Financial Data and Economic News for the week ending July 16, 2021

Source:
http://creditbubblebulletin.blogspot.com/2021/07/weekly-commentary-under-fire.html

Credit Bubble Bulletin
Saturday, July 17, 2021
by Doug Noland

Following is my edited version
of a long and hard to read column
Ye Editor

For the Week Ending July 16, 2021:

GLOBAL  STOCK  INDEXES:
S&P500 declined 1.0% (up 15.2% y-t-d)

Dow slipped 0.5% (up 13.3%)

Utilities jumped 2.7% (up 5.4%).

Banks fell 2.4% (up 24.0%)

Broker/Dealers lost 2.0% (up 20.3%)

Transports dropped 2.4% (up 15.9%)

S&P 400 Midcaps fell 3.3% (up 13.5%)

Small cap Russell 2000 sank 5.1% (up 9.5%)

Nasdaq100 declined 1.0% (up 13.9%)

Semiconductors sank 4.1% (up 12.5%)

 Biotechs dropped 4.3% (down 1.4%)

The HUI gold stock index
declined 1.4% (down 11.5%).

U.K.'s FTSE declined 1.6% (up 85% y-t-d).

Japan's Nikkei recovered 0.2% (up 2.0% y-t-d).

France's CAC40 declined 1.1% (up 16.4%).

The German DAX fell 0.9% (up 13.3%).

Spain's IBEX 35 dropped 3.1% (up 5.4%).

Italy's FTSE MIB declined 1.0% (up 11.5%)

Brazil's Bovespa gained 0.4% (up 5.8%)

Mexico's Bolsa increased 0.8% (up 13.8%)

 South Korea's Kospi rallied 1.8% (up 14.0%)

 India's Sensex rose 1.4% (up 11.3%

China's Shanghai added 0.4% (up 1.9%)

Russia's MICEX slumped 2.2% (up 14.6%).


US  BONDS:
Three-month Treasury bill rates
ended the week at 0.0425%.

Two-year government yields
added a basis point to 0.22% (up 10bps y-t-d).

Five-year T-note yields
slipped a basis point to 0.78% (up 41bps).

Ten-year Treasury yields
dropped seven bps to 1.29% (up 38bps).

Long bond yields
fell seven bps to 1.92% (up 27bps).

Benchmark Fannie Mae MBS yields
declined two bps to 1.75% (up 41bps).

Federal Reserve Credit last week
expanded $31.9bn to $8.080 TN.
Over the past 96 weeks,
Fed Credit expanded $4.353 TN,
or 117%


US  MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
slipped two bps to a five-month low 2.88%
   (down 10bps y-o-y).

Fifteen-year rates
increased two bps to 2.22%
   (down 26bps).

Five-year hybrid ARM rates
fell five bps to 2.47%
   (down 59bps).

Jumbo mortgage 30-year fixed rates
down three bps to 3.04%
    (down 15bps).


COMMODITIES:
July 12
– Reuters
(Julie Ingwersen and
Karl Plume):
“Farmers in the northern U.S. Plains are on track to harvest the smallest spring wheat crop in 33 years, reflecting the impact of severe drought in the key farming region, the U.S. Department of Agriculture (USDA) said… The shortfall in spring wheat… means tighter supplies of the variety used in bread and pizza dough, prized by millers for its quality and high protein content. Benchmark futures prices on the Minneapolis Grain Exchange surged more than 5% after the USDA slashed its 2021 spring wheat harvest outlook to 345 million bushels, down 41% from a year earlier and the smallest since 1988.”

July 13
– Wall Street Journal
(Joe Wallace):
“A scramble for natural gas is creating pockets of scarcity in the global market, boosting prices for the fuel and for the electricity generated by burning it. Rampant demand in China is sucking in chilled cargoes of gas from the U.S., after a year in which American energy companies throttled back production. A drought in Brazil has added to the competition by curtailing power output from hydroelectric dams. Searing heat in Canada and the Pacific Northwest has also lifted gas demand.”

Bloomberg Commodities Index gained 1.0%
   (up 21.0% y-t-d).

Spot Gold added 0.2% to $1,812 (down 4.6%).

Silver fell 1.7% to $25.66 (down 2.8%).

WTI crude dropped $2.75 to $71.81 (up 48%).

Gasoline fell 1.7% (up 60%)

Natural Gas was unchanged (up 45%).

Copper declined 0.5% (up 23%).

Wheat surged 12.6% (up 8%).

Corn jumped 6.8% (up 14%).

Bitcoin sank $2,402 this week
to $31,264 (up 7.5%).


DOUG  NOLAND's
COMMENTARY
   (highly edited)
Ten-year Treasury yields
dropped another seven bps to 1.29%
- completely disregarding
much stronger-than-expected reports
on consumer and producer prices.

German bund yields fell another six bps
to a three-month low negative 0.35%.

The US Midcaps dropped 3.3%,
and the small cap Russell 2000 sank 5.1%.

... Consumer Prices (CPI) jumped 0.9% in June ...

Year-over-year CPI was up 5.4%
... the strongest jump since 2008. ...

Core CPI… was up 4.5% in June;
the highest reading in almost 30 years.
The two-year change in Core CPI
was at a 25-year-high.

Producer Prices rose a data series record 7.3% y-o-y.

Import Prices jumped 1% for the month and 11.2% y-o-y.

University of Michigan one-year Inflation Expectations
rose to 4.8%, the high since the summer of 2008.

Also, at 4.8%, the New York Fed’s survey
of one-year inflation expectations
jumped to the highest level in data back to 2013.

To this point, inflation has not been an issue for the markets.

It has become a problem for millions of Americans. ...

Pennsylvania Senator Pat Toomey:
“The Fed's policy is especially troubling because the warning siren for problematic inflation is getting louder. Inflation is here, and it’s more severe than most, including the Fed itself, expected. And it is more than offsetting the wage gains, so leaving workers worse off despite their nominal wage increases.

... The Case-Shiller Home Price Index
showed housing prices across the U.S.
as a whole increased in May
by more than 15%
from the previous year…

Fifteen percent, clearly,
is making housing less affordable,
more out of reach for more people.

... I have to ask why on Earth
is the Fed still buying $40 billion
in mortgage-backed bonds each month?


NEWS  FROM  LAST  WEEK:

Coronavirus Watch:

July 13
– Associated Press
(Heather Hollingsworth and
Josh Funk):
“The COVID-19 curve in the U.S. is rising again after months of decline, with the number of new cases per day doubling over the past three weeks, driven by the fast-spreading delta variant, lagging vaccination rates and Fourth of July gatherings. Confirmed infections climbed to an average of about 23,600 a day on Monday, up from 11,300 on June 23… And all but two states — Maine and South Dakota — reported that case numbers have gone up over the past two weeks.”

July 14
– Associated Press
(Heather Hollingsworth and
Maria Cheng):
“COVID-19 deaths and cases are on the rise again globally in a dispiriting setback that is triggering another round of restrictions and dampening hopes for a return to normal life. The World Health Organization reported… deaths climbed last week after nine straight weeks of decline… Cases rose 10% last week to nearly 3 million, with the highest numbers recorded in Brazil, India, Indonesia and Britain...”

Inflation Watch:

July 12
– CNBC
(Jeff Cox):
“Despite the Federal Reserve’s assurance that current inflation pressures won’t last, consumers see things differently, according to a survey… from the central bank’s New York district. The June Survey of Consumer Expectations showed that median inflation expectations over the next 12 months jumped to 4.8%, a 0.8 percentage point rise from May and the highest reading in history for a series that goes back to 2013.”

July 13
– Bloomberg:
“The cost of feeding the world is the most expensive it’s been in years. The Food and Agriculture Organization’s food price index, which tracks a basket of grains, vegetable oils, meat, dairy and sugar, rose to its highest level in a decade in May. On the Chicago Mercantile Exchange, the prices of soybean oil is more than double what it was a year ago, while lean hogs and ethanol are up by about three-quarters. The same dynamic is affecting corn, palm oil, coffee, sugar and a host of other commodities. Even the price of moving food around the world is surging: The Baltic Handysize Index, which tracks freight rates on the ships used for hauling grains between continents, is at levels last seen in 2008.”

July 12
– Wall Street Journal
(Will Horner and
Jeffrey T. Lewis):
“Global coffee prices are climbing and threatening to drive up costs at the breakfast table as the world’s biggest coffee producer, Brazil, faces one of its worst droughts in almost a century. Prices for arabica coffee beans… hit their highest level since 2016 last month. New York-traded arabica futures have risen over 18% in the past three months to $1.51 a pound.”

July 13
– Bloomberg
(Daniela Sirtori-Cortina and
Elizabeth Elkin):
“Eric Vanstrom stuck by his dairy cows through a recession, a trade war and a global pandemic that forced him to dump milk into manure pits. This year, though, he’s finally had enough. The thing that’s putting him over the edge: exorbitant grain prices. One weekend in early June, the… farmer and his wife loaded 46 milking cows into livestock trailers and sent them off to an auction house. Some went to other dairies. Others ended up at slaughterhouses, to be turned into ground beef. They were so expensive to feed and so unprofitable that he wasn’t even sad to see them go.”

Biden Administration Watch:

July 13
– Reuters
(Richard Cowan and
Susan Cornwell):
“U.S. President Joe Biden's drive for big new infrastructure investment got a boost… when leading Senate Democrats agreed on a $3.5 trillion investment plan they aim to include in a budget resolution to be debated soon, Senate Majority Leader Chuck Schumer said. ‘We have come to an agreement,’ Schumer told reporters after more than two hours of closed-door talks that included Senate Budget Committee Democrats and White House officials. Republicans have not been part of these negotiations. ‘You add that to the $600 billion in a bipartisan plan and you get to $4.1 trillion, which is very, very close to what President Biden has asked us for,’ Schumer said.”

U.S. Bubble Watch:

July 13
– Associated Press
(Martin Crutsinger):
“The U.S. government’s deficit for the first nine months of this budget year hit $2.24 trillion, keeping the country on track for its second biggest shortfall in history… So far this fiscal year, government receipts have totaled $3.06 trillion, up 35.2% from the same period a year ago. The number for last year was pushed downward by the fact that various tax deadlines were delayed… Spending in the October-June period totaled $5.29 trillion, up 5.8% from the same period last year. For the month of June, the deficit totaled $174.2 billion…”

July 15
– Bloomberg
(Vince Golle and Olivia Rockeman):
“A gauge of New York state manufacturing in July advanced to a record high, reflecting the strongest orders and shipments in 17 years, while a measure of selling prices advanced to an unprecedented level. The Federal Reserve Bank of New York’s general business conditions index climbed to 43 from 17.4 a month earlier… The median projection called for a reading of 18. The Fed bank’s gauge of prices received climbed 6.1 points to 39.4, while a measure of prices paid for materials eased to a still-elevated 76.8.”

China Watch:

July 13
– Bloomberg:
“The recent cut in the amount of money banks must keep in reserve doesn’t mean a change in the China’s monetary policy, the People’s Bank of China said. ‘The RRR cut is a standard liquidity operation after monetary policy returned to normal and the prudent monetary policy direction has not changed,’ Sun Guofeng, head of the central bank’s monetary policy department, said…”

July 15
– Bloomberg:
“China’s economic rebound steadied in the second quarter and showed more balance as consumer spending picked up… Gross domestic product in the world’s second-largest economy expanded 7.9% from a year earlier… down from 18.3% in the previous quarter, with that slowdown largely reflecting base effects from last year’s pandemic. On a two-year average growth basis which strips out that effect, the economy grew 5.5% last quarter, slightly higher than in the previous three months.”

July 12
– Bloomberg
(Steven Church):
 “China’s dollar debt market has gotten so big and so distressed in the last decade that it’s now the number one risk faced by high-yield investors, according to Bank of America Global Research. About 15% of the $425 billion in corporate bonds in China trade at distressed levels, Bank of America said. In 2011-2012, the rate was higher, but the total amount of dollar-denominated corporate bonds in China was a small fraction of what it is today.”

July 14
– Financial Times
(Hudson Lockett):
“Global holdings of Chinese stocks and bonds have surged about 40% to more than $800bn over the past year as investors bought assets at a record pace in spite of souring relations between Beijing and the international community. The drive into China’s markets by global investors has come despite tensions between Beijing and Washington…”

Global Bubble Watch:

July 12
– Wall Street Journal
(Marcus Walker and Peter Landers):
“The pandemic has pushed global government debt to the highest level since World War II, surpassing the world’s annual economic output. Governments, especially in rich countries, are borrowing still more, partly to erase the damage of Covid-19. Advocates say the spending, also encouraged by new economic thinking about debt, could usher in a period of robust global growth, reversing the malaise many wealthy countries have felt this century. But if those theories are off-base, the world could be saddled with debts that can be absorbed only via inflation, high taxes or even default… ‘The world has changed. The intellectual frameworks have evolved,’ said Paul Sheard, a research fellow at the Harvard Kennedy School and former chief economist at… S&P Global. ‘We don’t need to worry’ about debt.”

July 12
– Reuters
 (Gavin Jones and
Leigh Thomas):
“An upsurge in new coronavirus variants and poor access to vaccines in developing countries threaten the global economic recovery, finance ministers of the world's 20 largest economies warned… The G20 gathering… was the ministers' first face-to-face meeting since the start of the pandemic. Decisions include the endorsement of new rules aimed at stopping multinationals shifting profits to low-tax havens. That paves the way for G20 leaders to finalise a new global minimum corporate tax rate of 15% at a Rome summit in October, a move that could recoup hundreds of billions of dollars for public treasuries straining under the COVID-19 crisis.”

Emerging Markets Watch:

July 13
– Reuters
(Alexander Winning and
Wendell Roelf):
“Crowds clashed with police and ransacked or set ablaze shopping malls in cities across South Africa on Tuesday, with dozens of people reported killed, as grievances unleashed by the jailing of ex-president Jacob Zuma boiled over into the worst violence in years. Protests that followed Zuma's arrest last week for failing to appear at a corruption inquiry have widened into looting and an outpouring of general anger over the hardship and inequality that persist 27 years after the end of apartheid.”

July 15
– Reuters
(Nqobile Dludla and
Alexander Winning):
“South Africans counted the cost… of arson and looting that has destroyed hundreds of businesses and killed at least 117 people, as the spasm of violence began to ebb and the government doubled its troop deployment to 10,000. Pockets of unrest remained, notably in the port city of Durban, where looters pillaged shops and racial tensions flared. But in the main commercial city Johannesburg, shopkeepers and other residents sifted through debris, cleared up trash and assessed what remained of their ruined enterprises. The rioting broke out in response to the jailing of ex-President Jacob Zuma last week for his failure to appear at a corruption inquiry.”

July 13
– Reuters
(Sarah Marsh and
Elizabeth Culliford):
“Cuba has restricted access to social media and messaging platforms including Facebook and WhatsApp…, in the wake of the biggest anti-government protests in decades. Thousands of Cubans joined demonstrations throughout the Communist-run country on Sunday to protest against a deep economic crisis that has seen shortages of basic goods and power outages. They were also protesting against the government's handling of the coronavirus pandemic and curbs on civil liberties.”

July 12
– Wall Street Journal
(Kejal Vyas):
“Nearly half of the population on this island nation is facing acute hunger, while gang members block fuel distribution routes to the capital and scare away tourists from pristine beaches. In contrast to neighboring countries, Haiti has yet to administer a single vaccine against Covid-19. A country that for much of its history has been stifled by poverty and strife is now mired in its worst crisis in a generation after President Jovenel Moïse was assassinated in his home last week…”

Japan Watch:

July 11
– Reuters
(Leika Kihara):
“Japanese wholesale prices continued to surge in June as import costs spiked at the fastest pace on record…, a sign rising raw material costs were weighing on corporate profits. Households may also start to feel the pinch... The corporate goods price index (CGPI)… rose 5.0% in June from a year earlier…, beating a median market forecast for a 4.7% gain.”

Geopolitical Watch:

July 15
– Bloomberg:
“Any foreign military planes landing in Taiwan need China’s approval, Chinese defense ministry says… on the landing of a U.S. government plane at Taipei airport Thursday. Foreign planes’ entering into China’s space without its approval will lead to ‘serious consequences,’ the ministry says. China warns the U.S. to stop ‘playing with fire’ and not to worsen tensions in the Taiwan strait. The Chinese military are on high alert; will take all necessary actions against attempts seeking Taiwan independence.”

July 11
– Associated Press:
“China… said it will take ‘necessary measures’ to respond to the U.S. blacklisting of Chinese companies over their alleged role in abuses of Uyghur people and other Muslim ethnic minorities. The Commerce Ministry said the U.S. move constituted an ‘unreasonable suppression of Chinese enterprises and a serious breach of international economic and trade rules.’ China will ‘take necessary measures to firmly safeguard Chinese companies’ legitimate rights and interests,’ the ministry’s statement said.”