Financial data and economic news for the week ending October 2, 2020

 For the week ending
Friday, October 2, 2020:

With 32 days until 2020 election day,
President Trump contracts COVID-19,
as if this election cycle wasn’t
chaotic enough.


GLOBAL  STOCKS:
S&P500
up1.5%
   (up 3.6% y-t-d)

Dow Industrials
up1.9%
   (down 3.0%)

Dow Utilities
up 3.4%
   (down 4.0%)

Dow Transports
up 0.2%
   (up 3.6%).

S&P 400 Midcaps
up 4.7%
   (down 7.8%)

Small cap Russell 2000
up 4.4%
   (down 7.7%).

Nasdaq100
up 0.9%
   (up 28.9%)

Biotechs
down 0.2%
   (up 4.2%).

With GOLD bullion
up 2.1% to $1,900
the HUI gold stock index
was up .4%
   (up 34.1%)

U.K.'s FTSE
up1.0%
   (down 21.7%).

Japan's Nikkei
down 0.8%
   (down 2.6% y-t-d).

France's CAC40
up 2.0%
   (down 19.3%)

German DAX
up 1.8%
   (down 4.2%).

Spain's IBEX 35
up 1.9%
   (down 29.3%).

Italy's FTSE MIB
up 2.0%
   (down 18.9%)

Brazil's Bovespa
down 3.1%
   (down 18.7%)

Mexico's Bolsa
up 0.2%
   (down 15.9%).

South Korea's Kospi
up 2.2%
   (up 5.9%).

India's Sensex
up 3.5%
   (down 6.2%).

China's Shanghai
little changed
   (up 5.5%).

Russia's MICEX
down 1.5%
   (down 6.4%).



US  BONDS  &  MORTGAGES:
Ten-year Treasury bond yields
up five bps to 0.70%
   (down 122bps year over year).

Freddie Mac 30-year
fixed mortgage rates
down two bps to 2.88%
    (down 77bps y-o-y).

Fifteen-year rates
down four bps to 2.36%
   (down 78bps).

Five-year hybrid ARM rates
 were unchanged at 2.90%
   (down 48bps).

Jumbo mortgage
30-year fixed rates
up eight bps to 3.11%
    (down 87bps).

Federal Reserve Credit
over the past year
expanded 80.3%.

M2 money supply
over the past year
expanded 24.3%.



COMMODITIES:
Bloomberg Commodities Index
down 1.3%
   (down 13.7% y-t-d).

Spot Gold
up 2.1% to $1,900
   (up 25.1%).

Silver
up 4.1% to $24.03
   (up 34.1%).

WTI crude oil
down $3.20 to $37.05
    (down 39%).

Gasoline
down 7.5%
   (down 34%)

Natural Gas
down 13.1%
   (up 11%)

Copper
up 0.2%
   (up 7%)

Wheat
up 5.3%
   (up 3%)

Corn
up 4.0%
   (down 2%).



THE  NEWS:
Coronavirus:

(1)
October 1
– CNBC:
“Participants in two of the leading coronavirus vaccine trials told CNBC that they are experiencing high fever, body aches, bad headaches, day-long exhaustion and other symptoms after receiving the shots. In interviews, all five participants — three in Moderna’s study and two in Pfizer’s late-stage trials — said they think the discomfort is worth it to protect themselves against the coronavirus. Luke Hutchison… said he was bed bound with a fever of over 101, shakes, chills, a pounding headache and shortness of breath after receiving his second dose in Moderna’s phase three trial. Another participant, testing Pfizer’s candidate, similarly woke up with chills, shaking so hard he cracked a tooth after taking the second dose.”


(2)
September 28
– Reuters
(Andreas Rinke and
 Alexander Huebner):
“Chancellor Angela Merkel told leaders of her Christian Democrats (CDU) on Monday that coronavirus infection rate could hit 19,200 per day in Germany if the current trend continues but stressed that the economy must be kept running…”



ALL  OTHER  NEWS:
(3)
September 29
– Financial Times
(Robert Armstrong):
“A dramatic gap has opened in how banks and the bond market perceive the health of corporate America, with banks setting aside billions against bad loans even while bond prices suggest a dramatic recuperation from the Covid-19 shock. US banks’ loan loss reserves have risen by $110bn since the crisis began, and are now equivalent to 2.2% of their loan portfolios, the highest level since after the financial crisis in 2012. Meanwhile, the difference in yield between US government debt and corporate bonds with the lowest investment-grade rating appears to indicate that the pandemic crisis is all but over. The spread has tightened from almost 5 percentage points in March to well under 2 points now — as narrow as it was early last year.”



(4)
September 29
– Financial Times
(Ortenca Aliaj, Kaye Wiggins,
James Fontanella-Khan and
Arash Massoudi): “
A resurgence in mergers and acquisitions activity led to the busiest summer for blockbuster deals in three decades… The combined value of $5bn-plus deals worldwide soared to $456bn in the three months to September, figures from Refinitiv show. That makes it the busiest third quarter on record, as bankers raced to make up for a dearth of activity at the height of the coronavirus crisis. ‘The pace of the rebound in August and September somewhat surprised us,’ said Dirk Albersmeier, global co-head of M&A at JPMorgan. ‘It’s been an amazing third quarter in terms of the rebound.’”



(5)
September 25
– Reuters
(Andy Sullivan):
“U.S. President Donald Trump said… Americans might not know the winner of the November presidential election for months due to disputes over mail ballots, building on his criticism of a method that could be used by half of U.S. voters this year… ‘I like watching television and have, ‘The winner is’, right? You might not hear it for months, because this is a mess,’ he said. ‘It’s very unlikely that you’re going to hear a winner that night… I could be leading and then they’ll just keep getting ballots, and ballots, and ballots and ballots. Because now they’re saying the ballots can come in late.’”



(6)
September 28
– The Hill
(Alexander Bolton):
“If Trump’s nominee, Amy Coney Barrett, is confirmed, it would cement a conservative majority on the court that would include three justices nominated by the president. Polls showing a close race against Democrat Joe Biden in several battleground states have lawmakers predicting the results won’t be known immediately after Election Day, particularly with millions expected to vote via mail-in ballots given the coronavirus pandemic.”



(7)
September 30
– Reuters
(Alexandra Alper):
“The Trump administration has proposed including a $20 billion extension in aid for the battered airline industry in a new stimulus proposal to House Democrats worth over $1.5 trillion, White House chief of staff Mark Meadows said… ‘There’s $20 billion in the most recent proposal for the airlines that would give them a six month extension,’ Meadows told reporters…”



(8)
September 28
– Wall Street Journal
(Dan Strumpf):
“The Commerce Department has told U.S. computer-chip companies that they must obtain licenses before exporting certain technology to China’s largest manufacturer of semiconductors, a blow to China’s efforts to compete in advanced technology. The department laid out the requirement in a letter… The letter… says exports to Semiconductor Manufacturing International Corp. or its subsidiaries risk being used for Chinese military activities. The U.S. action threatens to cut off SMIC from equipment used to manufacture chips.”



(9)
September 30
– Wall Street Journal
(Nick Timiraos):
“Federal Reserve officials’ promises to hold interest rates very low for a long time could pose a dilemma once the pandemic is over: how to deal with the risk of asset bubbles. Those concerns flared when Dallas Fed President Robert Kaplan dissented from the central bank’s Sept. 16 decision to spell out those promises. The Fed committed to hold short-term rates near zero until inflation reaches 2% and is likely to stay somewhat above that level… ‘There are costs to keeping rates at zero for a prolonged period,’ Mr. Kaplan said… He added that he worries such a commitment ‘causes people to take more risk in that they know it’s much less likely that they’re going to be able to earn on savings.’ …’I share a lot of Rob’s concerns,’ said Boston Fed President Eric Rosengren… ‘I am worried about financial-stability aspects of this policy. I think we’re going to need to address it over the next couple of years,’ he said…”



(10)
September 28
– Wall Street Journal
(James Mackintosh): “
"The gap between everyday experience and the yearly inflation rate of 1.3% in August is massive. The price of the stuff we’re buying is rising much faster, while the stuff we’re no longer buying has been falling, but still counts for the figures. Economists will be relieved that the laws of supply and demand are still working… But for investors it hangs a veil over the outlook for perhaps the single most important issue for the markets: whether we’re headed for a future of inflation, deflation or a continuation of the past decade’s lackluster price rises.”



(11)
October 2
– CNBC
(Jeff Cox): “
Nonfarm payroll rose by a lower than expected 661,000 in September and the unemployment rate was 7.9%... Economists surveyed by Dow Jones had been expecting a payrolls gain of 800,000 and the unemployment rate to fall to 8.2% from 8.4% in August. The payrolls miss was due largely to a drop in government hiring as at-home schooling continued and Census jobs fell.”



(12)
September 29
– Reuters
(Lucia Mutikani):
“The United States’ trade deficit in goods widened in August, with imports rising as businesses rebuild inventories which were depleted when the COVID-19 pandemic upended the flow of goods. The …goods trade gap increased 3.5% to $82.9 billion last month. Imports of goods rose 3.1% to $201.3 billion, eclipsing a 2.8% increase in goods exports to $118.3 billion.”



(13)
October 1
– Reuters
(David Henry):
“As big U.S. commercial banks close their books on the third quarter, analysts expect them to report a 30% to 60% plunge in profits on the year-ago period due to the pandemic-induced recession and near record low interest rates.”



(14)
October 1
– Reuters
(Karen Pierog):
“With revenue dropping due to the fallout from the pandemic, New York already sold $4.5 billion of short-term notes out of an $8 billion authorization, while New Jersey gave final approval this week to $4.5 billion of debt, and Illinois lawmakers earlier this year agreed to issue up to $5 billion of bonds.”



(15)
October 1
– CNBC
(Jeff Cox):
“First-time claims for unemployment insurance totaled 837,000 last week, …as the jobs market continues its plodding recovery from the coronavirus pandemic… Continuing claims provided some better news, with those collecting benefits for at least two weeks falling by 980,000 to 11.77 million. The continuing claims number runs a week behind.”



(16)
October 1
– Reuters
(Lucia Mutikani):
“U.S. employers announced another 118,804 job cuts in September, with bars, restaurants, hotels and amusement parks leading the pack amid sluggish demand several months after the COVID-19 pandemic struck the nation. The layoffs reported by… Challenger, Gray & Christmas… were up 2.6% from August and boosted total job cuts so far this year to a record 2.082 million. The previous all-time annual high was 1.957 million in 2001.”


(17)
September 30
– CNBC
(Leslie Josephs):
“The terms of billions in federal airline aid expire early Thursday, setting the stage for more than 30,000 job cuts. Airline executives including the CEOs of American, United, Southwest and JetBlue have been making last-ditch attempts in Washington to persuade lawmakers and Trump officials to provide additional aid as the job cuts are set to begin Thursday.”



(18)
September 29
– CNBC
(Sarah Whitten):
“Prolonged closures at Disney’s California-based theme parks and limited attendance at its open parks has forced the company to lay off 28,000 employees across its parks, experiences and consumer products division, the company said. In a memo sent to employees…, Josh D’Amaro, head of parks at Disney, detailed several ‘difficult decisions’ the company has had to make in the wake of the coronavirus pandemic, including ending its furlough of thousands of employees.”



(19)
September 29
– Wall Street Journal
(Aisha Al-Muslim):
“Retail store closings in the U.S. reached a record in the first half of 2020 and the year is on pace for record bankruptcies and liquidations as the Covid-19 pandemic accelerates industry changes… This year’s collapse in American retail could overtake that of 2010, when 48 retailers filed for bankruptcy in the wake of the 2007-09 recession, according to… BDO USA LLP. Including filings through mid-August, BDO said 29 retailers have sought bankruptcy protection in 2020, surpassing the 22 such filings recorded last year.”


(20)
October 1
– Financial Times
(Joshua Chaffin):
“As many as half of New York City’s restaurants could close permanently over the next year due to the coronavirus pandemic, eliminating up to 159,000 jobs, according to an audit issued by the state comptroller. The report offers a dire assessment of an industry that has been especially hard hit by the pandemic but whose precise financial condition has been difficult to pinpoint. Based on credit card transactions and other data, the report concluded that about a third of the city’s restaurants and half of its bars that were open before the pandemic have shut their doors.”



(21)
October 1
– Bloomberg
 (Natalie Wong):
“Office space is flooding the market in Manhattan, as companies look to cut costs during the pandemic. Tenants put 2.5 million square feet up for sublease in the third quarter, more than double the space a year earlier and the biggest quarterly increase since the end of 2008, according to… Savills. Manhattan offices, which emptied out when the pandemic hit in March, are still largely vacant. And with workers staying home, employers in New York are rethinking how much space they need. The sublease space added in the third quarter brought the supply to 16.1 million square feet, just 200,000 shy of the high from 2009, when the financial crisis battered New York City.”



(22)
October 1
– CNBC
(Jessica Bursztynsky):
“Rent prices continued to plunge across the U.S. last month, with San Francisco leading the decline, according to… Zumper… The median rent for a one-bedroom apartment in San Francisco dropped more than 20% from a year ago, to $2,830… That’s the largest decline the company has recorded. Month-to-month, the price of a median one-bedroom in the city dropped nearly 7%... Zumper CEO Anthemos Georgiades pointed toward a flood of supply in the market.”



(23)
October 2
– Wall Street Journal
(Collin Eaton):
“The leaders of U.S. shale companies received some of the largest executive pay increases in corporate America, even as their shareholders lost billions of dollars… The median pay for chief executives of large U.S. oil and gas drillers rose for four straight years, hitting $13 million in 2019. That was up from about $9.9 million in 2015, a stretch when the companies’ median total returns to shareholders fell 35%, according to the WSJ analysis of executive compensation data…”



(24)
October 1
 – Reuters
(Jessica Resnick-Ault and
Arathy Nair):
“Oasis Petroleum Inc and Lonestar Resources US Inc's bankruptcy filings are the latest in a slew of restructurings that put oil-and-gas producers on track for their biggest year of bankruptcies since the 2016 shale downturn. Thirty-six producers with $51 billion in debt filed for bankruptcy protection in the first eight months of the year, according to… Haynes and Boone. The coronavirus pandemic crushed fuel demand and left debt-laden producers without access to credit. The number of companies filing still lags 2016, when 70 companies filed for bankruptcy. However, those firms were generally smaller and left a total of $56 billion in debt.”



(25)
September 27
– Reuters
(David Randall):
“The economic effects of the coronavirus are battering the U.S. commercial-backed securities market, raising the question of the value of hotels, malls, and other buildings that act as collateral for mortgages, according to a report in the Financial Times… Wells Fargo estimates that U.S. properties that have gotten into trouble are being written down by 27% on average… Declining appraisal values could hammer portfolio managers that have moved into the commercial mortgage-backed securities market in search for yield at a time when the Federal Reserve has indicated that it will keep benchmark yields near zero until 2023 at the earliest.”



(26)
September 27
– Bloomberg:
“China’s economic rebound showed signs of plateauing in September, weighed down by lackluster home and car sales, a weaker stock market and worsening business confidence. That’s the assessment from the earliest available indicators, which showed China’s recovery is losing pace. The aggregate index combining eight indicators tracked by Bloomberg this month slipped into contraction, compared to accelerated expansion in August.”



(27)
September 28
– Financial Times
(Tom Mitchell in Singapore
and Xinning Liu):
“Senior Chinese Communist party officials have been sending an ominous message to private sector entrepreneurs in recent weeks. In a series of policy announcements and meetings, they have emphasised that private companies have an important role to play in ‘United Front work’ — a euphemism for efforts aimed at ensuring that non-party organisations and entities support the party’s top policy objectives as well as its iron grip on power. The officials added that they wanted to assemble a ‘team of representatives’ from the private sector. They would be recruited either as party members or to join formal advisory bodies, with a particular focus on younger entrepreneurs in strategically important technology sectors.”



(28)
September 30
– Bloomberg
(Alexander Weber and
Piotr Skolimowski): “
European Central Bank President Christine Lagarde said it’s worth examining a Federal Reserve-style strategy that allows inflation to temporarily rise above the institution’s target. A policy of committing to make up for low inflation after missing the goal for a while ‘could be examined’ as part of the institution’s strategic review, Lagarde said… ‘If credible, such a strategy can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound… This is because the promise of inflation overshooting raises inflation expectations and therefore lowers real interest rates.’”



(29)
September 30
– Bloomberg
(Mario Sergio Lima):
“Brazil’s public debt reached a record in August as the government increases spending to fight the impact of the coronavirus pandemic. The country’s gross debt rose to 88.8% of gross domestic product last month, the highest ever… The primary budget deficit, which excludes interest payments, reached 611.3 billion reais ($108.2bn) in a 12-month period, or 8.5% of GDP.”



(30)
October 1
 – Associated Press
(David McHugh and
Helena Alves):
“Unemployment rose for a fifth straight month in Europe in August and is expected to grow further amid concern that extensive government support programs won’t be able keep many businesses hit by coronavirus restrictions afloat forever. The jobless rate increased to 8.1% in the 19 countries that use the euro currency, from 8.0% in July… The number of people out of work rose by 251,000 during the month to 13.2 million.”



(31)
September 30
– Reuters
(Nvard Hovhannisyan and
Nailia Bagirova):
“NATO allies France and Turkey traded angry recriminations… as international tensions mounted over the fiercest clashes between Azerbaijan and ethnic Armenian forces since the mid-1990s. On the fourth day of fighting, Azerbaijan and the ethnic Armenian enclave of Nagorno-Karabakh accused each other of shelling along the line of contact that divides them in the volatile, mountainous South Caucasus.”

Data source:

http://creditbubblebulletin.blogspot.com/2020/10/weekly-commentary-covid-uncertainties.html