Source:
http://creditbubblebulletin.blogspot.com/2020/12/weekly-commentary-just-facts-12252020.html
For the week ending
Friday, December 25, 2020
by Dog Noland
GLOBAL STOCKS:
S&P500 slipped 0.2% (up 14.6% y-t-d)
Dow Industrials little changed (up 5.8%)
Utilities declined 0.9% (down 2.9%)
Transports dipped 0.3% (up 14.9%)
S&P 400 Midcaps rose 1.2% (up 12.2%)
Small cap Russell 2000 jumped 1.7% (up 20.1%)
Nasdaq100 slipped 0.2% (up 45.6%)
Biotechs added 0.3% (up 17.1)
Though gold bullion added $2,
the HUI gold stock index declined 0.8%
(up 24.4%).
U.K.'s FTSE declined 0.4% (down 13.8%).
Japan's Nikkei fell 0.4% (up 12.7% y-t-d).
France's CAC40 little changed (down 7.6%)
German DAX slipped 0.3% (up 2.6%)
Spain's IBEX 35 gained 0.9% (down 15.1%).
Italy's FTSE MIB rose 0.7% (down 5.9%)
Brazil's Bovespa dipped 0.2% (up 1.9%)
Mexico's Bolsa fell 1.1% (down 0.4%)
South Korea's Kospi jumped 1.3% (up 27.7%).
India's Sensex unchanged (up 13.9%).
China's Shanghai fell 0.9% (up 10.3%).
Turkey's Istanbul National 100 gained 1.3% (up 24.6%).
Russia's MICEX fell 1.1% (up 6.3%).
U.S. BONDS & MORTGAGES
Ten-year U.S. Treasury bond yields
slipped two bps to 0.93%
(down 99bps year over year).
Freddie Mac 30-year
fixed mortgage rates
declined a basis point
to a record low 2.66%
(down 108bps y-o-y).
Fifteen-year rates
fell two bps
to an all-time low 2.19%
(down 100bps).
Five-year hybrid ARM rates
were unchanged at 2.79%
(down 66bps)
Jumbo mortgage
30-year fixed rates
up four bps to 2.93%
(down 107bps).
COMMODITIES:
Bloomberg Commodities Index
declined 0.4%
(down 4.8% y-t-d).
Spot Gold little changed at $1,883
(up 24.1%).
Silver declined 0.5% to $25.908
(up 44.6%).
WTI crude fell 87 cents to $48.23
(down 21%).
Gasoline lost 1.2%
(down 18%)
Natural Gas sank 6.7%
(up 15%).
Copper dropped 1.8%
(up 27%).
Wheat jumped 3.1%
(up 12%).
Corn surged 3.1%
(up 16%).
COVID-19 NEWS:
December 23 – Wall Street Journal (Joe Barrett and Ben Kesling):
“States and major cities across the country have imposed the most extensive restrictions on business and social gatherings since widespread lockdowns during the spring, in hopes of preventing a further surge in Covid-19 cases over the winter holidays… Nearly 85 million Americans are expected to travel from Dec. 23 through Jan. 3, off at least 29% from last year, according to an estimate by AAA.”
December 23 – CNBC (Susan Heavey and Gabriella Borter):
“Americans were warned again… not to travel for Christmas as the latest COVID-19 surge left hospitals struggling to find beds for the sick and political leaders imposed restrictions to try to curb new infections, making for a grim holiday season… In California, an epicenter of the latest surge, intensive care unit (ICU) beds were scarce and hospitals said they lacked enough doctors and nurses to care for patients. ‘The whole California ICU capacity has been going down. We are all struggling,’ said Dr. Imran Mohammed of Sutter Roseville Medical Center… ‘We really don’t want to see more than this. We will be challenged to see further ICU patients and we will have no place eventually.’”
December 19 – CNBC (Greg Iacurci):
“Almost 8 million people have fallen into poverty since the summer. Savings for many, especially the lowest earners, are either dwindling or gone. Millions of households owe thousands in back rent and utilities — and face a renewed threat of eviction in the new year. A growing share of unemployed individuals say their households don’t have enough to eat.”
December 21 – Associated Press (Christopher Weber):
“California’s overwhelmed hospitals are setting up makeshift extra beds for coronavirus patients, and a handful of facilities in hard-hit Los Angeles County are drawing up emergency plans in case they have to limit how many people receive life-saving care. The number of people hospitalized across California with confirmed COVID-19 infections is more than double the state’s previous peak, reached in July, and a state model forecasts the total could hit 75,000 patients by mid-January.”
December 20 – Bloomberg:
“U.K. Health Secretary Matt Hancock warned that the new strain of the coronavirus is ‘out of control’ and suggested parts of England will be stuck in the new, highest tier of restrictions until a vaccine is rolled out. More than 16 million Britons are now required to stay at home after a lockdown came into force Sunday in London and southeast England and the government scrapped plans to relax rules on socializing at Christmas.”
December 22 – Financial Times (Clive Cookson, Anna Gross and John Burn-Murdoch):
“Scientists are scrambling to understand the new coronavirus variant that has devastated the Christmas plans of millions of people in Britain and left the UK largely isolated from the rest of the world… Labelled B.1.1.7… It was first detected in mid-October when the Covid-19 Genomics UK Consortium (Cog-UK)… But scientists did not become alarmed about B.1.1.7 until mid-December when they associated it with rapidly rising case numbers in south-east England. B.1.1.7 has far more mutations than in any previous variant of the Sars-Cov-2 virus analysed since the pandemic started. Twenty-three letters of the viral genetic code have changed, of which 17 could alter the behaviour of the virus. They include several mutations on the key ‘spike protein’ that it uses to enter human cells.”
December 23 – CNBC:
“The U.S. began vaccinating the population against the coronavirus last week, but mass adoption is not a guarantee. Nearly 4 in 10 Americans say they would ‘definitely’ or ‘probably’ not get a vaccine, according to a Pew Research Center survey of 12,648 U.S. adults from Nov. 18 to 29.”
December 21 – Bloomberg (John Tozzi):
“The National Institutes of Health plans to begin a clinical trial that aims to help doctors ‘predict and manage’ allergic reactions related to Pfizer Inc.’s Covid-19 vaccine. Moncef Slaoui, chief scientific adviser to Operation Warp Speed, said… the aim of the trial, which will also study the Moderna Inc. shot just authorized for emergency use, will be to pinpoint why the incidents, known as anaphylaxis, are occurring.”
OTHER NEWS:
December 19 – Bloomberg:
“Global stocks are now worth around $100 trillion. American companies have raised a record $175 billion in public listings. Some $3 trillion of corporate bonds are trading with negative yields. All the while the virus spreads, the economic cycle stays on life-support and businesses get thrashed by fresh lockdowns. Spurred by endless monetary stimulus and bets on a post-pandemic world, day traders and institutional pros alike are enjoying the easiest financial conditions in history. ‘Sentiment indicators are moving to euphoria,’ said Cedric Ozazman, chief investment officer at Reyl & Cie... ‘People are now jumping to invest amid fears they will miss the Santa Claus rally.’”
December 21 – Financial Times (David Carnevali):
“Purchases of call options… have surged since November’s US election and Covid-19 vaccine breakthroughs, according to exchange operator Cboe. The daily trading volumes of call contracts, which are effectively a bet on rising prices, have far outpaced put options, which give the buyer a right to sell shares at a set level. The put/call ratio is just the latest indication of enthusiasm for stocks, despite the continuing rise in coronavirus cases and major cities turning again to lockdowns, investors and analysts have said.”
December 22 – CNBC (Mike Calia):
“President Donald Trump, in a stunning nighttime tweet, called the $900 billion Covid relief bill passed by Congress an unsuitable ‘disgrace’ and urged lawmakers to make changes to the measure, including bigger direct payments to individuals and families. Trump also suggested that his administration might be the ‘next administration,’ despite his loss to President-elect Joe Biden… The president’s Tuesday night tweet, which included a video of him discussing what he considers the bill’s many flaws, including funding headed overseas, came less than 24 hours after the Senate passed the measure. The foreign aid provisions are part of a $1.4 trillion measure to keep the government funded, which was paired with the Covid relief bill.”
December 24 – CNBC (Jacob Pramuk and Tucker Higgins):
“House Republicans on Thursday blocked a Democratic attempt to pass $2,000 direct payments to Americans, as the fate of the massive coronavirus relief package passed by Congress earlier in the week hangs in the balance. The Democrats moved to increase the size of the checks after President Donald Trump threatened to oppose the $2 trillion pandemic aid and federal funding bill because it included only $600 in direct payments rather than $2,000… The House tried to pass the $2,000 payments during a pro forma session on Christmas Eve day, a brief meeting of the chamber where typically only a few members attend. Democrats aimed to approve the measure by unanimous consent, which means any one lawmaker can block it.”
December 21 – Bloomberg (Erik Wasson, Laura Litvan and Billy House):
“The Senate… passed a giant year-end spending bill combining $900 billion in Covid-19 relief aid with $1.4 trillion in regular government funding and a bevy of tax breaks for businesses. The vote was 92-6 after the House passed the combined bill in two votes of 327-85 and 359-53. The legislation now will go to President Donald Trump, whose aides said would sign it when it arrives at the White House this week. The House and Senate also cleared a seven-day stopgap funding bill to avert a partial government shutdown while the broader legislation is prepared for the president. The 5,593-page bill, which totals more than $2.3 trillion, contains the second-largest economic relief measure in U.S. history -- after the $1.8 trillion Cares Act passed in March…”
December 23 – Wall Street Journal (Josh Mitchell):
“Household spending dropped for the first time in seven months and layoffs remained elevated as a surge in virus cases weighed on economic recovery. After going on a shopping spree this summer, consumers closed their wallets last month, cutting spending by 0.4%... They cut spending on services such as restaurant meals, as well as purchases of goods, including big-ticket items… Household incomes also took a hit as the effects of federal aid programs put in place earlier this year fade. Household income—measuring what Americans received in wages, investment returns and government aid—fell 1.1%, the third drop in four months.”
December 23 – Reuters (Lucia Mutikani):
“Sales of new U.S. single-family homes fell more than expected in November, but the housing market remains underpinned by historically low mortgage rates. New home sales tumbled 11.0% to a seasonally adjusted annual rate of 841,000 units last month… October’s sales pace was revised down to 945,000 units from the previously reported 999,000 units… New home sales jumped 20.8% on a year-on-year basis.”
December 21 – Bloomberg (Drew Singer):
“In a year that saw a pandemic upend financial markets and economies around the globe, U.S. companies and their largest shareholders raised a record $435 billion with stock sales. That’s far above the previous high of $279 billion set in 2014… About a quarter of this year’s bonanza came from traditional initial public offerings, which have raised a record $100 billion -- the most ever… In a departure from past years, the largest IPOs delivered some of the best returns in 2020. Freshly minted stocks such as Snowflake Inc., Airbnb Inc. and Unity Software Inc. have soared… Companies that have raised more than $1 billion are trading 81% above their average offering price…”
December 23 – Bloomberg (Crystal Tse):
“There’s no stopping the SPAC, which emerged from obscurity to seemingly take over finance in 2020. Special purpose acquisition companies, or SPACs, went from a back-of-the-shelf financial vehicle to one of the biggest segments of initial public offerings, with a record $78 billion raised in the U.S. this year… That exceeded the combined total of SPACs in all previous years and made up about 45% of this year’s record $177 billion IPO volume… Blank-check companies, as SPACs are also known, will continue to shake up not only equity markets but also mergers and acquisitions in 2021, dealmakers predict. Still, the flood of SPACs searching for acquisition targets -- plus the new ones being raised every day trying to woo investors -- could create a challenging dynamic.”
December 22 – Bloomberg (Josh Saul and Katherine Doherty):
“This month has seen 16 large companies file for bankruptcy protection in the U.S., the most of any December since 2011… The 44 bankruptcies by companies with over $50 million since Oct. 1 make the fourth quarter of 2020 the worst for that period since 2009… Experts have said the pain will continue next year. Real estate could be a specific area that comes under pressure, said Cynthia Romano, global director of CohnReznick LLP’s restructuring and dispute resolution practice. ‘Real estate companies are not going to be able to stomach rent abatement for another 12 months,’ she said… ‘Real estate will be the next domino to fall unless there’s some kind of relief.’”
December 20 – Wall Street Journal (Peter Rudegeair):
“ The Paycheck Protection Program funneled $525 billion in forgivable loans to millions of small businesses in the pandemic’s early days. Yet that massive infusion masked a years long contraction in small-business lending that happened alongside a big-business borrowing boom. In 2007, banks held $721 billion in small loans to businesses and small commercial mortgages of $1 million or less, according to an analysis of bank regulatory filings by Florida Atlantic University professor Rebel A. Cole. By 2019, such loan balances had fallen around 6% to $680 billion. Bigger business loans and commercial mortgages, meanwhile, more than doubled to $2.82 trillion.”
December 22 – Financial Times (Joe Rennison):
“US companies have borrowed a record $2.5tn in the bond market in 2020. The borrowing binge has driven leverage… to an all-time peak for higher-rated, investment grade companies, having already surpassed historic records at the end of 2019… At the same time, companies’ ability to pay for the increase in debt has declined, with the number of so-called zombie companies — whose interest payments have been higher than profits for three years running — rising close to the historic peak…”
December 23 – Wall Street Journal (Paul J. Davies):
"Private debt has grown to become a major part of the financial infrastructure in the U.S. and Europe since the 2008 financial crisis, as banks reduced lending to smaller companies. It is different from other forms of lending because it is done directly from a specialist fund manager to all sorts of companies—dentists, restaurants, insurance brokers and software makers, among others—without going through either a bank or bond markets. Many companies have faced hard times during lockdowns, but the unprecedented support from governments and central banks across economies in the U.S. and Europe has limited the damage… Assets under management at private-debt funds have rocketed from less than $200 billion globally in 2007 to $850 billion by the end of March this year…”
December 21 – Bloomberg (Cecile Gutscher and Sam Potter):
“Tesla Inc.’s entry to the S&P 500 may be stoking relentless controversy, but in a specialized market for risk assets the electric-car maker is eliciting cheers all round. Fueled by the Tesla effect, convertible bonds -- which start life as low-interest debt but can turn into shares if stock prices get high enough -- are poised for one of their best-ever years. A Bloomberg index of the securities is at an all-time high while U.S. exchange-traded funds that track the assets hold a record $8.2 billion.”
December 20 – Reuters (Gabriel Crossley and Stella Qiu):
“China’s manufacturing recovery, fuelled in part by demand from COVID-constrained consumers abroad, has soared past expectations this year, so much so that factories are now struggling to fill a shortage of blue-collar workers… The country’s output of industrial robots, computer equipment, and integrated circuits has roared back from its coronavirus paralysis - production for the year to November is up 22.2%, 10.1% and 15.9%... Much of the manufacturing boom has come from foreign demand, with export growth topping expectations for eight of the last nine months.”
December 20 – Bloomberg (Lilian Karunungan):
“It says a lot about the state of global financial markets when countries such as Ghana, Senegal and even Belarus are being touted as the best places for investors to pick up returns in 2021. But, with the latest signal from the Federal Reserve that U.S. rates will stay lower for longer, the highest-yielding -- and riskiest -- corners of the world’s bond markets are being tipped as a top investment choice for the coming year… The willingness of bond-buyers to move up the risk ladder would underscore how rising U.S. Treasury rates will do little to dim the appeal of developing-nation debt as long as an $18 trillion pile of negative-yielding debt hangs over markets and central banks remain accommodative. Even among developing economies, spreads on bonds from lower-risk borrowers have narrowed so much that investors are being forced to go further into junk territory for better returns.”
December 20 – Reuters (Tetsushi Kajimoto):
“Japan’s cabinet approved… a record $1.03 trillion budget draft for the next fiscal year starting in April 2021…, as the coronavirus and stimulus spending puts pressure on already dire public finances. The 106.6 trillion yen ($1.03 trillion) annual budget also got a boost from record military and welfare outlays. It marked a 4% rise from this year’s initial level, rising for nine years in a row, with new debt making up more than a third of revenue. From Europe to America, policymakers globally have unleashed a torrent of monetary and fiscal stimulus to prevent a deep and prolonged recession as the pandemic shut international borders and sent many out of work.”
December 21 – Wall Street Journal (Kevin Poulsen, Robert McMillan and Dustin Volz):
“The suspected Russian hackers behind breaches at U.S. government agencies also gained access to major U.S. technology and accounting companies, at least one hospital and a university… The Journal identified infected computers at two dozen organizations that installed tainted network monitoring software called SolarWinds Orion that allowed the hackers in via a covertly inserted backdoor. It gave them potential access to much sensitive corporate and personal data. Among them: technology giant Cisco…, Intel Corp. and Nvidia Corp. , accounting firm Deloitte LLP, cloud-computing software maker VMware Inc. and Belkin International Inc., which sells home and office Wi-Fi routers and networking gear…”
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