Friday, November 19, 2021
Weekly Commentary
by Doug Noland
My edited easy to read version follows.
Ye Editor
"Germany reported a record 65,000 new (COVID) infections Thursday. And ... infections are now doubling every 12 days ... “In Berlin, there were 79 intensive-care beds available for the city’s 3.8 million people on Friday, while in the northern port city of Bremen, there were just five beds for its 680,000 residents.”
... Friday from CNBC: “The U.S. reported a seven-day average of nearly 95,000 new Covid infections Thursday, up 31% over the past two weeks…” Outbreaks are up about 50% in two weeks in the Midwest and Northeast.
... This week’s 11.3% drop pushed Turkish lira year-to-date losses to 34%. Turkish inflation, already above 20%, will surely accelerate. ... Turkish local-currency bond yields jumped 60 bps this week to 19.31%, up about 300 bps in two months. ...
... Brazil’s local-currency bond yields rose 22 bps this week to 11.69%. ... At 10.7%, Brazil’s y-o-y inflation hasn’t been higher since the dark days of 2003.
For the Week Ending November 19, 2021:
S&P500 added 0.3% (up 25.1% year-to-date)
Dow Industrials fell 1.4% (up 16.3%)
Utilities gained 0.9% (up 7.6%)
Banks dropped 2.7% (up 39.2%)
Transports slumped 1.4% (up 32.1%)
S&P 400 Midcaps fell 1.1% (up 24.5%)
Small cap Russell 2000 dropped 2.8% (up 18.6%)
Nasdaq100 advanced 2.3% (up 28.6%)
Semiconductors surged 3.1% (up 39.9%)
Biotechs declined 0.2% (down 5.4%).
With gold bullion down $19,
the HUI gold stock index fell 3.8%
(down 10.7%).
U.K.'s FTSE fell 1.7% (up 11.8% y-t-d).
Japan's Nikkei increased 0.5% (up 8.4% y-t-d).
France's CAC40 increased 0.3% (up 28.1%)
German DAX added 0.4% (up 17.8%).
Spain's IBEX 35 sank 3.6% (up 8.4%).
Italy's FTSE MIB slumped 1.4% (up 23.0%)
Brazil's Bovespa sank 3.1% (down 13.4%)
Mexico's Bolsa fell 1.2% (up 15.3%).
South Korea's Kospi little changed (up 3.4%).
India's Sensex dropped 1.7% (up 24.9%).
China's Shanghai gained 0.6% (up 2.5%).
Turkey's Istanbul National 100 surged 6.0% (up 17.6%).
Russia's MICEX dropped 2.6% (up 22.1%).
US BONDS:
Three-month Treasury bill rates
ended the week at 0.04%.
Two-year government yields
slipped a basis point to 0.51%
(up 39bps y-t-d).
Five-year T-note yields
were unchanged at 1.22%
(up 86bps).
Ten-year Treasury yields
declined two bps to 1.55%
(up 63bps).
Long bond yields
dipped two bps to 1.91%
(up 27bps).
Benchmark Fannie Mae MBS yields
declined three bps to 2.02%
(up 68bps).
Federal Reserve Credit last week
surged $67.1bn to a record $8.627 TN.
Over the past 114 weeks,
Fed Credit expanded $4.900 TN, or 131%.
US MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
surged 12 bps to 3.10% (up 38bps y-o-y).
Fifteen-year rates jumped 12 bps to 2.39%
(up 11bps).
Five-year hybrid ARM rates
declined four bps to 2.49%
(down 36bps).
Jumbo mortgage 30-year fixed rates
up 15 bps to 3.20%
(up 26bps).
COMMODITIES:
Bloomberg Commodities Index
declined 0.5% (up 31.1% y-t-d).
Spot Gold fell $19 to $1,846 (down 2.8%).
Silver dropped 2.8% to $24.62 (down 6.8%).
WTI crude sank $4.85 to $75.94 (up 57%).
Gasoline fell 4.3% (up 57%)
Natural Gas jumped 5.7% (up 100%).
Copper declined 1.1% (up 25%).
Wheat added 0.7% (up 30%)
Corn declined 1.4% (up 19%).
Bitcoin sank $6,070 or 9.5%,
this week to $58,002 (up 100%).
Coronavirus Watch:
November 19 – Reuters
“Austria will become the first country in western Europe to reimpose a full COVID-19 lockdown, it said on Friday as neighbouring Germany warned it may follow suit, sending shivers through financial markets worried about the economic fallout. Europe has again become the epicentre of the pandemic, accounting for half of global cases and deaths. A fourth wave of infections has plunged Germany, Europe's largest economy, into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.”
November 18 – Associated Press
“A surge in cases in the Upper Midwest has some Michigan schools keeping students at home ahead of Thanksgiving and the military sending medical teams to Minnesota to relieve hospital staffs overwhelmed by COVID-19 patients. The worsening outlook in the Midwest comes as booster shots are being made available to everyone in a growing number of locations… Cold weather states are dominating the fresh wave of cases over the last seven days, including New Hampshire, North Dakota and Wisconsin, according to federal data. But the Southwest had trouble spots, too, with more than 90% of inpatient hospital beds occupied in Arizona.”
Market Mania Watch:
November 12 – Financial Times
US equities are at the epicentre of the worldwide rush into stocks that has almost doubled the MSCI All-World share index since the coronavirus crisis nadir in March 2020 — one of the most powerful runs for global equities in history. Wall Street’s S&P 500 this week sealed its longest streak of hitting record highs since 1964 before pulling back slightly… Meanwhile, highly-speculative digital assets such as bitcoin, ethereum and ‘meme coins’ such as Shiba Inu have shot higher, bringing the crypto market value to about $3tn from less than $500bn at this time last year.”
November 14 – Bloomberg:
“ Last week so-called real yields, which take into account the corrosive effects of inflation, hit some of their lowest levels on record. One measure of real yields, 10-year Treasury inflation-protected securities, fell to minus 1.2%... That is the lowest on record…”
November 17 – Bloomberg:
“ Companies this year have borrowed or are planning to borrow more than $88 billion in the U.S. leveraged loan market to fund dividend payments to their private equity owners. That’s the most for a year since Bloomberg began compiling the data in 2013, and 2021 isn’t over. Private equity firms are reaping the benefits, using the intense demand for loans to pile even more borrowings onto the heavily-indebted companies they own.”
Inflation Watch:
November 16 – CNBC:
“Rents for single-family homes increased 10.2% nationally in September year over year, up from a 2.6% rise in September of last year, according to… CoreLogic. Improved job growth and sky-high prices in the for-sale housing market added to already strong demand for single-family rentals fueled by the coronavirus pandemic.”
November 17 – Los Angeles Times:
“Brian Sproule ... examined the price board at a Chevron station in downtown Los Angeles, where a regular gallon of gas was $6.05. ... He said he’s used to spending about $40 to fill his tank, but by the time he capped off his Hyundai Elantra, the meter displayed a whopping $71.59.
November 15 – Bloomberg:
“U.S. coal prices surged to the highest in more than 12 years as a global power crisis drives up demand for the dirtiest fossil fuel. Prices for coal from Central Appalachia climbed more than $10 last week to $89.75 a ton…”
U.S. Bubble Watch:
November 12 – Wall Street Journal:
“There were 10.4 million job openings at the end of September, amounting to 1.4 jobs for each unemployed person seeking work. That was the highest the ratio has been in the 21-year history of the report. Another measure of tightness, the number of job openings to the number of people hired during the month, remained near a record high. Finally, people quit a record 4.4 million jobs in September… Most signs point to hiring difficulties only getting more intense.”
November 16 – Reuters:
“The number of container ships waiting to enter the busiest U.S. seaport complex hit a new record of 84 on Tuesday, as growing piles of empty containers crowd docks at the Southern California facility that has been racing to remove lingering imports. ... There are now roughly 65,000 empty containers on the Port of Los Angeles docks, up about 18% from just a couple of weeks ago…”
November 14 – New York Times:
“California Dairies Inc., which manufactures milk powder for factories in Southeast Asia and Mexico… The company typically ships 50 million pounds of its milk powder and butter out of ports each month. But roughly 60% of the company’s bookings on outbound vessels have been canceled or deferred in recent months, resulting in about $45 million in missed revenue per month. ‘This is not just a problem, it’s not just an inconvenience, it’s catastrophic,’ said Brad Anderson, the chief executive of California Dairies.”
November 15 – Bloomberg:
“Real estate investors acquired a record 18% of U.S. homes sold in the third quarter of 2021, wagering $64 billion that home prices and rents will continue to surge. Investors bought more than 90,000 homes in the three months through September, up 10% from the prior quarter and 80% from a year earlier, according to… Redfin Corp."
China Watch:
November 15 – Reuters:
“China's property woes worsened on all fronts last month, as price falls in both new and resale homes amid deeper contractions in construction starts and investment by developers piled pressure on the sector in a rare confluence of declines. The Chinese property market… has slowed sharply since May, with sentiment increasingly shaken by stress in the sector in the wake of a growing liquidity crisis that has engulfed some of the country's biggest and most indebted developers… Prices of new homes dropped 0.2% on average last month from September…, the first decline since March 2015. In the resale market, prices slumped in all but six of the 70 major cities tracked by the bureau… During the month, homes sales tumbled 22.65% on year to 1.24 trillion yuan…, the fourth straight decline and the lowest this year.”
Global Bubble Watch:
November 17 – Reuters
“British inflation has hit a 10-year high as household energy bills rocket, bolstering expectations the Bank of England will raise interest rates in December just weeks after it rocked markets by keeping borrowing costs on hold. Consumer prices rose by 4.2% in annual terms in October, leaping from a 3.1% increase in September"
November 18 – Bloomberg:
“Factory-gate prices in South Korea rose at the fastest pace since 2008 last month, fueling inflation concerns and adding to reasons for the central bank to raise interest rates next week. Producer price inflation from a year earlier picked up to 8.9% from a revised 7.6% in September, the Bank of Korea said Friday. The gains were led by a 85.6% jump in prices of coal and oil related products.”
Japan Watch:
November 15 – Reuters:
“Japan's economy contracted much faster than expected in the third quarter as global supply disruptions hit exports and business spending while new COVID-19 cases soured the consumer mood… The economy shrank an annualised 3.0% in July-September after a revised 1.5% gain in the second quarter…, much worse than a median market forecast of a 0.8% contraction.”
Social and Environmental Watch:
November 17 – Bloomberg:
“The U.S. reached the grim milestone of 100,000 drug overdose deaths annually, a sign that the opioid crisis deepened at the height of the Covid-19 pandemic. An estimated 100,306 Americans died from an overdose in the 12 months ended in April…, according to… the Centers for Disease Control and Prevention’s National Center for Health Statistics. The toll is up 29% from the previous year.”
November 18 – Reuters (Tim Mclaughlin):
“The Texas electric grid could suffer a massive shortfall in generating capacity in a winter deep freeze, potentially triggering outages similar to those in February, according to a report on Thursday by an electric reliability authority. The assessment by the North American Electric Reliability Corp (NERC), a nonprofit regulatory authority, comes as Texas lawmakers and regulators continue to investigate ways to bolster the grid to avert a repeat of last winter's blackouts, which left 4.5 million customers without power in a deep freeze that killed more than 200 people.”
November 17 – Bloomberg:
“India has directed six coal-fired power plants located around Delhi to shut down until the end of this month as part of measures to clean some of the world’s dirtiest air, as a cloud of smog has enveloped the city and its suburbs for nearly two weeks. The federal Environment Ministry… also barred the entry of all trucks except those carrying essential items into the National Capital Region of Delhi and encouraged citizens to work from home to curb pollution.”
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