Economic & Financial News for the week ending January 3, 2020

Saturday, January 4, 2020

Weekly Commentary: 

2019 in Review

by Doug Noland

full column here:

http://creditbubblebulletin.blogspot.com/2020/01/weekly-commentary-2019-in-review.html

Portions that 

interested me

are below

  Ye Editor

For the week ending 

January 3, 2020:

S&P500 slipped 0.2% (2019 return 31.48%)

Dow Industrials was about unchanged (25.34%)

Dow Utilities declined 0.8% (26.82%)

Dow Transports declined 0.2% (20.83%)

S&P 400 Midcaps declined 0.3% (26.17%)

Small cap Russell 2000 fell 0.5% (25.49%)

Nasdaq100 increased 0.3% (39.46%)

Biotechs dropped 2.4% (20.43%). 

With gold bullion surging $41.6, 

the HUI gold stock index 

increased 03% (52.33%).

U.K.'s FTSE declined 0.3% (2019 gain 12.1%).

Japan's Nikkei declined 0.8% (2019 gain 18.2%). 

France's CAC40 little changed (up 26.4%)

German DAX declined 0.9% (up 25.5%). 

Spain's IBEX 35 dipped 0.6% (up 11.8%). 

Italy's FTSE MIB slipped 0.2% (up 28.3%).

Brazil's Bovespa gained 1.0% (up 27.1%)

Mexico's Bolsa rose 0.8% (up 4.6%). 

South Korea's Kospi fell 1.3% (up 7.7%).

 India's Sensex slipped 0.3% (up 14.4%). 

China's Shanghai surged 2.6% (up 22.3%). 

Turkey's Istanbul National 100 about unchanged (up 25.4%). 

Russia's MICEX gained 0.8% (up 28.6%).

US Ten-year Treasury bond yields 

dropped nine bps to 1.79% 

   (down 77bps). 

US Thirty-year Treasury bond yields 

fell seven bps to 2.24% 

   (down 63bps). 

Freddie Mac 30-year fixed mortgage rates 

slipped two bps to 3.72% (down 79bps y-o-y). 

Fifteen-year rates 

fell three bps to 3.16% 

   (down 83bps). 

Five-year hybrid ARM rates 

added one basis point to 3.46% 

    (down 52bps). 

Jumbo mortgage 30-year fixed rates 

up four bps to 4.04% 

   (down 28bps).

Federal Reserve Credit 

last week added $1.0bn to $4.121 TN, 

with a 16-week gain of $395 billion. 

Over the past year, Fed Credit 

expanded $92.4bn, or 2.3%. 

M2 "money" supply 

gained $4.7bn last week 

to a record $15.425 TN. "

M2 surged $1.024 TN, 

or 7.1%, 

over the past year. 

Commodities Watch:

Bloomberg Commodities Index little changed this week 

    (up 5.1% in 2019). 

Spot Gold jumped 2.8% to $1,552 

   (up 18.4%). 

Silver gained 1.2% to $18.151 

   (up 15.3%). 

WTI crude jumped $1.33 to $66.05 

   (up 40%). 

Gasoline was little changed 

   (up 28%)

Natural Gas sank 4.5%

     (down 25%). 

Copper fell 1.5% 

    (up 6%). 

Wheat slipped 0.3% 

    (up 11%). 

Corn declined 0.9%

     (up 3%).

December 31 – Bloomberg (Brian Smith): 

“Few assets did more to enrich investors than stocks in the Nasdaq 100 Index. Their combined value jumped by more than $7 trillion, ending with the best year since the bull run began. Powered by a near-doubling in Apple Inc. and gains exceeding 50% in Microsoft Corp. and Facebook Inc., the tech-heavy gauge surged 38% over the past 12 months, the biggest increase since 2009.”

December 29 – Reuters (Saqib Iqbal Ahmed): 

“ The CBOE Volatility Index (VIX)… is on track to end the decade at a level about a third lower than its lifetime average... With the S&P 500 Index nearly tripling since the end of 2009, the average level of the VIX this decade is the lowest of the three since it launched in the early 90s, even with a number of periodic spikes higher. Nonetheless, trading volatility, or ‘vol’ in Wall Street parlance, came of age in a big way in the ‘10s.”

December 31 – Reuters (Idrees Ali and Kanishka Singh): 

“U.S. President Donald Trump blamed Iran… for ‘orchestrating’ an attack on the U.S. embassy in Baghdad and said he would hold Tehran responsible, as officials said more Marines were expected to be sent to the mission. ‘Iran killed an American contractor, wounding many. We strongly responded, and always will. Now Iran is orchestrating an attack on the U.S. Embassy in Iraq. They will be held fully responsible. In addition, we expect Iraq to use its forces to protect the Embassy, and so notified,’ Trump said on Twitter.”

December 29 – Wall Street Journal (Maureen Farrell): 

“In 2019 through Thursday, 211 companies that went public raised $62.33 billion—far below expectations that offerings could eclipse 1999’s record of nearly $108 billion. 2019 still registered the most money raised since 2014…”

December 31 – Bloomberg (Jeff Kearns): 

“The S&P CoreLogic Case-Shiller index of property values advanced 2.2% from October 2018… Prices rose 0.4% from a month earlier… also topping projections. A separate report from the Federal Housing Finance Agency showed house prices climbed 0.2% in October from the previous month… Prices nationwide rose 5% from a year earlier, increasing in all nine regions measured…”

January 1 – Wall Street Journal (Ryan Dezember): 

“The bill is coming due for the shale industry’s price war with OPEC. North American oil-and-gas companies have more than $200 billion of debt maturing over the next four years, starting with more than $40 billion in 2020, according to Moody’s… It is a tab that producers, pipeline operators and oil-field service companies have run up battling the Organization of the Petroleum Exporting Countries for global market share. It is unclear how they will repay it all.”

December 28 – CNBC (Lauren Thomas): 

“2019 brought with it more retail bankruptcies. 

And the implications have been more store closures, thousands of lost jobs and an vastly different retail landscape that doesn’t look anything like where your parents used to shop. While some retailers filed for Chapter 11 bankruptcy protection for the first time this year, others went through a so-called Chapter 22 scenario, where it was their second time in bankruptcy court. That included Z Gallerie and Charming Charlie. And some retailers, like discount chain Fred’s, ended up liquidating.”

December 31 – CNSNews (Terence P. Jeffrey): 

“The federal debt increased by a record $10,796,419,662,320 in the decade that is coming to a close today… This was the first decade in the history of the nation when increases in the federal debt averaged more than $1 trillion per year. The total federal debt accumulated during the decade has equaled approximately $83,967 per household.”

December 29 – Reuters (Joshua Franklin, Kate Duguid): 

“Whatever nickname ultimately gets attached to the now-ending Twenty-tens, on Wall Street and across Corporate America it arguably should be tagged as the ‘Decade of Debt.’ With interest rates locked in at rock-bottom levels courtesy of the Federal Reserve’s easy-money policy after the financial crisis, companies found it cheaper than ever to tap the corporate bond market… Bond issuance by American companies topped $1 trillion in each year of the decade that began on Jan. 1, 2010, and ends on Tuesday at midnight, an unmatched run… In all, corporate bond debt outstanding rocketed more than 50% and will soon top $10 trillion, versus about $6 trillion at the end of the previous decade. The largest U.S. companies - those in the S&P 500 Index account for roughly 70% of that, nearly $7 trillion.”

January 2 – Bloomberg (Brandon Kochkodin): 

“S&P Global Ratings was the most bearish on U.S. corporate debt in 2019 than at any other point in the last decade. Last year saw the most credit ratings downgrades for U.S. companies relative to upgrades since 2009… That didn’t stop the money from piling in. The Bloomberg Barclays U.S. Aggregate Bond Index surged 8.7% in 2019, its best year since 2002… Investment grade U.S. corporate debt returned 14.5%, its best year in the decade. The credit rating agency issued downgrades for 676 issuers compared to 352 upgrades, which translated to an upgrade to downgrade ratio of 0.52 for the year. Most of those cuts, 580 in total, were applied to the high-yield corner of the market compared to just 194 upgrades.”

December 29 – Wall Street Journal (Julia-Ambra Verlaine): 

“Downgrades on U.S. leveraged loans are picking up, a sign of fragility in the booming corporate debt market. The ratio of downgrades to upgrades in the S&P/LSTA Leveraged Loan Index rose in the 12 months through September to nearly 3 to 1—the highest reading since 2009. A total of 282 issuers were downgraded from the beginning of January through Oct. 11, up from 244 in all of 2018 and 33 in 2017... Leveraged loans are junk-rated corporate loans, a favorite financing source of private-equity firms seeking to buy up companies they see as undervalued, or in need of a makeover to turn a profit. They are often made to highly indebted companies with poor credit ratings.”

December 30 – Reuters (Stella Qiu and Kevin Yao): 

“Manufacturing activity in China expanded for a second straight month in December as seasonal demand and signs of progress in trade talks with Washington boosted factories’ output and order books. China’s official Purchasing Managers’ Index (PMI) was unchanged at 50.2 in December from November…, slightly higher than the 50.1 expected…”

January 2 – Reuters (Andy Bruce and David Milliken): 

“British factory output fell in December at the fastest rate since 2012 as a tepid global economy hurt demand and businesses further reduced stocks of goods they had built up in case of a no-deal Brexit… The output gauge in the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 45.6 from 49.1 in November…”

December 30 – Bloomberg (Samuel Potter):

 “The world looks poised to begin 2020 with almost $12 trillion of bonds carrying a negative yield, up 40% from the start of this somewhat volatile year. While the pool of sub-zero debt is significantly smaller than the $17 trillion peak in August, there are signs of stabilization at current levels.”

December 29 – Financial Times (Robin Wigglesworth): 

“One of the biggest trends in finance over the past decade has been the explosive growth of cheap, passive investment vehicles known as exchange traded funds. Although the ETF was first invented back in the early 1990s as a way to invigorate trading on the now-defunct American Stock Exchange, the industry has expanded dramatically in size and breadth since the financial crisis. The ETF universe has grown sixfold since the end of 2009 to almost $6tn today… Investor interest been fuelled by rising focus on cost — ETFs usually cost a fraction of actively managed, traditional mutual funds — and the continued inability of most active fund portfolio managers to beat their benchmarks.”

January 3 – NBC (Charles W. Dunne): 

“Whether Americans realize it or not, the United States has just declared war on Iran. And, in part because the declaration was less than clear, that could be even more dangerous than it sounds. When the U.S. on Sunday assassinated Qassem Soleimani, a top Iranian general who directed violent anti-U.S. campaigns for more than 15 years, it transformed a long-simmering proxy tit-for-tat between the two sworn enemies to one of direct military confrontation — one to which Iran will have almost no choice but to react to forcefully (and has indeed already promised ‘revenge’).”

December 31 – Reuters (Hyonhee Shin and Sangmi Cha): 

“North Korea’s leader plans to further develop nuclear programs and to introduce a ‘new strategic weapon’ in the near future, state media said…, although he signaled there was still room for dialogue with the United States. Kim Jong Un presided over a four-day meeting of top Workers’ Party officials this week amid rising tensions with the United States, which has not responded to his repeated calls for concessions to reopen negotiations. Washington has dismissed the deadline as artificial.”