SOURCE:
Credit Bubble Bulletin : Weekly Commentary: Deflation and Policy Mistakes
For the Week Ending September 16, 2022:
FINANCIAL DATA:
S&P500 dropped 4.8% (down 18.7% y-t-d),
Dow fell 4.1% (down 15.2%)
Utilities slumped 3.9% (up 2.6%)
Banks fell 3.8% (down 19.8%)
Broker/Dealers lost 3.6% (down 9.9%)
Transports sank 8.8% (down 22.2%)
S&P 400 Midcaps dropped 4.7% (down 16.2%)
Small cap Russell 2000 fell 4.5% (down 19.9%)
Nasdaq100 sank 5.8% (down 27.3%)
Semiconductors stumbled 5.8% (down 35.0%)
Biotechs fell 4.4% (down 13.9%).
he HUI gold equities index lost 4.1% (down 26.3%).
Japan's Nikkei fell 2.3% (down 4.3% y-t-d). .
Three-month Treasury bill rates ended the week at 3.0275%.
Two-year government yields surged 31 bps to 3.87% (up 314bps y-t-d).
Five-year T-note yields jumped 20 bps to 3.63% (up 237bps).
Ten-year Treasury yields rose 14 bps to 3.45% (up 194bps).
Long bond yields gained seven bps to 3.52% (up 161bps).
Benchmark Fannie Mae MBS yields surged 26 bps to 5.07% (up 300bps).
Federal Reserve Credit was little changed last week at $8.789 TN. Fed Credit is down $101bn from the June 22nd peak. Over the past 157 weeks, Fed Credit expanded $5.062 TN, or 136%.
jumped 13 bps to 6.02% (up 316bps y-o-y)
- the high since November 2008.
to a 13-year high 5.21% (up 309bps).
(up 242bps) - the high since July 2009.
had 30-year fixed rates up eight bps to 6.18% (up 315bps)
- the high since January 2010.
For the week, the U.S. Dollar Index added 0.7%
to 109.76 (up 14.7% y-t-d).
The Chinese (onshore) renminbi declined 0.87% versus the dollar (down 9.03% y-t-d).
The Bloomberg Commodities Index declined 1.5% (up 17.7% y-t-d).
Spot Gold fell 2.4% to $1,675 (down 8.4%).
Silver rallied 3.9% to $19.59 (down 16.0%).
WTI crude declined $1.68 to $85.11 (up 13%).
Gasoline slipped 0.7% (up 8%)
Natural Gas dropped 2.9% to $7.76 (up 108%).
Copper declined 1.4% (down 21%).
Wheat dipped 1.0% (up 12%)
Corn declined 1.1% (up 14%).
Bitcoin sank $1,555, or 7.3%, this week to $19.750 (down 57%).
ECONOMIC NEWS:
September 11 – Bloomberg (Enda Curran and Ainsley Thomson): “Around the world, soaring borrowing costs are squeezing homebuyers and property owners alike. From Sydney to Stockholm to Seattle, buyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices falling. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset. The rapid cooldown in real estate — a leading source of household wealth — threatens to worsen a global economic downturn. While the slump so far isn’t near the levels of the 2008 financial crisis, how the decline plays out is a key variable for central bankers who want to tamp down inflation without hurting consumer confidence and triggering a deep recession. Already, frothy markets such as Australia and Canada are facing double-digit house-price declines, and economists believe the worldwide downswing is only getting started.”
September 13 – Bloomberg (Muyao Shen and David Pan): “Bitcoin tumbled more than 10%, the biggest decline since cryptocurrencies plunged in June, as the broad-based selloff in financial markets spilled over into the digital-asset sector. Ether fell almost 9% to $1,571 even as its underlying Ethereum network is poised for a long-anticipated energy-saving software upgrade. Tether, the largest so-called stablecoin, is the most traded token on Tuesday as investors seek shelter from the sector’s volatility. Other stablecoins such as Binance USD and USD Coin also saw a jump in volume.”
September 15 – Dow Jones (Ben Eisen ): “Mortgage rates topped 6% this week, their highest level since 2008… The average rate on a 30-year fixed mortgage climbed to 6.02% this week, up from 5.89% last week and 2.86% a year ago… The last time rates were this high was in the heart of the financial crisis almost 14 years ago, when the U.S. was deep in recession.”
September 12 – Wall Street Journal (Caitlin Ostroff and Vicky Ge Huang): “Last year was harvest time for crypto miners. Now, they’re getting hit on all sides. Crypto prices are plunging. Miners’ electricity bills are surging. Practically no one wants to buy their equipment. It is a sharp turnaround from 2021, when crypto prices were soaring and many mining firms went on a mostly debt-funded buying spree of mining machines. But this year, crypto prices have been dropping and major crypto projects and companies have been wiped out. That has reduced the profits that miners can make from harvesting digital coins—and from selling their equipment in a pinch. Meanwhile, prices for electricity—needed to keep the miners’ powerful computers running—are soaring.”
September 14 – Associated Press (Christopher Rugaber): “U.S. inflation is showing signs of entering a more stubborn phase that will likely require drastic action by the Federal Reserve, a shift that has panicked financial markets and heightens the risks of a recession. Some of the longtime drivers of higher inflation — spiking gas prices, supply chain snarls, soaring used-car prices — are fading. Yet underlying measures of inflation are actually worsening. The ongoing evolution of the forces behind an inflation rate that’s near a four-decade high has made it harder for the Fed to wrestle it under control. Prices are no longer rising because a few categories have skyrocketed in cost. Instead, inflation has now spread more widely through the economy, fueled by a strong job market that is boosting paychecks, forcing companies to raise prices to cover higher labor costs and giving more consumers the wherewithal to spend.”
September 14 – Associated Press (Christopher Rugaber): “Inflation at the wholesale level jumped 8.7% in August from a year earlier, a slowdown from July yet still a painfully high level that suggests prices will keep spiking for months to come… On a month-to-month basis, the producer price index — which measures inflation before it reaches consumers — declined 0.1% from July to August, the second straight monthly decline. Yet the better readings mostly reflect plunging gas prices and don’t necessarily point to a broader slowdown in inflation. A measure that excludes the volatile food and energy categories — so-called core prices — rose 0.4% from July to August and 7.3% in August compared with a year ago.”
September 14 – CNN (Danielle Wiener-Bronner): “Inflation may be slowing, but food prices are still through the roof. Food costs spiked 11.4% over the past year, the largest annual increase since May 1979… Americans browsing the supermarket aisle will notice most food items are far more expensive than they were a year ago. Egg prices soared 39.8%, while flour got 23.3% more expensive. Milk rose 17% and the price of bread jumped 16.2%. Meat and poultry also grew costlier. Chicken prices jumped 16.6%, while meats rose 6.7% and pork increased 6.8%. Fruits and vegetables together are up 9.4%. Overall, grocery prices jumped 13.5% and restaurant menu prices increased 8%... The seasonally adjusted prices of most grocery items ticked up from July to August, but there were some standouts. Margarine spiked the most, up 7.3%. Eggs were 2.9% more expensive and sugar was 2.4% higher, while flour and bread edged up 2.2%. Canned fruit prices rose 3.4% while fresh vegetables got 1.2% pricier. Hot dog prices jumped 4.9%, while ham was up 1.3% and turkey rose 2.2%.”
September 13 – Wall Street Journal (Naureen S. Malik): “August electricity bills for US consumers jumped the most since 1981, gaining 15.8% from the same period a year ago, according to the US Bureau of Labor Statistics. Natural gas bills, which crept back up last month after dipping in July, surged 33% from the same month last year… Broader energy costs slipped for a second consecutive month because of lower gasoline and fuel oil prices. Even with that drop, total energy costs were still about 24% above August 2021 levels. Electricity costs are relentlessly climbing because prices for the two biggest power-plant fuels -- natural gas and coal -- have surged in the last year as the US economy rebounds from the pandemic and as Russia’s war in Ukraine triggers an energy crisis in Europe. Another factor is the hot and humid summer across most of the lower 48 states drove households and businesses to crank up air conditioners.”
September 13 – Bloomberg (Michael Sasso and Alex Tanzi): “Inflation soared to 13% in Phoenix last month, a record for any US city in data going back 20 years and more than twice as high as San Francisco. Other cities across the South and Southwest saw double-digit increases in consumer prices, with the Atlanta metropolitan area posting annual inflation of 11.7% and Miami reaching 10.7%...”
September 12 – Reuters (Dan Burns): “U.S. consumers' inflation expectations slid further in August as gasoline prices extended their steep decline from June's record high, a development likely to be welcomed by Federal Reserve policymakers weighing how big an interest rate hike to deliver next week. Consumers in August saw inflation at 5.75% over the next 12 months, down from 6.2% in July and the lowest rate since October 2021, the New York Fed's monthly consumer expectations survey showed...”
September 16 – Bloomberg (Annie Lee): “The surge in prices of lithium, the key battery material used to power electric cars, is seemingly unstoppable. Lithium carbonate hit a fresh record of 500,500 yuan ($71,315) a ton in China Friday, according to data from Asian Metal Inc. Prices more than tripled in the past year, inflating the cost of batteries used in electric vehicles, with recent gains driven by strong demand and disruptions at a domestic producing hub.”
September 13 – Reuters (Dan Burns): “The U.S. government posted a $220 billion budget deficit for August, up 29% from the $171 billion gap reported in the same month last year, as spending on health services, education and interest on the public debt outstripped a double-digit increase in revenues… The Treasury said that receipts in August grew by $35 billion, or 13%, from a year earlier to $304 billion, with a $25 billion, or 11%, increase in individual income tax withholdings accounting for most of the gain. But outlays climbed by $84 billion, or 19%, to $523 billion, leading to only the second year-over-year increase in the federal deficit so far in fiscal 2022…”
September 14 – CNBC (Diana Olick): “Mortgage demand appears to have nowhere to go but down, as interest rates go up… Mortgage applications to purchase a home squeezed out a gain of 0.2% from the previous week, but were 29% lower than the same week one year ago.”
September 14 – Yahoo Finance (Ben Werschkul): “After 9 months of economic uncertainty, CEO optimism continues to fall. The latest quarterly survey of America's top business leaders from the Business Roundtable… finds pessimism growing among America’s C-suite as businesses mull what could be coming in the next six months for the U.S. economy. ‘Global economic uncertainty continues to temper CEO sentiment for domestic plans and expectations’ General Motors (GM) CEO Mary Barra, the Business Roundtable Chair, said…, adding ‘We must remain steadfast in putting in place the building blocks for future economic growth.’”
September 12 – CNBC (Hugh Son): “The weakest American borrowers are starting to miss payments and default on their loans, and that is showing up at a surprising place: Goldman Sachs. While competitors like Bank of America enjoy repayment rates at or near record levels, Goldman’s loss rate on credit card loans hit 2.93% in the second quarter. That’s the worst among big U.S. card issuers and ‘well above subprime lenders,’ according to… JPMorgan. The profile of Goldman’s card customers actually resembles that of issuers known for their subprime offerings. More than a quarter of Goldman’s card loans have gone to customers with FICO scores below 660… Goldman’s credit card business, anchored by the Apple Card since 2019, has arguably been the company’s biggest success yet in terms of gaining retail lending scale. It’s the largest contributor to the division’s 14 million customers and $16 billion in loan balances, a figure that Goldman said would nearly double to $30 billion by 2024.”
September 14 – Reuters (Kate Abnett and Tom Käckenhoff): “The European Union's executive outlined plans… to raise more than $140 billion from energy firms to help shield households and businesses from soaring prices that threaten economic recession and insolvencies. European gas and power prices have rocketed this year as Russia cut fuel exports to retaliate for Western sanctions over its invasion of Ukraine, leaving many struggling to pay bills and utilities grappling with a liquidity crunch.”
September 15 – Bloomberg: “The threat of energy rationing in Europe is still real as the German regulator warned that there will likely be gas shortages this winter. The impact of the crisis is reverberating through the economy and markets. The German government is ready to take a stake in troubled gas supplier VNG AG, after Uniper SE said this week that a nationalization of the company was under consideration. Warning signs are piling up elsewhere too, with Electricite de France SA saying the crisis could last beyond this winter.”
September 12 – Reuters (Leika Kihara): “Japan's wholesale prices rose 9.0% in August from the previous year, matching the annual pace of growth in July…, signalling that persistently high raw material costs continued to squeeze corporate margins. The rise in the corporate goods price index (CGPI)…, was largely in line with a median market forecast for a 8.9% increase… The index, at 115.1, extended a record high for the fifth straight month in a sign Japan continues to feel the impact of rising global raw material prices.”
Doug Noland's Commentary:
Credit Bubble Bulletin : Weekly Commentary: Deflation and Policy Mistakes
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.