Financial and economic news for the week ending February 14, 2020

Saturday, February 15, 2020
Weekly Commentary: 
One Extraordinary Year
by Doug Noland

full column here:
http://creditbubblebulletin.blogspot.com/2020/02/weekly-commentary-one-extraordinary-year.html


Portions that
interested me
are below:
 Ye Editor


For the week ending 
February 14, 2020:

S&P500 rose 1.6% (up 4.6% y-t-d)

Dow Industrials gained 1.0% (up 3.0%)

Dow Utilities rallied 2.6% (up 9.0%)

Dow Transports little changed (down 0.4%)

S&P 400 Midcaps gained 2.4% (up 1.6%)

Small cap Russell 2000 rose 1.9% (up 1.1%). 

Nasdaq100 advanced 2.4% (up 10.2%)

Biotechs rose 2.9% (up 3.7%). 

Though bullion rallied $14, 
the HUI gold stock index slipped 0.5% 
   (down 6.9%).


 U.K.'s FTSE declined 0.8% (down 0.8%).

Japan's Nikkei slipped 0.6% (unchanged y-t-d). 

France's CAC40 increased 0.7% (up 1.5%). 

German DAX jumped 1.7% (up 3.7%). 

Spain's IBEX 35 rose 1.5% (up 4.3%).

 Italy's FTSE MIB advanced 1.6% (up 5.8%). 

Brazil's Bovespa gained 0.5% (down 1.1%), 

Mexico's Bolsa rose 1.4% (up 3.3%). 

South Korea's Kospi jumped 1.4% (up 2.1%). 

India's Sensex increased 0.3% (unchanged). 

China's Shanghai rallied 1.4% (down 4.4%). 

Turkey's Istanbul National 100 declined 0.7% (up 5.0%). 

Russia's MICEX added 0.3% (up 1.7%).


BONDS  &  MORTGAGESUS Ten-year Treasury yields 
were little changed at 1.59% (down 33bps).

 Long bond yields 
slipped one basis point to 2.04% (down 35bps). 

Freddie Mac 30-year fixed mortgage rates 
increased two bps to 3.47% (down 90bps y-o-y). 

Fifteen-year rates 
were unchanged at 2.97% (down 84bps). 

Five-year hybrid ARM rates
fell four bps to 3.28% (down 60bps). 

Jmbo mortgage 30-year fixed rates 
down eight bps to 3.61% (down 78bps).

Federal Reserve Credit last week rose $17.1bn to $4.135 TN, with a 22-week gain of $408 billion. Over the past year, Fed Credit expanded $146bn, or 3.7%. 

M2 (narrow) "money" supply slipped $4.9bn last week to $15.490 TN. "Narrow money" surged $1.028 TN, or 7.1%, 


Commodities Watch:
Bloomberg Commodities Index recovered 0.8% (down 6.8% y-t-d). 

Spot Gold rallied 0.9% to $1,584 (up 4.3%). 

Silver increased 0.2% to $17.734 (down 1.0%). 

WTI crude recovered $1.73 to $52.05 (down 15%). 

Gasoline rallied 3.9% (down 6%)

Natural Gas fell 1.1% (down 16%). 

Copper rose 2.1% (down 7%). 

Wheat sank 2.7% (down 3%). 

Corn slipped 0.4% (down 1.5%).



NEWS  FROM  LAST  WEEK

February 10 – Reuters (Kevin Yao): 
“China’s fiscal spending climbed 8.1% in 2019 from the previous year, the finance ministry said…, outpacing economic growth as policymakers sought to ward off a sharper slowdown. Fiscal revenues increased an annual 3.8% last year, dragged by a 1.0% rise in tax receipts due to huge tax cuts…”


February 8 – Bloomberg (Jason Gale): 
“The new coronavirus might have infected at least 500,000 people in Wuhan, the Chinese city at the epicenter of the global outbreak, by the time it peaks in coming weeks. But most of those people won’t know it. The typically bustling megacity, where the so-called 2019-nCoV virus emerged late last year, has been in effective lockdown since Jan. 23, restricting the movement of 11 million people. Recent trends in reported cases in Wuhan broadly support the preliminary mathematical modeling the London School of Hygiene & Tropical Medicine is using to predict the epidemic’s transmission dynamics.”



February 11 – Bloomberg (Brendan Murray): 
“Global supply chains look to be suffering longer-than-expected disruptions tied to coronavirus as China’s government tries to nudge idled factories back to work to limit the damage to the world’s second-largest economy. To contain the crisis, Chinese authorities have ordered city lockdowns and extended holidays but the human impact is unrelenting, with deaths topping 1,000. The economic fallout could extend well into March with rising numbers of bankruptcies, increasing layoffs and worsening demand, according to economists at Nomura… Bloomberg is reporting that thousands of businesses are in limbo, waiting to hear from local authorities on when they can resume operations. Even when they get the all-clear, it might take days to get back to full staff…”



February 13 – Financial Times (Harry Dempsey and Sun Yu): 
“China’s slowdown in response to the deadly coronavirus has sent the global shipping industry veering off course, with transit rates falling to record lows as ships are turned away from ports. All shipping segments from oil tankers to container lines have been hit by the economic impact from factory shutdowns and travel restrictions… The Capesize Index, which tracks freight costs for the largest carriers of dry bulk commodities such as iron ore, coal and grain, fell into negative territory last week for the first time since its creation in 1999, indicating that shipping companies are running at a loss on certain routes. Brokers and analysts say the slump in demand for the transportation of goods in and out China… will leave its mark on the shipping industry and commodity trading for months to come.”



February 12 – CNBC (Fred Imbert): 
“Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s longtime business partner, issued a dire warning about the future… ‘I think there are lots of troubles coming,’ he said… ‘There’s too much wretched excess.’ Munger… highlighted how much risk investors are taking when investing, particularly in China. ‘In China, … they love to gamble in stocks. This is really stupid,’ Munger said. ‘It’s hard to imagine anything dumber than the way the Chinese hold stocks.’”



February 12 – Reuters (David Lawder): 
“ The Congressional Budget Office predicted in January that U.S. deficits would average $1.3 trillion a year over the next decade, far higher than envisioned in Trump’s budget…”


February 9 – Associated Press (Andrew Taylor): 
“Confronted with the threat of trillion-dollar-plus deficits for as far as the eye can see, President Donald Trump is offering a $4.8 trillion budget plan for the upcoming fiscal year that rehashes previously rejected spending cuts while leaving Social Security and Medicare benefits untouched. Trump’s fiscal 2021 budget plan… isn’t likely to generate a serious Washington dialogue about what to do, if anything this election year, about entrenched fiscal problems that have deficits surging despite a healthy economy.”


February 11 – Reuters (Andrea Shalal and David Lawder): 
“An emboldened President Donald Trump has set his sights on restructuring the more than $1 trillion U.S. trade relationship with the European Union, raising the specter of another major trade war as the global economy slows and he seeks re-election. Trump, who has long complained that the EU’s position on trade is ‘worse than China,’ on Monday told U.S. governors that he was training his sights on Europe after signing a Phase 1 deal… with China. ‘Europe has been treating us very badly,’ he said. ‘Over the last 10, 12 years, there’s been a tremendous deficit with Europe. They have barriers that are incredible ... So we’re going to be starting that. They know that.’”



February 12 – Wall Street Journal (Bojan Pancevski): 
“U.S. officials say Huawei Technologies Co. can covertly access mobile-phone networks around the world through ‘back doors’ designed for use by law enforcement, as Washington tries to persuade allies to exclude the Chinese company from their networks. Intelligence shows Huawei has had this secret capability for more than a decade, U.S. officials said. Huawei rejected the allegations. The U.S. kept the intelligence highly classified until late last year, when U.S. officials provided details to allies including the U.K. and Germany… That was a tactical turnabout by the U.S., which in the past had argued that it didn’t need to produce hard evidence of the threat it says Huawei poses to nations’ security.”



February 11 – Reuters (Jonnelle Marte): 
“American households added $193 billion of debt in the fourth quarter, driven by a surge in mortgage loans, and overall debt levels rose to a new record at $14.15 trillion, the Federal Reserve Bank of New York said… Mortgage balances rose by $120 billion in the fourth quarter to $9.56 trillion… Mortgage originations - pushed up by an increase in refinancing - also rose to $752 billion in the fourth quarter, reaching the highest volume since the fourth quarter of 2005…”


February 8 – Wall Street Journal (Orla McCaffrey): 
“Mortgage rates are at their lowest level in more than three years, potentially boosting the U.S. housing market as it enters the crucial spring selling season. The average rate on the 30-year fixed-rate mortgage… dropped to 3.45%... That is down from 3.51% a week earlier and 4.41% this time last year… ‘It’s very much a historical opportunity for folks who have an existing mortgage to refinance and for credit-qualified people to lock in a low rate,’ said Doug Duncan, chief economist at Fannie Mae.”


February 14 – Bloomberg (Max Reyes): 
“U.S. consumer sentiment rose to the highest level in almost two years in February on brighter views of finances and the economy, adding to signs consumption will keep fueling growth. The University of Michigan’s preliminary sentiment index rose to 100.9 from 99.8 in January…”


February 11 – Wall Street Journal (Yuka Hayashi):
“Credit-card debt rose to a record in the final quarter of 2019 as Americans spent aggressively amid a strong economy and job market, and the proportion of people seriously behind on their payments increased. Total credit-card balances increased by $46 billion to $930 billion, well above the previous peak seen before the 2008 financial crisis, according to… the Federal Reserve Bank of New York…”


February 10 – Financial Times (Robin Wigglesworth):
“The wealthiest US households are strengthening their grip over corporate America. The richest 1% of Americans now account for more than half the value of equities owned by US households, according to Goldman Sachs. Since 1990, the wealthiest have bought a net $1.2tn in company stakes, while the rest of the population has sold more than $1tn. Three decades ago, ownership was also lopsided, but the top percentage point of Americans by wealth only controlled 46% of all US equities held by households. By the end of September 2019, that proportion had hit a record 56%, amounting to $21.4tn…”


February 9 – Wall Street Journal (Ruth Simon): 
“The number of people working at small companies essentially didn’t budge last year, even as larger businesses continued to expand their payrolls for a record 10th straight year. Head count at businesses with fewer than 20 employees was essentially unchanged in 2019… Small businesses are the first to feel the pinch from a tight labor market, but the challenges they face in adding workers highlight a threat to companies of all sizes and to the broader economy.”



February 9 – Reuters (Karen Pierog and Luis Valentin): 
“Puerto Rico would shed about $24 billion of debt and move closer to exiting bankruptcy under an agreement with bondholders announced on Sunday by the U.S. commonwealth’s federally created financial oversight board. The deal would cut $35 billion of bonds and claims to about $11 billion…”


February 13 – Financial Times (Colby Smith):
 “Brazil’s central bank stepped in to shore up its flagging currency after it fell to yet another record low against the dollar and solidified its ranking as the worst-performing emerging market currency this year. The central bank sold $1bn in foreign exchange swaps on Thursday as the country sought to avoid further depreciation in the real. The intervention came in the wake of a series of record lows against the dollar for Brazil’s currency that have seen the real shed 6.9% so far this year.”



February 14 – Bloomberg (Vrishti Beniwal): 
“India’s trade deficit unexpectedly widened in January, as exports contracted for a sixth straight month while the decline in imports eased. The gap between exports and imports was at $15.2 billion last month, compared with $11.25 billion in December… That’s the widest gap since June and compares with the median estimate of an $11 billion deficit in a Bloomberg survey…”



February 14 – Financial Times (Martin Arnold): 
“The eurozone’s economy is growing at the slowest rate since the bloc’s debt crisis seven years ago…, dealing a blow to expectations that the outlook had begun to brighten. The single currency zone grew at a quarterly rate of 0.1% in the fourth quarter, its slowest rate of expansion since early 2013… Germany flatlined in the fourth quarter, producing zero growth, a performance that was below analysts’ expectations…”



February 12 – Associated Press (Jill Lawless): 
“British Prime Minister Boris Johnson tightened his grip on the government Thursday with a Cabinet shake-up that triggered the unexpected resignation of his Treasury chief, the second-most powerful figure in the administration. Sajid Javid’s resignation was the most dramatic moment in a shuffle that saw Johnson fire a handful of Cabinet members he viewed as under-performing or untrustworthy, and promote loyal lawmakers to senior jobs.”


February 10 – Reuters (Chris Fournier): 
“Canadian consumers filed the largest number of insolvencies in almost a decade at the end of last year, stoking concern about the impact of record indebtedness on households and the economy. Insolvencies totaled 35,155 in the final three months of 2019, the most in any one quarter since 2010…”