Friday, November 26, 2021
Weekly Commentary
by Doug Noland
For the Week Ending November 26, 2021:
GLOBAL STOCK MARKET INDEXES:
S&P500 fell 2.2% (up 22.3% y-t-d)
Dow slumped 2.0% (up 14.0%)
Utilities declined 1.0% (up 6.5%)
Banks lost 1.1% (up 37.6%)
Transports declined 1.8% (up 29.7%).
S&P 400 Midcaps dropped 3.2% (up 20.5%),
Small cap Russell 2000 sank 4.1% (up 13.7%).
Nasdaq100 slumped 3.3% (up 24.3%).
Semiconductors sank 4.0% (up 34.4%).
Biotechs dipped 0.5% (down 5.9%).
With gold bullion down $43,
the HUI gold stock index dropped 4.3%
(down 14.6%).
U.K.'s FTSE fell 2.5% (up 9.0% y-t-d).
Japan's Nikkei dropped 3.3% (up 4.8% y-t-d).
France's CAC40 sank 5.2% (up 21.4%)
German DAX slumped 5.6% (up 11.2%).
Spain's IBEX 35 fell 4.0% (up 4.1%).
Italy's FTSE MIB sank 5.4% (up 16.3%)
Brazil's Bovespa declined 0.8% (down 14.1%)
Mexico's Bolsa fell 2.6% (up 12.3%).
South Korea's Kospi declined 1.2% (up 2.2%).
India's Sensex dropped 4.2% (up 19.6%).
China's Shanghai was little changed (up 2.6%).
Russia's MICEX sank 5.1% (up 15.9%).
US BONDS:
Three-month Treasury bill rates
ended the week at 0.0375%.
Two-year government yields
slipped a basis point to 0.50%
(up 38bps y-t-d).
Five-year T-note yields
declined six bps to 1.16%
(up 80bps).
Ten-year Treasury yields
dropped seven bps to 1.48%
(up 56bps).
Long bond yields fell nine bps to 1.83%
(up 18bps).
Benchmark Fannie Mae MBS yields
dipped two bps to 2.01%
(up 66bps).
Federal Reserve Credit last week
jumped $24.8bn to a record $8.651 TN.
Over the past 115 weeks, Fed Credit
expanded $4.925 TN, or 132%.
US MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
were unchanged at 3.10%
(up 38bps y-o-y).
Fifteen-year rates
increased three bps to 2.42%
(up 14bps).
Five-year hybrid ARM rates
declined two bps to 2.47%
(down 69bps)
Jumbo mortgage 30-year fixed rates
down three bps to 3.17%
(up 20bps).
COMMODITIES:
Bloomberg Commodities Index fell 2.2%
(up 28.2% y-t-d).
Spot Gold declined $43 to $1,803
(down 5.1%).
Silver sank 5.9% to $23.16
(down 12.3%).
WTI crude oil sank $7.79 to $68.15
(up 41%).
Gasoline dropped 8.3%
(up 44%)
Natural Gas surged 7.5%
(up 115%).
Copper fell 2.4%
(up 22%).
Wheat added 0.7%
(up 31%)
Corn jumped 2.6%
(up 22%).
Bitcoin sank $4,285 or 7.4%, this week
to $53,717
(up 85%).
COMMENTARY:
It was definitely Black Friday for crude and some other commodities. WTI was slammed $10.24, or 13%, to an 11-week low $68.15. The Bloomberg Commodities Index dropped 2.2%. If there were any doubts, the cryptocurrencies are vulnerable speculative vehicles. Bitcoin was hammered for more than 7%.
NEWS SUMMARY OF LAST WEEK:
Coronavirus Watch:
November 25 – Bloomberg:
“The new COVID discovery, called B.1.1529 until a Greek letter is assigned, carries an unusually large number of mutations and is ‘clearly very different’ from previous incarnations, Tulio de Oliveira, a bio-informatics professor who runs gene-sequencing institutions at two South African universities, said… ‘Here is a mutation variant of serious concern,’ Health Minister Joe Phaahla said…”
November 22 – Bloomberg:
“ Colorado, Minnesota and Michigan have 41%, 37% and 34% of ICU beds occupied by Covid-19 patients, respectively, the data show.”
November 24 – Reuters:
“Coronavirus infections broke records in parts of Europe on Wednesday, with the continent once again the epicentre of a pandemic that has prompted new curbs on movement and seen health experts push to widen the use of booster vaccination shots. Slovakia, the Czech Republic, the Netherlands and Hungary all reported new highs in daily infections as winter grips Europe… New cases have jumped 23% in the Americas in the last week, mostly in North America, in a sign that region might also face a resurgence of infections.”
November 22 – Bloomberg:
“Chancellor Angela Merkel said the latest surge in Covid-19 infections is worse than anything Germany has experienced so far and called for tighter restrictions to help check the spread. Merkel told officials from her Christian Democratic party… the situation is ‘highly dramatic’ and warned that some hospitals would soon be overwhelmed unless the fourth wave of the pandemic is broken, according to a person familiar with her remarks.”
Market Mania Watch:
November 26 – Bloomberg:
“Bitcoin tumbled 20% from the record high it notched earlier this month as a potentially worrisome new variant of the coronavirus spurred traders to dump risk assets across the globe. The world’s largest cryptocurrency fell as much as 9% to $53,552 on Friday. Ether, the second-largest digital currency, dropped more than 12%, while the wider Bloomberg Galaxy Crypto Index declined as much as 7.7%.”
Inflation Watch:
November 24 – Financial Times:
“A US inflation measure closely watched by the Federal Reserve posted its biggest year-on-year jump since the 1990s last month, adding to pressure on President Joe Biden as his White House scrambles to tame rising costs. The commerce department’s core personal consumption expenditure index, which strips out volatile food and energy costs, rose 4.1% in October compared with a year ago. The jump represents a significant increase from the 3.7% annual rise in September…”
November 23 – Bloomberg:
Price surges are busting through policy makers’ targets in all the region’s major economies, with annual inflation prints this month of 6% in Chile, 6.2% in Mexico, 10.7% in Brazil and a whopping 52% in Argentina. Major Wall Street banks are forecasting average cost-of-living increases across Latin America will end the year above 10%, the highest globally, and predict pressure on consumer prices will extend well into 2022. The world’s worst inflation is adding to the pain Latin America has been going through as one of the hardest hit regions during the pandemic.”
U.S. Bubble Watch:
November 24 – Reuters:
“The number of Americans filing new claims for unemployment benefits dropped to a 52-year low last week, suggesting economic activity was accelerating as a year ravaged by shortages, high inflation and an unrelenting pandemic draws to a close… ‘There might be some seasonal adjustment problems, but the handwriting is on the wall and all the anecdotal reports on how companies cannot find the help they need are true,’ said Christopher Rupkey, chief economist at FWDBONDS…”
November 22 – Wall Street Journal:
“U.S. home sales rose in October as buyers continued to compete for a limited number of homes for sale. Existing-home sales increased 0.8% in October from the prior month to a seasonally adjusted annual rate of 6.34 million, the highest pace since January… Still, October sales fell 5.8% from a year earlier, when the market was at its peak for this cycle… At the same time, the number of homes on the market has remained low, and new homes that are listed for sale are often snapped up quickly… Even so, the market is on pace for its strongest sales in 15 years, said Lawrence Yun, NAR’s chief economist. ‘The housing market is remaining strong’ due to continued low interest rates, a robust job market and rising stock-market values, he said.”
November 22 – Bloomberg:
“Spending by U.S. states in the most recent fiscal year grew at the fastest pace in at least 35 years as the governments deployed a surge of federal relief funds. Total spending, including stimulus, rose about 16% to an estimated $2.65 trillion in fiscal 2021…, according to… The National Association of State Budget Officers. In the past two years, states reported spending $427.9 billion in federal Covid-19 aid, the report said. The unprecedented spending clip last fiscal year highlights the sheer scale of pandemic aid the federal government handed to states…”
November 24 – Bloomberg:
“In Miami, West Palm Beach and Fort Lauderdale, rents jumped 36% in October from a year earlier, while the New York City metro area -- including Westchester County and parts of northern New Jersey -- posted a 31% gain, according to… Redfin Corp. The average increase in monthly rents nationwide was 13%, the highest growth rate in at least two years, Redfin said.”
Fixed-Income Bubble Watch:
November 22 – Wall Street Journal:
“U.S. junk bond and leveraged loan sales have surpassed $1 trillion in 2021, an unprecedented amount for a calendar year. Loan funds have experienced inflows during all but two weeks this year, bringing the S&P/LSTA Leveraged Loan Price Index close to an all-time high, and year-to-date issuance of collateralized-loan obligations is also at a record. Even municipal-bond buyers are turning to the riskiest corners of the market, plowing $1.2 billion into high-yield muni funds in the week ended Nov. 10, the second-most ever… Simply put, in the world of corporate credit, many companies want to borrow cheaply and a lot of investors are all too willing to lend at rock-bottom rates.”
China Watch:
November 22 – Bloomberg:
“China Evergrande Group shares worth almost $1 billion appeared in Hong Kong’s Central Clearing and Settlement System, a sign that founder Hui Ka Yan may be pledging part of his stake as collateral for loans. Billionaire owners of Chinese developers have dipped into their own pockets for at least $3.8 billion to save their companies from default, as a cash crunch engulfs the industry.”
Europe Watch:
November 22 – Bloomberg:
“German inflation may spike even higher than previously forecast this month with a rate just under 6%, according to the Bundesbank. About 1 1/2 percentage points of that will reflect a temporary cut in value-added tax and very low prices for travel-related services in 2020, the… central bank said… German inflation already hit a three-decade high of 4.6% in October, but that was always flagged as a prelude to an even faster surge in November.”
November 24 – Bloomberg:
“German business confidence took another hit in November, with a new wave of Covid-19 infections looming over the economy and rising inflationary pressures threatening to weigh on manufacturing. A gauge compiled by the Munich-based Ifo Institute dropped for a fifth straight month to its lowest since April.”
traditional colors.”
Japan Watch:
November 26 – Financial Times:
“Japan’s cabinet has signed off a $6.8bn package of extra defence spending as new prime minister Fumio Kishida signals his concern about China’s rising power. In an unusual move that will take defence spending to its highest level for decades as a share of national income, Japan will bring forward purchases of patrol aircraft and surface-to-air missiles from next year’s budget. The decision highlights Tokyo’s growing concern about military tensions across the Taiwan Strait as well as Kishida’s wish to send a clear statement of intent on defence spending to the Biden administration...”
Social and Environmental Instability Watch:
November 23 – Reuters:
“A Nordstrom department store in a Los Angeles mall on Monday night became the latest target in a string of ‘smash-and-grab’ robberies that have hit luxury retailers in California and Illinois as the holiday shopping season approaches… Local reports said as many as 20 people may have been involved in the break-in and theft. Law enforcement authorities say they are alarmed by the brazen nature of the burglaries -- some involving dozens of people -- which have targeted high-end stores in the two states in the past week. Videos from the chaotic burglaries, called ‘smash-and-grabs’, have flooded social media in recent days, showing masked figures breaking into stores, running out with bags of merchandise, and fleeing in cars idling outside. The San Francisco Bay Area has been particularly hard hit…”
November 20 – Bloomberg:
“The world’s fish population is in a dire state, with about half of assessed stocks being overfished, according to a study backed by Australian billionaire Andrew Forrest. The rate of depletion is worse than previous estimates of just over a third, Forrest’s Minderoo Foundation said in a report... A tenth of fish stocks worldwide is now on the brink of collapse, reduced to 10% of their original size, the study shows.”
Geopolitical Watch:
November 24 – Reuters:
“Russia staged military drills in the Black Sea, south of Ukraine, on Wednesday and said it needed to sharpen the combat-readiness of its conventional and nuclear forces because of heightened NATO activity near its borders. Ukraine, which says it believes Russia may be preparing an invasion, held exercises of its own near the frontier with Belarus. An independent Russian investigative group posted photos and videos it said showed movements of tanks and other military vehicles in southern Russia in the past few days.”
November 24 – Reuters:
“Ukraine, which has accused Russia of massing troops and says Belarus could send migrants over its borders, launched an operation on Wednesday to strengthen its frontier, including military drills for anti-tank and airborne units. The Ukrainian state border service said the ‘special operation’ at the border with Belarus involved troops of the National Guard, police, Armed Forces and other reserves.”
November 22 – Wall Street Journal:
“China is expanding its capacity to develop weapons that can be fired from hypersonic missiles, suggesting a test this summer that surprised U.S. military officials with its technological accomplishment is part of a program to create new threats for U.S. missile defenses… A hypersonic glide vehicle is a maneuverable warhead that sits on the tip of a long-range missile and, once released, glides to its target on an unpredictable path that makes it difficult to intercept. In a test in July, U.S. officials said, China fired a missile that traveled around the globe in a low-earth orbit before releasing the glide vehicle. That glide vehicle then separately fired a projectile of its own, they said—a feat that pushes the boundaries of physics.”
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