-staples real-estate stocks, weighing on the broader market, which has mostly been trading in record territory until this holiday-abbreviated week's recent slump. The Dow closed down over 150 points, or 0.4%, at 34,879, l Published:9/9/2021 3:26:29 PM
[Markets] Dow Jones Dips As Biden Drug Plan Hits Health Stocks; Warren Buffett Stock Passes Buy Point The Dow Jones fell as a Biden administration plan to cut prescription prices hit health care stocks. A Warren Buffett stock passed a buy point. Published:9/9/2021 2:57:44 PM
[Markets] US STOCKS-Wall St holds ground as jobless claims fall to near 18-month low "This jobs data is counter-intuitive to the way market are moving because it provides a reason for the Federal Reserve to pull back its asset purchases sooner, a factor that has weighed on markets recently," said Jeff Powell, managing partner at Polaris Wealth Advisory Group. The S&P 500 and the Dow Jones were little changed after gaining in early trading, hinting they were set to snap a three-day losing streak. Investor mood has been glum this week after a recent monthly jobs report showed a slowdown in U.S. hiring amid worries over a fading recovery. Published:9/9/2021 11:54:05 AM
[Markets] Rabobank: What Is Coming Is A Bigger Economic, Market, And Geopolitical Earthquake Than QE Tapering Rabobank: What Is Coming Is A Bigger Economic, Market, And Geopolitical Earthquake Than QE Tapering

By Michael Every of Rabobank

Where's the beef? (And pork and chicken?)

Yesterday US stocks had the temerity to go down. Not a lot: S&P -0.13%, Dow -0.2%-- but red, not green. It’s apparently headline news. More significantly, markets are worrying the all-time high in stocks might not last for all time. The chatter / whisper is of a possible correction which, to be fair, it has been for a long time as stocks have kept levitating regardless. Meanwhile, as Treasury yields dropped to reverse the previous day’s climb, 3-month USD LIBOR is still only just above the lowest level this year at 0.11% vs 0.24% at the start.

For markets, where is the beef? The LIBOR trend is nothing new, and reflects excess liquidity via QE, as already evident in reverse repo action, etc. On stocks, the issue is again QE: when does the music stop? On that front, the analogy of musical chairs is a good one. (As it is for the potential Fed Chairs, Powell and Brainard, too.)

Vis-à-vis QE, the Fed’s Beige Book was long “shortages”. “The US economy strengthened further from late May to early July, displaying moderate to robust growth,” beiged the book, an upgrade from “moderate” in the spring. However, “Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods”; that as global shippers underline supply chain snarls will last well into 2022 at least. Indeed, as the ‘force majeure’ news in fertilizer production this week made clear further hefty US food-price increases can be expected well into 2022 too, the National Economic Council’s Deese was rolled out to explain that if you exclude beef, pork, and poultry, price increases “are more in line with historical norms. (No hedonic adjustment to chickpeas to solve the CPI problem?)

More directly worrying for markets was the New York Fed’s Williams saying that “it could be appropriate” for the Fed to start tapering this year, with Kaplan adding the announcement could come as soon as the September 21-22 FOMC meeting for an October start. More beef was that Williams said “right now, asset valuations are very high. Was it a boast or a problem? Perhaps if the QE timetable is as suggested, that won’t be an issue for much longer.

Then again, as is repeated often here, are the Fed really going to taper if the fiscal picture is unclear? On which, the question is not “where’s the beef?” but “where’s the pork?” And the latest news there is “stuck in a supply-chain snarl”. Indeed, Senator Manchin, for one, has made clear only $1.0-1.5 trillion of the $3.5 trillion stimulus proposed is acceptable to him, which shows just how far apart the Democrats are internally. But is this good news for stocks (and bonds) after a dip and the obligatory dip-buying referred to yesterday?

But back to beef, where the market is also fretting the ECB might take a hawkish turn today. Our ECBeebies believe the Bank will keep rates unchanged and the APP (“bond buying”, for those who don’t speak Euroacronym) steady at EUR 20bn/month, but with the target pace of PEPP purchases (“more buying”) to be slowed to EUR 60bn/month for Q4, and the PEPP envelope unchanged at EUR1,850bn. Any decisions regarding the 2022 policy mix will probably be postponed until December. Importantly, however, they also think the ECB will want to make clear that this is not the start of a taper or a signal that PEPP ends in March 2022. Let’s see if the ECB can make all things clear: the track record is not good - far more gristle than meat is often the case. Meanwhile, the latest German opinion polls suggest outgoing Chancellor Merkel’s CDU is slumping, and assembling a viable coalition after the upcoming election could be problematic. Then again, which major EU economy does have a strong functioning government at the moment? Which is why we all listen to the ECB so much.

And so to the next portion of animal protein: “where’s the chicken?” US Secretary of State Blinken is now stating that the US is getting 'closer' to giving up on Iran nuclear deal. So the US isn’t prepared to keep negotiating like Brian in ‘The Life of Brian’ forever(?): “How much, quick? It's for the wife” “Oh, uh, 20 shekels.” “Right.” “What?” “There you are.” “Wait a minute!” “What?” “We're supposed to haggle.” “No, no, no. I've got to get…” “What do you mean, no?” “I haven't got time.” “Well, give it back, then!” “No, no. I just paid you!” “Burt, this bloke won't haggle!” What comes next if the US-Iranian transaction does not end up with a nice gourd being thrown in?

On which, economic historian Adam Tooze argues in “The New Age of American Power” that some see the US debacle in Kabul marking the end of its global power projection: that as the AP reports “Taliban form all-male government of old guard members”, as if shocked this is what they meant by “diverse”, and whispers that the PLA is looking at Bagram airbase. However, Tooze posits the US is instead refocusing on Russia/China, and on two key areas it dominates: finance and tech, concluding: “They aim to secure US military dominance even as the centrifugal effect of global economic growth reduces America’s relative weight in the world economy. Ultra-advanced technology, not GDP, will be the decisive factor. As Washington torques the sinews of power, the entire world will feel the effect.” This comes on the back of increasingly bipartisan arguments for the adoption of US industrial policy, where one ambitious proposal is even a Factory Bill modelled after the Farm Bill that supports US agriculture and its supply chain.  

Moving in that direction -- the US dollar as weapon, decoupling tech, and the US becoming a manufacturing power again to match its agricultural power -- is more of a potential economic, market, and geopolitical earthquake than QE tapering. Dare the US act like that, given the impact? Post-Kabul, as hegemon, dare it not?

However, this is a longer term issue than QE or fiscal stimulus. For now, focus on the beef, or lack of beef, and the pork, or lack of pork. Just don’t forget the real game is actually chicken.

Meanwhile, very much related to this hypothetical discussion, Chinese inflation data today saw headline CPI up just 0.8% y/y, down 2 ticks from last month, while PPI was 9.5% y/y, 0.5ppts higher than expected and up from 9.0%. That is even more of a margin squeeze – and we now have to wait for the more detailed data breakdowns to be released so we can see what beef, pork, and chicken were doing. Mr Deese may want to take some notes.

Tyler Durden Thu, 09/09/2021 - 12:10
Published:9/9/2021 11:31:16 AM
[Markets] Dow Jones Erases Early Gains That Came On Jobs Data; Nike Leads Blue Chips Key market indexes were mildly higher midday, after trimming early gains spurred by bullish jobs data. Nike led the Dow Jones industrials. Published:9/9/2021 11:31:16 AM
[Markets] GLOBAL MARKETS-Wall Street gains, European shares reverse earlier losses Euro zone bonds were on course for their best day in months on Thursday as the European Central Bank took its first tentative step in withdrawing COVID-era stimulus, and Wall Street indexes gained after weekly jobless claims data fell to a pandemic low. The Dow Jones Industrial Average rose 41.01 points, or 0.12%, to 35,072.08, the S&P 500 gained 3.34 points, or 0.07%, to 4,517.41 and the Nasdaq Composite added 39.29 points, or 0.26%, to 15,325.93 by 11:22 a.m. EDT (1523 GMT). Europe's STOXX 600 reversed earlier losses and banking shares climbed after the ECB signaled it will only slightly reduce its emergency bond purchases over the coming quarter, in line with expectations. Published:9/9/2021 10:52:24 AM
[Markets] Stocks edge higher in early trade as jobless claims fall U.S. stocks were trading with small gains after a mixed opening Thursday, following data that showed a drop in first-time applications for jobless benefits to a pandemic low. The Dow Jones Industrial Average was up 40 points, or 0.1%, at 35,071, while the S&P 500 rose 0.1%, to 4,517. The Nasdaq Composite advanced 0.1% to 15,308. Initial jobless claims fell by 35,000 to 310,000 in the week ending Sept. 4, the lowest since the pandemic struck in March 2020. Published:9/9/2021 9:22:44 AM
[Markets] Stocks Slump, Bonds Jump As Fed Fears "Very High" Asset Valuations Stocks Slump, Bonds Jump As Fed Fears "Very High" Asset Valuations

Not a great day for the infinite-liquidity-dependent bulls: Surging JOLTS data (but still hiring is lagging) prompted some equity investor anxiety as The Fed may see that as 'strong' enough to taper. Soaring 'shortages' in the Beige Book suggest inflation is anything but transitory (again pressuring taper action from The Fed). Renewed anxiety over the debt ceiling (as Yellen urged Congress to fix things) brings back 'Stealth QT' fears. And finally, Fed's Williams warned that "right now, asset valuations are 'very high'".

He is right...

Source: Bloomberg

And combined with anxiety over tomorrow's ECB meeting (which is expected to signal the beginning of the end of their asset buying spree), US equities took another spill today, with Small Caps leading the drop (and Nasdaq the least bad horse in this week's glue factory)...

The Dow dropped to its 50DMA and stabilized...

Small Caps slipped to their 100DMA (stabilizing between that and the 50DMA)...

Defensives were bid all day as Cyclicals extended yesterday's losses...

Source: Bloomberg

FANG Stocks chopped around but ended the day lower after yesterdays' big surge...

Source: Bloomberg

Interestingly, "stay at home freaked out" stocks notably  outperformed "get out and live your f**king life" stocks today...

Source: Bloomberg

What happens if the "IF 'Dip' THEN 'Buy'" guru strategy begins to fail?

Bonds erased most of yesterday's losses...

Source: Bloomberg

With a very strong 10Y auction sending the yields back to unch for the shortened week...

Source: Bloomberg

The dollar extended its recent bounce but stalled at the nadir of the drop from Powell's Jackson Hole speech...

Source: Bloomberg

Cryptos extended yesterday's losses but on a far smaller scale. Bitcoin was pretty much unchanged in the big picture...

Source: Bloomberg

Gold slipped back below $1800 again thanks to another monkeyhammering around the US equity cash open...

WTI rallied on the day, ahead of tonight's API inventory data, back above $69...

Finally, Bloomberg notes that demand for S&P hedges is soaring as the market rallies into taper uncertainty. The gap between one-year and one-month implied volatility in the largest exchange-traded fund tracking the S&P 500 Index hit 7.6 points on Friday, a nine-year high, showing increased demand for protection against longer-term risks.

Source: Bloomberg

As the equity gauge hovers near a record, anxiety is on the rise about everything from the timing of the Federal Reserve’s withdrawal of its bond-buying program to elevated inflation to slowing growth. “Investors remain in ‘trust but verify’ mode,” said Stuart Kaiser, head of equity derivatives research at UBS Group AG. “Markets reset all-time highs but risk premiums remain fairly wide.”

Tyler Durden Wed, 09/08/2021 - 16:00
Published:9/8/2021 3:19:26 PM
[Markets] Dow Jones Component 3M Stock Could Add Bearish Exposure With Options With the Dow Jones Industrial Average pulling back to its 50-day line, traders may be looking to add some bearish exposure to their portfolios. Take 3M. Among Dow Jones industrials members, 3M stock is on the weaker side. Published:9/8/2021 1:16:03 PM
[Markets] Dow industrials skid to lowest level in two weeks after surrendering early gain Dow industrials skid to lowest level in two weeks after surrendering early gain Published:9/8/2021 11:11:26 AM
[Markets] Dow Jones Slides As Yellen Warns Congress; Apple Sells Off From Record High; Tesla Skids Amid China Sales The Dow Jones Industrial Average dropped 150 points Wednesday, as Tesla stock reversed lower amid China sales. Apple fell from record highs. Published:9/8/2021 10:47:23 AM
[Markets] Dow Jones Slides As Apple Sells Off From Record High; Tesla Reverses Amid China Sales The Dow Jones Industrial Average dropped 150 points Wednesday, as Tesla stock reversed lower amid China sales. Apple fell from record highs. Published:9/8/2021 10:11:48 AM
[Markets] Dow forfeits early advance as U.S. stocks dip amid latest Fed ‘taper’ hint Dow forfeits early advance as U.S. stocks dip amid latest Fed ‘taper’ hint Published:9/8/2021 9:38:47 AM
[Markets] Stocks open slightly lower as worries continue over delta variant Stocks opened slightly lower Wednesday, with analysts attributing weakness to continued concerns over the spread of the delta variant of the coronavirus that causes COVID-19. The Dow Jones Industrial Average was down 82 points, or 0.3%, at 35,018, while the S&P 500 was off 10 points, or 0.2%, at 4,510. The Nasdaq Composite declined 44 points, or 0.3%, to 15,330, after the tech-heavy index on Tuesday finished at a record. Published:9/8/2021 8:49:00 AM
[Markets] Futures Extend Slide, European Markets Drop On Growth, Tapering Fears Futures Extend Slide, European Markets Drop On Growth, Tapering Fears

World stocks receded from the previous session’s record highs, European stocks were headed for the biggest decline in almost three weeks and US futures were set for a third straight day of losses on Wednesday with the global growth outlook coming under increasing pressure while the dollar hit one-week highs and 10Y yields dipped as investors reduced exposure to riskier assets. S&P futures briefly fell 0.5%, tipping below 4,500 before, recovering losses after the S&P 500 fell 0.34% on Tuesday, while Dow futures were flat and Nasdaq emini futs were fractionally in the red as banks from Morgan Stanley to Citigroup turned cautious on US equities.

The S&P 500 and Dow Jones indexes closed lower on Tuesday, but the Nasdaq edged up to an all-time high after shares of Apple and Netflix hit record levels. US stocks have come under increasing pressure in recent days as investors have turned increasingly cautious following Friday’s weak August payrolls data and uncertainty over tapering. 

In the premarket, cryptocurrency-exposed stocks drop as Bitcoin falls along with other digital currencies after Coinbase said it received a warning from the Securities and Exchange Commission. Future Fintech (FTFT) falls 4.1% and Coinbase (COIN) declines 2.2%, while Marathon Digital (MARA) loses 1.3%. FAAMG gigatechs such as Microsoft, Amazon, Facebook and Alphabet Inc fell between 0.1% and 0.3% in premarket trading. PayPal rose 0.7% after it said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal. Tesla edged 0.6% higher after the China Passenger Car Association (CPCA) said the electric vehicle maker sold 44,264 China-made vehicles in August and reported a jump on local deliveries.  Here are some of the other big movers today:

  • Coty (COTY) falls 6.8% after announcing the start to offer Class A stock by KKR Rainbow Aggregator LP.
  • India Globalization Capital (IGC) jumps 18% after the company says its cannabis-based drug for Alzheimer’s was safe and well tolerated in an early-stage clinical trial on 12 patients.
  • Kadmon (KDMN) surges 78% after Sanofi’s $1.9 billion cash acquisition of the U.S. biotech.
  • Nio Inc. (NIO) slides 3.1% after announcing a $2 billion at-the-market offering postmarket Tuesday. Its peers like Li Auto (LI) and Xpeng (XPEV) also declines by 0.5% and 0.8% respectively.
  • UiPath (PATH) slips 7% after sales forecast trails some estimates.

And then there is tapering: despite the weakest jobs report in seven months on Friday, St. Louis Fed President James Bullard said in an interview with the Financial Times on Wednesday that the Fed should move forward with a plan to taper QE despite the slowdown in job growth.

"Everything is tapering, tapering, tapering. We are looking at every single central bank - when is the next one?” said Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management, though he added: “The Delta variant impact is still running like a wild card”.

MSCI’s world equity index fell 0.17% after seven consecutive days of gains.

European equities slumped, with the Euro Stoxx 50 dropping as much as 1.5%, and the Stoxx 600 gauge headed for the biggest decline in almost three week; the DAX and SMI lag. Autos, industrial and media names are the weakest sectors with travel and retail the sole sectors in the green. Britain’s FTSE 100 struck two-week lows and were down 0.56%. European traders were focused on whether the European Central Bank will this week also begin to scale back its bond purchase program.

“What is likely ahead of us is a continued but temporary deceleration of economic activity of one to three months which likely started in August,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.  "Fears that central banks might start to taper their asset purchases seems to have knocked away a little confidence, particularly given tomorrow’s ECB decision where many expect we’ll begin to see the start of that process, not least with inflation there running at its highest levels in almost a decade,” Deutsche Bank analysts said in a note. 

Here are some of the biggest European movers today:

  • B&M shares gain as much as 5.9% as it says revenue in the year to date has been broadly in line with market expectations, though gross margins have been stronger than originally anticipated in the B&M U.K. fascia business.
  • Dunelm rises as much as 11% after its FY profit topped estimates and it announced a special dividend, with analysts saying the payout points to a more confident outlook for the home furnishings retailer.
  • EasyJet shares rise as much as 3.8% and Ryanair shares up by as much as 2.3% after the Telegraph reported the U.K. may scrap its Green and Amber warning lists for foreign travel next month
  • Siemens Gamesa falls by as much as 7.5% and Siemens Energy drops by as much as 6.1% after JPMorgan downgrades both stocks. Other wind- energy stocks also fell including Orsted, down as much as 3.6%, after UBS cut its rating to neutral.
  • InPost falls as much as 4.2% despite its 2Q results getting a good reception from analysts, who noted its record margins and strong growth in parcel volumes.
  • Interparfums shares sink as much as 7.8% as its sales forecast disappointed and branded fragrances maker was downgraded by both Oddo and Midcap Partners.

Earlier in the session, the MSCI Asia Pacific Index slipped 0.1% while Japan’s Topix index closed 0.8% higher, with the rally driven by Japanese Prime Minister Yoshihide Suga’s decision to effectively step down. Asian stocks retreated, led by benchmarks in Korea and Taiwan, as investors awaited fresh catalysts following an eight-day rally. The MSCI Asia Pacific Index fell as much as 0.4%, before paring much of those losses. The regional benchmark is up by more than 8% from its lowest level for this year, marked on Aug. 20. A group of materials firms declined the most, offsetting gains in utilities. Regional equities have been in recovery since late August as concern over any abrupt tapering by the U.S. Federal Reserve abated and a selloff in Chinese equities eased. Still, stocks have been whipsawed by the rise and fall of daily virus cases in some countries and attempts by China to regulate a wide range of businesses.  Chinese blue chips dropped 0.41%, weighed down by recent soft data in the world’s second-biggest economy.

“A window remains for positive equity returns before the Fed raises rates in 2023 and a counter-trend dollar rally starts,” Jefferies strategist including Darby wrote in a note. “But a lot depends on further easing by China and better S.E. Asia vaccine roll-outs. The good news is that global trade is booming and an IT spending cycle is unfolding.” Singapore’s Straits Times Index fell more than 1% after local Covid-19 infections jumped to the highest in more than a year. South Korea’s Kospi was driven lower by a plunge in Kakao and Naver, after prominent lawmakers warned internet giants against pursuing profits and abusing their market dominance.

Japan outperformed as investors continued to be cheered by prospects for a new government and a recovery from the pandemic, with the Nikkei 225 Stock Average’s rally bolstered by gains in SoftBank. The Nikkei 225 Stock Average climbed 0.9% to 30,181.21, its highest closing level since March 18. The eight-day rise marks the blue-chip gauge’s longest win streak since November. SoftBank was the largest contributor to the Nikkei 225’s advance, rising for a second day on a deal that may set up a buyback for the Japanese tech giant.  Telecommunications providers and electronics makers were the biggest boosts to the Topix, which rose 0.8% to the highest level since August 1990. Trading volume on the first section of the Tokyo Stock Exchange was 3.7 trillion yen ($33.3 billion), the most since May 27. Friday marks the expiration of options and futures contracts in the so-called “special quotation” settlement. The event often leads to speculative trading in the run-up and heavy volumes on the day, especially in quarter-ending months like September. “Investors are eying positive change in Japanese politics, but they are also looking to the major SQ on Friday -- foreign investors that had sold futures are now trying to buy back positions as the cash market has jumped,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. “Should the Nikkei 225 exceed the SQ price Friday morning, it would indicate that the market remains firm.”

Australian stocks declined as miners, consumer staples tumble. The S&P/ASX 200 index fell 0.2% to close at 7,512.00 as materials and consumer staples stocks weighed on the benchmark. Eagers was the worst performer, retreating from a record high set Tuesday. Macquarie was among the top performers after issuing positive 1H guidance. In New Zealand, the S&P/NZX 50 index fell 1% to 13,193.01.

In rates, 10Y Yields fell to 1.3512% compared to a U.S. close of 1.371% on Tuesday, retreating from this week’s eight-week highs in a quiet session. Germany’s 10-year Bund yield also hit eight-week highs before edging lower to -0.331%. Peripheral spreads widen a touch with the belly of the Italian curve widening ~1.5bps to Germany.

In FX, USD and haven currencies are modestly bid given the weakness in stocks. The dollar hit a one-week high against the single currency and was trading at $1.1819. It also reached a one-week peak against an index of currencies, recovering from recent five-week lows. It was trading at 92.67 on the index, up 0.15%. The Bloomberg dollar index trades near best levels for the week. CAD and SEK are the weakest in G-10. Turkish lira snaps through 8.40 to lag EMFX peers. The pound weakened for a third day, its longest losing streak in a month, ahead of a Parliament vote on a government tax package that seeks to trim a U.K. budget deficit swollen by pandemic spending; Bank of England Governor Andrew Bailey’s comments will also be in focus as he faces the Treasury Select Committee on Wednesday. The Australian dollar was the worst G-10 performer while Australia’s bonds opened lower following Treasuries and held losses through the day; New Zealand peers also declined following a solid milk auction. The yen touched its weakest level in almost a month before rebounding as risk sentiment soured.

Bitcoin paused for breath after plunging 17% on Monday to a low of around $43,000 before recovering. It was last at $46,552, down 0.7%.

In commodities, crude futures pushed higher, returning toward Asia’s best levels. WTI jumped 1.38% to $69.30 a barrel and Brent crude rose 1.14% to $72.50 per barrel, with prices supported by a slow restart to production in the Gulf of Mexico after Hurricane Ida hit the region. Base metals were mixed: LME copper underperforms, snapping through $9,300/MT to trade down as much as 1.5%.  Gold gained 0.17% to $1796.90 per ounce in line with the risk-averse mood and just below the psychologically key $1,800 level which it fell through in the previous session.

Looking at the day ahead now, and data releases include US job openings and consumer credit for July, alongside Italian retail sales for July as well. From central banks, we’ll get the Bank of Canada’s latest rate decision, the Federal Reserve will be releasing their Beige Book, and speakers include the BoE’s Bailey, Broadbent, Ramsden and Tenreyro, and the Fed’s Williams and Kaplan.

Market Wrap

  • S&P 500 futures down 0.4% to 4,499.75
  • STOXX Europe 600 down 1.2% to 467.39
  • MXAP down 0.2% to 206.88
  • MXAPJ down 0.6% to 671.33
  • Nikkei up 0.9% to 30,181.21
  • Topix up 0.8% to 2,079.61
  • Hang Seng Index down 0.1% to 26,320.93
  • Shanghai Composite little changed at 3,675.19
  • Sensex down 0.3% to 58,082.81
  • Australia S&P/ASX 200 down 0.2% to 7,512.00
  • Kospi down 0.8% to 3,162.99
  • Brent Futures up 0.2% to $71.83/bbl
  • Gold spot up 0.2% to $1,798.76
  • U.S. Dollar Index up 0.20% to 92.70
  • German 10Y yield fell 1.0 bps to -0.332%
  • Euro down 0.2% to $1.1820
  • Brent Futures up 0.2% to $71.83/bbl

Top Overnight News courtesy of Bloomberg

  • “There is the possibility that we may be able to normalize monetary policy sooner than most financial market experts expect,” European Central Bank Governing Council member Robert Holzmann says in Eurofi Magazine
  • “Pandemic measures, temporary in their nature, will be phased out eventually, but the current situation still calls for monetary policy to remain highly accommodative,” European Central Bank Governing Council member Bostjan Vasle says in Eurofi Magazine
  • The Federal Reserve should press ahead with a plan to taper its massive pandemic stimulus program despite weak U.S. jobs growth last month, the Financial Times reports St. Louis Fed President James Bullard as saying in an interview
  • Jitters in the Chinese high-yield dollar bond market are prompting investors to chase quality debt in Asia, pushing down spreads on investment-grade notes to pre-pandemic levels

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac equity markets followed suit from the lacklustre performance in the US where sentiment was subdued on return from the Labor Day weekend with weakness seen in cyclicals. ASX 200 (-0.2%) traded negative as the ongoing COVID-19 disruptions continued to take their toll on the nation’s stock markets and with gold miners frontrunning the declines after the precious metal recently slipped beneath the 1800/oz level, although losses for the index were stemmed with the top-weighted financial sector underpinned by the higher yield environment. Nikkei 225 (+0.9%) recovered from opening losses, helped by stronger than expected GDP revisions for Q2 and although the government is likely to extend COVID emergency measures to the end of this month, reports added that it will gradually ease COVID-19 restrictions beginning in October. Furthermore, SoftBank was the biggest gainer in the Japanese benchmark with its shares briefly higher by double-digit percentages after the recent share-swap agreement with Deutsche Telekom fuelled speculation it could lead to a share buyback. Hang Seng (-0.1%) and Shanghai Comp. (Unch) traded indecisively amid ongoing regulatory and debt concerns with reports noting that China will increase transparency of policies and will crackdown to better support companies in competition, while Evergrande shares were choppy after Fitch downgraded its credit rating from CCC+ to CC which reflects the view that a default of some type seems probable. Finally, 10yr JGBs declined following the bear steepening in US where bonds were also pressured by increased issuer activity and with demand dented by the GDP-uplifted mood in Japanese stocks, although the pressure in JGBs was cushioned by the BoJ's presence in the market for more than JPY 1tln of government bonds.

Top Asian News

  • Gold Edges Up as Bond Yields Fall After Biggest Drop in a Month
  • Tesla Delivers 44,264 China-Made Cars in Aug., up 34.3% M/m
  • China Aug. Retail Passenger Vehicle Sales Fall 14.7% Y/y: PCA
  • China Praises Hong Kong Arrests of Tiananmen Vigil Organizers

Bourses in Europe saw losses intensify shortly after the cash open and have since trickled lower and stabilised near lows. (Euro Stoxx 50 -0.7%; Stoxx 600 -0.8%). The downside across Europe also reverberated across the pond but to a lesser extent and with the effects fleeting. The ES (-0.1%) briefly dipped below 4,500, the YM (-0.1%) fell below 35k, whilst the RTY (-0.1%) initially narrowly underperformed, and the NQ (-0.1%) is cushioned by yields. There is no discernible catalyst behind the losses across equities, and as to why sentiment deteriorated from the lacklustre APAC handover. That being said, the rest of the week is packed with central bank updates, including tomorrow’s ECB (full previous in the Newsquawk Research Suite), but before that, several Fed speakers. On that note, Fed’s Bullard (2022 voter) was the first official to speak post-NFP and held onto his hawkish stance by stating the Fed should proceed with tapering despite the weak US jobs data, while he also dismissed concerns about the rebound in the labour market was faltering and said there is plenty of demand for workers – it will be interesting to see how aligned other Fed officials are to this view. Back to Europe, the majors see broad-based losses with no standout performer. Sectors are all in the red and do not portray a clear theme nor bias. Travel & Leisure is among one of the better performers, with some downside potentially alleviated by reports that the UK travel traffic light system could be tweaked under plans drawn up by ministers, which could mean the red category will still require hotel quarantine, but amber and green categories will disappear, and travel will be determined by vaccination status as opposed to country, according to the Telegraph. Further for travel, Ryanair (+1.7%) CEO noted the Co. will be operating at 90% of pre-covid volumes by the Christmas period but will have lower pricing, whilst summer 2022 is expected to be “very strong”. Ryanair also guided 90-100mln passengers for FY 2022, and added that the trend is moving towards to upper end of that range. Moving on, Auto & Parts, alongside Banks, reside at the foot of the bunch, the former weighed on by the ongoing chip shortage and Stellantis’ (-2.3%) losses after Dongfeng filed to sell a 1.15% stake in the Franco-Italian carmaker. Autos may also feel headwinds from the Chinese retail passenger vehicle sales declining almost 15% Y/Y, although Tesla (Unch pre-market) Chinese-made cars sales rose 34.3% in the period. In terms of individual movers and shakers, Smiths Group (+2.1%) resides as one of the winners after divesting Smiths Medical for USD 2.7bln.

Top European News

  • Morrison Seeks Auction to Decide Between Fortress, CD&R Bids
  • Smiths Group to Sell Medical Unit to ICU for $2.35 Billion (1)
  • Deutsche Bank Chief Blames Europe for Keeping Banks Small
  • Gold Edges Up as Bond Yields Fall After Biggest Drop in a Month

In FX, the Dollar index has extended its recovery from post-NFP lows after a shallower a brief retreat to 92.472 and is now targeting loftier upside chart levels ahead of last Wednesday’s 92.790 peak from a 92.732 high, thus far. Latest gains are broad based, but not universal as the Greenback’s main safe-haven rivals are in demand against the backdrop of deteriorating risk sentiment in equities especially. However, the Buck is also up independently or with some fundamental impetus following comments from Fed’s Bullard as the first official to respond to the disappointing headline payrolls number, and discounting the big miss on grounds that there is ample demand for staff, so tapering should go ahead. The impending JOLTS data may well back him up, while Williams and Kaplan are scheduled either side of the Beige Book.

  • JPY/CHF - As noted above, the Yen and Franc are ‘benefiting’ from risk-off positioning to a degree, as Usd/Jpy eases back towards the low 110.00 area from around 110.45 and Usd/Chf from just over 0.9200, while Eur/Jpy and Eur/Chf retreat from overnight peaks as well in classic safety flight fashion, albeit not extreme.
  • CAD/AUD - The major casualties amidst aversion and relative strength in their US peer, but the Loonie also looking increasingly nervous ahead of the BoC policy meeting that might err on the side of caution given the spread of the Delta variant. Usd/Cad is hovering near the top of a 1.2707-1.2626 range as implied volatility picks up to price in a 68 pip break-even for the event that coincides with August’s Ivey Canadian PMIs - full BoC preview available via the Research Suite and to be posted on the Headline Feed before 15.00BST. Elsewhere, the Aussie is now more than a full big figure under Tuesday's post-RBA apex against the backdrop of weak underlying commodities, but keeping its head just over 0.7350.
  • EUR/GBP/NZD - All conceding more ground as the Greenback revival gathers momentum, with the Euro currently in the bottom half of approximate 1.1800-1.1900 m-t-d extremes and looking for fresh guidance from the ECB on Thursday, while the Pound remains depressed close to 1.3750 having lost 1.3800+ status yesterday following confirmation of higher taxes to fund NHS spending from UK PM Johnson and now awaiting BoE speakers at the TSC for any fresh policy insight. Back down under, the Kiwi has Q2 NZ manufacturing sales on the radar as its pivots 0.7100 and 1.0400 vs its US and Antipodean counterparts respectively.
  • SCANDI/EM - The Nok and Sek are both softer as the general market tone sours, but the latter is holding above 10.2000 and does not seem likely to trigger decent option expiry interest at the 10.2500 strike (1 bn) against the Eur at this stage. Conversely, the Try appears in danger of further depreciation and a test of 8.5000 vs the increasingly buoyant Usd after candid remarks from the CBRT Governor who conceded that there is room for improvement in terms of Turkey’s inflation rate, reserves situation and overall risk premium, rather than his contention that policy is tight enough to reduce inflation in Q4. On that note, CPI is now 25 bp higher than the benchmark rate, at 19.25%.

In commodities, WTI and Brent front-month futures have been consolidating throughout most of the European morning following the prior session’s losses, and on balance, the benchmarks did not see much follow-through from this morning’s losses across stocks, although WTI Oct and Brent Nov have subsequently been gaining heading into the US open, with the former back above USD 69/bbl and the later inching closer towards USD 72.50/bbl. News flow for the complex has been light, but over in the Gulf of Mexico, participants are cognizant of a potential cyclone formation in the next 48 hours for a system located over the south-central GoM, just as the BSEE reports the slow resumption of oil and gas operations, with the latest metrics suggesting 79% of offshore production still shuttered (vs 84% D/D). Over to the demand side, Qatar narrowed its price differentials to Oman/Dubai for Marine Crude and Land Crude in lockstep with Saudi’s lowering of its Asia OSPs. Elsewhere, the Ryanair CEO hit the wires today and suggested its volumes will be around 90% of pre-pandemic levels around Christmas, whilst holding a robust outlook for next year, and separate reports also stated that the UK traffic light system would be tweaked whereby the “amber” and “green” categories will shift to a vaccination-based system – which in turn feeds into jet fuel demand. Ahead, the weekly Private Inventories will be released alter today on account of Monday's US Labor Day Holiday, with the DoEs released tomorrow. Over to metals, spot gold and silver trade flat and remain contained to APAC ranges in the absence of a fresh macro catalyst and ahead of a slew of central bank updates. Spot gold, during European trade, remained under USD 1,800/oz and sandwiched between its 50 and 21 DMAs at USD 1,797.70/oz and USD 1,1795/oz. Meanwhile, LME copper has remained subdued around the USD 9,250/t mark, with China’s economic slowdown and base metal crackdown cited by traders. Elsewhere, China’s coke futures and coking coal swung between gains and losses after the market regulators announced an increase in transaction fees for actively -traded contracts.

US Event Calendar

  • 1:10pm: Fed’s Williams Discusses Economic Outlook
  • 2pm: U.S. Federal Reserve Releases Beige Book
  • 6pm: Fed’s Kaplan Holds Virtual Townhall

DB's Jim Reid concludes the overnight wrap

Today the tears will be flowing at home as the kids all go back to school. Actually the twins start school officially today (Reception) after a year in the nursery. How time flies. It will be hard to judge how many of my wife’s tears will be emotional due to them starting school and how much will be an immense release of joy to be able to pass them onto someone else for a few hours a day as all three have been a big handful of late. Constantly fighting, shouting and screaming. She said she is going to get home from dropping them off today and she’s going to sit in a quiet dark room for 2 hours and close her eyes and do absolutely nothing.

As US markets got back to school themselves after Monday’s holiday, yesterday witnessed a selloff across multiple asset classes as markets took a break from record highs. In some ways the moves were surprising, since yesterday’s data releases actually surpassed expectations, whilst the global picture on the pandemic is continuing to brighten for now. However, fears that central banks might start to taper their asset purchases seems to have knocked away a little confidence, particularly given tomorrow’s ECB decision where many expect we’ll begin to see the start of that process, not least with inflation there running at its highest levels in almost a decade.

Those tapering fears were evident in sovereign bond markets, which sold off strongly on both sides of the Atlantic. Yields on 10yr Treasuries ended the session up +5.1bps at 1.37%, their highest closing level in nearly 2 months. Yields were propelled by both higher inflation expectations (+2.4bps) and real rates (+2.6), as the latter closed above -1% for the first time since mid-July. There was also a noticeable curve steepening, with the 2s10s slope up +3.7bps. Over in Europe there were similarly noticeable rises, with yields on 10yr bunds up +4.5bps to their highest levels in almost 2 months as well, whilst other 10yr yields including gilts (+4.3bps), OATs (+5.1bps) and BTPs (+6.3bps) followed suit.

Staying with yields, I did a CoTD (helped by Craig Nicol) yesterday showing that 85% of US HY now has a yield below CPI. It’s never been above 10% prior to this year. To outstrip inflation you now have to own weak single-Bs or below. Clearly inflation will likely dip from here but even at 3%, 35% of US HY will yield below inflation. See the CoTD here and if you want to be added to the daily list please email jim-reid.thematicresearch@db.com.

Much like bond markets, equities fell back yesterday, with the S&P 500 (-0.34%) seeing a small but broad-based decline that saw 411 of its members lose ground on the day, whilst the Dow Jones (-0.76%) and Europe’s STOXX 600 (-0.49%) also dipped. Tech stocks were a relative outperformer, with the NASDAQ (+0.07%) managing to eke out a modest gain, though megacap tech stocks put in a strong performance, as the FANG+ index rose +1.40% to another all-time high, aided by sizeable gains for Netflix (+2.74%) and Tesla (+2.64%). On the other hand, bond proxy sectors such as utilities (-1.37%) and real estate (-1.13%) were among the worst performers in the US. Utility companies (-0.90%) also lagged in Europe, with chemical (-1.16%) and healthcare (-1.02%) stocks the other main underperformers. Meanwhile, the souring risk sentiment sent the US dollar higher for the first time in 6 sessions as the greenback added +0.52% - its largest one day gain in 3 weeks.

Overnight in Asia, the Nikkei is on course of its longest winning streak since November 2020 as it is up +0.49% marking the eighth consecutive gain. Other regional indices are generally trading weaker though with the Hang Seng -0.52%, CSI (-0.25%), Kospi (-0.86%) and Asx (-0.37%) all down. The Shanghai Comp (+0.07%) is trading broadly flat. In terms of overnight data releases, Japan’s final 2Q annualised GDP printed at +1.9% qoq vs. +1.6% qoq expected.

In other overnight news, Bloomberg reported that the Biden Administration is planning to distribute one-time $600 pandemic relief payments to US meatpacking and farm workers. The move expands an agriculture aid program which sets aside as much as $700 mn of aid, to be distributed through state agencies, tribal entities and non-profit groups. Elsewhere, yields on 10y USTs are down -1.2bps to 1.362%. Futures on the S&P 500 (-0.02%) are flattish while those on the Stoxx 50 are down -0.25%.

Turning to the German election, our colleagues in Germany put out a comprehensive slide pack yesterday (link here) looking at the election and its implications ahead of polling day on September 26. Importantly, it looks at the most likely coalition options and the policy proposals of the various parties,as well as the mechanics of the German election process. Speaking of that election, the latest Forsa poll created some fresh headlines yesterday by showing Chancellor Merkel’s CDU/CSU bloc falling to an all-time record low of 19%. Obviously it’s just one poll, but it put the SPD on 25%, ahead of the CDU/CSU on 19% and the Greens on 17%. Interestingly, given the margin of error in this specific poll is +/- 2.5%, this means the SPD’s 6-point lead exceeds the normal margin of error, and fits into the pattern of other polls over the last week putting them consistently ahead of the CDU/CSU.

Meanwhile in the UK, there were some important policy announcements, with the government announcing an increase in National Insurance (similar to a payrolls tax) by 1.25 per cent, as well as a rise in the rates of dividend tax by 1.25 per cent, in order to fund higher spending on health and social care. Furthermore, it was confirmed that the pension “triple lock” would be suspended for a year, which sees the state pension rise by whichever is the biggest of inflation, average wage increases or 2.5%. This is because the statistical bounceback in earnings following the pandemic could have led to a massive increase in the state pension, even though underlying earnings have not risen by as much. Finally on UK economic policy, it was announced that a Spending Review would take place alongside an Autumn Budget on October 27 this year. I can’t help thinking the decision on tax is the beginning of a long road ahead of global tax rises given both debt and demographics. The pandemic has likely accelerated such a move given what it’s done to public finances.

Speaking of taxes, those in El Salvador can now use Bitcoin to pay their tax bill as the cryptocurrency became legal tender in the Central American nation yesterday – the first country to make such a move. It was a volatile start, with Bitcoin selling off -17.1% at one point as the government announced it had to disconnect its Bitcoin wallet to solve glitches. President Bukele later said the nation was “buying the dip” and had added roughly $26 million of the cryptocurrency yesterday. While Bitcoin did recover off the lows, it was still down -9.85% yesterday with other major coins such as Ether (-13.58%), XRP (-21.33%), and Litecoin (-20.28%) seeing much larger drops. Bitcoin is pretty stable overnight after all the fun and games yesterday. Overall this remains an experiment that bears watching as the use of bitcoin as true legal tender is probably the largest change to the cryptocurrency market since bitcoin futures were listed in 2017.

Turning to the pandemic, it was confirmed by a White House official that President Biden will outline a plan tomorrow to boost vaccinations and stop the spread of the delta variant. Meanwhile there were also a number of vaccine milestones reached yesterday, with the US reporting that 75% of adults had now received at least a first dose, while the UK reported that 80% of the over-16 population are now fully vaccinated. Elsewhere, the Asahi newspaper reported that the Japanese government is planning to extend the state of emergency in areas including Tokyo to the end of September. The state of emergency was originally scheduled to expire on September 12.

There was some positive data from the Euro Area, where the Q2 GDP reading was revised up to show growth of +2.2% (vs. +2.0% in the flash reading), whilst German industrial production in July grew by a stronger-than-expected +1.0% (vs. +0.8% expected). That said the German ZEW survey for September saw the expectations reading fall to 26.5 (vs. 30.3 expected), which marks the lowest figure for the expectations measure since March 2020.

To the day ahead now, and data releases include US job openings and consumer credit for July, alongside Italian retail sales for July as well. From central banks, we’ll get the Bank of Canada’s latest rate decision, the Federal Reserve will be releasing their Beige Book, and speakers include the BoE’s Bailey, Broadbent, Ramsden and Tenreyro, and the Fed’s Williams and Kaplan.

Tyler Durden Wed, 09/08/2021 - 08:02
Published:9/8/2021 7:07:40 AM
[Markets] Chinese Coal Prices Soar To Record High Ahead Of Surge In Mining Chinese Coal Prices Soar To Record High Ahead Of Surge In Mining

Remember when China vowed last year hit peak carbon emissions in 2030 and to reach carbon neutrality in 2060? Maybe it will (spoiler alert: it won't)...

... but long before we hit 2060, China plans on taking coal-based pollution to the next level.

Overnight coal futures prices a hit record level and are almost +80% higher than a year ago, signalling a desperate need for China to increase domestic production in the short term, notwithstanding the government’s plan to reduce reliance on coal in the long term. As Reuters energy analyst John Kemp writes, "electricity consumption is surging and the country is struggling to import sufficient volumes of competitively priced spot LNG, boosting the need for coal for power generation." 

Prices for the most-traded thermal coal futures contract on the Zhengzhou Commodity Exchange hit $150 a tonne on Tuesday, up from $85 a year ago, which was also the five-year average before the COVID-19 pandemic.

At the same time, coking coal on the Dalian Commodity Exchange jumped 4.3% to $448 per ton - both rose to intraday records.

As Reuters notes, surging prices are an indication of the tension between the country’s surging electricity demand and the government’s stated aim to limit coal output and reduce it over time in favor of renewable energy sources.
 
Coal production in the first seven months of the year was up at a compound annual rate of only 4.1% compared with the same period in 2019, according to the National Bureau of Statistics. But the country’s electricity generation increased at a compound annual rate of 7.4% over the same period in response to strong residential and industrial demand.


 
The fastest growth came from wind farms (+25% compound annual rate) and solar power (+24%), with slower growth from nuclear (+10%) and thermal generators (+7%) and a fall in hydroelectric output (-2%).

But both wind and solar are growing from a very low base so they have contributed only a small share of the extra generation required, with most of the extra generation coming from thermal sources, mainly coal.

In the first seven months of the year, China’s power producers generated 4,645 terawatt-hours (TWh), which was 615 more than in the same period in 2019.

But only a minority of the extra generation came from wind (+119 TWh) and solar (+36 TWh) sources, with most coming from thermal plants (+445 TWh)

While China is installing more wind and solar capacity than any other country, it is not enough to keep pace with surging electricity demand, forcing greater reliance on coal in the short term.  As a result, the country is having to run new and existing thermal power plants for more hours; the average thermal generating unit ran for 2,589 hours in the first seven months of this year, up 268 hours (+12%) from the same period in 2020, according to data compiled by the China Electricity Council.

Reflecting the tightening coal supply situation, the National Development and Reform Commission (NDRC), the country’s top economic regulator, this summer called for more coal output to help to meet peak demand for air-conditioning.

“Key coal-producing regions such as Shanxi, Shaanxi and Mongolia should take the lead in ... increasing production and supply,” the commission said in a circular issued on July 23.

The NDRC directed all areas and coal mining companies to boost output from larger and more productive mines, accelerating capacity replacement and new construction. It also ordered them to make the production of thermal coal their top priority and do everything possible to help power plants with low stocks to increase their number of days of coal storage, meaning that a deluge of domestic coal production is coming.

Indeed, Daiwa reported that thermal coal stockpiles at the port city Qinhuangdao located in the northern Hebei region, recorded a 12% decline for the week of Sept. 3 to less than 4 million tons. Chan said stockpiles of coking coal dropped 11% from last year. With coal imports sliding, China has just one option left: crank up its domestic coal-mining industry to 11.

Commenting on the soaring prices, Bloomberg echoed Reuters' observations that the ability to source coal has been challenging due to stricter safety policies imposed by the government following a series of deadly mine accidents. There have also been new measures to prevent mine flooding, which is also dwindling supplies. 

"Under current high prices, miners have been incentivized to boost production. This poses higher risk of accidents, which in turn leads to more frequent examinations," Morgan Stanley analyst Sara Chan said in a report. "Coal production is constrained as a result and this creates a circular loop for even higher prices."

The circular loop may persist for now, but it's only a matter of time before China ramps up production as the alternative is an unacceptable surge in prices. This means much more pollution emerging from China in the coming year; this is happening as 23 of the world's 25 most polluting cities are already in China.

Like other countries in Asia and Europe, China’s coal shortages and surging prices reflect the contradiction between the long-term need to move away from coal and the short-term challenge of meeting power demand. In the short term, higher coal prices are signalling the need to boost production to meet power producers’ needs and build sufficient stocks ahead of the winter heating season.

Meanwhile, demonstrating just how much of a straw man China's promises to clean up its act truly are, also on Tuesday China’s carbon price slumped to a new low even as trading volumes increased. Emission allowances traded on China's carbon market, the largest in the world, declined -0.2% Tuesday to close at 43.90 yuan ($6.80) a metric ton, the National Carbon Emissions Trading Agency said in a statement. Price is lowest since the market launched in July, with allowances closing Monday at 44 yuan a ton, signifying that virtually nobody on the mainland is actually serious about reducing the intensity of emissions generation.

Meanwhile, with everyone across the Pacific thinking coal is trash, perhaps there is some material upside opportunity as coal prices rise. Take a look at the Dow Jones U.S. Coal Index has been basing since March.

Is the index ready for an upswing on higher prices? And while we wait, we eagerly look forward to climate change messiah Greta Thunberg launching a critical tirade of China for the smog storm it is about to unleash.

Tyler Durden Tue, 09/07/2021 - 23:50
Published:9/7/2021 11:06:48 PM
[Markets] Dow finishes down over 260 points; Nasdaq ekes out record high Dow finishes down over 260 points; Nasdaq ekes out record high Published:9/7/2021 3:34:56 PM
[Markets] Dow Jones Slips As Apple Hits New High; Bitcoin Plunges Amid El Salvador Move; Tesla Surges The Dow Jones was lower in late trading Tuesday, but Apple was a bright spot in the blue-chip index. Tesla was a top gainer on the Nasdaq. Published:9/7/2021 2:42:36 PM
[Markets] US STOCKS-Wall Street falls on worries over slowing economic recovery The Dow Jones and S&P 500 fell on Tuesday, as worries over the slowing pace of economic recovery overshadowed hopes that the Federal Reserve would maintain its accommodative stance a little longer after a soft U.S. payrolls report. Amgen Inc and Merck & Co fell about 2.4% each as the drugmakers dragged down the Dow Jones index, after Morgan Stanley cut its rating on the stocks to "equal-weight" from "overweight". Published:9/7/2021 11:32:11 AM
[Markets] Dow Jones Sells Off As Apple Hits New High; Four Top Growth Stocks To Buy And Watch The Dow Jones Industrial Average dropped 200 points Tuesday, as Apple stock hit an all-time high in today's stock market. Published:9/7/2021 10:33:45 AM
[Markets] Nasdaq registers all-time intraday high early Tuesday; Dow, S&P slip Nasdaq registers all-time intraday high early Tuesday; Dow, S&P slip Published:9/7/2021 9:12:17 AM
[Markets] Nasdaq finishes higher but S&P 500 and Dow fall after jobs report Nasdaq finishes higher but S&P 500 and Dow fall after jobs report Published:9/3/2021 3:35:51 PM
[Markets] Nasdaq Composite marks 35th record close of 2021 but S&P 500, Dow limp lower after weak Friday jobs report U.S. stock indexes ended mixed Friday, with the Nasdaq booking its 35th record close of 2021, but the other two main bourses closing lower, heading into a three-day Labor Day weekend, after a report on monthly employment from the Labor Department came in weaker than expected, sparking fresh questions about the job market's recovery from the COVID-19 pandemic amid the spread of the delta variant. The Dow Jones Industrial Average closed down 0.2% on the session and booked a weekly decline of 0.24% Published:9/3/2021 3:35:51 PM
[Markets] 'Losing Faith'? - Cryptos & Commodities Rally As Dollar Dumps On Dismal Data, Afghan Angst 'Losing Faith'? - Cryptos & Commodities Rally As Dollar Dumps On Dismal Data, Afghan Angst

An ugly week for 'hard' and 'soft' data sent the US economic surprise data to its worst velocity since the plunge in March 2020...

Source: Bloomberg

Precious Metals gained as investors' confidence that the central planners have a clue starts to fade...

Crypto markets also surged this week as traders sought alternatives to the dollar...

Source: Bloomberg

Sending the dollar down to one-month lows, sliding for the 9th of the last 10 days...

Source: Bloomberg

But stocks were mixed with momo-chasers and gamma-hammers always willing to buy any dip. Nasdaq was the week's outperformer. The Dow lagged the rest of the majors to end the week unchanged...

So stocks are at record highs screaming "all is well" as the dollar, gold, and cryptos all scream "something's up"...

Value stocks went nowhere as growth dominated (but mostly thanks to Monday's opening squeeze)...

Source: Bloomberg

An odd week sector-wise with Utes outperforming and Energy & Financials lagging

Source: Bloomberg

Which fits with the dramatic surge in "Defensive" stocks this week with Cyclicals going nowhere...

Source: Bloomberg

VIX trod water on the week, trading in a range between 16 and 17 most of the time...

Treasuries were mixed on the week with the long-end marginally higher in yield and shorter-end marginally lower...

Source: Bloomberg

Treasury yields were wild today but a look at the 10Y Yield chart explains some of the movement as the kneejerk lower on the jobs data ran the stops at the low yield of the week and the strong earnings growth sparked a rip higher to run the stops at the high yield of the week...and with the stops run, the liquidty providers left the building for the long weekend...

Source: Bloomberg

Ethereum was the week's big winner in crypto-land, topping $4000 for the first time since mid-May...

Source: Bloomberg

Bitcoin also had a big week and rose back above $50,000...

Source: Bloomberg

Oil prices rallied on the week, thanks to gains on Thursday largely, with WTI back above $70 intraday but ending back below...

Finally, as we all look forward to a long weekend of socializing, mobility in the US has begun to trend downward again in reaction to the rise in Covid cases -- a trend that is likely weighing on Service-sector confidence as we saw in the decline in the Non-manufacturing ISM index today.

And what happens next in markets? There have been 10 other years in which the S&P 500's gain through August surpassed 20%, according to data compiled by Bloomberg. The final four months of those years brought everything from a 21% advance to a 32% decline. All this left the S&P 500 with an average loss for the September-December period of 2.1% -- and a median gain of 2.2%.

Trade accordingly.

Tyler Durden Fri, 09/03/2021 - 15:59
Published:9/3/2021 3:11:13 PM
[Markets] Dow Jones Falls As Biden Blames Poor Jobs Report On Delta, Unvaccinated; DocuSign, MongoDB Pop The Dow Jones fell as President Joe Biden blamed a weak jobs report on the Delta variant and the unvaccinated. DocuSign and MongoDB stock jumped. Published:9/3/2021 1:05:16 PM
[Markets] US STOCKS-S&P 500, Dow slip as monthly jobs growth slows; tech stocks lift Nasdaq The S&P 500 and the Dow fell on Friday as a slowdown in U.S. jobs growth raised questions about the pace of the economic recovery, while the tech-heavy Nasdaq rose as the report also calmed fears of an imminent tapering in monetary policy. Nine of the 11 S&P sectors were down by early afternoon, with economically sensitive industrials and financial stocks leading declines. Published:9/3/2021 11:33:55 AM
[Markets] The Mass Market Apple Car Is Being Planned For 2024 The Mass Market Apple Car Is Being Planned For 2024

For years, the rumors of Apple developing a mass market car were just that: rumors.

But now it is starting to feel as though we are getting closer to the rubber hitting the proverbial road, as reports surfaced this week that Apple is planning on the launch of a mass market EV by 2024. 

Apple is reportedly visiting with both Korean and Japanese car manufacturers, according to Apple Insider. The new 2024 timeline for the vehicle speeds up previous estimates, which had pinned mass market production of a vehicle by Apple closer to 2027. 

The company is in the midst of exploring the best way to produce the car amidst the ongoing semiconductor shortage. 

There have been a litany of rumors about the Apple car dating back to last year. For example, we reported in February this year that Apple was considering having Kia manufacture its EV in the U.S. 

At the time, Kia had reportedly "approached potential partners about a plan to assemble Apple Inc.'s long-awaited electric car in Georgia," according to Dow Jones

A partnership between the two companies could involve a "multibillion-dollar investment", it was reported, despite the fact that a deal had not yet been finalized. To date, no additional details have surfaced. 

Previously, we had reported on an ebb and flow of rumors that Apple was working with Hyundai as a partner in early 2021.  

Professional lagging indicator sell side analyst Dan Ives at Wedbush published a note at the beginning of the year 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 at the beginning of the year that Apple had a 35% to 40% chance of unveiling their own car by 2024 despite the "Herculean" hurdles involved, including battery technology, financial implications and regulatory red tape. He called the move to EVs a "smart" strategic move for Apple and said that a "larger strategic partnership with an established electric-vehicle player..." would be on its way.

The million dollar question remains: with who?

Tyler Durden Fri, 09/03/2021 - 10:31
Published:9/3/2021 9:47:37 AM
[Markets] US STOCKS-S&P 500, Dow slip as monthly jobs growth slows; tech stocks lift Nasdaq The S&P 500 and the Dow fell on Friday as a slowdown in U.S. jobs growth raised questions about the pace of the economic recovery, while the tech-heavy Nasdaq jumped as the report also calmed fears of an imminent tapering in monetary policy. Eight of the 11 S&P sectors were down in morning trading, with real estate and utilities stocks leading declines. Published:9/3/2021 9:47:37 AM
[Markets] Dow Jones Today, Stocks Open Lower On August Payrolls Dive; Broadcom Aces Breakout; DocuSign, Matson Rise In Buy Ranges Intel led the Dow Jones today, as stocks opened lower on Friday after disappointing August payrolls data. Published:9/3/2021 9:06:07 AM
[Markets] US STOCKS-S&P, Nasdaq edge to record closes, energy stocks buoyant The S&P 500 and Nasdaq eked out record finishes on Thursday, while the Dow also posted a modest gain, as higher commodity prices helped energy names recover ground and the latest jobs data left investors unfazed about existing positions. The energy sector rose 2.5%, reversing much of the loss suffered during the first three days of the week. Published:9/2/2021 3:58:30 PM
[Markets] Dow Jones Leads Upside; S&P 500, Nasdaq Notch New Highs; Facebook, Netflix Stock Near Buy Zones The Dow Jones moved higher in today's market, but pared earlier gains. The S&P 500 and Nasdaq rose while both notched new all-time highs. Published:9/2/2021 3:46:36 PM
[Markets] Dow Jones Gains; Netflix Stock Pounces After Apple App Store Boost; 3 Stocks Pass Buy Points The Dow Jones edged higher Thursday. Netflix stock pounced on a buy point after Apple relaxed App Store rules on content subscriptions. Published:9/2/2021 2:31:57 PM
[Markets] Dow Jones Leads As S&P 500, Nasdaq Hit New Highs; Growth Stocks Rally On Earnings Stocks rose Thursday as the Dow Jones Industrial Average rallied 150 points while the S&P 500 and Nasdaq headed for record highs. Published:9/2/2021 11:22:31 AM
[Markets] GLOBAL MARKETS-Stocks charge ahead on U.S. data, dollar eases ahead MSCI's all-country world index climbed to a new peak, while the S&P 500 and Nasdaq also set new highs. MSCI's world stock index, which measures equity performance in 50 countries, rose 0.29% and was on track to post its fifth consecutive closing high. On Wall Street, the Dow Jones Industrial Average rose 0.38%, the S&P 500 added 0.32% and the Nasdaq Composite advanced 0.21%. Published:9/2/2021 10:32:44 AM
[Markets] 3 Flagging Dow Giants to Buy Today August was another great month for the stock market, with indexes hitting fresh highs. The Dow Jones Industrial Average (DJINDICES: ^DJI) has now gained roughly 16% so far in 2021 and several of its members, including Microsoft and American Express, are up over 30% so far. On the other hand, a few of the Dow's 30 components are flat or even down slightly as we approach the final quarter of the year. Published:9/2/2021 8:21:48 AM
[Markets] Futures Just Keep Ramping Higher As Bitcoin Rises Above $50,000 Futures Just Keep Ramping Higher As Bitcoin Rises Above $50,000

The financial capital of the world may be shut down after record flooding from Ida's remnants has effectively frozen mass transit in New York, but that is not preventing the algos, trading out of comfortable, air-conditioned server farms to ramp S&P futures higher and this morning spoos are up again rising by 0.2% or 8 points to 4,529 with Nasdaq and Dow Jones futures both about 0.2% higher as attention turns to today's initial claims data which is expected to print at 345K ahead of tomorrow's closely watched payrolls report. 10Y Treasury yields steadied below 1.30%. The dollar was little changed, while bitcoin rose above $50,000.

After the NYSE FANG index hit a new all time high yesterday, tech names were again broadly higher while a rise in the price of Brent crude above $72 helped move energy stocks higher after Wednesday's drubbing. Here are some other notable movers today:

  • Assembly Biosciences (ASMB) shares tumble 21% in premarket trading after the biopharmaceutical company announced plans to scrap the development of its ABI-H2158 (2158) drug for the treatment of chronic hepatitis B. William Blair downgraded its rating to market perform from outperform, citing a lack of clarity surrounding the serious adverse events induced by 2158, along with a scarcity of near-term catalysts.
  • U.S. listed shares of Chinese ride hailing firm Didi (DID) fell 1.3% after Chinese regulators summoned ride-hailing firms including Didi to discuss concerns related to the sector.
  • ChargePoint (CHPT) surges 12% with Jefferies (buy) saying the EV-charging company’s 2Q results and FY guidance look strong.
  • Chewy (CHWY) shares fall 9.4% premarket after the online pet products retailer’s sales outlook and guidance disappointed, prompting analysts to trim price targets.
  • Cryptocurrency-exposed stocks rise premarket, with Bitcoin continuing to gain and trading around the closely- watched $50,000 level. Bit Digital (BTBT) rises 5.8% and Marathon Digital (MARA) gains 4.5%, while Riot Blockchain (RIOT) advances 4%.
  • Hall of Fame (HOFV) sinks 10% after the company said it has postponed the Highway 77 Musical Festival due to an increase in Covid-19 cases throughout Ohio.
  • Focus Universal (FCUV) rallies as much as 61% after skyrocketing 278% on Wednesday.
  • Meten EdtechX (METX) tumbles 49% after the China-based English language training company’s planned share and warrants offering implied a 67% discount from Wednesday’s closing price.
  • Support.com (SPRT) rises 8.6% after slumping over the past two days, following a triple digit rally last week.

Expect a muted session today for the simple reason that many traders will be unable to leave their house: last night, the tail-end of hurricane Ida dumped a “record breaking” amount of rain over New York and New Jersey putting both areas into states of emergency. The weather triggered tornadoes, thunderstorms and torrential rain that has overwhelmed streets and forced transport services to grind to a halt. President Biden will address his administration’s response to Ida this morning.

In any case, all eyes are turning to jobs data due in 24 hours for clues on the economy and the Fed's next steps. Investors are trying to assess when the delta-Covid variant outbreak might peak and how that will play into timing of Fed bond taper plans. Global stocks are near record levels and gauges of implied financial market volatility are declining, as many remain optimistic that the Fed will never let stocks drop again the reopening from the health crisis will weather challenges. At the same time, a move into defensive havens such as mega-tech stocks are a sign traders are bracing for more negative data surprises. The latest ADP jobs data showed U.S. companies added fewer jobs than expected in August. Manufacturing expanded at a stronger-than-estimated pace but faced supply snarls.

“The market is fading Covid more as a risk in terms of really hampering economic activity,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. “We think the Fed is going to stick with their word and they will start tapering later this year. But we don’t think they are going to be in any hurry to raise interest rates.”

Economic pessimism was underscored by Goldman Sachs strategist Zach Pandl who said that “our U.S. growth forecasts for the next two years are below other bank forecasts for the first time since the recovery began. Markets may underappreciate the coming step-down in growth momentum.”

A Reuters poll last month showed the S&P 500 is likely to end 2021 at 4,500 points, slightly lower than current levels.

The Stoxx Europe 600 Index rose 0.2%, with most industry groups posting modest gains. Swedish Orphan Biovitrum jumped 25%, the most in nine years, after private-equity firm Advent International and Singapore wealth fund GIC agreed to buy the drugmaker for the equivalent of $8 billion.

Asian stocks also edged higher, setting course for a fifth consecutive day of gains, with trading in a narrow range ahead of a report on U.S. jobs data that’s a litmus test for economic health. The MSCI Asia Pacific index swung between a gain of 0.2% and a fall of 0.3% throughout the day. A subgauge of consumer-discretionary firms including Alibaba and Sony provided the biggest support, while materials-group shares fell, weighing most on the gauge, as BHP Group and Nippon Steel dropped amid weaker iron ore prices.  The lull comes after the Asian stock benchmark capped a 2.3% gain in August, the best month since December, which helped the regional measure to trade near its highest since mid-July. The gains were preceded by two months of losses as worries over the delta virus variant and China’s tightening regulatory grip on various industries took a toll on the region’s investor sentiment.  “Investors seem undecided on how to respond to the string of U.S. data, which is what you can tell from today’s market moves,” said Shogo Maekawa, a strategist at JP Morgan Asset Management in Tokyo, noting that while ISM manufacturing data was positive, the ADP jobs report fell short of expectations. “There are also a lot of investors wanting to wait to see the key U.S. employment data.”  China’s technology stocks notched a fourth day of gains in a rally that lost some of its steam after regulators stepped up their criticism of the nation’s ride-hailing giants. Hong Kong’s Hang Seng Tech Index trimmed a rally of as much as 3.2% and closed up 1.6%, after criticism of ride-hailing firms highlighted risks from the nation’s ongoing crackdown on private industries. China’s overall market was steady, with traders assessing a central bank step to cushion the economy by helping smaller firms. Benchmarks in Thailand and India were the best performers, while those in Taiwan and South Korea retreated most. 

Japan stocks rose after mega-cap companies in the U.S. rallied to a record as traders turned to defensive shares. The Topix rose 0.1% to 1,983.57 at the 3 p.m. close in Tokyo, while the Nikkei 225 advanced 0.3% to 28,543.51. Sony Group Corp. contributed the most to the Topix’s gain, increasing 1.4%. Out of 2,186 shares in the index, 896 rose and 1,195 fell, while 95 were unchanged. Shares of West Japan Railway Co. slid 13%. Japan’s third-largest listed rail operator is seeking to sell around $2.5 billion in shares amid mounting losses as the coronavirus pandemic that’s devastated tourism drags on. 

India’s benchmark equity index rose, set for a third day of gains this week. Dr Reddy’s Laboratories advanced most. The S&P BSE SENSEX Index added 0.2% to 57,476.04 as of 9:55 a.m. in Mumbai, while the NSE Nifty 50 Index advanced by a similar magnitude. Both measures are trading near record highs after ending last month at new peaks. Of 30 shares in the Sensex, 14 rose and 16 fell. Sixteen of the 19 sector indexes on the BSE Ltd. advanced, led by a gauge of consumer durable stocks.  Low interest rates and ample liquidity are driving the buying sentiment in local stocks, which are now among the top performers in Asia. 

"The spread of the Delta variant amid still-low vaccination rates in many ASEAN economies and China's zero-tolerance Covid strategy has prompted governments to impose restrictions and order factory/port closures," warned analysts at Nomura. "Input shortages and low inventories will likely lead to production cuts and delayed shipments in Q3."

In rates, amid the jobs chatter, 10-year Treasury yields eased back to 1.29% and away from the recent top of 1.375%, while the U.S. dollar index touched a one-month low.

The Bloomberg Dollar Spot Index was set to decline a third day after reversing an earlier gain; the greenback weakened most of its G10 peers as risk-sensitive currencies rallied while the yen and the Swiss franc hovered. The euro inched up to trade near almost a one-month high amid broad dollar weakness, and the pound also inched higher; European bond yields fell. The Australian dollar led G-10 gains after climbing on Prime Minister Scott Morrison’s plans to relax curbs on movements; the nation posted a record trade surplus in July of A$12.1b vs est. A$10b. Japan’s bonds held steady after a 10-year note auction met solid demand; the yen traded in a narrow range.

The ramp in cryptos continued, sending Ethereum to the highest level since its May record, while Bitcoin was trading back over $50,000.

To the day ahead now, and data highlights from the US include July’s industrial production, factory orders and trade balance, along with the weekly initial jobless claims. From the Euro Area, we’ll also get the PPI reading for July. Otherwise, central bank speakers include the Fed’s Bostic and Daly.

Market Snapshot

  • S&P 500 futures up 0.2% to 4,531.00
  • STOXX Europe 600 up 0.2% to 473.95
  • German 10Y yield fell 1.7 bps to -0.390%
  • Euro little changed at $1.1845
  • MXAP little changed at 203.14
  • MXAPJ little changed at 668.23
  • Nikkei up 0.3% to 28,543.51
  • Topix up 0.1% to 1,983.57
  • Hang Seng Index up 0.2% to 26,090.43
  • Shanghai Composite up 0.8% to 3,597.04
  • Sensex up 0.8% to 57,770.59
  • Australia S&P/ASX 200 down 0.5% to 7,485.75
  • Kospi down 1.0% to 3,175.85
  • Brent Futures up 0.2% to $71.73/bbl
  • Gold spot up 0.1% to $1,815.27
  • U.S. Dollar Index little changed at 92.45

Top Overnight News from Bloomberg

  • The remnants of Hurricane Ida ripped through New York, New Jersey and across the Northeast early on Thursday morning, triggering tornadoes, thunderstorms, and torrential rain that inundated streets and paralyzed transport services
  • The euro-area economy’s rebound and a dramatic inflation surge has reignited the sparring among European Central Bank policy makers about when to shift the institution away from its crisis mode
  • For years, the premium paid for dollars over the euro, Japanese yen and so on in the cross-currency markets has been negative, indicating rampant demand for greenbacks. Now, these so-called cross-currency basis swaps are on the verge of turning positive in a major shift for money markets
  • Aluminum reached a fresh decade high, rallying with other metals after China ramped up financial support for small businesses and pledged better use of local government bonds as the economy showed further signs of a slowdown because of tight property controls and fresh virus outbreaks
  • After easing in the previous two months, a United Nations gauge of food costs rose 3.1% in August to near a peak set in May. The advance was driven by reduced grain production expectations, frosts that hurt sugar-cane crops in top grower Brazil and tightening oilseed supplies
  • The Bank for International Settlements will test the use of central bank digital currencies with Australia, Malaysia, Singapore and South Africa in an experiment that could lead to a more efficient global payments platform

A more detailed look at global markets courtesy of Newsquawk

Asian equity markets took their cues from a similar indecisive performance stateside where price action was choppy and the major indices finished relatively flat as participants digested varied data releases, including the disappointing ADP Employment data which precedes Friday’s NFP jobs report. ASX 200 (-0.6%) was pressured amid a continued surge of COVID-19 infections and with the declines led by mining names after the recent losses in commodity prices and fresh bout of China’s state reserve selling, with mining giant BHP the worst hit as it traded ex-dividend. Nikkei 225 (+0.3%) lacked firm direction with Japan mulling extending the COVID-19 state of emergency by two weeks and the KOSPI (-1.0%) failed to benefit from the upgrade to Q2 GDP which confirmed the fastest growth in more than a decade, as the strong economic growth data and a 9-year high CPI, added to the case for a further BoK rate hike this year. Hang Seng (+0.2%) and Shanghai Comp. (+0.8%) were kept afloat after recent soft data releases stoked calls for PBoC easing, while China's Cabinet will reportedly step up support for smaller businesses in which it will add CNY 300bln in relending quota for small firms and provide rediscount support to help ease their financing burdens. Finally, 10yr JGBs were slightly higher as they continued to nurse Tuesday’s slump and after having found support near 152.00. There were also comments from BoJ’s Kataoka who suggested the central bank should aggressively buy bonds and push yields down to prop up capex and investment, although the impact was muted given that he is a notorious dovish dissenter at BoJ meetings and with mixed results at the latest 10yr JGB auction also capping price action.

Top Asian News

  • China Ties Climate Work to Better U.S. Relations in Kerry Talks
  • Guangzhou R&F Dollar Bonds Sink to New Lows as Weakness Builds
  • Philippine BSP’s Usual Tools Not Yet Fully Used: Diokno
  • PAG-Backed $2 Billion Asia Hedge Fund to Reopen After Gains

European bourses remain just off the flat mark but have adopted more of an upside bias vs the mild downside seen across the region at the cash open following the cautious/mixed APAC handover. US equity futures have also seen some tailwinds from Europe, with broad-based performance across the ES, NQ, YM and RTY at the time of writing, and with catalysts scarce in European hours as the US jobs report looms. Sectors are predominantly in the green with no overarching theme. Travel & Leisure extends on earlier gains, led by its heaviest-weight stock Evolution (+3.5%) following reports that it has gone live in South Africa with SunBet. Healthcare also resides near the top of the bunch with AstraZeneca (+1.0%) cheering an announcement that multiple trials reinforce the efficacy of Imfinzi combinations, including with novel immunotherapies, for lung cancer patients across settings. On the downside, Basic resources are pressured as base metal prices remain subdued, albeit after taking somewhat of a breather overnight following yesterday’s selloff. However, some large-cap mining names are trading ex-divs, including the likes of Antofagasta (-0.4%), BHP (-6.3%) and Glencore (-0.6%). Banks have trundled to the foot of the bunch in sympathy with yields. In terms of individual movers, Babcock (-1.8%) continues to decline after the sale of its "nightmare" helicopter division for GBP 10mln after purchasing it for GBP 1.6bln seven years ago. The sale is part of the CEO's turnaround plan which includes GBP 400mln of disposals. In terms of the FTSE 100 reshuffle, Just Eat Takeaway (+1.0%) and Weir Group (+1.1%) are to exit the FTSE 100 and be replaced by Morrisons (+0.4%) and Meggitt (+0.2%).

Top European News

  • Sobi Shareholder AP4 Says Industrial Bidders Could Pay More
  • JPMorgan Agrees to Pay EU25M to Settle French Tax-Fraud Case
  • BNP Paribas in Talks With AgBank on Wealth Mgmt Venture: Reuters
  • Danske Bank Global Head of Primary Markets Joins SEB

In FX, the Aussie and Kiwi have both extended gains beyond half round number levels vs their US rival that were hampering further upside, with Aud/Usd and Nzd/Usd now approaching 0.7400 and 0.7100 respectively after the former cleared technical resistance in the form of the 50 DMA at 0.7376 today. Meanwhile, the Kiwi has topped its 100 DMA at 0.7083, but is still trying to make its way towards 0.7100 amidst headwinds from the Aud/Nzd cross that remains elevated above 1.0400 in wake of a 2nd consecutive record Aussie trade surplus that is shading robust NZ terms of trade marginally by virtue of the fact that it relates to July rather than Q2 and is therefore more current.

  • DXY - Antipodean Dollar outperformance aside, the Buck continues to flounder post-Powell and on the back of ADP most recently as the index struggles to find sure footing around 92.500 and the Greenback any real traction overall. However, the DXY is holding within a 92.536-388 range compared to Wednesday’s 92.376 low awaiting more pre-NFP jobs proxies that come via Challenger lay-offs today, but also a more timely snapshot of the labour market via IJC alongside trade and before factory orders, then 2 scheduled Fed speakers (Bostic and Daly).
  • CAD/GBP - A partial recovery in crude has given the Loonie another fillip and incentive to probe 1.2600 again in the run up to Canadian building permits and trade, while the Pound is back within striking distance of 1.3800, but still striving hard to defend or contain declines around 0.8600 against the Euro in the absence of anything UK specific.
  • EUR/JPY/CHF - All hugging tight lines vs their US counterpart, with the Euro taking a firmer grip of the 1.1800 handle and hardly hindered by stronger than expected Eurozone ppi data in contrast to the Yen that remains anchored around 110.00 following very dovish commentary from BoJ’s Katoaka. To recap, he stated that given economic developments bolder steps on monetary policy are needed, including an increase in bond buying to push short and long term rates down. Elsewhere, the Franc is restrained between 0.9160-40 and largely shrugged off, if not quite ignored conflicting Swiss macro releases, as CPI came in a tad firmer than forecast, but Q2 GDP missed and retail sales fell.

In commodities, WTI and Brent front month futures have been erring higher throughout the European session in the aftermath of the OPEC+ confab which turned out to be a smooth (and timely) affair. Producers, as expected, stuck to the plan of hiking 400k BPD – with the White House also welcoming the decision in a statement. WTI and Brent have erased the losses seen post-Novak yesterday, with the former just under USD 69/bbl and the latter near USD 72.00/bbl. Elsewhere, and from a policy standpoint, developments surrounding Iranian oil and nuclear talks will likely gain focus in the run-up to the next OPEC meeting in October. The Iranian Oil Minister said that as soon as the US’ unilateral illegal sanctions are lifted, Iran is ready to increase its oil output to the highest possible level to compensate for the losses caused by the sanctions, while he also noted that Tehran is determined to raise its oil exports irrespective of this. Aside from that, crude prices may take their cues from risk sentiment ahead of tomorrow’s US labour market report. In terms of bank commentary, the UBS notes that with oil demand set to rise, the bank expects the oil market to stay undersupplied, thus supporting prices. “We reiterate our advice for investors with a high-risk tolerance to be long Brent, add exposure to longer-dated oil contracts, or sell downside price risks”, the Swiss bank says. Elsewhere, spot gold and silver are once again uneventful within the same European ranges seen throughout most of this week thus far. LME copper remains subdued following yesterday’s selloff which was followed by a mild reprieve overnight – but again awaiting catalysts. Elsewhere, the Dalian commodity exchange is to raise speculative trading margin requirements for coking coal and coke futures to 15%, as of settlement on September 6th.

US Event Calendar

  • 8:30am: Aug. Initial Jobless Claims, est. 345,000, prior 353,000; Continuing Claims, est. 2.81m, prior 2.86m
  • 8:30am: 2Q Nonfarm Productivity, est. 2.5%, prior 2.3%; Unit Labor Costs, est. 0.9%, prior 1.0%
  • 8:30am: July Trade Balance, est. -$70.9b, prior -$75.7b
  • 10am: July Factory Orders, est. 0.3%, prior 1.5%
  • 10am: July Durable Goods Orders, est. -0.1%, prior -0.1%
  • 10am: July Cap Goods Ship Nondef Ex Air, prior 1.0%; -Less Transportation, est. 0.7%, prior 0.7%
  • 10am: July Cap Goods Orders Nondef Ex Air, est. 0%, prior 0%;
  • 10am: July Factory Orders Ex Trans, est. 0.5%, prior 1.4%

DB's Jim Reid concludes the overnight wrap

Markets continue to creep higher as we await the all important US jobs report tomorrow. That was in spite of a mixed bag of data releases yesterday. By the close of trade, the MSCI World index (+0.41%) reached all-time highs once again, even though the S&P 500 sold off late in the session to close only +0.03% higher - just short of its record. Meanwhile the dollar weakened for the 8th time in the last 9 sessions, as the greenback has had to deal with Fed Chair Powell’s dovish Jackson Hole speech last week, alongside more hawkish rhetoric from the ECB and the domestic impact of the delta variant.

Running through those data releases, the first big one was the ADP’s report of private payrolls for August which strongly underwhelmed at +374k (vs. 625k expected). That said, the ADP’s reports have missed the actual number of private payrolls significantly in recent months, with last month’s initial reading also coming in beneath expectations at 330k (vs. 690k expected), before private payrolls then rose by +703k. So markets didn’t seem too disturbed by the release yesterday. Later on in the session, we then got the ISM manufacturing print for August, which unexpectedly rose to 59.5 (vs. 58.5 expected), with new orders up to 66.7 (vs. 61.0 expected), but the employment reading came in at a contractionary 49.0, so again not a great sign ahead of the jobs report tomorrow.

Against this backdrop, investors reallocated to more defensive sectors in the S&P 500, which was just better than unchanged (+0.03%) while trading in a c.15pt (0.3%) range yesterday. The search for defensives led to a decent outperformance from tech stocks, with both the NASDAQ (+0.33%) and the FANG+ Index (+1.28%) close to all-time highs of their own, as 9 of the 10 megacap tech stocks in the FANG+ moved higher on the day – Tesla (-1.9%) was the sole laggard. The concentrated tech index has now gained in 8 of the last 9 sessions, with the index up +8.73% over that time.

However, energy stocks lagged (-1.51%) amidst a further decline in oil prices. Brent Crude (-2.34%) followed up its poor August performance by sliding lower, while WTI recovered from falling -2.0% by midday to end up +0.13%. That came as the OPEC+ group agreed that they should continue with their planned production increases that will see a further 400k barrels per day added to supply. Other cyclicals similarly weighed on the index with banks (-1.29%) and capital goods (-0.65%) the other main S&P laggards as investors shifted to more defensive industries. This rotation saw bond proxies such as utilities (+1.30%) and real estate (+1.69%) lead the S&P’s gain, along with the aforementioned tech rally.

European stocks outperformed as US stocks slid after the close of trading here, with the STOXX 600 up +0.48%. Unlike in the US, the reopening trade did well on this side of the Atlantic with retail (+1.83%), travel & leisure (+1.81%), and consumer products (+1.81%) leading the way, though tech (+1.43%) outperformed as well.

Sovereign bond markets had a much more divergent performance yesterday, though yields on 10yr bunds (+1.0bps) rose once again as hawkish noises around next week’s ECB meeting continued. In particular, Bundesbank President Weidmann said that “we shouldn’t disregard the risk to too-fast inflation”, and that risks to the upside predominate. That follows the flash CPI estimate that showed Euro Area inflation at +3.0% in August, the highest in almost a decade. However, Greek central bank governor Stournaras said that higher inflation was due to temporary factors and he’d advise caution about the path of inflation relative to the medium-term target. As core European debt lost ground though, peripheral debt benefited, with yields on 10yr BTPs down -1.8bps. And in the US, yields on 10yr Treasuries declined -1.5bps to 1.294%, led by falling real yields (-1.8bps).

Sentiment in Asian markets this morning is being supported by the PBoC move to provide CNY 300bn of low cost funds to banks so they can lend to small and medium-sized companies. Besides this the PBoC has also announced other measures such as interest subsidies to firms hit hard by the pandemic and a bigger role for local special bonds in driving investment. This has helped Chinese stock markets to outperform overnight with the Shanghai Comp (+0.55%) and Shenzhen Comp (+0.23%) both advancing. Other Asian markets are also posting gains with the Nikkei (+0.28%) and Hang Seng (+0.08%) also up. The Kospi (-0.70%) is trading lower though. Elsewhere, futures on the S&P 500 (-0.05%) and the Stoxx 50 (-0.11%) are slightly lower.

Turning to the pandemic, data from the UK’s ONS showed that 94% of the adult population in England had Covid antibodies in the week commencing August 9, which is the highest percentage yet. Nevertheless, that number has shown signs of plateauing over recent weeks, having risen just 1 percentage point relative to 4 weeks earlier. The 16-24 age bracket were the least likely of the over-16 groups to have antibodies, at 85.4%, which is in line with them also being the least likely to be vaccinated. There is some evidence of antibodies waning for the earlier vaccinated elderly with rates down from their early summer peak by 2-3pp. They are still comfortably in the 90 plus percentage point range though. Staying in the UK, Scotland will be instituting vaccine passports to enter nightclubs and large events starting later this month, with the mandate going to members of the Edinburgh legislature by the end of the week. Meanwhile the weekly average of US hospitalisations fell for the first time since late-June yesterday in a sign that the current surge may be declining.

Looking at yesterday’s other data, the final manufacturing PMI readings for August cemented the picture seen in the flash readings late last month. The Euro Area reading was revised down a tenth to 61.4, its lowest level in 6 months, while the US reading was also revised down a tenth to 61.1. Another notable release were German retail sales, which fell by a larger-than-expected -5.1% in July (vs. -1.0% expected), but that was largely a normalisation following the strong increases in May and June after Covid restrictions were phased out.

To the day ahead now, and data highlights from the US include July’s industrial production, factory orders and trade balance, along with the weekly initial jobless claims. From the Euro Area, we’ll also get the PPI reading for July. Otherwise, central bank speakers include the Fed’s Bostic and Daly.

Tyler Durden Thu, 09/02/2021 - 07:47
Published:9/2/2021 7:02:47 AM
[Markets] 2 Top Stocks Getting Hammered After Hours The stock market started September with mixed performance from major indexes, as many investors looked forward to employment data due out Friday to give a hint on the future direction of the market. The Nasdaq Composite (NASDAQINDEX: ^IXIC) managed to climb to another record high, but the S&P 500 (SNPINDEX: ^GSPC) was just about unchanged, and the Dow Jones Industrial Average (DJINDICES: ^DJI) actually gave up ground. The string of high-profile earnings reports continued after the market closed on Wednesday, and some stocks took big hits despite companies offering relatively strong results. Published:9/1/2021 6:01:46 PM
[Markets] Rally Fizzles As Banks And Energy Dump While FANGs Hit All-Time High; Cryptos Soar Rally Fizzles As Banks And Energy Dump While FANGs Hit All-Time High; Cryptos Soar

For the second day in a row, stocks rushed out of the gate only to stumble late in the day.

On the first day of the month, following a stellar Aug which saw 12 all time highs in the S&P - the most since 1987, September started off with a whimper as a broad divergence emerged beneath the market surface as energy and banks slumped while duration-sensitive and small cap stocks traded in the green.

As a result, the S&P failed to hold on to gains and closed broadly unchanged.

The slumping reflation trade was once again offset by strength in gigacaps, as the NYSE FANG+ Index climbed about 1.5% to reach a new all time high....

... with utilities and real-estate sectors also rising. The benchmark gauge of American equities traded near its all-time high, while the Dow Jones Industrial Average fluctuated.

Helping the FANGs was an upgrade by Wolfe Research of Apple to peer perform from underperform on the back of strong demand trends for the iPhone. The stock hit an all time high briefly before fading much of its gains.

Tech outperformance was also driven by another day of declining rates, with the 10Y yield sliding as soon as the ugly ADP print showed a huge miss to expectations, sparking concerns about Friday's payrolls report...

... which in turn dragged the broader curve lower.

“The private payrolls numbers have been all over the map during the pandemic, and often not the strongest indicator of how the rest of the jobs report will play out,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “With so much pressure on improvement on the labor-market front coming from the Fed, this could send a signal that jobs growth is stagnating. That’s likely a good thing for the markets though, as it means easy-money policy continues.”

In short, good news is good but bad news is better, leading to a relentless meltup but while the market hasn't had a 5% drawdown since November, it also hasn't had a 3% drop since May as stocks become a one-way diagonal line higher.

There is debate on what happens next, with bulls and bears once again torn: For Linda Duessel, senior equity strategist at Federated Hermes, it’s still too early to get bearish on the market. While more Wall Street voices are predicting a pullback soon, she told Bloomberg TV Wednesday that the “unbelievable” landscape of strong earnings and fiscal stimulus means stocks can run higher for longer.

Meantime, Citigroup Inc.’s Tobias Levkovich is sticking to his bearish call. The bank’s chief U.S. equity strategist predicts the index will end the year at 4,000 before reaching 4,350 by June 2022. Both levels sit below its last close of 4,522.68. Underpinning his view are stretched valuations and a planned tax rise that will hurt corporate profits.

One thing which however appears quite likely is even more gains for cryptos: with the prospect of even more monetary easing on deck, and as the NFT craze finds a second and far more powerful wind, cryptos jumped with Ethereum surging to the highest level since May, with many expecting ETH to take out its May all time highs in the coming weeks.

Away from cryptos, commodities were flat with gold flatlining and oil paring steep earlier losses as traders found comfort from a bullish U.S. government oil inventory report which saw a more than 7mm bbl inventory draw. Nerves were also soothed by the speed with which OPEC and its partners agreed - with hardly any discussion  -  to continue with a plan to add about 400,000 barrels a day of supply the group had shut last year when the pandemic destroyed demand.

But if today was boring, expect even more muted volumes tomorrow when traders will refrain from taking any major positions ahead of Friday's NFP which, however, as noted above will be bullish if it beats, and more bullish if it misses.

Tyler Durden Wed, 09/01/2021 - 16:02
Published:9/1/2021 3:28:01 PM
[Markets] Dow Jones Slips Despite Apple; Nasdaq Hits Fresh High As Tech Stocks Rally Stocks were mixed midday Wednesday, as the Nasdaq hit a record high but the Dow Jones Industrial Average lagged despite Apple's fresh high. Published:9/1/2021 11:51:10 AM
[Markets] Dow Jones Falls As Jobs Data Misses Estimates; Apple Hits All-Time High The Dow Jones Industrial Average reversed lower Wednesday, as jobs data missed estimates. Apple stock hit a new high. Published:9/1/2021 11:30:53 AM
[c92483f7-5c7f-549a-902e-64f1c8e432f9] 'Leave It to Beaver' star Tony Dow has a 'violent cough' but his 'spirit is positive' amid health battle: wife The update comes after news broke that Tony Dow, 76, was forced to wait 24 hours for a hospital bed as Delta variant COVID-19 cases surge in California. Published:9/1/2021 9:51:11 AM
[Markets] Dow stalls out to kick off September trade, while S&P 500, Nasdaq clamber higher after ADP jobs report for August U.S. stock benchmarks were mixed Wednesday, with equity indexes trading mostly higher, even as data on private-sector employment came in weaker than expected. A report from Automatic Data Processing showed that businesses in the U.S. created 374,000 new jobs in August, versus 600,000 that economists had forecast on average, based on a Dow Jones survey. The lackluster report suggests that the delta vairant of COVID-19 may be stalling out job creation in the recovery phase from the pandemic. The D Published:9/1/2021 9:00:26 AM
[Markets] Futures Rise Toward Fresh Record High As PMIs Confirm Global Economy Slowing Futures Rise Toward Fresh Record High As PMIs Confirm Global Economy Slowing

After a somewhat soggy end to the otherwise spectacular month of August which saw 12 new all time highs in the S&P500, global stocks and US futures are solidly green to start the month of September despite another round of dismal global PMIs confirming the global economy is slowing, and especially China where the Caixin China manufacturing PMI came in at 49.2, missing expectations of 50.3, and the first contraction since April 2020. Of course, the coming global slowdown is great news for stocks as it means more stimmies in China, and a potential taper delay in the West (where hyperinflation is "transitory" after all) meanwhile the Fed's QE cannon continues to blast billions in daily liquidity and naturally futures were solidly in the green, higher by 15 points to 0.34% to 4,536, Dow e-minis were up 106 points, while Nasdaq 100 e-minis were up 33.75 points, or 0.22%.ahead of U.S. ISM manufacturing data and ADP employment change.

Energy stocks led Wednesday's gains, with oil majors Chevron Corp, Exxon Mobil and Schlumberger NV rising between 0.5% and 1.1% in premarket trading as crude prices rose ahead of today's OPEC+ meeting. Rate-sensitive banks also rose with J.P.Morgan, Goldman Sachs and Citigroup up about 0.6% on support from higher bond yields.  U.S-listed shares of the world’s biggest miner BHP Group dropped 1.7%, while those in China-focused mining giant Rio Tinto fell 1.2% after tepid China factory data dented copper and iron ore prices. Shares of Calvin Klein and Tommy Hilfiger owner PVH Corp surged 7.8% after it raised its full-year earnings forecast. Here are some other notable movers:

  • Baudax Bio (BXRX) surges 19% after a director of the company bought 100,000 of the pharmaceutical company’s shares.
  • Crowdstrike (CRWD) shares fall 3.2% in premarket trading with analysts suggesting its 2Q results didn’t meet the most bullish expectations, but that the stock remains a top pick in the cybersecurity sector.
  • Focus Universal (FCUV) shares surge 38% following a share offering and the company’s listing on the Nasdaq Capital Market.
  • Luxury EV startup Lucid Group (LCID) drops 8% on the lock-up expiry date that allows some shareholders to sell stock for the first time since the SPAC deal closed.
  • Riot Blockchain (RIOT) is down 0.2% after filing for an at-the-market offering via Cantor Fitzgerald, B. Riley, BTIG, Roth.
  • Skillz (SKLZ) and AMC Entertainment (AMC) are among meme stocks gaining in premarket trading, rising 6.8% and 1.9% respectively, extending rallies fueled by retail investors in chatrooms like StockTwits, and on Reddit.
  • XPeng (XPEV) and Li Auto (LI) shares fall 1.7% and 0.1% respectively in U.S. premarket trading after Chinese EV peer Nio cut its delivery outlook. Nio drops 4.9%.
  • Wells Fargo (WFC) shares edge 0.7% higher in premarket trading after a 5.6% decline on Tuesday following a report that the bank could face regulatory action over the pace at which it is compensating victims of past scandals and shoring up its controls.

Still, while corporate results are strong, concerns about the delta variant, inflation spikes, supply bottlenecks and stimulus tapering could easily trigger a 10%-20% drop in stock prices, said Ipek Ozkardeskaya, senior analyst at Swissquote. “The markets are on path for more gains,” she wrote in a report. “Nobody can tell how healthy the trend is, where it will end, or how it will end.”

The ADP report, published ahead of the government’s more comprehensive and closely watched employment report on Friday, is expected to show private payrolls rose by 613,000 in August after 330,000 gain in July. The number is due at 8:15 a.m. ET. Separately, the Institute for Supply Management’s gauge of manufacturing sector activity is expected to have moderated to 58.6 in August from 59.5 in the previous month.

Earlier, surveys showed Asian and European factory activity lost momentum in August as the ongoing coronavirus pandemic-disrupted supply chains. Many firms reported logistical troubles, product shortages and a labor crunch which have made it a sellers’ market of the goods factories need, driving up prices.  Here is a snapshot of the overnight PMIs:

  • China Caixin Mfg PMI (August): 49.2, Exp. 50.2, previous 50.3
  • Euro Area Manufacturing PMI (Final, August): 61.4, flash 61.5, previous 62.8
  • Germany Manufacturing PMI (Final, August): 62.6, flash 62.7, previous 65.9
  • France Manufacturing PMI (Final, August): 57.5, flash 57.3, previous 58.0
  • Italy Manufacturing PMI (August): 60.9, GS 60.0, consensus 60.1, previous 60.3
  • Spain Manufacturing PMI (August): 59.5, GS 58.8, consensus 59.0, previous 59.0
  • UK Manufacturing PMI (Final, August): 60.3 flash 60.1, previous 60.4

While factory activity remained strong in the euro zone, IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) fell to 61.4 in August from July’s 62.8, below an initial 61.5 “flash” estimate. “Despite the strong PMI figures, we think that lingering supply-side issues and related producer price pressures might take longer to resolve than previously expected, increasing the downside risk to our forecast,” said Mateusz Urban at Oxford Economics. In Britain, where factories also faced disruptions, manufacturing output grew in August at the weakest rate for six months. The United States likely suffered a similar slowdown, data is expected to show later on Wednesday.

“We’re moving past the point of peak growth. The strongest period of the recovery now looks to be behind us, we’re seeing that in the economic data,” said Hugh Gimber, global market strategist at JP Morgan Asset Management. “The recovery is slowing, but it remains on track. And so that I think is what’s underpinning markets.”

Nothing like new all time highs to celebrate the slowdown.

European stocks also rose in the first trading session of September (because like the Fed, the ECB will be injecting billions in liquidity for a long, long time) after seven straight months of gains. The Stoxx 600 is up ~0.5%, led higher by travel, retail and banking industries. DAX took back some earlier gains, but was still up 0.1% on the day, while the FTSE 100 is up 0.6%.  French spirits maker Pernod Ricard gained 3.3% after reporting better-than-expected results. Carrefour slumped 4.4% in Paris as billionaire Bernard Arnault sold his remaining holding in the supermarket chain. European luxury shares rose after Bernstein says stock market movements in August have priced in the risk of potentially higher taxation in China, “at least in its milder form.” Among the gainers were Richemont +2.2%, LVMH +2.2%, Kering +2%, Burberry +1.8%, Hermes +1.3%, and Swatch +0.9%. While new taxation would prompt rich consumers to momentarily rein in their discretionary spending, it’s unlikely that there will be “highly disruptive action” from the Chinese authorities, analyst Luca Solca writes in a note. Here are some of the biggest European movers today:

  • Pernod Ricard shares rise as much as 3.9% after the French distiller’s FY results, which analysts say show a strong recovery with positive medium-term guidance.
  • Fluidra shares jump as much as 4.1%, after it acquired U.S. pool deck equipment manufacturer S.R. Smith in a deal valued at $240m.
  • EDP shares rise as much 4.3% as Berenberg raises its PT and says it remains a buy on upside from renewables growth and carbon prices.
  • BioMerieux’s shares gain as much as 7.7% after 1H earnings, which Jefferies analyst Peter Welford says beat consensus as costs declined.
  • WH Smith shares fall by as much as 7.2% after its FY results, with RBC saying that its outlook for a further recovery in its travel retail business seems “relatively cautious”
  • Carrefour shares drop by as much as 5.3% after billionaire Bernard Arnault, the world’s third-richest person, sold his remaining holding in the company, ending a 14- year largely unsuccessful investment in the French supermarket chain.

Earlier in the session, Asian stocks climbed for a fourth straight day as Chinese technology heavyweights extended their rebound from the massive rout seen earlier this year.  The MSCI Asia Pacific Index rose as much as 0.5%, with Tencent and Meituan the biggest individual contributors to the gauge’s advance. The financials sector gave the biggest boost, helped by Ping An Insurance’s bounce back from Tuesday’s losses. Equity benchmarks in China, Singapore and Japan were among the region’s biggest gainers. The Hang Seng Tech Index rallied for a third day as more investors grow confident that a bottom may have been reached following the selloff sparked by Beijing’s regulatory crackdown on private industry. A gauge of Asia’s software technology firms including Tencent also rose after capping its first monthly advance since April.  Asia’s stock benchmark is extending gains after rising 2.3% in August in what was its best monthly performance since December. Still, the rout in China and Hong Kong has meant that regional shares continue to underperform peers in the U.S. and Europe so far this year. “Many are starting to realize that the regulatory crackdown on large Internet platforms is becoming quite targeted in nature and isn’t creating existential threats to their business,” said Bloomberg Intelligence analyst Matthew Kanterman. “Coupled with relatively strong sector results the last few weeks and what appears to be a slowing cadence of bad regulatory developments vs July, sentiment may be starting to turn the corner for the sector.” Japan’s Topix closed at its highest level since April, while China’s CSI 300 Index climbed more than 1%.

Australian stocks pared declines after GDP beat expectations; the country's S&P/ASX 200 index fell 0.1% to close at 7,527.10, trimming a loss of as much as 1% after Australia’s GDP report. The economy grew faster than expected last quarter as household’s tapped their savings to boost spending, underscoring the central bank’s view that the nation entered a renewed lockdown with solid momentum. Mesoblast was among the worst performers after Jefferies lowered its rating on the stock to “hold.” Alumina was among the top performers, extending its winning streak to a fourth day. In New Zealand, the S&P/NZX 50 index rose 0.2% to 13,243.49

In FX, the Euro trades around session high after the ECB’s Yannis Stournaras said inflation jump is temporary and the central bank should be cautious. Dollar was little changed for a third day. Commodity-linked currencies led gains while havens slipped; the euro and the pound were steady. The Aussie rallied amid short covering of AUD/USD and AUD/JPY positions after a strong close in Japanese stocks; bond yields in Australia and New Zealand jumped after hawkish comments from ECB officials spurred losses in global debt markets. The yen weakened a third day amid risk-positive sentiment and higher Treasury yields as traders positioned before the U.S. data.

In rates, 10-year Treasury yields are little changed at 1.31%. Treasuries were steady, off session lows, after facing slight pressure following block sale in Ultra 10-year note futures shortly after 6am ET. In Europe, bunds continue to underperform amid heavy debt sales in Germany. U.S. stock futures advance, still inside Tuesday’s range. Yields were cheaper across belly, remain broadly within a basis point of Tuesday’s close; in 10-year sector bunds lag by 1bp vs Treasuries while gilts trade broadly in line.

Government bond yields across the euro area touched their highest levels in around six weeks, pushed up by unease over the future pace of European Central Bank bond purchase after two ECB officials said the central bank needs to begin tapering soon. Germany’s 10-year Bund yield touched its highest level in just over six weeks, briefly rising above -0.36%.

In commodities, crude maintained a zigzag-trading pattern ahead of the upcoming OPEC ministers and allies meeting later Wednesday. Brent and WTI are little changed, with the global crude benchmark holding above $71/bbl. LME copper extends decline, down 2% after China released its third batch of metals from state reserves, vowing to sell more based on the market. The rest of the base metals complex is in red. In fixed income, bund yields gives back some gains, trading at the -0.38-handle, while peripheral spreads move wider to the core, the steepest at the longest end of the curve. 

Market Snapshot

  • S&P 500 futures up 0.4% to 4,537.50
  • STOXX Europe 600 up 0.8% to 474.73
  • MXAP up 0.3% to 202.44
  • MXAPJ up 0.2% to 666.43
  • Nikkei up 1.3% to 28,451.02
  • Topix up 1.0% to 1,980.79
  • Hang Seng Index up 0.6% to 26,028.29
  • Shanghai Composite up 0.7% to 3,567.10
  • Sensex little changed at 57,564.08
  • Australia S&P/ASX 200 down 0.1% to 7,527.13
  • Kospi up 0.2% to 3,207.02
  • Brent Futures up 0.5% to $72.01/bbl
  • Gold spot down 0.1% to $1,811.06
  • U.S. Dollar Index little changed at 92.68
  • German 10Y yield rose 0.5 bps to -0.377%
  • Euro little changed at $1.1810

Top Overnight News from Bloomberg

  • Short-term funding costs in the U.K are diverging from those in Europe as traders grow increasingly confident the Bank of England will deliver an interest-rate hike within the next year.
  • European factories saw unfilled orders rise to an unprecedented level in August as companies struggled to meet demand amid widespread bottlenecks in the global supply chain.There were “clear signs of strong capacity constraints,” according to an IHS Markit survey of purchasing managers
  • Manufacturing managers across Southeast Asia reported a heavy blow in August from one of the world’s worst Covid-19 outbreaks, while producers in North Asia continued to enjoy robust output, PMIs showed
  • Australia’s economy grew faster than expected last quarter as household’s tapped their savings to boost spending, underscoring the central bank’s view that the nation entered a renewed lockdown with solid momentum  

A more detailed look at global markets courtesy of Newsquawk

Asian stocks traded somewhat cautiously after further disappointing Chinese PMI data and following a soft handover from the US where sentiment was mired by disappointing Chicago PMI and US Consumer Confidence data, although the losses on Wall Street were only marginal and all major indices registered a seventh consecutive monthly gain for August. ASX 200 (-0.1%) was pressured as daily COVID-19 infections continued to ramp up in Australia’s most-populous states and with better-than-expected GDP doing little to brighten the mood, given that the strong economic growth for Q2 was made somewhat stale by the lockdowns throughout the entirety of Q3 so far. Nikkei 225 (+1.3%) outperformed amid reports PM Suga is to order the compiling of an economic package and additional budget within the week, while data also showed Japanese companies' recurring profits nearly doubled Y/Y during the prior quarter. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) eventually weathered the miss on Chinese Caixin PMI data which slipped into contraction territory for the first time since April last year and effectively supported the argument for PBoC easing. However, price action was choppy as crackdown concerns also lingered amid the continued tightening of Beijing’s regulatory grip with China to curb overly fast growth in medicine expenses and the PBoC is to implement new disclosure measures for Chinese non-bank payment apps when they make new products or conduct foreign stock market listings. Finally, 10yr JGBs declined amid spillover selling from global counterparts including the bear steepening stateside and pressure in European bonds following the firm Eurozone inflation data, while the outperformance in Japanese stocks and lack of BoJ purchases in the market today also contributed to the headwinds for JGBs.

Top Asian News

  • India to Offer Indemnity to Flag Carrier Bidder Over Cairn Claim
  • China Bonds Shrug Off PBOC Cash Drainage to Jump on Weak PMI
  • Stocks, U.S. Futures Gain on Reopening Optimism: Markets Wrap
  • China Quants Pay $300,000 to Beat Wall Street to Graduates

Stocks in Europe trade with respectable gains across the board (Euro Stoxx 50 +1.2%; Stoxx 600 +0.9%), despite a somewhat mixed APAC lead and with little in terms of fresh fundamentals to sour risk appetite. US equity futures see gains of a lesser magnitude and have been waning off best levels, with the RTY (+0.6%) outpacing the ES (+0.3%), YM (+0.3%) and NQ (+0.2%), ahead of the ADP and ISM Manufacturing PMI later today before Friday’s pivotal jobs report. Back to Europe and sticking with PMIs where we have had the manufacturing finals across Europe – with the resonating theme being ongoing supply chain issues. The DAX (+0.7%) narrowly underperforms the region after the German manufacturing metric was slightly revised lower, deviating from the revision higher seen in France and the forecast beats printed in Italy and Spain – with the IBEX (+2.2%) the clear European outperformer at the time of writing, although more-so on the back of solid sectorial performances seen in Retail, Travel & Leisure and Banks. Sectors across Europe are predominantly in the green, with the only laggards the Basic Resources and Chemicals sectors. Sectors do not portray a clear theme nor bias. In terms of individual movers, Pernod Ricard (+3.5%) is firmer post-earnings where it announced the resumption of its EUR 500mln share buyback programme. Carrefour meanwhile trades at the foot of the Stoxx 600 after Billionaire Bernard Arnault's Agache group announced the sale of its 5.7% stake in the Co. via accelerated bookbuilding. Meanwhile, Stoxx will announce the results of its annual review of the Euro Stoxx 50 Index at the close of business on 1 September, to be effective Friday, 17 September – JPM expects BBVA (+2.2%) and Stellantis (+0.3%) to replace Engie (+2.0%) and Amadeus (+2.6%).

Top European News

  • Billionaire Arnault Sells Carrefour Stake for $854 Million
  • KPMG Accused of Giving Regulator ‘False and Misleading’ Data
  • U.K. House Prices Surge in August Despite Ending of Tax Cut
  • EDF Slips as Path to Fresh France-EU Reform Talks Still Unclear

In FX, a marked change in fortunes for the Yen following its fleeting breach of 100 DMA resistance vs the Dollar yesterday, as Usd/Jpy rebounds sharply through 110.00 and the 50 DMA (110.10) towards 110.50 alongside US Treasury yields amidst further bear-steepening and renewed risk appetite. The Yen may also be factoring in reports that Japanese PM Suga is preparing an economic package and supplementary budget, plus pretty dovish/downbeat from BoJ’s Wakatabe, and the same could be said for the Franc in wake of SNB’s Zurbruegg saying that he expects low global interest rates will remain unchanged for some time to come, while noting vulnerabilities on the Swiss mortgage and real estate markets currently at a high level. Furthermore, the Bank sees clear signs of unsustainable mortgage lending on the one hand and heightened risks of a price correction on the other. Usd/Chf is back in the high 0.9100 area following its flirt with the round number on Monday, and with little downside reaction to a firmer Swiss manufacturing PMI. Conversely, Gold is coping relatively well with the rise in UST yields and risk-on environment on the Usd 1800/oz handle, albeit back below 100 and 200 DMAs after hurdling both and closing above yesterday, as the Greenback grinds higher and DXY attempts to form a base beyond 92.500 having bounced from a 92.395 low on Tuesday. The index is now hovering within a 92.790-640 band awaiting ADP, Markit’s final US manufacturing PMI, ISM and comments from Fed’s Bostic.

  • AUD/NZD/CAD - All firmer against their US counterpart, with the Aussie establishing a firmer platform over 0.7300 to stage another assault on 0.7350. Better than expected Q2 GDP did not really boost Aud/Usd overnight as COVID lockdowns have subsequently scuppered the economic recovery and China’s Caixin manufacturing PMI fell below the 50.0 growth/contraction threshold. However, the technical backdrop looks more constructive above a Fib retracement level at 0.7319 and Aud/Nzd crosswinds have turned in the run up to NZ terms of trade, import and export prices on a further bounce from 1.0350 to top 1.0400 again. Nevertheless, the Kiwi has reclaimed 0.7050+ status vs its US peer and the Loonie is paring more post-Canadian GDP declines with some traction from crude in advance of Markit’s manufacturing PMI, JMMC and OPEC+ meetings, with Usd/Cad probing 1.2600 compared to peaks just above 1.2650 yesterday.
  • EUR/GBP - Both narrowly mixed against the Greenback, but the Euro marginally outpacing the Pound as Eur/Gbp eyes 0.8600 irrespective of final Eurozone and UK manufacturing PMIs that were somewhat contrasting, but probably all too close to consensus or preliminary prints to prompt much reaction. Eur/Usd has regained 1.1800+ status, while Cable is straddling 1.3750.

In commodities, Crude futures have largely retraced their overnight gains, with WTI and Brent both back towards the bottom end of today’s ranges. The choppiness comes in the run-up to the JMMC meeting at 15:00BST/10:00EDT and the decision-making OPEC+ confab at 16:00BST/11:00EDT – subject to delays. Expectations have solidified around a 400k BPD hike, i.e., a continuation of the current plan, with all sources thus far pointing in that direction. That being said, it’s worth keeping in mind that OPEC+ has a tendency to massage expectations and then surprise markets. The full Newsquawk preview can be accessed here, and the exclusive Twitterdeck is available here. Elsewhere, spot gold and silver are uneventful and contained to recent ranges awaiting Tier 1 US data. Industrial metals are slightly more interesting following later-confirmed reports that China is releasing a third batch of metals totalling 150k tonnes, comprised of 30k tonnes of copper (prev. 30k), 70k tonnes of aluminium (prev. 90k) and 50k tonnes of zinc (prev. 50k). LME copper slumped back under USD 9,500/t and resides near session lows at the time of writing – with the disappointing Chinese Caixin manufacturing PMI also weighing on the red metal.

US Event Calendar

  • 7am: Aug. MBA Mortgage Applications, prior 1.6%
  • 8:15am: Aug. ADP Employment Change, est. 638,000, prior 330,000
  • 9:45am: Aug. Markit US Manufacturing PMI, est. 61.2, prior 61.2
  • 10am: July Construction Spending MoM, est. 0.2%, prior 0.1%
  • 10am: Aug. ISM Manufacturing, est. 58.5, prior 59.5
    • 10am: Aug. ISM Employment, prior 52.9
    • 10am: Aug. ISM New Orders, est. 61.0, prior 64.9
    • 10am: Aug. ISM Prices Paid, est. 84.0, prior 85.7

DB's Jim Reid concludes the overnight wrap

So I now have 16 weeks holiday from looking after the kids which is a nice relief. After 2 weeks non stop with them that’s the bare minimum required. They are all lovely individually but together they are awful, especially the twins. A graph of the amount of fights I had to break up over the last couple of weeks would require a log scale. The biggest problem is they don’t bear grudges so this increases the number of fights. The pattern is a major bust up, five minutes of hysteria, move on, forget about it, play for a few minutes until the next conflict and then the loop starts up again.

So holidays are coming to an end and dark September mornings writing the EMR are well and truly here. Given it’s the start of the month today, Henry will shortly be releasing our monthly performance review for August. Normally the summer holidays are a relatively quiet period for markets, and last month very much fit into that pattern, but that didn’t stop equities powering ahead to fresh all-time highs as they advanced for a 7th successive month. In fact, both the S&P 500 and the STOXX 600 are now up by over +20% YTD on a total returns basis, with a third of the year still remaining. At the other end of the leaderboard however, oil prices saw their biggest decline so far this year in August, as fears of weakening economic demand and concerns about the delta variant of Covid took their toll. More details in the report out shortly.

It might be the start of September today, but investors will be grappling with a number of familiar themes this morning. The tapering and inflation debate was a hot topic yesterday but more from Europe for once rather than the US. This coupled with weak data served to dampen sentiment and spark a selloff across various asset classes. The most significant data yesterday came from the Euro Area, where the flash CPI estimate for August came in at a far stronger-than-expected +3.0% (vs. +2.7% expected), which is the highest since November 2011, and was also above every economists’ estimate on Bloomberg. Then we had some weak consumer confidence data from the US Conference Board, which backed up the weak reading from the University of Michigan earlier in the month.And both the European inflation reading and US consumer sentiment data came against the backdrop of weak PMIs out of China heading into yesterday’s session.

Looking at yesterday’s developments, that strong Euro Area inflation print was by some way the most impactful on markets, and gave further ammunition to the ECB’s hawks who’ve been calling for a withdrawal of emergency support. Although core inflation only exceeded expectations by 0.1%, the +1.6% reading marked the highest core inflation since July 2012, which was the month that former ECB President (and now Italian PM) Mario Draghi made his “whatever it takes” pledge. At a similar time to the inflation release, Dutch central bank governor Knot said that he believes in an immediate slowdown in ECB purchases and supports ending their pandemic emergency purchase programme in March. Furthermore, Austrian governor Holzmann said that he was in favour of reducing the pace of purchases in Q4. With both the strong inflation reading and the hawkish comments, European sovereign bonds witnessed a significant selloff, with yields on 10yr bunds climbing +5.6bps to -0.38%, which is their biggest one-day move since March, whilst those on 10yr BTPs (+9.9bps) saw their biggest one-day move higher since February.

With sovereign bond yields moving sharply higher in Europe, equities indices lost ground with the STOXX 600 closing the session -0.38% lower. In the US the S&P 500 similarly fell back, with the index down -0.13% from the previous day’s record highs after drifting lower in the US afternoon. This occurred as macroeconomic data continues to surprise to the downside as the Conference Board’s consumer confidence reading came in at a 6-month low of 113.8 in August (vs. 123.0 expected). Looking at the sectoral breakdowns, the FANG+ index of megacap tech stocks was an outperformer, managing to close +0.36% higher to just about achieve a new all-time closing high, its first since mid-February. Meanwhile, yields on 10yr US Treasuries were up +3.0bps to 1.309%, however US banks (-0.58%) reversed earlier gains as cyclicals largely lagged.

Asian markets are generally trading higher this morning with the Nikkei (+1.17%), Hang Seng (+0.62%), Shanghai Comp (+0.86%) and Kospi (+0.25%) all advancing. Meanwhile, yields on 10y USTs are up +2.2 bps to 1.332% and those on Australia and New Zealand’s 10y sovereign bonds are up +9.2bps and +9.3bps respectively after the global sell-off yesterday. Futures on the S&P 500 are up +0.29% and those on the Stoxx 50 are +0.65%. Elsewhere, oil prices are up c.+0.70% ahead of today’s OPEC+ meeting.

Overnight China’s Caixin manufacturing PMI came in at 49.2 (vs. 50.1 expected and 50.2 last month). This was in contrast to yesterday’s official manufacturing PMI reading of 50.1 which was relatively stable. The Caixin PMI is more representative of smaller and private companies while the official PMI covers larger, state owned enterprises. Given the weakness in the PMIs, our China economist Yi Xiong is of the view that the PBoC should soon cut the MLF rate to support growth (to read more click the link here). Looking at other Asian manufacturing PMIs, Japan’s final manufacturing reading got revised up +0.3pts from the flash to 52.7 while Australia’s final manufacturing PMI also saw a similar upward revision of 0.3pts to 52.0. Taiwan’s continued to remain well in expansionary territory with a reading of 58.5 (vs. 59.7 last month). Meanwhile, Vietnam’s dropped substantially to 40.2 from 45.1 last month and South Korea’s reading softened to 51.2 from 53.0 but Indonesia’s improved to 43.7 (vs. 40. 1 last month). These readings generally point to a slightly softer manufacturing activity in the region during the month as most countries imposed restrictions to curb the spread of the delta variant.

In other overnight news, the BoJ Deputy Governor Masazumi Wakatabe indicated in a speech that the central bank may revise down its economic assessment at this month’s policy meeting as the spread of the delta variant has caused the expansion and extension of the state of emergency.

With September having arrived, we’re now finally in the month of the German election, for which yet more polls yesterday showed the centre-left SPD in the lead. The first from Ipsos had them at 25%, ahead of the CDU/CSU on 21% and the Greens at 19%. And then another from Forsa had a slightly tighter race at the top, with the SPD on 23%, the CDU/CSU on 21%, and the Greens on 18%. The SPD’s candidate for chancellor, German finance minister and Vice-Chancellor Olaf Scholz, has sought to project himself as the heir to Chancellor Merkel, with whom he’s currently serving in the grand coalition with. But yesterday Chancellor Merkel herself took aim at this portrayal, saying that a major difference between the two is that she would never go into coalition with Die Linke, whereas she said it “remains an open question” whether Scholz was of this view.

Turning to the pandemic, there was some positive news as European Commission President von der Leyen confirmed that 70% of adults in the EU were now fully vaccinated. Meanwhile vaccine “passports” are becoming more widespread with Italy requiring travellers on planes, ferries and long-haul trains show proof of vaccinations or a negative Covid-19 test.

Looking at yesterday’s other data, inflation in France came in at a stronger-than-expected +2.4% (vs. +2.1% expected) in August, using the EU harmonised measure, whilst the Italian reading also surprised to the upside at +2.6% (vs. +2.1% expected). Over in the US, the MNI Chicago PMI for August fell to 66.8 (vs. 68.0 expected), though the S&P CoreLogic Case-Shiller national home price index was up +18.6% year-on-year in June, which is the fastest since that series begins in 1988.

To the day ahead now, and the main data highlight will be the release of the global manufacturing PMIs and the ISM manufacturing reading from the US, but there’s also the Euro Area unemployment rate for July, along with the ADP’s report of private payrolls from the US for August. Otherwise, central bank speakers include the ECB’s Weidmann and the Fed’s Bostic.

Tyler Durden Wed, 09/01/2021 - 07:58
Published:9/1/2021 7:21:18 AM
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