Financial data and economic news for the week ending September 25, 2020

Federal Reserve Bank
Second Quarter 2020
Z.1  Flow of Funds data:

Total U.S.  NFD
( Non-Financial Debt )
increased $3.5 TN
during Q2, 2020,
more than doubling
Q1’s record
$1.4 TN gain.

At $59.3 TN, NFD
surged to a record
304% of GDP.
( 1999 ended at
184% of GDP,
2007 was 227%,
   and
2019 was 250% )

Treasury bonds,
notes and bills
iended Q2 2020
at 115% of GDP,
   up from
44% to end the1990s;
41% to end 2007;
   and
69% to end 2010.

Stocks, as
a percentage
of GDP rose
to a record 267%.
Prior peaks were
181% at the
end of Q3 2007,
   and
202% at the
end of Q1 2000.

Total Bonds & Stocks
ended Q2 at a record
532% of GDP,
with prior peaks at
379% during Q3 2007,
  and
359% to end Q1 2000,
   after
ending the 1980s
at 194% and
ending the 1970s
at 117%.
 

For the Week Ending
September 25, 2020:

US  &  FOREIGN  STOCKS:
S&P500
down 0.6%
   (up 2.1% y-t-d)

Dow Industrials
down 1.7%
   (down 4.8%)

Dow Utilities
up 1.5%
   (down 7.1%)

Transports
doen 1.4%
   (up 3.4%)

S&P 400 Midcaps dropped 2.6%
   (down 11.9%)

Small cap Russell 2000
down 4.0%
   (down 11.6%)

Nasdaq100
up 2.0%
   (up 27.7%) 

Biotechs
down 1.4%
   (up 4.5%).

With gold bullion down $89,
the HUI gold stock index
was down 6.6%
   (up 32.3%).

U.K.'s FTSE
down 2.7%
   (down 22.5%)

Japan's Nikkei
down 0.7%
    (down 1.9%)

France's CAC40
down 5.0%
     (down 20.9%).

German DAX
down 4.9%
    (down 5.9%).

Spain's IBEX 35
down 4.4%
    (down 30.6%).

Italy's FTSE MIB
down 4.2%
    (down 20.5%).

Brazil's Bovespa
down 1.3%
    (down 16.1%),

Mexico's Bolsa
up1.6%
   (down 16.0%).

South Korea's Kospi
sown 5.5%
    (up 3.7%).

India's Sensex 
down 3.8%
    (down 9.4%).

China's Shanghai
down 3.6%
    (up 5.5%).

Russia's MICEX
down 1.9%
   (down 4.9%).



U.S.  BONDS  &  MORTGAGES
Ten-year US Treasury
bond yields
down four bps to 0.66%
    (down 126bps year-over-year).

Freddie Mac 30-year
fixed mortgage rates
up three bps
to 2.90%
    (down 74bps y-o-y).

Fifteen-year rates
up five bps to 2.40%
   (down 76bps y-o-y).

Five-year hybrid ARM rates
down six bps to 2.90%
    (down 48bps y-o-y)

Jumbo mortgage
30-year fixed rates
down a basis point to 3.03%
   (down 101bps y-o-y).


Federal Reserve Credit
expanded 85%
over the past year

M2 money supply
expanded 24.8%
over the past year.



COMMODITIES:
Bloomberg Commodities Index
down 1.8%
   (down 12.6% y-t-d).

Spot Gold
down 4.6% to $1,862
    (up 22.6%).

Silver
down 14.9% to $23.093
    (up 28.9%).

WTI crude oil
down 86 cents to $40.25
    (down 34%).

Gasoline
down 1.8%
    (down 28%)

Natural Gas
up 4.4%
    (down 2%).

Copper
down 4.7%
    (up 6%).

Wheat
down 5.3%
    (down 3%).

Corn
down 3.5%
    (down 6%).



COVID-19  NEWS:
(1)
September 21
– Wall Street Journal
(Ted Mann and Talal Ansari):
“Deaths in the U.S. attributed to the coronavirus neared 200,000 Monday amid concerns from some health experts that the country was heading for another wave of infections. The U.S. continues to lead the world in both total confirmed cases and deaths".


(2)
September 22
– Associated Press
(Jill Lawless and Pan Pylas):
“British Prime Minister Boris Johnson ... unveiled new restrictions on everyday life to suppress a dramatic spike in coronavirus cases. ...
Johnson urged people to work from home where possible. He said stiff fines will be imposed on anyone breaking quarantine rules or gathering in groups of more than six, while the use of face masks will be expanded to include passengers in taxis and staff at bars and shops.”


(3)
September 24
– Reuters
(Daina Beth Solomon,
Laura Gottesdiener and
David Alire Garcia):
“Mexico surpassed 75,000 confirmed coronavirus deaths on Thursday, as the pandemic ravages Latin American nations with large informal economies where workers have grappled with the twin threats of hunger and contagion… More than half of Latin America’s active population have informal jobs in areas such as street commerce and domestic labor. In Mexico, working from home or strict social-distancing measures can mean no income, since the welfare safety net is small.”


(4)
September 19
– Reuters
(Shilpa Jamkhandikar):
“India’s coronavirus case tally surged to 5.4 million as it added 92,605 new infections in the last 24 hours, data from the health ministry showed on Sunday. The country has posted the highest single-day caseload in the world since early August, and lags behind only the United States, which has 6.7 million cases in terms of total infections.”


(5)
September 21
– Reuters (Lewis Krauskopf):
“Optimism that vaccines are on the way to end the coronavirus pandemic has been a major factor in this year’s U.S. stock resurgence. That will face a critical test in coming weeks, as investors await clinical data on whether they actually work.”



ALL  OTHER  NEWS:
(6)
September 23
– CNBC
(Stephanie Landsman):
“Economist Stephen Roach ... told CNBC… ‘The current account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter… The so-called net-national savings rate, which is the sum of savings of individuals, businesses and the government sector, also recorded a record decline in the second quarter going back into negative territory for the first time since the global financial crisis.’”


(7)
September 21
– Reuters
 (Annie Nova):
“Bored at home, many people are turning to the stock market and dabbling in day trading for entertainment and profits. However, most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the losses that day trading can bring … Activity has ‘increased dramatically’ in the first quarter of 2020 compared with 2019, according to data analyzed by Cerulli Associates.”


(8)
September 23
– Bloomberg
(Davide Scigliuzzo and 

Paula Seligson):
“Junk-rated companies are binging on debt like never before thanks to a pledge from the Federal Reserve to keep rates low and credit markets open. But not every borrower is welcome on board. Aethon United BR LP, a… natural gas company, has postponed a $700 million high-yield bond sale that would have refinanced existing debt, according to people with knowledge of the matter who asked not to be identified because the details are private.”


(9)
September 21
– Reuters
(Alun John, Sumeet Chatterjee, Donny Kwok, Lawrence White, Ritvik Carvalho, Sujata Rao, Karin Strohecker, Pete Schroeder and Paritosh Bansal):
“Global banks faced a fresh scandal about dirty money on Monday as they sought to limit the fallout from a cache of leaked documents showing they transferred more than $2 trillion in suspect funds over nearly two decades. Britain-based HSBC Holdings Plc, Standard Chartered Plc and Barclays Plc, Germany's Deutsche Bank and Commerzbank AG, and… JPMorgan Chase & Co JPM.N and Bank of New York Mellon Corp BK.N were among the lenders named in the report by the International Consortium of Investigative Journalists and based on leaked documents obtained by BuzzFeed News.”


(10)
September 24
– Bloomberg
(Maciej Onoszko):
“New bond sales in Europe are set to exceed 1.39 trillion euros ($1.62 trillion) this year, breaking the record tally from 2019 with more than three months to spare.”


(11)
September 19
– Wall Street Journal
(Alexa Corse):
“How soon Americans know the outcome of the presidential election could hinge on a few states—and how fast they count mail ballots. Many states allow election workers to start processing mail ballots before Election Day, and so count them relatively swiftly. Some states—including potentially decisive swing states like Wisconsin, Michigan and Pennsylvania—don’t open envelopes containing mail ballots until Election Day. With an unprecedented number of voters expected to vote by mail amid the coronavirus pandemic, counting ballots may take days or longer in some states, possibly delaying a tally.”


(12)
September 20
– Bloomberg
(Rich Miller):
“It sounded a bit like a broken record. Confronted by a pandemic that has devastated the economy, Federal Reserve Chair Jerome Powell declared no less than 10 times last week that the central bank has a ‘powerful’ new monetary policy road map for returning the U.S. to full employment and lifting inflation temporarily above 2%. ‘It was powerful,’ Mellon chief economist Vincent Reinhart said wryly of the central bank’s plan for continued rock-bottom interest rates. ‘If you say it 10 times it must be so.’”


(13)
September 24
– Reuters
(Lucia Mutikani):
“The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery from the COVID-19 pandemic was running out of steam… The weekly jobless claims report… also showed 26 million people were on unemployment benefits in early September.”


(14)
September 24
– CNBC
(Diana Olick):
“Exceptional demand for new and existing homes, brought on by the stay-at-home culture of the coronavirus pandemic, has the housing market severely depleted. Sales of newly built homes jumped to the highest level in 14 years in August, but builders’ supply dropped to just 3.3 months’ worth… A six-month supply is considered a balanced market. Supply was at 5.5 months in August 2019…”


(15)
September 21
 – Wall Street Journal
(Nicole Friedman):
“The pandemic has aggravated the housing market’s longstanding lack of supply, creating a historic shortage of homes for sale. Buyers are accelerating purchase plans or considering homeownership for the first time, rushing to get more living space as many Americans anticipate working from home for a while. Many potential sellers, meanwhile, are keeping their homes off the market for pandemic-related reasons. The combined effect has created an extreme drought of previously owned homes for sale. At the end of July, there were 1.3 million single-family existing homes for sale, the lowest count for any July in data going back to 1982…”


(16)
September 24
– Bloomberg
(Katia Dmitrieva):
“Sales of new homes in the U.S. unexpectedly advanced for a fourth month in August to the highest level in almost 14 years as record-low mortgage rates continued to entice buyers into a market with ever-shrinking supply. Purchases of new single-family houses increased 4.8% to a 1 million annualized pace, led by a flurry of demand in the South, after an upwardly revised 14.7% surge in July… It’s the same picture for backlogs: the number of properties sold for which construction hadn’t yet started jumped to 342,000 in August."


(17)
September 21
– Bloomberg
(Danielle Moran):
“Without federal aid, Illinois credit pressures are mounting, and the state may have to borrow more even as officials seek to cut spending and balance the budget, according to S&P Global Ratings. The coronavirus has exacerbated the worst-rated state’s challenges, including already large budget gaps and weak demographics… ‘The magnitude of the current budget gap and reliance on one-time measures make us question Illinois’ ability to achieve structural balance in a reasonable time,’ the analysts wrote. ‘Even if Illinois receives federal aid in fiscal 2021, we expect that it will face challenging budget gaps beyond the current fiscal year.’”


(18)
September 18
– Financial Times
(Myles McCormick):
“It is less than two months since Donald Trump travelled to Texas to declare that the US energy industry, laid low by this year’s oil price crash, was back on its feet.  ... Another 16 upstream US oil and gas companies — producers and service providers — hit the wall in August, the same number as in July… Bigger drillers such as Chaparral and Valaris have joined a pile-up that has seen companies with a combined $85bn worth of debt file for protection from creditors over the past eight months.”


(19)
September 22
– Bloomberg
(Jack Pitcher and
Gabrielle Coppola):
“Carvana Co. has yet to post a quarterly profit since going public in 2017, but it’s made Ernie Garcia II and his son Ernest Garcia III two of the richest people in America. The elder Garcia is the largest shareholder of… Carvana, the online retailer that sells cars out of massive vending machines. His son, Garcia III, is the company’s chief executive officer. Together they’re worth $21.4 billion… Shares of the company surged 31%... after it projected record revenue and profit margins. The stock has rallied almost 150% this year…”


(20)
September 23
– Reuters
(Andrew Galbraith):
“China has no reason to approve the ‘dirty and unfair’ deal based on ‘bullying and extortion’ that Oracle Corp and Walmart Inc said they struck with ByteDance, the state-backed… China Daily newspaper said… ‘What the United States has done to TikTok is almost the same as a gangster forcing an unreasonable and unfair business deal on a legitimate company,’ it said…”


(21)
September 21
– Reuters
(Akanksha Rana):
“Beijing has sped up development of a blacklist that could be used to punish U.S. technology firms, with Huawei Technologies Co Ltd rival Cisco Systems Inc among the companies seen as likely to be included in the list… However, Chinese leaders are hesitating to pull the trigger, with some arguing that a decision on the list should wait till after the U.S. election in November, the report said.”


(22)
September 23
– CNBC
(Evelyn Cheng):
“Chinese fervor for online shopping waned in August, a sign that the world's second-largest economy still faces many challenges as it tries to boost consumption at home… Online sales of consumer goods and services grew 13.3% in August, slower than the 18.8% growth in July and down from 19% in June, CNBC analysis of official data showed.”


(23)
September 24
– Bloomberg
(Cagan Koc):
“Turkey’s central bank raised interest rates for the first time since a currency crisis in late 2018, surprising most economists after a series of backdoor measures fell short of stabilizing the lira. The Monetary Policy Committee… increased the benchmark one-week repo rate to 10.25% from 8.25% on Thursday… The decision caps a period of tightening by stealth as the central bank tried to contain the lira’s weakness by using fringe tools and ceasing to provide funding at its cheapest benchmark rate.”


(24)
September 23
– Reuters
(Jonathan Cable):
“Euro zone business growth ground to a halt this month, throwing the economic recovery into question, as fresh restrictions to quell a resurgence in coronavirus infections slammed the services industry into reverse… IHS Markit’s flash Purchasing Managers’ Index sank to 50.1 in September from August’s 51.9, only just above the 50 mark separating growth from contraction and well below the median forecast…”


(25)
September 22
– Reuters
(Daniel Leussink):
“Japan’s factory activity extended declines in September largely due to a sharper fall in output, as the world’s third-largest economy struggles to stage a robust recovery from the coronavirus pandemic. The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) was largely unchanged at 47.3 in September… Output contracted at a faster pace for the first time in four months…”


(26)
September 22
– Wall Street Journal
(William Mauldin and
James T. Areddy):
“World leaders sounded alarms… over the widening rift between the U.S. and China, warning that a lack of cooperation could worsen the coronavirus pandemic, slow a global economic recovery or even lead to outright conflict. ‘We must do everything to avoid a new Cold War,’ United Nations Secretary-General António Guterres said in opening the annual U.N. General Assembly… the growing U.S.-China divide was on display as President Trump slammed Beijing for allowing the coronavirus to spread and took aim at China’s environmental and trade record.”


(27)
September 19
– Reuters
(Ben Blanchard and
Jeanny Kao):
“Two days of Chinese military aircraft approaching Taiwan demonstrate that Beijing is a threat to the entire region and have shown Taiwanese even more clearly the true nature of China’s government, President Tsai Ing-wen said…”


(28)
September 24
 – Bloomberg:
“China’s military is committed to defeating Taiwanese independence ‘at all cost,’ Defense Ministry spokesman Senior Colonel Tan Kefei tells briefing… People’s Liberation Army exercises in Taiwan Strait targeted at independence forces and external forces who meddle in China’s affairs, Tan says ‘If Taiwan independence forces dare to separate Taiwan from China in any form or use any excuse, we will resolutely defeat it at all costs,’ Tan says.”


Original full column is here:

http://creditbubblebulletin.blogspot.com/2020/09/weekly-commentary-extraordinary-q2-2020.html