Saturday, January 16, 2021
The Reality of Financial Dominance
by Doug Noland
For the week ending
January 15, 2021:
GLOBAL STOCK MARKETS
S&P500 fell 1.5%
(up 0.3% year-to-date)
Dow Industrials declined 0.9%
(up 0.7%)
S&P 400 Midcaps added 0.3%
(up 5.1%)
Small cap Russell 2000 up 1.5%
(up 7.5%)
Utilities increased 0.9%
(up 0.8%)
Transports gained 0.5%
(up 3.5%)
Nasdaq100 dropped 2.3%
(down 0.7%)
Biotechs gained 1.1%
(up 4.9%).
With bullion falling $21,
the HUI gold stock index fell 5.9%
(down 5.0%).
U.K.'s FTSE
dropped 2.0%
(up 4.3% y-t-d).
Japan's Nikkei
gained 1.4%
(up 3.9% y-t-d)
France's CAC40
fell 1.7%
(up 1.1%)
German DAX
lost 1.9%
(up 0.5%)
Spain's IBEX 35
dropped 2.1%
(up 1.9%).
Italy's FTSE MIB
fell 1.8%
(up 0.7%)
Brazil's Bovespa
sank 3.8%
(up 1.1%)
Mexico's Bolsa
fell 1.8%
(up 4.1%).
South Korea's Kospi
declined 2.1%
(up 7.4%).
India's Sensex
increased 0.5%
(up 2.7%).
China's Shanghai
was little changed
(up 2.7%).
Turkey's Istanbul National 100
fell 1.0%
(up 3.2%).
Russia's MICEX
was little changed
(up 4.9%).
US BONDS & MORTGAGES
Ten-year Treasury yields
dipped three bps to 1.08%
(up 17bps).
Federal Reserve Credit
Over the past year
expanded 76%.
M2 (narrow) "money" supply
surged 25% over the past year.
Freddie Mac 30-year
fixed mortgage rates
surged 14 bps to 2.79%
(down 86bps y-o-y).
Fifteen-year rates
rose seven bps to 2.23%
(down 86bps).
Five-year hybrid ARM rates
spiked 37 bps to 3.12%
(down 27bps).
Jumbo mortgage
30-year fixed rates
added a basis point to 2.95%
(down 104bps).
COMMODITIES:
Bloomberg Commodities Index
rose 1.0%
(up 3.1% y-t-d).
Spot Gold
declined 1.1% to $1,828
(down 3.7%).
Silver
gained 0.9% to $24.866
(down 5.9%).
WTI crude
increased 12 cents to $52.36
(up 7.9%).
Gasoline
declined 0.9%
(up 8%)
Natural Gas
gained 1.4%
(up 7.8%).
Copper
dropped 1.9%
(up 2%).
Wheat
surged 5.8%
(up 6%).
Corn
jumped 7.1%
(up 10%).
Bitcoin
dropped $3,779
to $36,262
(up 24.7%)
DEFICIT SPENDING:
... The Biden administration Thursday released details of its Covid stimulus package with a price tag of $1.9 TN. ... It appears likely that this year’s fiscal deficit will now even exceed last year’s unprecedented $3.1 TN. Our federal government is in the process of expanding debt by more than 30% of GDP in only two years.
The system is today one unexpected spike in market yields away from mayhem. Why are current deficits not alarming, when past deficits a fraction of today’s size were recognized as dangerous and unsustainable?
... Inflation risk is the highest it’s been in years. The 10-year Treasury “breakeven” inflation rate added a couple more basis points this week to 2.09%, the high since October 2018. Commodity prices continue to rally, with the Bloomberg Commodities Index closing Friday near one-year highs. Services and manufacturing surveys indicate heightened price pressures.
January 11 – CNBC (Noah Higgins-Dunn):
“New, more contagious mutated variants of the coronavirus are ‘highly problematic’ and could cause more cases and hospitalizations if the virus’ spread isn’t immediately suppressed, the head of the World Health Organization said… The global health agency was alerted over the weekend of a new Covid-19 strain discovered in Japan… On Sunday, Japan’s National Institute of Infectious Diseases said it discovered a new coronavirus variant in four travelers arriving from Brazil. The variant appears to have some of the same mutations as other strains discovered in the United Kingdom and South Africa, the institute said.”
January 13 – Reuters (Kate Kelland):
“People who have had COVID-19 are highly likely to have immunity to it for at least five months, but there is evidence that those with antibodies may still be able to carry and spread the virus, a study of British healthcare workers has found.”
January 12 – CNBC (Yen Nee Lee):
“The Covid-19 vaccine developed by China’s Sinovac Biotech is just 50.4% effective in a Brazilian trial — barely meeting the threshold for regulatory approval and well below the initially reported efficacy rate, according to several media reports. Brazil is the first to complete late-stage trial of the vaccine CoronaVac.”
ALL OTHER NEWS:
January 14 – Bloomberg (Katherine Greifeld):
“ ... Over the last 30 days, an average of more than 22 million calls traded across U.S. exchanges -- close to a record… That’s forced the dealers selling those contracts to buy the underlying shares to offset any option price drift, boosting their potential selling pressure to an all-time high, according to at least one model. To some, the feverish call-buying is fueling a bullish feedback loop in equities as market makers hedge their positions. Retail traders have stoked the frenzy, with JPMorgan... analysts noting that small-trader call option buying has rebounded abruptly after December’s seasonal dip.”
January 14 – Bloomberg (Vildana Hajric, Claire Ballentine and Michael P. Regan):
“ ... Fact: shortly before 1 p.m. New York time Thursday, there were six penny stocks posting daily gains of at least 9,900%. Off-exchange venues where unlisted equities trade had seen about 38 billion shares change hands, up sevenfold from the average a year ago. Ascribe it to what you want: a boom in retail trading triggered by injections of government cash, stay-at-home orders and commission-free brokerages, maybe even the buy-low approach on steroids. More than 1 trillion shares changed hands in December over lightly regulated quotation systems run by firms like OTC Markets.”
January 12 – Reuters (Tim Ahmann):
“An FBI office in Virginia issued an internal warning the day before rioters supporting President Donald Trump stormed the U.S. Capitol that extremists were planning to come to Washington and were talking of ‘war,’ the Washington Post reported…
January 11 – Wall Street Journal (Kate Davidson):
“The Federal Reserve sent $88.5 billion in profits to the U.S. Treasury Department in 2020, a nearly two-thirds increase from the previous year as lower rates held down the central bank’s interest expense. The Fed’s payments to the Treasury had fallen over the previous four years as interest rates rose, boosting the interest it paid on reserves, or money that private banks keep at the Fed’s regional reserve banks.”
January 13 – Reuters:
“U.S. consumer prices increased solidly in December amid a surge in the cost of gasoline, though underlying inflation remained tame… The… consumer price index increased 0.4% last month after gaining 0.2% in November. An 8.4% jump in gasoline prices accounted for more than 60% of the rise in the CPI. In the 12 months through December the CPI advanced 1.4% after increasing 1.2% in November.”
January 14 – Bloomberg (Olivia Rockeman):
“Applications for U.S. state unemployment benefits surged last week by the most since late March, pointing to persistent labor-market pain as coronavirus infections continue to soar and potentially adding to momentum for a larger federal stimulus plan. Initial jobless claims in regular state programs rose by 181,000 to 965,000 in the week ended Jan. 9, according to… data… that showed a broad number of states with large increases. On an unadjusted basis, the figure jumped to 1.15 million. The scope of the increase caught many economists by surprise…”
January 15 – Bloomberg (Olivia Rockeman):
“U.S. retail sales declined at the close of the holiday-shopping season, wrapping up a painful year for the nation’s merchants... Total retail receipts decreased 0.7% in December from the prior month after a downwardly revised 1.4% drop in November… ‘The December retail results were an absolute disaster,’ Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said… ‘Clearly, consumer spending slowed down sharply in November and December as the virus gained ground and forced closures of stores and restaurants in many key states.’”
January 12 – Bloomberg (Julia Fanzeres):
“U.S. small-business optimism slumped in December to a seven-month low as Covid-19 infections spread at a record rate and governments tightened restrictions on activity. The National Federation of Independent Business index of sentiment decreased by 5.5 points to 95.9… The figure was weaker than the median projection of 100.2… Nine out of the 10 subindexes declined in December.”
January 12 – Bloomberg (Noah Buhayar):
“San Francisco’s office market is being hit so hard by the pandemic that, by some measures, it’s worse than the global financial crisis or dot-com collapse. The city’s office-vacancy rate reached 16.7% at the end of 2020, up 11 percentage points from a year prior, according to… Cushman & Wakefield. That’s a higher level than in the aftermath of the 2008 recession.”
January 12 – Bloomberg (Fola Akinnibi):
“The muni-bond market has never looked more expensive. A key measure of relative value in the $3.9 trillion market for state and local government debt, the ratio of top-rated 10-year muni yields to U.S. Treasury securities, is holding at 67%. That’s the lowest level since at least 2001 and in stark contrast to March, when the ratio stood at 215%, according to the Bloomberg BVAL index.”
January 10 – Reuters (Yimou Lee, David Brunnstrom and Humeyra Pamuk): “China condemned the United States… for scrapping curbs on interactions with Taiwan officials, saying nobody could prevent China’s ‘reunification’, while Taiwan’s foreign minister hailed the U.S. move as a sign of ‘global partnership’… China, which claims democratic Taiwan as its own territory, said it was ‘resolutely opposed’ to the decision and condemned it. ‘The Chinese people’s resolve to defend our sovereignty and territorial integrity is unshakable and we will not permit any person or force to stop the process of China’s reunification,’ Foreign Ministry spokesman Zhao Lijian told reporters.”
January 13 – Wall Street Journal (Stella Yifan Xie, Eun-Young Jeong and Mike Cherney):
“China ended the Year of Covid in many ways stronger than it started, accelerating its movement toward the center of a global economy long dominated by the U.S. While the U.S. and Europe wait for vaccine rollouts to get fully back on track, China is the only major economy expected to report growth for 2020… It has expanded its role in global trade and shored up its position as the world’s factory floor… China’s consumer market—lifted by its quick recovery from Covid-19—keeps gaining momentum, making it a bigger driver of global companies’ earnings. And the country has solidified its standing as a force in global financial markets, with a record share of initial public offerings and secondary listings in 2020, large capital inflows into stocks and bonds, and indexes that far outperformed even the U.S.’s strong showing.”
January 13 – Bloomberg:
“China’s export boom continued into December, pushing the trade surplus to a record high in the month… Fueling the shipments surge is insatiable global appetite for work-from-home technology and health care equipment as Covid-19 continues to surge in many places around the world. Demand is so strong that’s it’s contributing to a bottleneck at ports as manufacturers complain of a shortage of shipping containers and surging costs… Exports grew 18.1% in dollar terms in December from a year earlier -- softer than November’s bumper 21.1% expansion -- while imports rose 6.5%...”
January 11 – Bloomberg (Suvashree Ghosh and Rahul Satija):
“India’s central bank expects banks’ bad-loan ratios to almost double this year and warned that soaring markets and a weakened economy threaten financial stability. The Reserve Bank of India forecasts non-performing assets will rise to 13.5% of total advances by the end of September from 7.5% a year ago… If the number holds through the fiscal year ending March 2022, it would be the worst since 1999. ... ”
January 13 – Financial Times (Miles Johnson):
“The Italian government was plunged into crisis… after the resignation of three ministers from the ruling coalition put the future of prime minister Giuseppe Conte in doubt. The departures came as Matteo Renzi, the former prime minister and leader of the small Italia Viva party, pulled his support from Mr Conte’s coalition. That decision followed weeks of sustained criticism of the government’s economic response to the coronavirus pandemic.”
January 15 – CNBC (Silvia Amaro):
“The whole Dutch government collectively resigned on Friday after a scandal involving the mismanagement of childcare funds, which drove thousands of families into financial hardship. An investigation revealed in December that tax officials wrongly accused thousands of working families of fraud and ordered them to repay childcare benefits between 2013 and 2019.”
January 14 – Associated Press (David McHugh):
“The German economy, Europe’s largest, shrank by 5% in the pandemic year 2020, ending a decade of growth as lockdowns wiped out much business and consumer activity. As dreary as the numbers were, the drop was smaller than many had expected…”
January 11 – Reuters (James Pomfret):
“The arrest of more than 50 democrats in Hong Kong last week intensifies a drive by Beijing to stifle any return of a populist challenge to Chinese rule and more measures are likely, according to two individuals with direct knowledge of China’s plans. While stressing that plans haven’t been finalised, the individuals said it was possible that Hong Kong elections - already postponed until September on coronavirus grounds - could face reforms that one person said were aimed at reducing the influence of democrats.”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.