Financial data and economic news for the week ending February 5, 2021

Source:

http://creditbubblebulletin.blogspot.com/2021/02/weekly-commentary-thats-on-them.html

Friday, February 5, 2021
Weekly Commentary
by Doug Noland

Following is my highly edited
and easy to read version
of the original column.


For the week ending
February 5, 2020:

S&P500 surged 4.6%
   (up 3.5% y-t-d)

Dow rose 3.9%
   (up 1.8%)

Utilities rallied 2.4%
   (up 1.8%)

Transports rose 5.8%
   (up 2.3%)

S&P 400 Midcaps jumped 5.8%
    (up 7.4%)

Small cap Russell 2000 surged 7.7%
    (up 13.1%)

Nasdaq100 rose 5.2%
    (up 5.6%)

Biotechs jumped 4.2%
   (up 8.7%).

Though gold bullion fell $34,
the HUI gold index gained 1.1%
    (down 4.3%).


Great Britain's FTSE recovered 1.3% (up 0.4% y-t-d).

Japan's Nikkei rallied 4.0% (up 4.9% y-t-d).

France's CAC40 surged 4.8% (up 1.9%)

German DAX rose 4.6% (up 2.5%). 

Spain's IBEX 35 surged 5.9% (up 1.7%). 

Italy's FTSE MIB jumped 7.0% (up 3.8%)

Brazil's Bovespa rose 4.5% (up 1.0%)

Mexico's Bolsa gained 2.7% (up 0.2%). 

South Korea's Kospi surged 4.9% (up 8.6%). 

India's Sensex equities index surged 9.6% (up 6.2%). 

China's Shanghai increased 0.4% (up 0.7%). 

Russia's MICEX  jumped 3.5% (up 3.2%).


US  BONDS  &  MORTGAGES

Ten-year Treasury yields jumped 10 bps to 1.17% 

(up 25bps year over year).

Federal Reserve Credit 

expanded 78.8% over the past year.

M2 money" supply 

surged 26.1%, over the past year.

Freddie Mac 30-year
fixed mortgage rates
were unchanged at 2.73%
   (down 72bps y-o-y).

Fifteen-year rates
added a basis point to 2.21%
 (down 76bps).

Five-year hybrid ARM rates
declined two bps to 2.78%
   (down 54bps)

Jumbo mortgage 30-year fixed rates
down two bps to 2.87%
   (down 82bps).



COMMODITIES:
Bloomberg Commodities Index jumped 3.0%
   (up 5.7% y-t-d).

Spot Gold declined 1.8% to $1,814
   (down 4.5%).

Silver ended a volatile week
little changed at $26.92
   (up 1.9%).

WTI crude surged $4.65 to $56.85
    (up 17%).

Gasoline jumped 6.2%
   (up 17%)

Natural Gas surged 11.7%
   (up 13%).

Copper gained 2.0%
   (up 3.0%).

Wheat dropped 3.3%
   (unchanged).

Corn added 0.3%
   (up 13%).

Bitcoin gained $3,218, or 9.3%,
this week to $37,859
   (up 30%).


GameStop collapsed 80% this week,
with Express and AMC Entertainment
down 48%, Vaxart 36%, and
Siebert Financial 31%.

Wealth was redistributed –
and count me skeptical
that the flow was from
professional speculators
to retail traders.

I am reminded of the sage words

from the late German economist 

Dr. Kurt Richebacher: 

“The only cure for a Bubble 

is to not let it inflate.”

COVID  NEWS:

February 1 – Associated Press (Michael Kunzelman and Michelle Smith): 

“The deadliest month yet of the coronavirus outbreak in the U.S. drew to a close with certain signs of progress: COVID-19 cases and hospitalizations are plummeting, while vaccinations are picking up speed. The question is whether the nation can stay ahead of the fast-spreading mutations of the virus. The U.S. death toll has climbed past 440,000, with over 95,000 lives lost in January alone. Deaths are running at about 3,150 per day on average, down slightly by about 200 from their peak in mid-January.”

January 30 – Los Angeles Times (Emily Baumgaertner):
“New data showing that two COVID-19 vaccines are far less effective in South Africa than in other places they were tested have heightened fears that the coronavirus is quickly finding ways to elude the world's most powerful tools to contain it. The U.S. company Novavax reported this week that while its vaccine was nearly 90% effective in clinical trials conducted in Britain, the figure fell to 49% in South Africa…”

February 3 – Financial Times (Michael Pooler, Clive Cookson and Carolina Pulice):
“A more transmissible strain of coronavirus linked to an explosion of infections in the Amazonian city of Manaus is believed to be spreading throughout Brazil, where it could become the main variant, according to scientists. Researchers revealed last month they had detected the P. 1 lineage of Sars-Cov-2 in the remote rainforest municipality… The variant has also been registered in São Paulo, as well as in several other countries. Specialists… said there was now a risk of the strain taking hold more broadly throughout Latin America’s largest nation…”

February 1 – Wall Street Journal (Sumathi Reddy):
“Even people with asymptomatic Covid cases can have after-effects in their bodies, research indicates… An estimated one-quarter to one-third of Covid infections are asymptomatic… Multiple studies have shown asymptomatic patients can have irregular lung scans. A couple of small studies have found cardiac issues in student athletes, including those with asymptomatic infections. And a study looking at asymptomatic and mild cases of Covid in children found signs of possible small blood vessel damage. It’s not yet clear what health consequences any of these after-effects may have, if any, doctors say.”

ALL  OTHER  NEWS:

January 30 – Financial Times (Ortenca Aliaj and Robin Wigglesworth):  

“Renowned short-seller Jim Chanos says the GameStop saga has been the most ‘surreal’ episode in his career, and worries that things are going ‘completely off the rails’ with populist politicians looking to capitalise on the situation. ‘This was a week even us ancients haven’t seen before,’ Mr Chanos said… ‘I have been doing this for 40 years and I don’t remember a period like the past 10 days.’”

January 30 – Reuters (David Randall):
“The date: February 3, 1636. On that day, the infamous Dutch tulip bubble burst during an outbreak of the bubonic plague, illustrating that asset prices can plummet just as quickly as they soar, leaving only pain behind. Now, almost exactly 385 years and another pandemic later, Wall Street waits to see how long it will take for history to repeat itself.”


February 2 – Reuters (Imani Moise and Medha Singh):
“Apex Clearing, which helps facilitate trades for brokerages, said the nearly 6 million accounts it opened in 2020 represented a 137% increase from the year before. About 1 million of those belonged to Gen Z investors born in the late-1990s or younger, with an average age of 19.”

February 4 – Financial Times (Colby Smith):
 “A sell-off in 30-year Treasuries has pushed the US yield curve… to its steepest level in more than five years. Investors said the development reflected the prospects of a large additional injection of economic stimulus from the Biden administration, along with the stronger global growth expected as vaccination drives gather pace.”

February 3 – Bloomberg (Erik Wasson, Justin Sink and Jennifer Jacobs):  

“President Joe Biden told House Democrats… that backing anything less than $1,400 stimulus checks would mean starting his presidency with a broken promise… Biden said he was open to considering tighter eligibility requirements for stimulus checks but signaled he wasn’t willing to reduce the standard of a $1,400 payment outlined in his aid package… Republican lawmakers have suggested both reducing the amount of the next round of stimulus checks and sending them to a smaller group of Americans.”

February 2 – Bloomberg:
“The Senate… began a process that would let Democrats pass President Joe Biden’s $1.9 trillion stimulus without Republican votes… With a 50-49 vote Tuesday, the Senate opened debate on a budget resolution for the 2021 fiscal year, a maneuver that would clear the way for the president’s relief plan to pass in the chamber with a simple majority rather than the 60-vote threshold for most legislation. Senate Majority Leader Chuck Schumer said that the process, known as reconciliation, is open to GOP participation and the stimulus package can still be tweaked with their input. But he said Democrats won’t risk moving slowly or timidly to bolster the economy.”

February 1 – Reuters (Lucia Mutikani):
“U.S. construction spending raced to a record high in December as historically low mortgage rates powered outlays on private projects. The Commerce Department said… construction spending increased 1.0% to $1.490 trillion, the highest level since the government started tracking the series in 2002.”


February 3 – Reuters (Ben Klayman):
“General Motors Co became the latest automaker hit by the global shortage of semiconductor chips as the U.S. automaker said… it will take down production next week at four assembly plants.”


February 2 – Financial Times (Derek Brower and Anjli Raval):
“The pandemic’s devastating impact on Big Oil was illustrated on Tuesday when some of the world’s biggest energy groups reported record annual losses, marking a brutal 12 months for an industry under mounting pressure to speed up a transition to cleaner fuels. ExxonMobil… racked up losses of more than $20bn last year — the first annual loss in its history… ‘The past year presented the most challenging market conditions ExxonMobil has ever experienced,’ said Darren Woods, chief executive.”


February 3 – Bloomberg (Caleb Mutua):
“Bond investors are shoveling money at technology companies, allowing them to borrow at rates that might be less than zero after inflation. On Monday, Apple Inc. borrowed $14 billion, its largest bond offering since 2013. The five-year portion of the deal featured a yield of just around 0.75 percentage points, a figure below recent measures of U.S. inflation rates. In Asia, Alibaba Group Holding Ltd. is holding investor calls on Wednesday for a dollar bond offering of as much $5 billion.”


February 2 – Bloomberg (Jeremy Hill and Katherine Doherty):
“More U.S. bankruptcy filings are happening with restructuring plans already in place, a trend that’s likely to extend as companies look to save time and money by reorganizing before they get to court. CiCi’s Holdings Inc., parent of the unlimited pizza buffet chain, entered bankruptcy last month with a plan to hand ownership to lenders. Alpha Media Holdings… filed for Chapter 11 with a similar deal already agreed. Department store chain Belk Inc. hopes to go one step further this month by filing a pre-packaged bankruptcy, meaning it will complete negotiations with all parties, solicitation and voting in advance.”


January 31 – Reuters (Stella Qiu and Ryan Woo):
“China’s factory activity expanded at the slowest pace in seven months at the start of 2021, weighed down by falling export orders amid a surging global pandemic and rising costs, a business survey showed… The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery in China… The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 51.5 last month, the lowest level since June last year and easing markedly from December’s reading of 53.0.”

February 3 – Bloomberg (Molly Dai):
“China saw a record number of corporate defaults last year and that trend looks set to continue as policy makers try to tighten credit and pull back on stimulus this year. Those stresses aren’t distributed evenly across the country though, with companies in the provinces of Liaoning, Qinghai and Henan facing the most difficulty in raising funds at the moment… The data shows that firms in those three regions issued new bonds equal to less than 30% of the debt that matured over the last three months… The ratio was 116% nationwide in January. The wide variation between provinces highlights another aspect of the unbalanced nature of China’s recovery, with the richer eastern provinces booming but other areas such as the rust-belt north-east being left behind.”

January 30 – Financial Times (Chris Flood):

“China’s mutual fund industry assets surged 48% to a record $3.1tn (Rmb20tn) in 2020 but huge demand for new funds is stoking fears that volatile investor inflows could spur a stock market bubble… UBS forecasts mainland mutual fund assets could reach $16tn by 2030. Assets held in US mutual funds currently stand at about $23tn.”

February 4 – Financial Times (Emiko Terazono):

“Global food prices have reached their highest in almost seven years, further raising the spectre of food inflation and hunger at a time when the Covid-19 pandemic continues to hit economies around the world. The UN Food and Agriculture Organization’s food price index for January rose by a tenth from a year ago to its highest level since July 2014… Substantial buying of corn by China and lower-than-expected production in the US helped send the gauge… to its eighth consecutive monthly increase, the longest rising streak in a decade.”

February 2 – Bloomberg (Isis Almeida, Ann Koh and Michael Hirtzer): 

“Global competition for the ribbed steel containers means that Thailand can’t ship its rice, Canada is stuck with peas and India can’t offload its mountain of sugar. Shipping empty boxes back to China has become so profitable that even some American soybean shippers are having to fight for containers to supply hungry Asian buyers. ‘People aren’t getting their goods where they need them,’ said Steve Kranig, director of logistics at IM-EX Global Inc… ‘One of my customers ships 8 to 10 containers of rice every week from Thailand to Los Angeles. But he can only ship 2 to 3 containers a week right now.’”

February 2 – Financial Times (Martin Arnold and Valentina Romei):
“The eurozone economy fell into a double-dip contraction in the final quarter of last year, shrinking 0.7% from the previous three months… The drop reversed some of the previous quarter’s strong growth, leaving gross domestic product down 6.8% over the full year after the bloc’s historic recession in the first half of 2020…”

February 3 – Financial Times (Martin Arnold):
“Inflation in the eurozone has shot up to its highest level since the coronavirus pandemic hit last year… Headline consumer price inflation hit an 11-month high of 0.9% in January, up from minus 0.3% in December… The fastest jump in more than a decade was driven by a combination of one-off factors rather than a revival in underlying demand, as many of the bloc’s shops, schools and leisure venues remain closed due to lockdowns to stem the spread of the virus.”


February 3 – Reuters (Daniel Leussink):
“Japan’s services sector shrank at the fastest pace in five months in January, as a heavy blow to demand from a resurgence in coronavirus infections and a state of emergency in parts of the country… The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) dropped to a seasonally adjusted 46.1 from the prior month’s 47.7, marking the lowest reading since August.”

February 2 – Financial Times (Kathrin Hille and Demetri Sevastopulo): 

“When a group of Chinese warplanes simulated an attack on a US aircraft carrier last week, Beijing was delivering a warning. The USS Theodore Roosevelt was entering the South China Sea, disputed waters that Beijing claims as its own but where Washington insists on asserting freedom of navigation for everyone else, when six Chinese H-6K heavy bombers flanked by four J-16 fighter jets flew into Taiwan’s air defence zone. ‘That manoeuvre killed three birds with one stone: they signalled to the Americans that they regard the US military as a destabilising force here; they intimidated Taiwan; and they got some valuable practice at the same time,’ said a Taiwanese former senior military commander.”