Financial data and economic news for the week ending October 23, 2020

SOURCE:

http://creditbubblebulletin.blogspot.com/2020/10/weekly-commentary-new-massive.html

 

For the Week:

STOCKS:
S&P500 down 0.5% (up 7.3% y-t-d)

Dow Industrials down 0.9% (down 0.7%)

Dow Utilities up 0.9% (down 2.4%)

Dow Transports up 0.4% (up 9.0%)

S&P 400 Midcaps up 0.9% (down 2.3%)

Small cap Russell 2000 up 0.4% (down 1.7%). 

Nasdaq100 down 1.3% (up 33.9%)

Biotechs down 1.9% (up 6.1%).

 Though gold bullion added $3,

 the HUI gold stock index 

dropped 2.9% (up 33.8%).

Japan's Nikkei up 0.5% (down 0.6% y-t-d).  

France's CAC40 down 0.5% (down 17.9%)

German DAX down 2.0% (down 4.6%).

Spain's IBEX 35 up 0.6% (down 27.8%). 

Italy's FTSE MIB down 0.5% (down 18.0%).

Brazil's Bovespa  up 3.0% (down 12.4%), 

Mexico's Bolsa up 2.2% (down 11.1%). 

South Korea's Kospi up 0.8% (up 7.4%).

India's Sensex up 1.8% (down 1.4%). 

China's Shanghai down 1.7% (up 7.5%). 

Turkey's Istanbul National 100 down  0.2% (up 4.1%). 

Russia's MICEX up 0.6% (down 7.5%).

BONDS  &  MORTGAGES:

 Ten-year U.S Treasury bond yields 

jumped 10 bps to 0.84% 

(down 107bps year over year)

Freddie Mac 30-year fixed mortgage rates slipped a basis point to a record low 2.80% (down 95bps y-o-y). 

Fifteen-year rates declined two bps to an all-time low 2.33% (down 85bps). 

Five-year hybrid ARM rates fell three bps to 2.87% (down 53bps). 

Jumbo mortgage 30-year fixed rates up three bps to 3.09% (down 102bps).

Federal Reserve Credit grew 80.8% over the past year

M2 money supply grew 24% over the past year. 

COMMODITIES:
 Bloomberg Commod. Index increased 0.2% (down 9.1% y-t-d). 

Spot Gold was up slightly to $1,902 (up 25.3%). 

Silver gained 1.1% to $24.675 (up 37.7%). 

WTI crude dropped $1.03 to $39.85 (down 35%). 

Gasoline sank 2.6% (down 33%)

 Natural Gas surged 7.1% (up 36%). 

Copper gained 2.0% (up 12%).

 Wheat rose 1.2% (up 13%). 

Corn surged 4.3% (up 8%)

THE  NEWS:

 COVID-19  NEWS:

October 23 – New York Times:
(1)
“The number of people hospitalized with the coronavirus in the United States has risen 40% in the past month, while the number of new cases approaches record levels and deaths continue to creep up in several heartland states. More than 75,000 cases of the coronavirus were announced in the United States on Thursday, the second-highest daily total nationwide since the pandemic began. Some 41,000 people are now hospitalized across the country, including many in the Midwest and the Mountain West, according to the Covid Tracking Project.”

 

October 19 – Reuters (Holly Ellyatt):
(2)
“The number of reported coronavirus cases around the world has hit 40 million, according to… Johns Hopkins University. The grim milestone of 40,050,902 confirmed cases on Monday comes as various parts of Europe and the U.S. struggle to deal with an alarming surge in infections. The dreaded ‘second wave’ began in August in Europe, following the relaxation of national lockdowns implemented in spring.”

October 20 – Bloomberg (David R Baker and Jonathan Levin):
(3)
“More people are hospitalized with Covid-19 across the South than in any other part of the U.S… It’s a big gap, with 17,216 now being treated in Southern hospitals, compared with 10,351 in the Midwest and 6,377 in the West. The Northeast, site of this year’s deadliest coronavirus outbreak, now has 3,405 people hospitalized.”

October 21 – Bloomberg:
(4)
“Illinois, Ohio, Utah and North Dakota reported daily records, as states from Florida to New Jersey reported jumps in infections. In Chicago, a night-time curfew will be imposed for non-essential businesses starting on Friday… The seven-day average of U.S. deaths on Wednesday hit the highest in a month… The nation recorded 994 confirmed and probable deaths, pushing the seven-day average to 757, signs of the start of a third ascent. The surge in U.S. cases mirrors those seen in the Europe, where governments have started deploying curfews and other restrictions more widely.”

October 22 – Bloomberg (Rudy Ruitenberg):
(5)
“Governments around Europe began to deploy curfews more widely, as the coronavirus pandemic gained momentum across the continent, with France reporting more than 40,000 new cases for the first time. Daily virus cases are hitting records around Europe… Against that backdrop, authorities are expanding a curfew beyond large cities, with some 46 million people told to stay at home from 9 p.m. to 6 a.m… ‘In France, like everywhere in Europe, the second wave is here,’ Prime Minister Jean Castex said. ‘The situation is grave.’ Ordering people to stay home is emerging as a weapon against the spread of the virus, as governments seek to avoid the full lockdowns…”

October 20 – Bloomberg (Emma Court):
(6)
“Herd immunity aims instead to expose more people to the coronavirus, to build protection broadly in the population. It’s been roundly denounced by mainstream experts, who say it promises still more sickness and death. Still, the concept has surfaced in the White House, due to the increasing influence of Trump medical advisor Scott Atlas. It was backed this month by a group of academics in a treatise titled the Great Barrington Declaration.”

October 20 – Bloomberg (Naomi Kresge):
(7)
“Many people’s hopes for a speedy coronavirus vaccine are still too high, Roche Holding AG Chief Executive Officer Severin Schwan warned, adding to the chorus of drug industry leaders trying to temper expectations. It is ‘completely unrealistic’ to expect a Covid-19 vaccine to be widely available by the end of this year, and most people probably won’t have access to a shot until the second half of 2021, Schwan said… Companies need time to test the candidates in enough people to be sure they’re safe and then scale up production, he said.”

October 18 – Bloomberg (James Paton and Sybilla Gross):
(8)
“Governments and drug makers have long faced skepticism, and even hostility, from a small but vocal group of anti-vaccination campaigners. In the battle against the coronavirus, they may also run into reluctance from a broader swath of the population — people ... who would normally be on board. Fading trust in governments, political interference and the dash to create a shot in record time are sowing doubts.”

October 20 – Wall Street Journal (Margherita Stancati and Dasl Yoon):
(9)
“For months now, life across Asia, where the virus first emerged, has mostly returned to normal… While China, Japan, South Korea, Singapore and Hong Kong, combined, have been recording fewer than 1,000 cases a day since September, the U.S. alone was reporting more than 56,000 cases a day…”


ALL  OTHER  NEWS:

October 21 – Financial Times (Stephen King):
(10)
“In a world in which government debt is rapidly rising, it’s hardly surprising that there’s growing interest among investors in Modern Monetary Theory. After all, one of its central claims is that budget deficits are, from a financing perspective, an irrelevance. So long as increased government borrowing doesn’t lead to inflation — and, at the moment, there really isn’t much of it around — we can all afford to relax. ... all their (government) spending could, in principle, be financed via the creation of cash. Taxes may serve other purposes — the redistribution of income and wealth, the discouragement of ‘sinful’ behaviour — but, in the world of MMT, they serve no useful macroeconomic role.”

October 19 – Reuters (Saqib Iqbal Ahmed and April Joyner):
(11)
“Investors are once again chasing upside in shares of tech companies after a sharp sell-off in U.S. equities last month… Despite last week’s market dip, the tech-heavy Nasdaq remains around 3% away from its record high. Traders - many of them retail investors - have plowed back into call options, used to position for gains in shares.”

October 20 – Bloomberg (Naomi Kresge):
(12)
“The surge in blank-check company deals is a sign of unfettered speculation and investors may see lackluster returns from these offerings, legendary short-seller Jim Chanos said. ‘We are going to blow through the records of 1999 and 2000 in terms of new issuance,’ Chanos said at Grant’s Interest Rate Observer’s fall conference... ‘We are now seeing speculation in all its glory come back.’”


October 20 – Wall Street Journal (Anna Hirtenstein):
(13)
“Borrowing costs for Europe’s riskiest governments are hitting record lows as investors bet on newfound European political cohesion… Yields on 10-year benchmark debt of Italy and Greece dropped to all-time lows last week, both well under 1%. In a sign inventors see fewer risks among eurozone members, Southern European yields have converged to the narrowest point in years with those of Germany, considered the safest in the region. Greece’s borrowing costs shrank to the tightest point relative to Germany since 2009 last week…”

October 23 – Bloomberg (Fabiana Batista, Agnieszka de Sousa and Mai Ngoc Chau):
(14)
“On wheat farms in the U.S. and Russia, it’s a drought that’s ruining harvests. The soybean fields of Brazil are bone dry too, touched by little more than the occasional shower. In Vietnam, Malaysia and Indonesia, the problem is the exact opposite. Torrential downpours are causing flooding in rice fields and stands of oil palm trees. The sudden emergence of these supply strains is a big blow to a global economy that has been struggling to regain its footing after the shock of the Covid-19 lockdowns. As prices soar on everything from sugar to cooking oil, millions of working-class families that had already been forced to scale back food purchases in the pandemic are being thrust deeper into financial distress.”

October 20 – Financial Times (George Steer and Thomas Hale):
(15)
“The cost of shipping goods from Asia to the US has soared in the past month as American companies seek to restock depleted inventories ahead of the holiday season and prepare for the pandemic to worsen over the winter. Container shipping lines had cancelled hundreds of sailings in the early months of the pandemic… But the reinstatement of services has yet to restore balance in a market responsible for about 90% of global trade. Long term rates to the US west coast jumped by 12.7% over the weekend following a 37.2% increase on October 1… Prices now stand 63.4% higher than on the same day in 2019.”

October 19 – Reuters (Jonnelle Marte):
(16)
"It will be a while before the U.S. economy is fully recovered and before the Federal Reserve will raise interest rates or remove the support it is providing financial markets, Atlanta Federal Reserve Bank President Raphael Bostic said… ‘On balance, I am comfortable with our current policy stance,’ Bostic said… ‘As I have detailed today, though the U.S. economy continues to show clear signs of recovery, there remain significant portions where the recovery has been weak or nonexistent.’”

October 22 – Financial Times (Gillian Tett):
(17)
“In early 2020 Francis Suarez, mayor of Miami, Florida ... became the first American mayor to test positive for coronavirus. He soon recovered from the disease, but Miami’s fiscal health has not. ‘We had a $20m surplus going into Covid and $25m deficit after — and started the fiscal year [in October] with a $35m deficit,’ he told me…. He is not alone. ‘I am in a situation where I have spent down our reserve funds . . . cut every dime and nickel we can,’ said Bill Peduto, mayor of Pittsburgh... ‘But we are still facing a $75m deficit out of a $600m budget.’ Jenny Durkan, mayor of Seattle, Washington, echoed: ‘Our revenues have been decimated. Without help we are facing depressionary conditions.’”

October 21 – Bloomberg (Shruti Date Singh):
(18)
“Mayor Lori Lightfoot… will lay out how she plans to close the largest budget gap in Chicago’s history as Covid-19’s resurgence threatens to hobble the junk-rated city’s recovery in the years ahead. Spending cuts, increases to property taxes, pension obligation bonds and debt refinancings have all been under consideration to close the record $1.2 billion deficit for fiscal 2021… That comes after a nearly $800 million gap this year.”

October 22 – CNBC (Diana Olick):
(19)
“Sales of existing homes rose a higher-than-expected 9.4% in September to a seasonally adjusted annualized rate of 6.54 million units… Sales were up 20.9% annually. Sales could be more robust if there were more homes available. The inventory of homes for sale fell 19.2% annually to just 1.47 million homes for sale at the end of September. At the current sales pace that represents a 2.7-month supply. That is the lowest since the Realtors began tracking this metric in 1982. Tight supply continues to push prices higher. The median price of an existing home sold in September was $311,800, a 14.8% gain compared with September 2019. That is a new high for this series, dating back to 1968. It is also an all-time high when adjusted for inflation.”

October 20 – Reuters (Lucia Mutikani):
(20)
“U.S. single-family homebuilding raced to a more than 13-year high in September, cementing the housing market’s status as the star of the economic recovery amid record-low mortgage rates and a migration to the suburbs and low-density areas in search of more room for home offices and schooling. The report… also showed building permits and housing completions scaling levels last seen in 2007.”

October 20 – Bloomberg (Kevin Crowley and David Wethe):
(21)
“There is no more dramatic sign of the U.S. shale industry’s fall from grace than one of the best in the business being sold off for less than a third of its peak value. Concho Resources Inc., an early explorer… once-coveted oil riches that was worth $32 billion just two years ago, is selling for $9.7 billion in stock. ConocoPhillips is paying a meager 15% premium over Concho’s closing price on Oct. 13… Concho is not alone: More than half of the shale deals this year came with a premium of less than 10% over stock prices that had already plunged in the past couple of years…”

October 20 – Reuters (David Shepardson and Diane Bartz): “
(22)

"The U.S. sued Google…, accusing the $1 trillion company of illegally using its market muscle to hobble rivals in the biggest challenge to the power and influence of Big Tech in decades. ... The lawsuit marks the first time the U.S. has cracked down on a major tech company since it sued Microsoft Corp for anti-competitive practices in 1998.”

October 21 – Wall Street Journal (Eliot Brown):
(23)
“Early this summer, electric-vehicle startups Hyliion Inc., Fisker Inc. and Lordstown Motors Corp. were tiny companies with staff numbers measuring in the dozens. Two had built little more than a prototype. None have reported any revenue. Today, they are valued at more than $3 billion apiece by stock-market investors. A frenzy has hit the sector. Buoyed by the surge in the stock price of electric-vehicle pioneer Tesla Inc. and a rush of blank-check companies that take startups public, investors are hoping to find the future titans of an auto market transformed by a shift away from the internal-combustion engine.”

October 17 – Wall Street Journal (James Mackintosh):
(24)
“Today there are two obvious bubble candidates, and as usual, both come with good underlying reasons for their success. Big Tech’s high profits and growth prospects make it a beneficiary of lockdown and of low-forever interest rates, justifying a high valuation. As usual, the question is how high is too high. The boom in cash shells, or special-purpose acquisition companies, also known as SPACs, is in some ways more troubling.”

October 21 – Reuters (Lisa Baertlein, Richa Naidu and Nivedita Balu):
(25)
“This time last year, shoppers on Chicago’s Magnificent Mile were waiting for Louis Vuitton to debut its whimsical holiday window decorations. Now those same windows are hidden behind a wall of wood panels painted bright orange… As security experts warn that the U.S. presidential election could spark renewed civil unrest, those stores remain clad in plywood as retailers seek to keep property and employees safe in the event street violence flares anew.”

October 21 – Reuters (Gabriel Crossley and Ben Blanchard):
(26)
“China threatened… to retaliate against the latest U.S. arms sale to Chinese-claimed Taiwan, as the island welcomed the weapons package but said it was not looking to get into an arms race with Beijing… Responding the U.S. approval of a potential $1.8 billion arms sale to Taiwan, China’s Foreign Ministry spokesman Zhao Lijian said during a daily news briefing that such sales should stop. The sales ‘seriously interfere with China’s internal affairs, seriously damage China’s sovereignty and security interests, send a seriously wrong signal to Taiwan independence forces, and severely damage China-U.S. relations and peace and stability in the Taiwan Strait,’ he said.”

October 22 – Bloomberg:
(27)
“China is going all out in remembrance of its participation against the U.S. in the Korean War, sending a message to Washington that it’s not intimidated by American military might. President Xi Jinping took part in a ceremony Friday in Beijing marking the 70th anniversary since its army took up fighting in a conflict China’s government describes as the ‘War to Resist U.S. Aggression and Aid Korea.’ The war ‘shatters the legend that the U.S. Army is not defeatable,’ Xi said in an address at the Great Hall of the People… ‘The Korean War shows that the Chinese people should not be provoked. If you make trouble, be prepared to bear the consequences.’”

October 22 – Wall Street Journal (Chao Deng and Liza Lin):
(28)
“The wave of nationalism sweeping through China, amplified by party propaganda, the political ambitions of Xi Jinping and the country’s success in containing Covid-19, is taking a darker turn, with echoes of the country’s Maoist past. Angry mobs online have swarmed any criticism of China’s leaders or a perceived lack of loyalty to the country. Targets are being harassed and silenced. Some have lost their jobs. Among those who have been attacked this year are public figures who have raised questions about officials’ early handling of the coronavirus. They include a writer from Wuhan named Fang Fang, who wrote online about the struggles of local residents and accused government officials of being slow to respond to the outbreak.”

October 18 – CNBC (Evelyn Cheng):

 (29)
“China’s economy recovered further from the coronavirus in the third quarter… The world’s second-largest economy reported third-quarter GDP growth on the low end of expectations, up 4.9% from a year ago. That brings growth for the first three quarters of the year to 0.7% from a year ago. Chinese economists expected GDP growth of 5.2% in the third quarter… Retail sales rose 3.3% in September, for a 0.9% increase in the third quarter. For the first nine months of the year, retail sales contracted 7.2%.”

October 19 – Reuters (Leika Kihara and Takahiko Wada):
(30)

"Japan’s central bank is expected to cut its growth and price forecasts for the current fiscal year at next week’s rate review…, as the coronavirus pandemic weighs on the economic recovery… The main reason for the downward revision in growth is the bigger-than-expected economic slump in April-June and soft consumption during the summer, the source said.”

October 22 – Wall Street Journal (Paul Hannon):
(31)
“Government borrowing in the eurozone surged this spring to its highest levels since the creation of the currency union… The combined budget deficits of eurozone governments surged to 11.6% of gross domestic product, more than four times the 2.5% deficit recorded in the first quarter, and well above the 7% deficit recorded in the first quarter of 2010, which was the largest seen in the wake of the global financial crisis."

October 21 – Reuters (David Milliken and Andy Bruce):
(32)
“Britain’s government borrowing in the first half of the financial year was more than six times higher than before the COVID pandemic…, taking public debt to its highest since 1960. Public borrowing in September alone totalled 36.101 billion pounds ($46.90bn), above all forecasts… The increased borrowing took total public debt further above the 2 trillion pound mark to 2.060 trillion pounds or 103.5% of GDP, its highest on this measure since 1960…”

October 23 – Reuters (Jonathan Cable):
(33)
“Euro zone economic activity slipped back into decline this month as a second wave of the coronavirus sweeps across the continent, heightening expectations for a double-dip recession… IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good gauge of economic health, fell to 49.4 from September’s final reading of 50.4.”

October 21 – Reuters (Mark John): “
(35)
Over half the small and medium-sized companies which together provide jobs for two-thirds of European workers fear for their survival in the coming 12 months, according to a survey released by management consultancy McKinsey…”

October 19 – Financial Times (Christian Shepherd and Xinning Liu):
(36)
“History has become the latest battlefront between Beijing and Washington after a sharp rise in nationalism and anti-American sentiment around the 70th anniversary of China entering the Korean war. The three years of conflict on the Korean peninsula, beginning with North Korea invading the South in June 1950 and ending in July 1953 with an armistice, are a central plank of the People’s Republic of China’s founding mythology. …China regularly celebrates the ‘war to resist American aggression and aid [North] Korea’ with great fanfare.”