Source:
http://creditbubblebulletin.blogspot.com/2021/03/weekly-commentary-double-trouble.html
March 27, 2021
Weekly Commentary
By Doug Noland
My highly edited
http://creditbubblebulletin.blogspot.com/2021/03/weekly-commentary-double-trouble.html
March 27, 2021
Weekly Commentary
By Doug Noland
My highly edited
much easier to read
version follows:
Ye Editor
For the week ending March 26, 2021:
Ye Editor
For the week ending March 26, 2021:
Stocks:
S&P500 gained 1.6%
(up 5.8% year-to-date)
Dow Industrials rose 1.4% (up 8.1%)
Utilities jumped 3.0% (up 0.8%)
Transports surged 3.0% (up 16.8%)
S&P 400 Midcaps added 0.5% (up 13.9%)
Small cap Russell 2000 fell 2.9% (up 12.5%)
Nasdaq100 advanced 0.9% (up 0.7%)
Semiconductors jumped 3.2% (up 11.1%)
Biotechs dropped 1.9% (down 4.7%).
With gold bullion down $13,
the HUI gold stock index sank 4.0%
Utilities jumped 3.0% (up 0.8%)
Transports surged 3.0% (up 16.8%)
S&P 400 Midcaps added 0.5% (up 13.9%)
Small cap Russell 2000 fell 2.9% (up 12.5%)
Nasdaq100 advanced 0.9% (up 0.7%)
Semiconductors jumped 3.2% (up 11.1%)
Biotechs dropped 1.9% (down 4.7%).
With gold bullion down $13,
the HUI gold stock index sank 4.0%
(down 10.5%).
U.K.'s FTSE increased 0.5% (up 4.3% y-t-d).
Japan's Nikkei fell 2.1% (up 6.3% y-t-d).
German DAX gained 0.9% (up 7.5%).
South Korea's Kospi was unchanged (up 5.8%).
U.K.'s FTSE increased 0.5% (up 4.3% y-t-d).
Japan's Nikkei fell 2.1% (up 6.3% y-t-d).
German DAX gained 0.9% (up 7.5%).
South Korea's Kospi was unchanged (up 5.8%).
India's Sensex equities index dropped 1.7% (up 2.6%).
China's Shanghai Exchange rallied 0.4% (down 1.6%).
Russia's MICEX equities index increased 0.4% (up 6.1%).
Russia's MICEX equities index increased 0.4% (up 6.1%).
US Ten-year Treasury bond yields
fell five bps to 1.68% (up 76bps).
US Thirty-year Treasury bond yields
dropped six bps to 2.38% (up 74bps).
Federal Reserve Credit last week
surged $48.9bn to a record $7.685 TN.
Over the past 80 weeks,
Fed Credit expanded 106%.
Mortgage Rates:
Freddie Mac 30-year fixed mortgage rates
jumped nine bps to a nine-month high 3.17%
(down 33bps year-over-year).
Fifteen-year rates
gained five bps to 2.45%
(down 45bps).
Five-year hybrid ARM rates
rose five bps to 2.84%
(down 50bps).
Jumbo mortgage 30-year fixed rates
down three bps to 3.25% (down 59bps).
Commodities Watch:
jumped nine bps to a nine-month high 3.17%
(down 33bps year-over-year).
Fifteen-year rates
gained five bps to 2.45%
(down 45bps).
Five-year hybrid ARM rates
rose five bps to 2.84%
(down 50bps).
Jumbo mortgage 30-year fixed rates
down three bps to 3.25% (down 59bps).
Commodities Watch:
Bloomberg Commodities Index
declined 0.5% (up 7.8% y-t-d).
Spot Gold slipped 0.7% to $1,733 (down 8.8%).
Silver sank 4.5% to $25.0605 (down 5.1%).
WTI crude slipped 45 cents to $60.97 (up 26%).
Gasoline gained 1.2% (up 40%)
Natural Gas rose 0.9% (up 1%).
Copper fell 1.1% (up 16%).
Wheat dropped 2.2% (down 4%).
Corn declined 0.9% (up 14%).
Bitcoin sank $4,408, or 7.5%, this week
to $54,002 (up 86% y-t-d).
Coronavirus Watch:
March 24 – Financial Times (Clive Cookson):
“Most patients treated in hospital for Covid-19 are still suffering a wide range of symptoms five months after discharge — and middle-aged women are even more likely to have long Covid than other groups — according to two UK studies… The larger study, led by the University of Leicester and called Phosp-Covid, analysed 1,077 people discharged from hospitals across the UK and found that only 29% were fully recovered. The remainder had an average of nine persistent symptoms each.”
March 23 – Reuters (Anthony Boadle):
“The coronavirus is surging ‘dangerously’ across Brazil, the World Health Organization’s (WHO) regional director for the Americas, Carissa Etienne, warned… ‘Unfortunately, the dire situation in Brazil is also affecting neighboring countries,’ Etienne, director of the Pan American Health Organization (PAHO), said…”
March 24 – Reuters (Sachin Ravikumar and Neha Arora):
“India has detected a ‘double mutant variant’ of the novel coronavirus in 206 samples in the worst-hit western state of Maharashtra, a senior government official said… The new variant was also detected in nine samples in the capital New Delhi…”
Market Mania Watch:
March 21 – Wall Street Journal (Nicole Friedman):
“... There are more real-estate agents than homes for sale in the U.S. This phenomenon reflects both the extremely tight supply of homes on the market and how surging prices are persuading tens of thousands more Americans to try their hands at selling real estate.”
Inflation Watch:
March 21 – Associated Press (Joyce M. Rosenberg):
“A trade bottleneck born of the COVID-19 outbreak has U.S. businesses anxiously awaiting goods from Asia — while off the coast of California, dozens of container ships sit anchored, unable to unload their cargo. The pandemic has wreaked havoc with the supply chain since early 2020, when it forced the closure of factories throughout China. The seeds of the current problems were sown last March, when Americans stayed home and dramatically changed their buying habits — instead of clothes, they bought electronics, fitness equipment and home improvement products. U.S. companies responded by flooding reopened Asian factories with orders, leading to a chain reaction of congestion and snags at ports and freight hubs across the country as the goods began arriving.”
March 24 – Financial Times (Justin Jacobs and Harry Dempsey):
“Texas petrochemical plants hit by last month’s Arctic blast have still not returned to full capacity, threatening months of disruptions to the global supply chain for chemical raw materials critical to everything from cars to medical equipment to nappies. The outages… are disrupting manufacturing operations from the American south to the UK and raising prices for vital plastic inputs around the world, fuelling worries about inflation. Last month’s winter storm in Texas knocked as much as 80% of the state’s chemicals output offline, disrupting the vast majority of US production of the world’s three most widely used plastic polymers — polyethylene, polypropylene, and polyvinyl chloride (PVC).”
March 24 – Financial Times (Claire Jones):
“From chip shortages shuttering car plants for weeks to shipping delays and soaring costs, the pandemic has shone a spotlight on global supply chain deficiencies… While container shipping prices are expected to remain higher than before the crisis, they are unlikely to stay at their current levels. It now costs about $4,000 for a container between East Asia and the US west coast, up from $1,500 at the start of 2020.”
March 24 – CNBC (Michael Wayland):
“General Motors will suspend production of its midsize pickup trucks due to a global semiconductor chip shortage. It’s the latest shutdown as the automaker prioritizes production of its larger, more profitable full-size pickups and SUVs.”
Biden Administration Watch:
March 22 – Wall Street Journal (Ken Thomas and Andrew Duehren): “Administration officials are crafting a plan for a multipart infrastructure and economic package that could cost as much as $3 trillion and fulfill key elements of President Biden’s campaign agenda... The first proposal would center on roads, bridges and other infrastructure projects and include many of the climate-change initiatives Mr. Biden outlined in the ‘Build Back Better’ plan he released during the 2020 campaign. That package would be followed by measures focusing on education and other priorities, including extending the newly expanded child tax credit scheduled to expire at the end of the year and providing for universal prekindergarten and tuition-free community college…”
March 23 – Financial Times (James Politi):
“Janet Yellen, the US Treasury secretary, said tax increases would be required to fund the next stages of the Biden administration’s economic agenda involving roughly $3tn in new spending on infrastructure, clean energy and education. In testimony before the House financial services committee on Tuesday, Yellen faced criticism from Republican lawmakers who objected to raising taxes on corporations and wealthy households to pay for the large-scale spending. The Treasury secretary defended the need for tax increases, but pledged that the Biden administration would not do anything to ‘hurt’ small businesses or lower- and middle-income Americans.”
U.S. Bubble Watch:
March 22 – Bloomberg (Andrew Davis):
“Former Treasury Secretary Lawrence Summers warned that the U.S. is suffering from the ‘least responsible’ macroeconomic policy in four decades, pointing the finger at both Democrats and Republicans for creating ‘enormous’ risks. ... ‘These are the least responsible fiscal macroeconomic policy we’ve have had for the last 40 years,’ Summers said. ‘It’s fundamentally driven by intransigence on the Democratic left and intransigence and the completely irresponsible behavior in the whole of the Republican Party.’”
March 25 – Associated Press (Christopher Rugaber):
“The number of people seeking unemployment benefits fell sharply last week to 684,000, the fewest since the pandemic erupted a year ago and a sign that the economy is improving. Thursday’s report… showed that jobless claims fell from 781,000 the week before. It is the first time that weekly applications for jobless aid have fallen below 700,000 since mid-March of last year.”
March 24 – Bloomberg (Reade Pickert):
“Orders for U.S. durable goods unexpectedly declined in February for the first time in nearly a year, indicating a pause in the months-long manufacturing rebound. Bookings for durable goods -- or items meant to last at least three years -- decreased 1.1% from the prior month, the first drop since April, after an upwardly revised 3.5% gain in January…”
March 21 – Bloomberg (Shahien Nasiripour):
“U.S. bank lending fell to a new low this month, Federal Reserve data show, as a cash-rich banking system continues its cautious approach to making new loans… Total loans and leases dropped to 62.8% of bank deposits in the week ended March 10... Total assets at U.S. banks climbed 0.7% to $21 trillion… Loans and leases slipped to 49.7% of total assets, the lowest reading in data going back to 1973.”
March 22 – Wall Street Journal (Nicole Friedman):
“The record-low number of homes on the market is limiting purchases heading into the spring selling season… There were 1.03 million homes for sale in the U.S. at the end of February, unchanged from the revised January level, which was the lowest in data going back to 1982, the National Association of Realtors said... The level was down 29.5% from February 2020, a record annual decline…”
March 23 – Bloomberg (Jeremy Hill):
“ ... Already this month 15 firms with at least $50 million of liabilities have filed for bankruptcy, compared with 16 in all of March 2020… That’s more than the average of 12 for the third month of the year over the last decade and on pace to exceed the 21 filings of March 2018, which was the most since 2009. Last week’s five large filings pushed the year’s haul to 41 through March 21, neck-and-neck with the 2020 pace…”
Fixed Income Watch:
March 23 – Bloomberg (Finbarr Flynn and Stephen Spratt):
“Government and corporate bonds around the world have tumbled in their worst start to a year this century, as markets spooked by the prospect of resurgent inflation turn increasingly volatile. The notes have lost about 3.7% so far in 2021…, according a Bloomberg Barclays index of investment-grade securities across currencies going back to 1999. That’s worse than for similar periods in previous years. An unprecedented confluence of events has triggered concerns that faster inflation will increasingly eat into fixed-income returns.”
March 22 – Financial Times (Joe Rennison and Derek Brower):
Copper fell 1.1% (up 16%).
Wheat dropped 2.2% (down 4%).
Corn declined 0.9% (up 14%).
Bitcoin sank $4,408, or 7.5%, this week
to $54,002 (up 86% y-t-d).
Coronavirus Watch:
March 24 – Financial Times (Clive Cookson):
“Most patients treated in hospital for Covid-19 are still suffering a wide range of symptoms five months after discharge — and middle-aged women are even more likely to have long Covid than other groups — according to two UK studies… The larger study, led by the University of Leicester and called Phosp-Covid, analysed 1,077 people discharged from hospitals across the UK and found that only 29% were fully recovered. The remainder had an average of nine persistent symptoms each.”
March 23 – Reuters (Anthony Boadle):
“The coronavirus is surging ‘dangerously’ across Brazil, the World Health Organization’s (WHO) regional director for the Americas, Carissa Etienne, warned… ‘Unfortunately, the dire situation in Brazil is also affecting neighboring countries,’ Etienne, director of the Pan American Health Organization (PAHO), said…”
March 24 – Reuters (Sachin Ravikumar and Neha Arora):
“India has detected a ‘double mutant variant’ of the novel coronavirus in 206 samples in the worst-hit western state of Maharashtra, a senior government official said… The new variant was also detected in nine samples in the capital New Delhi…”
Market Mania Watch:
March 21 – Wall Street Journal (Nicole Friedman):
“... There are more real-estate agents than homes for sale in the U.S. This phenomenon reflects both the extremely tight supply of homes on the market and how surging prices are persuading tens of thousands more Americans to try their hands at selling real estate.”
Inflation Watch:
March 21 – Associated Press (Joyce M. Rosenberg):
“A trade bottleneck born of the COVID-19 outbreak has U.S. businesses anxiously awaiting goods from Asia — while off the coast of California, dozens of container ships sit anchored, unable to unload their cargo. The pandemic has wreaked havoc with the supply chain since early 2020, when it forced the closure of factories throughout China. The seeds of the current problems were sown last March, when Americans stayed home and dramatically changed their buying habits — instead of clothes, they bought electronics, fitness equipment and home improvement products. U.S. companies responded by flooding reopened Asian factories with orders, leading to a chain reaction of congestion and snags at ports and freight hubs across the country as the goods began arriving.”
March 24 – Financial Times (Justin Jacobs and Harry Dempsey):
“Texas petrochemical plants hit by last month’s Arctic blast have still not returned to full capacity, threatening months of disruptions to the global supply chain for chemical raw materials critical to everything from cars to medical equipment to nappies. The outages… are disrupting manufacturing operations from the American south to the UK and raising prices for vital plastic inputs around the world, fuelling worries about inflation. Last month’s winter storm in Texas knocked as much as 80% of the state’s chemicals output offline, disrupting the vast majority of US production of the world’s three most widely used plastic polymers — polyethylene, polypropylene, and polyvinyl chloride (PVC).”
March 24 – Financial Times (Claire Jones):
“From chip shortages shuttering car plants for weeks to shipping delays and soaring costs, the pandemic has shone a spotlight on global supply chain deficiencies… While container shipping prices are expected to remain higher than before the crisis, they are unlikely to stay at their current levels. It now costs about $4,000 for a container between East Asia and the US west coast, up from $1,500 at the start of 2020.”
March 24 – CNBC (Michael Wayland):
“General Motors will suspend production of its midsize pickup trucks due to a global semiconductor chip shortage. It’s the latest shutdown as the automaker prioritizes production of its larger, more profitable full-size pickups and SUVs.”
Biden Administration Watch:
March 22 – Wall Street Journal (Ken Thomas and Andrew Duehren): “Administration officials are crafting a plan for a multipart infrastructure and economic package that could cost as much as $3 trillion and fulfill key elements of President Biden’s campaign agenda... The first proposal would center on roads, bridges and other infrastructure projects and include many of the climate-change initiatives Mr. Biden outlined in the ‘Build Back Better’ plan he released during the 2020 campaign. That package would be followed by measures focusing on education and other priorities, including extending the newly expanded child tax credit scheduled to expire at the end of the year and providing for universal prekindergarten and tuition-free community college…”
March 23 – Financial Times (James Politi):
“Janet Yellen, the US Treasury secretary, said tax increases would be required to fund the next stages of the Biden administration’s economic agenda involving roughly $3tn in new spending on infrastructure, clean energy and education. In testimony before the House financial services committee on Tuesday, Yellen faced criticism from Republican lawmakers who objected to raising taxes on corporations and wealthy households to pay for the large-scale spending. The Treasury secretary defended the need for tax increases, but pledged that the Biden administration would not do anything to ‘hurt’ small businesses or lower- and middle-income Americans.”
U.S. Bubble Watch:
March 22 – Bloomberg (Andrew Davis):
“Former Treasury Secretary Lawrence Summers warned that the U.S. is suffering from the ‘least responsible’ macroeconomic policy in four decades, pointing the finger at both Democrats and Republicans for creating ‘enormous’ risks. ... ‘These are the least responsible fiscal macroeconomic policy we’ve have had for the last 40 years,’ Summers said. ‘It’s fundamentally driven by intransigence on the Democratic left and intransigence and the completely irresponsible behavior in the whole of the Republican Party.’”
March 25 – Associated Press (Christopher Rugaber):
“The number of people seeking unemployment benefits fell sharply last week to 684,000, the fewest since the pandemic erupted a year ago and a sign that the economy is improving. Thursday’s report… showed that jobless claims fell from 781,000 the week before. It is the first time that weekly applications for jobless aid have fallen below 700,000 since mid-March of last year.”
March 24 – Bloomberg (Reade Pickert):
“Orders for U.S. durable goods unexpectedly declined in February for the first time in nearly a year, indicating a pause in the months-long manufacturing rebound. Bookings for durable goods -- or items meant to last at least three years -- decreased 1.1% from the prior month, the first drop since April, after an upwardly revised 3.5% gain in January…”
March 21 – Bloomberg (Shahien Nasiripour):
“U.S. bank lending fell to a new low this month, Federal Reserve data show, as a cash-rich banking system continues its cautious approach to making new loans… Total loans and leases dropped to 62.8% of bank deposits in the week ended March 10... Total assets at U.S. banks climbed 0.7% to $21 trillion… Loans and leases slipped to 49.7% of total assets, the lowest reading in data going back to 1973.”
March 22 – Wall Street Journal (Nicole Friedman):
“The record-low number of homes on the market is limiting purchases heading into the spring selling season… There were 1.03 million homes for sale in the U.S. at the end of February, unchanged from the revised January level, which was the lowest in data going back to 1982, the National Association of Realtors said... The level was down 29.5% from February 2020, a record annual decline…”
March 23 – Bloomberg (Jeremy Hill):
“ ... Already this month 15 firms with at least $50 million of liabilities have filed for bankruptcy, compared with 16 in all of March 2020… That’s more than the average of 12 for the third month of the year over the last decade and on pace to exceed the 21 filings of March 2018, which was the most since 2009. Last week’s five large filings pushed the year’s haul to 41 through March 21, neck-and-neck with the 2020 pace…”
Fixed Income Watch:
March 23 – Bloomberg (Finbarr Flynn and Stephen Spratt):
“Government and corporate bonds around the world have tumbled in their worst start to a year this century, as markets spooked by the prospect of resurgent inflation turn increasingly volatile. The notes have lost about 3.7% so far in 2021…, according a Bloomberg Barclays index of investment-grade securities across currencies going back to 1999. That’s worse than for similar periods in previous years. An unprecedented confluence of events has triggered concerns that faster inflation will increasingly eat into fixed-income returns.”
March 22 – Financial Times (Joe Rennison and Derek Brower):
“Lowly rated US energy companies that struggled for survival last year are finding renewed optimism among investors after a surge in oil prices, helping them raise a record amount of debt to fend off bankruptcy. Energy and power companies tracked by Refinitiv have raised more than $20bn in the high-yield bond market so far this year, an all-time record for data going back to 1996.”
China Watch:
March 24 – Reuters (Katanga Johnson and Scott Murdoch):
“Shares in dual-listed Chinese companies fell sharply… after the U.S. securities regulator adopted measures that would kick foreign companies off American stock exchanges if they do not comply with U.S. auditing standards. The move by the Securities and Exchange Commission (SEC) adds to the unprecedented regulatory crackdown in China on domestic technology companies… The Holding Foreign Companies Accountable Act, signed into law by then-President Donald Trump in December, is aimed at removing Chinese companies from U.S. exchanges if they fail to comply with American auditing standards for three years in a row.”
Global Bubble Watch:
March 24 – Reuters (Brenna Hughes Neghaiwi and Simon Jessop):
“In 2020 ... billionaires saw their riches reach new heights. Now some are talking to their wealth managers about how to keep a hold of and consolidate their fortunes amid the global debris of the pandemic. Others are discussing how to preempt and navigate demands from governments, and the wider public, to pick up their share of the recovery costs.”
March 24 – Wall Street Journal (Paul Vieira):
“ ... one country has been outpacing its peers in home-price growth: Canada. Just like in the U.S., the U.K., Australia and elsewhere, Canada is experiencing a housing craze… Yet Canada has seen a more dramatic price run-up than all Group of Seven countries. …Nominal house prices in Canada rose at an annual rate of about 16% in the fourth quarter from the previous three-month period, outpacing the U.S., the U.K. and elsewhere.”
Geopolitical Watch:
March 25 – Reuters (Ben Blanchard):
“Taiwan and the United States have signed their first agreement under the Biden administration, establishing a Coast Guard Working Group to coordinate policy, following China’s passing of a law that allows its coast guard to fire on foreign vessels. The new government of U.S. President Joe Biden has moved to reassure Chinese-claimed Taiwan that its commitment to the island is rock solid.”
March 24 – CNN (Brad Lendon):
“China is quickly amassing weapons and systems to militarily overwhelm Taiwan, an action it could be poised to take within the next six years, the admiral chosen to be the next commander of US forces in the Pacific warned… ‘My opinion is this problem is much closer to us than most think,’ Adm. John Aquilino said before the Senate Armed Services Committee… China considers establishing full control over Taiwan to be its ‘number one priority,’ added Aquilino.”
March 20 – Bloomberg (Abbas Al Lawati):
“Missiles used in the attacks on Saudi Aramco facilities, for which Yemen’s Tehran-backed Houthi group has claimed responsibility, were made in Iran, a Saudi minister said. ‘All of the missiles and drones that came into Saudi are Iranian-manufactured or Iranian-supplied,” Adel Al-Jubeir… said… ‘Several of them, as we’ve said, came from the north; several came from the sea.’”
China Watch:
March 24 – Reuters (Katanga Johnson and Scott Murdoch):
“Shares in dual-listed Chinese companies fell sharply… after the U.S. securities regulator adopted measures that would kick foreign companies off American stock exchanges if they do not comply with U.S. auditing standards. The move by the Securities and Exchange Commission (SEC) adds to the unprecedented regulatory crackdown in China on domestic technology companies… The Holding Foreign Companies Accountable Act, signed into law by then-President Donald Trump in December, is aimed at removing Chinese companies from U.S. exchanges if they fail to comply with American auditing standards for three years in a row.”
Global Bubble Watch:
March 24 – Reuters (Brenna Hughes Neghaiwi and Simon Jessop):
“In 2020 ... billionaires saw their riches reach new heights. Now some are talking to their wealth managers about how to keep a hold of and consolidate their fortunes amid the global debris of the pandemic. Others are discussing how to preempt and navigate demands from governments, and the wider public, to pick up their share of the recovery costs.”
March 24 – Wall Street Journal (Paul Vieira):
“ ... one country has been outpacing its peers in home-price growth: Canada. Just like in the U.S., the U.K., Australia and elsewhere, Canada is experiencing a housing craze… Yet Canada has seen a more dramatic price run-up than all Group of Seven countries. …Nominal house prices in Canada rose at an annual rate of about 16% in the fourth quarter from the previous three-month period, outpacing the U.S., the U.K. and elsewhere.”
Geopolitical Watch:
March 25 – Reuters (Ben Blanchard):
“Taiwan and the United States have signed their first agreement under the Biden administration, establishing a Coast Guard Working Group to coordinate policy, following China’s passing of a law that allows its coast guard to fire on foreign vessels. The new government of U.S. President Joe Biden has moved to reassure Chinese-claimed Taiwan that its commitment to the island is rock solid.”
March 24 – CNN (Brad Lendon):
“China is quickly amassing weapons and systems to militarily overwhelm Taiwan, an action it could be poised to take within the next six years, the admiral chosen to be the next commander of US forces in the Pacific warned… ‘My opinion is this problem is much closer to us than most think,’ Adm. John Aquilino said before the Senate Armed Services Committee… China considers establishing full control over Taiwan to be its ‘number one priority,’ added Aquilino.”
March 20 – Bloomberg (Abbas Al Lawati):
“Missiles used in the attacks on Saudi Aramco facilities, for which Yemen’s Tehran-backed Houthi group has claimed responsibility, were made in Iran, a Saudi minister said. ‘All of the missiles and drones that came into Saudi are Iranian-manufactured or Iranian-supplied,” Adel Al-Jubeir… said… ‘Several of them, as we’ve said, came from the north; several came from the sea.’”
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