Source:
http://creditbubblebulletin.blogspot.com/2021/07/weekly-commentary-hedge-fund-treasury.html
Friday, July 2, 2021
Weekly Commentary
by Doug Noland
http://creditbubblebulletin.blogspot.com/2021/07/weekly-commentary-hedge-fund-treasury.html
Friday, July 2, 2021
Weekly Commentary
by Doug Noland
My edited and easy to read version follows
Ye Editor
For the Week Ending July 2, 2021:
GLOBAL STOCK INDEXES:
S&P500 rose 1.7% (up 15.9% year-to-date)
Dow Industrials gained 1.0% (up 13.7%)
Utilities were little changed (up 1.5%)
Banks fell 1.1% (up 28.6%)
Broker/Dealers declined 0.9% (up 24.9%)
Transports increased 0.4% (up 20.2%)
S&P 400 Midcaps slipped 0.6% (up 17.5%)
Small cap Russell 2000 fell 1.2% (up 16.8%)
Nasdaq100 advanced 2.7% (up 14.3%)
Semiconductors jumped 2.3% (up 18.6%)
Biotechs declined 0.5% (up 3.4%).
With Gold bullion rising $6,
the HUI gold stock index gained 0.5%
(down 9.8%)
U.K.'s FTSE slipped 0.2% (up 10.3% y-t-d).
Japan's Nikkei fell 1.0% (up 4.9% y-t-d)
France's CAC40 declined 1.1% (up 18.0%)
German DAX added 0.3% (up 14.1%)
Spain's IBEX 35 dropped 2.1% (up 10.3%)
Italy's FTSE MIB fell 0.9% (up 13.7%)
Brazil's Bovespa increased 0.3% (up 7.2%)
Mexico's Bolsa declined 0.6% (up 14.0%)
South Korea's Kospi slipped 0.6% (up 14.2%).
India's Sensex declined 0.8% (up 9.9%).
China's Shanghai dropped 2.5% (up 1.3%)
Russia's MICEX gained 0.9% (up 17.5%).
US BONDS:
Three-month Treasury bill rates
ended the week at 0.0375%.
Two-year government yields declined three bps to 0.235%
(up 11bps y-t-d).
Five-year T-note yields fell seven bps to 0.86%
(up 50bps).
Ten-year Treasury yields dropped 10 bps to 1.43%
(up 51bps).
Long bond yields sank 11 bps to 2.04%
(up 40bps).
Benchmark Fannie Mae MBS yields fell nine bps to 1.81%
(up 47bps).
Federal Reserve Credit last week
declined $11.5bn to $8.039 TN.
ver the past 94 weeks,
Fed Credit expanded $4.313 TN,
or 116%.
US MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
fell four bps to 2.98%
(down 9bps year-over-year).
Fifteen-year rates
dropped eight bps to 2.26%
(down 30bps).
Five-year hybrid ARM rates
added a basis point to 2.54%
(down 46bps)
Jumbo mortgage 30-year fixed rates
down six bps to 3.08%
(down 24bps).
COMMODITIES:
June 30
– CNBC
(Yun Li):
“The great lumber bubble of 2021 has popped. After a jaw-dropping rally this spring, lumber prices have come back down to earth as supply increased, speculative trading action cooled and homebuilding demand eased. Lumber futures have tanked 42% in June alone, on pace for their worst month on record back to 1978. The building commodity is down more than 13% in 2021, headed for the first negative first half since 2015. At its peak on May 7, lumber prices hit an all-time high of $1,670.50 per thousand board feet on a closing basis, which was more than six times higher than its pandemic low in April 2020.”
– CNBC
(Yun Li):
“The great lumber bubble of 2021 has popped. After a jaw-dropping rally this spring, lumber prices have come back down to earth as supply increased, speculative trading action cooled and homebuilding demand eased. Lumber futures have tanked 42% in June alone, on pace for their worst month on record back to 1978. The building commodity is down more than 13% in 2021, headed for the first negative first half since 2015. At its peak on May 7, lumber prices hit an all-time high of $1,670.50 per thousand board feet on a closing basis, which was more than six times higher than its pandemic low in April 2020.”
Bloomberg Commodities Index jumped 2.7%
(up 21.7% y-t-d).
Spot Gold increased 0.3% to $1,787
(down 5.9%).
Silver rose 1.4% to $26.47
(up 0.3%).
WTI crude gained $1.11 to $75.16
(up 55%).
Gasoline added 1.6%
(up 63%)
Natural Gas jumped 5.8%
(up 46%)
Copper slipped 0.3%
(up 22%).
Wheat rose 1.9%
(up 2%).
Corn rallied 11.7%
(up 20%).
Bitcoin recovered $1,369, or 4.2%,
this week to $33,732 (up 16.0%).
DOUG NOLAND COMMENTARY:
... It’s being called a “mixed” June payrolls report. With a stronger-than-expected 850,000 jobs added – strongest in 10 months – I’ll downplay the bump in the unemployment rate (and small decline in Average Weekly Hours) and label this a robust report. It follows on the heels of the lowest weekly Initial Jobless Claims since before the pandemic; the Challenger, Gray & Christmas job cuts report at the “lowest level since June 2000”; and Wednesday’s much stronger-than-expected ADP employment gain (692k).
NEWS FROM LAST WEEK:
Coronavirus Watch:
June 27
– Wall Street Journal
(Josh Ulick):
“Based on a recent government projection, the Delta variant of the Covid-19 virus could become the dominant type of this coronavirus in the U.S. within a month, making it one of most aggressive variants to take hold in the country. Delta is the latest in a series of variants that have spread throughout the U.S. Like all viruses, coronaviruses mutate as they reproduce. Some of these genetic changes make them better at infecting human cells or evading our immune defenses. As newer, better-adapted variants emerge, they push aside earlier versions of the virus.”
July 1
“Based on a recent government projection, the Delta variant of the Covid-19 virus could become the dominant type of this coronavirus in the U.S. within a month, making it one of most aggressive variants to take hold in the country. Delta is the latest in a series of variants that have spread throughout the U.S. Like all viruses, coronaviruses mutate as they reproduce. Some of these genetic changes make them better at infecting human cells or evading our immune defenses. As newer, better-adapted variants emerge, they push aside earlier versions of the virus.”
July 1
– Reuters
(William Schomberg):
“Britain reported 27,989 new cases of COVID-19, government data showed on Thursday, the highest number since Jan. 29 and taking the rise in cases between June 25 and July 1 to nearly 72% compared with the previous seven days.”
Market Mania Watch:
June 30
– Reuters
(Marc Jones):
“Vaccine programmes and some of the biggest fiscal and central bank stimulus ever seen have made for compelling viewing. Oil’s 45% surge will be its best start to a year since 2009, world stocks are on course for their second best H1 since 1998, wood is on fire and amateur traders’ much-loved ‘meme’ stocks AMC and GameStop are up more than 2,500% and 1,000% respectively. Add to that another wild run for bitcoin, digital art selling for tens of millions of dollars despite being free on the internet and major gyrations in government bond markets and you start to get the picture. ‘It has been extremely dramatic year,’ SEB investment management’s head of asset allocation Hans Peterson said. ‘The swings have been absolutely enormous. It has not been an easy year, it has been quite tumultuous.’ World equities have recorded an 11% gain but mainstay U.S. and German government bond markets have had their toughest H1 since 2013 despite a better last few months.”
June 26
– Bloomberg
(Swetha Gopinath and
Myriam Balezou):
“Companies are racing to public markets like never before, cashing in on record-high stock prices. An all-time high of almost $350 billion has been raised in initial public offerings in the first six months of this year, according to… Bloomberg, surpassing the previous peak of $282 billion from the second half of 2020 and enriching entrepreneurs and bankers alike. When the rush for IPOs kicked off last year, stay-at-home technology dominated the scene, seizing on investor interest in anything digital, while special-purpose acquisition companies also flooded the market. This year, with stocks continuing to push skyward, the trend has broadened to include renewable-energy companies and online retailers… As long as the stock market is rising, the flow of IPOs is unlikely to dry up, and total proceeds this year are on track to eclipse the record of $420.1 billion set in 2007.”
June 27
– Bloomberg
(Lu Wang and
Vildana Hajric):
“If you think a rush by companies to sell their shares is a bad omen for the market, imagine a scenario where most of the sales come from firms that don’t make money. It’s happening now. Since the end of March, almost 100 unprofitable U.S. companies, including GameStop Corp. and AMC Entertainment Holdings Inc., have raised money through secondary offerings, twice as many as coming from profitable firms, according to… Bloomberg. During the past 12 months, almost 750 money-losing firms have sold shares in the secondary market, exceeding those that make profits by the biggest margin since at least 1982… In fact, the previous two periods in which unprofitable firms dominated the pool of equity offerings, the S&P 500 Index was either at the start of a bear market, or already in one.”
June 30
– Bloomberg
(Luke McGrath):
“Charlie Munger is not shy about his thoughts on Robinhood. In an interview with CNBC…, Munger, 97, continued a spat between Berkshire Hathaway Inc. executives and the trading platform, saying the company is ‘beneath contempt…’ ‘Robinhood is a ‘gambling parlor masquerading as a respectable business,’ Munger added.”
Market Instability Watch:
June 25
– Reuters
(Saqib Iqbal Ahmed):
“While major U.S. stock indexes reach new highs, options data suggests traders see the market as vulnerable to a big drop should bears gain the upper hand, according to strategists at Goldman Sachs. Apparent calm in the stock market masks heightened expectations for big stock market gyrations over the next three months, Goldman strategists said… One indication of how anxious investors are is the fact that the 3-month downside implied volatility skew, which compares put option prices with at-the-money option prices, has reached new all-time highs, the note said.”
Inflation Watch:
June 30
– Bloomberg
(Katia Dmitrieva):
“Americans are enjoying outsized pay boosts this year from desperate employers, but the raises are failing to keep pace with surging prices for everyday goods. U.S. wages likely posted a third strong monthly gain to fuel a 3.6% increase in June from a year earlier, according to economists’ forecasts… Companies… are raising wages to attract staff. At the same time, prices for everything from milk to car rentals and gasoline are rising at a rapid clip, eating into those income gains. The Federal Reserve’s preferred consumer-price gauge rose 3.9% in the 12 months through May, the fastest since 2008.”
July 1
– Wall Street Journal
(Ryan Dezember):
“Propane has rarely been so expensive this time of year, and prices may have to move higher yet to ensure ample supply for winter, when millions of rural Americans rely on the fuel to heat their homes. At hubs in Mont Belvieu, Texas, and Conway, Kan., propane futures traded Wednesday at $1.09 and 95 cents a gallon… Those prices are roughly twice their levels during the past two summers. Spot prices have moved in a similar way. Retail prices have also risen… The Energy Information Administration said U.S. households can expect to spend an average of 14% more on propane this winter than they did during last year’s—and significantly more than that if the weather is colder than forecast.”
Biden Administration Watch:
June 27
– Reuters
(Phil Stewart):
“The United States said… it carried out another round of air strikes against Iran-backed militia in Iraq and Syria, this time in response to drone attacks by the militia against U.S. personnel and facilities in Iraq… The U.S. military said it targeted operational and weapons storage facilities at two locations in Syria and one location in Iraq.”
U.S. Bubble Watch:
July 1
– CNBC
(Jeff Cox):
“The federal government will be swimming in $3 trillion of red ink by the end of fiscal 2021, according to a Congressional Budget Office estimate Thursday that swelled 33% from the last forecast. As a result of multiple stimulus measures aimed at combating the pandemic’s economic impact, Congress will run a budgetary shortfall this year equivalent to 13.4% of GDP, the second-largest level since 1945 and exceeded only by the 2020 spending. The CBO last released a deficit estimate in February, when it saw a deficit $745 billion smaller than the one projected now. Under the current projections, the $23 trillion portion of government debt held by the public would bump to 103% by the end of the current fiscal year.”
June 27
– Wall Street Journal
(Orla McCaffrey and
Shane Shifflett):
“The coronavirus pandemic plunged Americans into recession. Instead of emerging poorer, many came out ahead. U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades… That challenged the conventions of previous economic downturns. In 2008, for example, U.S. households lost $8 trillion… The stock market, in turn, became the driver of the household wealth gain, accounting for nearly half the total increase. That has produced a lopsided distribution of the wealth gains, since well-off households are more likely to own stocks. More than 70% of the increase in household wealth went to the top 20% of income earners. About a third went to the top 1%.”
June 29
– Financial Times
(Mamta Badkar):
“US home price growth accelerated in April at the fastest pace in more than three decades… The S&P Case-Shiller national home price index, which covers all nine US census divisions, rose 14.6% year on year in April… That followed a 13.3% annual jump in March, and was ‘the highest reading in more than 30 years’… Meanwhile, the 20-city composite, which covers US metropolitan areas including Dallas, Miami, New York and San Francisco, rose 1.6% from the previous month and 14.9% year on year… ‘April’s performance was truly extraordinary,’ said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.”
June 29
– Reuters
(Evan Sully):
“U.S. single-family home prices in 20 key urban markets rose in April from a year earlier by the most in over 15 years as the shortage of homes available to buy drives up prices at the fastest rate seen since before the financial crisis, a closely watched survey said… The S&P/Case Shiller composite index of 20 metropolitan areas gained 14.9% through the 12 months ended in April, the largest annual price increase since December 2005… On a month-to-month basis, the 20-city composite index rose 1.6% from March… Among the twenty cities, Phoenix, San Diego, and Seattle reported the highest year-over-year gains in April… Similar data out Tuesday from the U.S. Federal Housing Finance Agency showed its home price index gained a record-high 15.7% through the 12 months ended in April.”
June 30
– CNBC (Diana Olick):
“The pandemic-induced housing boom may not be over quite yet. Despite recent months of softening sales, buyers came back remarkably strongly in May. Pending home sales, a measure of signed contracts on existing homes, jumped an unexpectedly high 8% in May compared with April, according to the National Association of Realtors. Analysts expected a 1% drop. This is the highest level of sales activity for May since 2005. Sales were up 13% from May 2020…”
June 30
– CNBC
(Diana Olick):
“Record high home price appreciation is sidelining ever more buyers and finally taking the bang out of the pandemic-induced housing boom. Weekly mortgage demand is falling along with it, down 6.9% for the week according to the Mortgage Bankers Association… That is the lowest level in almost a year and a half. Mortgage applications to purchase a home dropped 5% for the week and were 17% lower annually. That is the slowest pace since the start of May 2020, when lockdowns were in full force.”
July 1
– CNBC
(Jeff Cox):
“Initial filings for unemployment insurance fell sharply last week, indicating continued improvement in the U.S. jobs market… First-time jobless claims totaled 364,000 for the week ended June 26, compared with the 390,000 Dow Jones estimate. That marked a new pandemic-era low and a decline of 51,000 from the previous week.”
June 28
– Bloomberg
(Katia Dmitrieva):
“The U.S. labor market is entering one of its strangest summers ever, with a powerful economic rebound generating record demand for workers just as roadblocks distort employment and wage levels. While economic growth will clock 10% this quarter and 7% next, according to Bloomberg surveys -- well above pre-pandemic trends -- millions of Americans remain reluctant or unable to take up the unprecedented number of job openings available.”
June 30
– CNBC
(Michael Wayland):
“Ford Motor is significantly cutting its North American vehicle production in July due to an ongoing shortage of semiconductor chips impacting the global automotive industry. The automaker said… it will idle or reduce production at eight plants, including six in the U.S., for varying periods of time next month and into early August due to the problem. Affected products range from the Ford F-150 and Ford Bronco Sport to the Ford Mustang and Ford Explorer.”
China Watch:
June 30
– Reuters
(Stella Qiu and
Ryan Woo):
“China’s factory activity expanded at a softer pace in June, as the resurgence of COVID-19 cases in the export province of Guangdong and supply chain woes drove output growth to the lowest in 15 months, a private survey showed… The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 51.3 last month from May’s 52, marking the 14th month of expansion, but it came below analyst expectations…”
Global Bubble Watch:
July 1
– Reuters
(Leigh Thomas):
“Most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed and a tax rate of at least 15%, they said on Thursday after two days of talks. The Paris-based Organisation for Economic Cooperation and Development, which hosted the talks, said a global minimum corporate income tax of at least 15% could yield around $150 billion in additional global tax revenues annually. It said 130 countries, representing more than 90% of global GDP, had backed the agreement at the talks.”
June 30
– Bloomberg:
“From the U.S. to the U.K. to China, housing is riding an extended boom. Global valuations are soaring at the fastest pace since 2006, according to Knight Frank, with annual price increases in double digits. Frothy markets are flashing the kind of bubble warnings that haven’t been seen since the run up to the financial crisis… On the ground, outrageous stories are rife, with desperate buyers promising to name their first-born after sellers and derelict buildings selling for mansion prices. The drivers for the frenzy are remarkably consistent: cheap mortgages, a post-pandemic desire for more space, newly remote workers taking city cash to regional locations — and, crucially, a pervasive fear that if you don’t buy now you may never be able to. As prices mount, so do the risks for both individuals and society.”
June 29
– Reuters
(William Schomberg):
“British house prices jumped by the most in more than 16 years this month, soaring by 13.4% from June 2020, and demand is expected to stay strong while a coronavirus emergency tax break remains in place, mortgage lender Nationwide said.”
Europe Watch:
July 1
– Reuters
(Jonathan Cable and
Leika Kihara):
“European factories continued to ramp up their post-lockdown recovery in June but Asian manufacturers saw momentum weaken amid rising input costs and the reintroduction of curbs to combat a new wave of coronavirus infections, surveys showed. Euro zone manufacturing activity expanded at its fastest pace on record last month while Britain's factories extended their post-lockdown recovery and went on a hiring spree.”
Geopolitical Watch:
June 30
– Bloomberg:
“President Xi Jinping struck a defiant tone in a speech marking the Communist Party’s 100-year anniversary, calling China’s quest to gain control of Taiwan a ‘historic mission’ and warning the country’s adversaries to avoid standing in the way of his government. In a nationwide address from above the portrait of Mao Zedong in Tiananmen Square, Xi hailed the party’s successes, saying China wanted to promote peace in the world and was open to ‘constructive criticism.’ Yet he quickly warned that the country would no longer listen to ‘sanctimonious preaching’ and that ‘the time when the Chinese nation could be bullied and abused by others was gone forever.’”
July 1
– Reuters
(Yew Lun Tian and
Yimou Lee):
“Chinese President Xi Jinping pledged… to complete ‘reunification’ with self-ruled Taiwan and vowed to ‘smash’ any attempts at formal independence, drawing a stern rebuke from Taipei, which lambasted the Communist Party as a dictatorship. China, which considers democratically-ruled Taiwan its own territory, has stepped up efforts under Xi to assert its sovereignty claims, including regular flights by fighter jets and bombers close to the island. ‘Solving the Taiwan question and realising the complete reunification of the motherland are the unswerving historical tasks of the Chinese Communist Party and the common aspiration of all Chinese people,’ Xi said… ‘All sons and daughters of China, including compatriots on both sides of the Taiwan Strait, must work together and move forward in solidarity, resolutely smashing any 'Taiwan independence' plots.’”
June 27
– Bloomberg
(Sudhi Ranjan Sen):
“India has redirected at least 50,000 additional troops to its border with China in a historic shift toward an offensive military posture against the world’s second-biggest economy. Although the two countries battled in the Himalayas in 1962, India’s strategic focus has primarily been Pakistan since the British left the subcontinent, with the long-time rivals fighting three wars over the disputed region of Kashmir. Yet since the deadliest India-China fighting in decades last year, Prime Minister Narendra Modi’s administration has sought to ease tensions with Islamabad and concentrate primarily on countering Beijing. Over the past few months, India has moved troops and fighter jet squadrons to three distinct areas along its border with China…”
“Britain reported 27,989 new cases of COVID-19, government data showed on Thursday, the highest number since Jan. 29 and taking the rise in cases between June 25 and July 1 to nearly 72% compared with the previous seven days.”
Market Mania Watch:
June 30
– Reuters
(Marc Jones):
“Vaccine programmes and some of the biggest fiscal and central bank stimulus ever seen have made for compelling viewing. Oil’s 45% surge will be its best start to a year since 2009, world stocks are on course for their second best H1 since 1998, wood is on fire and amateur traders’ much-loved ‘meme’ stocks AMC and GameStop are up more than 2,500% and 1,000% respectively. Add to that another wild run for bitcoin, digital art selling for tens of millions of dollars despite being free on the internet and major gyrations in government bond markets and you start to get the picture. ‘It has been extremely dramatic year,’ SEB investment management’s head of asset allocation Hans Peterson said. ‘The swings have been absolutely enormous. It has not been an easy year, it has been quite tumultuous.’ World equities have recorded an 11% gain but mainstay U.S. and German government bond markets have had their toughest H1 since 2013 despite a better last few months.”
June 26
– Bloomberg
(Swetha Gopinath and
Myriam Balezou):
“Companies are racing to public markets like never before, cashing in on record-high stock prices. An all-time high of almost $350 billion has been raised in initial public offerings in the first six months of this year, according to… Bloomberg, surpassing the previous peak of $282 billion from the second half of 2020 and enriching entrepreneurs and bankers alike. When the rush for IPOs kicked off last year, stay-at-home technology dominated the scene, seizing on investor interest in anything digital, while special-purpose acquisition companies also flooded the market. This year, with stocks continuing to push skyward, the trend has broadened to include renewable-energy companies and online retailers… As long as the stock market is rising, the flow of IPOs is unlikely to dry up, and total proceeds this year are on track to eclipse the record of $420.1 billion set in 2007.”
June 27
– Bloomberg
(Lu Wang and
Vildana Hajric):
“If you think a rush by companies to sell their shares is a bad omen for the market, imagine a scenario where most of the sales come from firms that don’t make money. It’s happening now. Since the end of March, almost 100 unprofitable U.S. companies, including GameStop Corp. and AMC Entertainment Holdings Inc., have raised money through secondary offerings, twice as many as coming from profitable firms, according to… Bloomberg. During the past 12 months, almost 750 money-losing firms have sold shares in the secondary market, exceeding those that make profits by the biggest margin since at least 1982… In fact, the previous two periods in which unprofitable firms dominated the pool of equity offerings, the S&P 500 Index was either at the start of a bear market, or already in one.”
June 30
– Bloomberg
(Luke McGrath):
“Charlie Munger is not shy about his thoughts on Robinhood. In an interview with CNBC…, Munger, 97, continued a spat between Berkshire Hathaway Inc. executives and the trading platform, saying the company is ‘beneath contempt…’ ‘Robinhood is a ‘gambling parlor masquerading as a respectable business,’ Munger added.”
Market Instability Watch:
June 25
– Reuters
(Saqib Iqbal Ahmed):
“While major U.S. stock indexes reach new highs, options data suggests traders see the market as vulnerable to a big drop should bears gain the upper hand, according to strategists at Goldman Sachs. Apparent calm in the stock market masks heightened expectations for big stock market gyrations over the next three months, Goldman strategists said… One indication of how anxious investors are is the fact that the 3-month downside implied volatility skew, which compares put option prices with at-the-money option prices, has reached new all-time highs, the note said.”
Inflation Watch:
June 30
– Bloomberg
(Katia Dmitrieva):
“Americans are enjoying outsized pay boosts this year from desperate employers, but the raises are failing to keep pace with surging prices for everyday goods. U.S. wages likely posted a third strong monthly gain to fuel a 3.6% increase in June from a year earlier, according to economists’ forecasts… Companies… are raising wages to attract staff. At the same time, prices for everything from milk to car rentals and gasoline are rising at a rapid clip, eating into those income gains. The Federal Reserve’s preferred consumer-price gauge rose 3.9% in the 12 months through May, the fastest since 2008.”
July 1
– Wall Street Journal
(Ryan Dezember):
“Propane has rarely been so expensive this time of year, and prices may have to move higher yet to ensure ample supply for winter, when millions of rural Americans rely on the fuel to heat their homes. At hubs in Mont Belvieu, Texas, and Conway, Kan., propane futures traded Wednesday at $1.09 and 95 cents a gallon… Those prices are roughly twice their levels during the past two summers. Spot prices have moved in a similar way. Retail prices have also risen… The Energy Information Administration said U.S. households can expect to spend an average of 14% more on propane this winter than they did during last year’s—and significantly more than that if the weather is colder than forecast.”
Biden Administration Watch:
June 27
– Reuters
(Phil Stewart):
“The United States said… it carried out another round of air strikes against Iran-backed militia in Iraq and Syria, this time in response to drone attacks by the militia against U.S. personnel and facilities in Iraq… The U.S. military said it targeted operational and weapons storage facilities at two locations in Syria and one location in Iraq.”
U.S. Bubble Watch:
July 1
– CNBC
(Jeff Cox):
“The federal government will be swimming in $3 trillion of red ink by the end of fiscal 2021, according to a Congressional Budget Office estimate Thursday that swelled 33% from the last forecast. As a result of multiple stimulus measures aimed at combating the pandemic’s economic impact, Congress will run a budgetary shortfall this year equivalent to 13.4% of GDP, the second-largest level since 1945 and exceeded only by the 2020 spending. The CBO last released a deficit estimate in February, when it saw a deficit $745 billion smaller than the one projected now. Under the current projections, the $23 trillion portion of government debt held by the public would bump to 103% by the end of the current fiscal year.”
June 27
– Wall Street Journal
(Orla McCaffrey and
Shane Shifflett):
“The coronavirus pandemic plunged Americans into recession. Instead of emerging poorer, many came out ahead. U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades… That challenged the conventions of previous economic downturns. In 2008, for example, U.S. households lost $8 trillion… The stock market, in turn, became the driver of the household wealth gain, accounting for nearly half the total increase. That has produced a lopsided distribution of the wealth gains, since well-off households are more likely to own stocks. More than 70% of the increase in household wealth went to the top 20% of income earners. About a third went to the top 1%.”
June 29
– Financial Times
(Mamta Badkar):
“US home price growth accelerated in April at the fastest pace in more than three decades… The S&P Case-Shiller national home price index, which covers all nine US census divisions, rose 14.6% year on year in April… That followed a 13.3% annual jump in March, and was ‘the highest reading in more than 30 years’… Meanwhile, the 20-city composite, which covers US metropolitan areas including Dallas, Miami, New York and San Francisco, rose 1.6% from the previous month and 14.9% year on year… ‘April’s performance was truly extraordinary,’ said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.”
June 29
– Reuters
(Evan Sully):
“U.S. single-family home prices in 20 key urban markets rose in April from a year earlier by the most in over 15 years as the shortage of homes available to buy drives up prices at the fastest rate seen since before the financial crisis, a closely watched survey said… The S&P/Case Shiller composite index of 20 metropolitan areas gained 14.9% through the 12 months ended in April, the largest annual price increase since December 2005… On a month-to-month basis, the 20-city composite index rose 1.6% from March… Among the twenty cities, Phoenix, San Diego, and Seattle reported the highest year-over-year gains in April… Similar data out Tuesday from the U.S. Federal Housing Finance Agency showed its home price index gained a record-high 15.7% through the 12 months ended in April.”
June 30
– CNBC (Diana Olick):
“The pandemic-induced housing boom may not be over quite yet. Despite recent months of softening sales, buyers came back remarkably strongly in May. Pending home sales, a measure of signed contracts on existing homes, jumped an unexpectedly high 8% in May compared with April, according to the National Association of Realtors. Analysts expected a 1% drop. This is the highest level of sales activity for May since 2005. Sales were up 13% from May 2020…”
June 30
– CNBC
(Diana Olick):
“Record high home price appreciation is sidelining ever more buyers and finally taking the bang out of the pandemic-induced housing boom. Weekly mortgage demand is falling along with it, down 6.9% for the week according to the Mortgage Bankers Association… That is the lowest level in almost a year and a half. Mortgage applications to purchase a home dropped 5% for the week and were 17% lower annually. That is the slowest pace since the start of May 2020, when lockdowns were in full force.”
July 1
– CNBC
(Jeff Cox):
“Initial filings for unemployment insurance fell sharply last week, indicating continued improvement in the U.S. jobs market… First-time jobless claims totaled 364,000 for the week ended June 26, compared with the 390,000 Dow Jones estimate. That marked a new pandemic-era low and a decline of 51,000 from the previous week.”
June 28
– Bloomberg
(Katia Dmitrieva):
“The U.S. labor market is entering one of its strangest summers ever, with a powerful economic rebound generating record demand for workers just as roadblocks distort employment and wage levels. While economic growth will clock 10% this quarter and 7% next, according to Bloomberg surveys -- well above pre-pandemic trends -- millions of Americans remain reluctant or unable to take up the unprecedented number of job openings available.”
June 30
– CNBC
(Michael Wayland):
“Ford Motor is significantly cutting its North American vehicle production in July due to an ongoing shortage of semiconductor chips impacting the global automotive industry. The automaker said… it will idle or reduce production at eight plants, including six in the U.S., for varying periods of time next month and into early August due to the problem. Affected products range from the Ford F-150 and Ford Bronco Sport to the Ford Mustang and Ford Explorer.”
China Watch:
June 30
– Reuters
(Stella Qiu and
Ryan Woo):
“China’s factory activity expanded at a softer pace in June, as the resurgence of COVID-19 cases in the export province of Guangdong and supply chain woes drove output growth to the lowest in 15 months, a private survey showed… The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 51.3 last month from May’s 52, marking the 14th month of expansion, but it came below analyst expectations…”
Global Bubble Watch:
July 1
– Reuters
(Leigh Thomas):
“Most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed and a tax rate of at least 15%, they said on Thursday after two days of talks. The Paris-based Organisation for Economic Cooperation and Development, which hosted the talks, said a global minimum corporate income tax of at least 15% could yield around $150 billion in additional global tax revenues annually. It said 130 countries, representing more than 90% of global GDP, had backed the agreement at the talks.”
June 30
– Bloomberg:
“From the U.S. to the U.K. to China, housing is riding an extended boom. Global valuations are soaring at the fastest pace since 2006, according to Knight Frank, with annual price increases in double digits. Frothy markets are flashing the kind of bubble warnings that haven’t been seen since the run up to the financial crisis… On the ground, outrageous stories are rife, with desperate buyers promising to name their first-born after sellers and derelict buildings selling for mansion prices. The drivers for the frenzy are remarkably consistent: cheap mortgages, a post-pandemic desire for more space, newly remote workers taking city cash to regional locations — and, crucially, a pervasive fear that if you don’t buy now you may never be able to. As prices mount, so do the risks for both individuals and society.”
June 29
– Reuters
(William Schomberg):
“British house prices jumped by the most in more than 16 years this month, soaring by 13.4% from June 2020, and demand is expected to stay strong while a coronavirus emergency tax break remains in place, mortgage lender Nationwide said.”
Europe Watch:
July 1
– Reuters
(Jonathan Cable and
Leika Kihara):
“European factories continued to ramp up their post-lockdown recovery in June but Asian manufacturers saw momentum weaken amid rising input costs and the reintroduction of curbs to combat a new wave of coronavirus infections, surveys showed. Euro zone manufacturing activity expanded at its fastest pace on record last month while Britain's factories extended their post-lockdown recovery and went on a hiring spree.”
Geopolitical Watch:
June 30
– Bloomberg:
“President Xi Jinping struck a defiant tone in a speech marking the Communist Party’s 100-year anniversary, calling China’s quest to gain control of Taiwan a ‘historic mission’ and warning the country’s adversaries to avoid standing in the way of his government. In a nationwide address from above the portrait of Mao Zedong in Tiananmen Square, Xi hailed the party’s successes, saying China wanted to promote peace in the world and was open to ‘constructive criticism.’ Yet he quickly warned that the country would no longer listen to ‘sanctimonious preaching’ and that ‘the time when the Chinese nation could be bullied and abused by others was gone forever.’”
July 1
– Reuters
(Yew Lun Tian and
Yimou Lee):
“Chinese President Xi Jinping pledged… to complete ‘reunification’ with self-ruled Taiwan and vowed to ‘smash’ any attempts at formal independence, drawing a stern rebuke from Taipei, which lambasted the Communist Party as a dictatorship. China, which considers democratically-ruled Taiwan its own territory, has stepped up efforts under Xi to assert its sovereignty claims, including regular flights by fighter jets and bombers close to the island. ‘Solving the Taiwan question and realising the complete reunification of the motherland are the unswerving historical tasks of the Chinese Communist Party and the common aspiration of all Chinese people,’ Xi said… ‘All sons and daughters of China, including compatriots on both sides of the Taiwan Strait, must work together and move forward in solidarity, resolutely smashing any 'Taiwan independence' plots.’”
June 27
– Bloomberg
(Sudhi Ranjan Sen):
“India has redirected at least 50,000 additional troops to its border with China in a historic shift toward an offensive military posture against the world’s second-biggest economy. Although the two countries battled in the Himalayas in 1962, India’s strategic focus has primarily been Pakistan since the British left the subcontinent, with the long-time rivals fighting three wars over the disputed region of Kashmir. Yet since the deadliest India-China fighting in decades last year, Prime Minister Narendra Modi’s administration has sought to ease tensions with Islamabad and concentrate primarily on countering Beijing. Over the past few months, India has moved troops and fighter jet squadrons to three distinct areas along its border with China…”
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