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[Markets] US Home Prices Explode At Fastest Pace Since 2013 US Home Prices Explode At Fastest Pace Since 2013

"In real terms, home prices have never been so high. My data goes back over 100 years, so this is something," Nobel prize-winning economist Robert Shiller told CNBC's "Trading Nation" earlier this week and according to Case-Shiller's latest data (for March) released today, home prices in America (the 20-City Composite) are surging at a stunning 13.27% YoY (up 1.6% MoM)...

Source: Bloomberg

Phoenix, San Diego, Seattle reported highest year-over-year gains among 20 cities surveyed.

"These data are consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes," Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices, said in statement.

"This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years. Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing."

As Shiller noted, that is the highest price ever and over 19% higher than the home price index was at the peak in 2006...

Finally, we revert back to the man behind the index. Shiller believes the current housing market environment is similar to 2003, five years before the housing market crash in 2008. 

"If you go out three or five years, I could imagine they'd [prices] be substantially lower than they are now, and maybe that's a good thing," he added.

"Not from the standpoint of a homeowner, but it's from the standpoint of a prospective homeowner. It's a good thing. If we have more houses, we're better off."

Tyler Durden Tue, 05/25/2021 - 09:05
Published:5/25/2021 8:11:08 AM
[Markets] Dow Jones Futures Rally As Bitcoin Surges; 2 Hot IPO Stocks Break Out Dow Jones futures were higher early Tuesday, The tech-heavy Nasdaq reclaimed a key level in today's stock market rally, as Bitcoin surged. Published:5/25/2021 6:09:00 AM
[Markets] Mark Hulbert: Dow 37,000? It’s possible if U.S. stocks stage an ‘average’ summer rally Dow Jones Industrial Average has gained 7% on average between the beginning of June and the end of August.
Published:5/25/2021 6:09:00 AM
[Markets] Dow Jones Futures Rally: Nasdaq, Tesla Retake Key Levels As Bitcoin Surges; 2 Hot IPO Stocks Break Out Dow Jones futures were little changed late Monday. The tech-heavy Nasdaq reclaimed a key level in today's stock market rally, as Bitcoin surged. Published:5/24/2021 7:06:39 PM
[Markets] Dow Jones Futures Rally: Tech Stocks, Tesla Retake Key Levels As Bitcoin Surges; 2 Hot IPO Stocks Break Out Dow Jones futures were little changed late Monday. The tech-heavy Nasdaq reclaimed a key level in today's stock market rally, as Bitcoin surged. Published:5/24/2021 6:07:26 PM
[Markets] Dow Jones Futures: Tech Stocks, Tesla Retake Key Levels As Bitcoin Surges Dow Jones futures were little changed late Monday. The tech-heavy Nasdaq reclaimed a key level in today's stock market rally, as Bitcoin surged. Published:5/24/2021 4:35:00 PM
[Markets] Dow Jones Holds Gain As Nasdaq Leads Market; These Stocks Trade In Buy Zones The Dow Jones Industrial Average rose in today's market, recovering some of its losses from last week. Technology stocks led the upside. Published:5/24/2021 1:05:34 PM
[Markets] Dow Jones Rallies As Virgin Galactic Rockets On Successful Flight Test; Apple, Tesla Rebound The Dow Jones Industrial Average rallied 200 points Monday, as Virgin Galactic skyrocketed 21% on a successful flight test. Tesla stock rebounded. Published:5/24/2021 9:32:46 AM
[Markets] Stocks open higher after back-to-back weekly declines Stocks opened higher Monday, kicking off the last trading week of May on a positive note after back-to-back weekly declines for the Dow Jones Industrial Average and the S&P 500. Analysts said investor worries over a pickup in inflation may be moderating as Treasury yields remain relatively stable. The Dow was up 120 points, or 0.3%, at 34,327, while the S&P 500 advanced 0.5% to 4,178. The Nasdaq Composite advanced 0.6% to 13,552.31. Published:5/24/2021 9:03:21 AM
[Markets] PG&E stock gains after deal to sell San Francisco headquarters for $800 million Shares of PG&E Corp. rose 0.9% in premarket trading Monday, after the California-based utility announced an agreement to sell its San Francisco headquarters complex for $800 million to Hines Atlas U.S. LP. The utility said it proposing to distribute $390 million to $420 million in proceeds from the sale to its customers, pending approval by the California Public Utilities Commission (CPUC). The company said it remains on track to move into its new headquarters in Oakland, Calif., starting in the first half of 2022. "This sale and relocation will achieve cost savings that directly help reduce customer bills," said Chief Executive Patti Poppe. "At the same time, it will give us an efficient and effective Bay Area workspace as we focus on delivering for all of the communities we serve." Separately, the company said it plans to consolidate two other California properties, on in San Ramon and one in Concord, into the new Oakland headquarters. The stock has dropped 17.5% year to date through Friday, while the Dow Jones Utility Average has gained 5.1% and the Dow Jones Industrial Average has advanced 10.6%. Published:5/24/2021 8:32:15 AM
[Markets] Futures Jump As Inflation Fears Fade On China's Commodity Crackdown Futures Jump As Inflation Fears Fade On China's Commodity Crackdown

Now that the inflation narrative has been crippled with Bloomberg picking up on what we said last week about China's tumbling credit impulse...

... and the deflationary consequences thereof, while an acceleration of China’s crackdown on commodities speculation weighed on raw-material prices with steel dropping more than 5% and iron ore tumbling by close to the daily limit, stocks are again free to roam about the stratosphere as the risk of runaway prices is fading and S&P futures rose to 2-week highs on Monday as higher oil prices lifted energy stocks ahead of key inflation readings later this week when the personal consumption data is released on Thursday, the Fed’s preferred inflation measure. At 7:30 a.m. ET, Dow e-minis were up 118 points, or 0.%, S&P 500 e-minis were up 21 points, or 0.51%, and Nasdaq 100 e-minis were up 87.5 points, or 0.65%.

After falling as much as 4.3% from its May 7 record high, the S&P 500 is now only 2% off that level as investors picked up technology stocks that were beaten down the most. Risk sentiment also improved as cryptocurrencies rebounded from a weekend rout fueled by further signs of a gathering Chinese crackdown on the emerging sector. The dollar and Treasuries were steady. Implied volatility for major global indexes remains subdued, suggesting investors aren’t pricing in a surprise from the Fed in the next six months.

Some notable pre-market movers:

  • Bitcoin advanced above $37,000 following another weekend of big swings, with shares including Ebang International Holdings and Bit Digital falling in premarket.
  • Coinbase initiated with a buy rating at Goldman Sachs, with price target on the cryptocurrency exchange set at $306, the second-lowest among analysts tracked by Bloomberg. Shares gain 2.5% to $227 in U.S. premarket trading.
  • Chevron, Occidental Petroleum and Schlumberger rose between 1% and 2% in premarket trading as oil prices firmed more than $1 a barrel.
  • Jiuzi rises ~10% in U.S. premarket trading, set for a second day of gains after a 13% rally on Friday; the shares were volatile as they started trading last week.
  • Virgin Galactic soars as much as 36% in premarket trading after the company founded by British billionaire Richard Branson conducted a test flight to space for the first time in more than two years.
  • Cryptocurrency-exposed stocks including Riot Blockchain, Ebang and Bit Digital slipped after Bitcoin’s volatile moves over the weekend.
  • Beyond Meat adds 3.8% after the plant-based meat producer is upgraded to outperform at Bernstein.
  • Martin Marietta Materials said it would buy HeidelbergCement AG’s assets in California and Arizona for $2.3 billion.

“It’s going to be a very mixed market over the next several months until we get more information on what’s really going to happen with inflation and how the stimulus in the U.S. affects spending there, but also how the coronavirus really progresses,” JoAnne Feeney, a partner at Advisors Capital Management LLC, said in a Bloomberg TV interview.

In Europe, the Stoxx Europe 600 fell 0.1%, after rising as much as 0.2% amid low volumes, with travel and leisure shares leading gains among sectors while utilities fell the most. The FTSE 100 outperformed, rising 0.2%. German, Danish, Norwegian and Swiss stock markets are closed for holidays. In France, Solutions 30 SE shares plunged after a two-week halt as its troubles escalated amid a row with its auditor over the 2020 accounts. Here are some of the biggest European movers today:

  • Juventus shares rose as much as 6.1%, the steepest intraday advance since April 19, after the Italian soccer club qualified for the Champions League.
  • Cineworld gained as much as 4.5% after the company reported a strong opening weekend in the U.K., with the performance beating its own expectations.
  • Alpha Bank shares rose as much as 13%, the most intraday since December, as the lender gives details for its share capital increase plan to support growth projects.
  • Premier Foods shares climbed as much as 4.7% after analysts at Peel Hunt and Jefferies increased their price targets following the company’s FY results and bond refinancing.
  • Solutions 30 plunged as much as 77% as the stock resumed trading following a two-week halt. The technology- services firm said its auditor wasn’t in a position to express an opinion on its 2020 financial statement, and subsequently published its unaudited report on Sunday.
  • Indra Sistemas dropped as much as 5.2%, extending Friday’s losses after Spain, the company’s main shareholder, said it intended to name a new chairman.
  • Ted Baker rose as much as 3.7% after the company confirmed FY results will be in line with consensus expectations and reiterated its FY23 financial targets.

Earlier in the session, Asian stocks were little changed as weakness in technology shares offset gains in cyclical sectors such as banks and automakers. Taiwan Semiconductor Manufacturing and Japan’s SoftBank Group were among the biggest drags on the MSCI Asia Pacific Index, while Mitsubishi UFJ Financial Group and Toyota Motor climbed. The moves mirrored U.S. market performance on Friday, when the tech-heavy Nasdaq fell while the Dow Jones Industrial Average advanced. Sentiment in the Asia Pacific remained fragile as investors continued to assess risks, among them the resurgence of Covid-19 cases and the potential rolling back of stimulus by the region’s policy makers as inflation rises. Central bank decisions from South Korea, Indonesia and New Zealand due out this week will be closely monitored by investors. “Lingering inflationary pressure and viral concerns may continue to dampen sentiment in risk assets across the Asia-Pacific region,” said Margaret Yang, an strategist at DailyFX. Japan’s Mothers gauge of small cap and tech-heavy stocks and South Korea’s equivalent, the Kosdaq, each fell 1.8%. Meanwhile, Japan’s Topix benchmark advanced alongside benchmarks in Vietnam and China

Chinese stocks fluctuated in a narrow range, with further declines in health-care-related stocks offsetting gains for financial shares. The CSI 300 Index rose 0.4% at close after falling as much as 0.8%. The Shanghai Composite Index added 0.3%, while the small-cap ChiNext Index gained 0.9%. A gauge of health-care stocks fell 0.5%, dropping for the fifth consecutive day. Financial-related shares gained, led by brokerage stocks. Hong Kong’s Hang Seng Index slipped 0.2% on its first trading session after the gauge’s compiled announced the addition of three new members and lowered the weighting of the biggest stocks, including Tencent, which fell 5%. Xiaomi dropped 2.9% in Hong Kong amid concern over a global chip shortage after Taiwan’s Covid situation worsened. Xinyi Solar, BYD Added to Hong Kong Stock Gauge in Overhaul Chinese education stocks fell after President Xi Jinping urged regulation of the after-school education sector. China Education Group lost 2.1%, while Minsheng Education Group slipped 2.2%. Gainers

In rates, bunds and gilts drift off best levels (bund futures volumes are ~50% of recent averages), while Treasuries were steady in narrow ranges. A subdued Asia session has been followed by slow European morning action, with holidays in France and Germany, among others. U.S. auction cycle totaling $183b starts Tuesday. IG supply expected to be busy and front-loaded this week ahead of next week’s Memorial Day holiday.  Treasury 10-year yields around 1.615%, slightly richer vs Friday close with gilts slightly outperforming and bunds marginally underperforming; curve spreads also little changed.

In FX, the Bloomberg Dollar Spot Index fluctuated in a narrow range, staging a modest rally to fade Asia’s losses. The dollar was mixed versus its Group-of-10 peers in muted trading, with the exception of one sudden move higher in the greenback in European morning hours.  Norway’s krone led gains in G-10 after nearing a one-month low against the greenback on Friday amid higher oil prices, while the Australian dollar was the worst performer, tracking heavy losses in iron ore futures after China stepped up its campaign to cool a raw-materials boom. The pound inched lower, yet held onto most of its recent gains, with the U.K.’s economic reopening set to remain on track as data shows Covid vaccines are effective against a worrying variant, Cable’s retreat from last week’s high to $1.4172 in the spot market was met by strong demand for front-end calls that briefly traded above parity for the first time this year

In commodities, Crude futures grind higher: WTI rises 1.8% near $64.75, Brent extends above $67. Spot gold is ~$3 in the red, trading just off session lows near $1,878/oz. Most base metals are in negative territory with LME zinc underperforming; copper and nickel hold small gains. China’s crackdown on commodities speculation weighed on raw-material prices, with steel dropping more than 5% and iron ore tumbling by close to the daily limit. Bloomberg’s industrial metals subindex declined for a fourth day to a one-month low.

Looking at today's calendar, we get the April Chicago Fed National activity index followed by a bunch of Fed speakers, including Brainard, Mester, Bostic and George, while in Europe, the European Council meeting begins.

Market Snapshot

  • S&P 500 futures up 0.4% to 4,169.00
  • STOXX Europe 600 fell 0.05% to 444.23
  • MXAP little changed at 204.30
  • MXAPJ down 0.1% to 682.63
  • Nikkei up 0.2% to 28,364.61
  • Topix up 0.4% to 1,913.04
  • Hang Seng Index down 0.2% to 28,412.26
  • Shanghai Composite up 0.3% to 3,497.28
  • Sensex up 0.2% to 50,653.99
  • Australia S&P/ASX 200 up 0.2% to 7,045.93
  • Kospi down 0.4% to 3,144.30
  • Brent Futures up 1.8% to $67.64/bbl
  • Gold spot down 0.0% to $1,881.10
  • U.S. Dollar Index down 0.11% to 89.92
  • German 10Y yield rose 0.4 bps to -0.126%
  • Euro up 0.1% to $1.2200

Top Overnight News from Bloomberg

  • The next French presidential election is 11 months away but markets are already starting to get worked up. French bonds have been underperforming their German counterparts in recent weeks with the spread between their 10-year yields widening to the most since June. Part of the reason may be expectations for a slowdown in European Central Bank debt purchases, but strategists say the move is also being driven by fears of a potential election cliffhanger
  • Weeks after President Joe Biden pitched the first major set of tax increases since 1993, signs are mounting that anxiety among congressional Democrats will significantly temper any increases that manage to pass Congress
  • Bitcoin’s extreme volatility carried into the weekend as the world’s largest cryptocurrency continued to whipsaw investors with double-digit percentage moves
  • Flights are being re-directed to avoid Belarusian airspace after the government in Minsk forced a Ryanair Holdings Plc plane to land and arrested a journalist on board. The EU will consider further sanctions against President Alexander Lukashenko’s administration when its leaders meet for dinner in Brussels on Monday night for the start of a two-day summit
  • As the hunt for investments that can withstand rising interest rates gathers pace, frontier assets are gaining popularity over their larger emerging-market peers. The bonds of the world’s least-developed economies have returned 2.6% this year, keeping pace with their 2020 performance, while higher-ranked emerging-market debt has lost almost 2%, reversing some of last year’s 5.3% advance, according to JPMorgan Chase & Co. indexes

A quick look at global markets courtesy of Newsquawk

Asia-Pac equity markets began the week choppy following on from last Friday’s mixed performance on Wall Street, light weekend newsflow and heading into month-end. ASX 200 (+0.2%) swung between gains and losses with the index underpinned by strength in healthcare, tech and gold miners although gains in the broader market were briefly reversed alongside pressure in other commodity-related sectors after China’s NDRC vowed a zero-tolerance approach on commodities futures violations and with property names initially constrained after the recent increases in home loan rates among the big 4 banks. Nikkei 225 (+0.2%) shrugged off opening losses although was contained by the indecisive mood in the local currency and with Japan planning an extension to the virus state of emergency beyond May 31st. Hang Seng (-0.2%) and Shanghai Comp. (+0.3%) were mixed with risk appetite sapped by crackdown concerns after China’s State Council said it will prevent financial risks and crackdown on Bitcoin mining, while the NDRC also pledged zero tolerance on commodities futures violations and warned to severely punish commodity monopolies and price violations. Furthermore, it was also reported that the CSRC approved 6 companies for an IPO on the ChiNext board and that the Hang Seng Index compiler added 3 companies to the Hong Kong benchmark in its quarterly review to take the total constituents to 58 effective June 7th, which is part of the overhaul announced in March that would raise the total number of components to 80 by mid-next year and therefore, dilutes the individual stock weightings. Finally, 10yr JGBs were relatively flat with marginal gains due to the cautious mood in stocks and with the BoJ also present in the market for JPY 925bln in 1yr-5yr JGBs, while the Aussie 10yr yield was down about 1.5bps amid the RBA’s regular QE purchases.

Top Asian News

  • Thailand Says Its Tourism Industry May Not Recover Until 2026
  • JD Logistics Prices Low in Sign of IPO Market Cooling: ECM Watch
  • Xinyi Solar, BYD Added to Hong Kong Stock Gauge in Overhaul
  • China Auto Makers Fall as Huawei Says It Won’t Invest in Sector

Europe sees a raft of cash closures in observance of Whit Monday, with Germany and Switzerland among those away. The rest of the bourses trade relatively flat (FTSE 100 (+0.4%), CAC 40 (+0.2%), AEX (+0.1%), IBEX (+0.1%)) whilst the FTSE MIB (-0.4%) narrowly lags its peers. US equity futures also see broad-based gains to the tune of around 0.5% at the time of writing with Fed speak the main State-side highlight today. JPM highlights some factors that could lead to US inflation getting hotter before normalising is due - 1) global logistics and supply chain disruptions (cited by recent PMIs), 2) transitory factors like restrained labour supply, 3) oil price recovery, 4) release of pent-up consumer demand, 5) base effects of weak 2020 price prints. Meanwhile, Morgan Stanley suggests that correlations are breaking down amid the economic shift from early to mid-cycle, and this "should translate to a) dampened volatility for many investor portfolios (which can justify continued high leverage) and b) more dispersion driven by single-names instead of factors and themes (i.e. a good environment for stock picking)." Back to Europe, sectors are mixed with no clear overarching theme and with the breadth of the action shallow, although miners reside towards the bottom of the pile amid hefty losses in the Chinese base metals complex overnight - with Fresnillo (-3%) and Antofagasta (-1.2%) among the laggards in the UK. In terms of individual movers, Cineworld (+3.6%) is firmer after announcing a strong opening weekend in the UK, whilst anticipating most of its cinemas will be open by month-end. Co. has also received the full USD 203mln in tax refunds under the US CARES Act. Finally, given last week's focus on cryptos' ripple effect across other markets, it's worth noting that the crypto market saw another notable selloff over the weekend after China reiterated its stance whilst crypto exchange Huobi suspended some services and stopped miners from hosting services.

Top European News

  • How Belarus Snatched a Dissident Off a Ryanair Plane From Greece
  • Poland to Propose Sanctions on Belarus at EU Meeting: Minister
  • Solutions 30 Plunges as Auditor Fails to Sign Off Accounts
  • Johnson’s Plan to Open U.K. Economy Gets Boost From Vaccine Data
  • Nord Stream 2 Gas Pipelaying Vessels Move Into German Waters

In FX, the charts will record that the Dollar index managed to ‘close’ above the psychological, if not key technical 90.000 mark last Friday having pared some losses and successfully defending multiple waves of downside pressure, but the last traded price was still below the prior week’s final level to keep the Buck in a clear bear trend awaiting today’s lean data agenda that puts the focus firmly on another raft of Fed speakers including Brainard, Mester, Bostic and George. Back to the DXY, rather aimless trade either side of the round number within a tight 90.108-89.861 band in the absence of many European participants out of action due to Whit Monday and the start of Pentecost.

  • NZD/AUD - A much more robust recovery in NZ retail sales than most were anticipating in the run up to trade data and this week’s RBNZ policy meeting, is keeping the Kiwi underpinned between 0.7187-58 parameters vs its US counterpart alongside the NZIER shadow board noting that tightening is more appropriate likely over the year ahead than previously envisaged. Meanwhile, the Aud/Nzd cross has backed off from the high 1.0700 area as the Aussie feels the heat coming off Chinese commodity prices again, such as iron ore that plunged 5% overnight. Hence, Aud/Usd is languishing below 0.7750 and nearer 0.7700 amidst another ‘outbreak’ of COVID-19 in Melbourne, Victoria, albeit confined to just 2 cases at this stage.
  • EUR - The Euro has peered above 1.2200 against the Greenback, but not been able to extend much beyond and perhaps heavy option expiry interest at the strike (1.3 bn) is keeping a lid on the headline pair on top of offers with a more psychological leaning. However, by the same token Eur/Usd could remain supported around 1.2150 given expiries spanning the half round number between 1.2145-60 (1 bn), and as Eurozone yields rebound from earlier lows to marginally narrow spreads vs USTs.
  • GBP/JPY/CHF/CAD - All softer vs their US rival, with Sterling losing further momentum and sight of 1.4150 as Eur/Gbp tests 0.8650, while the Yen is slipping back to retest support circa 109.00 and the Franc is trying to stay afloat of 0.9000 in wake of some verbal intervention from SNB chair Jordan. Note, Switzerland is also observing Whit Monday so weekly sight deposit balances will be posted tomorrow, while Canada is celebrating Victoria Day, but the Loonie is deriving impetus to a degree from a rebound in crude prices to keep its head above 1.2100.

In commodities, WTI and Brent front-month futures continue the grind upwards adopted at the European entrance, with WTI now eyeing USD 65/bbl (vs low 63.63/bbl) and Brent inching towards USD 68/bbl (vs low 66.46/bbl). The focus for the energy complex this week remains on Iran, with a one-month technical agreement between Iran and the IAEA announced as expected - this is separate from the broader JCPOA deal. Meanwhile, assuming gaps are narrowed, participants expect an official nuclear deal to be announced later this week. "If and when the US re-joins the Iranian nuclear deal, this will likely hit sentiment in the oil market, however, we are still of the view that the market will be able to absorb this additional supply, so would expect price weakness to be short-lived.", ING says. Meanwhile, Citi continues to expect an early agreement on some aspects of the nuclear agenda between Iran and the US, though this would only be a partial return of Iranian supply to the market. The bank expects strong summer demand, with markets tight enough for mid-USD 70/bbl. Elsewhere, spot gold and silver move in tandem to the Buck and yields in the absence of any fresh catalysts, with the former back to levels around USD 1,875/oz and the latter meandering USD 27.50/oz. Finally, base metals overnight were back under pressure after China's NDRC reiterated zero tolerance on price manipulation, with Dalian iron ore ending daytime trading with losses of 5%, whilst the Singapore contract fell as much as 7.5%. LME copper fell in tandem but has since recouped most of its earlier losses as it sets its sights on USD 10,000/t to the upside once again.

US Event Calendar

 

  • 8:30am: April Chicago Fed Nat Activity Index, est. 1.10, prior 1.71
  • 9am: Fed’s Brainard Speaks at Crypto Currency Conference
  • 11am: Mester Speaks on Diversity and Central Bank Communication
  • 12pm: Fed’s Bostic Discusses Policy Response to Covid-19
  • 5:30pm: Fed’s George Speaks at Agricultural Symposium

DB's Jim Reid concludes the overnight wrap

I have a spring in my step this morning as there is now a golf major winner who is 4 years older than me and Liverpool qualified for the Champions League after a strong end to a dreadful season! This offset the outrage of the U.K. gaining “nul points” and finishing rock bottom at the Eurovision Song Contest on Saturday. I suspect given Brexit, even if “Hey Jude”, “Imagine”, “Stairway to Heaven”, or “Billy Jean” had been our original song we still would have come last. Just for the record our song wasn’t quite in this league!

From one poll to another now and we will publish our latest monthly survey results in the next hour. Many thanks to those who filled it in. We have some interesting results on inflation with fears rising over the past month according to respondents. It’s the first time this year where the majority expect a taper tantrum at some point in 2021. This is reflected in the least bullish 3-month views on equities since last July. The net bullish 3m view on the S&P 500 is down to +6% from +65% in February. Lots more stuff in the note.

On paper this doesn’t look like the most exciting week ahead but don’t panic as it’s only 11 days until the next payrolls report which will be a blockbuster a week on Friday. Oh and only 17 days until the next US CPI report which will possibly be one of the most-watched economic releases in history. Maybe that’s a slight bit of hyperbole but the inflation debate is probably the most important macro story in a generation.

Having said that it will be quiet, we do have a couple of important inflation markers on Friday with the April core PCE deflator and the final reading on the University of Michigan May consumer sentiment survey. On the former DB expect +0.77% MoM vs. +0.36% previously and +1.8% YoY to +3.1%. All eyes on any clues as to any non-transitory elements.

For the University of Michigan's consumer sentiment index (83.0 final vs. 82.8 preliminary), it will be the revisions to the median 5 - 10 year inflation expectations series that will be key. In the preliminary release this surged 40bps to 3.1% – the highest since August 2008. Was the first print an aberration or will expectations have increased still further? As a reminder DB’s 10yr UST view (2.25% by YE) is based on such expectations moving back into the higher 1998-2014 regime. The preliminary reading firmly knocked us back in this range after 7 years away.

Before we look at the other key highlights this week we’ll first look at the Asian session where it’s been a mixed start to the week. Both the Nikkei (+0.21%) and the Shanghai Comp (+0.16%) have advanced this morning, whereas the Hang Seng (-0.34%) and the KOSPI (-0.10% have both moved lower. Meanwhile in the US, S&P 500 futures are up +0.31% to point towards a positive open later on.

The more eventful moves have been in crypto-assets however, with Bitcoin continuing to be volatile after experiencing some sizeable swings last week. After being back above $40,000 on Friday we traded as low as $31,133 yesterday afternoon and are now at $35,336 this morning. Other cryptocurrencies including Ethereum, Litecoin and XRP have all seen similar moves over the weekend. Our monthly performance review isn’t out until next week, but as it stands Bitcoin is on track for its worst monthly performance in almost a decade, having lost over -37% since its closing level in April.

As for the rest of this week, we have a gathering of EU leaders meeting in Brussels today and tomorrow for a special European Council meeting. The items on the agenda include the Covid-19 response, climate change, a strategic debate on Russia, and discussions on the EU’s relations with the UK. They’re also expected to discuss the weekend news that Belarus ordered a Ryanair flight moving through its airspace to land before arresting a journalist on board.

Otherwise, data releases this week include the German Ifo tomorrow and final Q1 GDP alongside the US Conference Board’s consumer confidence. The other main releases are noted at the end in our day by day guide.

On the central bank side, the 2 decisions from G20 central banks next week are from Bank Indonesia tomorrow and the Bank of Korea on Thursday. In terms of what to expect, our economists think that Bank Indonesia will keep its policy rate steady at 3.5%, as it continues to prioritise the rupiah’s stability. Meanwhile the Bank of Korea is also likely to keep its policy rate steady at 0.5%, and the market will be closely watching for forecasts revisions for clues to its policy bias. Otherwise there are only a few speakers from the Fed and the ECB, including Fed Vice Chair Quarles who’ll be making multiple appearances, including a speech on the Economic Outlook.

For earnings, the season is really winding down to the end now, with just 15 companies each from the S&P 500 and the STOXX 600 reporting. Among the highlights are Intuit tomorrow, Nvidia on Wednesday, before Thursday sees reports from Salesforce, Medtronic, Costco, HP, Royal Bank of Canada and Dell Technologies.

Back to last week now and inflation worries eased slightly which allowed technology stocks to climb higher even as broader risk markets pulled back a touch. The S&P 500 fell -0.43% (-0.08% Friday) for a second straight weekly loss – the first consecutive losing weeks since the end of February. As mentioned the easing of inflation worries propped up technology shares in particular as the NASDAQ gained +0.31% (-0.48% Friday) while the FANG+ index was up a greater +1.03%. The weekly gains for the two tech indices were the first in five weeks, while cyclicals sectors underperformed their growth counterparts as banks (-0.91%) fell back as yields slid slightly. European stocks rose to within 0.25% of their all-time highs with the STOXX 600 climbing +0.43% over the week, with southern European bourses such as the FTSE MIB (+0.84%) and IBEX (+0.64%) outperforming.

Inflation expectations fell back markedly this week even as US 10yr yields finished the week just -0.7bps lower (-0.3bps Friday) at 1.622% - the fifth drop in the last seven weeks. Inflation expectations as measured by 10yr breakevens (-9.1bps) fell by the most since mid-April 2020, but remain up +4.1bps on the month and closed at an 8 year high last Monday. European rates fell back slightly as well with 10yr bund yields mostly unchanged (-0.1bps) last week but with UK gilt yields falling -2.7bps and OATs dipping -1.9bps. Commodities fell for a second straight week, with the Bloomberg commodity spot index losing -1.18%. Oil prices in particular fell back this week with WTI (-3.3%) and Brent crude (-2.7%) retreating partly on news that Iranian President Rouhani said that a broad outline had been reached to end oil sanctions.

In terms of economic data from Friday, the global flash PMIs were the main story with prints in both the US and Europe beating expectations. In the Euro Area, the headline PMI rose to a 3-year high of 56.9 in May, up from 53.8 in April and beating expectations of 55.1. The gains were mostly driven by the services PMI reaching a 35 month high of 62.8 as reopenings drove much of the improvement. In the US, the composite PMI rose to 68.1, the highest reading since 2009, on the back of a record services PMI at 70.1. Among the few misses was the lower-than-expected UK services data which was still a robust 61.8 (62.2 expected) and German manufacturing which was also at a robust 64.0 (65.9 expected).

Tyler Durden Mon, 05/24/2021 - 07:52
Published:5/24/2021 7:01:58 AM
[Markets] Market Snapshot: Stock futures point higher after Dow, S&P 500 post consecutive losing weeks Stock-index futures rise Monday, signaling a positive start for Wall Street after back-to-back weekly declines for the Dow Jones Industrial Average and the S&P 500.
Published:5/24/2021 7:01:58 AM
[Markets] US STOCKS-U.S. stocks end mixed as Dow recovers on strong economic data Wall Street closed mixed at the end of a volatile week of trading, with the Dow Jones Industrial Average being the only bright spot, as inflation concerns loom over growth names. The Dow was lifted by industrial heavyweights, including Boeing and Caterpillar Inc.. Boeing jumped 3.1% as industry sources said the planemaker has drawn up preliminary plans to increase in 737 MAX output to as many as 42 jets a month in fall 2022.. Banks, including Goldman Sachs, and JP Morgan , also supported the Dow. Published:5/21/2021 4:14:19 PM
[Markets] Dow Jones Gains Fade; Apple Falls Amid Tim Cook Testimony; Bitcoin Dives As China Does This The Dow Jones saw its gains fade as the Nasdaq fell lower. Apple stock dipped as CEO Tim Cook took to the stand to defend against claims it is a monopoly. Published:5/21/2021 2:42:24 PM
[Markets] US STOCKS-Stocks mixed as Dow extends recovery after strong U.S. business surveys The S&P 500 and the Dow Jones Industrial Average rose on Friday, extending a recovery from the previous session, while inflation concerns still loom for growth stocks at the end of a volatile week of trading. Helping the Dow outperform was Boeing, which added 3.2% as industry sources said the planemaker has drawn up preliminary plans to increase in 737 MAX output to as many as 42 jets a month in fall 2022. Following a three-day slump, Wall Street's main indexes gained ground on Thursday after data showed the fewest U.S. weekly jobless claims since the pandemic-driven recession in 2020, pointing to a pickup in labor market. Published:5/21/2021 2:11:46 PM
[Markets] Dow Jones Fades Early Gain, But Boeing Stock Jumps 3% On 737 Max Plans The Dow Jones faded Friday along with the other major stock indexes, but Boeing was a bright spot along with JPMorgan and Goldman Sachs. Published:5/21/2021 1:13:56 PM
[Markets] Dow pushes higher, but on track for weekly loss in choppy U.S. stock market The Dow Jones Industrial Average trades higher Friday afternoon, while other major benchmarks slip at the end of a choppy week of trade marked by concerns about Federal Reserve policy in the face of rising inflation in the economy's COVID recovery. Published:5/21/2021 12:43:34 PM
[Markets] Dow Jones Rallies As Apple, Tesla Look To Retake Key Levels; Applied Materials Falls On Earnings The Dow Jones Industrial Average rallied more than 300 points early Friday, as Apple eyed a key level. Tesla stock continues to rebound from recent lows. Published:5/21/2021 9:44:28 AM
[Markets] Stocks open higher, with S&P 500 erasing weekly loss U.S. stocks opened higher Friday, with the S&P 500 turning higher for the week as inflation-inspired jitters appeared to subside. The Dow Jones Industrial Average was up 157 points, or 0.5%, at 34,241, while the S&P 500 rose 0.5% to 4,179. The Nasdaq Composite gained 0.5% to trade at 13,606. The lift put the S&P 500 up 0.1% for the week, while the Dow remained on track for a 0.4% weekly loss. The tech-heavy Nasdaq was up solidly for the week, up 1.3%. Published:5/21/2021 8:41:05 AM
[Markets] Dow Jones Rallies On Jobs Data; Bitcoin Falls As Biden Targets Crypto; Apple Stock Pops The Dow Jones rallied amid encouraging new jobs data. Bitcoin fell after the Biden administration announced a crackdown on transactions. Apple stock rose. Published:5/20/2021 2:35:58 PM
[Markets] Dow Jones Rallies As Jobless Claims Fall To Pandemic Low; Tech Stocks Bounce Stocks extended their gains midday Thursday, with the Dow Jones Industrial Average rallying 240 points as big-cap techs staged a rebound. Published:5/20/2021 12:04:02 PM
[Markets] Dow Jones Up 240 Points As Stock Market Rallies On Jobs Data; Tech Stocks Rebound Stocks extended their gains midday Thursday, with the Dow Jones Industrial Average rallying 240 points as big-cap techs staged a rebound. Published:5/20/2021 11:33:32 AM
[Markets] Dow Jones Rallies As Bitcoin Rebounds From Crash; Virgin Galactic Soars 25% On Test Flight News The Dow Jones Industrial Average rallied 50 points Thursday, as Bitcoin rebounded from Wednesday's crash. Virgin Galactic soared 25% on test flight news. Published:5/20/2021 9:33:17 AM
[Markets] U.S. stocks mostly higher after fall in jobless claims U.S. stock-index futures trim or erase losses after data shows a further fall in first-time claims for jobless benefits, but the Dow Jones Industrial Average and S&P 500 remain on track for a fourth straight decline. Published:5/20/2021 9:05:34 AM
[Markets] Stock futures head higher, erase losses after fall in jobless claims U.S. stock-index futures trim or erase losses after data shows a further fall in first-time claims for jobless benefits, but the Dow Jones Industrial Average and S&P 500 remain on track for a fourth straight decline. Published:5/20/2021 8:29:18 AM
[Markets] Dow Jones Down Over 300 Points But Stocks Remain Off Session Lows; Target Jumps On Earnings The Dow Jones Industrial Average fell in today's market, extending its losses from earlier this week. The tech-heavy Nasdaq also traded in the red. Published:5/19/2021 2:27:32 PM
[Markets] Dow Jones Slumps 375 Points As Bitcoin, Tesla Plunge; Cisco Systems Holds Up Ahead Of Earnings The Dow Jones moved off lows in afternoon trading Wednesday as it tests support at the 50-day moving average. Salesforce.com rallied on an upgrade. Published:5/19/2021 2:05:35 PM
[Markets] Dow Jones Dives 587 Points As Bitcoin Crashes On These Warnings; Apple, Tesla Sell Off The Dow Jones Industrial Average dived 575 points, as Bitcoin plunged on warnings from Chinese regulators. Apple and Tesla stock sold off in morning trade. Published:5/19/2021 9:57:08 AM
[Markets] Dow Jones Dives As Bitcoin Crashes On These Warnings; Apple, Tesla Sell Off The Dow Jones Industrial Average dived 400 points, as Bitcoin plunged on warnings from Chinese regulators. Apple and Tesla stock sold off in morning trade. Published:5/19/2021 9:30:12 AM
[Markets] Dow falls 400 points as stocks open sharply lower on inflation jitters Stocks opened sharply lower Wednesday, with tech shares leading the way to the downside on worries over rising inflation pressures and plunging prices for bitcoin and other crypto assets. The Dow Jones Industrial Average was down 402 points, or 1.2%, at 33,859, while the S&P 500 skidded 1.3% to 4,076. The Nasdaq Composite dropped 1.5% to 13,108. Investors are awaiting the 2 p.m Eastern release of minutes from the Federal Reserve's April policy meeting for further insights into the central bank's views on inflation. Fed officials have largely reiterated that they believe it is too early to be begin contemplating rolling back monetary policy support despite a pickup in inflation. Published:5/19/2021 8:55:28 AM
[Markets] Dow Jones Today, Futures Tumble As Bitcoin, Tech, Commodities Stocks Slide; Target Rallies On Earnings, Salesforce Upgraded Target rallied, and Salesforce.com topped the Dow Jones today, but stock futures and Bitcoin tumbled as bond yields climbed. Published:5/19/2021 7:25:02 AM
[Markets] Dow ends nearly 270 points lower as tech shares lose steam in afternoon trade Stocks ended lower Tuesday as a bounce for tech-related shares ran out of steam in afternoon trading. The Dow Jones Industrial Average fell around 267 points, or 0.8%, to close near 34,061, according to preliminary figures, while the S&P 500 declined around 36 points, or 0.9%, to finish near 4,128. The Nasdaq Composite ended with a loss of around 75 points, or 0.6%, near 13,304. Stocks saw a mixed performance in early activity, with tech shares holding gains. A round of upbeat earnings from retailers were seen providing support but was offset by a weaker-than-expected reading on housing starts, analysts said. Published:5/18/2021 3:20:23 PM
[Markets] Dow Jones Falls As Yellen Touts Higher Taxes, Unions, Walmart Surges On Earnings The Dow Jones Industrial Average slipped lower as Treasury Secretary Janet Yellen touted the benefits of higher taxes and unions. Walmart stock gained. Published:5/18/2021 2:20:24 PM
[Markets] Dow Jones Dips 40 Points, But Walmart Stock Pops On Earnings; MGM Resorts Jumps On Upgrade The Dow Jones lagged the Nasdaq composite in afternoon trading Tuesday, but Walmart stock was a bright spot on strong earnings. Published:5/18/2021 1:20:55 PM
[Markets] Dow, S&P 500 struggle for altitude early Tuesday, even as Walmart shares climb U.S. stock benchmarks traded flat to lower Tuesday morning, even amid better-than-expected quarterly results from retailers, including Home Depot Inc. [: HD] and Walmart Inc. , with declines in communication services and energy offsetting gains in technology shares. Worries about surging inflation have been weighing on investor sentiment as the economy enters the recovery phase of the COVID pandemic and market participants fret about high valuations of stocks and the threat of the Federal Reserve removing accommodative policies faster than projections imply. The Dow Jones Industrial Average [: DJIA] was declining 0.1% at 34,308, the S&P 500 index retreated less than 0.1% at 4,161, while the Nasdaq Composite Index added 0.2% to 13,397. Shares of Dow component Walmart were up nearly 4% after delivering earnings and revenue that topped forecasts and raised its full-year guidance. Home Depot shares, however, were flat to slightly lower. Published:5/18/2021 8:48:22 AM
[Markets] Dow futures edge higher as Home Depot, Walmart deliver strong earnings The Dow Jones Industrial Average on Tuesday is poised to open slightly higher, with Wall Street sentiment scoring a lift from better-than-expected quarterly results from retailers, including Home Depot, Walmart and Macy's. Published:5/18/2021 8:20:24 AM
[Markets] Dow Jones Futures Rally As Tesla Gives Up Key Level; Baidu Jumps On Earnings Dow Jones futures were higher early Tuesday following Monday's stock market losses. Tesla stock gave up a key support level, as Bitcoin plunged. Published:5/18/2021 5:48:02 AM
[Markets] Dow Jones Futures Rally: Stock Market Slashes Losses, But Tesla Gives Up Key Support Level Dow Jones futures were in focus following Monday's stock market losses. Tesla stock gave up a key support level, as Bitcoin plunged. Published:5/17/2021 10:15:42 PM
[Markets] Dow Jones Futures: Stock Market Slashes Losses, But Tesla Gives Up Key Support Level Dow Jones futures were in focus following Monday's stock market losses. Tesla stock gave up a key support level, as Bitcoin plunged. Published:5/17/2021 4:16:58 PM
[Markets] Dow Jones Slips As Tech Stocks Fall Again; Microsoft Stock Drops Amid Bill Gates Revelations The Dow Jones slipped while tech stocks got walloped again. Microsoft stock dropped amid reports Bill Gates left the firm's board amid a relationship probe. Published:5/17/2021 2:45:35 PM
[Markets] Dow Jones Drops As Disney Weighs; Tech Stocks Lead Downside; Multiple Financial Stocks Trade Inside Buy Zones The Dow Jones Industrial Average fell modestly in today's market, extending its losses from last week. The tech-heavy Nasdaq led on the downside. Published:5/17/2021 1:13:19 PM
[Markets] Dow Jones Slides As Bitcoin Plunges On Elon Musk Tweet; Apple, Tesla Skid The Dow Jones Industrial Average fell 150 points Monday, as Bitcoin plunged on Tesla CEO Elon Musk's tweet. Tesla stock skidded. Published:5/17/2021 9:43:34 AM
[Markets] U.S. stocks open moslty lower after worst week in 3 months Stocks opened modestly lower Monday, under renewed pressure after major benchmarks saw their biggest weekly declines since February --- a selloff blamed on worries over rising inflation pressures. The Dow Jones Industrial Average was down 9 points, or less than 0.1%, at 34,373, while the S&P 500 fell 0.3% to 4,162.33. The Nasdaq Composite shed 0.7% to trade at 13,328.45. Shares of Discovery Inc. rose more than 10%, while AT&T Inc. shares rose 4.7% after the companies announced a $43 billion deal to combine WarnerMedia with Discovery. Published:5/17/2021 8:41:55 AM
[Markets] GLOBAL MARKETS-U.S. stocks surge in recovery; dollar, bond yields dip U.S. stocks rallied in a sharp rebound on Friday as investors set aside inflation worries and bought shares hammered by the week's volatility, with the shift back into riskier assets dragging on the dollar. The jump in shares was in step with buoyant global stocks as investors put on the back burner concerns that rising prices could lead the U.S. Federal Reserve to raise interest rates sooner than expected and reduce the gush of cash that has propelled financial markets. The Dow Jones Industrial Average climbed 1%, the S&P 500 jumped 1.5%, the most on any day since March 26, and the Nasdaq Composite leaped 2.3%, its biggest one-day rise in about two months. Published:5/14/2021 4:22:44 PM
[Markets] Dow Jones Gains As Rally Continues; Google Stock Offers Buy Point; Apple Retakes Key Level The Dow Jones rose again as the stock market rally continued. Google stock Alphabet is offering a new buy point, while Apple stock retook a key benchmark. Published:5/14/2021 2:24:38 PM
[Markets] GLOBAL MARKETS-U.S. stocks extends recovery; dollar, bond yields dip U.S. stocks extended their recovery on Friday as investors set aside inflation worries and bought shares hammered by the week's volatility, with the shift back into riskier assets dragging on the dollar. The bounce in U.S. equities was in step with gains in global stocks, as investors heeded assurances from the U.S. Federal Reserve that there would be no imminent move to tighten monetary policy, and reduce the gush of cash that has propelled financial markets higher. By early morning, the Dow Jones Industrial Average was up 0.7%, the S&P 500 climbed 1.1%, and the Nasdaq Composite climbed 1.7%. Published:5/14/2021 10:22:36 AM
[Markets] Dow Jones Rallies As Disney Dives On Earnings; Tesla Looks To Rebound From Key Support The Dow Jones Industrial Average rallied 300 points, as Disney dived 5% on earnings. Tesla stock is looking to rebound from a critical support level. Published:5/14/2021 9:21:56 AM
[Markets] Dow Jones Spikes As Bitcoin Dives On Elon Musk Tweet; Tesla Loses Key Level; Apple Bites Back The Dow Jones rallied and the Nasdaq erased losses as the stock market powered higher. Bitcoin crashed on a tweet from Tesla CEO Elon Musk. Apple stock rose. Published:5/13/2021 2:49:52 PM
[Markets] GLOBAL MARKETS-U.S. stocks rebound following rout, bond yields edge down U.S. shares rebounded on Thursday after falling for three consecutive days and benchmark Treasury yields edged lower as investors snapped up technology stocks and shrugged off worries over rising prices, for now. By early morning, the Dow Jones Industrial Average rose 1.5%, the S&P 500 was up 1.4%, and the Nasdaq Composite jumped 1.3%. "We’re certainly oversold here, so remember our 5-percent maxim: buy every S&P 500 down 5 percent close after the first one," said Nicholas Colas, co-founder of DataTrek Research. Published:5/13/2021 10:16:05 AM
[Markets] Dow Jones Surges 500 Points As Bitcoin Plunges On Elon Musk Tweet; Apple Rebounds, Tesla Reverses Lower The Dow Jones Industrial Average rallied 300 points Thursday, as Bitcoin plunged on Tesla CEO Elon Musk's tweet. Tesla stock rebounded. Published:5/13/2021 9:46:09 AM
[Markets] Market Snapshot: U.S. stock futures mostly lower after rout triggered by inflation fears U.S. stock-index futures point to a mixed start for U.S. equities Thursday, a day after hot inflation data sent the Dow Jones Industrial Average to its biggest one-day loss since January.
Published:5/13/2021 6:47:06 AM
[Markets] Dow Jones Sells Off 460 Points As Inflation Fears Boost Bond Yields, Maul Stocks Key market indexes extended already sharp losses midday Wednesday as the Dow Jones industrials lost over 400 points as big techs weighed. Published:5/12/2021 11:38:21 AM
[Markets] Dow sinks over 450 points Wednesday midday as inflation-fueled slump deepens A slide in U.S. stock indexes accelertaed Wednesday midday, after a reading on inflation for the year to April climbed 4.2%, marking the highest rate in about 13 years, reigniting fears that the Federal Reserve may need to dial back its easy money policies earlier than expected. The Dow Jones Industrial Average was trading 450 points, or 1.3%, lower at 33,838, trying to defend its 50-day moving average at 33,328. The S&P 500 index was trading 1.5% at 4,089, while the Nasdaq Composite Index off 2.3% to around 13,087. Published:5/12/2021 11:10:17 AM
[Markets] Dow Jones Slides, Tech Stocks Tumble As Yields Jump On Accelerating Inflation; Apple, Tesla Sell Off The Dow Jones Industrial Average dropped by more than 200 points Wednesday, as Treasury yields jumped on key inflation data. Apple and Tesla stock sold off. Published:5/12/2021 9:37:19 AM
[Markets] Dow Hits $35,000, Crushing the Nasdaq. What Does That Mean for Retirees? On Monday, the Dow Jones Industrial Average (DJIA) hit an intraday high above the $35,000 mark for the first time in history. America's oldest stock index has produced a total return just shy of 17% for the year, handily outperforming both the S&P 500's 12% gain and the Nasdaq Composite's 4% gain. Here's why the Dow's outperformance is great news for dividend investors and retirees. Published:5/12/2021 6:05:56 AM
[Markets] Market Snapshot: Stock futures point lower ahead of inflation data Stock-index futures point to further losses for equities Wednesday as investors await a key reading on inflation a day after the Dow Jones Industrial Average suffered its biggest one-day fall since late February.
Published:5/12/2021 6:05:56 AM
[Markets] Dow Jones Sinks 500 Points Amid Rising Inflation Fears, Sector Rotation The Dow Jones fell in today's market and led on the downside as stocks extend losses. The tech-heavy Nasdaq continued lower below its key 50-day line. Published:5/11/2021 1:05:21 PM
[Markets] Dow Jones Dives 450 Points As Stock Market Sells Off; Nasdaq Cuts Steep Losses Stocks moved well off session lows midday Tuesday, even though the Dow Jones Industrial Average was still down over 400 points. Published:5/11/2021 11:34:13 AM
[Markets] Stock market selloff is showing no signs of panic selling Despite the sharp selloff in the stock market, with the Dow Jones Industrial Average taking a 474-point, or 1.4% dive and the Nasdaq Composite shedding 0.4%, market internals are showing no signs of panic selling. In fact, some may interpret the readings as suggesting a buy-on-dip mentality is more prevalent. The NYSE Arms Index has fallen to 0.435, according to FactSet data, with levels below 0.500 viewed as suggesting panic-like buying, while the Nasdaq Arms Index declined to 0.653. The Arms Index is a volume-weighted breadth measure that tends to rise above 1.000 when the market is declining, as volume increases in declining stocks more than in advancing stocks, with rises above 2.000 viewed as depicting panic-like selling. With the Arms declining, it means the volume in advancing stocks is greater on a relative basis than volume in declining stocks. For example, the number of declining stocks is outnumbering advancers by a 5.37-to-1 margin on the NYSE and by a 2.83-to-1 margin on the Nasdaq, while volume in declining stocks is outnumber up volume by ratios of only 2.34 to 1 on the NYSE and 1.85 to 1 on the Nasdaq. Published:5/11/2021 10:33:57 AM
[Markets] Dow falls over 300 points early Tuesday as tech stocks get slammed amid renewed inflation fears U.S. stock benchmarks opened solidly lower Tuesday, with inflation worries seen keeping pressure on previously highflying tech stocks. The Dow Jones Industrial Average fell 0.9%, or over 300 points, to trade at around 34,423, the S&P 500 index was down 1.2% at 4,137, while the Nasdaq Composite Index declined 1.6% to 13,185. The market's recent selloff has been mostly concentrated in tech and growth stocks as investors shift out of highflying investments and buy assets that are viewed as performing better during the expected economic improvement from the COVID pandemic. In corporate news, Novavax Inc. late Monday said revenue climbed in the latest quarter as the company saw positive results from its COVID-19 vaccine trials in the U.K. and South Africa. Shares were down 20%. Published:5/11/2021 9:01:10 AM
[Markets] Reflation Panic Sparks Global Stock Rout Reflation Panic Sparks Global Stock Rout

Yesterday was bad, but not too bad, and we titled our morning market wrap "Futures Flat As Soaring Commodities Depress Tech Stocks." 24 hours later it's much worse, as the rout that hammered US tech stocks on surging inflation fears (see "This Is Not Transitory": Hyperinflation Fears Are Soaring Across America") has now gone global, with markets in Asia and Europe hammered and S&P futures sliding 0.8%, while Nasdaq futures tumbled by another 1.3% after Monday's 2.6% rout. Treasuries were steady ahead of today's 3Y auction while the dollar erased its gains and dropped to session lows.

Here are some of the notable bloodbath highlights: the Hang Seng Tech Index sank as much as 4.5%, extending its tumble from a February high to about 30%. In Europe, the Stoxx 600 Index fell the most since January as tech sector losses drove the gauge lower. One of the biggest winners over the past year, Cathie Wood’s Ark Innovation ETF, was down more than 3% in pre-market trading after plunging 5.2% yesterday.

“It seems to be a combination of inflation fears making a comeback and some market participants moving higher along the value spectrum, cutting their exposure to anything with a stretched valuation,” said Marios Hadjikyriacos, investment analyst at online broker XM in Cyprus.

In a late session reversal on Monday, inflation jitters drove investors away from growth stocks to cyclicals, which benefit the most as the economy reopens, resulting in the S&P 500 logging its worst day in nearly eight weeks. At 700 am ET, Dow e-minis were down 159 points, or 0.46%, S&P 500 e-minis were down 31.5 points, or 0.75%, and Nasdaq 100 e-minis were down 169.25 points, or 1.27%.

Some of the bigger pre-market movers:

  • Tesla dropped 7% in U.S. premarket trading after reports that the company halted a plan to buy land in Shanghai and sales in China fell.
  • Cathie Wood’s Ark Innovation ETF dropped down more than 3% in pre-market trading after plunging5.2% yesterday.
  • Shares of the FAAMG complex dropped between 1% and 2% in premarket trading, while Tesla Inc fell nearly 4%, one day after a rare downgrade of GOOGL and FB by Citi sparked a widespread selloff.
  • Simon Property Group Inc fell 3.6% after the U.S. mall operator said it does not expect a return to 2019 occupancy levels until next year or 2023, as it looks to play hardball in rent negotiations with tenants.

“The underlying driver is that there is still a rotation out of duration (higher interest rate) sensitive parts of the market and this is why tech stocks are coming under pressure now,” said Mizuho’s Head of multi-asset strategy Peter Chatwell. “Given the rise in the earnings power of these firms different governments will also seek to raise more tax revenue from them in the coming years.”

Debate rages over whether the expected jump in price pressures will be enduring enough to force the Federal Reserve into tightening policy sooner than current guidance suggests. US inflation expectations as measured by 5Y breakevens reached the highest level since 2006.

"There is a risk the discussion could trigger market volatility,” BlackRock Investment Institute strategist Jean Boivin said. “We believe investors should look through any such bouts of volatility. The Fed will likely be much slower than in the past to raise rates in the face of rising inflation."

Yet even after the declines, the Nasdaq trades at 26 times the 12-month projected profits, while the gauge of European technology shares enjoys a valuation of 29 times.

And speaking of Europe, its benchmark Stoxx 600 index tumbled 2.1% the most this year, one day after touching a record high on Monday, but its Tuesday restart was a sea of red as London’s FTSE, Frankfurt’s DAX and the CAC 40 in Paris all dropped roughly 2%. Just 18 index members were up while a whopping 582 were down. Europe travel and leisure stocks underperformed the broad market, with the benchmark tracking the sector dropping as much as 4.3%, most since Dec. The Stoxx 600 Travel & Leisure Index was down 4.2% as of 10:11 am CET, worst-performing sector in Europe. Here are some of the biggest European movers today:

  • THG shares jump as much as 19%, the most since September 2020, after the U.K. online retailer raised $1b for future M&A, adding Japan’s SoftBank as a cornerstone investor, and agreed to buy U.S. beauty company Bentley Laboratories for $255m.
  • Morrisons shares gain as much as 1.3% after the British supermarket chain released 1Q sales that topped analysts’ estimates. Morgan Stanley (equal-weight) says results were positive and it sees scope for potential upside and operating leverage.
  • Evolution Gaming shares slide as much as 12%, the most intraday since October 2018, after the company’s founders sold 4.2 million shares in an offering.
  • Ceconomy shares plunge as much as 16% after the German consumer-electronics retailer reported a 2Q adjusted Ebit loss of EU146m and named Karsten Wildberger as its new CEO. Consensus estimates look too high, according to Bryan Garnier.
  • Jenoptik shares fall as much as 13% in Frankfurt trading, the steepest intraday decline since March 2020, after posting 1Q earnings as Baader Helvea highlights a “mixed picture” for profitability.
  • ThyssenKrupp shares fall as much as 6.3% after reporting second-quarter results, with Morgan Stanley (underweight) noting that the guidance raise had “no surprises” and could still be too conservative.

Earlier in the session, Asia’s main regional equity gauges suffered their biggest slide in nearly two months overnight; the MSCI Asia Pacific Index dropped as much as 2.2% at one point as a slump in information-technology stocks weighed on the market with Japan’s Nikkei and Hong Kong’s Hang Seng both closing down 3%. Asian stocks were poised for their lowest finish in six weeks, dragged down by a selloff in the region’s chipmakers amid renewed concerns of rising global inflation. Taiwan Semiconductor Manufacturing, Samsung Electronics and SK Hynix were among the top contributers to the measure’s decline. The Philadelphia semiconductor index, or SOX, tumbled the most in two months on Monday on concerns inflation was likely to surge in coming months. The drop in the tech gauge came ahead of the release of the U.S. CPI report due Wednesday, which is expected to show prices continued to increase in April. Rising inflation could lead the Federal Reserve to reduce easy money policies. “If yields go higher, it’ll be difficult for current valuations to hold,” said Takahiro Kusakari, chief investment officer at Sawakami Asset Management Inc. “In case of higher yields, technology stocks trading with extra risk premiums won’t be able to help it but be sold.”

Taiwan, Japan and Hong Kong were among the biggest losers in the region, while China outperformed. China’s main equities benchmark ended higher Tuesday, after a rebound in consumer staples offset the earlier selloff in commodity firms. With talk of tighter regulation from Beijing, Chinese tech heavyweights Baidu, Alibaba Tencent, collectively dubbed the BATs, all dropped more than 3%. Food delivery major Meituan tumbled as much as 9.8% too, leaving its value $30 billion lower in a week.

“We have been here before with inflation scares and extended valuations in technology fraying investor nerves,” Jeffrey Halley, senior market analyst with Oanda Asia Pacific Pte wrote in a note. “Nevertheless, the technical break of support by the Nasdaq overnight is significant. If it does not recapture that tonight, equities could be in for a torrid week.” The Nasdaq composite lost 2.6% on Monday, closing a touch below its 100-day moving average.

Emerging-market equities fell to the lowest level in almost a month and currencies in Asia weakened as data from China added to inflation worries, while strong commodity prices fueled a rally in the South African and Russian currencies. The worldwide slump in technology stocks sent the MSCI benchmark index to its biggest drop since March 24. Data showing contractions in the Philippine and Malaysian economies added to skepticism about a robust recovery this year amid a resurgence in coronavirus cases. China’s factory-gate prices surged more than expected in April on the back of rapid gains in commodities due to rising global demand and supply shortages. That’s stoking concerns about price increases around the world, with a measure of U.S. inflation expectations reaching the highest level since 2006, though data today showed slowing inflation in Russia and Egypt.

“The turnaround in risk sentiment is largely isolated toward Asian FX this morning, where losses have been driven by inflation concerns and poor performance in domestic equity markets,” said Ima Sammani, an Amsterdam-based currency analyst at Monex Europe Ltd. Brazil and India will also report price figures this week after Citigroup Inc.’s inflation-surprise index for emerging markets spiked last month to the highest since 2008, a sign investors may be underestimating the scale of the resurgence. U.S. Treasury yields rose for a fourth day today and the extra premium demanded for EM debt was unchanged.  “It’s all about rates in the U.S. and how it contaminates risk markets,” said Francesc Balcells, chief investment officer for emerging-market debt at Fim Partners in London. “There’s a fair amount of nervousness on this but reflation is good for EM. The key is that real rates in the U.S. stay in check so as long as the Fed is not falling behind the curve, EM will be OK.”

U.S. breakeven rates, which factor in inflation, have scaled multi-year peaks. Most euro zone bond yields edged back up on Tuesday while a market gauge of long-term inflation expectations was nearing its highest in over two years. A host of Federal Reserve and European Central bank speakers this week will be closely watched by markets to assess how authorities are likely to respond.

A test case on U.S. inflation will come when the Labor Department releases consumer price index report on Wednesday. “Inflation’s shadow looms large and we do think that there is a limit to the Fed’s tolerance of inflation,” DBS Bank said in a note.

In FX markets, Dollar Spot Index traded near session lows amid tight ranges and 10-year Treasury yields rose for a fourth day. Scandinavian currencies lead gains followed by the euro, which pared yesterday’s losses. Bunds extended their slide and underperformance against Treasuries after Germany’s sale of its first 30-year green bond. The pound hovered near the highest level since February, holding onto Monday’s gains following the Scottish election results; sales of five- and 40-year gilts are in focus, as well speeches by the Queen’s and BOE Governor Andrew Bailey. The yen edged lower as concern over rising U.S. inflation puts an upward pressure on Treasury yields and the dollar. The Canadian dollar stabilised near a four-year high, while the New Zealand dollar perched comfortably at February highs.

In commodities, oil prices gave up earlier gains as concerns that rising COVID-19 cases in Asia will dampen demand outweighed expectations that a major U.S. fuel pipeline could restart swiftly. U.S. crude dipped 0.66% to $64.49 a barrel. Brent crude fell to $67.84 per barrel. Metal markets saw copper prices start to nudge higher again. They were last at $10,470 a tonne having hit a record high $10,747.50 the previous session. Iron ore had settled too after surging 7% on Monday.

Wednesday’s U.S. inflation report along with a series of U.S. government bond auctions this week are seen as the next factors to deepen or arrest the slide. The latest reading is expected to show an accelerated pace of consumer-price increases, with the year-on-year comparison made starker by the pandemic shock in 2020.

Looking at the day ahead now, and data releases from the US include April’s NFIB small business optimism index and the JOLTS job openings,. Central bank speakers include BoE Governor Bailey, the Fed’s Williams, Brainard, Daly, Bostic, Harker and Kashkari, and the ECB’s Knot and Hernandez de Cos. Otherwise, the Queen’s speech will be taking place in the UK, where the government outlines its legislative programme for the coming session of Parliament.

Market Snapshot

  • S&P 500 futures down 0.8% to 4,152.00
  • STOXX Europe 600 down 1.9% to 436.89
  • MXAP down 2.0% to 204.14
  • MXAPJ down 1.7% to 683.64
  • Nikkei down 3.1% to 28,608.59
  • Topix down 2.4% to 1,905.92
  • Hang Seng Index down 2.0% to 28,013.81
  • Shanghai Composite up 0.4% to 3,441.85
  • Sensex down 0.8% to 49,107.22
  • Australia S&P/ASX 200 down 1.1% to 7,096.97
  • Kospi down 1.2% to 3,209.43
  • Brent Futures down 1.1% to $67.55/bbl
  • Gold spot down 0.0% to $1,835.40
  • U.S. Dollar Index little changed at 90.27
  • German 10Y yield rose 0.43 bps to -0.169%
  • Euro up 0.1% to $1.2144

Top Overnight News from Bloomberg

  • Investor confidence in Germany’s economic recovery jumped to the highest level in more than 21 years after the country’s vaccine rollout gained speed. The ZEW institute’s gauge of expectations rose to 84.4 in May from 70.7 the previous month. A measure of current conditions improved, as did prospects for the euro zone
  • With the ECB widely seen slowing bond buying in July as the economic recovery gains traction -- which is already being reflected in higher yields -- this bet focuses on the next step being a greater chance of rate hikes. The largest wagers in Euribor options are targeting markets to price in higher rates in late 2024
  • England reported no deaths from Covid-19 in its latest daily update, a milestone that highlights the effectiveness of the U.K.’s vaccine program in stopping the spread of the disease
  • Palestinian militants in the Hamas-ruled Gaza Strip bombarded southern Israel with dozens of rockets overnight, and Israeli aircraft pounded their facilities in lethal raids, after a showdown over Jerusalem erupted into one of the most intense confrontations between the sides in years
  • German inflation could climb above 3% as the economy recovers from the pandemic, but it won’t last and the European Central Bank will look beyond such volatility, Executive Board member Isabel Schnabel said in an interview
  • China’s factory-gate prices surged more than expected in April, fueled by rapid gains in commodity prices, adding to global inflation concerns
  • Norway is relying on its $1.3 trillion sovereign wealth fund more than ever, as the country ratchets up spending without turning to bond markets to provide economic relief from the pandemic. The government is raising its so-called structural non-oil fiscal deficit for 2021 to 403 billion kroner, or almost $50 billion, compared with 369 billion kroner last year, it said on Tuesday. The withdrawals, as a share of the world’s biggest wealth fund, will reach 3.7%, compared with the central bank’s estimate of 3.3%

Quick look at global markets courtesy of Newsquawk

Asia-Pac bourses traded with firm losses on spillover selling from the tech-led declines on Wall St, where all major indices were dragged into the red amid higher yields and inflationary concerns, although the downside in the DJIA was contained after it briefly breached the 35k level for the first time ever. ASX 200 (-1.1%) was pressured amid underperformance in tech and with the commodity-related sectors subdued by a pullback in copper and iron ore futures from record levels which was not helped by reports of tougher supervision by China’s exchange. Nikkei 225 (-3.1%) was the biggest decliner after Japanese Governors warned that a nationwide state of emergency cannot be ruled out and as participants digested a slew of earnings updates, with better-than-expected Household Spending data doing little to stem the losses in Japan, while the KOSPI (-1.4%) succumbed to the broad risk aversion which overshadowed the strong early trade data for May which showed Exports jumped 81.2% Y/Y during the first 10 days of the month. Hang Seng (-2.0%) and Shanghai Comp. (+0.3%) weakened as the large Chinese tech stocks were impacted by the industry sell-off which resulted to losses of around 4% for the Hang Seng TECH Index, while a pullback for commodity prices and mixed inflation data in which Chinese CPI printed below forecast but PPI rose by its fastest pace since 2017, added to the uninspired mood; though sentiment did recover marginally from lows at the tail-end of the session. In addition, China released its latest Census which showed population growth in 2010-2020 slowed to 5.38% from 5.84% the decade before and the NBS chief noted that China’s population is declining, ageing is deepening and that steps must be taken to ensure a balanced population growth. Finally, 10yr JGBs were marginally higher amid the underperformance of Japanese stocks but with gains capped amid mixed results at the 10yr JGB auction and following the whipsawing in USTs where early gains were wiped out as yields recovered heading into this week's refunding auctions and heavy corporate supply including a USD 18.5bln offering from Amazon.

Top Asian News

  • New Outbreaks Threaten Status of Places That Had Virus Contained
  • TSMC Is Stuck in the Middle of a Global Panic Over Chip Supply
  • SK IE Technology Pares Gains After Doubling in Trading Debut
  • Japan’s Struggling Regional Banks Consider Overdue Mergers

Stocks in Europe see hefty losses across the board (Euro Stoxx -2.0%) as the region plays catch-up to the sell-off seen on Wall Street yesterday and across APAC overnight. Markets are wobbling on inflationary concerns - stoked by the elevated post-NFP yields alongside the recent bull run across some commodities including copper, iron, and lumber to name a handful - with inflation being a key theme across the Q1 earnings. These inflation woes are reflected across US equity futures with the tech-laden NQ (-2.6%) weighed on heavily whilst the YM (-0.1%) remains cushioned ahead of the US CPI figures tomorrow. Back to Europe, major bourses are for the most part experiencing broad-based losses with the AEX (-2.3%) narrowly underperforming amid notable downside in some large-cap names including Shell (-2.8%), ING (-2.6%), and ASML (-2.4%). European sectors are in a sea of red with defensives faring marginally better than cyclicals as a whole. Delving deeper, Telecoms, Food & Beverage, Household Goods, and Healthcare are the "better" performers with Banks also at the top of the table amid the higher yield environment; though still very much negative on the session. Moving to the other end of the spectrum, Tech lags in a continuation of global sectoral underperformance whilst yields are an additional headwind. Travel & Leisure however, is the notable underperformer as tourist hotspots France, Spain, Greece and Italy will not likely be added to the UK travel "green list" anytime soon, whilst Lufthansa (-3.2%) is reportedly preparing for a EUR 3bln rights issue and Evolution Gaming (-8.6%) further pressures the sector following a share offering. Basic Resources kicked the day off as one of the laggards, but the sector has since trimmed losses with base metals remain elevated. Out of the handful of companies in the green across Europe, THG (+12%) tops the chart amid reports that Softbank will take a stake in the Co., Deutsche Bank (-2.3%) meanwhile fails to shrug off reports that the US DoJ has closed their probe into the Co. regarding their role in the 1MDB scandal.

Top European News

  • Schaeffler, Timken Said to Weigh Bids for $1.5 Billion ABB Unit
  • Renishaw Said to Face Uphill Battle to Sell Over Steep Price
  • Life-Insurance Startup Ethos Valued at More Than $2 Billion
  • England Reports Zero Covid Deaths for First Time in 14 Months

In FX, global bond yields are rising on renewed inflation vibes and debt and equities show little sign of resuming any real inverse correlation in the traditional manner associated with relatively pronounced bouts of risk aversion, or appetite for that matter, but the Dollar has gleaned some support from safe-haven demand along with technical encouragement after evading deeper losses vs major and EM counterparts. On that note, the index is looking a bit more comfortable on the 90.000 handle within a 90.359-089 range having recovered from a 90.032 low on Monday, albeit with the Buck still mixed against its G10 protagonists awaiting NFIB, JOLTS and another heavy slate of Fed speakers.

  • EUR - The Euro has recoiled into a slightly tighter band vs the Greenback from 1.2132 to 1.2170 and could be more inclined towards chart levels while monitoring EGB/UST differentials and some decent option expiry interest either side (1.5 bn at 1.2095-1.2100 and 1.2125 before 1.6 bn between 1.2185-90). However, Eur/Usd may get a belated boost from a much better than expected German ZEW survey, and the headline economic sentiment reading especially.
  • AUD/NZD - Some retracement may have been in order anyway after yesterday’s extended gains against their US rival to circa 0.7891 and just over 0.7300 respectively, but consolidation off recent highs in base metals and other commodities allied to a downturn in risk sentiment has ensured that the Aussie and Kiwi have pulled back anyway. Note, very little reaction to the Australian Budget, thus far, as Aud/Usd continues to hover sub-0.7850 and the cross under 1.0800 on mixed revised deficits vs prior forecasts and Westpac expectations.
  • GBP/CAD/JPY/CHF - All narrowly divergent vs their US peer, as the Pound unwinds some of its all round appreciation, though keeps its head above 1.4100 and around 0.8600 against the Euro amidst robust UK consumption surveys and confirmation from PM Johnson that the 3rd phase of lifting lockdown restrictions will go ahead next Monday. Elsewhere, the Loonie has stalled into 1.2075 against the backdrop of waning oil prices pre-OPEC MOMR and API weekly inventories, the Yen is hovering just over 109.00 and Franc a similar distance below 0.9000 and under 1.0950 against the Euro.
  • SCANDI/EM - The Nok and Sek are both holding up quite well given the potentially bearish mix of retreating bonds and stocks as a mark of souring risk sentiment, with the latter possibly taking on board former 12 month Swedish money market inflation expectations on the eve of official CPI data. Meanwhile, strong Chinese PPI could be propping up the Cnh, but the Try is not getting much respite even though Turkish ip was considerably stronger than anticipated in March.

In commodities, WTI and Brent front month futures are choppy but off worse levels with the former re-eying USD 64.50/bbl (vs low 64.09/bbl) and the latter inches back towards USD 68/bbl (vs low 67.50/bbl). The losses today seem to be stemming from the soured mood across stock coupled with some unwind of the Colonial Pipeline premium as it is expected to be largely online by the end of the week. Desks note that supply tightness to the US East Coast will likely be eased with increased flows of seaborne cargos. That being said, the longer the situation takes to resolve, the greater the likelihood refineries will need to start cutting run rates. Elsewhere in terms of geopolitics, tensions remain high in the Strait of Hormuz chokepoint as the US Navy stated that it had to fire warning shots as IRGC boats - whilst Press TV reports suggested that JCPOA talks hit a deadlock by its the US refusal to moved 500 individuals from its sanctions list. Elsewhere, Saudi and Iran have been sounding more sanguine in their separate negotiations which could see the simmering down of an ongoing spat between the countries on either side of the Persian Gulf. In terms of COVID, eyes remain on India's escalating situation with reports today suggesting that the Indian Oil Corp has cut operating rates at refineries to 85-88% (late-April 95%) due to high product stock with COVID-19 impacting demand, whilst BPCL cuts crude imports by 5% in May and 10% in June; expects May fuel consumption to decrease by 5% vs April. Onto metals, spot gold, and silver remain within a tight range and are supported by the suppressed Dollar, with the former comfortable north of USD 1,800/oz (1831-38 range) whilst the latter holds its USD 27/oz handle (27.13-47 range). Meanwhile, the base metals complex is back on the rise with LME copper back above USD 10,500/t with traders citing the mounting speculative bets on inflation and EV production, whilst overnight, Chinese stainless steel and iron ore rose near-10% apiece as production curbs also spurred supply woes.

US Event Calendar

  • 10am: March JOLTs Job Openings, est. 7.5m, prior 7.37m
  • 10:30am: Fed’s Williams speaks at SOFR Symposium
  • 12pm: Fed’s Brainard Discusses U.S. Economic Outlook
  • 1pm: Fed’s Daly Speaks at Community Bankers Event
  • 1:15pm: Fed’s Bostic Speaks to Rotary Club of Alexandria, Louisiana
  • 2pm: Fed’s Harker Speaks on Economic Outlook
  • 2:30pm: Fed’s Kashkari Discusses Economic Outlook

DB's Jim Reid concludes the overnight wrap

In the U.K. yesterday we learned that as of next Monday we will be able to use our own judgement as to social distancing with close family and friends. I delightedly showed my wife this but she said that she would like to continue to observe the 2 metre rule that first started when the twins were born.

So as we attempt to get our lives back after the pandemic, the economic repercussions will reverberate for a while with Friday’s payrolls still creating fierce debate in markets. We are doing a 24hr flash payrolls poll as to whether you think the huge downside miss on Friday represented a) Labour supply constraints, b) Lower demand for labour, c) Measurement errors and likely later revised, d) Don’t know. You can click on the answer that you think is most representative. We will print the answers in today’s CoTD later.

So fascinating markets yet again with inflation worries higher now than they were before the horrendous payrolls miss. All this ahead of tomorrow’s all-important CPI release in the US, with various expectation measures rising to new highs as investors are anticipating a jump in the annual CPI to its highest level in years. The jitters sent tech stocks sharply lower, with the NASDAQ (-2.55%) and the FANG+ index (-3.61%) of megacap tech seeing big declines – with the best performing FANG+ index member being Google (-2.56%) while Tesla (-6.4%) was the worst. It was the worst days for the NASDAQ and the FANG+ index since March 3rd and 8th respectively. The S&P 500 fell back -1.04% as the recent cyclical winners such as energy (-0.05%), banks (-0.20%) and materials (-0.41%) were not able to keep the broader index afloat amidst the heavy tech losses. The best performing US industries yesterday were the defensives such as household products (+1.36%) and utilities (+1.02%). Earlier Europe’s STOXX 600 (+0.10%) gained slightly, having closed before the steepest US declines, whilst the Dow Jones (-0.10%) actually traded above the 35,000 mark for the first time intraday before falling back to just worse than unchanged.

Given the inflation concerns, it was no surprise that breakevens roes to fresh multi-year highs in numerous countries yesterday even if they were off their intraday highs at the close. In the US, 10yr breakevens were up +2.6bps to 2.53%, their highest level since 2013, while the 30yr rate was up +3.0bps to 2.35%, the highest since 2014. The 5y5y forward inflation swap (+2.7bps) also closed above 2.5% for the first time since 2018. Similar moves were seen in Europe too, with German 10yr breakevens up to 1.42%, their highest level since 2018, and their Italian counterparts at 1.38%, their highest since 2013. Yields on 10yr Treasuries were up +2.5bps at 1.602%, as inflation expectation overcame a small drop in real yields (-0.1bps), which fell for the 5th time in the last 6 sessions. Meanwhile in Europe, yields on 10yr bunds (+0.3bps) only saw a modest rise as those on OATs (-0.4bps) and BTPs (-3.7bps) fell back.

Asian markets have taken Wall Street’s lead this morning with the Nikkei (-2.98%), Hang Seng (-2.15%) and Kopsi (-1.34%) all trading deep in the red while the Shanghai Comp is down a more limited -0.27%. Futures on the S&P 500 (-0.55%) and the Nasdaq (-0.97%) are also pointing to a weaker open in the US later today. European futures are also pointing to a sharply lower open with Stoxx 50 futures down -1.37% and those on the Dax down -1.24%. Not helping sentiment China’s April PPI came in 0.3 percentage points higher than expectations at +6.8% yoy while, the CPI printed -0.1% weaker than expectations at +0.9% yoy. The rise in PPI was likely driven by the continued rise in commodities with Bloomberg commodity spot index up c. +65% yoy.

Speaking of inflation, my chart of the day yesterday (link here) discussed the debate over whether the big downside miss in payrolls on Friday would mean higher inflation moving forward. I lean towards the inflation side, and pointed out DB’s Francis Yared work highlighting that the quits rate (which reflects voluntary departures and workers’ true bargaining power) shows a much tighter labour market than the unemployment rate, and has seen a better correlation to wages since the pandemic started than the unemployment rate. The quits rate has bounced back to its pre-Covid levels, so adds to increasing signs that workers are recovering power quickly while firms are finding it hard to fill new roles.

Though the prospects of higher inflation was spoiling the market mood, the rally in commodity prices seemed to run out of steam by yesterday afternoon, with Bloomberg’s commodity spot index actually snapping a run of 6 successive gains to close -0.61% lower on the day – only the 2nd daily loss for the index since April 16. Copper prices (-0.68%) had hit an all-time high earlier in the day, while oil prices also pared back their gains into the afternoon as both Brent crude (+0.06%) and WTI (+0.03%) finished just above unchanged. Even corn futures (-3.20%) shifted lower, in spite of having risen for the last six weeks in a row.

In the UK, Prime Minister Johnson announced that restrictions in England would be eased further from May 17, with indoor mixing in groups of up to six people or two households being allowed once again, while indoor venues including pubs, restaurants, museums and cinemas would also be able to reopen. Separately, the UK Covid-19 alert level was moved from level 4 to level 3. No covid deaths were reported yesterday in England for the first time in 14 months. There was additional good news from elsewhere in Europe as Austria announced that their planned reopening would go forward with small groups being allowed to gather and hospitality establishments will reopen. Spanish Prime Minister Sanchez announced that the country is on track to reach herd immunity in about 100 days when 70% of the population will be vaccinated – if current trends continue. In the US, weekly cases rose by the slowest rate (+0.88%) since the pandemic started and the lowest total (+286k) since mid-September. On the flipside, the pandemic is seen to be firming its grip over Asia with the Asahi Newspaper reporting that Japan’s regional governors have called on the central government to consider declaring a national emergency while Malaysia moved to close schools and banned social gatherings. The Apple Daily also reported that Taiwan’s Premier Su Tseng-chang may announce tighter Covid-19 restrictions. Lastly, Bloomberg reported that the WHO will classify a fast-spreading strain of Covid-19 first identified in India as a variant of concern.

Back to the UK, sterling was the strongest performing G10 currency yesterday (+0.96% vs USD) following the results of various local and regional elections over the weekend, hitting its highest level against the dollar since February. The move seemed to be driven in part by relief among some investors that the SNP had fallen just short of a majority in the Scottish Parliament, though given the pro-independence Greens can get them there, the reality is that the lack of majority for the SNP on their own has limited implications for independence. Instead the bigger question for the coming months and years will be what the UK government’s approach is, since they’re the ones with the power to authorise a legal Scottish referendum, as happened in 2014. That said, speculation has in turn been rising that the question of whether the Scottish government could hold a referendum without the UK government’s consent could end up in the courts, so one to watch moving forward potentially.

To the day ahead now, and data releases from the US include April’s NFIB small business optimism index and the JOLTS job openings, while Europe’s include Italian industrial production for March and the German ZEW survey for May. Central bank speakers include BoE Governor Bailey, the Fed’s Williams, Brainard, Daly, Bostic, Harker and Kashkari, and the ECB’s Knot and Hernandez de Cos. Otherwise, the Queen’s speech will be taking place in the UK, where the government outlines its legislative programme for the coming session of Parliament.

Tyler Durden Tue, 05/11/2021 - 07:48
Published:5/11/2021 6:59:47 AM
[Markets] Dow Jones Futures Fall, Tech Futures Dive As Split Market Rally Continues; Virgin Galactic Plunges On Earnings Dow Jones futures were lower late Monday, as the split stock market rally continues. The Dow Jones industrials hit a new high, while tech stocks dived. Published:5/10/2021 8:32:48 PM
[Markets] Dow Jones Futures Rise: Split Stock Market Rally Continues As Tech Stocks Dive; Virgin Galactic Plunges On Earnings Dow Jones futures were little changed Monday, as the split stock market rally continues. The Dow Jones industrials hit a new high, while tech stocks dived. Published:5/10/2021 5:55:41 PM
[Markets] Dow Jones Futures: Split Stock Market Rally Continues As Tech Stocks Dive; Virgin Galactic Slides On Earnings Dow Jones futures were little changed Monday, as the split stock market rally continues. The Dow Jones industrials hit a new high, while tech stocks dived. Published:5/10/2021 4:25:31 PM
[Markets] In One Chart: While Dow flirts with 35,000, the S&P 500 is on pace for second-highest number of records in a year 2021 is shaping up as a year of milestones for stocks, with the Dow Jones Industrial Average on Monday briefly pushing above 35,000 and the S&P 500 on pace to log the second-highest number of all-time highs on record.
Published:5/10/2021 4:00:23 PM
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[Markets] Dow Jones Rallies, Tech Stocks Dive As Covid Vaccine Maker Surges On Earnings; Apple, Tesla Sell Off The Dow Jones Industrial Average rallied 200 points as coronavirus vaccine maker BioNTech surged on earnings. Tesla stock skidded Monday. Published:5/10/2021 9:23:11 AM
[Markets] Market Snapshot: Stock futures struggle for direction after Dow, S&P 500 set records Stock-index futures trade mixed Monday, after the Dow Jones Industrial Average and the S&P 500 ended last week at records following a disappointing jobs report that was seen keeping the Federal Reserve from tightening policy.
Published:5/10/2021 6:22:25 AM
[Markets] Investors Beware: The "Can't Lose" Stock Market Won't Last Forever The stock market continued to move higher Friday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) rising to record closes. Stocks tracked by the S&P Midcap 400 Index are up 74% over the past year. Published:5/7/2021 7:34:05 PM
[Markets] Dow Jones Hits Record As Market Shrugs Off Jobs Report; Growth Stocks Surge On This The Dow Jones powered higher as the stock market shrugged off a dismal jobs report. Nike stock led the blue chips, while Square stock rose on earnings. Published:5/7/2021 3:33:52 PM
[Markets] Dow, Tech Stocks Rally As Yields Dive On Weak Jobs Report; Tesla Races Higher, While Square Surges On Earnings The Dow Jones Industrial Average rallied 100 points Friday, as Treasury yields dived on a weak jobs report. Square stock surged on earnings. Published:5/7/2021 10:01:29 AM
[Markets] Dow Jones Futures Rise As Market Rally Awaits Jobs Report; Roku Leads Earnings Movers As Fed Warns Asset Prices 'Vulnerable' Dow Jones futures rose ahead of the April jobs report. Roku and Cloudflare led late earnings as the Fed warned asset prices risk "significant declines." Published:5/7/2021 7:29:43 AM
[Markets] Asia Stocks Edge Up After Robust Data Boost U.S.: Markets Wrap (Bloomberg) -- Asian stocks opened slightly higher after U.S. indexes gained on positive economic data. The dollar held losses.Shares edged up in Japan, South Korea and Australia. U.S. contracts were in the green after rallies in U.S. benchmarks overnight, which included a fresh record for the Dow Jones Industrial Average. Treasuries held steady, with the 10-year yield hovering at 1.57%, well below recent highs.Investors will be watching for weakness at China’s open, after Bloomberg News reported the Biden administration is likely to preserve limits on U.S. investments in certain Chinese companies.U.S. economic reports helped sentiment, as applications for state unemployment insurance fell to a fresh pandemic low, and separate data showed a rebound in productivity. Traders now turn to Friday’s payrolls numbers.“With jobless claims hitting a pandemic-era low, anticipation for the full jobs picture tomorrow mounts,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “Today’s read is another proof point that we’re one step closer to full economic recovery. As we see some serious momentum building on the jobs front, all eyes will be on how this plays into action taken by the Fed.”While strengthening growth in the world’s largest economy is supporting markets, investors are concerned that a faster-than-expected rebound on unprecedented government and central bank stimulus could drive excessive inflation. The Federal Reserve remains committed to near-zero interest rates to bring about a full recovery, though an announcement of a pullback in its heavy monthly bond purchases seems increasingly likely in the second half of this year.Concerns about excessive risk taking could spur more talk of the Fed adjusting policy. The central bank’s semi-annual financial stability report noted rising appetite for risk across a variety of asset markets is stretching valuations and creating vulnerabilities in the U.S. financial system. Elsewhere, spot iron ore broke $200 a ton for the first time, while copper approached a record high. Oil climbed.These are some of the main moves in markets:StocksS&P 500 futures were little changed at 9:35 a.m. in Tokyo, after the index rose 0.8%Nasdaq 100 contracts rose 0.3%. The index gained 0.8%.Japan’s Topix Index climbed 0.3%South Korea’s Kospi was up 0.2%Australia’s S&P/ASX 200 Index rose 0.2%Hong Kong’s Hang Seng Index futures slipped 0.4% earlierCurrenciesThe Bloomberg Dollar Spot Index was steadyThe euro traded at $1.2067The British pound was $1.3895The Japanese yen was 109.02 per dollarBondsThe yield on 10-year Treasuries was little changed at 1.57%Australia’s 10-year yield rose one basis point to 1.69%CommoditiesWest Texas Intermediate crude traded just below $65 a barrelGold futures traded at $1,815 an ounceFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:5/6/2021 7:57:12 PM
[Markets] US STOCKS-Dow ends at record high after upbeat jobless claims report The Dow Jones Industrial Average closed at a record high on Thursday, bolstered by an upbeat weekly jobless claims report, while vaccine makers dipped after U.S. President Joe Biden backed plans to waive patents on COVID-19 shots. Lifted by Apple Inc, the S&P 500 rose after a Labor Department report showed initial claims for state unemployment benefits totaled a seasonally adjusted 498,000 for the week ended May 1, compared with 590,000 in the prior week. Published:5/6/2021 3:33:57 PM
[Markets] Dow hits record high as cyclicals rise on jobless claims data The Dow Jones Industrials hit a record high on Thursday, as economically sensitive stocks rose after an upbeat weekly jobless claims report, while vaccine makers fell as President Joe Biden backed plans to waive patents on COVID-19 shots. Cyclical sectors including the S&P 500 financials and industrials rose after a Labor Department report showed initial claims for state unemployment benefits totaled a seasonally adjusted 498,000 for the week ended May 1 compared to 590,000 in the prior week. Shares in Pfizer Inc, Moderna Inc, Johnson & Johnson and Novavax Inc, all involved in the making of COVID-19 vaccines, fell between 0.2% and 1.7%. Published:5/6/2021 11:55:33 AM
[Markets] Dow Jones Rallies, Tech Stocks Reverse As Jobless Claims Fall; Apple At Key Level, While PayPal Jumps On Earnings The Dow Jones Industrial Average rallied 100 points, as jobless claims dropped below 500,000. Apple stock is trying to find support at critical level. Published:5/6/2021 10:54:21 AM
[Markets] Dow Jones Erases Gains, Tech Stocks Slide As Jobless Claims Fall; Apple At Key Level, While PayPal Jumps On Earnings The Dow Jones Industrial Average rallied 100 points, as jobless claims dropped below 500,000. Apple stock is trying to find support at critical level. Published:5/6/2021 9:57:23 AM
[Markets] Why Peloton and Zillow Plunged Despite the Dow's Record Close The stock market had another topsy-turvy day on Wednesday, with major market benchmarks getting pushed and pulled in both directions at various points. A couple of Nasdaq stocks, Peloton Interactive (NASDAQ: PTON) and Zillow Group (NASDAQ: Z) (NASDAQ: ZG), had a role to play in the index's decline. The Dow Jones Industrial Average (DJINDICES: ^DJI) climbed to all-time record highs, while the S&P 500 (SNPINDEX: ^GSPC) treaded water amid downward pressure from the tech stocks that make up such a large portion of the Nasdaq's constituency. Published:5/6/2021 4:21:06 AM
[Markets] Asia Stocks Look Steady as Tech Drops; Yields Fall: Markets Wrap (Bloomberg) -- Asia stocks are set for a muted open after technology shares weighed on U.S. markets, offsetting optimism over solid corporate earnings and economic reports. Treasuries climbed.Futures were little changed in Australia and Hong Kong. Trading resumes in Japan and China after holidays. U.S. futures edged lower after the S&P 500 notched a small gain while the Nasdaq 100 ended in the red. The Dow Jones Industrial Average rose to a fresh record. Moderna Inc. and Johnson & Johnson retreated on news the U.S. will support a proposal to waive intellectual-property protections for Covid-19 shots, joining an effort to increase global supplies.The Bloomberg Commodity Spot Index returned to its highest level since 2011 as growth bets boost demand, while poor weather and transportation bottlenecks threaten supply. Oil slipped toward $65 a barrel. The dollar was little changed.The U.S. Treasury said it will sell $126 billion of long-term debt next week in its quarterly refunding auctions. It’s the first time in more than a year that the total hasn’t increased, suggesting that the government’s financing needs may have peaked. Treasuries rallied over the session, with the benchmark 10-year yield slipping to 1.57%.As the world’s largest economy rebounds, an intense debate has emerged over whether inflation could get out of control. The five-year breakeven rate -- a proxy for inflation expectations -- has jumped to the highest since 2008, buoyed in part by commodity prices. Despite massive government spending and central bank stimulus, several Federal Reserve officials said Wednesday that price pressures can be contained.“I do think we are set up for a more difficult summer,” Andrew Sheets, Morgan Stanley chief cross asset strategist, said on Bloomberg TV. “The higher inflation numbers are going to come through -- they might be temporary but we are definitely going to get them -- and we are at much higher levels” in the stock market, he said.Here are some key events to watch this week:Bank of England rate decision ThursdayThe April U.S. employment report is released on FridayThese are some of the main moves in markets:StocksS&P 500 futures dipped as of 7:16 a.m. in Tokyo. The S&P 500 was little changedNasdaq 100 futures slipped 0.1%. The Nasdaq 100 fell 0.3%Australia’s S&P/ASX 200 Index futures were little changedHong Kong’s Hang Seng Index futures rose 0.3% earlierCurrenciesThe Japanese yen was at 109.20 per dollarThe offshore yuan was at 6.4876 per dollarThe Bloomberg Dollar Spot Index was little changedThe euro was little changed at $1.2005BondsThe yield on 10-year Treasuries declined two basis points to 1.57%CommoditiesWest Texas Intermediate crude fell 0.5% to $65.28 a barrelGold was at $1,787.33 an ounceFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P. Published:5/5/2021 5:48:24 PM
[Markets] Dow Jones Rises On Yellen Comments; Apple Stock Rebounds, Peloton Dives The Dow Jones rose after Treasury Secretary Janet Yellen clarified her hawkish comments on interest rates. Apple stock gained. Peloton stock dove. Published:5/5/2021 2:17:10 PM
[Markets] US STOCKS-Wall Street rises as megacap stocks bounce; Dow hits record high The Dow Jones Industrial Average hit a record high on Wednesday, as the market recovered from a steep tech sell-off, after investors were encouraged by U.S. Treasury Secretary Janet Yellen's new comments on interest rates and a positive private jobs report. Energy and materials continued this week's momentum, leading gains among S&P 500 sectors, with a jump of 2.4% and 1.1%, respectively. The S&P 500 technology sector gained 0.43%, while the Philadelphia SE Semiconductor index added 1.3%, recovering from a sell-off on Tuesday after Yellen suggested that interest rates might need to rise in an overheating economy. Published:5/5/2021 1:46:58 PM
[Markets] Dow Jones Rallies As Janet Yellen Backs Off Rate Hike Comments; Apple, Tesla Look To Rebound, GM Jumps On Earnings The Dow Jones Industrial Average briefly rallied 75 points Wednesday, as Treasury Secretary Janet Yellen backed off from rate-hike comments. Published:5/5/2021 10:47:19 AM
[Markets] Dow Jones Falls As Janet Yellen Backs Off Rate Hike Comments; Apple, Tesla Look To Rebound, GM Jumps On Earnings The Dow Jones Industrial Average briefly rallied 75 points Wednesday, as Treasury Secretary Janet Yellen backed off from rate-hike comments. Published:5/5/2021 9:49:56 AM
[Markets] Dow Jones Today Eyes Record, Tech Stocks Bounce As Yellen Clarifies; Big 5, Under Armour Lead Retail Rally Facebook shares rose after upholding the site's blackout against former President Donald Trump. The Dow Jones Industrial Average crept up 0.1%. The Nasdaq Composite rebounded 0.5% on the stock market today, as video game developer Activision Blizzard jumped more than 5% on earnings news to lead the Nasdaq 100. Published:5/5/2021 8:47:35 AM
[Markets] Dow Jones Today, Futures Rise, Tech Stocks Bounce As Yellen Clarifies; Big 5, Under Armour Lead Retail Rally Big 5 and Under Armour jumped, Chevron led the Dow Jones today, and Nasdaq futures led the premarket advance as stock futures gained. Published:5/5/2021 8:16:35 AM
[Markets] NewsWatch: Dow down 280 points, with tech shares under heavy pressure U.S. stocks are off to a weak start Tuesday, a day after the S&P 500 index and the Dow Jones Industrial Average put in a strong start to May, pushing the equity benchmarks near records.
Published:5/4/2021 11:09:51 AM
[Markets] Dow Jones Slides, Tech Stocks Dive As Apple Sells Off; Tesla Falls Below Key Level The Dow Jones Industrial Average declined over 250 points Tuesday, as Dow Jones leader Apple sold off sharply. Tesla stock fell through a key support level. Published:5/4/2021 10:09:44 AM
[Markets] Dow down 280 points, with tech shares under heavy pressure U.S. stocks are off to a weak start Tuesday, a day after the S&P 500 index and the Dow Jones Industrial Average put in a strong start to May, pushing the equity benchmarks near records. Published:5/4/2021 9:40:38 AM
[Markets] Dow slips to start Tuesday trade as investors weigh corporate quarterly results, economic reports, await Yellen remarks U.S. stock indexes opened lower Tuesday, a day after the S&P 500 index and the Dow Jones Industrial Average put in a strong start to May, pushing the equity benchmarks near records. Investors are awaiting comments from Treasury Secretary Janet Yellen at 11 a.m. ET and again at 4 p.m. at an event hosted by The Wall Street Journal, as they assess earnings from the likes of Pfizer and CVS Health Corp. and economic data that has recently helped to power a rotation into energy and banking assets. The Dow Jones Industrial Average [: DJIA] was off 0.1% at 34,066, the S&P 500 index declined 0.5% at 4,172, while the Nasdaq Composite Index was trading 1.1% lower at 13,743. Published:5/4/2021 8:40:36 AM
[Markets] Dow Jones Futures Slide As Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were lower early Tuesday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/4/2021 7:10:53 AM
[Markets] Dow Jones Futures Rise, Tech Futures Slide Amid Stock Market Rotation As Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were higher early Tuesday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/4/2021 6:10:43 AM
[Markets] Dow Jones Futures Signal Modest Gains Amid Stock Market Rotation As Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were higher early Tuesday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/4/2021 5:39:10 AM
[Markets] Dow Jones Futures Fall: Stock Market Rotation? Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were lower early Tuesday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/3/2021 11:06:32 PM
[Markets] Dow Jones Futures: Stock Market Rotation? Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were lower late Monday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/3/2021 8:06:30 PM
[Markets] Dow Jones Futures: Tech Stocks Stumble As Apple Nears New Buy Point; Tesla Tests Key Level Dow Jones futures were lower late Monday, as Apple approaches a new buy point. Tesla stock is testing a key support level. Published:5/3/2021 6:05:17 PM
[Markets] Dow Jones Rises, Nasdaq Sells Off; Logistics Stocks Show Strength Amid Economic Recovery The Dow Jones Industrial Average traded higher in today's stock market while the Nasdaq composite led on the downside and was the only index trading lower. Published:5/3/2021 2:34:17 PM
[Markets] Dow Jones Rallies 300 Points To Lead Stock Market; Is a New Closing High Next? Stocks were mixed near midday Monday as the Dow Jones Industrial Average rallied 300 points, on track for a new closing high, but the Nasdaq slipped. Published:5/3/2021 11:33:22 AM
[Markets] Dow Rallies 300 Points As Apple Nears Buy Point; Tesla Slashes Losses, While Nio Reports Surging Sales The Dow Jones Industrial Average rallied 300 points Monday, as Apple neared a new buy point. Tesla stock skidded in morning trade, while Nio reported sales. Published:5/3/2021 9:32:48 AM
[Markets] Exchange Fund posts US$1.5 billion first-quarter gain, giving Hong Kong more financial fire power to defend currency Hong Kong's Exchange Fund, the war chest used to defend the local currency from attacks by short-sellers, earned HK$11.6 billion (US$1.5 billion) from its investments in the first quarter as it benefited from a global rally in stock markets, according to the Hong Kong Monetary Authority (HKMA). The gain was a turnaround from a record quarterly loss of HK$112 billion in the prior-year period, as equity markets around the world slumped last year against the backdrop of the coronavirus pandemic. The fund's first-quarter returns this year, however, significantly trailed its gains throughout the remainder of 2020 as it suffered a HK$16 billion loss on its bond investments in the first three months of 2021. In particular, the fund's results were sharply lower than the HK$145 billion earned in last year's fourth quarter, the best quarterly performance on record. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. The preliminary results, revealed at a quarterly meeting with lawmakers at Hong Kong's Legislative Council, were not audited and did not include financial results for the fund's long-term "other investments". Those figures are expected to be available later. Equities markets advanced broadly in the first quarter, supported by the roll-out of Covid-19 vaccines globally and a US$1.9 trillion fiscal stimulus package signed into law by US President Joe Biden in March. The Biden administration also proposed an additional package of US$2 trillion in infrastructure spending to help stimulate the US economy. In the first quarter, Hong Kong's benchmark Hang Seng Index rose 4.2 per cent, compared with a drop of 16 per cent in the first three months of 2020. The Dow Jones Industrial Average rose 7.8 per cent in the first quarter, a sharp contrast to the 23 per cent drop a year earlier and its worst quarterly loss since 1987. On Monday, Eddie Yue Wai-man, the HKMA's CEO, warned the sharp rebound in the US economy could spark inflation concerns and lead to a change in monetary policy, which could create "significant volatility in the financial markets and lead to an outflow of funds from Asia". "Having said that, we have a strong financial system that is ... resilient," Yue said. "We are confident that the linked-exchange rate system will continue to operate efficiently." Yue also expressed concern about the uptake of vaccinations in Hong Kong and how that could affect the city's position as an international financial hub. Only about 10 per cent of the city's 7.5 million people have been vaccinated, well below financial hubs in the US, the United Kingdom and Singapore, he said. The Hong Kong Monetary Authority invests the Exchange Fund's assets in stocks, bonds and overseas property. Photo: Shutterstock alt=The Hong Kong Monetary Authority invests the Exchange Fund's assets in stocks, bonds and overseas property. Photo: Shutterstock "I'm worried if we don't push up our vaccination rate our competitiveness will be affected," Yue said. The Exchange Fund recorded a gain of HK$7.6 billion on its investments in Hong Kong stocks in the first quarter, compared with a loss of HK$28.4 billion a year earlier. The fund reported investment gains of HK$20.8 billion on Hong Kong equities in the first quarter of 2019. It earned HK$18.8 billion from its overseas stock investments in the first three months of this year, compared with a loss of HK$83.1 billion a year earlier and a gain of HK$49.9 billion during the corresponding quarter in 2019. The fund also reported a gain from foreign-exchange valuation changes on its assets of HK$12 billion in the first quarter, compared with a loss of HK$29 billion in the first three months of 2020 and a gain of HK$13.5 billion during the same quarter in 2019. The fund reported a loss of HK$16 billion on its bond investments in the first quarter, compared with gains on its bond investments of HK$54.4 billion in the year-ago period and a HK$36.7 billion increase in the first quarter of 2019. Yue said the fund emphasises liquidity, so it mostly holds one-year bonds. He said the fund's portfolio has some flexibility in what kinds of bonds it holds, so it would make some adjustments based on "prevailing market conditions". On Monday, HKMA officials did not report results on its long-term "other investments". It suffered a loss of HK$25.9 billion in that category of investments in the first quarter of 2020, compared with a gain of HK$12.5 billion in the same period in 2019. Hong Kong's government set up the Exchange Fund in 1935 to back the issuance of banknotes. Since the HKMA was established in 1993, it has invested the fund's money in stocks, bonds and overseas property. The Exchange Fund, which stood at HK$4.54 trillion as of the end of March, protects the Hong Kong dollar, which is pegged to the US dollar. The HKMA intervened in the market 85 times in 2020, selling HK$383.5 billion to keep the local currency within its trading band of HK$7.75 to HK$7.85 per US dollar. The city's treasury places its fiscal reserves with the Exchange Fund and earns a share of any profit from its investments. The government received HK$9.2 billion from the Exchange Fund in the first quarter, after receiving HK$32.6 billion for all of 2020. ?A strong return on both stocks and bonds last year helped the Exchange Fund report a gain of HK$235.8 billion last year as a whole, compared with a record full-year high of HK$262.2 billion in 2019. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved. Published:5/3/2021 5:01:34 AM
[Markets] Richest Americans Add $195 Billion To Net Worth During Biden's First 100 Days Richest Americans Add $195 Billion To Net Worth During Biden's First 100 Days

As the Biden Administration and Congressional Democrats continue to spend money like Pretty Woman with Richard Gere's credit card, the top beneficiaries of this 'froth-inducing' stimulus have been America's wealthiest 100 individuals - who've tacked on a combined $195 billion to their fortunes during President Biden's first 100 days in office, according to Bloomberg.

The most recent gains have been fueled by the continued rise of the stock market since Biden was sworn in Jan. 20, along with the vaccination program’s fast rollout and a $1.9 trillion government stimulus package. The S&P 500 and Dow Jones indexes have both climbed more than 10% during that time.

Attempts such as Biden’s to refloat the economy can boost incomes and wealth at the very top, said Mike Savage, a sociology professor at the London School of Economics.

We’ve seen that paradox since the 2008 financial crash with quantitative easing, which has mostly benefited people with assets, inflating their value significantly,’’ Savage said. -Bloomberg

What's more, the richest 100 Americans saw their wealth grow by $267 billion before Biden's inauguration if one counts gains since the 2020 election, for a total gain of $461 billion since Nov. 4. For comparison's sake, between Donald Trump's 2017 inauguration and last fall's election, the same group of billionaires grew around $860 billion richer.

Biden's coming for it though...

In addition to raising capital gains taxes and taxing inherited wealth, the Big Guy's proposals will 'recover' trillions of dollars in wealth into government coffers after the wealthiest pay their 'fair share.'

"Sometimes I have arguments with my friends in the Democratic Party," said Biden during his first address to Congress on Wednesday. "I think you should be able to become a billionaire or a millionaire. But pay your fair share."

Under his “American Families Plan” announced Wednesday, the top rate of personal income tax would increase to 39.6% for the highest 1% of earners from the current 37%, while the capital gains rate would be raised to the same level for those earning above $1 million, wiping out the discrepancy between income and capital gains tax rates that has benefitted many of the ultra-rich.

The wealthiest 1% currently pay 40% of all federal income taxes, according to Internal Revenue Service data, an amount that doesn’t include payroll taxes. -Bloomberg

"When you ask the American people what they want, they want corporations and millionaires and billionaires to pay higher taxes," according to Erica Payne, founder of the Patriotic Millionaires, a group of progressive high-net-worth individuals. "It is politically a winner, it is economically the right thing to do and it is morally a no-brainer."

Meanwhile, the Biden administration has also floated a proposal which would raise corporate taxes to fund infrastructure spending - a move which Amazon founder Jeff Bezos, the richest (known) person in the world - supported.

"We look forward to Congress and the administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness," said Bezos.

Conservatives, meanwhile, say the money grab is likely to backfire.

"Government investments are often sold to the public with the promise that they will improve lives and improve the economy," said Tax Foundation president, Scott Hodge, in Congressional testimony this week. "In every case, the economic harm caused by the taxes would swamp any of the benefits from the new spending, leaving taxpayers and the economy worse off."

Congressional Democrats are also gunning for tax loopholes in order to claw back gains made by America's wealthy during the pandemic, with Sen. Elizabeth Warren (D-MA) proposing an Ultra Millionaire tax - which would hit those with fortunes above $50 million with a 2% annual tax on their wealth, and 3% for those with more than $1 billion.

That said, higher taxes aren't "going to have very much effect in the long term on redistributing wealth," according to Carnegie Mellon econ and statistics professor Robert Miller. "This focus on how we’re going to get the money is a bit misplaced – we should be thinking more about how we want to help the people that need help."

Tyler Durden Sun, 05/02/2021 - 09:55
Published:5/2/2021 8:58:10 AM
[Markets] Dow ends more than 180 points lower, but stocks book monthly gains Stocks ended lower Friday as investors shrugged off largely strong earnings reports and economic data, dragging the Dow Jones Industrial Average and the Nasdaq Composite to weekly losses but leaving solid monthly gains intact. The Dow fell around 186 points, or 0.5%, to close near 33,875, according to preliminary figures, while the S&P 500 fell around 30 points, or 0.7%, to end near 4,181 and the Nasdaq Composite gave up around 120 points, or 0.9%, finishing near 13,963. Friday's losses left the Dow down 0.5% for the week, while the S&P 500 clung to a gain of less than 0.1% and the Nasdaq Composite declined 0.4%. That left the Dow with a monthly gain of 2.7%, while the S&P 500 rose 5.2% for the month and the Nasdaq advanced 5.4%. Published:4/30/2021 3:15:14 PM
[Markets] Falling Chevron Stock Hurts Dow Jones, Which Slumps 200 Points; Twitter Crashes 13% The Dow Jones Industrial Average was under selling pressure Friday along with the other major stock indexes as the focus remained on earnings. Published:4/30/2021 12:45:15 PM
[Markets] Dow down more than 200 points as hectic week of earnings comes to a close U.S. stocks fell Friday on the last trading day of the month as one of the busiest weeks of the first quarter earnings reporting season comes to a close with investors weighing blockbuster results from most large technology companies and good economic data, while keeping an eye on weaker data out of China and Europe. The Dow Jones Industrial Average (DJIA) fell 220.27 points, or 0.7%, to 33,840.09, pulling the index into negative territory for the week, on track for a fall of 0.6%. The S&P 500 (SPX) was off 24.50 points, or 0.6%, at 4,186.97, leaving it clinging to a 0.2% weekly rise. Published:4/30/2021 10:14:26 AM
[Markets] Dow Jones Drops 200 Points As Chevron Stock Slips; Apple Falls But Amazon Soars Key market indexes were lower early Friday with the Dow Jones Industrial Average down nearly 200 points as Chevron and Apple weighed. Published:4/30/2021 9:49:33 AM
[Markets] U.S. stocks slide at open after lackluster China and Europe data U.S. equities fell on Friday's open, following the cue of global stock markets as investors responded to signs of weakening economic activity in China and the eurozone. The Dow Jones Industrial Average fell 171 points, or 0.5%, to 33,889. The S&P 500 slid 24 points, or 0.6%, to 4,188, after closing at a record on Thursday. The Nasdaq Composite was down 0.7% to 13,991. The eurozone economy shrank at the beginning of 2021 for the second consecutive quarter, entering its second technical recession in a year. Shares of Amazon.com Inc. were up after the e-commerce giant reported a second consecutive quarter of more than $100 billion in sales and predicted a third on the way. Published:4/30/2021 8:42:53 AM
[Markets] Deep Dive: These 20 stocks performed the best over the first 100 days of Biden’s presidency The Dow Jones Industrial Average and S&P 500 have had their biggest gains during a president's first 100 days in office since Franklin D. Roosevelt in 1933.
Published:4/30/2021 7:42:24 AM
[Markets] Exposed: The Myth Of "Efficient Markets" Exposed: The Myth Of "Efficient Markets"

Authored by James Rickards via The Daily Reckoning,

What took Wall Street so long to figure out something I’ve been saying for months?

Six months ago, even before the presidential election in November, I began warning my readers that Joe Biden was going to double the capital gains tax.

It wasn’t a difficult prediction. Biden said so himself in his campaign website as one of a long list of policy proposals.

Of course, the mainstream media didn’t report this because they were all-in for Biden and were determined to beat Donald Trump (remember how they covered up the Hunter Biden laptop report?).

The media were careful to cover-up any Biden policies that might prove unpopular with voters. Still, Democratic Party progressives knew about the plan and were all for it.

One Simple Rule

My rule for making policy forecasts is simple. If a politician tells you he’s going to do something, believe him.

Policies don’t drop out of the sky. They’re the result of intense internal debate and compromise by competing factions. Once a policy makes it to a candidate’s website, you can bet they will try to deliver.

This doesn’t mean that every proposal becomes law because there can be opposition in Congress and the courts. However, it does mean the politician will work to achieve his stated goals.

With the White House and both houses of Congress in the Democrat’s hands, the odds of this doubling of the capital gains tax becoming law look very good.

Despite my forecasts (which fortunately left my readers well-prepared), Wall Street didn’t seem to pay attention until last Thursday, when the Dow Jones index plunged 210 points in a matter of hours after the Biden tax plan was formally announced.

That’s a good example of how so-called “efficient markets” are not efficient at all.

Not so Efficient After All

Mainstream economists have insisted for decades that markets are highly efficient, and they do a nearly perfect job of digesting available information and correctly pricing assets today to take account of future events based on that information.

In fact, nothing could be further from the truth. Markets do offer valuable information to analysts, but they are far from efficient.

Markets can be rational or irrational. Markets can be volatile, irrationally exuberant, or in a complete state of panic depending upon the emotions of investors, herd behavior, and the specific array of preferences when a new shock emerges.

If markets were so efficient, why was Wall Street surprised when it was obvious to anyone paying attention that Biden was going to raise the capital gains tax?

The capital gains tax increase information had been there for all to see for six months, but it took a press release to get Wall Street to sit up and take notice.

It should have been priced in long before, and the announcement just would have confirmed market expectations.

So the next time you hear about efficient markets, take it with a large grain of salt.

But my forecast from six months ago was wrong in one respect.

Even Worse Than I Thought

I said the tax rate on capital gains would almost double from 20% to 39.6%. It turns out the rate will actually be 43.4% once a 3.8% investment income surtax is added on top. That surtax is a holdover from Obamacare.

If one were to add state and local income taxes, the combined rate on capital gains could exceed 50%, depending on the jurisdiction.

Of course, capital gains taxes are imposed on investments you make from after-tax dollars, so even the initial investment has already been taxed. And the corporations whose stock you buy pay corporate income tax too.

When those burdens are included, you’re lucky to get even 25% of your gains back net of taxes. This will be a headwind to stock markets for the foreseeable future.

The big question is, is the stock market in a bubble?

A $100 Million Deli?

When I first saw a recent story about a deli in New Jersey that was worth $100 million, I couldn’t believe it.

I assumed the deli must have a big-ticket franchising deal with McDonald’s or Subway to expand to 1,000 locations under the original name brand. That type of deal might justify a sky-high valuation for a one-store operation.

But, no, there was no franchise deal or other licensing deal that might explain the price. It’s just a deli with about $35,000 in annual sales.

As one analyst said, “The pastrami must be amazing.” Does anyone in their right mind think a deli with $35,000 in annual sales could be worth $100 million?

Well, it turns out that the owner of the deli created a company called Hometown International, and its shares trade over-the-counter. Recently, investors have bid up the stock price from $9.25 per share to $14.00 per share, giving the deli company a market capitalization of $113 million.

Hoping For a Greater Fool

But this story is not really about delis or pastrami. It’s about market bubbles and ridiculous valuations that can result when retail investors bid up stocks in the hope that a greater fool will pay them even more when they cash out.

In these situations, the market capitalization becomes completely detached from fundamental value, projected earnings or any other tool used in securities analysis.

It’s just a bubble with inevitable losses for the last buyers. But does that mean you should sell all your stocks now because the bubble will pop any day now?

No, not really. Bubbles can last longer than many believe because there is a continual flood of new buyers who hope that they won’t be the last ones to run for the exits.

The bigger issue is whether this kind of bubble in one stock indicates a broader market indices trend.  The Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite are all at or near all-time highs.

But this does not automatically mean the stock market indices are in bubble territory, although, many objective metrics, including the ratio of market cap to GDP and the Shiller CAPE price-earnings ratio, indicate that is the case.

No One Rings a Bell at the Top

Saying that markets are overvalued is not the same as saying they’re ready to crash.

It will take some external shock such as higher interest rates, a geopolitical crisis, or an unexpected bankruptcy of a major company to bring markets back to earth.

We know that such events do occur with some frequency. But, it’s probably not a good idea to short the market, because it could go even higher. That’s the way bubbles work. No one rings a bell at the top. There’s no precise formula to tell you the day they’ll pop.

So, I’m not suggesting that you sell everything and head for the hills. Having said that, it’s a good idea to reduce your exposure to stocks, diversify with cash and gold and just bide your time.

When the crash comes, you’ll be greatly outperforming those who are all-in with stocks – including delis.

Then we’ll see how efficient markets really are.

Tyler Durden Fri, 04/30/2021 - 08:02
Published:4/30/2021 7:12:17 AM
[Markets] Dow Jones Gains 240 Points After President Joe Biden's Speech; These Stocks Score Breakouts The Dow Jones Industrial Average rose as the S&P 500 closed near session highs. Stocks reversed higher in afternoon trading. Published:4/29/2021 4:09:29 PM
[Markets] Dow Jones Leads Stock Market But Nasdaq Lags; Biden Speech, Earnings In Focus Stocks were mixed after a strong start, following President Joe Biden's Wednesday address to Congress, as the Dow Jones index led but the Nasdaq lagged. Published:4/29/2021 1:08:09 PM
[Markets] Dow, Tech Stocks Slide As Apple Breakout Fades; Tesla Skids Again, While Nio, Twitter Set To Report The Dow Jones Industrial Average rallied 200 points Thursday as Apple stock jumped on blowout earnings. Nio and Twitter are set to report late. Published:4/29/2021 11:13:56 AM
[Markets] Dow Reverses Lower As Apple Breakout Fades; Tesla Skids Again, While Nio, Twitter Set To Report The Dow Jones Industrial Average rallied 200 points Thursday as Apple stock jumped on blowout earnings. Nio and Twitter are set to report late. Published:4/29/2021 10:42:42 AM
[Markets] Dow Rallies As Apple Breaks Out On Blowout Earnings; Facebook Surges, While Nio, Twitter Set To Report The Dow Jones Industrial Average rallied 200 points Thursday as Apple stock jumped on blowout earnings. Nio and Twitter are set to report late. Published:4/29/2021 9:42:26 AM
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